CHINA FORTUNE HOLDINGS LIMITED Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
China Fortune Holdings Limited
中 國 長 遠 控 股 有 限 公 司 *
(Incorporated in Bermuda with limited liability, carrying on business in H.K. as CFH Ltd.)
(Stock Code: 110)
ANNOUNCEMENT
- DISCLOSEABLE AND CONNECTED TRANSACTIONS - CAPITAL SUBSCRIPTIONS IN ASSOCIATE;
- CONNECTED TRANSACTION AND
VERY SUBSTANTIAL ACQUISITION -
ACQUISITION OF INTEREST IN AN ASSOCIATE;
- INSIDE INFORMATION - CHANGE OF ASSOCIATE INTO SUBSIDIARY; AND (IV) APPOINTMENT OF EXECUTIVE DIRECTOR
- THE CAPITAL SUBSCRIPTIONS
Beijing Feiying was established by Mr. Gao on 22 October 2013 with a registered capital of RMB200,000 (equivalent to approximately HK$230,000). On 11 October 2014, Shanghai Yuanjia, an indirect wholly-owned subsidiary of the Company, Mr. Gao, and an independent third party agreed to increase the registered capital of Beijing Feiying from RMB200,000 (equivalent to approximately HK$230,000) to RMB1,500,000 (equivalent to approximately HK$1,725,000), of which Shanghai Yuanjia injected capital of RMB750,000 (equivalent to approximately HK$862,500) in Beijing Feiying and its shareholding in Beijing Feiying became 50.0%.
- For identification purpose only
1
On 20 October 2016, Mr. Gao, Shanghai Yuanjia, and a number of different independent third parties agreed to increase the registered capital of Beijing Feiying from RMB1,500,000 (equivalent to approximately HK$1,725,000) to RMB15,000,000 (equivalent to approximately HK$17,250,000), of which Shanghai Yuanjia agreed to further inject RMB2,250,000 (equivalent to approximately HK$2,587,000) of capital into Beijing Feiying. After such capital increase, Shanghai Yuanjia's shareholding in Beijing Feiying was diluted to 20.0%, equivalent to approximately RMB3,000,000 (equivalent to approximately HK$3,450,000).
On 8 January 2018, Shanghai Yuanjia and Other Beijing Feiying Shareholders agreed that the registered capital in Beijing Feiying shall be increased by RMB10,000,000 (equivalent to approximately HK$11,500,000) and Shanghai Yuanjia shall subscribe for a further RMB2,000,000 (equivalent to approximately HK$2,300,000) of the increased registered capital in Beijing Feiying in cash, based on Shanghai Yuanjia's pro-rata interest in Beijing Feiying. Upon completion of the 2018 First Capital Subscription, the registered capital of Beijing Feiying increased to RMB25,000,000 (equivalent to approximately HK$28,750,000) and Shanghai Yuanjia continued to hold 20.0% of Beijing Feiying, equivalent to approximately RMB5,000,000 (equivalent to approximately HK$5,750,000).
On 8 June 2018, Shanghai Yuanjia, an indirect wholly-owned subsidiary of the Company, and Other Beijing Feiying Shareholders agreed that the registered capital in Beijing Feiying shall be further increased by RMB15,000,000 (equivalent to approximately HK$17,250,000) and Shanghai Yuanjia shall subscribe for RMB3,000,000 (equivalent to approximately HK$3,450,000) of the increased registered capital in Beijing Feiying in cash, based on Shanghai Yuanjia's pro-rata interest in Beijing Feiying. Upon completion of the 2018 Second Capital Subscription, the registered capital of Beijing Feiying increased to RMB40,000,000 (equivalent to approximately HK$46,000,000) and Shanghai Yuanjia continued to hold 20.0% of Beijing Feiying, equivalent to approximately RMB8,000,000 (equivalent to approximately HK$9,200,000).
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(II) THE ACQUISITION
On 27 September 2018, Shanghai Yuanjia, an indirect wholly-owned subsidiary of the Company, purchased and the Vendor sold 13.5% issued share capital of Beijing Feiying. Following Acquisition Completion, Shanghai Yuanjia held 33.5% of Beijing Feiying. The total consideration for the Acquisition was approximately RMB5,400,000 (equivalent to approximately HK$6,210,000), which was the Vendor's agreed subscription amount of Beijing Feiying's registered capital and the payment obligation for paid-up capital of Beijing Feiying has been transferred to Shanghai Yuanjia upon the Acquisition Completion. The consideration of the Acquisition will be settled by cash by Shanghai Yuanjia on or before 21 October 2033 when the paid up of registered capital of Beijing Feiying becomes due. The consideration of the Acquisition was determined based on the amount of registered capital of Beijing Feiying and arm's length negotiation between Shanghai Yuanjia and the Vendor.
- THE CORPORATE ACTION AND THE ACTING-IN-CONCERT AGREEMENT
The Board also wishes to announce that Shanghai Yuanjia and Other Beijing Feiying Shareholders started contemplating on implementing change in control of the board of Beijing Feiying in March 2019. Pursuant to the change in control of the board of Beijing Feiying which became effective on 27 December 2019, the board of directors of Beijing Feiying shall comprise five members, of which two had been appointed by Shanghai Yuanjia, Mr. Gao has undertaken to vote in concert with Shanghai Yuanjia by virtue of a signed Acting-in-Concert Agreement entered into between Shanghai Yuanjia and Mr. Gao, and two which had been appointed by the Other Beijing Feiying Shareholders. As a result of the change in control of the board of Beijing Feiying, Shanghai Yuanjia shall be able to control the respective board of directors of Beijing Feiying. As such, Beijing Feiying shall be accounted for as a subsidiary of the Company. No consideration has been paid or is payable by the Company for the change in control of the board of Beijing Feiying and there has not been any changes to the respective equity interest held by Shanghai Yuanjia and the Other Beijing Feiying Shareholders. The change in control of the board of Beijing Feiying were agreed between Shanghai Yuanjia and Mr. Gao after arm's length negotiations and allow the Group to step up its participation in the operations and strengthen the corporate governance of Beijing Feiying.
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Beijing Feiying is primarily engaged in the recycling of used mobile phones. In addition, Beijing Feiying has also entered into a cooperation agreement with the mobile and internet conglomerate, Tencent, for Tencent's new mobile application, which helps users transfer data from old phones to newer ones. Under the cooperation agreement, Beijing Feiying receives 70% of revenue generated from the mobile application by users. As stipulated in the cooperation agreement, Beijing Feiying is to assist in the promotion of the mobile application to consumers.
(IV) APPOINTMENT OF MR. GAO AS EXECUTIVE DIRECTOR
The Board is also pleased to announce that Mr. Gao has been appointed as an Executive Director of the Company on 27 December 2019.
LISTING RULES IMPLICATIONS
The 2014 Capital Subscription and the 2016 Capital Subscription would not constitute notifiable transactions both on a stand-alone or aggregated basis since all of applicable percentage rates calculated pursuant to Rule 14.07 of the Listing Rules are below 5%.
The 2018 First Capital Subscription would not constitute a notifiable transaction both on a stand-alone or aggregated basis since all of applicable percentage rates calculated pursuant to Rule 14.07 of the Listing Rules are below 5%.
The 2018 Second Capital Subscription would constitute a discloseable transaction both on a stand-alone or aggregated basis since one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules are more than 5% but less than 25%.
The 2018 First Capital Subscription on an aggregate basis would constitute non-exempt connected transaction for the Company and was subject to the reporting and announcement requirements pursuant to Rule 14A.35, but was exempted from independent shareholders' approval requirement pursuant to Rule 14A.76 under Chapter 14A of the Listing Rules. The 2018 Second Capital Subscription both on stand-alone and aggregate basis would also constitute non-exempt connected transaction for the Company and was subject to the reporting and announcement requirements pursuant to Rule 14A.35, but was exempted from independent shareholders' approval requirement pursuant to Rule 14A.76 under Chapter 14A of the Listing Rules.
