GOME RETAIL HOLDINGS LIMITED 
By 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.
GOME ELECTRICAL APPLIANCES HOLDING LIMITED*
(incorporated in Bermuda with limited liability)
(Stock Code: 493) ANNOUNCEMENT MR. WONG AND MS. DU IN AGREEMENT WITH THE SFC TO RESOLVE THE SFC ACTION UPDATE ON THE COMPANY ACTION SUMMARY
This announcement is made pursuant to Rule 13.09 of the Listing Rules and Part XIVA of the
SFO.
Reference is made to the 2010 Announcement and the 2010 Circular in respect of the legal proceedings separately instituted by the Company and the SFC against, among others, Mr. Wong, the controlling shareholder and former executive director of the Company and former chairman of the Board, and Ms. Du, the wife of Mr. Wong and a former executive Director, in connection with the Share Repurchases conducted between January and February 2008.
On 5 August 2009, the SFC commenced court proceedings against the Defendants under section
213 of the SFO alleging that Mr. Wong and Ms. Du organized the Share Repurchases in or about January and February 2008 to raise funds to repay a HK$2.4 billion personal loan due from Mr. Wong to a financial institution.
The Company was informed that, as a result of mediation between the SFC and the Defendants, the SFC and the Defendants have reached an agreement to resolve the SFC Action subject to certain conditions being fulfilled by the Defendants, including (i) requisitioning by Shinning Crown and Shine Group of a shareholders' meeting and the ratification by the Independent Shareholders of the Share Repurchases and the Breaches of Duties on the part of Mr. Wong and Ms. Du; and (ii) the payment to the Company of an aggregate amount of HK$420,608,765.75, representing the gains received by Mr. Wong and the loss incurred by the Company as a result of the Share Repurchases, together with interest accrued thereon.
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The Payment reflects the SFC's independent expert valuation of the amount of the Gains. The SFC considers that the Payment, subject to approval by the Independent Shareholders, represents a proper expiation of the Gains and also full compensation for the loss incurred by the Company as a result of the actions carried out by Mr. Wong and Ms. Du in relation to the Share Repurchases.
Pursuant to the resolution agreement between the SFC and the Defendants, Shinning Crown and Shine Group are expected to make a requisition to the Company to convene a general meeting to seek the ratification by the Independent Shareholders of the Share Repurchases and the Breaches of Duties on the part of Mr. Wong and Ms. Du and the acceptance of the Payment.
In addition, Mr. Wong and Ms. Du have also agreed to pay (i) all costs involved in convening and holding the requisitioned general meeting and (ii) the SFC's legal costs.
The Board would like to give the Shareholders and potential investors of the Company an update of the Company Action since the 2010 Announcement was issued.
On 5 August 2010, in order to preserve its cause of action against Mr. Wong pending the conclusion of the SFC Action, the Company filed a writ of summons against Mr. Wong for, inter alia, damages suffered by the Company for breaches of fiduciary duties as a director of the Company and breach of trust by Mr. Wong arising from or in connection with the Share Repurchases.
The Company Action has not progressed after the filing of the writ of summons on 5 August
2010 because the Company recognised that the SFC had already commenced the SFC Action and the relief sought by the SFC in that action, if granted by the Court, would effectively achieve what the Company was seeking and would have obtained in the Company Action (if successful). Taking into account also the difficulty in serving the proceedings on Mr. Wong at the time and the possibility that the Company Action might in any case be stayed by the Court in the light of the then ongoing SFC Action, the Company was of the view that the best course was to commence the Company Action but not to progress with it whilst observing the developments of the SFC Action. The writ issued on 5 August 2010 expired on 5 August 2011 and no steps had been taken to renew the writ.
The limitation period in respect of the Company's claim expired in January 2014. Taking into account all the difficulties and reasons for the Company's decision not to actively progress with the Company Action, which remained dormant since the writ was issued, the Board resolved not to issue a fresh writ of summons against Mr. Wong for the same reliefs. In reaching this decision, the Board took into account the difficulty it would face in serving the proceedings on Mr. Wong, which was one of the reasons why the Company never progressed with the Company Action. The Board also took into account the proposed resolution of the SFC Action. If the SFC Action is amicably resolved, resulting in payment of compensation to the Company, the Company Action would become nugatory.
The Company will keep the Shareholders and potential investors informed of the development of the above action by way of further announcement as and when appropriate.
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This announcement is made pursuant to Rule 13.09 of the Listing Rules and Part XIVA of the SFO.
Reference is made to the 2010 Announcement and the 2010 Circular in respect of the legal proceedings separately instituted by the Company and the SFC against, among others, Mr. Wong, the controlling shareholder and former executive director of the Company and former chairman of the Board, and Ms. Du, the wife of Mr. Wong and a former executive Director, in connection with the Share Repurchases conducted between January and February 2008.
