THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker
or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Town Health International Medical Group Limited (“Company”), you
should at once hand this circular, together with the enclosed form of proxy, to the purchasers or transferees or to the bank,
stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchasers or transferees.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for
the contents of this circular, 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 circular.
This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe
for any securities of the Company.
Town Health International Medical Group Limited
康健國際醫療集團有限公司
(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)
(Stock Code: 3886)
MAJOR AND CONNECTED TRANSACTION:
ISSUE OF CONSIDERATION SHARES TO
BONJOUR GROUP LIMITED
UNDER SPECIFIC MANDATE
IN RELATION TO THE
ACQUISITION OF 100% INTEREST IN THE TARGET
AND
NOTICE OF SPECIAL GENERAL MEETING
Independent Financial Adviser to the Independent Board Committee
and the Independent Shareholders
A notice convening the special general meeting of the Company to be held at 9:00 a.m. on Friday, 12 December 2014 at
1st Floor, Town Health Technology Centre, 10-12 Yuen Shun Circuit, Siu Lek Yuen, Shatin, New Territories, Hong Kong
is set out on pages SGM-1 to SGM-3 of this circular. Whether or not you are able to attend the meeting, you are requested
to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible
and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof to
the office of the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22,
Hopewell Centre, 183 Queen’s Road East, Hong Kong. Completion and return of the form of proxy will not preclude you
from attending and voting in person at the meeting or any adjournment thereof should you so wish, and in such event, the
instrument appointing a proxy shall be deemed to be revoked.
19 November 2014
CONTENTS
Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Appendix I
–
Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . .
I-1
Appendix II
–
Financial Information of the Target Group . . . . . . . . . . . . . . . . . .
II-1
Appendix III –
Unaudited Pro Forma Financial Information of
the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
III-1
General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IV-1
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SGM-1
Appendix IV
–
–i–
DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the
following meanings:
“Acquisition”
the acquisition of the Sale Shares pursuant to the
Agreement
“Agreement”
the agreement for sale and purchase dated 20 August 2014
entered into between the Vendor and the Company in
respect of the Acquisition
“Board”
the board of Directors
“Bonjour Holdings”
Bonjour Holdings Limited, a company incorporated in the
Cayman Islands with limited liability and the ordinary
shares of which are listed on the Main Board of the Stock
Exchange (Stock Code: 653)
“Bonjour Holdings Group”
Bonjour Holdings and its subsidiaries
“Business Day”
a day (excluding Saturday and any day on which a tropical
cyclone warning no.8 or above is hoisted or remains hoisted
between 9:00 a.m. and 12:00 noon and is not lowered at or
before 12:00 noon or on which a “black” rainstorm warning
is hoisted or remains in effect between 9:00 a.m. and 12:00
noon and is not discontinued at or before 12:00 noon) on
which licensed banks in Hong Kong are generally open for
business
“BVI”
the British Virgin Islands
“Company” or “Purchaser”
Town Health International Medical Group Limited, a
company incorporated in the Cayman Islands and continued
in Bermuda with limited liability and the ordinary shares of
which are listed on the Main Board of the Stock Exchange
“Completion”
completion of the Acquisition
“Completion Date”
the third Business Day after the last outstanding Condition
shall have been fulfilled or waived (or such other date
agreed by the Purchaser and the Vendor in writing) on
which Completion is to take place
–1–
DEFINITIONS
“Condition(s)”
the condition(s) precedent which Completion is subject to
as set out in the paragraph headed “Conditions Precedent”
under the section “The Agreement” in the letter from the
Board in this circular
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“Consideration”
the sum of HK$423,780,000, being the consideration for
the sale and purchase of the Sale Shares
“Consideration Shares”
365,327,586 new Shares
“CPS Subscription Agreement”
t h e p e r p e t u a l n o n - vo t i n g r e d e e m a b l e c o nve r t i b l e
preference shares (“CPS”) subscription agreement dated
31 October 2014 entered into between the Company,
Fubon Life Insurance Co., Ltd., Fubon Insurance Co.,
Ltd. and Broad Idea International Limited in relation
to (i) Fubon Life Insurance Co., Ltd.’s conditional
subscription, and the Company’s conditional allotment
and issue, of 212,121,212 CPS at the cash consideration
of HK$254,545,455; (ii) Fubon Insurance Co., Ltd.’s
conditional subscription, and the Company’s conditional
allotment and issue, of 79,545,454 CPS at the cash
consideration of HK$95,454,545; and (iii) Broad Idea
International Limited’s conditional subscription, and the
Company’s conditional allotment and issue, of 83,333,333
CPS at the cash consideration of HK$100,000,000, each at
the subscription price of HK$1.20 per CPS, further details
of which are set out in the announcement of the Company
dated 31 October 2014
“Director(s)”
the director(s) of the Company
“Dr. Ip”
Dr. Ip Chun Heng, Wilson
“Enlarged Group”
the Group as enlarged by the Acquisition
“Group”
the Company and its subsidiaries
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
–2–
DEFINITIONS
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“Hong Kong Company 1”
Bonjour Beauty Limited, a company incorporated in Hong
Kong with limited liability
“Hong Kong Company 2”
Bonjour Medical Science & Technology Beauty Centre
Limited, a company incorporated in Hong Kong with
limited liability
“Independent Board Committee”
the independent board committee comprising all the
independent non-executive Directors, i.e. Mr. Chan Kam
Chiu, Mr. Ho Kwok Wah, George and Mr. Wai Kwok Hung,
SBS, JP , who have no material interest in the Agreement
and the transactions contemplated thereunder, which has
been established by the Board to advise the Independent
Shareholders in relation to the Agreement and the
transactions contemplated thereunder
“Independent Financial Adviser”
Goldin Financial Limited, a corporation licensed to carry
out type 6 (advising on corporate finance) regulated
activity as defined under the SFO, being the independent
financial adviser appointed by the Company to advise
the Independent Board Committee and the Independent
Shareholders in relation to the Agreement and the
transactions contemplated thereunder
“Independent Shareholder(s)”
Shareholder(s) other than those who are required by the
Listing Rules to abstain from voting on the resolution
approving the Agreement and the transactions contemplated
thereunder (including the allotment and issue of the
Consideration Shares)
“Latest Practicable Date”
14 November 2014 , being the latest practicable date
prior to the publication of this circular for the purpose of
ascertaining certain information contained in this circular
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock
Exchange
“Long Stop Date”
31 December 2014 (or such later date as the Purchaser and
the Vendor may agree in writing)
–3–
DEFINITIONS
“Macau”
the Macau Special Administrative Region of the PRC
“Material Adverse Change”
any change (or effect) which has a material and adverse
effect on the financial position, business or prospects or
results of operations, of the Target Group or the Group (as
the case may be) as a whole
“PRC”
the People’s Republic of China, excluding Hong Kong,
Macau and Taiwan for the purpose of this circular
“Purchaser’s Warranties”
the representations, warranties and undertakings given by
the Purchaser under the Agreement
“Restructuring”
(i) the further acquisition of 50% of the issued share capital
of Hong Kong Company 1 by the Target; (ii) the acquisition
of the entire issued share capital of Hong Kong Company 2
by the Target; and (iii) the transfer of the permit issued by
the China Food and Drug Administration（國家食品藥品監
督管理局）for the importation of special types of cosmetics
into the PRC from 雅悅美容（上海）有限公司 (in English,
for identification purpose, Ya Yue Cosmetics (Shanghai)
Co., Ltd.) to the Vendor or its subsidiaries
“Sale Shares”
1,000 shares of US$1 each in the share capital of the Target,
representing 100% of the issued share capital of the Target
as at Completion, legally and beneficially owned by the
Vendor immediately prior to Completion
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong)
“SGM”
a special general meeting of the Company convened to be
held at 9:00 a.m. on Friday, 12 December 2014 at 1st Floor,
Town Health Technology Centre, 10-12 Yuen Shun Circuit,
Siu Lek Yuen, Shatin, New Territories, Hong Kong for the
purpose of considering and, if thought fit, approving the
Agreement and the transactions contemplated thereunder
(including the allotment and issue of the Consideration
Shares)
–4–
DEFINITIONS
“Share(s)”
ordinary share(s) of HK$0.01 each in the share capital of
the Company
“Shareholder(s)”
holder(s) of the Share(s)
“Share Subscription Agreement”
the share subscription agreement dated 31 October 2014
entered into between the Company, Fubon Life Insurance
Co., Ltd., Fubon Insurance Co., Ltd. and Broad Idea
International Limited in relation to (i) Fubon Life Insurance
Co., Ltd.’s conditional subscription, and the Company’s
conditional allotment and issue, of 259,740,260 Shares
at the cash consideration of HK$254,545,455; (ii) Fubon
Insurance Co., Ltd.’s conditional subscription, and the
Company’s conditional allotment and issue, of 97,402,597
Shares at the cash consideration of HK$95,454,545;
and (iii) Broad Idea International Limited’s conditional
subscription, and the Company’s conditional allotment and
issue, of 102,040,816 Shares at the cash consideration of
HK$100,000,000, each at the subscription price of HK$0.98
per Share, further details of which are set out in the
announcement of the Company dated 31 October 2014
“Specific Mandate”
the specific mandate proposed to be sought at the SGM to
authorise the Directors to allot and issue the Consideration
Shares
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Target”
Bonjour Beauty International Limited, a company
incorporated in the BVI with limited liability
“Target Group”
the Target and its subsidiaries upon Completion
“US$”
U.S. dollars, the lawful currency of the United States of
America
“Vendor”
Bonjour Group Limited, a company incorporated in the BVI
with limited liability
“Vendor’s Warranties”
the representations, warranties and undertakings given by
the Vendor under the Agreement
–5–
LETTER FROM THE BOARD
Town Health International Medical Group Limited
康健國際醫療集團有限公司
(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)
(Stock Code: 3886)
Executive Directors:
Miss Choi Ka Yee, Crystal (Chairperson)
Dr. Cho Kwai Chee (Executive Vice Chairman)
Dr. Hui Ka Wah, Ronnie, JP
(Chief Executive Officer)
Mr. Lee Chik Yuet
Dr. Chan Wing Lok, Brian
Mr. Wong Seung Ming (Chief Financial Officer)
Non-executive Director:
Dr. Choi Chee Ming, GBS, JP (Vice-Chairman)
Independent non-executive Directors:
Mr. Chan Kam Chiu
Mr. Ho Kwok Wah, George
Mr. Wai Kwok Hung, SBS, JP
Registered office:
Canon’s Court
22 Victoria Street
Hamilton HM12
Bermuda
Head office and principal place of
business in Hong Kong:
6th Floor
Town Health Technology Centre
10-12 Yuen Shun Circuit
Siu Lek Yuen, Shatin
New Territories, Hong Kong
19 November 2014
To the Shareholders
Dear Sir or Madam,
MAJOR AND CONNECTED TRANSACTION:
ISSUE OF CONSIDERATION SHARES TO
BONJOUR GROUP LIMITED
UNDER SPECIFIC MANDATE
IN RELATION TO THE
ACQUISITION OF 100% INTEREST IN THE TARGET
INTRODUCTION
Reference is made to the announcement of the Company dated 20 August 2014 in which
the Company announced that on 20 August 2014, the Company and the Vendor entered into the
Agreement pursuant to which the Company has conditionally agreed to allot and issue 365,327,586
Consideration Shares to the Vendor (or its nominee) to settle the Consideration of HK$423,780,000
in respect of the Vendor’s conditional sale, and the Company’s conditional acquisition, of the Sale
Shares (representing 100% of the issued share capital of the Target).
–6–
LETTER FROM THE BOARD
The purpose of this circular is to provide you with, among other things, (i) details of the
Agreement and the transactions contemplated thereunder (including the Acquisition); (ii) the
recommendation of the Independent Board Committee to the Independent Shareholders regarding
the Agreement and the transactions contemplated thereunder; (iii) the advice of the Independent
Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding
the Agreement and the transactions contemplated thereunder; (iv) the financial information relating
to the Group, the Target Group and the Enlarged Group; (v) other information as required to be
disclosed under the Listing Rules; and (vi) the notice of the SGM.
THE AGREEMENT
Major terms of the Agreement are set out below.
Date:
20 August 2014
Parties:
(1)
the Company as purchaser
(2)
the Vendor as vendor
The Vendor is a company incorporated in the BVI with limited liability and is a whollyowned subsidiary of Bonjour Holdings. Bonjour Holdings Group is principally engaged in the retail
and wholesale of beauty and health-care products and the operation of beauty and health salons in
Hong Kong, Macau and the PRC.
To the best of the Directors’ knowledge, information and belief having made all reasonable
enquiries, save that Dr. Ip, an ultimate substantial shareholder of the Target, is proposed to be an
executive Director, the chairman and chief executive officer of the Target Group with effect from
the Completion Date, the Vendor and its ultimate beneficial owners are third parties independent of
the Company and connected persons of the Company.
Assets to be acquired
The Company has conditionally agreed to acquire, and the Vendor has conditionally agreed
to sell, the Sale Shares at the Consideration of HK$423,780,000. The Sale Shares represent 100% of
the issued share capital of the Target. The Company shall not be obliged to purchase the Sale Shares
unless the sale and purchase of all the Sale Shares are completed simultaneously.
–7–
LETTER FROM THE BOARD
Consideration
The Consideration is HK$423,780,000 which shall be paid by the Company by the allotment
and issue of 365,327,586 Consideration Shares, credited as fully paid, at an issue price of HK$1.16
per Consideration Share to the Vendor (or its nominee) at Completion.
The 365,327,586 Consideration Shares represent (i) approximately 7.85% of the issued share
capital of the Company as at the Latest Practicable Date; and (ii) approximately 7.28% of the issued
share capital of the Company as enlarged by the allotment and issue of the Consideration Shares
(assuming that there is no other change to the issued share capital of the Company from the Latest
Practicable Date and up to Completion). Accordingly, the issue of the Consideration Shares will not
result in a change of control of the Company.
The issue price of HK$1.16 per Consideration Share was arrived at by the Company and the
Vendor after arm’s length negotiations taking into account the prevailing trading price of the Shares.
The issue price of the Consideration Shares also represents:
(i)
a discount of approximately 2.52% to the closing price of HK$1.19 per Share as
quoted on the Stock Exchange on the date of the Agreement; and
(ii)
the average closing price of HK$1.16 per Share as quoted on the Stock Exchange for
the last five consecutive trading days of the Shares up to and including the date of the
Agreement.
The Consideration Shares will be issued under the Specific Mandate.
Application will be made to the Stock Exchange for the listing of, and permission to deal in,
the Consideration Shares. The Consideration Shares to be allotted and issued shall rank pari passu
among themselves and with all Shares in issue on the Completion Date.
Basis of the Consideration
The Consideration was determined after arm’s length negotiations between the Company
and the Vendor with reference to (i) historical financial performance of the Target Group, being
the unaudited combined net profit of the Target for the year ended 31 December 2013; and (ii) the
business potential of the Target Group.
With the increase in people’s income and their pursuit of quality of life, more and more
female are willing to increase their spending on beauty-related products and services, thus creating
a bright outlook for the beauty industry. The Target Group specializes in providing a full range of
high quality beauty treatment services including facial, medical aesthetics, nail art, body and foot
massage. The Group believes that there will be good potential for the Target Group to expand its
existing services.
–8–
LETTER FROM THE BOARD
Conditions Precedent
Completion is subject to the fulfilment or (if applicable) waiver of the following conditions:
(a)
the sale and purchase of the Sale Shares, the allotment and issue of the Consideration
Shares and other transactions contemplated under the Agreement having been
approved by the Independent Shareholders at the SGM;
(b)
the Stock Exchange having granted the listing of, and permission to deal in, the
Consideration Shares;
(c)
the Purchaser being reasonably satisfied with the results of the due diligence exercise
(whether on legal, accounting, financial, operational, properties or other aspects that
the Purchaser may consider necessary) on the Target Group and its assets, liabilities,
activities, operations, prospects and other status which the Purchaser, its agents or
professional advisers think reasonably necessary and appropriate to conduct;
(d)
(if applicable) the receipt from the Vendor of all such waivers, consents or other
documents as the Purchaser may require in relation to the completion of the
transactions contemplated under the Agreement;
(e)
there is no Material Adverse Change or prospective Material Adverse Change in the
Target Group’s business, operations, financial conditions or prospects taken as a whole
since the date of the Agreement;
(f)
the Purchaser being satisfied that, from the date of the Agreement and at any time
before the Completion, that the Vendor’s Warranties remain true, accurate and not
misleading and that no events have occurred that would result in any breach of any of
the Vendor’s Warranties or other provisions of the Agreement by the Vendor;
(g)
there is no Material Adverse Change or prospective Material Adverse Change in the
Group’s business, operations, financial conditions or prospects taken as a whole since
the date of the Agreement;
(h)
the Vendor being satisfied that, from the date of the Agreement and at any time
before the Completion, that the Purchaser’s Warranties remain true, accurate and not
misleading and that no events have occurred that would result in any breach of any of
the Purchaser’s Warranties or other provisions of the Agreement by the Purchaser;
–9–
LETTER FROM THE BOARD
(i)
(if applicable) the sale and purchase of the Sale Shares and other transactions
contemplated under the Agreement having been approved by the shareholders of
Bonjour Holdings (who are not required to abstain from voting in such respect under
the Listing Rules or otherwise) and have fulfilled any requirements under the Listing
Rules;
(j)
(if applicable) the receipt from the Purchaser of all such waivers, consents or other
documents as the Vendor may require in relation to the completion of the transactions
contemplated under the Agreement;
(k)
the delivery of the disclosure letter in the form and substance reasonably satisfactory
to the Purchaser by the Vendor to the Purchaser; and
(l)
completion of the Restructuring.
Conditions (a), (b), (d), (i) and (j) are not capable of being waived by any parties to the
Agreement. The Purchaser may waive Conditions (c), (e), (f), (k) and (l). The Vendor may waive
Conditions (g) and (h).
If any of the Conditions shall not have been fulfilled or (if applicable) waived at or before
5:00 p.m. on the Long Stop Date, all rights and obligations of the parties under the Agreement
shall cease and terminate, save and except clauses in relation to confidentiality, costs and expenses,
miscellaneous, notices and governing law and jurisdiction which provisions shall remain in full
force and effect, and no party to the Agreement shall have any claim against the other save for claim
(if any) in respect of any antecedent breach thereof.
Completion
Completion shall take place on the Completion Date.
Immediately after Completion, the Target will become a wholly-owned subsidiary of the
Company.
Upon Completion, the Vendor and Hong Kong Company 1 will enter into a loan agreement
in a form and substance to be agreed by the Vendor and the Purchaser in relation to the loan
of HK$138,000,000 owing by the Vendor to Hong Kong Company 1 (“Loan”), which has been
advanced by certain subsidiaries of Bonjour Holdings to the Vendor in 2000 and will be assigned by
those subsidiaries to Hong Kong Company 1 before Completion, based on the terms set out below:
(a)
the Loan shall be for a term of two years from the Completion Date;
– 10 –
LETTER FROM THE BOARD
(b)
the Loan shall carry interest at the rate of 3% per annum, calculated on the basis of the
actual number of days elapsed and a 365-day year;
(c)
interest will be paid semi-annually in arrears since the Completion Date; and
(d)
the Vendor may at any time during the term of the Loan early repay the Loan in full
together with the accrued interest up to and including the early repayment date by
giving not less than ten Business Days’ prior written notice to Hong Kong Company 1
before the repayment date.
The Loan has been advanced by certain subsidiaries of Bonjour Holdings to the Vendor in
2000, which is before the date of the Agreement. At the time of the advance of the Loan, as the
Loan was loan between group members of Bonjour Holdings Group, the Loan was interest free and
there was no maturity date of the Loan. The parties to the Agreement agree that as part of the terms
of the Agreement, the Loan shall be for a term of two years from the Completion Date and carry
interest at the rate of 3% per annum. Taking into account that the advance of the Loan took place
before the date of the Agreement and the Completion, the advance of the Loan are not considered as
a financial assistance granted by the Group under the Listing Rules.
INFORMATION ABOUT THE TARGET GROUP
The Target is a company incorporated in the BVI with limited liability whose principal
business activity is investment holding. Upon Completion, the Target shall have 8 subsidiaries.
The Target Group is principally engaged in the operation of 17 beauty and health salons under the
brands of “About Beauty”, “Dr. Protalk” and “Top Comfort” in Hong Kong, Macau and Shanghai,
and provision of beauty and health-care related consultancy services in Hong Kong and Macau.
The Target Group is operating 12 beauty salons under the brand of “About Beauty” in Hong
Kong, Macau and Shanghai, which specializes in providing a full range of high quality beauty
treatment services including facial, nail art and body massage. Revenue from “About Beauty” for
the three years ended 31 December 2013 and the six months ended 30 June 2014 was derived from
the service fees for the provision of the aforementioned services. During the six months ended 30
June 2014, “About Beauty” contributed approximately 57.0% of the total revenue of the Target
Group.
– 11 –
LETTER FROM THE BOARD
The Target Group is operating 3 medical beauty centers under the brand of “Dr. Protalk” in
Hong Kong, which provides medical beauty services, including micro-cosmetic beauty treatment,
laser skin care, permanent laser hair removal and botox injection to the customers. Revenue from
“Dr. Protalk” for the three years ended 31 December 2013 and the six months ended 30 June 2014
was derived from the service fees for the provision of the aforementioned services. During the six
months ended 30 June 2014, “Dr. Protalk” contributed approximately 39.3% of the total revenue of
the Target Group.
The Target Group is operating 2 health salons under the brand of “Top Comfort” in Hong
Kong, which provides foot massage services. Revenue from “Top Comfort” for the three years
ended 31 December 2013 and the six months ended 30 June 2014 was derived from the service fees
for the provision of the aforementioned services. During the six months ended 30 June 2014, “Top
Comfort” contributed approximately 3.7% of the total revenue of the Target Group.
All the customers of the Target Group are individuals, who visit the aforesaid salons and
centers of the Target Group for high quality beauty treatment services.
The major costs of the Target Group for the six months ended 30 June 2014 were staff costs
and rental expenses of beauty salons, which accounted for approximately 44.2% and 16.6% of the
total revenue of the Target Group respectively.
As at 31 December 2013, the audited combined total assets and net assets of the Target
(assuming completion of the Restructuring having taken place) amounted to approximately
HK$261,289,000 and HK$13,726,000 respectively.
The audited combined financial information of the Target Group (assuming completion of
the Restructuring having taken place) for the two years ended 31 December 2012 and 31 December
2013 are as follows:
Revenue
Net profit before taxation
Net profit after taxation
– 12 –
Year ended
31 December
2012
HK$’000
Year ended
31 December
2013
HK$’000
300,933
40,891
32,172
314,830
44,553
35,635
LETTER FROM THE BOARD
The Target Group has completed the Restructuring and the corporate structures of the Target
Group immediately before and after the Restructuring are as follows:
(A)
Corporate structure of the Target Group immediately before the Restructuring
Bonjour Cosmetic
(Overseas) Limited
Vendor
1%
99%
100%
Target
Hong Kong Company 2
50%
50%
Hong Kong Company 1
100%
100%
Speedwell Group
Limited
100%
Bonjour Beauty
(Shanghai) Limited
100%
Richly Fine Limited
100%
100%
Mega World (HK)
Limited
雅悅美容（上海）有限公司
(Ya Yue Cosmetics
(Shanghai) Co., Ltd.)
(B)
Ace Advance Limited
Corporate structure of the Target Group immediately after the Restructuring
Vendor
100%
Target
100%
Hong Kong Company 1
100%
Speedwell Group
Limited
100%
100%
Bonjour Beauty
(Shanghai) Limited
100%
Richly Fine Limited
100%
Ace Advance Limited
100%
Hong Kong Company 2
100%
雅悅美容（上海）有限公司
(Ya Yue Cosmetics
(Shanghai) Co., Ltd.)