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The Acquisition would constitute a major transaction on a stand-alone basis since one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules are more than 25% but less than 100%. When aggregated with previous transactions, the Acquisition would constitute very substantial acquisition of the Company as one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules is more than 100%. It is subject to the reporting, announcement and shareholders' approval requirements set out in Chapter 14 of the Listing Rules. At the time of the Acquisition, Beijing Feiying and Mr. Gao have become connected persons of the Company at subsidiary level due to the Company's shareholding in another subsidiary, Zhejiang Aoying. By virtue of Rule 14A.101 of the Listing Rules, since (1) Beijing Feiying was a connected person at the subsidiary level, (2) the Board has approved the Acquisition; and (3) the independent non-executive Directors have confirmed that the terms of the Acquisition were fair and reasonable and the Acquisition was on normal commercial terms or better and in the interests of the Company and its shareholders as a whole, the Acquisition is subject to the reporting and announcement requirements, and is exempt from the circular, independent financial advice and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
The Directors noted that the Company have breached the Listing Rules requirements for reporting and announcement and shareholders' approval requirements as set out in Chapter 14 and 14A of the Listing Rules, as one or more of the transactions mentioned above constituted notifiable transactions and connected transactions and were subject to reporting and announcement and shareholders' approval, due to inadvertent overlook. The Directors reiterated that they have no intention for such non-compliance and the non-compliance was solely due to the reasons as stated above. The 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition were made in the interests of the Shareholders. Furthermore, the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition were conducted on normal commercial terms, and the terms of the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition were fair and reasonable, and in the interests of the Company and the Shareholders as a whole.
The Company have taken the following actions to remedy the breach, through the publication of this announcement, setting out, among others, the principal terms of the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition, the reasons for and benefits of the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition, the Listing Rules implications and measures to tighten the internal control of the Company with a view to prevent similar non-compliance in the future. The Company will re-comply with the Listing Rules requirements by issuing a circular in relation to the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition and hold the SGM to pass the relevant resolutions.
5
Furthermore, the Directors have come to the view that internal control of the Group needs to be tightened and certain measures shall be implemented in this regard. Please refer to the section headed "Implementation of measures to tighten internal control" in this announcement for further details.
Beijing Feiying was established by Mr. Gao on 22 October 2013 with a registered capital of RMB200,000 (equivalent to approximately HK$230,000).
(I) THE CAPITAL SUBSCRIPTIONS
The 2014 Capital Subscription
On 11 October 2014, Shanghai Yuanjia, an indirect wholly-owned subsidiary of the Company, Mr. Gao, and an independent third party agreed to increase the registered capital of Beijing Feiying from RMB200,000 (equivalent to approximately HK$230,000) to RMB1,500,000 (equivalent to approximately HK$1,725,000), of which Shanghai Yuanjia injected capital of RMB750,000 (equivalent to approximately HK$862,500) in Beijing Feiying and its shareholding in Beijing Feiying became 50.0%. The 2014 Capital Subscription was completed on 11 October 2014. Beijing Feiying was accounted for as an associate in the Company's consolidated accounts upon the completion of the 2014 Capital Subscription.
The 2016 Capital Subscription
On 20 October 2016, Mr. Gao, Shanghai Yuanjia, and a number of different independent third parties agreed to increase the registered capital of Beijing Feiying from RMB1,500,000 (equivalent to approximately HK$1,725,000) to RMB15,000,000 (equivalent to approximately HK$17,250,000), of which Shanghai Yuanjia agreed to further inject RMB2,250,000 (equivalent to approximately HK$2,587,000) of capital into Beijing Feiying. After such capital increase, Shanghai Yuanjia's shareholding in Beijing Feiying was diluted to 20.0%. The 2016 Capital Subscription was completed on 20 October 2016. Beijing Feiying was accounted for as an associate in the Company's consolidated accounts upon the completion of the 2016 Capital Subscription.
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The 2018 First Capital Subscription
Date
8 January 2018
Party
Shanghai Yuanjia
Consideration
RMB2,000,000 (equivalent to approximately HK$2,300,000)
On 8 January 2018, Shanghai Yuanjia, an indirect wholly-owned subsidiary of the Company, Mr. Gao, 重慶易一天使投資有限公司 (Chongqing Yitianshi Investment
Co., Ltd.*), 北京老鷹創新投資中心（有限合夥）(Beijing Eagle Innovation Investment Center (Limited Partnership)*), 北京迪信通商貿股份有限公司 (Beijing Dixintong Trading Co., Ltd.*), 上海長鷹投資管理有限公司(Shanghai Changying
Investment Management Co., Ltd.*), and 上海長鷹創業投資中心（有限合夥） (Shanghai Changying Venture Capital Center (Limited Partnership)*) agreed that the registered capital in Beijing Feiying shall be increased by RMB10,000,000 (equivalent to approximately HK$11,500,000) and Shanghai Yuanjia shall subscribe for RMB2,000,000 (equivalent to approximately HK$2,300,000) of the increased registered capital in Beijing Feiying in cash, based on Shanghai Yuanjia's pro-rata interest in Beijing Feiying. Upon completion of the 2018 First Capital Subscription on 8 January 2018, the registered capital of Beijing Feiying increased to RMB25,000,000 (equivalent to approximately HK$28,750,000), and Shanghai Yuanjia continued to hold 20.0% of Beijing Feiying. The consideration of the 2018 First Capital Subscription of RMB2,000,000 (equivalent to approximately HK$2,300,000) has not been settled and shall be settled by cash by Shanghai Yuanjia on or before 21 October 2033 when the paid-up capital of Beijing Feiying becomes due. There is no estimated payment schedule for the outstanding consideration for the 2018 First Capital Subscription and the Directors confirm that the 2018 First Capital Subscription has been completed upon filing of the relevant documents to the relevant PRC regulatory body. The 2018 First Capital Subscription was completed on 8 January 2018. Beijing Feiying was accounted for as an associate in the Company's consolidated accounts upon the completion of the 2018 First Capital Subscription. The Company has not paid any consideration for the 2018 First Capital Subscription as at the date of this announcement.
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The 2018 Second Capital Subscription
Date
8 June 2018
Party
Shanghai Yuanjia
Consideration
RMB3,000,000 (equivalent to approximately HK$3,450,000)
On 8 June 2018, Shanghai Yuanjia, an indirect wholly-owned subsidiary of the Company, 郭紅偉 (Guo Hongwei*), Mr. Hu, Mr. Gao, 重慶易一天使投資有限公司 (Chongqing Yitianshi Investment Co., Ltd.*), 北京老鷹創新投資中心（有限合夥）
(Beijing Eagle Innovation Investment Center (Limited Partnership)*), 北京迪信通商 貿股份有限公司 (Beijing Dixintong Trading Co., Ltd.*), 北京鷹飛長空管理諮詢中 心（有限合夥）(Beijing Eagle Flying Sky Management Consulting Center (Limited Partnership)*)and 上海長鷹投資管理有限公司(Shanghai Changying Investment
Management Co., Ltd.*) agreed that the registered capital in Beijing Feiying shall be increased by RMB15,000,000 (equivalent to approximately HK$17,250,000) and Shanghai Yuanjia shall subscribe for RMB3,000,000 (equivalent to approximately HK$3,450,000) of the increased registered capital in Beijing Feiying in cash, based on Shanghai Yuanjia's pro-rata interest in Beijing Feiying. Upon completion of the 2018 Second Capital Subscription on 8 June 2018, the registered capital of Beijing Feiying increased to RMB40,000,000 (equivalent to approximately HK$46,000,000), upon completion, Shanghai Yuanjia continued to hold 20.0% of Beijing Feiying. The consideration of the 2018 Second Capital Subscription of RMB3,000,000 (equivalent to approximately HK$3,450,000) has not been settled and shall be settled by cash by Shanghai Yuanjia on or before 21 October 2033 when the paid-up capital of Beijing Feiying becomes due. There is no estimated payment schedule for the outstanding consideration for the 2018 Second Capital Subscription and the Directors confirm that the 2018 Second Capital Subscription has been completed upon filing of the relevant documents to the relevant PRC regulatory body. The 2018 Second Capital Subscription was completed on 8 June 2018. Beijing Feiying was accounted for as an associate in the Company's consolidated accounts upon the completion of the 2018 Second Capital Subscription. The Company has not paid any consideration for the 2018 Second Capital Subscription as at the date of this announcement.