On 5 August 2009, the SFC commenced court proceedings against the Defendants under section
213 of the SFO alleging that Mr. Wong and Ms. Du organized the Share Repurchases in or about January and February 2008 to raise funds to repay a HK$2.4 billion personal loan due from Mr. Wong to a financial institution.
As disclosed in the SFC Press Release, the SFC alleged that Mr. Wong had directed the Company to repurchase the majority of the 136,937,000 Shares held by him, representing approximately 70% of the total number of Shares repurchased by the Company under the Share Repurchases.
The Company was informed that, as a result of mediation between the SFC and the Defendants, the SFC and the Defendants have reached an agreement to resolve the SFC Action subject to certain conditions being fulfilled by the Defendants, including (i) requisitioning by Shinning Crown and Shine Group of a shareholders' meeting and the ratification by the Independent Shareholders of the Share Repurchases and the Breaches of Duties on the part of Mr. Wong and Ms. Du; and (ii) the payment to the Company of an aggregate amount of HK$420,608,765.75, representing the gains received by Mr. Wong and the loss incurred by the Company as a result of the Share Repurchases, together with interest accrued thereon. The Payment reflects the SFC's independent expert valuation of the amount of the Gains.
The SFC considers that the Payment, subject to approval by the Independent Shareholders, represents a proper expiation of the Gains and also full compensation for the loss incurred by the Company as a result of the actions carried out by Mr. Wong and Ms. Du in relation to the Share Repurchases.
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The amount of the Payment set out in the Independent Expert Report is higher than the amount of Gains as valued by an independent expert commissioned by Mr. Wong and Ms. Du. Mr. Wong and Ms. Du have agreed to the amount of the Payment sought by the SFC in the interest of resolving the SFC Action in a manner which will, in the opinion of Mr. Wong and Ms. Du, without any shadow of a doubt cause the Company to receive in full the compensation sought for it by the SFC.
In addition, Mr. Wong and Ms. Du have also agreed to pay (i) all costs involved in convening and holding the requisitioned general meeting and (ii) the SFC's legal costs.
As disclosed in the SFC Press Release, in entering the agreement with the Defendants in resolving the SFC Action, the SFC had taken into account that:
• the agreement will enable the Company to receive in full the compensation calculated on the basis of the Independent Expert Report without the costs and risks of separate legal proceedings;
• Mr. Wong and Ms. Du have accepted the Breaches of Duties and by paying a sum higher than their own valuation, they could do right for the Company and the Independent Shareholders;
• the Independent Shareholders will be given an opportunity at the general meeting to be convened to consider whether to approve the resolution to ratify the Share Repurchases, the Breaches of Duties and the Payment by Mr. Wong and Ms. Du; and
• the agreement, if accepted by the Independent Shareholders, will bring the matter to an appropriate end for the benefit of the Independent Shareholders.
Upon the payment of the compensation to the Company and the passing of the resolution by the Independent Shareholders to ratify the Share Repurchases and the Breaches of Duties, the SFC will terminate the SFC Action.
The Board would like to give the Shareholders and potential investors of the Company an update of the Company Action since the 2010 Announcement was issued.
On 5 August 2010, in order to preserve its cause of action against Mr. Wong pending the conclusion of the SFC Action, the Company filed a writ of summons against Mr. Wong for, inter alia, damages suffered by the Company for breaches of fiduciary duties as a director of the Company and breach of trust by Mr. Wong arising from or in connection with the Share Repurchases.
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The Company Action has not progressed after the filing of the writ of summons on 5 August 2010 because the Company recognised that the SFC had already commenced the SFC Action and the relief sought by the SFC in that action, if granted by the Court, would effectively achieve what the Company was seeking and would have obtained in the Company Action (if successful). Further, evidence would be revealed in the SFC Action, which could be used in the Company Action and which the Company might have difficulties in gathering through its own resources. Taking into account also the difficulty in serving the proceedings on Mr. Wong at the time and the possibility that the Company Action might in any case be stayed by the Court in the light of the then ongoing SFC Action, the Company was of the view that the best course was to commence the Company Action but not to progress with it whilst observing the developments of the SFC Action. The writ issued on 5 August 2010 expired on 5 August 2011 and no steps had been taken to renew the writ.
The limitation period in respect of the Company's claim expired in January 2014. Taking into account all the difficulties and reasons for the Company's decision not to actively progress with the Company Action, which remained dormant since the writ was issued, the Board resolved not to issue a fresh writ of summons against Mr. Wong for the same reliefs. In reaching this decision, the Board took into account the difficulty it would face in serving the proceedings on Mr. Wong, which was one of the reasons why the Company never progressed with the Company Action. The Board also took into account the proposed resolution of the SFC Action. If the SFC Action is amicably resolved, resulting in payment of compensation to the Company, the Company Action would become nugatory.