Mega World (HK)
Limited
INFORMATION ABOUT THE GROUP
The Group is principally engaged in (i) healthcare business investments; (ii) provision and
management of healthcare and related services; and (iii) properties and securities investments and
trading.
– 13 –
LETTER FROM THE BOARD
REASONS FOR AND BENEFITS OF THE TRANSACTIONS UNDER THE AGREEMENT
The Group is seeking to expand its business scope and scale through acquisitions in Hong
Kong and the PRC. Besides offering medical and medically related services, the Group is actively
exploring opportunities to venture into other health or healthcare related businesses. In order
to further expand its business, the Group also strives to forge partnership with other strategic
investment partners who could bring in expertise, network, know-how and most importantly,
business opportunities, to help develop the Group’s business. Through developing strategic
investment partnership, the Group could also broaden its shareholder base and bring in new capital
for future development.
The Target Group is a well-established cosmetic beauty chain in Hong Kong with a large
customer base. The Target Group has been enjoying good brand name. On the other hand, the
Group is one of the leading medical services providers in Hong Kong, offering primary and
specialty medical services to the general public. The Group has been striving to develop medical
centers in five specialties in Hong Kong, which include cosmetic dermatology medical center.
The Group plans to develop a cosmetic dermatology medical center which provides advanced
medical dermatology treatments, including plastic surgery treatments. The Group believes that
by integrating this planned cosmetic dermatology medical center with the cosmetic beauty chain
network of the Target Group, substantial synergy could be created for both parties. The large
customer base of the Target Group could serve as the clientele referral pool for the Group’s
cosmetic dermatology medical center. On the other hand, such center could further enhance the
service scope and quality of the Target Group, offering to the customers more quality, advanced and
professional medical dermatology services. Further, the combination could offer a good branding
effect to boost up the image of the cosmetic beauty chain of the Target Group, hence enhancing its
market share. The Group believes the cosmetic dermatology business could be further developed
to become an important business segment of the Group, and bring in steadily growing net profit
and operating cash flows. As at the Latest Practicable Date, the development of the cosmetic
dermatology business was in a preliminary stage and the Group was in the course of identifying
suitable location for the cosmetic dermatology medical center.
The Company intends to maintain and further develop the existing business of the
Target Group. Upon Completion, the Directors, who are experienced in corporate and finance
management, will work together with the existing management of the Target Group on expanding
and enhancing its beauty services.
Save as disclosed above, the Company does not intend to change or modify the business
operations of the Target Group and the Group after the Completion.
– 14 –
LETTER FROM THE BOARD
The Directors are of the view that the terms of the Agreement are normal commercial terms
and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
IMPLICATIONS UNDER THE LISTING RULES
As the relevant percentage ratios under the Listing Rules in respect of the Acquisition are
more than 25% but less than 100%, the Acquisition constitutes a major transaction for the Company
under the Listing Rules and is subject to notification, announcement and Shareholders’ approval
requirements of Chapter 14 of the Listing Rules.
As at the Latest Practicable Date, the Target was wholly-owned by the Vendor and the Vendor
was beneficially owned as to 100% by Bonjour Holdings, which was indirectly and beneficially
owned as to 61.10% by Dr. Ip. As such, Dr. Ip is an ultimate substantial shareholder of the Target.
Pursuant to the Agreement, it is proposed that Dr. Ip will be appointed as an executive Director with
effect from the Completion Date. As such, Dr. Ip, an ultimate substantial shareholder of the Target,
is proposed to be a controller (as defined under the Listing Rules) of the Company. Accordingly,
the Acquisition also constitutes a connected transaction for the Company under Chapter 14A of
the Listing Rules and is subject to reporting and announcement and Independent Shareholders’
approval requirements of Chapter 14A of the Listing Rules.
SGM
The SGM is convened to be held at 9:00 a.m. on Friday, 12 December 2014 at 1st Floor,
Town Health Technology Centre, 10-12 Yuen Shun Circuit, Siu Lek Yuen, Shatin, New Territories,
Hong Kong, the notice of which is set out on pages SGM-1 to SGM- 3 of this circular, for
the Independent Shareholders to consider and, if thought fit, approve the Agreement and the
transactions contemplated thereunder (including the allotment and issue of the Consideration
Shares).
In compliance with the Listing Rules, the resolution will be voted on by way of poll at the
SGM.
To the best of the Directors’ knowledge, information and belief, having made all
reasonable enquiries, no Shareholder has a material interest in the Agreement and the transactions
contemplated thereunder and no Shareholder will be required to abstain from voting at the SGM
to approve the resolution regarding the Agreement and the transactions contemplated thereunder
(including the allotment and issue of the Consideration Shares). None of the Directors has a
material interest in the Agreement and the transactions contemplated thereunder.
– 15 –
LETTER FROM THE BOARD
You will find enclosed a form of proxy for use at the SGM. Whether or not you are able to
attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance
with the instructions printed thereon as soon as possible and in any event not less than 48 hours
before the time appointed for holding the SGM or any adjournment thereof to the office of the
Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level
22, Hopewell Centre, 183 Queen’s Road East, Hong Kong. Completion and return of the form of
proxy will not preclude you from attending and voting in person at the SGM or any adjournment
thereof should you so wish, and in such event, the instrument appointing a proxy shall be deemed to
be revoked.
RECOMMENDATION
The Independent Board Committee, having taken into account the advice of the Independent
Financial Adviser, considers that the terms of the Agreement are normal commercial terms and the
entering into of the Agreement and the transactions contemplated thereunder are fair and reasonable
so far as the Independent Shareholders are concerned and are in the interests of the Company and
the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the
Independent Shareholders to vote for the resolution to approve the Agreement and the transactions
contemplated thereunder (including the allotment and issue of the Consideration Shares). The text
of the letter from the Independent Board Committee is set out on page 17 of this circular.
Having considered the above-mentioned benefits to the Group, the Directors believe that
the terms of the Acquisition are fair and reasonable and in the interests of the Company and the
Shareholders as a whole. The Board recommends the Independent Shareholders to vote in favour of
the resolution as set out in the notice of the SGM.
ADDITIONAL INFORMATION
Your attention is also drawn to the additional information set out in the appendices to this
circular.
By order of the Board
Town Health International Medical Group Limited
Lee Chik Yuet
Executive Director
– 16 –
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
Town Health International Medical Group Limited
康健國際醫療集團有限公司
(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)
(Stock Code: 3886)
19 November 2014
To the Independent Shareholders
Dear Sir or Madam,
MAJOR AND CONNECTED TRANSACTION:
ISSUE OF CONSIDERATION SHARES TO
BONJOUR GROUP LIMITED
UNDER SPECIFIC MANDATE
IN RELATION TO THE
ACQUISITION OF 100% INTEREST IN THE TARGET
This Independent Board Committee has been appointed to advise you on the terms of the
Acquisition, details of which are set out in the letter from the Board contained in the circular to the
Shareholders dated 19 November 2014 (“Circular”) of which this letter forms part. Terms defined
in the Circular shall have the same meanings when used in this letter unless the context otherwise
requires.
Having considered the terms of the Acquisition and the advice of the Independent Financial
Adviser in relation thereto as set out on pages 18 to 38 of the Circular, we are of the opinion that
the terms of the Agreement are normal commercial terms and the entering into of the Agreement
and the transactions contemplated thereunder are fair and reasonable so far as the Independent
Shareholders are concerned and are in the interests of the Company and the Shareholders as a
whole. We therefore recommend the Independent Shareholders to vote in favour of the ordinary
resolution to be proposed at the SGM to approve the Agreement and the transactions contemplated
thereunder (including the allotment and issue of the Consideration Shares).
Yours faithfully,
Independent Board Committee of
Town Health International Medical Group Limited
Chan Kam Chiu
Wai Kwok Hung, SBS, JP
Ho Kwok Wah, George
Independent non-executive Directors
– 17 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The following is the full text of the letter from the Independent Financial Adviser to the
Independent Board Committee and the Independent Shareholders in respect of the Agreement and
the transactions contemplated thereunder, prepared for the purpose of incorporation in this circular.
Goldin Financial Limited
23rd Floor
Two International Finance Centre
8 Finance Street
Central
Hong Kong
19 November 2014
To the Independent Board Committee and the Independent Shareholders
Dear Sirs,
MAJOR AND CONNECTED TRANSACTION
INTRODUCTION
We refer to our appointment as the Independent Financial Adviser to the Independent Board
Committee and the Independent Shareholders in relation to the Agreement and the transactions
contemplated thereunder, details of which are set out in the letter from the board (the “Letter
from the Board”) contained in the circular dated 19 November 2014 issued by the Company (the
“Circular”), of which this letter forms part. Capitalised terms used in this letter shall have the same
meanings as defined in the Circular unless the context requires otherwise.
On 20 August 2014, after trading hours, the Company and the Vendor entered into the
Agreement pursuant to which the Company has conditionally agreed to allot and issue 365,327,586
Consideration Shares to the Vendor (or its nominee) to settle the Consideration of HK$423,780,000
in respect of the Vendor’s conditional sale, and the Company’s conditional acquisition, of the Sale
Shares (representing 100% of the issued share capital of the Target).
As the relevant percentage ratios under the Listing Rules in respect of the Acquisition are
more than 25% but less than 100%, the Acquisition constitutes a major transaction for the Company
under the Listing Rules and is subject to notification, announcement and Shareholders’ approval
requirements of Chapter 14 of the Listing Rules. As at the Latest Practicable Date, the Target
was wholly-owned by the Vendor and the Vendor was beneficially owned as to 100% by Bonjour
Holdings, which was indirectly and beneficially owned as to 61.10% by Dr. Ip. As such, Dr. Ip is
an ultimate substantial shareholder of the Target. Pursuant to the Agreement, it is proposed that
– 18 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Dr. Ip will be appointed as an executive Director with effect from the Completion Date. As such,
Dr. Ip, an ultimate substantial shareholder of the Target, is proposed to be a controller (as defined
under the Listing Rules) of the Company. Accordingly, the Acquisition also constitutes a connected
transaction for the Company under Chapter 14A of the Listing Rules and is subject to reporting and
announcement and Independent Shareholders’ approval requirements of Chapter 14A of the Listing
Rules.
THE INDEPENDENT BOARD COMMITTEE
The Independent Board Committee, comprising all independent non-executive Directors,
namely Mr. Chan Kam Chiu, Mr. Ho Kwok Wah, George and Mr. Wai Kwok Hung, SBS, JP , has been
established to make recommendations to the Independent Shareholders as to whether the terms of
the Agreement are normal commercial terms and whether the entering into the Agreement and the
transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders
are concerned and are in the interests of the Company and the Shareholders as a whole and to
advise the Independent Shareholders on how to vote on the resolution in respect of the Agreement
and the transactions contemplated thereunder after taking into account the recommendations of the
Independent Financial Adviser.
We, Goldin Financial Limited, have been appointed by the Company as the Independent
Financial Adviser to advise the Independent Board Committee and the Independent Shareholders
in relation to the Agreement and the transactions contemplated thereunder and to make a
recommendation as to, among others, whether the terms of the Agreement are normal commercial
terms and whether the entering into of the Agreement and the transactions contemplated thereunder
are fair and reasonable so far as the Independent Shareholders are concerned and are in the
interests of the Company and the Shareholders as a whole and as to voting in respect of the relevant
resolution at the SGM.
BASIS OF OUR ADVICE
In formulating our opinions and recommendations, we have reviewed, inter alia, the
announcement of the Company dated 20 August 2014 in relation to the Agreement, the Circular, the
Agreement, the annual report of the Company for the year ended 31 December 2013 (the “Annual
Report 2013”) and the interim report of the Company for the six months ended 30 June 2014 (the
“Interim Report 2014”). We have also reviewed certain information provided by the management
of the Company relating to the operation, financial conditions and prospects of the Group. We have
also considered such other information, analyses and market data which we deemed relevant. We
have assumed that such information and statements, and any representation made to us, which we
have relied upon in formulating our opinion, are true, accurate and complete in all material respects
as of the date hereof and the Shareholders will be notified of any material changes as soon as
possible.
– 19 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The Directors collectively and individually accept full responsibility for the accuracy of
the information contained in the Circular and confirm, having made all reasonable inquiries, that
to the best of their knowledge, information contained in the Circular is accurate and complete in
all material respects and not misleading or deceptive and there are no other matters the omission
of which would make any statement in the Circular misleading. We consider that we have been
provided with, and we have reviewed, all currently available information and documents under
present circumstances to enable us to reach an informed view regarding the terms of, and the
reasons for entering into, the Agreement and the transactions contemplated thereunder and to justify
reliance on the accuracy of the information contained in the Circular so as to provide a reasonable
basis of our opinion. We have no reasons to suspect that any material facts or information has been
withheld by the Directors or management of the Company, or is misleading, untrue or inaccurate.
We have not, however, for the purpose of this exercise, conducted any independent detailed
investigation or audit into the businesses or affairs or future prospects of the Company, the Vendor,
the Target or their respective subsidiaries or associates. Our opinion was necessarily based on
financial, economic, market and other conditions in effect, and the information made available to us
as at the Latest Practicable Date.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In giving our recommendation to the Independent Board Committee and the Independent
Shareholders in respect of the Agreement and the transactions contemplated thereunder, we have
taken into account the following principal factors and reasons:
1.
Business and financial information of the Group
The Group is principally engaged in (i) healthcare business investments; (ii) provision
and management of healthcare and related services; and (iii) properties and securities
investments and trading. Set out below is certain audited financial information of the Group
for the two years ended 31 December 2012 and 2013 as extracted from the Annual Report
2013 and certain unaudited financial information of the Group for the six months ended 30
June 2013 and 2014 as extracted from the Interim Report 2014:
Table 1: Financial highlights of the Group
For the year ended
31 December
2012
2013
(audited)
(audited)
HK$’000
HK$’000
Revenue
(Loss)/profit
for the year/period
For the six months ended
30 June
2013
2014
(unaudited)
(unaudited)
HK$’000
HK$’000
341,768
354,553
164,694
191,887
(430,664)
79,318
22,001
64,634
– 20 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
As at 31 December
2012
2013
(audited)
(audited)
HK$’000
HK$’000
Non-current assets
Current assets
Current liabilities
Net current assets
Net assets
1,031,686
640,862
(333,593)
307,269
1,337,349
849,945
1,162,572
(515,977)
646,595
1,493,477
As at 30 June
2014
(unaudited)
HK$’000
712,024
1,185,925
(386,299)
799,626
1,498,047
For the year ended 31 December 2013
For the year ended 31 December 2013, the Group recorded an audited revenue
of approximately HK$354.55 million, representing an increase of approximately
3.74% compared to approximately HK$341.77 million recorded in the previous year.
The Group recorded an audited profit after taxation of approximately HK$79.32
million, as compared to a loss after taxation of approximately HK$430.66 million in
the previous year, which was mainly attributable to, among other matters, (i) share of
profits of associates during the year of approximately HK$159.93 million as compared
to share of loss of approximately HK$9.47 million in the previous year; (ii) the gain
on disposal of associates completed during the year of approximately HK$27.84
million as compared to that of approximately HK$3.46 million in the previous year;
and (iii) an increase in the profits for provision of healthcare and dental services
business, for the year ended 31 December 2013, rising from approximately HK$11.54
million in the previous year to approximately HK$21.04 million.
As at 31 December 2013, the audited net current assets and net assets of
the Group amounted to approximately HK$646.60 million and approximately
HK$1,493.48 million, respectively, increased by approximately 110.43% and
approximately 11.67% from approximately HK$307.27 million and approximately
HK$1,337.35 million as at 31 December 2012, respectively.
– 21 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
For the six months ended 30 June 2014
For the six months ended 30 June 2014, the Group recorded an unaudited
revenue of approximately HK$191.89 million, representing an increase of
approximately 16.51% compared to approximately HK$164.69 million recorded
in the previous corresponding period. Unaudited profit for the period increased
to approximately HK$64.63 million, which is almost 3 times the profit for the
previous corresponding period of approximately HK$22.0 million, which was mainly
attributable to (i) an increase in the revenue for the provision of healthcare and dental
service business; (ii) a reversal of tax provision on unrealised gain in securities
trading; (iii) a reversal of provision for impairment of certain loans receivable; and
(iv) a fair value gain on held for trading investments.
As at 30 June 2014, the unaudited net current assets and net assets of the Group
amounted to approximately HK$799.63 million and approximately HK$1,498.05
million, respectively, increased by approximately 23.67% and approximately 0.31%
from approximately HK$646.60 million and approximately HK$1,493.48 million as at
31 December 2013, respectively.
2.
Information on the Target Group
The Target is a company incorporated in the BVI with limited liability whose
principal business activity is investment holding. As one of the condition precedents to the
Completion, the Restructuring has been carried out and was completed on 29 August 2014,
details of which are contained in the Letter from the Board.
Upon Completion, the Target shall have 8 subsidiaries. The Target Group is principally
engaged in the operation of 17 beauty and health salons under the brands of “About Beauty”,
“Dr. Protalk” and “Top Comfort” in Hong Kong, Macau and Shanghai, the PRC, and
provision of beauty and health-care related consultancy services in Hong Kong and Macau.
– 22 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Financial overview
Set out below are the audited combined financial information of the Target
(assuming completion of the Restructuring having taken place) for the two years
ended 31 December 2012 and 2013 and for the six months ended 30 June 2013 and
2014 as extracted from Appendix II to the Circular:
Table 2: Financial highlights of the Target Group
For the year ended
31 December
2012
2013
HK$’000
HK$’000
Turnover
Net profit before
taxation
Net profit after
taxation
For the six months ended
30 June
2013
2014
HK$’000
HK$’000
(unaudited)
300,933
314,830
143,865
149,357
40,891
44,553
10,688
11,357
32,172
35,635
9,329
10,023
For the year ended 31 December 2013, the Target Group recorded a revenue
of approximately HK$ 314.83 million, representing an increase of approximately
4.62% compared to approximately HK$300.93 million recorded in the previous year.
Net profit after taxation of the Target Group achieved a higher growth rate, which
increased by approximately 10.76% to approximately HK$35.64 million, up from
approximately HK$32.17 million of the prior year.
As at 31 December 2013, the audited combined total assets and net assets of
the Target (assuming completion of the Restructuring having taken place) amounted to
approximately HK$261.29 million and approximately HK$13.73 million, respectively.
For the six months ended 30 June 2014, the Target Group recorded a revenue of
approximately HK$149.36 million, representing an increase of approximately 3.82%
compared to approximately HK$143.87 million recorded in the prior corresponding
period. As stated in the Letter from the Board, the major costs of the Target Group
for the six months ended 30 June 2014 were staff costs and rental expenses of beauty
salons, which accounted for approximately 44.2% and 16.6% of the total revenue of
the Target Group respectively. Net profit after taxation of the Target Group for the
– 23 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
six months ended 30 June 2014 increased by approximately 7.44% to approximately
HK$10.02 million, up from approximately HK$9.33 million of the prior corresponding
period.
As at 30 June 2014, the audited combined total assets and net assets of the
Target (assuming completion of the Restructuring having taken place) amounted to
approximately HK$286.97 million and approximately HK$23.90 million, respectively.
Operational overview
Set out below are an overview of the Target Group’s beauty and health salons
operation based on the information provided by the Company:
About Beauty
Number of stores
Total: 12 beauty salons
– Hong Kong: 10
– Macau: 1
– PRC: 1
Number of employees
338
Services provided
Facial, nail art and body massage
Dr. Protalk
Number of stores
Hong Kong: 3 medical beauty centers
Number of employees
16
Services provided
Micro-cosmetic beauty treatment, laser skin care,
permanent laser hair removal and botox injection
Top Comfort
Number of stores
Hong Kong: 2 health salons
Number of employees
6
Services provided
Foot massage services
– 24 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The Target Group offers one-stop professional beauty, slimming, medical
beauty care, manicure, spa and massage services through its beauty and health salon
chain. The beauty and health salons are mainly located in the downtown area across
different regions in Hong Kong, such as Causeway Bay, Tsim Sha Tsui and Mong
Kok. All the customers of the Target Group are individuals who visit the aforesaid
salons and centers of the Target Group for beauty treatment services. Beauty treatment
packages with service usage period are sold to customers. Such packages sold are
initially recorded as deferred revenue under current liabilities and are recognised as
revenue in the income statement of the Target Group when the underlying services are
delivered.
As stated in the Letter from the Board, revenue from each of About Beauty, Dr.
Protalk and Top Comfort for the three years ended 31 December 2013 and for the six
months ended 30 June 2014 was derived from the service fees for the provision of its
respective services as discussed above. During the six months ended 30 June 2014,
About Beauty, Dr. Protalk and Top Comfort contributed 57.0%, 39.3% and 3.7% of the
total revenue of the Target Group, respectively.
As advised by the management of the Company, the Target Group has been
committing to various advertising and marketing campaigns since its establishment.
We were advised that the yearly marketing budget amounts to between HK$15 million
and HK$20 million, with key marketing initiatives including, but not limited to (i)
signing of celebrities as spokespersons to deliver brand value; (ii) on-going marketing
and sales promotional programs like magazine/newspaper advertisings, as well as TV
program sponsorship; and (iii) cooperation with shopping malls/banks for one-off/
periodic sales and marketing programs.
3.
Reasons for and benefits of the Acquisition
The Group is principally engaged in (i) healthcare business investments; (ii) provision
and management of healthcare and related services; and (iii) properties and securities
investments and trading.
As stated in the Letter from the Board, the Group is seeking to expand its business
scope and scale through acquisitions in Hong Kong and the PRC, and that besides offering
medical and medically related services, the Group is actively exploring opportunities to
venture into other health or healthcare related businesses.
– 25 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
A stance as shared in the Chairperson’s Statement in the Annual Report 2013,
the Group has been striving to develop medical centers in five specialties in Hong Kong
which include cosmetic dermatology, alongside the other four areas of ophthalmology,
orthopaedics, in-vitro fertilization subspecialty, and general surgery. The Group plans
to develop a cosmetic dermatology medical center which provides advanced medical
dermatology treatments, including plastic surgery treatments. It should be noted that,
according to the Letter from the Board, as at the Latest Practicable Date, the development of
the cosmetic dermatology business was still in a preliminary stage and the Group was in the
course of identifying suitable location for the cosmetic dermatology medical center.
As analysed in the section headed “Information on the Target Group” above, the
Target Group is an established cosmetic beauty chain in Hong Kong, leveraging on the
brands of “About Beauty”, “Dr. Protalk” and “Top Comfort”.
The Group believes that by integrating this planned cosmetic dermatology medical
center with the cosmetic beauty chain network of the Target Group, substantial synergy
could be created for both parties. The customer base of the Target Group could serve as the
clientele referral pool for the Group’s cosmetic dermatology medical center.
Prospect of the beauty and wellness service sector
We have researched on the information from the public domain to assess the
prospect of the Hong Kong beauty service sector as a whole. According to the World
Economic Outlook 2014 published by the International Monetary Fund, the real GDP
growth was 2.9% in 2013, and is projected to accelerate to 3.7% and 3.8% in 2014 and
2015, respectively. Of all the business sectors, the beauty and wellness service sector
has seen healthy growth alongside the steady economic development. The Group
believes that there exists great demand in the beauty market due to the increasing
awareness for beauty care. Indeed, according an article published by InvestHK, an
organisation established by the Hong Kong government promoting commerce in Hong
Kong, there was a total of 9,770 beauty and personal grooming service establishments
in the city in 2013, rising from 9,530 and 9,650 in 2011 and 2012 respectively, with
reference to the statistical data released by the Census and Statistics Department.