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(II) THE ACQUISITION
Date
27 September 2018
Parties
- the Vendor; and
- Shanghai Yuanjia.
To the best of the knowledge and information of the Directors having made all reasonable enquiries, the Vendor and its ultimate beneficial owner are independent third parties of the Company and not connected persons of the Company. There is no other relationship and arrangements between the Vendor and the Company and its connected persons.
Assets Acquired
Pursuant to the Acquisition, Shanghai Yuanjia has purchased from the Vendor and the Vendor has sold the Sale Interest. The Sale Interest represents 13.5% of the equity interest in Beijing Feiying. The Acquisition was completed on 27 September 2018.
Immediately before the date of the Acquisition, Shanghai Yuanjia was holding 20.0% of the equity interest in the Beijing Feiying. Upon Acquisition Completion, Shanghai Yuanjia held 33.5% of the equity interests in Beijing Feiying.
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Consideration
The total consideration for the Acquisition was approximately RMB5,400,000 (equivalent to approximately HK$6,210,000), which was the Vendor's agreed subscription amount of Beijing Feiying's registered capital and the payment obligation for paid-up capital of Beijing Feiying has been transferred to Shanghai Yuanjia upon the Acquisition Completion. The consideration of the Acquisition has not been settled and will be settled by cash by Shanghai Yuanjia on or before 21 October 2033 when the paid up of registered capital of Beijing Feiying becomes due. The Company has not paid any consideration for the Acquisition as at the date of this announcement and will not pay any consideration for the Acquisition until the paid up of the registered capital of Beijing Feiying becomes due. Beijing Feiying was accounted for as an associate in the Company's consolidated accounts upon the completion of the Acquisition. There is no estimated payment schedule for the outstanding consideration for the Acquisition and the Directors confirm that the Acquisition has been completed upon filing of the relevant documents to the relevant PRC regulatory body. The consideration was determined based on the amount of registered capital of Beijing Feiying and arm's length negotiation between Shanghai Yuanjia and the Vendor. When determining whether to further invest in Beijing Feiying and the consideration for the Acquisition, the Company has taken into account that Beijing Feiying has improving financial performance during year 2018 and has turned from net liabilities position to net asset position during year 2018. The Company has also taken into account the great potential of Beijing Feiying's used mobile phone business and cooperation with Tencent. Beijing Feiying has turned profitable after it started its cooperation with Tencent in 2018 and the Directors believe that Beijing Feiying's business cooperation with Tencent has great potentials for growth. The Board is of the view that the consideration of the Acquisition is fair and reasonable. The consideration of the Acquisition will be satisfied by internal resources of the Group.
(III) SHAREHOLDING STRUCTURE OF BEIJING FEIYING
Based on the information available to the Directors as at the date of this announcement, set out below is the shareholding structure of Beijing Feiying: (i) when Beijing Feiying was established on 22 October 2013; (ii) immediately after the 2014 Capital Subscription; (iii) immediately after the 2016 Capital Subscription; (iv) immediately after the 2018 First Capital Subscription; (v) immediately after the 2018 Second Capital Subscription; (vi) immediately after the Acquisition; and (vii) immediately after the 6 June Subscription:
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When Beijing Feiying was | After the 2014 | After the 2016 | After the 2018 | After the 2018 | After the | After the | |||||||||||||||||||||||
established on 22 October 2013 | Capital Subscription | Capital Subscription | First Capital Subscription | Second Capital Subscription | Acquisition | 6 June subscription | |||||||||||||||||||||||
Subcription | Subcription | Subcription | Subcription | Subcription | Subcription | Subcription | |||||||||||||||||||||||
Capital | Capital | Capital | Capital | Capital | Capital | Capital | |||||||||||||||||||||||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||||||||||||||||||||||
郭紅偉 (Guo Hongwei*) | - | 0.00% | - | 0.00% | - | 0.00% | - | 0.00% | 1,600 | 4.00% | 1,600 | 4.00% | 1,600 | 3.87% | |||||||||||||||
Mr. Hu | - | 0.00% | - | 0.00% | - | 0.00% | - | 0.00% | 2,000 | 5.00% | 2,000 | 5.00% | 2,000 | 4.83% | |||||||||||||||
Mr. Gao | 200 | 100.00% | 525 | 35.00% | 5,025 | 33.50% | 8,375 | 33.50% | 13,400 | 33.50% | 13,400 | 33.50% | 13,400 | 32.38% | |||||||||||||||
Shanghai Yuanjia | - | 0.00% | 750 | 50.00% | 3,000 | 20.00% | 5,000 | 20.00% | 8,000 | 20.00% | 13,400 | 33.50% | 13,400 | 32.38% | |||||||||||||||
重慶易一天使投資有限公司 | |||||||||||||||||||||||||||||
(Chongqing Yitianshi Investment Co., Ltd.*) | - | 0.00% | - | 0.00% | 375 | 2.50% | 625 | 2.50% | 1,000 | 2.50% | 1,000 | 2.50% | 1,000 | 2.42% | |||||||||||||||
北京老鷹創新投資中心（有限合夥） | |||||||||||||||||||||||||||||
(Beijing Eagle Innovation Investment Center | |||||||||||||||||||||||||||||
(Limited Partnership)*) | - | 0.00% | - | 0.00% | 563 | 3.75% | 938 | 3.75% | 1,500 | 3.75% | 1,500 | 3.75% | 2,879 | 6.96% | |||||||||||||||
北京迪信通商貿股份有限公司 | |||||||||||||||||||||||||||||
(Beijing Dixintong Trading Co., Ltd.*) | - | 0.00% | - | 0.00% | 1,500 | 10.00% | 2,500 | 10.00% | 4,000 | 10.00% | 4,000 | 10.00% | 4,000 | 9.67% | |||||||||||||||
北京鷹飛長空管理諮詢中心（有限合夥） | |||||||||||||||||||||||||||||
(Beijing Eagle Flying Sky Management Consulting | |||||||||||||||||||||||||||||
Center (Limited Partnership)*) | - | 0.00% | - | 0.00% | - | 0.00% | - | 0.00% | 3,100 | 7.75% | 3,100 | 7.75% | 3,100 | 7.49% | |||||||||||||||
上海長鷹投資管理有限公司 | |||||||||||||||||||||||||||||
(Shanghai Changying Investment Management Co., Ltd.*) | - | 0.00% | - | 0.00% | 2,025 | 13.50% | 3,375 | 13.50% | 5,400 | 13.50% | - | 0.00% | - | 0.00% | |||||||||||||||
上海長鷹創業投資中心（有限合夥） | |||||||||||||||||||||||||||||
(Shanghai Changying Venture Capital Center | |||||||||||||||||||||||||||||
(Limited Partnership)*) | - | 0.00% | - | 0.00% | 2,512 | 16.75% | 4,187 | 16.75% | - | 0.00% | - | 0.00% | - | 0.00% | |||||||||||||||
覃昊凌 (Tan Haoling*) | - | 0.00% | 225 | 15.00% | - | 0.00% | - | 0.00% | - | 0.00% | - | 0.00% | - | 0.00% | |||||||||||||||
200 | 100.00% | 1,500 | 100.00% | 15,000 | 100.00% | 25,000 | 100.00% | 40,000 | 100.00% | 40,000 | 100.00% | 41,379 | 100.00% | ||||||||||||||||
(IV) THE CORPORATE ACTION AND THE ACTING-IN-CONCERT AGREEMENT