Pursuant to the resolution agreement between the SFC and the Defendants, Shinning Crown and Shine Group are expected to make a requisition to the Company to convene a general meeting to seek the ratification by the Independent Shareholders of the Share Repurchases and the Breaches of Duties on the part of Mr. Wong and Ms. Du and the acceptance of the Payment. The Company will keep the Shareholders and potential investors informed of the development of the above action by way of further announcement as and when appropriate.
The resolution agreement between the SFC and the Defendants is subject to conditions which may or may not materialize as described or at all, and accordingly, shareholders and potential investors of the Company should exercise caution when dealing in the shares of the Company. DEFINITIONS
In this announcement, the following expressions have the meanings set out below unless the context requires otherwise.
"%" per cent.
"2010 Announcement" the announcement made by the Company on 5 August 2010 pursuant to Rule 13.09(1) of the Listing Rules
"2010 Circular" the circular of the Company dated 23 August 2010 "associates" has the meaning ascribed to it in the Listing Rules "Board" the board of Directors
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"Breaches of Duties" the alleged breaches of directors' duties on the part of Mr. Wong and Ms. Du
"Company" GOME Electrical Appliances Holding Limited, an exempted company incorporated in Bermuda with limited liability and the securities of which are listed on the main board of the Stock Exchange
"Company Action" the legal proceedings brought by the Company against Mr. Wong on 5 August 2010 for, inter alia, breaches of fiduciary duties as director of the Company and breach of trust in connection with the Share Repurchases
"controlling shareholder" has the meaning ascribed to it in the Listing Rules
"Court" the High Court of Hong Kong
"Defendants" Mr. Wong, Ms. Du, Shinning Crown and Shine Group, being the defendants in the SFC Action
"Directors" the directors of the Company from time to time
"Gains" the gains which had accrued to Mr. Wong as a result of the Share
Repurchases
"HK$" Hong Kong dollar, the lawful currency of Hong Kong
"Hong Kong" the Hong Kong Special Administrative Region of the People's
Republic of China
"Independent Expert Report" the report prepared by an independent expert appointed by the SFC to value the quantum of the Gains and the loss caused to the Company as a result of the actions carried out by Mr. Wong and Ms. Du in relation to the Share Repurchases
"Independent Shareholders" Shareholders other than Mr. Wong, Ms. Du, Shinning Crown, Shine Group and their respective associates
"Listing Rules" the Rules Governing the Listing of Securities on the Stock
Exchange
"Mr. Wong" Mr. Wong Kwong Yu, the controlling shareholder and former executive director of the Company and former chairman of the Board
"Ms. Du" Ms. Du Juan, the wife of Mr. Wong and the controlling shareholder and former executive director of the Company
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"Payment" the proposed payment of HK$420,608,765.75 in aggregate by Mr.
Wong and Ms. Du to the Company in full and final compensation due to the Company as a result of the actions carried out by Mr. Wong and Ms. Du in relation to the Share Repurchases, calculated on the basis of the Independent Expert Report together with simple interest accrued thereon at a rate of prime rate plus 2% per annum, from 5 February 2008 until payment made by the Defendants into the Court
"SFC" The Securities and Futures Commission of Hong Kong
"SFC Action" the legal proceedings brought by the SFC in August 2009 against the Defendants pursuant to section 213 of the SFO in relation to the Share Repurchases
"SFC Press Release" the press release issued by the SFC dated 11 March 2014 in respect of the resolution of the SFC Action
"SFO" the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong)
"Share Repurchases" certain share repurchases conducted by the Company between 22
January 2008 and 5 February 2008 involving approximately 129.8 million Shares (of which approximately 70% were originally held by or for Mr. Wong) which are the subject of the SFC Action
"Share(s)" ordinary share(s) of HK$0.025 each in the capital of the Company
"Shareholder(s)" the holder(s) of the Shares
"Shine Group" Shine Group Limited, a company wholly-owned by Mr. Wong and a shareholder of the Company
"Shinning Crown" Shinning Crown Holdings Inc., a company wholly-owned by Mr.
Wong and a substantial shareholder of the Company
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"substantial shareholder" has the meaning ascribed to it in the Listing Rules
By Order of the Board
Chairman
Hong Kong, 11 March 2014
As at the date of this announcement, the Board comprises Mr. Zou Xiao Chun as executive director; Mr. Zhang Da Zhong, Mr. Zhu Jia, Ms. Wang Li Hong and Mr. Cheung Leong as non-executive directors; and Mr. Sze Tsai Ping, Michael, Mr. Chan Yuk Sang, Mr. Lee Kong Wai, Conway, Mr. Ng Wai Hung and Ms. Liu Hong Yu as independent non-executive directors.
* For identification purpose only
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