Among which the number of establishments under the segment of skin and facial care
services, also known as cosmetic dermatology, has increased from 4,660 in 2012 to
4,710 in 2013. The total number of persons engaged in the entire beauty and wellness
service sector also increased to 38,490 in 2013, up from 37,780 and 38,040 in 2011
and 2012 respectively. As such, we are positive of the prospect of the beauty and
wellness service sector given the aforesaid market trend, as well as the growth of the
consumer population.
– 26 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
In addition to the above market trend of the beauty service sector, as mentioned
under the section headed “Management discussion and analysis” in the Interim
Report 2014, the Directors consider that 2014 is a year of inflection for the healthcare
industry with a series of favourable policies released in 2013 paving the way for the
opening up of the Chinese medicine hospital and healthcare service markets, and with
the improved access to healthcare services and increased public awareness for wellbeing, the health expenditure is expected to increase rapidly. We noted that a paper
called “Development of Chinese Medicine and Integrated Chinese-Western Medicine
Project (ICWM)” was presented to the Legislative Council Panel on Health Services
on 17 March 2014, outlining the government’s plan to develop Chinese medicine
hospital as well as Chinese medicine specialisation and in-patient services under the
ICWM pilot project, alongside the other two focuses of research and development, and
development of the Chinese medicines industry (including Chinese medicine testing).
We consider that such developments might result in increasing public awareness
for health and well being, and accordingly the end demand for beauty and wellness
services.
Synergies of the business combination
It is noted that there are increasing number of beauty and wellness services
that involve medical procedures. An adverse incidents in October 2012 involving
invasive procedures provided by a beauty parlour raised public concern and drew the
attention of the government. Following the incident, a working group chaired by the
Director of Health and comprising 22 members representing the relevant medical
specialties, beauty industry and consumer advocates has been established to examine
and identify cosmetic services that should be classified as medical treatment and
performed by registered medical practitioners, with an aim to minimise the health
risks involved in cosmetic services and safeguard the interest of consumer. A list of
35 cosmetic procedures with potential safety concerns has been compiled, comprising,
among others, procedures involving skin puncture, external application of energy and
mechanical/chemical exfoliation of the skin. Recommendations of the working group
on differentiation between medical procedures and beauty services was submitted to
the Legislative Council Panel on Health Services on 18 November 2013 and legislative
procedure is still underway.
– 27 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The Group has long been engaged in healthcare business investments and
provision and management of healthcare and related services. According to the
Annual Report 2013, as at 31 December 2013, the Company operated 68 clinics in the
provision of comprehensive medical and other healthcare services. The Group also
provides laboratory testing and services ranging from primary and specialty medical
healthcare services to dental services. The Group also provides medical diagnostic
services as well as other auxiliary medical services. Leveraging on its experience
in providing medical services, the Group plans to develop a cosmetic dermatology
medical center which provides advanced medical dermatology treatments, including
plastic surgery treatments. Based on our discussion with the management of the
Company, we noted that there are limitations on the beauty and wellness services, in
particular over the provision of services involving medical procedures with inherent
health risks. The presence of a cosmetic dermatology medical center such as one the
Group plans to develop in our view could help enhance the service scope and quality
of the Target Group, offering to the customers more quality, advanced and professional
medical dermatology services. Meanwhile, the customer base of the Target Group
could serve as the clientele referral pool for the Group’s cosmetic dermatology
medical center. And with such medical background of the Group, it is expected there
exists a good branding effect to strengthen the image of the cosmetic beauty chain
of the Target Group, in particular under the mainstream trend for demanding more
professional involvement in the sector following the adverse incidents in the past.
With respect to the regulation of the beauty and wellness service sector in the
medical context, we consider that, should the legislation of the proposed regulations
be enacted, numerous cosmetic procedures will be regulated, and non-compliant
market practitioners shall be forced to cease the regulated activities, while the Target
Group, with the supporting of the cosmetic dermatology medical center of the Group,
is expected to be in a favourable position to capitalise from such transformation of the
industry.
Having considered that (i) the profitable track record of the Target Group, with
net profit after taxation for the year ended 31 December 2013 recording a 10% growth
rate; (ii) the positive prospect of the beauty and wellness service sector as evidenced
by the increasing number of establishments; (iii) the customer base of the Target
Group serving as the clientele referral pool for the Group’s cosmetic dermatology
medical center to be developed as part of the Group’s plan; (iv) the medical
background of the Group is expected to create a good branding effect strengthening
the image of the cosmetic beauty chain of the Target Group; and (v) the Target Group
together with the cosmetic dermatology medical center of the Group to be developed
is expected to capitalise from the increasing regulation in the industry, we are of the
view that the Acquisition is in the interests of the Company and the Shareholders as a
whole.
– 28 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
4.
Principal terms of the Agreement
Pursuant to the Agreement, the Company has conditionally agreed to acquire
and the Vendor has conditionally agreed to sell the Sale Shares at the Consideration of
HK$423,780,000 which shall be paid by the Company by the allotment and issue of
365,327,586 Consideration Shares at an issue price of HK$1.16 per Consideration Share (the
“Issue Price”) to the Vendor (or its nominee) at Completion.
Determination of the Consideration
The Consideration was determined after arm’s length negotiations between the
Company and the Vendor with reference to (i) historical financial performance of the
Target Group, being the unaudited combined net profit of the Target for the year ended
31 December 2013; and (ii) the business potential of the Target Group.
In assessing the fairness and reasonableness of the Consideration, we have
attempted to compare the price-to-earnings ratio (the “P/E Ratio”) as represented
by the Consideration to the net profit after taxation of the Target Group for the year
ended 31 December 2013, with the P/E Ratio of other companies engaged in business
similar to the Target Group (which is regarded as one of the commonly used valuation
methods to value a company with recurrent income base). Companies are selected
based on the following criteria: (i) of companies listed on the Stock Exchange; (ii)
generating segment revenue from the provision of beauty and wellness services (which
is similar to the principal business of the Target Group) of not less than 50% of the
total revenue of the latest financial year and of a profit-making position; and (iii)
having more than half of the segment revenue derived in the PRC region (including
Hong Kong and Macau). We have, to our best effort, identified and made references
to, so far as we are aware, 4 companies that meet the aforesaid criteria which is
exhaustive (the “Comparables”). We consider that the Comparables are fair and
representative samples for comparison as the principal businesses and geographical
source of revenue are similar to those of the Target Group. Details of our analyses are
set out in the following table:
– 29 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Table 3: Comparables analyses
Company name
(stock code)
Century Legend
(Holdings) Limited (79)
Modern Beauty Salon
Holdings Limited (919)
Perfect Shape (PRC)
Holdings Limited
(1830)
Water Oasis Group
Limited (1161)
Shares
outstanding
(Note)
Share
price
(Note)
HK$
Market
capitalization
(1)
Profit after
tax for
the latest
financial year
(2)
P/E Ratio
(3)=(1)/(2)
HK$
HK$
times
303,609,597
0.61
185,201,854
16,938,000
10.93
873,996,190
0.55
480,697,905
54,841,000
8.77
1,130,416,000
1.66
1,876,490,560
83,024,000
22.60
763,952,764
0.55
420,174,020
30,880,000
13.61
Mean
Max
Min
13.98
22.60
8.77
Profit after tax
(31 December
2013)
Consideration
Target Group
423,780,000
35,635,000
11.89
Source: Website of the Stock Exchange
Note:
Based on the closing share price as quoted on the Stock Exchange on 20 August 2014,
being the date of the Agreement and the number of outstanding shares as at 31 August 2014
As shown in the above table, the P/E Ratios of the Comparables range from
a minimum of 8.77 to a maximum of 22.60 with a mean of 13.98. The P/E Ratio
represented by the Acquisition of approximately 11.89 is within the range and
below the mean of that of the Comparables. As such, we are of the view that the
Consideration is fair and reasonable.
– 30 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Payment of the Consideration
The Consideration of HK$423,780,000 shall be paid by the Company by the
allotment and issue of 365,327,586 Consideration Shares, credited as fully paid, at
the Issue Price of HK$1.16 per Consideration Share to the Vendor (or its nominee) at
Completion.
The 365,327,586 Consideration Shares represent (i) approximately 7.85% of the
issued share capital of the Company as at the date of the Latest Practicable Date; and
(ii) approximately 7.28% of the issued share capital of the Company as enlarged by
the allotment and issue of the Consideration Shares (assuming that there is no other
change to the issued share capital of the Company).
The Issue Price of HK$1.16 per Consideration Share was arrived at by the
Company and the Vendor after arm’s length negotiations taking into account the
prevailing trading price of the Shares. The Issue Price also represents:
(i)
a discount of approximately 2.52% to the closing price of HK$1.19 per
Share as quoted on the Stock Exchange on the date of the Agreement;
(ii)
the average closing price of HK$1.16 per Share as quoted on the Stock
Exchange for the five consecutive trading days of the Shares up to and
including the date of the Agreement; and
(iii)
a discount of approximately 8.66% to the closing price of HK$1.27 per
Share as quoted on the Stock Exchange on the Latest Practicable Date.
The Consideration Shares will be issued under the Specific Mandate.
– 31 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Share price performance
Chart 1 below shows the daily closing price of the Shares versus the Issue Price
for the period commencing from 20 August 2013 (being the 12-month period prior to
the Agreement as it is a commonly used tenure for analysis purpose) up to the Latest
Practicable Date (the “Review Period”):
Chart 1: Share price performance versus the Issue Price
2.0
1.8
1.6
Share Price
(HK$)
1.4
1.2
1.0
0.8
0.6
0.4
0.2
14
4
20
/1
0/
20
01
4
20
/9
/2
01
4
20
/8
/2
01
4
/2
/7
20
20
/2
01
4
Closing Price
/6
4
01
20
/5
/2
4
20
/4
/2
01
4
01
01
/2
/3
20
20
/2
/2
01
4
13
20
20
/1
/2
13
2/
/1
20
20
/1
1/
20
13
3
20
01
20
/1
0/
/2
/9
20
20
/8
/2
01
3
0.0
Issue Price
Source: The website of the Stock Exchange (www.hkex.com.hk)
Note 1: Pursuant to the payment of the final dividend for the year ended 31 December 2013, the last
day of dealings in the Shares on a cum-dividend basis was on 27 May 2014 and dealings
in the Shares on an ex-dividend basis were commenced on 28 May 2014. For comparison
purpose, the closing Share prices for the period from 20 August 2013 to 27 May 2014 have
been adjusted on an ex-dividend basis.
Note 2: Trading in the Shares was suspended during the afternoon session of 12 June 2014, and on
31 October 2014.
– 32 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
It is noted that the closing Share price was traded within the range from
HK$0.17 to HK$1.72 with a mean of approximately HK$0.90 during the Review
Period. The Issue Price represents a discount of approximately 32.56%, a premium
of approximately 582.35% and a premium of approximately 29.31% to the highest,
lowest and the mean of the closing Share price during the Review period, respectively.
On 13 March 2014, the Company issued a profit alert announcement informing
Shareholders that the Group is expected to record a profit for the year ended 31
December 2013. On 25 March 2014, the Company published the annual results for the
year ended 31 December 2013, showing profit for the year ended 31 December 2013
amounted to approximately HK$79.32 million, compared to a loss of approximately
HK$430.66 million in the previous year. Further on 6 August 2014, the Company
issued a profit alert announcement informing Shareholders that the unaudited
consolidated profit of the Group for the six months ended 30 June 2014 is expected to
increase from approximately HK$22 million for the six months ended 30 June 2013 to
not less than HK$60 million. On 25 August 2014, the Company published the interim
results for the six months ended 30 June 2014, showing profit for the six months
ended 30 June 2014 increased to approximately HK$64.63 million, which is almost 3
times the profit for the previous corresponding period.
We noted that the closing Share prices of the Company were in an upward trend
from HK$0.204 on 20 August 2013 to a maximum of HK$1.72 on 9 June 2014 before
returning and remaining steady at HK$1.27 as of the Latest Practicable Date.
– 33 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Historical trading volume of Shares
Table 4 below shows the average daily trading volume of the Shares per
month, and the respective percentages of the Shares’ average daily trading volume
as compared to the total number of issued Shares for each month, during the Review
Period:
Table 4: Historical trading volume of the Shares
% of Average
daily trading
volume over
outstanding
shares
Month
Number
of trading
days
Total number
of shares
trading volume
Average daily
trading volume
Total number
of outstanding
shares at
the end of
each month
Aug-13
Sept-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
June-14
Jul-14
Aug-14
Sept-14
Oct-14
21
20
21
21
20
21
19
21
20
20
20
22
21
21
20
175,535,000
67,208,502
69,965,400
74,212,370
68,961,560
41,942,840
260,615,460
146,367,665
97,051,582
122,844,962
549,301,515
358,072,250
330,355,479
595,375,423
344,252,101
8,358,810
3,360,425
3,331,686
3,533,922
3,448,078
1,997,278
13,716,603
6,969,889
4,852,579
6,142,248
27,465,076
16,276,011
15,731,213
28,351,211
16,712,605
915,437,710
915,437,710
915,937,710
916,937,710
916,937,710
916,937,710
916,937,710
916,937,710
916,937,710
916,937,710
4,584,688,550
4,616,188,550
4,616,188,550
4,616,188,550
4,629,188,550
0.91%
0.37%
0.36%
0.39%
0.38%
0.22%
1.50%
0.76%
0.53%
0.67%
0.60%
0.35%
0.34%
0.61%
0.36%
Nov-14 (Up to
the Latest
Practicable Date)
10
108,218,402
10,821,840
4,651,188,550
0.23%
Source: The website of the Stock Exchange (www.hkex.com.hk)
As illustrated from Table 2 above, we note that the average daily trading
volume of the Shares accounted for only a small portion (less than 1%) of the total
number of outstanding Shares for each month during the Review Period, except for
February 2014 which recorded a slightly higher figure of approximately 1.5%. Based
on the above, we consider that the liquidity of the Shares was thin during the Review
Period.
– 34 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Taking into account that (i) the Issue Price represents a premium over the
average closing price of the Shares during the Review Period; (ii) the liquidity of the
Shares was thin during the Review Period; and (iii) the reasons for entering into the
Agreement as described under the paragraphs headed “3. Reasons for, and benefits of
the Acquisition” above, we are of the view that the Issue Price is fair and reasonable
and is in the interests of the Company and the Shareholders as a whole.
The payment of the Consideration by way of issuing the Consideration Shares
will not involve any cash outlay of the Group (save for the payment of expenses
relating to the Acquisition), which allows the Group to conserve its financial resources
for its business developments. The issue of the Consideration Shares will at the same
time introduce Bonjour Holdings Group, through its shareholding in the Vendor, as
a shareholder of the Company. Bonjour Holdings Limited is listed company on the
Main Board of the Stock Exchange (stock code: 653), principally engaged in, other
than the operation of beauty and health salons through the Target Group, the retail
and wholesale of beauty and health-care products in Hong Kong, Macau and the PRC.
According to the annual report of Bonjour Holdings Limited for the year ended 31
December 2013, its total turnover for the year reached approximately HK$3,039.22
million with a total of 46 retail stores in Hong Kong, Macau and the PRC. Considering
the strong market presence of Bonjour Holdings Limited in the cosmetics and healthcare products retail sector, we consider that the introduction of Bonjour Holdings
Limited as a shareholder and a business partner of the Company through the issue
of the Consideration Shares could give the Group a competitive edge in the beauty
service sector with insight into the consumer trend and market intelligence which is
positive to the business of the Group.
The loan agreement
Upon Completion, the Vendor and Hong Kong Company 1 will enter into a
loan agreement in a form and substance to be agreed by the Vendor and the Purchaser
in relation to the loan of HK$138,000,000 owing by the Vendor to Hong Kong
Company 1 (the “Loan”), which has been advanced by certain subsidiaries of Bonjour
Holdings to the Vendor in 2000 and will be assigned by those subsidiaries to Hong
Kong Company I before Completion, based on the terms set out below:
(a)
the Loan shall be for a term of two years from the Completion Date;
(b)
the Loan shall carry interest at the rate of 3% per annum, calculated on
the basis of the actual number of days elapsed and a 365-day year;
(c)
interest will be paid semi-annually in arrears since the Completion Date;
and
– 35 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
(d)
the Vendor may at any time during the term of the Loan early repay the
Loan in full together with the accrued interest up to and including the
early repayment date by giving not less than ten Business Days’ prior
written notice to Hong Kong Company 1 before the repayment date.
The Loan has been advanced by certain subsidiaries of Bonjour Holdings to the
Vendor in 2000, which is before the date of the Agreement. At the time of the advance
of the Loan, as the Loan was loaned between group members of Bonjour Holdings
Group, the Loan was interest free and there was no maturity date of the Loan. The
parties to the Agreement agree that as part of the terms of the Agreement, the Loan
shall be for a term of two years from the Completion Date and carry interest at the
rate of 3% per annum. Taking into account that the advance of the Loan took place
before the date of the Agreement and the Completion, the advance of the Loan are not
considered as a financial assistance granted by the Group under the Listing Rules.
We were given to understand that the arrangement of the Loan was arrived at
after arm’s length negotiation as part of the terms of the Acquisition. The Loan shall
carry interest at the rate of 3% per annum. To assess the fairness and reasonableness
of the interest rate, we have analysed the financial information of Bonjour Holdings
Limited which wholly owns the Vendor. According to the annual report of Bonjour
Holdings Limited for the year ended 31 December 2013, Bonjour Holdings Limited
recorded net current assets and net assets of approximately HK$238.08 million and
approximately HK$398.56 million respectively, with net cash of approximately
HK$323.56 million (based on the bank and cash balance of the Group net of shortterm bank borrowings and trade finance loans). On the other hand, the interest rates
for short-term bank borrowings of Bonjour Holdings Limited range from HIBOR +
1.75% to + 2%, which translate to a range between approximately 2.59% and 2.84%
based on the 1-year HIBOR of approximately 0.84% as at the Latest Practicable Date
according to the Hong Kong Association of Banks. We consider that such borrowing
rates have reflected the risk profile of Bonjour Holdings Limited as appraised by
banks in Hong Kong. As such, we consider that the interest rate of 3% per annum
borne by the Loan is fair and reasonable.
Having considered the above, in particular the basis of determination of the
Consideration and the Issue Price, we are of the view that the terms of the Agreement,
including the loan agreement in relation to the Loan to be entered into, are normal
commercial terms, fair and reasonable so far as the Independent Shareholders are
concerned and in the interests of the Company and the Shareholders as a whole.
– 36 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
5.
Effects on the shareholding structure of the Company
The following table sets out the shareholding structure of the Company (based on the
best knowledge of the Directors) (i) as at the Latest Practicable Date; and (ii) immediately
upon Completion (assuming that save for the issue of the Consideration Shares, there is no
issue of new Shares from the Latest Practicable Date to Completion and there is no exercise
of the share options of the Company):
Broad Idea International
Limited (Note 1)
Bonjour Group Limited
(Note 2)
Public Shareholders
Total
As at the
Latest Practicable Date
No. of Shares Approximate %
Immediately after
the allotment and issue of
the Consideration Shares
No. of Shares Approximate %
1,233,202,615
26.51
1,233,202,615
24.58
–
3,417,985,935
–
73.49
365,327,586
3,417,985,935
7.28
68.13
4,651,188,550
100
5,016,516,136
100
Notes:
1.
As at the Latest Practicable Date, Broad Idea International Limited is beneficially owned as to
50.1% by Dr. Cho Kwai Chee and 49.9% by Dr. Choi Chee Ming, GBS, JP .
2.
As at the Latest Practicable Date, Bonjour Group Limited was wholly-owned by Bonjour Holdings
Limited.
Upon Completion with no exercise of the share options of the Company, the dilution
effect on the existing public Shareholders would be from approximately 73.49% to 68.13%
as a result of the issue of the Consideration Shares, representing a dilution of approximately
5.36% which is in our view relatively minor. Taking into account that (i) the reasons for,
and the benefits of entering into the Agreement as described under the paragraphs headed
“3. Reasons for and benefits of the Acquisition” above; and (ii) the issue of the Consideration
Shares allows the Group to complete the Acquisition without any cash outlay (save for the
payment of the related expenses), we are of the view that the abovementioned advantages to
the Group outweigh the dilution effects to the Independent Shareholders’ beneficial interests
and are therefore of the view that the possible dilution effect on the shareholding interests of
the existing public Shareholders is justifiable.
– 37 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
6.
Financial impacts of the Acquisition
(i)
Net asset value
According to the Interim Report 2014, the net assets of the Group were
approximately HK$1,498.05 million as at 30 June 2014. Based on the unaudited pro
forma financial information on the Enlarged Group as set out in Appendix III to the
Circular, assuming the Acquisition had taken place on 30 June 2014, the net assets of
the Group would have increased to approximately HK$2,009.51 million.
(ii)
Liquidity
According to the Interim Report 2014, the bank balances and cash of the Group
as at 30 June 2014 were approximately HK$277.48 million. Given the Acquisition will
not involve any immediate cash outlay of the Group (save for the payment of related
expenses), such settlement method would enable the Group to conserve more financial
resources for its future development.
(iii)
Financial leverage
Based on the Interim Report 2014, the gearing ratio (defined as total bank
and other borrowings divided by equity attributable to owners of the Company) was
approximately 24.53% as at 30 June 2014, or approximately 19.59% for gearing
ratio defined as total bank and other borrowings divided by total equity of the Group.
According to the unaudited pro forma consolidated statement of financial information
of the Enlarged Group as at 30 June 2014 set out in Appendix III in this circular, the
total bank and other borrowings and the total capital of the Enlarged Group would
be approximately HK$293.47 million and approximately HK$2,009.51 million,
respectively, with gearing ratio of approximately 14.60%.
– 38 –
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
RECOMMENDATIONS
Based on the abovementioned principal factors and reasons, while we are of the view that the
entering into of the Agreement and the transactions contemplated thereunder are not in the ordinary
and usual course of business of the Company, the terms of the Agreement are normal commercial
terms and the entering into of the Agreement and the transactions contemplated thereunder are
fair and reasonable so far as the Independent Shareholders are concerned and are in the interests
of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent
Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders,
to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Agreement
and the transactions contemplated thereunder.
Yours faithfully,
For and on behalf of
Goldin Financial Limited
Billy Tang
Director
*
for identification purpose only
– 39 –
APPENDIX I
1.
FINANCIAL INFORMATION OF THE GROUP
THREE-YEAR FINANCIAL INFORMATION OF THE COMPANY
Details of the financial information of the Group for the years ended 31 December 2011, 31
December 2012 and 31 December 2013 respectively have been set out in the Company’s annual
reports for the years ended 31 December 2011 (from pages 25 to 119), 31 December 2012 (from
pages 30 to 126) and 31 December 2013 (from pages 34 to 140).
All annual reports of the Company have been posted on the website of the Company
at http://www.townhealth.com. Please visit the Company’s website for more details.
2.
INDEBTEDNESS OF THE ENLARGED GROUP
The Group
As at the close of business on 30 September 2014, being the latest practicable date
for the purpose of ascertaining the indebtedness prior to the printing of this circular, the
Group had aggregate outstanding borrowings of approximately HK$256,000,000 comprising
(i) secured bank borrowings of approximately HK$210,000,000 which were secured by the
Group’s property, plant and equipment and investment properties; and (ii) unsecured loan
notes issued by the Company of approximately HK$46,000,000. No guarantee was given by
other parties regarding the bank and other borrowings.
Save as aforesaid and apart from intra-group liabilities as at the close of business on
30 September 2014, the Group did not have any debt securities issued and outstanding or
agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under
acceptance or acceptance credits, debentures, mortgages, charges, hire purchase or finance
lease commitments, guarantees or contingent liabilities.