On 6 June 2019, Beijing Feiying received further capital injection from 北京老鷹 創新投資中心（有限合夥）(Beijing Eagle Innovation Investment Center (Limited Partnership*), one of the Other Beijing Feiying Shareholders, amounting to approximately RMB1,379,000 (equivalent to approximately HK$1,586,000) of the registered capital of Beijing Feiying, after which the Group is interested in 32.4% of the shares of Beijing Feiying. The remaining 67.6% of the shares are held by seven other shareholders, out of which 32.4% and 4.8% are held by Mr. Gao and Mr. Hu, who holds 12.0% and 10.0% of Zhejiang Aoying respectively, an indirect non-wholly- owned subsidiary of the Company, thus are substantial shareholders and connected persons of the Group at subsidiary level, with the remaining 30.4% held by independent third parties. Beijing Feiying have been accounted for as interest in associates in the consolidated financial statements of the Group. Save for Mr. Gao and Mr. Hu being 12.0% and 10.0% shareholders of Zhejiang Aoying and being 32.4% and 4.8% shareholders of Beijing Feiying and being 60% and 30% shareholders of Beijing Eagle Flying and thus connected persons (as defined in the Listing Rules), the Other Beijing Feiying Shareholders are otherwise independent of the Company and its connected persons (as defined in the Listing Rules). Mr. Lau and Mr. Gao met in 2013, when Mr. Gao founded Beijing Feiying, he invited the Group to invest into Beijing Feiying. The Group decided to invest in Beijing Feiying starting from 2014 through the 2014 Capital Subscription mainly due to Beijing Feiying was already conceptualizing on a secondhand mobile phone trading business at that time and this business model would have synergy effects with the Group's existing business at that time. Furthermore, Mr. Gao has vast experience in business management, internet industry and telecommunication business development, Mr. Gao also has extensive network in the mobile phone and telecommunication related industry such as his connections with Tencent, JD.com and Taobao which may help the Company in identifying new business opportunities such as mobile phone distribution networks and cooperation opportunities, due to this reason, the Group decided to co-invest with Mr. Gao in Beijing Feiying in 2014 and onwards. Mr. Lau met the Other Beijing Feiying Shareholders and the Vendor through the Group's investment in Beijing Feiying. There is no other relationship and arrangements among the Other Beijing Feiying Shareholders and the Company and its connected persons.
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Shanghai Yuanjia and the Other Beijing Feiying Shareholders started contemplating on implementing change in control of the board of Beijing Feiying in March 2019. As at the date of this announcement, the board of Beijing Feiying comprise of Mr. Lau, Mr. Gao, Mr. Hu, 郭紅偉 (Guo Hongwei*), and 鮑康榮 (Bao Kang Rong*). Pursuant to the change in control of the board of Beijing Feiying which became effective on 27 December 2019, the board of directors of Beijing Feiying shall comprise five members, namely, Mr. Lau, Mr. Gao, Mr. Hu, 郭紅偉 (Guo Hongwei*), and 鮑康榮 (Bao Kang Rong*), of which Mr. Lau and 鮑康榮 (Bao Kang Rong*) had been appointed by Shanghai Yuanjia, Mr. Gao has undertaken to vote in concert with Shanghai Yuanjia and will follow the voting direction of Shanghai Yuanjia by virtue of a signed Acting-in- Concert Agreement entered into between Shanghai Yuanjia and Mr. Gao on 27 December 2019, and Mr. Hu, and 郭紅偉 (Guo Hongwei*) had been appointed by the Other Beijing Feiying Shareholders. The Acting-in-Concert Agreement shall be in effect until it is terminated and the Acting-in-Concert Agreement shall be terminated if either Mr. Gao or Shanghai Yuanjia cease to be shareholders of Beijing Feiying or by mutual agreement between the parties. As a result of the change in control of the board of Beijing Feiying, Shanghai Yuanjia shall be able to control the respective board of directors of Beijing Feiying. As such, Beijing Feiying shall be accounted for as a subsidiary of the Group. No consideration has been paid or is payable by the Company for the change in control of the board of Beijing Feiying and there has not been any changes to the respective equity interest held by Shanghai Yuanjia and the Other Beijing Feiying Shareholders. The change in control of the board of Beijing Feiying were agreed between Shanghai Yuanjia and Mr. Gao after arm's length negotiations and allow the Group to step up its participation in the operations and strengthen the corporate governance of Beijing Feiying. The Acting-in-Concert Agreement will continue to be in effect if the resolution for Mr. Gao's re-election is voted down by the Company's shareholders at the coming SGM. The Acting-in-Concert Agreement is not conditional on Mr. Gao's re-election as executive Director of the Company and there is no other arrangement between Mr. Gao and the Company in this respect. The dividend distribution of Beijing Feiying will be based on its registered capital.
Mr. Lau's beneficial interests in the Company is 48.85% and Mr. Lau's brother, Mr. Lau Kin Ying holds 19,516,000 Shares, representing 2.13% of the total number of issued Shares of the Company. Together they hold 50.98% of the Shares and voting rights of the Company. Mr. Lau and Mr. Lau Kin Ying have both indicated that they will both vote in favour for the resolutions of the 2018 First Capital Subscription, 2018 Second Capital Subscription and the Acquisition at the SGM. Both Mr. Lau and Mr. Lau Kin Ying are not interested in the 2018 First Capital Subscription, 2018 Second Capital Subscription and the Acquisition save for their interests in Shanghai Yuanjia through the Company.
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(V) APPOINTMENT OF MR. GAO AS EXECUTIVE DIRECTOR
The Board is also pleased to announce that Mr. Gao has been appointed as an executive Director of the Company on 27 December 2019.
Mr. Gao Fei（高飛）, aged 37, obtained a Bachelor's degree in Business Administration from Hebei Polytechnic University（河北理工大學）in 2005. He is currently the founder and Chief Executive Officer of Beijing Feiying. Mr. Gao served as the co- founder and Chief Operating Officer in Langfang Hongkun Network Technology Co., Ltd.（廊坊市鴻坤網絡科技有限公司）which developed and operated the earlier domestic web games (which are games played on the internet) and chess games. He also served as the co-founder and Chief Operating Officer Beijing Sihai Interconnection Network Technology Co., Ltd.（北京四海互通網絡科技有限公司）, respectively, from March 2006 to May 2008. From June 2008 to August 2010, he was the Vice President of Information Technology and Internet Division of Tsinghua Tongfang Co., Ltd.（同 方股份有限公司）, a company listed on the Shanghai Stock Exchange（上海證券交 易所）(Stock Code: 600100), he was responsible for product operation and sales of computer Internet business. From August 2010 to May 2013, he was the co-founder and Chief Operating Officer of Beijing Shengsheng Tianxia Technology Co., Ltd.（北京 耘升天下科技有限公司）("Shengsheng Tianxia"), he was responsible for product's manufacturing operation, research and development, and sales. Shengsheng Tianxia's app's cumulative users was over 100 million. He worked as Chief Operating Officer of Chetuobang (Beijing) Mobile Technology Co., Ltd.（車托幫（北京）移動科技有限公 司）from May 2013 to June 2014, responsible for the company's products; research and development, operations, personnel, sales, etc. Mr. Gao has vast experience in business management, internet industry and telecommunication business development. Mr. Gao has extensive network in the mobile phone and telecommunication related industry such as his connections with Tencent, JD.com and Taobao which may help the Company in identifying new business opportunities such as mobile phone distribution networks and cooperation opportunities. Mr. Gao also has experience in mobile software development and may benefit the Company to identify business opportunities in this segment. The intended duties and responsibilities of Mr. Gao within the Group are to (i) continue to manage Beijing Feiying's business; and (ii) help the Group to develop new business opportunities through his extensive network in the mobile phone and telecommunication related industry in the PRC and his knowledge in mobile software development.
14
The Board and the Nomination Committee, after taking into account of Mr. Gao's experience in the mobile phone and telecommunication related industry, are of the view that Mr. Gao possesses the character, experience and integrity and is able to demonstrate a standard of competence commensurate with his position as a director of a listed issuer as required under Rule 3.08 and 3.09.
As at the date of this announcement, Mr. Gao has no interest in the shares of the Company which are required to be disclosed pursuant to Part XV of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong). Mr. Gao is interested in 12.0% of Zhejiang Aoying, an indirect non-wholly-owned subsidiary of the Company, thus is a substantial shareholder and connected person of the Group at subsidiary level. Mr. Gao became connected person of the Company at the subsidiary level since 7 November 2017 when the Company acquired interests in Zhejiang Aoying.
Other than those disclosed above, Mr. Gao did not hold any directorships in public companies listed in Hong Kong or any other major exchanges in the last three years preceding the date of his appointment and he does not have any relationship with other Directors, senior management, substantial or controlling shareholders of the Company. Save as disclosed above, there are no other matters relating to the appointment of Mr. Gao that should be brought to the attention of the shareholders of the Company and there is no other information that should be disclosed pursuant to Rule 13.51(2)(h) to
- of the Rules Governing the Listing of Securities (the "Listing Rules") on the Stock Exchange.
As at the date of this announcement, Mr. Gao has entered into the letter of appointment with the Company and will hold office only until the first general meeting of the Company after his appointment and shall then be eligible for re-election at the first general meeting, and thereafter subject to retirement by rotation at least once every three years at each annual general meeting, in accordance with the memorandum of association and Bye-Laws of the Company. Mr. Gao will be entitled to an annual salary of RMB240,000 per annum, which has been recommended by the remuneration committee of the Company and determined by the Board with reference to his duties and responsibilities within the Company and the prevailing market conditions. His remuneration is subject to review by the remuneration committee of the Company and the Board from time to time.
The Board would like to take this opportunity to extend a warm welcome to Mr. Gao for joining the Board.
15
INFORMATION ON THE GROUP
The Group is principally engaged in distribution and trading of mobile phones and related accessories, development of marketing and after-sales service network and mining and processing of celestite, zinc and lead minerals.
INFORMATION ON BEIJING FEIYING
Beijing Feiying is a limited liability company established in the PRC with a registered capital of RMB41,379,310 (equivalent to approximately HK$47,586,000) and paid-up capital of RMB29,329,310 (equivalent to approximately HK$33,729,000). As at the date of this announcement, Mr. Gao holds 32.4% of the equity interests in Beijing Feiying. Beijing Feiying is engaged in the recycling of used mobile phones, Beijing Feiying will pay a fee to consumers who bring their used mobile phones for recycling, Beijing Feiying will then assess the quality of the used mobile phone. If the phone is deemed to be in good condition, Beijing Feiying would sell such phones to online platforms such as JD.com or Taobao for a profit. If the phones are deemed to be in poor condition, they can be sent to factories for recycling or taken apart for electronic parts where they can be used for making of other electronic accessories. In addition, Beijing Feiying has also entered into a cooperation agreement with the mobile and internet conglomerate, Tencent, on 9 May 2019 (a renewal of the previous cooperation agreement signed on 30 May 2018), for Tencent's new mobile application, which helps users introduced by Beijing Feiying transfer data from old phones to newer ones. Beijing Feiying will recommend Tencent's mobile application to end-users who have sold their old phones and bought new phones through Beijing Feiying. Beijing Feiying's staff will also assist end-users introduced by Beijing Feiying how to use the mobile application, help end-users introduced by Beijing Feiying to install the mobile application and help end-users introduced by Beijing Feiying transfer data from old phones to new phones. The mobile application was developed and owned by Tencent. When users download and install the mobile application through Beijing Feiying, they would need to pay a subscription fee and Tencent would be able to detect the downloading and installation of the mobile application of users through Beijing Feiying and Tencent would then share 70% of the revenue from subscription fees from users to Beijing Feiying for users solicited by Beijing Feiying.
16
The major cost to be borne by Beijing Feiying in the cooperation are cost for hiring and training staff of Beijing Feiying to learn about Tencent's mobile application and marketing costs. The cost currently borne by Beijing Feiying is approximately RMB800,000 per month. The cooperation period under the current cooperation agreement would be from 16 April 2019 to 15 April 2020 and the agreement and cooperation period is expected to be renewed on a yearly basis. The cooperation agreement will be terminated if either party becomes bankrupt or wound-up or when regulations changes and affect the legality of the cooperation model or when both parties agree to terminate the agreement. Under the cooperation agreement, Beijing Feiying receives 70% of revenue generated from the mobile application by users. As stipulated in the cooperation agreement, Beijing Feiying is to assist in the promotion of the mobile application to consumers. Through discussion between the Beijing Feiying management and Tencent, there is great demand for services currently provided by the mobile application. The Beijing Feiying management believes that such business provides it with an additional channel in which it can generate revenue and such cooperation with Tencent is of great benefit to Beijing Feiying. The gross profit margin for the year recorded by Beijing Feiying for the years ended 31 December 2016 and 2018 was relatively higher compared to the year ended 31 December 2017 due to most of the revenue generated in the years 2016 and 2018 were services provided by Beijing Feiying, which has a higher gross profit margin. In 2016, Beijing Feiying started its recycling of mobile phones business in an online platform and this platform mostly provided online services for the recycling of mobile phones, in 2017, Beijing Feiying began its brick and mortar business of recycling of mobile phones physically. Beijing Feiying then started the mobile app business in May 2018 and the performance of the mobile app business is reflected in the historical financial information of Beijing Feiying since May 2018. The fluctuation in the profitability of Beijing Feiying was mainly due to the commencement of the mobile app business which increased Beijing Feiying's profitability.
17
According to the unaudited management accounts of Beijing Feiying, the net profit (before and after taxation and extraordinary items) for the financial year ended 31 December 2018 and the net asset value as at 31 December 2018 of the Beijing Feiying are as follows:
For the year ended 31 December | |||||
2016 | 2017 | 2018 | |||
RMB'000 | RMB'000 | RMB'000 | |||
Revenue | 2,065 | 12,512 | 27,787 | ||
Gross profit | 1,989 | 830 | 22,068 | ||
(Loss)/profit before taxation | (4,800) | (10,135) | 8,645 | ||
As at 31 December | ||||||
2016 | 2017 | 2018 | ||||
RMB'000 | RMB'000 | RMB'000 | ||||
Non-current assets | 24 | 140 | 860 | |||
Current assets | 2,853 | 6,667 | 38,512 | |||
Current liabilities | 3,686 | 11,551 | 18,022 | |||
Non-current liabilities | 2,250 | - | - | |||
Net (liabilities)/assets | (3,059) | (4,744) | 21,350 | |||
Note: Beijing Feiying's 2016 and 2017 financial information were extracted from the audited reports prepared under the generally accepted accounting principles in the PRC. Beijing Feiying's 2018 financial information were extracted from the unaudited management accounts prepared under the generally accepted accounting principles in the PRC.