The Target Group
As at the close of business on 30 September 2014, the Target Group did not have
any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or
other similar indebtedness, liabilities under acceptance or acceptance credits, debentures,
mortgages, charges, hire purchase or finance lease commitments, guarantees or contingent
liabilities.
I–1
APPENDIX I
3.
FINANCIAL INFORMATION OF THE GROUP
WORKING CAPITAL SUFFICIENCY OF THE ENLARGED GROUP
The Directors are of the opinion that, taking into account the cash flows generated from the
operating activities, the financial resources available to the Enlarged Group including internally
generated funds, the available credit facilities and the effect of the Acquisition, the working capital
available to the Enlarged Group is sufficient for the Enlarged Group’s requirements for at least 12
months from the date of this circular.
4.
FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP
The pursuit of beauty is a lifelong goal for female. With the prevailing trend in beauty care,
ladies nowadays pay much attention to their appearance, and high quality beauty goods are much
sought-after. The Group believes there is tremendous demand in the beauty market. A favourable
environment had set in motion for the rapid development in the beauty and slimming industry. The
development of cosmetic dermatology will be one of the Group’s business focus. In the beauty
industry, good reputation is indispensable as it underlines a brand’s effort in maintaining good
relations with customers. The Target Group has established an amiable interdependent relationship
with customers by addressing customers’ genuine needs with sincerity and offering safe, quality
and considerate beauty services to consumers.
Revenue of the Group for the year ended 31 December 2013 increased by approximately
3.74% to approximately HK$354,553,000 (2012: approximately HK$341,768,000). The Group
recorded profit of approximately HK$79,318,000 for the year ended 31 December 2013 as
compared to a loss recorded for the year ended 31 December 2012, which was mainly attributable
to (1) an increase in share of profits of associates; (2) the gain on disposal of associates completed
during the year; and (3) an increase in the profits for provision of healthcare and dental services
business, for the year ended 31 December 2013. Also, the Group did not recognise a substantial
loss in relation to loss on fair value changes on held for trading investments for the year ended 31
December 2013.
The Group is one of the largest healthcare provider groups in Hong Kong. The Group’s
core businesses include provision of primary and specialty healthcare services and other
auxiliary medical services. The Group will continue to maintain its leading position in the Hong
Kong healthcare industry, and venture into the PRC healthcare market to introduce quality and
professional medical healthcare and management services.
The Acquisition will provide considerable synergetic effects to the Group as mentioned in the
paragraph headed “Reasons for and benefits of the Transactions under the Agreement” in the letter
from the Board in this circular.
I–2
APPENDIX I
5.
FINANCIAL INFORMATION OF THE GROUP
MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors confirmed that there had been no material
adverse change in the financial or trading position of the Group since 31 December 2013 (being the
date to which the latest published audited financial statements of the Group were made up).
6.
EFFECT OF THE ACQUISITION ON THE EARNINGS AND ASSETS AND
LIABILITIES OF THE GROUP
As at 30 June 2014, the unaudited consolidated total assets of the Group amounted to
approximately HK$1,897,949,000. As set out in Appendix III to this circular, assuming Completion
had taken place on 30 June 2014, the unaudited pro forma consolidated total assets of the Enlarged
Group would be increased to approximately HK$2,701,950,000. As set out in Appendix III to
this circular, assuming Completion had taken place on 30 June 2014, the unaudited pro forma
consolidated total liabilities of the Enlarged Group would increase to HK$692,444,000. Upon
Completion, the financial results of the Target will be consolidated with those of the Group and
the earnings of the Group will be affected by the performance of the Target Group. Further details
of the financial effect of the Acquisition on the earnings and the assets and liabilities of the Group
together with the bases in preparing the unaudited pro forma financial information are set out in
Appendix III to this circular.
7.
ACQUISITIONS OR PROPOSED ACQUISITIONS AFTER 31 DECEMBER 2013
BEING THE DATE ON WHICH THE LATEST PUBLISHED AUDITED
CONSOLIDATED ACCOUNTS OF THE GROUP WERE MADE UP
As disclosed in the circular of the Company dated 21 August 2014, the Company and
BALLANTINE Alistair Nigel Stuart, OTREMBA Francis Martin, SCRIVEN Nicholas Edward,
Bioventure Holdings Limited and Healthy Treasure Trading Limited entered into the agreement for
sale and purchase dated 12 June 2014 in relation to the Company’s acquisition of 943 shares in the
issued share capital of Dr. Vio & Partners Limited (“Dr. Vio”) (representing 94.3% of the issued
share capital of Dr. Vio) at the consideration of HK$409,288,404 which shall be satisfied by the
Company in cash. Dr. Vio is a company incorporated in Hong Kong with limited liability. Dr. Vio
is principally engaged in provision of primary and specialty healthcare services including hospital
admission, as well as the full gamut of insurance-based or employer-sponsored health scheme
expenditure management, logistics and related services. Completion of such acquisition took
place on 30 September 2014. Details of the financial information of Dr. Vio for the years ended
31 December 2011, 31 December 2012 and 31 December 2013 and the five months ended 31 May
2014 respectively have been set out in the Company’s circular dated 21 August 2014 (from pages
II-1 to II-51), which has been posted on the website of the Company at http://www.townhealth.com.
Please visit the Company’s website for more details.
The aggregate of the remuneration payable to and benefits in kind receivable by the Directors
will not be varied in consequence of the abovementioned acquisition.
I–3
APPENDIX II
(1)
FINANCIAL INFORMATION OF THE TARGET GROUP
ACCOUNTANTS’ REPORT ON THE TARGET
The following is the text of a report, prepared for the sole purpose of inclusion in this
circular, received from the independent reporting accountant, RSM Nelson Wheeler, Certified
Public Accountants, Hong Kong.
29th Floor
Caroline Centre
28 Yun Ping Road
Hong Kong
19 November 2014
The Board of Directors
Town Health International Medical Group Limited
Dear Sirs,
We set out below our report on the financial information (the “Financial
Information”) of Bonjour Beauty International Limited (the “Target Company”) and its
subsidiaries (hereinafter collectively referred to as the “Target Group”) for each of the
three years ended 31 December 2013 and the six months ended 30 June 2014 (the “Relevant
Periods”) for inclusion in the circular dated 19 November 2014 issued by Town Health
International Medical Group Limited (the “Company”) in connection with the proposed
acquisition of the entire equity interest in the Target Company (the “Circular”).
The Target Company was incorporated on 21 January 2003 in the British Virgin
Islands with limited liability and acts as an investment holding company. As at the date of
this report, the Target Company has the following subsidiaries:
Place and date of
incorporation/
establishment
Issued and
fully paid
share/registered
capital
Ace Advance Limited
Hong Kong
7 January 2011
Bonjour Beauty Limited
Hong Kong
11 February 2000
Name of company
Attributable
equity interest of
the Target Group
Principal
activities
Ordinary share
of HK$1
100% (direct)
Investment holding
Ordinary shares
of HK$2
100% (direct)
Operation of beauty and
health salons in Hong
Kong
II – 1
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Name of company
Place and date of
incorporation/
establishment
Issued and
fully paid
share/registered
capital
Bonjour Beauty
(Shanghai) Limited
Hong Kong
16 February 2005
Bonjour Medical Science &
Technology Beauty Center
Limited (“Bonjour Medical”)
Attributable
equity interest of
the Target Group
Principal
activities
Ordinary share
of HK$1
100% (direct)
Investment holding
Hong Kong
13 January 2003
Ordinary shares
of HK$100
100% (direct)
Provision of beauty and
health-care related
consultancy services in
Hong Kong
Mega World (HK) Limited
(“Mega World”)
Hong Kong
29 November
2000
Ordinary shares
of HK$200,000
100% (indirect)
Investment holding
Richly Fine Limited
Hong Kong
12 July 2005
Ordinary share
of HK$1
100% (direct)
Inactive
Speedwell Group Limited
British Virgin
Islands/Macau
18 July 2003
Ordinary share
of US$1
100% (direct)
Provision of beauty and
health-care related
consultancy services in
Macau
雅悅美容（上海）有限公司
Ya Yue Cosmetics (Shanghai)
Co., Ltd.* (“Ya Yue”) (Note)
People’s Republic
of China
(the “PRC”)
20 October 2005
Registered capital of
HK$2,000,000
100% (indirect)
Operation of beauty
salons in Shanghai
* The English translation name is for identification only.
Note:
Ya Yue is a wholly-owned foreign enterprise established in the PRC.
Ace Advance Limited and Mega World have become the subsidiaries of the Target
Group upon the acquisition of the entire equity interests by the Target Company and Ace
Advance Limited respectively on 24 February 2011.
Pursuant to the Restructuring as described in note 2 to the financial information below,
which was completed on 29 August 2014, Bonjour Medical and Bonjour Beauty Limited
have become the wholly-owned subsidiaries of the Target Company now comprising the
Target Group.
All the companies now comprising the Target Group have adopted 31 December as the
financial year end date.
II – 2
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
No audited financial statements of the Target Company have been prepared since
its date of incorporation as there is no statutory audit requirement in the country of its
incorporation.
The statutory financial statements of the following subsidiaries of the Target Company
for each of the three years ended 31 December 2013, or since the respective dates of their
incorporation, where this is a shorter period, were prepared in accordance with Hong Kong
Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified
Public Accountants (the “HKICPA”) and were audited by us in accordance with Hong Kong
Standards on Auditing issued by the HKICPA.
Name of company
Financial year/period
Ace Advance Limited
For the period from 7 January 2011 (date of
incorporation) to 31 December 2011, and each
of the two years ended 31 December 2013
Each of the three years ended 31 December 2013
Each of the three years ended 31 December 2013
Each of the three years ended 31 December 2013
Each of the three years ended 31 December 2013
Each of the three years ended 31 December 2013
Bonjour Beauty Limited
Bonjour Beauty (Shanghai) Limited
Bonjour Medical
Mega World
Richly Fine Limited
The statutory financial statements of Speedwell Group Limited for each of the three
years ended 31 December 2013 have been prepared in accordance with General Financial
Reporting Standards of Macao SAR and were audited by Leong Kam Chun & Co., Certified
Public Accountants registered in Macau.
The statutory financial statements of Ya Yue for each of the three years ended 31
December 2013 have been prepared in accordance with the relevant accounting principles
and financial regulations applicable to companies established in the PRC and were audited by
the following certified public accountants registered in the PRC.
Financial year ended 31 December
Name of statutory auditor
2011
2012
2013
上海海明會計師事務所有限公司
上海申亞會計師事務所有限公司
上海創聯會計師事務所
II – 3
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
For the purpose of this report, the directors of the Target Company have prepared
the combined financial statements of the Target Group (the “Underlying Financial
Statements”) for the Relevant Periods in accordance with the basis of preparation set out in
note 2 to the financial information and the HKFRSs issued by the HKICPA.
We have performed our independent audit on the Underlying Financial Statements
in accordance with Hong Kong Standards on Auditing issued by the HKICPA and have
examined the Underlying Financial Statements in accordance with Auditing Guideline 3.340
“Prospectuses and the Reporting Accountant” issued by the HKICPA.
The Financial Information has been prepared from the Underlying Financial
Statements in accordance with HKFRSs and the basis of preparation set out in note 2 to
the financial information. No adjustments were considered necessary for the purpose of
preparing our report for inclusion in the Circular.
The directors of the Target Company are responsible for the preparation of the
Underlying Financial Statements. The directors of the Target Company are responsible
for the contents of the Circular in which this report is included. It is our responsibility
to compile the Financial Information set out in this report from the Underlying Financial
Statements, to form an independent opinion on the Financial Information and to report our
opinion to you.
For the purpose of this report, the directors of the Target Company have prepared the
comparative financial information of the Target Group for the six months ended 30 June
2013 (the “Comparative Financial Information”) in accordance with HKFRSs. We have
reviewed the Comparative Financial Information in accordance with Hong Kong Standard
on Review Engagements 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the HKICPA. A review consists principally of
making enquiries of the Target Group management and applying analytical procedures to
the Comparative Financial Information and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise disclosed. A review
excludes audit procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion on the
Comparative Financial Information.
On the basis of our review which does not constitute an audit, we are not aware of any
material modifications that should be made to the Comparative Financial Information.
In our opinion, for the purpose of this report, the Financial Information gives a true
and fair view of the state of affairs of the Target Company and of the Target Group as at 31
December 2011, 2012 and 2013 and 30 June 2014 and of the Target Group’s results and cash
flows for the Relevant Periods.
II – 4
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
COMBINED STATEMENTS OF PROFIT OR LOSS
Year ended 31 December
Six months ended 30 June
Note
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
7
280,706
300,933
314,830
143,865
149,357
Cost of goods sold and
services rendered
(13,786)
(20,878)
(21,113)
(10,729)
(10,751)
Gross profit
266,920
280,055
293,717
133,136
138,606
1,471
(19,796)
(190,422)
(1,078)
2,389
(20,938)
(216,364)
(4,251)
651
(18,194)
(230,479)
(1,142)
586
(8,870)
(113,847)
(317)
150
(9,274)
(117,614)
(511)
57,095
40,891
44,553
10,688
11,357
(6)
–
–
–
–
57,089
40,891
44,553
10,688
11,357
Turnover
Other income
Distribution costs
Administrative expenses
Other operating expenses
8
Profit from operations
Finance costs
10
Profit before tax
Income tax expense
11
(7,574)
(8,719)
(8,918)
(1,359)
(1,334)
Profit for the year/period
12
49,515
32,172
35,635
9,329
10,023
49,515
32,172
35,635
9,329
10,023
Attributable to owners of
the Target Company
II – 5
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Year ended 31 December
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
49,515
32,172
35,635
9,329
10,023
Item that may be reclassified to profit or loss:
Exchange differences on
translating foreign operations
76
(205)
(129)
(73)
151
Other comprehensive income
for the year/period, net of tax
76
(205)
(129)
(73)
151
Total comprehensive income
for the year/period
49,591
31,967
35,506
9,256
10,174
Attributable to owners of
the Target Company
49,591
31,967
35,506
9,256
10,174
Profit for the year/period
Other comprehensive income after tax:
II – 6
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
COMBINED STATEMENTS OF FINANCIAL POSITION
Note
At 31 December
2011
2012
HK$’000
HK$’000
2013
HK$’000
At 30 June
2014
HK$’000
Non-current assets
Property, plant and equipment
Goodwill
Rental and utility deposits
Deferred tax assets
16
17
25,964
3,531
8,730
724
42,116
–
8,215
724
32,977
–
10,280
724
27,531
–
3,907
724
38,949
51,055
43,981
32,162
19
27,640
4,408
26,655
3,706
21,691
2,191
25,554
8,471
20
12,944
10,314
6,923
5,084
21
8,335
6,007
132,964
150,954
21
170,549
13,422
21,701
214,365
8,422
29,320
4,235
5,354
43,950
36,741
5,354
22,653
258,999
298,789
217,308
254,811
2,869
1,892
5,548
3,568
17,900
208,824
23,485
218,466
22,385
211,881
22,373
226,686
21
16,596
19,390
3,033
4,396
21
89,590
5,828
98,590
9,277
–
3,375
–
4,709
341,607
371,100
246,222
261,732
Net current liabilities
(82,608)
(72,311)
(28,914)
(6,921)
Total assets less current liabilities
(43,659)
(21,256)
15,067
25,241
24
Current assets
Trade receivables
Rental and utility deposits
Prepayments, deposits and other
receivables
Amount due from ultimate holding
company
Amounts due from fellow
subsidiaries
Current tax assets
Bank and cash balances
22
Current liabilities
Trade payables
Other payables, deposits received
and accrued charges
Deferred revenue
Amounts due to
fellow subsidiaries
Amount due to immediate holding
company
Current tax liabilities
23
II – 7
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
At 31 December
Note
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
–
1,088
–
524
942
399
942
399
1,088
524
1,341
1,341
(44,747)
(21,780)
13,726
23,900
8
(44,755)
8
(21,788)
8
13,718
8
23,892
(44,747)
(21,780)
13,726
23,900
Non-current liabilities
Deferred tax liabilities
Long service payment liabilities
24
25
NET (LIABILITIES)/ASSETS
Capital and reserves
Share capital
Reserves
26
27
(CAPITAL DEFICIENCY)/
TOTAL EQUITY
II – 8
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
STATEMENTS OF FINANCIAL POSITION
At 31 December
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
–
70,386
–
71,517
3,024
1,210
3,014
1,210
70,386
71,517
4,234
4,224
21
8,402
9,502
1,200
1,210
21
58,992
228
58,992
363
–
508
–
508
67,622
68,857
1,708
1,718
2,764
2,660
2,526
2,506
8
2,756
8
2,652
8
2,518
8
2,498
2,764
2,660
2,526
2,506
Note
Current assets
Amount due from ultimate
holding company
Amounts due from subsidiaries
21
18
Current liabilities
Amounts due to fellow subsidiaries
Amount due to immediate
holding company
Current tax liabilities
NET ASSETS
Capital and reserves
Share capital
Reserves
26
27
TOTAL EQUITY
II – 9
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
COMBINED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the Target Company
Foreign (Accumulated
currency
losses)/
translation
Retained
reserve
profits
HK$’000
HK$’000
Share
capital
HK$’000
Statutory
reserve
HK$’000
At 1 January 2011
8
15
296
(69,657)
(69,338)
Total comprehensive income for the year
2011 interim dividends paid
–
–
–
–
76
–
49,515
(25,000)
49,591
(25,000)
At 31 December 2011
8
15
372
(45,142)
(44,747)
At 1 January 2012
8
15
372
(45,142)
(44,747)
Total comprehensive income for the year
2012 interim dividends paid
–
–
–
–
(205)
–
32,172
(9,000)
31,967
(9,000)
At 31 December 2012
8
15
167
(21,970)
(21,780)
At 1 January 2013
8
15
167
(21,970)
(21,780)
Total comprehensive income for the year
–
–
(129)
35,635
35,506
At 31 December 2013
8
15
38
13,665
13,726
At 1 January 2014
8
15
38
13,665
13,726
Total comprehensive income for the period
–
–
151
10,023
10,174
At 30 June 2014
8
15
189
23,688
23,900
At 1 January 2013
8
15
167
(21,970)
(21,780)
Total comprehensive income
for the period (unaudited)
–
–
(73)
9,329
9,256
At 30 June 2013 (unaudited)
8
15
94
(12,641)
(12,524)
II – 10
Total
HK$’000
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
COMBINED STATEMENTS OF CASH FLOWS
Year ended 31 December
2011
2012
2013
HK$’000
HK$’000
HK$’000
Six months ended 30 June
2013
2014
HK$’000
HK$’000
(unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Finance costs
Interest income
Provision for/(reversal of
provision for)
long service payment
Depreciation
Write off of property,
plant and equipment
Loss/(gain) on disposal of
property, plant and equipment
Impairment loss on goodwill
Share-based payments
57,089
40,891
44,553
10,688
11,357
6
(3)
–
(1)
–
(1)
–
–
–
–
917
14,417
(564)
17,193
(68)
18,555
57
8,800
–
8,972
177
541
661
36
44
484
–
1,518
157
3,531
2,249
(224)
–
–
(224)
–
–
–
–
–
74,605
675
63,997
–
63,476
–
19,357
–
20,373
–
(6,658)
985
4,964
924
(3,863)
(4,042)
1,217
(550)
(527)
93
(3,172)
2,630
3,391
2,035
1,839
7
79
45
6
10
(73,219)
(43,816)
(17,527)
(1,629)
(32,506)
467
(977)
3,656
2,675
(1,980)
(157)
5,585
(1,100)
(835)
(12)
35,558
9,642
(6,585)
5,835
14,805
1,647
2,794
2,708
724
1,363
–
–
(57)
(57)
–
Cash generated from operations
Hong Kong profits tax paid
Overseas profits tax paid
Hong Kong profits tax refunded
Interest paid
25,711
(1,743)
(615)
6,971
(6)
42,136
–
(270)
–
–
52,421
(9,213)
(1,597)
–
–
28,508
(14,463)
–
–
–
122
–
–
–
–
Net cash generated from
operating activities
30,318
41,866
41,611
14,045
122
Operating profit before
working capital changes
Decrease in inventories
(Increase)/decrease in
trade receivables
(Increase)/decrease in rental and
utility deposits
(Increase)/decrease in
prepayments, deposits and
other receivables
Decrease in amount due from
ultimate holding company
Increase in amounts due from
fellow subsidiaries
Increase/(decrease) in
trade payables
(Decrease)/increase in
other payables, deposits
received and accrued charges
Increase/(decrease) in
deferred revenue
Increase in amounts due to
fellow subsidiaries
Long service payment to
retired/redundant staff
II – 11
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Year ended 31 December
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
(1,354)
3
–
1
–
1
–
–
–
–
(15,570)
(34,038)
(10,029)
(3,764)
(3,607)
23
18
230
230
–
(16,898)
(34,019)
(9,798)
(3,534)
(3,607)
Increase in amount due from
ultimate holding company
(11,000)
–
(17,000)
(11,000)
(18,000)
Net cash used in a
financing activity
(11,000)
–
(17,000)
(11,000)
(18,000)
2,420
7,847
14,813
(489)
(21,485)
67
(228)
(183)
(310)
188
CASH AND CASH
EQUIVALENTS AT
THE BEGINNING OF
RESPECTIVE REPORTING
PERIODS
19,214
21,701
29,320
29,320
43,950
CASH AND CASH
EQUIVALENTS AT
THE END OF RESPECTIVE
REPORTING PERIODS
21,701
29,320
43,950
28,521
22,653
21,701
29,320
43,950
28,521
22,653
Note
CASH FLOWS FROM
INVESTING ACTIVITIES
Net cash outflow arising
on acquisition of a subsidiary
Interest received
Purchases of property,
plant and equipment
Proceeds from disposals of
property, plant and equipment
28
Net cash used in
investing activities
CASH FLOWS FROM
FINANCING ACTIVITY
NET INCREASE/(DECREASE)
IN CASH AND CASH
EQUIVALENTS
Effect of foreign
exchange rate changes
ANALYSIS OF CASH AND
CASH EQUIVALENTS
Bank and cash balances
22
II – 12
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
NOTES TO THE FINANCIAL INFORMATION
1.
General information
The Target Company was incorporated in the British Virgin Islands with limited
liability. The address of its registered office is 30 de Castro Street, Wickhams Cay 1, PO
Box 4519, Tortola, British Virgin Islands and its principal place of business is 10/F., Bonjour
Tower, 3 Yuk Yat Street, Tokwawan, Kowloon, Hong Kong.
The Target Company is an investment holding company.
In the opinion of the directors of the Target Company, as at 30 June 2014, Bonjour
Group Limited, a company incorporated in the British Virgin Islands, is the immediate
parent; and Bonjour Holdings Limited, a company incorporated in the Cayman Islands, is the
ultimate parent of the Target Company.
2.
Basis of preparation
Pursuant to the Restructuring, which was completed on 29 August 2014 by (i) the
acquisition of the entire issued share capital of Bonjour Medical by the Target Company; (ii)
the acquisition of the remaining 50% shareholding interest in Bonjour Beauty Limited by
the Target Company; and (iii) the transfer of the permit issued by the China Food and Drug
Administration（國家食品藥品監督管理局 ）for the importation of special types of cosmetics
into the PRC from Ya Yue to Bonjour Group Limited, the immediate holding company.
Upon completion of Restructuring, the Target Company had a 100% equity interest in
Bonjour Medical and Bonjour Beauty Limited.
As the Target Company and its subsidiaries, Bonjour Medical and Bonjour Beauty
Limited were all controlled by Bonjour Group Limited before and after the Restructuring, the
Restructuring was accounted for as a business combination of entities under common control.