18
REASONS FOR AND BENEFITS OF THE 2018 FIRST CAPITAL SUBSCRIPTION AND 2018 SECOND CAPITAL SUBSCRIPTION, ACQUISITION, THE ACTING-IN-CONCERT AGREEMENT AND THE CORPORATE ACTION
The principal activities of the Group are distribution and trading of mobile phones and related accessories, development of marketing and after-sales service network and mining and processing of celestite, zinc and lead minerals. Beijing Feiying is principally engaged in the recycling of used mobile phones. In addition, Beijing Feiying has also entered into a cooperation agreement with the mobile and internet conglomerate, Tencent, for Tencent's new mobile application, which helps users transfer data from old phones to newer ones. Under the cooperation agreement, Beijing Feiying receives 70% of revenue generated from the mobile application by users. As stipulated in the cooperation agreement, Beijing Feiying is to assist in the promotion of the mobile application to consumers. Through discussion between the Beijing Feiying management and Tencent, there is great demand for services currently provided by the mobile application. The Beijing Feiying management believes that such business provides an additional channel in which it can generate revenue and such cooperation with Tencent is of great benefit to Beijing Feiying. The Directors have been devising plans to venture into the recycling of used mobile phones, which the Directors believe will experience significant growth in terms of revenue and overall market size in the near future. Since Beijing Feiying is engaged in the recycling of used mobile phones and is a profit making and growing business, the Directors believe that through the 2018 First Capital Subscription and 2018 Second Capital Subscription, the Acquisition and Corporate Action, the Group can tap into the used mobile phones and mobile apps market and could also share a greater profit of Beijing Feiying and this would be reflected in the accounts of the Group. Even though Beijing Feiying has recorded losses and generated net liabilities for the two years ended 31 December 2017, Beijing Feiying has turned profitable in 2018 since it started cooperation with Tencent, and the Directors believe that Beijing Feiying will have good profit generating ability through its cooperation with Tencent in the future.
The Directors consider that the Acquisition and the Corporate Action are on normal commercial terms after arm's length negotiations between the parties, fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Directors consider that the Corporate Action will be beneficial to the Company and is on normal commercial terms, fair and reasonable and in the interests of the Company and Shareholders as the Company can exert more control on Beijing Feiying, which has turned profitable in 2018 and is a growing business through its cooperation with Tencent and also the Company can consolidate Beijing Feiying's profitable results into the Group's accounts.
19
LISTING RULES IMPLICATIONS
The 2014 Capital Subscription and the 2016 Capital Subscription would not constitute notifiable transactions both on a stand-alone and aggregated basis, since all of applicable percentage rates calculated pursuant to Rule 14.07 of the Listing Rules are below 5%. The 2018 First Capital Subscription would not constitute a notifiable transaction both on a stand- alone and aggregated basis since all of applicable percentage rates calculated pursuant to Rule 14.07 of the Listing Rules are below 5%. The 2018 Second Capital Subscription would constitute a discloseable transaction both on a stand-alone and aggregated basis since one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules are more than 5% but less than 25%. At the time of the 2018 First Capital Subscription and 2018 Second Capital Subscription, Beijing Feiying has become a connected person of the Company at subsidiary level due to the Company's shareholding in another subsidiary, Zhejiang Aoying. Through the Group's purchase of shares of Zhejiang Aoying from Mr. Gao and Mr. Hu on 7 November 2017, the Group obtained a shareholding of 70% in Zhejiang Aoying with the remaining 12%, 10% and 8% held by Mr. Gao, Mr. Hu and Mr. Hou. The total consideration for the Zhejiang Aoying Acquisition was approximately RMB7,000,000 (equivalent to approximately HK$8,050,000), which was the Mr. Gao's agreed subscription amount of RMB6,500,000 (equivalent to approximately HK$7,475,000) and Mr. Hu's agreed subscription amount of RMB500,000 (equivalent to approximately HK$575,000) of Zhejiang Aoying's registered capital and the payment obligations for paid-up capital of Zhejiang Aoying have been transferred to Shanghai Yuanjia upon the completion of the Zhejiang Aoying Acquisition. Zhejiang Aoying is principally engaged in trading of mobile phones. The 2018 First Capital Subscription on an aggregate basis would constitute non-exempt connected transaction for the Company and was subject to the reporting and announcement requirements pursuant to Rule 14A.35, but was exempted from independent shareholders' approval requirement pursuant to Rule 14A.76 under Chapter 14A of the Listing Rules. The 2018 Second Capital Subscription both on stand-alone and aggregate basis would also constitute non-exempt connected transaction for the Company and was subject to the reporting and announcement requirements pursuant to Rule 14A.35, but was exempted from independent shareholders' approval requirement pursuant to Rule 14A.76 under Chapter 14A of the Listing Rules.
20
The Acquisition would constitute a major transaction on a stand-alone basis since one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules are more than 25% but less than 100%. When aggregated with previous transactions, the Acquisition would constitute very substantial acquisition of the Company as one or more of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules in respect of the Acquisition is more than 100%, therefore, it is subject to the reporting, announcement and shareholders' approval requirements set out in Chapter 14 of the Listing Rules. At the time of the Acquisition, Beijing Feiying has become a connected person of the Company at subsidiary level due to the Company's shareholding in another subsidiary, Zhejiang Aoying. Through the Group's purchase of shares of Zhejiang Aoying from Mr. Gao and Mr. Hu on 7 November 2017, the Group obtained a shareholding of 70% in Zhejiang Aoying with the remaining 12%, 10% and 8% held by Mr. Gao, Mr. Hu and Mr. Hou. The total consideration for the Zhejiang Aoying Acquisition was approximately RMB7,000,000 (equivalent to approximately HK$8,050,000), which was the Mr. Gao's agreed subscription amount of RMB6,500,000 (equivalent to approximately HK$7,475,000) and Mr. Hu's agreed subscription amount of RMB500,000 (equivalent to approximately HK$575,000) of Zhejiang Aoying's registered capital and the payment obligations for paid-up capital of Zhejiang Aoying have been transferred to Shanghai Yuanjia upon the completion of the acquisition of Zhejiang Aoying ("Zhejiang Aoying's Acquisition"). Zhejiang Aoying is principally engaged in trading of mobile phones. By virtue of Rule 14A.101 of the Listing Rules, since (1) Beijing Feiying was a connected person at the subsidiary level, (2) the Board has approved the Acquisition; and (3) the independent non-executive Directors have confirmed that the terms of the Acquisition were fair and reasonable and the Acquisition was on normal commercial terms or better and in the interests of the Company and its shareholders as a whole, the Acquisition is subject to the reporting and announcement requirements, and is exempt from the circular, independent financial advice and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.
The Directors are of the view that, given that (i) the Zhejiang Aoying Acquisition and the Previous Transactions were not with the same entity and different vendors 上海長鷹投資管理 有限公司 (Shanghai Changying Investment Management Co., Ltd.*), whose beneficial owner is Zhao Keming（趙克明）, for the Acquisition versus Mr. Gao and Mr. Hu for the Zhejiang Aoying's Acquisition); (ii) Beijing Feijing has more investors involved; and (iii) Beijing Feiying and Zhejiang Aoying have different business models (trading of used mobile phones versus trading of mobile devices), therefore, the Company is of the view that the Zhejiang Aoying's Acquisition should not be aggregated with the Company's investment in Beijing Feiying.
21
The Directors noted that the Company have breached the Listing Rules requirements for reporting and announcement and shareholders' approval requirements as set out in Chapter 14 and 14A of the Listing Rules, as one or more of the transactions mentioned above constituted notifiable transactions and connected transactions and were subject to reporting and announcement and shareholders' approval, due to inadvertent overlook. The Directors reiterated that they have no intention for such non-compliance and the non-compliance was solely due to the reasons as stated above. The 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition were made in the interests of the Shareholders. Furthermore, the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition were conducted on normal commercial terms, and the terms of the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition were fair and reasonable, and in the interests of the Company and the Shareholders as a whole.
The Company has taken/shall take the following actions to remedy the breach, through the publication of this announcement, setting out, among others, the principal terms of the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition, the reasons for and benefits of the 2018 First Capital Subscription and 2018 Second Capital Subscription and the Acquisition, the Listing Rules implications and measures to tighten the internal control of the Company with a view to prevent similar non-compliance in the future. The Company will re-comply with the Listing Rules requirements by issuing a circular in relation to the 2018 First Capital Subscription, the 2018 Second Capital Subscription, and the Acquisition and hold the SGM to pass the relevant resolutions.
Furthermore, the Company comes to the view that internal control of the Group needs to be tightened and certain measures shall be implemented/made in this regard. Please refer to the section headed "Implementation of measures to tighten internal control" in this announcement for further details.
22
IMPLEMENTATION OF MEASURES TO TIGHTEN INTERNAL CONTROL
The Company has identified certain internal control weaknesses in relation to the breaches such as the different departments' weakness in identifying notifiable transactions and reporting to the senior management and Directors of the Company. The Board has checked and is of the view that the impact on the Company's financial statements due to the internal control weaknesses are minimal because the accounting record of the 2016 Capital Subscription, the 2018 First Capital Subscription, the 2018 Second Capital Subscription, and the Acquisition has been properly reflected in the Group's financial statements irrespective of the breach of the Listing Rules. The Company will strengthen its internal control in this regard and provide trainings to staff to strengthen the staff's ability in identifying notifiable transactions.
The Company shall implement the following measures as soon as practicable:
- formulate guideline for the purchase or disposal of any shareholdings in any companies regardless of its nature and such internal control guideline shall set out the requirement of obtaining approvals from the Hong Kong Finance Team, a member of the Board and a representative from the internal control and legal departments of the Company prior to purchase or disposal of any shareholdings in any companies and the punishment for non- compliance of the said guideline (the "Internal Control Guideline");
- circulate the Internal Control Guideline to the management of the Company and the Group's finance staff of the Group and that they must comply with such guideline upon its adoption;
- the internal control and legal departments of the Company shall perform on an interim basis, checks on whether the staff have complied with the Internal Control Guideline;
- the relevant personnel shall consult the Hong Kong Finance Team, and where necessary, to report to the audit committee of the Company relating to the purchase or disposal of any shareholdings in any companies to be made by the Group as he/she may see fit;
- the Company will circulate training materials and organise trainings for the PRC Finance Team on the Company's compliance with the Listing Rules regularly;
23
- the Company will improve its financial control system, and improve the communication, coordination and reporting arrangements for notifiable transactions among the relevant departments (the "Relevant Departments") of the Group, consulting the PRC Finance Team, the Hong Kong Finance Team, the legal team, and the company secretary team. Prior to entering into any relevant potential transaction in the future, the PRC Finance Team will seek approval from the Hong Kong Finance Team and perform size test analysis accordingly. Where disclosure threshold is met, the PRC Finance Team will notify the Relevant Departments the details of the proposed transaction and circulate the relevant drafts of transaction agreement for review by the legal team and the company secretary team of the Company to ensure compliance with the Listing Rules; and
- the Company will improve its communication with its subsidiaries and emphasize the importance of ensuring the Company's compliance with the Listing Rules.
The Company has adopted the above measures and the Company takes this opportunity to emphasize that the Group shall continue to enhance its internal control management on purchasing or disposing (including deemed disposal and subscription) any shareholdings in any companies regardless of its nature. Going forward, the Group will make appropriate disclosure in a timely manner to ensure compliance with the Listing Rules. The Company's internal controls are effective after the implementation of the proposed remedial measures.
DESPATCH OF CIRCULAR
The Company expects that a circular containing, among other things, (i) further information on the 2018 First Capital Subscription and 2018 Second Capital Subscription, the Acquisition and the Corporate Action; (ii) financial information of Beijing Feijying; and (iii) the notice convening the SGM of the Company and a proxy form, will be despatched to the Shareholders on or before 30 April 2020.
24
DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"6 June Subscription" | the subscription for RMB1,379,000 (equivalent to |
approximately HK$1,586,000) of the registered capital | |
in Beijing Feiying by 北京老鷹創新投資中心（有限合 | |
夥）(Beijing Eagle Innovation Investment Center (Limited | |
Partnership*). | |
"2014 Capital | the increase of the registered capital of Beijing Feiying |
Subscription" | from RMB200,000 to RMB1,500,000 (equivalent to |
approximately HK$1,725,000) on 11 October 2014, of | |
which Shanghai Yuanjia injected capital of RMB750,000 | |
(equivalent to approximately HK$862,500) in Beijing | |
Feiying | |
"2016 Capital | the increase of registered Capital of Beijing Feiying from |
Subscription" | RMB1,500,000 (equivalent to approximately HK$1,725,000) |
t o R M B15,000,000 ( e q u iva l e n t t o a p p r o x i m a t e l y | |
HK$17,250,000) on 20 October 2016, of which Shanghai | |
Yuanjia agreed to further inject RMB2,250,000 (equivalent | |
to approximately HK$2,587,000) of capital into Beijing | |
Feiying | |
"2018 First Capital | the subscription for RMB2,000,000 (equivalent to |
Subscription" | approximately HK$2,300,000) of the increased registered |
capital in Beijing Feiying in cash by Shanghai Yuanjia on 8 | |
January 2018 | |
"2018 Second Capital | the subscription for RMB3,000,000 (equivalent to |
Subscription" | approximately HK$3,450,000) of the increased registered |
capital in Beijing Feiying in cash by Shanghai Yuanjia on 8 | |
June 2018 | |