The financial statements of the Target Group have been prepared based on the principles and
procedures of merger accounting as set out in Accounting Guideline 5 “Merger Accounting
for Common Control Combinations” issued by the HKICPA, as if the Restructuring had
occurred from the date when the combining entities first came under the control of Bonjour
Group Limited.
The combined financial statements incorporate the financial statements of the
combining entities as if they had been combined from the date when they first came under
the control of the immediate holding company.
II – 13
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The combined statements of profit or loss, combined statements of profit or loss and
other comprehensive income and combined statements of cash flows for each of the three
years ended 31 December 2013 and the six months ended 30 June 2014 (the “Relevant
Periods”) include the results and cash flows of the companies now comprising the Target
Group pursuant to the Restructuring as if the Target Group structure as at the date of this
report had been in existence throughout the Relevant Periods or since their respective dates
of incorporation or establishment where this is a shorter period.
The combined statements of financial position of the Target Group as at 31 December
2011, 2012 and 2013 and 30 June 2014 have been prepared to present the assets and
liabilities of the companies now comprising the Target Group as if the Target Group structure
as at the date of this report had been in existence as at those dates.
There was no adjustment made to the net assets nor the net profit or loss of any
companies now comprising the Target Group in order to achieve consistency of the Target
Group’s accounting policies.
3.
Adoption of new and revised Hong Kong Financial Reporting Standards
The Target Group has throughout the Relevant Periods consistently adopted all the
new and revised HKFRSs issued by the HKICPA that are relevant to its operations and
effective for its accounting period beginning on 1 January 2014. HKFRSs comprise Hong
Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKAS”) and
Interpretations.
The Target Group has not applied the new HKFRSs that have been issued but are not
yet effective. The Target Group has already commenced an assessment of the impact of these
new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a
material impact on its results of operations and financial position.
4.
Significant accounting policies
The Financial Information has been prepared in accordance with HKFRSs, accounting
principles generally accepted in Hong Kong and the applicable disclosures required by the
Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong
Companies Ordinance.
The Financial Information has been prepared under the historical cost convention.
The preparation of Financial Information in conformity with HKFRSs requires the
use of certain key assumptions and estimates. It also requires the directors to exercise their
judgement in the process of applying the accounting policies. The areas where assumptions
and estimates are significant to the Financial Information, are disclosed in note 5 to the
Financial Information.
II – 14
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The significant accounting policies applied in the preparation of the Financial
Information are set out below.
(a)
Subsidiaries
Subsidiaries are entities over which the Target Group has control. The Target
Group controls an entity when it is exposed, or has rights, to variable returns from
its involvement with the entity and has the ability to affect those returns through its
power over the entity. The Target Group has power over an entity when the Target
Group has existing rights that give it the current ability to direct the relevant activities,
i.e. activities that significantly affect the entity’s returns.
When assessing control, the Target Group considers its potential voting rights
as well as potential voting rights held by other parties, to determine whether it has
control. A potential voting right is considered only if the holder has the practical
ability to exercise that right.
In the Target Company’s statements of financial position the investments in
subsidiaries are stated at cost less allowance for impairment losses. The results of
subsidiaries are accounted for by the Target Company on the basis of dividends
received and receivable.
(b)
Business combination and goodwill
The acquisition method is used to account for the acquisition of a subsidiary in
a business combination. The cost of acquisition is measured at the acquisition-date fair
value of the assets given, equity instruments issued, liabilities incurred and contingent
consideration. Acquisition-related costs are recognised as expenses in the periods
in which the costs are incurred and the services are received. Identifiable assets and
liabilities of the subsidiary in the acquisition are measured at their acquisition-date
fair values.
The excess of the cost of acquisition over the Target Company’s share of the net
fair value of the subsidiary’s identifiable assets and liabilities is recorded as goodwill.
Any excess of the Target Company’s share of the net fair value of the identifiable
assets and liabilities over the cost of acquisition is recognised in combined profit or
loss as a gain on bargain purchase which is attributed to the Target Company.
II – 15
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Goodwill is tested annually for impairment or more frequently if events or
changes in circumstances indicate that it might be impaired. Goodwill is measured at
cost less accumulated impairment losses. The method of measuring impairment losses
of goodwill is the same as that of other assets as stated in the accounting policy (r)
below. Impairment losses of goodwill are recognised in combined profit or loss and
are not subsequently reversed. Goodwill is allocated to cash-generating units that are
expected to benefit from the synergies of the acquisition for the purpose of impairment
testing.
(c)
Foreign currency translation
(i)
Functional and presentation currency
Items included in the Financial Information of each of the Target Group’s
entities are measured using the currency of the primary economic environment
in which the entity operates (the “functional currency”). The Financial
Information is presented in Hong Kong dollars (“HKD”), which is the Target
Company’s functional and presentation currency.
(ii)
Transactions and balances in each entity’s financial statements
Transactions in foreign currencies are translated into the functional
currency on initial recognition using the exchange rates prevailing on the
transaction dates. Monetary assets and liabilities in foreign currencies are
translated at the exchanges rates at the end of each respective reporting period.
Gains and losses resulting from this translation policy are recognised in profit
or loss.
(iii)
Translation on combination
The results and financial position of all the Target Group entities that
have a functional currency different from the Target Company’s presentation
currency are translated into the Target Company’s presentation currency as
follows:
–
Assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that
statement of financial position;
II – 16
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
–
Income and expenses are translated at average exchange rates for
the period (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the
exchange rates on the transaction dates); and
–
All resulting exchange differences are recognised in the foreign
currency translation reserve.
On combination, exchange differences arising from the translation of
the net investment in foreign entities and of borrowings are recognised in other
comprehensive income and accumulated in the foreign currency translation
reserve. When a foreign operation is sold, such exchange differences are
reclassified to combined profit or loss as part of the gain or loss on disposal.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
(d)
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Target Group and the cost of the item can be
measured reliably. All other repairs and maintenance are recognised in profit or loss
during the period in which they are incurred.
Depreciation of property, plant and equipment is calculated at rates sufficient
to write off their cost less their residual values over the estimated useful lives on a
straight-line basis. The principal annual rates are as follows:
Leasehold improvements
Over the period of lease or their expected useful
lives to the Target Group whichever is shorter
Furniture, fixtures and
equipment
20%
II – 17
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The residual values, useful lives and depreciation methods are reviewed and
adjusted, if appropriate, at the end of each respective reporting period.
The gain or loss on disposal of property, plant and equipment is the difference
between the net sales proceeds and the carrying amount of the relevant asset, and is
recognised in profit or loss.
(e)
Operating l eases
Leases that do not substantially transfer to the Target Group all the risks and
rewards of ownership of assets are accounted for as operating leases. Lease payments
(net of any incentives received from the lessor) are recognised as an expense on a
straight-line basis over the lease term.
(f)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the weighted average basis. Cost represents the invoiced cost of
inventories which includes all costs of purchase, cost of conversion and other cost
incurred in bringing the inventories to their present location and condition. Net
realisable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and the estimated costs necessary to make the sale.
(g)
Recognition and derecognition of financial instruments
Financial assets and financial liabilities are recognised in the statement of
financial position when the Target Group becomes a party to the contractual provisions
of the instruments.
Financial assets are derecognised when the contractual rights to receive cash
flows from the assets expire; the Target Group transfers substantially all the risks and
rewards of ownership of the assets; or the Target Group neither transfers nor retains
substantially all the risks and rewards of ownership of the assets but has not retained
control on the assets. On derecognition of a financial asset, the difference between the
asset’s carrying amount and the sum of the consideration received and the cumulative
gain or loss that had been recognised in other comprehensive income is recognised in
profit or loss.
Financial liabilities are derecognised when the obligation specified in the
relevant contract is discharged, cancelled or expires. The difference between the
carrying amount of the financial liability derecognised and the consideration paid is
recognised in profit or loss.
II – 18
APPENDIX II
(h)
FINANCIAL INFORMATION OF THE TARGET GROUP
Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and are recognised
initially at fair value and subsequently measured at amortised cost using the effective
interest method, less allowance for impairment. An allowance for impairment of trade
and other receivables is established when there is objective evidence that the Target
Group will not be able to collect all amounts due according to the original terms of
receivables. The amount of the allowance is the difference between the receivables’
carrying amount and the present value of estimated future cash flows, discounted at
the effective interest rate computed at initial recognition. The amount of the allowance
is recognised in profit or loss.
Impairment losses are reversed in subsequent periods and recognised in profit
or loss when an increase in the receivables’ recoverable amount can be related
objectively to an event occurring after the impairment was recognised, subject to the
restriction that the carrying amount of the receivables at the date the impairment is
reversed shall not exceed what the amortised cost would have been had the impairment
not been recognised.
(i)
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents
represent cash at bank and on hand, demand deposits with banks and other financial
institutions, and short-term highly liquid investments which are readily convertible
into known amounts of cash and subject to an insignificant risk of change in value.
Bank overdrafts which are repayable on demand and form an integral part of the
Target Group’s cash management are also included as a component of cash and cash
equivalents.
II – 19
APPENDIX II
(j)
FINANCIAL INFORMATION OF THE TARGET GROUP
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into and the definitions of a
financial liability and an equity instrument under HKFRSs. An equity instrument is
any contract that evidences a residual interest in the assets of the Target Group after
deducting all of its liabilities.
(k)
Trade and other payables
Trade and other payables are stated initially at their fair value and subsequently
measured at amortised cost using the effective interest method unless the effect of
discounting would be immaterial, in which case they are stated at cost.
(l)
Equity instruments
Equity instruments issued by the Target Company are recorded at the proceeds
received, net of direct issue costs.
(m)
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and is recognised when it is probable that the economic benefits will flow
to the Target Group and the amount of revenue can be measured reliably.
Revenue is shown net of returns, rebates and discounts and after eliminating
sales within the Target Group.
Revenue from provision of beauty and health treatment services is recognised
on a systematic basis in accordance with service usage period. Beauty treatment
packages are recorded as liabilities when sold. Packages surrendered in exchange for
services during the Relevant Periods are recognised as service income in profit or
loss. The remaining value of packages is classified as deferred revenue under current
liabilities at the end of respective reporting periods. Upon expiry of prepaid packages,
the corresponding deferred revenue is fully recognised.
Interest income is recognised on a time-proportion basis using the effective
interest method.
Commission income is recognised on an accrual basis.
Service management fee income is recognised when the services are rendered.
II – 20
APPENDIX II
(n)
FINANCIAL INFORMATION OF THE TARGET GROUP
Employee benefits
(i)
Employee leave entitlements
Employee entitlements to annual leave and long service leave are
recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave and long service leave as a result of services
rendered by employees up to the end of respective reporting periods.
Employee entitlements to sick leave and maternity leave are not
recognised until the time of leave.
(ii)
Pension obligations
The Target Group contributes to defined contribution retirement schemes
which are available to all employees. Contributions to the schemes by the
Target Group and employees are calculated as a percentage of employees’ basic
salaries. The retirement benefit scheme cost charged to profit or loss represents
contributions payable by the Target Group to the funds.
Subsidiary incorporated in the PRC participates in the retirement
schemes operated by the local authorities for the Target Group’s employees
in the PRC. Contributions to these schemes are charged to profit or loss when
incurred.
(iii)
Long service payment liabilities
The Target Group’s net liability in respect of long service amounts
payable on cessation of employment in certain circumstances under the Hong
Kong Employment Ordinance is the amount of future benefit that employees
have earned in return for their services in the current and prior periods. The
long service payment liabilities are the present value of long service payment
obligation less the entitlements accrued under the Target Group’s defined
contribution retirement scheme that is attributable to contributions made by the
Target Group.
II – 21
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The long service payment obligation is calculated annually by
independent actuaries using the projected unit credit method. The present
value of the long service payment obligation is determined by discounting the
estimated future cash outflows using interest rates of high-quality corporate
bonds that are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating the terms of the related pension
obligation. If there is no deep market in such bonds, the market rates on
government bonds are used.
Remeasurements of the net long service payment liability which include
actuarial gains and losses are recognised in other comprehensive income in the
period in which they arise and will not be reclassified to profit or loss. Service
costs and interest on the net long service payment liability are recognised
immediately in profit or loss.
Interest on the net long service payment liability is determined by
multiplying the net long service payment liability by the discount rate used to
measure long service payment obligation at the start of the annual reporting
period, taking account of any changes in the net long service payment liability
during the period as a result of benefit payments.
(o)
Share-based payments
The ultimate holding company issues equity-settled share-based payments to
certain directors and employees. Equity-settled share-based payments are measured
at the fair value (excluding the effect of non market-based vesting conditions) of the
equity instruments at the date of grant. The fair value determined at the grant date of
the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the ultimate holding company’s estimate of shares that will
eventually vest and adjusted for the effect of non market-based vesting conditions.
(p)
Taxation
Income tax represents the sum of the current tax and deferred tax.
The tax currently payable is based on taxable profit for the Relevant Periods.
Taxable profit differs from profit recognised in profit or loss because it excludes
items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Target Group’s liability
for current tax is calculated using tax rates that have been enacted or substantively
enacted by the end of respective reporting periods.
II – 22
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Deferred tax is recognised on differences between the carrying amounts of
assets and liabilities in the Financial Information and the corresponding tax bases used
in the computation of taxable profit. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible
temporary differences, unused tax losses or unused tax credits can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising
on investments in subsidiaries, except where the Target Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each
respective reporting period and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised, based on tax rates that
have been enacted or substantively enacted by the end of respective reporting periods.
Deferred tax is recognised in profit or loss, except when it relates to items recognised
in other comprehensive income or directly in equity, in which case the deferred tax is
also recognised in other comprehensive income or directly in equity.
The measurement of deferred tax assets and liabilities reflects the tax
consequences that would follow from the manner in which the Target Group expects,
at the end of respective reporting periods, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable
right to set off current tax assets against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and the Target Group intends to
settle its current tax assets and liabilities on a net basis.
II – 23
APPENDIX II
(q)
FINANCIAL INFORMATION OF THE TARGET GROUP
Related parties
A related party is a person or entity that is related to the Target Group.
(A)
(B)
A person or a close member of that person’s family is related to the
Target Group if that person:
(i)
has control or joint control over the Target Group;
(ii)
has significant influence over the Target Group; or
(iii)
is a member of the key management personnel of the Target
Company or of a parent of the Target Company.
An entity is related to the Target Group if any of the following conditions
applies:
(i)
The entity and the Target Company are members of the same
group (which means that each parent, subsidiary and fellow
subsidiary is related to the others).
(ii)
One entity is an associate or joint venture of the other entity (or
an associate or joint venture of a member of a group of which the
other entity is a member).
(iii)
Both entities are joint ventures of the same third party.
(iv)
One entity is a joint venture of a third entity and the other entity is
an associate of the third entity.
(v)
The entity is a post-employment benefit plan for the benefit
of employees of either the Target Group or an entity related to
the Target Group. If the Target Group is itself such a plan, the
sponsoring employers are also related to the Target Group.
(vi)
The entity is controlled or jointly controlled by a person identified
in (A).
(vii)
A person identified in (A)(i) has significant influence over the
entity or is a member of the key management personnel of the
entity (or of a parent of the entity).
II – 24
APPENDIX II
(r)
FINANCIAL INFORMATION OF THE TARGET GROUP
Impairment of assets
At the end of each respective reporting period, the Target Group reviews the
carrying amounts of its tangible and intangible assets except goodwill, deferred tax
assets and receivables to determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists the recoverable amount
of the asset is estimated in order to determine the extent of any impairment loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the
Target Group estimates the recoverable amount of the cash-generating unit to which
the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value
in use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset or cash-generating unit is estimated to be
less than its carrying amount, the carrying amount of the asset or cash-generating unit
is reduced to its recoverable amount. An impairment loss is recognised immediately in
profit or loss, unless the relevant asset is carried at a revalued amount, in which case
the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset or cash-generating unit is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined (net of amortisation or depreciation) had no
impairment loss been recognised for the asset or cash-generating unit in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
(s)
Provisions and contingent liabilities
Provisions are recognised for liabilities of uncertain timing or amount when
the Target Group has a present legal or constructive obligation arising as a result of a
past event, it is probable that an outflow of economic benefits will be required to settle
the obligation and a reliable estimate can be made. Where the time value of money
is material, provisions are stated at the present value of the expenditures expected to
settle the obligation.
II – 25
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Where it is not probable that an outflow of economic benefits will be required,
or the amount cannot be estimated reliably, the obligation is disclosed as a contingent
liability, unless the probability of outflow is remote. Possible obligations, whose
existence will only be confirmed by the occurrence or non-occurrence of one or more
future events are also disclosed as contingent liabilities unless the probability of
outflow is remote.
(t)
Events after the reporting period
Events after the reporting period that provide additional information about the
Target Group’s position at the end of respective reporting periods or those that indicate
the going concern assumption is not appropriate are adjusting events and are reflected
in the Financial Information. Events after the reporting period that are not adjusting
events are disclosed in the notes to the Financial Information when material.
5.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of respective reporting periods, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are discussed below.
(a)
Property, plant and equipment and depreciation
The Target Group determines the estimated useful lives, residual values and
related depreciation charges for the Target Group’s property, plant and equipment.
This estimate is based on the historical experience of the actual useful lives and
residual values of property, plant and equipment of similar nature and functions. The
Target Group will revise the depreciation charge where useful lives are different to
those previously estimated, or it will write-off or write-down technically obsolete or
non-strategic assets that have been abandoned or sold.
(b)
Income taxes
The Target Group is subject to income taxes in several jurisdictions. Significant
estimates are required in determining the provision for income taxes. There are many
transactions and calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact
the current tax and deferred tax provisions in the period in which such determination
is made.
II – 26
APPENDIX II
6.
FINANCIAL INFORMATION OF THE TARGET GROUP
Financial risk management
The Target Group’s activities expose it to a variety of financial risks: foreign
currency risk, credit risk, liquidity risk and interest rate risk. The Target Group’s overall risk
management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Target Group’s financial performance.
(a)
Foreign currency risk
The Target Group has minimal exposure to foreign currency risk given that
most of its business transactions, assets and liabilities are principally denominated in
the functional currency of the Target Group entities. The Target Group currently does
not have a foreign currency hedging policy in respect of foreign currency transactions,
assets and liabilities. The Target Group monitors its foreign currency exposure closely
and will consider hedging significant foreign currency exposure should the need arise.
(b)
Credit risk
The carrying amounts of the bank balances, trade and other receivables,
amounts due from ultimate holding company and fellow subsidiaries and rental and
utility deposits included in the combined statements of financial position represent
the Target Group’s maximum exposure to credit risk in relation to the Target Group’s
financial assets.
The Target Group has no significant concentrations of credit risk.
It has policies in place to ensure that sales to customers are made in cash or
via major credit cards. In addition, the directors review the recoverable amount of
each rental and utility deposit regularly to ensure that adequate impairment losses are
recognised for irrecoverable deposits. Amounts due from ultimate holding company
and fellow subsidiaries are closely monitored by the directors.
The credit risk on bank balances and certain trade receivables is limited because
the counterparties are banks with high credit-ratings assigned by international creditrating agencies.
II – 27
APPENDIX II
(c)
FINANCIAL INFORMATION OF THE TARGET GROUP
Liquidity risk
The Target Group’s policy is to regularly monitor current and expected liquidity
requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity
requirements in the short and longer term.
The maturity analysis of the Target Group’s financial liabilities as at 31
December 2011, 2012 and 2013 and 30 June 2014 is less than 1 year.
(d)
Interest rate risk
The Target Group’s exposure to interest rate risk mainly arises from its bank
deposits. These deposits bear interests at variable rates varied with the then prevailing
market condition.
At the end of each respective reporting period, the impact of the sensitivity to
the reasonably possible change in interest rates on financial assets and liabilities is
insignificant to the profit after tax.
(e)
Categories of financial instruments
At 31 December
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
Financial assets:
Loans and receivables
(including cash and
cash equivalents)
248,406
289,428
216,454
248,535
Financial liabilities:
Financial liabilities
at amortised cost
123,754
138,710
26,757
26,665
II – 28
APPENDIX II
(f)
FINANCIAL INFORMATION OF THE TARGET GROUP
Fair values
The carrying amounts of the Target Group’s financial assets and financial
liabilities as reflected in the combined statements of financial position approximate
their respective fair values.
7.
Turnover
The Target Group’s turnover which represents sales of goods and services to
customers are as follows:
Year ended 31 December
Service income of
beauty treatment services
Sale of merchandise
8.
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
280,625
81
300,933
–
312,720
2,110
142,612
1,253
148,008
1,349
280,706
300,933
314,830
143,865
149,357
Other income
Year ended 31 December
Bank interest income
Commission income
Service management fee income
Sundry income
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
3
1,468
–
–
1
1,639
700
49
1
366
–
284
–
512
–
74
–
89
–
61
1,471
2,389
651
586
150
II – 29
APPENDIX II
9.
FINANCIAL INFORMATION OF THE TARGET GROUP
Segment information
The directors have identified that, during the Relevant Periods, the Target Group has
only one reportable segment, which is operation of beauty and health salons. Therefore no
separate segment information is prepared.
The analysis of the Target Group’s revenue and non-current assets by geographical
location is presented below.
The Target Group’s revenue, based on the locations of the customers, during the
Relevant Periods is as follows:
Year ended 31 December
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
Hong Kong
Macau
PRC except Hong Kong and Macau
264,430
15,767
509
272,017
28,394
522
284,673
29,236
921
128,331
15,035
499
135,420
13,266
671
Total
280,706
300,933
314,830
143,865
149,357
None of single customer whose revenue amount to 10% or more of the Target Group’s
revenue for the Relevant Periods.
The Target Group’s non-current assets, based on the assets’ physical location, at the
end of each respective reporting period is as follows:
At 31 December
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
Hong Kong
Macau
PRC except Hong Kong
and Macau
35,978
1,968
45,615
2,408
38,548
2,947
28,233
1,841
279
2,308
1,762
1,364
Total
38,225
50,331
43,257
31,438
II – 30
APPENDIX II
10.
FINANCIAL INFORMATION OF THE TARGET GROUP
Finance costs
Year ended 31 December
Interest expenses on bank borrowings
11.
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
6
–
–
–
–
Income tax expense
Year ended 31 December
Current tax – Hong Kong Profits Tax
Provision for the year/period
Under-provision in prior years
Current tax – Overseas
Provision for the year/period
Under/(over)-provision in
prior years
Deferred tax (Note 24)
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
7,200
–
5,200
1,514
5,604
655
430
–
700
–
7,200
6,714
6,259
430
700
–
1,735
1,720
929
634
374
270
(3)
–
–
374
2,005
1,717
929
634
–
–
942
–
–
7,574
8,719
8,918
1,359
1,334
Hong Kong Profits Tax has been provided at the rate of 16.5% on the estimated
assessable profit for the Relevant Periods.
Tax charge on profits assessable elsewhere have been calculated at the rates of tax
prevailing in the countries in which the Target Group operates, based on existing legislation,
interpretation and practices in respect thereof.
II – 31
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The reconciliation between the income tax expense and the product of profit before
tax multiplied by the Hong Kong Profits Tax rate is as follows:
Year ended 31 December
Profit before tax
Tax at the Hong Kong
Profits Tax rate of 16.5%
Tax effect of income
that is not taxable
Tax effect of expenses
that are not deductible
Tax effect of utilisation of tax losses
not previously recognised
Tax effect of unrecognised tax losses
and temporary differences
Under-provision in prior years
Effect of different tax rates of
subsidiaries
Income tax expense
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
57,089
40,891
44,553
10,688
11,357
9,420
6,747
7,351
1,764
1,874
(9)
(3)
(9)
–
–
411
1,326
475
172
95
(1,228)
(369)
(917)
(626)
(324)
(1,282)
374
162
1,784
2,260
652
566
–
61
–
(112)
(928)
(894)
(517)
(372)
7,574
8,719
8,918
1,359
1,334
II – 32
APPENDIX II
12.
FINANCIAL INFORMATION OF THE TARGET GROUP
Profit for the year/period
The Target Group’s profit for the year/period is stated after charging/(crediting) the
following:
Year ended 31 December
Auditors’ remuneration
Provision for the year/period
Under-provision in prior year
Cost of inventories sold and
services rendered
Impairment loss on goodwill
(included in other
operating expenses)
Depreciation
Loss/(gain) on disposal of
property, plant and equipment
Write off of property,
plant and equipment
Net exchange losses
Operating lease charge
for land and buildings
Staff costs, including
directors’ emoluments
Wages and salaries
Share-based payments
Retirement benefits scheme
contributions
Provision for unutilised
annual leave
Provision for/(reversal of provision
for) long service payment
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
476
330
503
5
524
5
243
5
243
–
806
508
529
248
243
13,786
20,878
21,113
10,729
10,751
–
14,417
3,531
17,193
–
18,555
–
8,800
–
8,972
484
157
(224)
(224)
–
177
442
541
183
661
711
36
511
44
467
33,777
43,008
48,408
22,760
24,797
105,923
1,518
115,271
2,249
124,121
–
63,489
–
63,112
–
2,923
3,759
4,032
2,097
2,021
768
499
152
600
856
917
(564)
(68)
57
–
112,049
121,214
128,237
66,243
65,989
II – 33
APPENDIX II
13.
FINANCIAL INFORMATION OF THE TARGET GROUP
Directors’ and employees’ emoluments
(a)
Directors’ and senior management’s emoluments
The directors and senior management of the Target Company were also the
directors and/or employees of the ultimate holding company and its subsidiaries and
their remuneration were paid for and borne by the ultimate holding company during
the Relevant Periods. In the opinion of the directors of the Target Company, there is no
reasonable basis to allocate their remuneration to the Target Group.
There was no arrangement under which a director waived or agreed to waive
any emoluments during the Relevant Periods.
(b)
Five highest paid individuals
The emoluments of the five highest paid individuals in the Target Group during
the Relevant Periods are set out below.
Year ended 31 December
Basic salaries, allowances
and benefits in kind
Discretionary bonuses
Retirement benefits
scheme contributions
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
5,723
15
5,231
15
5,703
15
2,764
91
3,447
14
60
69
75
38
39
5,798
5,315
5,793
2,893
3,500
II – 34
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The emoluments fell within the following bands:
Number of individuals
Year ended 31 December
Nil – HK$1,000,000
HK$1,000,001 –
HK$1,500,000
Six months ended 30 June
2011
2012
2013
2013
(unaudited)
2014
2
2
1
5
5
3
3
4
–
–
5
5
5
5
5
During the Relevant Periods, no emoluments were paid by the Target Group to any
of the directors or the highest paid individuals as an inducement to join or upon joining the
Target Group or as compensation for loss of office.
14.
Profit for the year/period attributable to owners of the Target Company
The profit for the year/period attributable to owners of the Target Company included
losses of approximately HK$5,000, HK$104,000 and HK$134,000 and HK$Nil (unaudited)
and HK$20,000 for the years ended 31 December 2011, 2012 and 2013 and for the six
months ended 30 June 2013 and 2014 respectively which have been dealt with in the
Financial Information of the Target Company.
15.
Dividends
Year ended 31 December
Interim dividends
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
25,000
9,000
–
–
–
No dividend has been declared or paid by the Target Company during the Relevant
Periods. However, during the Relevant Periods Bonjour Medical made distributions to the
immediate holding company, which is not part of the Target Group. The rates of dividends
and the number of shares ranking for distributions are not presented as such information is
not meaningful for this report.
The dividends were settled by the current account with the immediate holding
company.
II – 35
APPENDIX II
16.
FINANCIAL INFORMATION OF THE TARGET GROUP
Property, plant and equipment
Target Group
Leasehold
improvements
HK$’000
Furniture,
fixtures and
equipment
HK$’000
Total
HK$’000
Cost
At 1 January 2011
Additions
Disposals
Write off
Exchange differences
49,079
8,973
–
(8,524)
28
36,715
6,597
(3,745)
(451)
12
85,794
15,570
(3,745)
(8,975)
40
At 31 December 2011 and
1 January 2012
Additions
Disposals
Write off
Exchange differences
49,556
20,228
–
(7,480)
16
39,128
13,810
(326)
(3,450)
10
88,684
34,038
(326)
(10,930)
26
At 31 December 2012 and
1 January 2013
Additions
Disposals
Write off
Exchange differences
62,320
2,121
–
(3,100)
49
49,172
7,908
(467)
(54)
28
111,492
10,029
(467)
(3,154)
77
At 31 December 2013 and
1 January 2014
Additions
Write off
Exchange differences
61,390
891
–
(44)
56,587
2,716
(760)
(25)
117,977
3,607
(760)
(69)
At 30 June 2014
62,237
58,518
120,755
II – 36
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Leasehold
improvements
HK$’000
Furniture,
fixtures and
equipment
HK$’000
Total
HK$’000
Accumulated depreciation
and impairment
At 1 January 2011
Charge for the year
Disposals
Write off
Exchange differences
38,376
9,207
–
(8,487)
22
21,933
5,210
(3,238)
(311)
8
60,309
14,417
(3,238)
(8,798)
30
At 31 December 2011 and
1 January 2012
Charge for the year
Disposals
Write off
Exchange differences
39,118
10,882
–
(7,206)
2
23,602
6,311
(151)
(3,183)
1
62,720
17,193
(151)
(10,389)
3
At 31 December 2012 and
1 January 2013
Charge for the year
Disposals
Write off
Exchange differences
42,796
10,187
–
(2,448)
15
26,580
8,368
(461)
(45)
8
69,376
18,555
(461)
(2,493)
23
At 31 December 2013 and
1 January 2014
Charge for the period
Write off
Exchange differences
50,550
4,981
–
(22)
34,450
3,991
(716)
(10)
85,000
8,972
(716)
(32)
At 30 June 2014
55,509
37,715
93,224
Carrying amount
At 31 December 2011
10,438
15,526
25,964
At 31 December 2012
19,524
22,592
42,116
At 31 December 2013
10,840
22,137
32,977
6,728
20,803
27,531
At 30 June 2014
II – 37
APPENDIX II
17.
FINANCIAL INFORMATION OF THE TARGET GROUP
Goodwill
Target Group
HK$’000
Cost
At 1 January 2011
Arising on acquisition of a subsidiary (Note 28)
–
3,531
At 31 December 2011, 1 January 2012, 31 December 2012,
1 January 2013, 31 December 2013, 1 January 2014 and
30 June 2014
3,531
Accumulated impairment losses
At 1 January 2011, 31 December 2011 and 1 January 2012
Impairment loss
–
3,531
At 31 December 2012, 1 January 2013, 31 December 2013,
1 January 2014 and 30 June 2014
3,531
Carrying amount
At 31 December 2011
3,531
At 31 December 2012
–
At 31 December 2013
–
At 30 June 2014
–
Goodwill acquired in a business combination is allocated, at acquisition, to the cash
generating units (“CGUs”) that are expected to benefit from that business combination.
II – 38
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The recoverable amounts of the CGUs are determined from value in use calculations.
The key assumptions for the value in use calculations are those regarding the discount rates,
growth rates and budgeted gross margin and turnover during the period. The Target Group
estimates discount rates using pre-tax rates that reflect current market assessments of the
time value of money and the risks specific to the CGUs. The growth rates are based on
long-term average economic growth rate of the geographical area in which the businesses
of the CGUs operate. Budgeted gross margin and turnover are based on past practices and
expectations on market development.
The Target Group prepares cash flow forecasts derived from the most recent financial
budgets approved by the directors for the next five years with the residual period using zero
growth rates. The rate used to discount the forecast cash flows is 20%.
In 2012, due to changes in market condition and business development of beauty
business, the Target Group has revised its cash flow forecasts for one beauty CGU. The
goodwill allocated to this beauty CGU has therefore been reduced to its recoverable amount
through recognition of an impairment loss against goodwill of HK$3,531,000.
18.
Investments in subsidiaries
Target Company
The amounts due from subsidiaries are unsecured, interest-free and have no
fixed terms of repayment.
Details of the Target Company’s subsidiaries as at 31 December 2011, 2012 and
2013 and 30 June 2014 are disclosed on pages II-1 and II-2.
II – 39
APPENDIX II
19.
FINANCIAL INFORMATION OF THE TARGET GROUP
Trade receivables
Target Group
(a)
The Target Group’s trade receivables under credit card sales are due within 150
days from the date of billings. The ageing analysis of trade receivables is as
follows:
At 31 December
Trade receivables
under credit card
sales
0 – 30 days
31 – 60 days
61 – 90 days
91 – 120 days
Over 120 days
Others
0 – 30 days
31 – 60 days
61 – 90 days
91 – 120 days
Over 120 days
Total
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
17,599
3,294
1,673
1,172
2,013
20,480
4,228
86
16
180
18,640
2,649
214
–
184
20,129
4,608
301
54
172
25,751
24,990
21,687
25,264
1,317
–
–
–
572
1,648
11
1
1
4
–
–
–
–
4
32
31
56
10
161
1,889
1,665
4
290
27,640
26,655
21,691
25,554
II – 40
APPENDIX II
(b)
FINANCIAL INFORMATION OF THE TARGET GROUP
The carrying amounts of the Target Group’s trade receivables are denominated
in the following currencies:
(c)
HKD
HK$’000
Macau
Pataca
(“MOP”)
HK$’000
Renminbi
(“RMB”)
HK$’000
Total
HK$’000
At 31 December 2011
25,908
1,619
113
27,640
At 31 December 2012
23,283
3,232
140
26,655
At 31 December 2013
19,829
1,862
–
21,691
At 30 June 2014
22,876
2,678
–
25,554
As of 31 December 2011, 2012 and 2013 and 30 June 2014, trade receivables
of approximately HK$1,996,000, HK$3,947,000 and HK$2,930,000 and
HK$3,605,000 respectively were past due but not impaired. These relate to
a number of independent customers for whom there is no recent history of
default. The ageing analysis of these trade receivables is as follows:
At 31 December
Up to 3 months
3 to 6 months
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
1,784
212
3,763
184
2,742
188
3,264
341
1,996
3,947
2,930
3,605
II – 41
APPENDIX II
20.
FINANCIAL INFORMATION OF THE TARGET GROUP
Prepayments, deposits and other receivables
Target Group
At 31 December
Trade deposits
Other deposits
Prepaid rent
Other prepaid expenses
Other receivables
21.
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
2
3,559
283
83
9,017
1,350
795
585
3,486
4,098
–
660
347
3,500
2,416
7
255
346
3,443
1,033
12,944
10,314
6,923
5,084
Amounts due from/(to) ultimate holding company/immediate holding company/
fellow subsidiaries
The amounts due are unsecured, interest-free and have no fixed terms of repayment.
22.
Bank and cash balances
Target Group
The carrying amount of the Target Group’s total bank and cash balances are
denominated in the following currencies:
At 31 December
– HKD
– MOP
– RMB
– Others
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
14,203
7,038
456
4
15,568
13,527
225
–
36,311
7,418
221
–
19,072
3,525
56
–
21,701
29,320
43,950
22,653
Cash at bank earns interest at floating rates based on daily bank deposit rates,
and is therefore subject to cash flow interest rate risk.
II – 42
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
Conversion of RMB into foreign currencies is subject to the PRC’s Foreign
Exchange Control Regulations and Administration of Settlement, Sale and Payment of
Foreign Exchange Regulations.
23.
Trade payables
Target Group
(a)
The ageing analysis of the Target Group’s trade payables, based on the date of
receipt of goods, is as follows:
At 31 December
0 – 30 days
31 – 60 days
61 – 90 days
91 – 120 days
Over 120 days
(b)
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
875
960
86
323
625
1,232
404
174
5
77
3,842
1,472
225
5
4
2,923
605
32
5
3
2,869
1,892
5,548
3,568
The carrying amounts of the Target Group’s trade payables are denominated in
the following currencies:
HKD
RMB
Total
HK$’000
HK$’000
HK$’000
At 31 December 2011
2,864
5
2,869
At 31 December 2012
1,887
5
1,892
At 31 December 2013
5,543
5
5,548
At 30 June 2014
3,563
5
3,568
II – 43
APPENDIX II
24.
FINANCIAL INFORMATION OF THE TARGET GROUP
Deferred tax
Target Group
The following are the deferred tax assets/(liabilities) recognised by the Target
Group.
Accelerated
tax
depreciation
HK$’000
Decelerated
tax
depreciation
HK$’000
Total
HK$’000
–
724
724
At 1 January 2011,
31 December 2011,
1 January 2012,
31 December 2012
and 1 January 2013
Charge to profit or loss
for the year
(Note 11)
At 31 December 2013,
1 January 2014 and
30 June 2014
(942)
–
(942)
(942)
724
(218)
The following is the analysis of the deferred tax balances for combined
statements of financial position purpose:
At 31 December
Deferred tax assets
Deferred tax liabilities
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
724
–
724
–
724
(942)
724
(942)
724
724
(218)
(218)
II – 44
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
No deferred tax asset has been recognised in respect of the remaining unused
tax losses and deductible temporary differences due to the unpredictability of future
profit streams with tax effect as follows:
At 31 December
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
1,253
2,142
1,222
786
2,432
2,597
3,769
4,411
3,685
4,739
4,991
5,197
Unused tax losses
Remaining deductible
temporary
differences
The unused tax losses may be carried forward indefinitely.
25.
Long service payment liabilities
Target Group
Under the Hong Kong Employment Ordinance, the Target Group is obliged to
make lump sum payments on cessation of employment in certain circumstances to
certain employees who have completed at least five years of service with the Target
Group. The amount payable is dependent on the employee’s final salary and years
of service, and is reduced by entitlements accrued under the Target Group’s defined
contribution retirement scheme that is attributable to contributions made by the
Target Group. The Target Group does not set aside any assets to fund any remaining
obligations.
An actuarial valuation of long service payment liabilities was carried out at 31
December 2011, 2012 and 2013, by BMI Appraisals Limited, using the projected unit
credit method.
II – 45
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The amounts of long service payment liabilities recognised in the combined
statements of financial position are as follows:
At 31 December
Present value of long
service payment
obligation
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
1,088
524
399
399
Movements in the Target Group’s long service payment liabilities during the
Relevant Periods are as follows:
At 31 December
At the beginning of
respective reporting
periods
Current service cost
Interest expense
Losses/(gains) from
staff resignation
Payment to retired/
redundant staff
Actuarial (gains)/
losses arising from
changes in financial
assumptions
At the end of
respective reporting
periods
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
171
1,088
524
399
580
17
318
4
270
10
–
–
337
(1,177)
(144)
–
–
–
(57)
–
(17)
291
(204)
–
1,088
524
399
399
II – 46
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The principal actuarial assumptions adopted by the Target Group (expressed as
weighted average) are as follows:
At 31 December
Discount rate
Salary growth rate
At 30 June
2011
2012
2013
2014
1.52%
0.795%
2.574%
N/A
3.0%
3.7%
5.5%
N/A
–
–
–
N/A
Long term rate
of increases
to mandatory
provident fund
relevant income
and long service
payments
maximum
amount/wages
The Target Group is exposed to a number of risks, the most significant of which
are detailed below:
Risk
Description
Changes in bond yields
A decrease in corporate bond yields will increase
liabilities.
Inflation risk
The majority of the obligations are linked to
inflation, and higher inflation will lead to
higher liabilities.
II – 47
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The Target Group’s sensitivity analysis for each significant actuarial assumption
as of the end of respective reporting period based on reasonably possible changes of
the relevant actuarial assumption is as follows:
Increase/
decrease
in rate
Discount rate
Salary growth rate
0.5%
1.0%
Impact on obligation
At 31 December
2011
2012
2013
HK$’000
HK$’000
HK$’000
(284)/491
145/(139)
(152)/364
153/(152)
(89)/102
134/(133)
At 30 June
2014
HK$’000
(89)/102
134/(133)
The above sensitivity analysis is based on a change in an assumption while
holding all other assumptions constant. In practice, this is unlikely to occur, and
changes in some of the assumptions may be correlated. When calculating the
sensitivity of the long service payment obligation to significant actuarial assumptions
the same method (present value of the long service payment obligation calculated with
the projected unit credit method at the end of respective reporting period) has been
applied as when calculating the liability recognised within the combined statements of
financial position.
The methods and types of assumptions used in preparing the sensitivity analysis
did not change during the Relevant Periods.
The weighted average duration of the Target Group’s long service payment
obligation is approximately 21 years, 15 years, 13 years and 13 years at 31 December
2011, 2012 and 2013 and 30 June 2014 respectively. The maturity analysis of the
Target Group’s undiscounted benefit payments is as follows:
Less than
1 year
HK$’000
Between 1
and 2 years
HK$’000
Between 2
and 5 years
HK$’000
Over
5 years
HK$’000
Total
HK$’000
At 31 December 2011
–
–
22
3,690
3,712
At 31 December 2012
–
–
28
1,048
1,076
At 31 December 2013
4
27
97
1,351
1,479
At 30 June 2014
4
27
97
1,351
1,479
II – 48
APPENDIX II
26.
FINANCIAL INFORMATION OF THE TARGET GROUP
Share capital
Target Company
Number of shares
US$’000
Authorised:
Ordinary shares of US$1 each
At 1 January 2011, 31 December 2011,
31 December 2012, 31 December 2013
and 30 June 2014
50,000
50
Issued and fully paid:
Ordinary shares of US$1 each
At 1 January 2011, 31 December 2011,
31 December 2012, 31 December 2013
and 30 June 2014
1,000
1
Shown in the Financial Information:
At 31 December 2011, 31 December 2012,
31 December 2013 and 30 June 2014
HK$8,000
For the purpose of this report, the share capital of the Target Group represented the
combined share capital of Target Company and Bonjour Medical.
The Target Group’s objectives when managing capital are to safeguard the Target
Group’s ability to continue as a going concern and to maximise the return to the shareholders
through the optimisation of the debt and equity balance.
27.
Reserves
(a)
Target Group
The amounts of the Target Group’s reserves and the movements therein are
presented in the combined statements of profit or loss and other comprehensive
income and combined statements of changes in equity.
II – 49
APPENDIX II
(b)
FINANCIAL INFORMATION OF THE TARGET GROUP
Target Company
Retained
profits and Total
HK$’000
At 1 January 2011
Loss for the year
2,761
(5)
At 31 December 2011
2,756
At 1 January 2012
Loss for the year
2,756
(104)
At 31 December 2012
2,652
At 1 January 2013
Loss for the year
2,652
(134)
At 31 December 2013
2,518
At 1 January 2014
Loss for the period
2,518
(20)
At 30 June 2014
2,498
At 1 January 2013
Loss for the period (unaudited)
2,652
–
At 30 June 2013 (unaudited)
2,652
II – 50
APPENDIX II
(c)
FINANCIAL INFORMATION OF THE TARGET GROUP
Nature and purpose of reserves
(i)
Statutory reserve
The statutory reserve, which is non-distributable, is appropriated from
the profit after taxation of the Target Group’s foreign subsidiary under the local
applicable laws and regulations.
(ii)
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange
differences arising from the translation of the Financial Information of foreign
operations. The reserve is dealt with in accordance with the accounting policies
set out in note 4(c) to the Financial Information.
28.
Acquisition of a subsidiary
On 24 February 2011, the Target Group acquired 100% of the issued share capital
of Mega World for a cash consideration of HK$1,412,000. Mega World was engaged in
operation of beauty and health salons during the Relevant Periods.
II – 51
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
The fair value of the identifiable assets and liabilities of Mega World acquired as at its
date of acquisition is as follows:
HK$’000
Net liabilities acquired:
Inventories
Trade receivables
Rental and utility deposits
Prepayments, deposits and other receivables
Bank balances
Trade payables
Other payables
Deferred revenue
614
65
736
232
58
(686)
(7)
(3,131)
Goodwill
(2,119)
3,531
1,412
Satisfied by:
Cash
1,412
Net cash outflow arising on acquisition:
Cash consideration paid
Cash and cash equivalents acquired
1,412
(58)
1,354
The goodwill arising on the acquisition of Mega World is attributable to the
anticipated profitability of the distribution of the Target Group’s services in the anticipated
future operating synergies from the combination.
II – 52
APPENDIX II
29.
FINANCIAL INFORMATION OF THE TARGET GROUP
Lease commitments
(a)
Target Group
At the end of respective reporting periods, the Target Group had future
aggregate minimum lease payments under non-cancellable operating leases in respect
of land and buildings as follows:
At 31 December
Within one year
In the second to fifth
years, inclusive
After five years
At 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2014
HK$’000
27,842
38,837
45,881
33,764
37,863
–
59,744
1,535
37,058
–
24,379
–
65,705
100,116
82,939
58,143
Operating leases payments represent rental payable by the Target Group for
its beauty salons. Leases are negotiated for an average term 3-6 years and rentals are
fixed over the lease terms and do not include contingent rentals.
(b)
30.
The Target Company did not have any significant commitments at 31 December
2011, 2012 and 2013 and at 30 June 2014.
Related party transactions
In addition to those related party transactions and balances disclosed elsewhere in
the Financial Information, the Target Group had the following transactions with its related
parties during the Relevant Periods:
Year ended 31 December
Purchase of goods from
fellow subsidiaries
Service management fee to
a fellow subsidiary
Service management fee income
from a fellow subsidiary
Six months ended 30 June
2011
HK$’000
2012
HK$’000
2013
HK$’000
2013
HK$’000
(unaudited)
2014
HK$’000
1,221
1,697
3,122
1,107
1,853
–
1,100
1,200
–
–
–
700
–
–
–
II – 53
APPENDIX II
31.
FINANCIAL INFORMATION OF THE TARGET GROUP
Subsequent financial statements
No audited financial statement has been prepared by the Target Company or any of its
subsidiaries in respect of any period subsequent to 30 June 2014 and up to the date of this
report.
Yours faithfully,
RSM Nelson Wheeler
Certified Public Accountants
Hong Kong
II – 54
APPENDIX II
(2)
FINANCIAL INFORMATION OF THE TARGET GROUP
MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP FOR
EACH OF THE YEARS ENDED 31 DECEMBER 2011, 2012 AND 2013 AND FOR THE
SIX MONTHS ENDED 30 JUNE 2014
Set out below is the management discussion and analysis of the Target Group:
(i)
Financial and business performance
The Target Group is principally engaged in operation of beauty and health salons
in Hong Kong, Macau and Shanghai and provision of beauty and health-care related
consultancy services in Hong Kong and Macau.
For the years ended 31 December 2011, 2012 and 2013 and the six months ended 30
June 2014, revenue generated from the Target Group’s beauty services achieved a steady
growth which was mainly due to the increase in beauty consciousness, increase in quality of
beauty services and brand recognition. The Target Group recorded revenue of approximately
HK$280,706,000, HK$300,933,000, HK$314,830,000 and HK$ 149,357,000 for the
years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014,
respectively.
The revenue of the Target Group for the years ended 31 December 2011, 2012 and
2013 and the six months ended 30 June 2014 had increased by approximately 27.23%, 7.2%,
4.6% and 3.8%, respectively, when compared with the corresponding year/period.
The profit for the years ended 31 December 2011, 2012 and 2013 and the six
months ended 30 June 2014 amounted to approximately HK$49,515,000, HK$32,172,000,
HK$35,635,000 and HK$10,023,000, respectively.