"Acquisition" | the acquisition of the 13.5% equity interest in Beijing |
Feiying by Shanghai Yuanjia from the Vendor |
25
"Acquisition Completion" | completion of the Acquisition | |
"Acting-in-Concert | the acting-in-concert agreement that Shanghai Yuanjia and | |
Agreement" | Mr. Gao entered into on 27 December 2019 pursuant to | |
which Shanghai Yuanjia and Mr. Gao confirm to have been | ||
obligated to vote unanimously in the board meetings for | ||
Beijing Feiying since 27 December 2019. Therefore, the | ||
Group would have control of 3 members out of the total of | ||
5 directors in the board of Beijing Feiying, representing a | ||
majority | ||
"Beijing Dixintong" | 北京迪信通商貿股份有限公司 (Beijing Dixintong Trading | |
Co., Ltd.*) is ultimately beneficially owned as to 45.90% | ||
by 劉松山 (Liu Songshan*), 22.12% by | 劉東海 (Liu | |
Donghai*), 12.72% by 劉文莉 (Liu Wenli*), | 6.58% by 杜 | |
國輝 (Du Guohui*), 4.74% by 劉華 (Liu Hua*), 4.74% by | ||
劉詠梅 (Liu Yumei*), 2.20% by 劉文萃 (Liu Wencui*), | ||
and 0.99% by 裴啟迪 (Pei Qidi*) and are independent third | ||
parties to the best knowledge of the Directors | ||
"Beijing Eagle" | 北 京 老 鷹 創 新 投 資 中 心（ 有 限 合 夥）(Beijing Eagle | |
Innovation Investment Center (Limited Partnership)*) is | ||
held by 王偉東 (Wang Weidong*), 尹幸福 (Yin Xingfu*), | ||
蔡駿 (Cai Jun*), 蕭蕾 (Xiao Lei), 喬遷 (Qiao Qiang*), | ||
吳道逵 (Wu Daoqi*), 陳曉英 (Chen Xiaoying*), 朱秀敏 | ||
(Zhu Xiumin*), 胡嘉林 (Hu Jialin*), 馬敏媛 (Ma Minyuan*) | ||
and except for Xiao Lei, who is interested in approximately | ||
4.5% of Beijing Eagle and is the spouse of Mr. Lau, thus | ||
a connected person of the Company, are independent third | ||
parties to the best knowledge of the Directors | ||
"Beijing Eagle Flying" | 北京鷹飛長空管理諮詢中心（有限合夥）(Beijing Eagle | |
Flying Sky Management Consulting Center (Limited |
Partnership)*) is ultimately beneficially owned as to 60% by Mr. Gao, 30% by Mr. Hu, and 10% by 范佔房 (Fan Zhanfang*) to the best knowledge of the Directors
26
"Beijing Feiying"
"Board"
"Capital Subscriptions"
"Chongqing Yitianshi"
"Company"
北京飛鷹暢遊科技有限公司 (Beijing Feiying Changyou Technology Co., Ltd.*), an associate of the Company, which will change to be a non-wholly-owned subsidiary of the Company after entering into the Acting-in-Concert Agreement
the board of the Directors
the 2014 Capital Subscription, the 2016 Capital Subscription, the 2018 First Capital Subscription and the 2018 Second Capital Subscription
To the best knowledge of the Directors, 重慶易一天使投 資有限公司 (Chongqing Yitianshi Investment Co., Ltd.*) is held as to 95% by 重慶市博恩科技（集團）有限公司 (Chongqing Boen Technology (Group) Co., Ltd.*) and 5% by 劉強 (Liu Qiang*). 重慶市博恩科技（集團）有限公司 (Chongqing Boen Technology (Group) Co., Ltd.*) is owned as to 58.17% by 重慶時脈載科技有限公司(Chongqing Time Pulse Technology Co., Ltd*), 15.85% by 熊新翔 (Xiong Xinxiang*), 13.78% by 吳琪 (Wu Qi*), 10.53% by 劉強 (Liu Qiang*), 0.60% by 李雙燕 (Li Shuangyan*), 0.36% by 魏開慶 (Wei Kaiqing*), 0.27% by 王曉虹 (Wang Xiaohong*), 0.23% by 張本強 (Zhang Benqiang*), 0.22% by 吳筱英 (Wu Yuying*), and 0.01% by 鄭華 (Zheng Hua*). 重慶時脈載科技有限公司 (Chongqing Time Pulse Technology Co., Ltd*.) is owned as to 60% by 熊新翔 (Xiong Xinxiang*) and 40% by 劉強 (Liu Qiang*). The ultimate beneficial owners of Chongqing Yitianshi are independent third parties to the best knowledge of the Directors
China Fortune Holdings Limited, a company incorporated in Bermuda with limited liability, carrying on business in H.K. as CFH Ltd. and the shares of which are listed on the Stock Exchange
27
"Corporate Action" | proposed change of Beijing Feiying from an associate to a |
non-wholly-owned subsidiary of the Company by allowing | |
the Group to control the majority of the directors in Beijing | |
Feiying by the signing of Acting-in-Concert Agreement | |
"Director(s)" | the director(s) of the Company |
"Executive Director(s)" | the executive director(s) of the Company |
"Group" | the Company and its subsidiaries |
"HK$" | Hong Kong Dollar, the lawful currency of Hong Kong |
"Hong Kong" | The Hong Kong Special Administrative Region of the PRC |
"Hong Kong | the Hong Kong finance team of the Company |
Finance Team" | |
"Independent Third | independent third party(ies) who is/are not connected |
Party(ies)" | person(s) of the Company and is/are independent of and not |
connected with the Company and directors, chief executive, | |
controlling shareholders and substantial shareholders of | |
the Company or any of its subsidiaries or their respective | |
associates | |
"Listing Rules" | the Rules Governing the Listing of Securities on the Stock |
Exchange | |
"Mr. Gao" | 高飛 (Gao Fei*), a PRC natural person holding 32.4% |
interests in Beijing Feiying | |
"Mr. Hu" | 胡兵 (Hu Bing*), a PRC natural person holding 4.8% |
interests in Beijing Feiying | |
"Mr. Hou" | 候高瑞 (Hou Gaorui*), a PRC natural person holding 8.0% |
interests in Zhejiang Aoying |
28
"Mr. Lau"
"Other Beijing Feiying Shareholders"
"PRC"
"PRC Finance Team"
"Previous Transactions"
"RMB"
"Sale Interest" "SGM"
"Shanghai Yuanjia"
"Shareholder(s)" "Stock Exchange"
Lau Siu Ying, chairman, chief executive officer, Executive Director and a PRC natural person who is beneficially interested in 48.85% of the Company
the shareholders of Beijing Feiying (including Mr. Gao, Mr. Hu, 郭紅偉 (Guo Hongwei*), 重慶易一天使投資有限公
司 (Chongqing Yitianshi Investment Co., Ltd.*), 北京老 鷹創新投資中心（有限合夥）(Beijing Eagle Innovation
Investment Center (Limited Partnership)*), 北京迪信通商貿 股份有限公司 (Beijing Dixintong Trading Co., Ltd.*), 北京 鷹飛長空管理諮詢中心（有限合夥）(Beijing Eagle Flying Sky Management Consulting Center (Limited Partnership)*) other than Shanghai Yuanjia
the People's Republic of China
the PRC finance team of the Company
includes the 2014 Capital Subscription, the 2016 Capital Subscription, the 2018 First Capital Subscription, the 2018 Second Capital Subscription and the Acquisition
Renminbi, the lawful currency of PRC
13.5% of the equity interests in Beijing Feiying
the special general meeting of the Company to be convened for the purpose of considering, and if thought fit, approving the Acquisition
上海遠嘉國際貿易有限公司 (Shanghai Yuanjia International Trade Co., Ltd.*), an indirect wholly-owned subsidiary of the Company
the holder(s) of the issued shares of the Company
The Stock Exchange of Hong Kong Limited
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"Vendor" | 上 海 長 鷹 投 資 管 理 有 限 公 司 (Shanghai Changying |
Investment Management Co., Ltd.*), which is held as to | |
100% by 趙克明 (Zhao Keming*), and to the best knowledge | |
of the Directors, is an Independent Third Party | |
"Zhejiang Aoying" | 浙江澳英信息科技有限公司 (Zhejiang Aoying Information |
Technology Co., Ltd.*), an indirect 70% owned subsidiary of | |
the Company | |
"Zhejiang Aoying | the acquisition of the 65% equity interest in Zhejiang Aoying |
Acquisition" | from Mr. Gao and the acquisition of 5% equity interest in |
Zhejiang Aoying from Mr. Hu by Shanghai Yuanjia | |
"%" | per cent |
- In this announcement, the English names of the PRC entities are translation of their Chinese names, and are included herein for identification purpose only. In the event of any inconsistency, the Chinese names shall prevail.
By Order of the Board
China Fortune Holdings Limited
Lau Siu Ying
Chairman and Chief Executive Officer
Hong Kong, 27 December 2019
As at the date of this announcement, the Board comprises three executive directors, namely Mr. Lau Siu Ying, Mr. Wang Yu and Mr. Gao Fei; one non-executive director, namely Mr. Bao Kang Rong; and three independent non-executive directors, namely Dr. Law Chun Kwan, Mr. Lam Man Kit and Dr. Lo Wai Shun.
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China Fortune Holdings Limited published this content on 27 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 December 2019 12:05:08 UTC