II – 55
APPENDIX II
(ii)
FINANCIAL INFORMATION OF THE TARGET GROUP
Liquidity, financial resources and capital structure
For the year ended 31 December 2011
The Target Group generally financed its operations through its internal
resources generated from its operating activities.
As at 31 December 2011, the Target Group held bank and cash balances of
approximately HK$21,701,000 and had no bank borrowings.
For the year ended 31 December 2012
The Target Group generally financed its operations through its internal
resources generated from its operating activities.
As at 31 December 2012, the Target Group held bank and cash balances of
approximately HK$29,320,000 and had no bank borrowings.
For the year ended 31 December 2013
The Target Group generally financed its operations through its internal
resources generated from its operating activities.
As at 31 December 2013, the Target Group held bank and cash balances of
approximately HK$43,950,000 and had no bank borrowings.
For the six months ended 30 June 2014
The Target Group generally financed its operations through its internal
resources generated from its operating activities.
As at 30 June 2014, the Target Group held bank and cash balances of
approximately HK$22,653,000 and had no bank borrowings.
II – 56
APPENDIX II
(iii)
FINANCIAL INFORMATION OF THE TARGET GROUP
Financial ratio
For the year ended 31 December 2011
The gearing ratio of the Target Group (defined as total liabilities to total assets)
was approximately 115.0%. Current ratio (defined as total current assets divided by
total current liabilities) was 0.76 times.
For the year ended 31 December 2012
The gearing ratio of the Target Group (defined as total liabilities to total assets)
was approximately 106.2%.
Current ratio (defined as total current assets divided by total current liabilities)
was 0.81 times.
For the year ended 31 December 2013
The gearing ratio of the Target Group (defined as total liabilities to total assets)
was approximately 94.7%.
Current ratio (defined as total current assets divided by total current liabilities)
was 0.88 times.
For the six months ended 30 June 2014
The gearing ratio of the Target Group (defined as total liabilities to total assets)
was approximately 91.7%.
Current ratio (defined as total current assets divided by total current liabilities)
was 0.97 times.
(iv)
Material investments, acquisitions or disposals
There was no material acquisitions and disposals of subsidiaries and associated
companies of the Target and no significant investments held for the years ended 31 December
2011, 2012 and 2013 and the six months ended 30 June 2014.
II – 57
APPENDIX II
(v)
FINANCIAL INFORMATION OF THE TARGET GROUP
Employee and remuneration policy
For the year ended 31 December 2011
As at 31 December 2011, there were 419 staff employed by the Target
Group and the total staff costs for the year ended 31 December 2011 amounted to
approximately HK$112,049,000. The Target Group remunerates its employees mainly
based on industry practices and their respective educational background, experience,
performance and seniority. Discretionary bonus will be provided by reference to the
Target Group’s performance as well as individual’s performance. In addition, each
employee of the Target Group enjoys mandatory provident fund, medical allowance
and other fringe benefits.
For the year ended 31 December 2012
As at 31 December 2012, there were 388 staff employed by the Target
Group and the total staff costs for the year ended 31 December 2012 amounted to
approximately HK$121,214,000. The Target Group remunerates its employees mainly
based on industry practices and their respective educational background, experience,
performance and seniority. Discretionary bonus will be provided by reference to the
Target Group’s performance as well as individual’s performance. In addition, each
employee of the Target Group enjoys mandatory provident fund, medical allowance
and other fringe benefits.
For the year ended 31 December 2013
As at 31 December 2013, there were 360 staff employed by the Target
Group and the total staff costs for the year ended 31 December 2013 amounted to
approximately HK$128,237,000. The Target Group remunerates its employees mainly
based on industry practices and their respective educational background, experience,
performance and seniority. Discretionary bonus will be provided by reference to the
Target Group’s performance as well as individual’s performance. In addition, each
employee of the Target Group enjoys mandatory provident fund, medical allowance
and other fringe benefits.
II – 58
APPENDIX II
FINANCIAL INFORMATION OF THE TARGET GROUP
For the six months ended 30 June 2014
As at 30 June 2014, there were 373 staff employed by the Target Group
and the total staff costs for the six months ended 30 June 2014 amounted to
approximately HK$65,989,000. The Target Group remunerates its employees mainly
based on industry practices and their respective educational background, experience,
performance and seniority. Discretionary bonus will be provided by reference to the
Target Group’s performance as well as individual’s performance. In addition, each
employee of the Target Group enjoys mandatory provident fund, medical allowance
and other fringe benefits.
(vi)
Charge on assets
As at 31 December 2011, 2012 and 2013 and 30 June 2014, none of the assets of the
Target Group were charged or pledged as security for any banking facilities.
(vii)
Future plans for material investments or capital assets
The Target Group had no plans for material investments or capital assets for the twelve
months ending 30 June 2015.
(viii) Foreign exchange exposure
Most of the trading transactions, assets and liabilities of the Target Group for the
years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014 were
denominated in Hong Kong dollars. It is the Target Group’s policy for its operating entities
to operate in their corresponding local currencies to minimise currency risks. The Target
Group had minimal exposure to foreign currency risk for the years ended 31 December 2011,
2012 and 2013 and the six months ended 30 June 2014 since the principal businesses were
conducted and recorded in Hong Kong dollars.
(ix)
Contingent liabilities
As at 31 December 2011, 2012 and 2013 and 30 June 2014, the Target Group had no
material contingent liabilities
II – 59
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
The following is the text of a report, prepared for the purpose of inclusion in this circular,
received from the Company’s reporting accountants, Deloitte Touche Tohmatsu, Certified Public
Accountants, Hong Kong:
1.
INTRODUCTION TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE ENLARGED GROUP
The following is an unaudited pro forma statement of assets and liabilities of the Enlarged
Group (the “Unaudited Pro Forma Consolidated Statement of Assets and Liabilities”) which has
been prepared in accordance with paragraph 4.29 of the Listing Rules for the purpose of illustrating
the effect of the proposed acquisition of 100% equity interest in the Target as if the Acquisition had
been completed on 30 June 2014.
The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities is prepared
based on (i) the unaudited consolidated statement of financial position of the Group as at 30 June
2014 which has been extracted from the published interim report of the Company for the six
months ended 30 June 2014 dated on 25 August 2014; and (ii) the audited combined statement
of financial position of the Target Group as at 30 June 2014 as extracted from the accountants’
report issued by RSM Nelson Wheeler as set out in the Appendix II to this circular, after making
pro forma adjustments relating to the Acquisition that are (i) directly attributable; and (ii) factually
supportable as if the Acquisition had been undertaken as at 30 June 2014.
The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities has been
prepared by the directors of the Company based on a number of assumptions, estimates and
uncertainties for illustrative purposes only and because of its nature, it may not give a true
picture of the financial position of the Enlarged Group. Accordingly, the Unaudited Pro Forma
Consolidated Statement of Assets and Liabilities does not purport to describe the financial position
of the Enlarged Group that would have been attained had the Acquisition been completed as at 30
June 2014, nor purport to predict the future financial position of the Enlarged Group.
III – 1
APPENDIX III
(A)
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
The unaudited pro forma consolidated statement of assets and liabilities
The Group
as at
30 June 2014
(Unaudited)
HK$’000
(Note 1)
The Target
Group
as at
30 June 2014
(Audited)
HK$’000
(Note 2)
286,920
151,807
Pro forma
adjusted total
for the
Enlarged
Group
HK$’000
Sub-total
HK$’000
Pro forma
adjustments
HK$’000
(Note 3)
–
27,531
286,920
179,338
–
–
286,920
179,338
46,000
39,428
–
–
15,121
–
111,774
60,974
–
–
3,907
724
–
–
–
–
46,000
39,428
3,907
724
15,121
–
111,774
60,974
–
–
–
–
338,425
178,603
–
–
46,000
39,428
3,907
724
353,546
178,603
111,774
60,974
712,024
32,162
744,186
517,028
1,261,214
11,016
51,944
611,503
193,314
–
39,109
–
–
11,016
91,053
611,503
193,314
–
–
–
–
11,016
91,053
611,503
193,314
–
150,954
150,954
–
150,954
–
6,963
1,000
1,479
31,229
277,477
36,741
–
–
5,354
–
22,653
36,741
6,963
1,000
6,833
31,229
300,130
–
–
–
–
–
–
36,741
6,963
1,000
6,833
31,229
300,130
1,185,925
254,811
1,440,736
–
1,440,736
Non-current assets
Investment properties
Property, plant and equipment
Deposit paid for acquisition of
subsidiaries
Loans receivable
Rental and utility deposits
Deferred tax assets
Goodwill
Other intangible assets
Interests in associates
Available-for-sale investments
Current assets
Inventories
Trade and other receivables
Held for trading investments
Loans receivable
Amounts due from former
ultimate holding company
Amounts due from former
fellow subsidiaries
Amounts due from associates
Amount due from an investee
Tax recoverable
Pledged bank deposits
Bank balances and cash
III – 2
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
The Group
as at
30 June 2014
(Unaudited)
HK$’000
(Note 1)
The Target
Group
as at
30 June 2014
(Audited)
HK$’000
(Note 2)
49,636
12
12,000
5
–
–
283,467
41,179
Pro forma
adjusted total
for the
Enlarged
Group
HK$’000
Sub-total
HK$’000
Pro forma
adjustments
HK$’000
(Note 3)
25,941
–
–
–
4,396
226,686
–
4,709
75,577
12
12,000
5
4,396
226,686
283,467
45,888
–
–
–
–
–
–
–
–
75,577
12
12,000
5
4,396
226,686
283,467
45,888
386,299
261,732
648,031
–
648,031
799,626
(6,921)
792,705
–
792,705
1,511,650
25,241
1,536,891
517,028
2,053,919
3,603
10,000
–
942
–
399
4,545
10,000
399
29,469
–
–
34,014
10,000
399
13,603
1,341
14,944
29,469
44,413
1,498,047
23,900
1,521,947
487,559
2,009,506
Current liabilities
Trade and other payables
Amount due to an associate
Amounts due to non-controlling interests
Amounts due to related parties
Amounts due to fellow subsidiaries
Deferred income
Bank borrowing
Tax payable
Net current assets
Total assets less current liabilities
Non-current liabilities
Deferred tax liabilities
Other borrowings
Long service payment liabilities
III – 3
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
Notes to the Unaudited Pro Forma Consolidation Statement of Assets and Liabilities:
1.
The figures are extracted from the unaudited consolidated statement of financial position of the Group as at
30 June 2014 as set out in the published interim report of the Company for the period ended 30 June 2014.
2.
The figures are extracted from the audited combined statement of financial position of the Target Group as
at 30 June 2014 as set out in the Appendix II to the circular.
3.
The adjustment reflects the recognition of goodwill of HK$338,425,000 and other intangible assets of
HK$178,603,000 arising from the Acquisition.
Details of the recognition of the pro forma goodwill and the pro forma other intangible assets arising on the
Acquisition as if the Acquisition had been completed as at 30 June 2014 is as follows:
HK$’000
Carrying amount of combined net assets of the Target Group (as shown in the audited
combined statement of financial position as at 30 June 2014 of the Target Group as
set out in the Appendix II to the circular) (note c)
23,900
Pro forma fair value of other intangible assets (note a)
178,603
Deferred tax liabilities (note a)
(29,469)
Pro forma fair value of identifiable assets and liabilities of the Target Group
173,034
Pro forma goodwill arising on the Acquisition:
Consideration (note b)
511,459
Less: Pro forma fair value of identifiable net assets acquired
(173,034)
338,425
(a)
The pro forma fair values of other intangible assets as at 30 June 2014 comprising trade names and
customer relationship are estimated based on valuation report issued by Ascent Partners Valuation
Service Limited as at 30 June 2014 using Relief from Royalty Method and Excess Earning Method,
respectively, based on expected revenue and expected gross profits provided by the management
of the Target. Deferred tax liabilities are recognised using Hong Kong Profits Tax rate of 16.5%
accordingly.
(b)
The consideration will be settled through the allotment and issue of the shares of the Company of
365,327,586 shares of HK$0.01 each. As if Acquisition had been taken place at 30 June 2014, the
fair value of the consideration is HK$511,459,000, with reference to market price of HK$1.4 per
share on that date. The actual issue price is subject to change on the actual completion date when
the Group obtains control over the Target.
III – 4
APPENDIX III
(c)
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
For the purpose of the preparation of the unaudited pro forma financial information, except for
pro forma other intangible assets and pro forma goodwill, the carrying amounts of the identifiable
assets and liabilities are assumed to be approximate to their fair value. The fair value of the
identifiable assets and liabilities (including other intangible assets) of the Target Group will be
re-assessed at the actual completion date of the Acquisition. Therefore, the amounts of assets and
liabilities to be acquired including goodwill and other intangible assets which to be recognised in
connection with the Acquisition at the actual completion date are subject to changes from the pro
forma amounts shown above.
(d)
For the purpose of the preparation of the unaudited pro forma financial information, the Directors
have assessed and concluded that no impairment is identified on the pro forma amounts of goodwill
and other intangible assets as if the Acquisition had been taken place at 30 June 2014 in accordance
with HKAS 36 “Impairment of Assets”. The Directors confirmed that they will assess impairment
of the goodwill and other intangible assets in subsequent reporting periods, to calculate the valuein-use, in accordance with the requirement of HKAS 36.
(e)
For the purpose of the preparation of the unaudited pro forma financial information, the transaction
cost of the Acquisition is assumed to be minimal.
III – 5
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
To The Directors of Town Health International Medical Group Limited
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Town Health International Medical Group Limited (the “Company”)
and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the
Company (the “Directors”) for illustrative purposes only. The pro forma financial information
consists of the pro forma statement of assets and liabilities as at 30 June 2014 and related notes
as set out on pages III-1 to III-5 of the circular issued by the Company dated 19 November 2014
(the “Circular”). The applicable criteria on the basis of which the Directors have compiled the pro
forma financial information are described on pages III-1 to III-5 of the Circular.
The pro forma financial information has been compiled by the Directors to illustrate the
impact of the transaction relating to the proposed acquisition of 100% interest of Bonjour Beauty
International Limited (the “Acquisition”) on the Group’s financial position as at 30 June 2014 as
if the Acquisition had taken place as at 30 June 2014. As part of this process, information about
the Group’s financial position has been extracted by the Directors from the Group’s financial
statements for the six months ended 30 June 2014, on which an interim report has been published.
Directors’ Responsibilities for the Pro Forma Financial Information
The Directors are responsible for compiling the pro forma financial information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline
7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”)
issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
III – 6
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing
Rules, on the pro forma financial information and to report our opinion to you. We do not accept
any responsibility for any reports previously given by us on any financial information used in
the compilation of the pro forma financial information beyond that owed to those to whom those
reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements (“HKSAE”) 3420 Assurance Engagements to Report on the Compilation of Pro
Forma Financial Information Included in a Prospectus issued by the HKICPA. This standard
requires that the reporting accountant comply with ethical requirements and plan and perform
procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma
financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to
AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any reports
or opinions on any historical financial information used in compiling the pro forma financial
information, nor have we, in the course of this engagement, performed an audit or review of the
financial information used in compiling the pro forma financial information.
The purpose of pro forma financial information included in an investment circular is solely
to illustrate the impact of a significant event or transaction on unadjusted financial information of
the Group as if the event had occurred or the transaction had been undertaken as at an earlier date
selected for purposes of the illustration. Accordingly, we do not provide any assurance that the
actual outcome of the event or transaction as at 30 June 2014 would have been as presented.
A reasonable assurance engagement to report on whether the pro forma financial information
has been properly compiled on the basis of the applicable criteria involves performing procedures
to assess whether the applicable criteria used by the Directors in the compilation of the pro forma
financial information provide a reasonable basis for presenting the significant effects directly
attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:
•
The related pro forma adjustments give appropriate effect to those criteria; and
•
The pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
III – 7
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP
The procedures selected depend on the reporting accountant’s judgment, having regard to the
reporting accountant’s understanding of the nature of the Group, the event or transaction in respect
of which the pro forma financial information has been compiled, and other relevant engagement
circumstances.
The engagement also involves evaluating the overall presentation of the pro forma financial
information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion:
(a)
the pro forma financial information has been properly compiled on the basis stated;
(b)
such basis is consistent with the accounting policies of the Group; and
(c)
the adjustments are appropriate for the purposes of the pro forma financial information
as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
19 November 2014
III – 8
APPENDIX IV
1.
GENERAL INFORMATION
RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the Listing Rules for the purpose of giving
information with regard to the Company. The Directors, having made all reasonable enquiries,
confirm that to the best of their knowledge and belief the information contained in this circular is
accurate and complete in all material respects and not misleading or deceptive, and there are no
other matters the omission of which would make any statement herein or this circular misleading.
2.
SHARE CAPITAL
The authorised and issued share capital of the Company as at the Latest Practicable Date
were, and immediately after the issue of the Consideration Shares (assuming that save for the issue
of the Consideration Shares, no new Shares will be issued from the Latest Practicable Date to the
completion of the Acquisition) will be, as follows:
Authorised
Shares as at the Latest Practicable Date
Issued and fully paid
Shares in issue as at the Latest
Practicable Date
Consideration Shares to be issued
at Completion
IV – 1
Number of Shares
HK$
30,000,000,000
300,000,000
4,651,188,550
46,511,885.50
365,327,586
3,653,275.86
APPENDIX IV
3.
GENERAL INFORMATION
DISCLOSURE OF INTERESTS
(i)
Interests of Directors
As at the Latest Practicable Date, the interests and short positions of the Directors
and chief executives of the Company in the Shares, underlying Shares and debentures of
the Company or its associated corporations (within the meaning of Part XV of the SFO)
which (i) were required to be notified to the Company and the Stock Exchange pursuant
to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which
they were taken or deemed to have under such provisions of the SFO); or (ii) were required,
pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii)
were required to be notified to the Company and the Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules
were as follows:
Long position in the Shares and underlying Shares
Number of
Shares held
Number of
underlying
Shares held
Approximate
percentage of
the total
issued share
capital of
the Company
1,335,243,431
(Note 2)
83,333,333
(Note 3)
30.50%
(Note 1)
Name of Director
Capacity
Cho Kwai Chee
Interest in controlled
corporation
Chan Wing Lok, Brian
Beneficial owner
2,760,000
–
0.06%
(Note 1)
Lee Chik Yuet
Beneficial owner
–
5,000,000
0.11%
(Note 1)
Choi Chee Ming
Interest in controlled
corporation
1,335,243,431
(Note 2)
83,333,333
(Note 3)
30.50%
(Note 1)
Notes:
1.
The total number of the issued Shares as at the Latest Practicable Date (that was, 4,651,188,550
Shares) had been used for the calculation of the approximate percentage.
2.
Such Shares were held by Broad Idea International Limited (“Broad Idea”) which is owned as to
50.1% by Cho Kwai Chee and as to 49.9% by Choi Chee Ming. Accordingly, Cho Kwai Chee and
Choi Chee Ming are both deemed to be interested in the 1,335,243,431 Shares held by Broad Idea
under Part XV of the SFO. Cho Kwai Chee and Choi Chee Ming are also directors of Broad Idea.
IV – 2
APPENDIX IV
3.
GENERAL INFORMATION
Such underlying Shares were held by Broad Idea which is owned as to 50.1% by Cho Kwai Chee
and as to 49.9% by Choi Chee Ming. Accordingly, Cho Kwai Chee and Choi Chee Ming are both
deemed to be interested in the 83,333,333 underlying Shares held by Broad Idea under Part XV of
the SFO. Cho Kwai Chee and Choi Chee Ming are also directors of Broad Idea.
Save as disclosed above, as at the Latest Practicable Date, none of the Directors or
chief executives of the Company had or was deemed to have any interests and short positions
in the Shares, underlying Shares and debentures of the Company or any of its associated
corporations (within the meaning of Part XV of the SFO) which (i) were required to be
notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO (including interests and short positions which they were taken or deemed to have
under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO,
to be entered in the register referred to therein; or (iii) were required to be notified to the
Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by
Directors of Listed Issuers contained in the Listing Rules.
(ii)
Interests of substantial Shareholders
As at the Latest Practicable Date, so far as was known to the Directors, the following
parties, other than the Directors or chief executives of the Company, had interests or short
positions in the Shares and underlying Shares, which would fall to be disclosed to the
Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of
the SFO.
Number of
Shares held
Number of
underlying
Shares held
Approximate
percentage of
the total
issued share
capital of
the Company
Name
Capacity
Broad Idea
Beneficial
owner
1,335,243,431
(Note 2)
83,333,333
(Note 2)
30.50%
(Note 1)
Bonjour Group
Limited (Note 3)
Beneficial
owner
365,327,586
(Note 4)
–
7.85%
(Note 1)
Bonjour Holdings
Limited
Interest in
controlled
corporation
365,327,586
(Note 4)
–
7.85%
(Note 1)
IV – 3
APPENDIX IV
GENERAL INFORMATION
Number of
Shares held
Number of
underlying
Shares held
Approximate
percentage of
the total
issued share
capital of
the Company
Name
Capacity
Fubon Financial
Holding Co.,
Ltd. (“Fubon
Financial”)
Interest in
controlled
corporation
357,142,857
(Note 5)
291,666,666
(Note 6)
13.95%
(Note 1)
Fubon Life Insurance
Co., Ltd. (“Fubon
Life”)
Beneficial
owner
259,740,260
(Note 5)
212,121,212
(Note 6)
10.14%
(Note 1)
Notes:
1
The total number of the issued Shares as at the Latest Practicable Date (that was, 4,651,188,550
Shares) had been used for the calculation of the approximate percentage.
2.
Broad Idea is beneficially owned as to 50.1% by Cho Kwai Chee and as to 49.9% by Choi Chee
Ming. They are also directors of Broad Idea.
3.
Dr. Ip, who is proposed to be an executive Director with effect from the Completion Date, is a
director of Bonjour Group Limited.
4.
Bonjour Group Limited, a wholly owned subsidiary of Bonjour Holdings Limited, was the
beneficial owner of the 365,327,586 Shares. Accordingly, Bonjour Holdings Limited is deemed to
be interested in these Shares by virtue of the provisions of the SFO.
5.
Such Shares were held as to (i) 259,740,260 Shares by Fubon Life; and (ii) 97,402,597 Shares
by Fubon Insurance Co., Ltd. (“Fubon Insurance”). Each of Fubon Life and Fubon Insurance
is a wholly-owned subsidiary of Fubon Financial. Accordingly, Fubon Financial is deemed to be
interested in the aggregate of 357,142,857 Shares held by Fubon Life and Fubon Insurance under
Part XV of the SFO.
6.
Such underlying Shares were held as to (i) 212,121,212 underlying Shares by Fubon Life; and
(ii) 79,545,454 underlying Shares by Fubon Insurance. Each of Fubon Life and Fubon Insurance
is a wholly-owned subsidiary of Fubon Financial. Accordingly, Fubon Financial is deemed to
be interested in the aggregate of 291,666,666 underlying Shares held by Fubon Life and Fubon
Insurance under Part XV of the SFO.
IV – 4
APPENDIX IV
GENERAL INFORMATION
Save as disclosed above, the Directors were not aware of any party who, as at the
Latest Practicable Date, had interests or short positions in the Shares and underlying
Shares, which would fall to be disclosed to the Company and the Stock Exchange under the
provisions of Divisions 2 and 3 of Part XV of the SFO.
4.
MATERIAL CONTRACTS
The following contracts (not being contracts in the ordinary course of business of the
Enlarged Group) have been entered into by members of the Enlarged Group within two years
immediately preceding the Latest Practicable Date which are or may be material:
(a)
the shareholders’ agreement dated 10 December 2012 entered into between Town
Health (BVI) Limited (a wholly-owned subsidiary of the Company) and Chemosino
International Limited in relation to their participation and respective shareholdings
in Asset Management International Limited (formerly known as Town Health Asset
Management Limited) (“TH Asset”), further details of which are set out in the circular
of the Company dated 28 September 2012;
(b)
the provisional agreement for sale and purchase dated 18 January 2013 entered into
between Superb Yield Limited (a non-wholly-owned subsidiary of the Company) and
Starphoneix Investments Limited, pursuant to which Superb Yield Limited agreed to
sell and Starphoneix Investments Limited agreed to purchase the premises located
at Shop no. 21 on Ground Floor, Grandway Garden, No. 16 Mei Tin Road, and
Nos. 15 & 35 Tsuen Nam Road, Shatin, New Territories, at the total consideration
of HK$66,800,000, further details of which are set out in the announcement of the
Company dated 18 January 2013;
(c)
the agreement dated 4 February 2013 entered into between TH Asset (a
non-wholly-owned subsidiary of the Company) and Plenty Cash Investment Limited,
pursuant to which TH Asset agreed to acquire and Plenty Cash Investment Limited
agreed to sell two ordinary shares of US$1.00 each of Dragon Oriental Investment
Limited, representing its entire issued share capital, and together with all rights and
benefits attaching thereto at the consideration of HK$43,000,000, further details of
which are set out in the announcement of the Company dated 4 February 2013;
IV – 5
APPENDIX IV
GENERAL INFORMATION
(d)
the provisional agreement for sale and purchase dated 15 February 2013 entered into
between Ko Shi Wai (Holdings) Company Limited as the vendor and Wealthy Train
Limited (a non-wholly-owned subsidiary of the Company) as the purchaser in respect
of the sale and purchase of the premises of Shop 2 & 3A on G/F of Dang Fat Mansion,
10/16 & 20 Tai Ho Road, 8/12 Dang Fat Street & 7/11 On Wing Street, Tsuen Wan,
New Territories (“Property”) at the consideration of HK$155 million, details of which
are set out in the announcement of the Company dated 15 February 2013;
(e)
the agreement dated 28 February 2013 entered into between TH Asset (a
non-wholly-owned subsidiary of the Company) and Power Design Holdings Limited,
pursuant to which TH Asset agreed to sell, and Power Design Holdings Limited agreed
to purchase, 100 shares of RBI Conglomerate (Holdings) Limited of US$1.00 each,
representing 50% of its issued share capital, at the consideration of HK$72,500,000,
further details of which are set out in the announcement of the Company dated 28
February 2013;
(f)
the agreement dated 28 February 2013 entered into between Shine Legend Limited
(a non-wholly-owned subsidiary of the Company) and Mr. Yuen Shu Ming, Mr.
Fung Man Lam, Mr. Siu Kin Chung and Mr. Mak Hon Shing (collectively, “TJFL
Vendors”), pursuant to which Shine Legend Limited agreed to purchase, and the
TJFL Vendors agreed to sell, 2,000,000 shares of Trans Joy Finance Limited of
HK$1.00 each, representing its entire issued share capital, at the consideration of
HK$1,890,000;
(g)
the formal agreement for sale and purchase dated 5 March 2013 entered into between
Ko Shi Wai (Holdings) Company Limited as the vendor and Wealthy Train Limited (a
non-wholly-owned subsidiary of the Company) as the purchaser in respect of the sale
and purchase of the Property;
(h)
the subscription agreement dated 26 March 2013 entered into between the Company
and Convoy Financial Services Holdings Limited in relation to the subscription of
19,000,000 ordinary shares of HK$0.10 each in the share capital of Convoy Financial
Services Holdings Limited at the aggregate subscription price of HK$43,700,000,
details of which are set out in the announcement of the Company dated 26 March
2013;
IV – 6
APPENDIX IV
GENERAL INFORMATION
(i)
the sale and purchase agreement dated 16 April 2013 (“Luck Key SPA”) entered into
between Town Health (BVI) Limited (a wholly-owned subsidiary of the Company),
China Gogreen Assets Investment Limited (currently known as Jun Yang Solar
Power Investments Limited) (“China Gogreen”) and Dr. Fung Yiu Tong, Bennet as
the intended vendors, Absolutely Talent Technology Limited as the purchaser, and
Computech Holdings Limited (currently known as China Mobile Games and Cultural
Investment Limited) as the purchaser’s guarantor, in relation to the sale and purchase
of the entire issued share capital of Luck Key Investment Limited (“Luck Key”) and
the assignment of the entire sum owing by Luck Key and its subsidiaries to China
Gogreen as at the completion of the transactions contemplated under the Luck Key
SPA at an aggregate consideration of HK$85,000,000, details of which are set out in
the announcement of the Company dated 16 April 2013;
(j)
the sale and purchase agreement dated 14 May 2013 entered into between Million
Worldwide Investment Limited (a non-wholly-owned subsidiary of the Company) as
the vendor and Rosy Lane Investments Limited as the purchaser, in relation to the sale
and purchase of the entire issued share capital of Achieved Success Company Limited
at an aggregate consideration of HK$35,000,000, details of which are set out in the
announcement of the Company dated 14 May 2013;
(k)
the sale and purchase agreement dated 15 May 2013 entered into between TH Asset
(a non-wholly-owned subsidiary of the Company) as the vendor and Lucky Famous
Limited as the purchaser, in relation to the sale and purchase of the entire issued share
capital of Dragon Oriental Investment Limited at the consideration of HK$42,000,000,
details of which are set out in the announcement of the Company dated 15 May 2013;
(l)
the equity transfer agreement dated 1 July 2013 entered into between Hong Kong
Town Health Project Investments Limited (a wholly-owned subsidiary of the
Company) as the purchaser and 深圳市平安創新資本投資有限公司 (unofficial
English translation being Shenzhen City Ping An Chuang Xin Capital Investment
Co., Ltd.) as the vendor, in relation to the sale and purchase of 40% equity interest
of 廣州宜康醫療管理有限公司 (unofficial English translation being Guangzhou
Yikang Medical Management Co., Ltd.) (“Yikang”) at the aggregate consideration
of RMB99.92 million (“Yikang Acquisition”), details of which are set out in the
announcement of the Company dated 1 July 2013;
IV – 7
APPENDIX IV
GENERAL INFORMATION
(m)
the joint venture contract dated 1 July 2013 entered into between Hong Kong Town
Health Project Investments Limited (a wholly-owned subsidiary of the Company), 廣
東港康醫院管理有限公司 (Guangdong Townsfolk Hospital Management Co., Ltd.)
and 廣州中大控股有限公司 (unofficial English translation being Guangzhou Zhongda
Holdings Co., Ltd.) which set out, among other matters, the manner in which the
business and affairs of Yikang shall be managed and controlled after completion of the
Yikang Acquisition, details of which are set out in the announcement of the Company
dated 1 July 2013;
(n)
the addendum to the Luck Key SPA dated 19 July 2013 entered into between the
parties to the Luck Key SPA in relation to the postponement of the long stop date of
the disposal of Luck Key from 31 July 2013 to 30 September 2013, details of which
are set out in the announcement of the Company dated 19 July 2013;
(o)
the provisional agreement for sale and purchase dated 21 August 2013 entered into
between Pherson Limited (a then non-wholly-owned subsidiary of the Company) as
the vendor and Silver Ascot Development Limited as the purchaser in relation to the
sale and purchase of the premises located at Shop C on the Ground Floor, Carprio
Mansion, No.1 Lai Chi Kok Road, Kowloon at the consideration of HK$54,000,000,
details of which are set out in the announcement of the Company dated 21 August
2013;
(p)
the sale and purchase agreement dated 27 August 2013 entered into among Town
Health Healthcare Services Limited (a wholly-owned subsidiary of the Company) as
the purchaser, Rainbow Bright Enterprises Limited as the vendor and Mr. Yuen Siu
Wah as the warrantor in relation to the acquisition of 70% interest in Ever Full Harvest
Limited at the consideration of HK$21,000,000, details of which are set out in the
announcement of the Company dated 27 August 2013;
(q)
the provisional agreement for sale and purchase dated 14 September 2013 entered
into between Perfect Elite Investments Limited (a non-wholly-owned subsidiary of the
Company) as the vendor and Happy Vision Investments Limited as the purchaser in
relation to the disposal of the office and ancillary areas on 6th Floor, Silver Fortune
Plaza, No.1 Wellington Street, Hong Kong at the consideration of HK$72,000,000,
details of which are set out in the announcement of the Company dated 14 September
2013;
(r)
the agreement dated 12 December 2013 (“Formal Agreement”) entered into between
the Company and 河南金城技工學校 (unofficial English translation being Henan
Jincheng Technical School (“HJTS”)) in relation to the establishment of a fertility
specialty hospital which will be engaged in the business of in vitro fertilization and
eugenics with other third parties;
IV – 8
APPENDIX IV
GENERAL INFORMATION
(s)
the sale and purchase agreement dated 18 February 2014 entered into among Million
Worldwide Investment Limited (a non-wholly-owned subsidiary of the Company) as
the vendor, the Company as the vendor’s guarantor, and Active Earn Limited as the
purchaser in relation to the disposal of the entire issued share capital of Wealthy Train
Limited at the consideration of HK$3,321,615.75, details of which are set out in the
announcement of the Company dated 18 February 2014;
(t)
the loan assignment agreement dated 18 February 2014 entered into among Million
Worldwide Investment Limited (a non-wholly-owned subsidiary of the Company) as
the vendor, the Company as the vendor’s guarantor, and Bonjour Cosmetic Wholesale
Center Limited as the purchaser in relation to the disposal of the entire shareholder’s
loan owing by Wealthy Train Limited to Million Worldwide Investment Limited at the
consideration of HK$160,578,384.25, details of which are set out in the announcement
of the Company dated 18 February 2014;
(u)
the placing agreement dated 27 February 2014 entered into among the Company as
the issuer, and Astrum Capital Management Limited and GEO Securities Limited
as the placing agents in relation to the issue of 7% per annum notes (“Notes”) in
an aggregate principal amount of up to HK$500,000,000 maturing on the seventh
anniversary of the date of the first issue of the Notes at the placing price equal
to 100% of the principal amount of the Notes, details of which are set out in the
announcement of the Company dated 27 February 2014;
(v)
the supplemental agreement to the Formal Agreement dated 14 March 2014 entered
into between the Company and HJTS in relation to the formation of a joint venture
company (“PRC JV Company”) in Henan Province of the PRC by Yikang (a nonwholly-owned subsidiary of the Company) and HJTS, details of which are set out in
the announcement of the Company dated 14 March 2014;
(w)
the investment framework agreement dated 2 June 2014 entered into between Town
Health Corporate Advisory and Investments Limited (a wholly-owned subsidiary of
the Company) and Mr. Zhou Ling in relation to the proposed provision of certain
services by Mr. Zhou Ling regarding the possible acquisition of 51% of the issued
share capital and related equity interests of a company (which is to be incorporated in
the British Virgin Islands under the re-organisation being undergone by 杭州仁濟醫
院投資管理有限公司 (unofficial English translation being Hangzhou Renji Hospital
Investment Management Company Limited), 杭州聖康醫院有限公司 (unofficial
English translation being Hangzhou Shengkang Hospital Company Limited) and 杭州
數科醫療門診部 (unofficial English translation being Hangzhou Shuke Clinics)), by
Town Health Corporate Advisory and Investments Limited;
IV – 9
APPENDIX IV
GENERAL INFORMATION
(x)
the agreement for sale and purchase dated 12 June 2014 entered into between the
Company and BALLANTINE Alistair Nigel Stuart, OTREMBA Francis Martin,
Dr. SCRIVEN Nicholas Edward, Bioventure Holdings Limited and Health Treasure
Trading Limited in relation to the Company’s acquisition of 943 shares in the capital
of Dr. Vio & Partners Limited (representing 94.3% of the issued share capital of Dr.
Vio & Partners Limited) at the consideration of HK$409,288,404, further details of
which are set out in the circular of the Company dated 21 August 2014;
(y)
the cooperation agreement dated 7 July 2014 entered into between the Company and
貴州產業投資（集團）有限責任公司 (unofficial English translation being Guizhou
Industry Investment (Group) Co., Ltd.) pursuant to which (i) the Company proposed
to acquire, by itself or by a company designated by it, 31% equity interests in 貴州
產業投資基金管理有限公司 (unofficial English translation being Guizhou Industry
Investment Fund Management Co., Ltd.) by making capital contribution of RMB15.5
million; and (ii) the Company and 貴州產業投資（集團）有限責任公司 agreed to
jointly assist 貴州產業投資基金管理有限公司 to establish an investment fund in
the PRC with target scale of RMB5 billion, further details of which are set out in the
announcement of the Company dated 7 July 2014;
(z)
the subscription agreement dated 26 August 2014 entered into between Town Health
(BVI) Limited, a wholly-owned subsidiary of the Company, and Luck Key Investment
Limited in relation to Town Health (BVI) Limited’s subscription of 1,170 shares of
Luck Key Investment Limited at the aggregate subscription price of approximately
HK$2,700,000, further details of which are set out in the announcement of the
Company dated 26 August 2014;
(aa)
the Agreement;
(bb)
the equity transfer agreement dated 3 September 2014 entered into between Yikang
(a non-wholly-owned subsidiary of the Company) as the vendor, a third party
independent of the Company and connected persons of the Company as the purchaser,
HJTS and the PRC JV Company, in relation to the sale and purchase of 61.5% equity
interests in the PRC JV Company for a consideration of RMB28,000,000, details of
which are set out in the announcement of the Company dated 3 September 2014;
IV – 10
APPENDIX IV
5.
GENERAL INFORMATION
(cc)
the joint venture agreement dated 13 October 2014 entered into between Town Health
Corporate Management and Investment Limited (an indirect wholly-owned subsidiary
of the Company) (“THCMIL”), Thisco Ventures Limited (“THISCO”) and Max
Purple Company Limited (“BVI JV Company”) in relation to THCMIL’s subscription
of 60% shares of the BVI JV Company and THISCO’s subscription of 40% shares of
the BVI JV Company, in stages, at the total subscription prices of HK$30,000,000 and
HK$22,500,000 respectively, further details of which are set out in the announcement
of the Company dated 13 October 2014;
(dd)
the note purchase agreement dated 13 October 2014 entered into between the
Company as purchaser, An Qiao Investment Limited (“An Qiao”) as issuer and Mr.
Alexander King Ong Kong, a third party independent of the Company and connected
persons of the Company, as covenantor, in relation to the Company’s acquisition
of the secured exchangeable promissory note in the aggregate principal amount
of HK$30,000,000 to be issued by An Qiao to the Company, at face value, in the
aggregate amount of HK$30,000,000 from An Qiao, further details of which are set
out in the announcement of the Company dated 13 October 2014;
(ee)
the Share Subscription Agreement; and
(ff)
the CPS Subscription Agreement.
DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors or any proposed Directors had any
existing or proposed service contract with any member of the Enlarged Group (excluding contracts
expiring or determinable by the employer within one year without payment of compensation other
than statutory compensation).
IV – 11
APPENDIX IV
6.
GENERAL INFORMATION
EXPERTS AND CONSENTS
The following are the qualifications of the experts who have been named in this circular or
have given opinions, letters or advice contained in this circular:
Name
Qualification
RSM Nelson Wheeler
Certified Public Accountants, being the reporting
accountant for the financial information of the Target Group
Deloitte Touche Tohmatsu
Certified Public Accountants, being the reporting
a c c o u n t a n t f o r t h e u n a u d i t e d p r o f o r m a fi n a n c i a l
information of the Enlarged Group
Goldin Financial Limited
Goldin Financial Limited is a corporation licensed under
the SFO to carry out type 6 (advising on corporate finance)
regulated activity as defined under the SFO
Each of RSM Nelson Wheeler, Deloitte Touche Tohmatsu and Goldin Financial Limited
has given and has not withdrawn its written consent to the issue of this circular with the inclusion
therein of its letter and/or reference to its name, in the form and context in which they appear.
As at the Latest Practicable Date, each of RSM Nelson Wheeler, Deloitte Touche Tohmatsu
and Goldin Financial Limited was not beneficially interested in the share capital of any member
of the Group nor had any right, whether legally enforceable or not, to subscribe for or to nominate
persons to subscribe for securities in any member of the Group, nor did it have any interest, either
directly or indirectly, in the assets which have been acquired or disposed of by or leased to any
member of the Group since 31 December 2013, being the date to which the latest published audited
consolidated financial statements of the Group were made up.
7.
LITIGATION
As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any
litigation or arbitration of material importance and there was no litigation or claim of material
importance known to the Directors to be pending or threatened against any member of the Enlarged
Group.
IV – 12
APPENDIX IV
8.
GENERAL INFORMATION
DIRECTORS’ COMPETING INTERESTS
To the best knowledge of the Directors, as at the Latest Practicable Date, none of the
Directors or any proposed Director nor their respective close associates had any interests in a
business, which competes or is likely to compete either directly or indirectly with the business of
the Group which would be required to be disclosed under Rule 8.10 of the Listing Rules, as if each
of them were treated as a controlling Shareholder.
9.
DIRECTORS’ INTERESTS IN CONTRACTS OR ARRANGEMENTS
Save for the interests of Cho Kwai Chee, an executive Director and Choi Chee Ming,
the non-executive Director, under the Share Subscription Agreement and the CPS Subscription
Agreement, none of the Directors was materially interested in any contract or arrangement
subsisting as at the Latest Practicable Date which is significant in relation to the business of the
Enlarged Group, nor, save for the interests of Dr. Ip, the proposed Director, under the Agreement,
had any Director or any of the proposed Director had any direct or indirect interests in any assets
which have been acquired or disposed of by or leased to, or are proposed to be acquired or disposed
of by or leased to, any member of the Enlarged Group since 31 December 2013, being the date to
which the latest published audited consolidated financial statements of the Group were made up.
10.
GENERAL
(a)
The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton
HM 12, Bermuda.
(b)
The head office and principal place of business of the Company in Hong Kong is at
6th Floor, Town Health Technology Centre, 10-12 Yuen Shun Circuit, Siu Lek Yuen,
Shatin, New Territories, Hong Kong.
(c)
The company secretary of the Company is Mr. Wong Seung Ming, who is a fellow
member of the Association of Chartered Certified Accountants and a Certified Public
Accountant of the Hong Kong Institute of Certified Public Accountants.
(d)
The Company’s branch share registrar and transfer office in Hong Kong is Tricor
Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(e)
The English text of this circular shall prevail over the Chinese text.
IV – 13
APPENDIX IV
11.
GENERAL INFORMATION
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection during normal business
hours (Saturdays and public holidays excepted) from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m.
to 5:00 p.m. at the office of Messrs. Leung & Lau at Unit 7208-10, 72nd Floor, The Center, 99
Queen’s Road C., Central, Hong Kong from the date of this circular up to and including the date of
the SGM:
(a)
the memorandum of association and the bye-laws of the Company;
(b)
the annual reports of the Company for the years ended 31 December 2012 and 2013;
(c)
the letter from the Independent Board Committee, the text of which is set out on page
17 of this circular;
(d)
the letter from the Independent Financial Adviser, the text of which is set out on pages
18 to 39 of this circular;
(e)
the accountants’ report on the Target Group issued by RSM Nelson Wheeler as set out
in Appendix II to this circular;
(f)
the unaudited pro forma financial information of the Enlarged Group issued by
Deloitte Touche Tohmatsu as set out in Appendix III to this circular;
(g)
the written consents referred to in the section headed “Experts and Consents” in this
appendix;
(h)
the material contracts referred to in the section headed “Material Contracts” in this
appendix;
(i)
the circular of the Company dated 21 August 2014; and
(j)
this circular.
IV – 14
NOTICE OF THE SGM
Town Health International Medical Group Limited
康健國際醫療集團有限公司
(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)
(Stock Code: 3886)
NOTICE OF SPECIAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the special general meeting of Town Health
International Medical Group Limited (“Company”) will be held at 9:00 a.m. on Friday, 12
December 2014 at 1st Floor, Town Health Technology Centre, 10-12 Yuen Shun Circuit, Siu Lek
Yuen, Shatin, New Territories, Hong Kong to consider and, if thought fit, pass the following
resolution as an ordinary resolution:
ORDINARY RESOLUTION
“THAT:
(a)
the agreement for sale and purchase dated 20 August 2014 entered into between
Bonjour Group Limited as vendor and the Company as purchaser in respect of the
Acquisition (as defined in the circular of the Company dated 19 November 2014
(“Circular”), a copy of which is marked “A” and signed by the chairman of the
meeting for identification purpose has been tabled at the meeting) (“Agreement”)
(a copy of the Agreement is marked “B” and signed by the chairman of the meeting
for identification purpose has been tabled at the meeting) be and is hereby approved,
confirmed and ratified and the transactions contemplated thereunder be and are hereby
approved;
(b)
subject to Completion (as defined in the Circular), the allotment and issue of the
Consideration Shares (as defined in the Circular) by the Company in accordance with
the terms and conditions of the Agreement be and are hereby approved; and
SGM – 1
NOTICE OF THE SGM
(c)
any one of the directors of the Company (“Directors”) be and is authorised to do all
such acts and things, to sign and execute such documents or agreements or deeds on
behalf of the Company and to do such other things and to take all such actions as
he/she considers necessary, appropriate, desirable and expedient for the purposes of
giving effect to or in connection with the Agreement and all transactions contemplated
thereunder (including the allotment and issue of the Consideration Shares), and to
agree to such variation, amendments or waiver or matters relating thereto (including
any variation, amendments or waiver of such documents or any terms thereof, which
are not fundamentally different from those as provided in the Agreement) as are, in
the opinion of such Director, in the interests of the Company and its shareholders as a
whole.”
By order of the Board
Town Health International Medical Group Limited
Lee Chik Yuet
Executive Director
Hong Kong, 19 November 2014
Registered office:
Canon’s Court
22 Victoria Street
Hamilton HM12
Bermuda
Head office and principal place of
business in Hong Kong:
6th Floor,
Town Health Technology Centre
10-12 Yuen Shun Circuit
Siu Lek Yuen, Shatin
New Territories, Hong Kong
Notes:
(1)
A member of the Company entitled to attend and vote at the special general meeting convened by the above notice
is entitled to appoint one or more proxy to attend and, subject to the provisions of the bye-laws of the Company,
to vote on his/her behalf. A proxy need not be a shareholder of the Company but must be present in person at the
special general meeting to represent the shareholder. If more than one proxy is so appointed, the appointment shall
specify the number and class of shares in respect of which each such proxy is so appointed.
(2)
To be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is
signed (or a notarially certified copy thereof), must be deposited at the office of the Company’s branch share
registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road
East, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting
(as the case may be). Completion and return of the form of proxy will not preclude a member of the Company from
attending and voting in person at the meeting and/or any adjournment thereof, should he/she so wish.
SGM – 2
NOTICE OF THE SGM
(3)
Completion and return of an instrument appointing a proxy should not preclude a member of the Company from
attending and voting in person at the meeting and/or any adjournment thereof and in such event, the instrument
appointing a proxy shall be deemed to be revoked.
(4)
As required under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the
above resolution will be decided by way of poll.
As at the date of this notice, the executive Directors are Miss Choi Ka Yee, Crystal
(Chairperson), Dr. Cho Kwai Chee (Executive Vice Chairman), Dr. Hui Ka Wah, Ronnie, JP
(Chief Executive Officer), Mr. Lee Chik Yuet, Dr. Chan Wing Lok, Brian and Mr. Wong Seung
Ming (Chief Financial Officer); the non-executive Director is Dr. Choi Chee Ming, GBS, JP (ViceChairman) and the independent non-executive Directors are Mr. Chan Kam Chiu, Mr. Ho Kwok
Wah, George and Mr. Wai Kwok Hung, SBS, JP.
SGM – 3