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,
a licensed dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Sinofortune Financial Holdings Limited (the “Company”), you should
at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other
agent through whom the sale was effected for transmission to the purchaser or transferee.
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.
華 億 金 控 集 團 有 限 公 司SINOFORTUNE FINANCIAL HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 08123)
MAJOR TRANSACTION IN RELATION TO
THE PROPOSED ADDITIONAL CAPITAL CONTRIBUTION TOJOINT VENTURE COMPANY
ANDNOTICE OF EXTRAORDINARY GENERAL MEETING
A letter from the Board is set out on pages 4 to 32 of this circular.
A notice convening the EGM to be held at 10:00 a.m. on Monday, 9 April 2018 at 4/F., Allied Kajima Building, 138
Gloucester Road, Wanchai, Hong Kong is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you intend
to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed
thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Hong Kong
Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible but
in any event not less than 48 hours before the time scheduled for the EGM or any adjournment thereof. The completion and
return of the form of proxy will not preclude you from attending or voting in person at the EGM or any adjourned meeting
thereof should you so wish.
This circular will remain on the “Latest Company Announcement” page of the GEM website at www.hkgem.com for at least
seven days from the date of its posting and on the website of the Company at www.sinofortune.hk.
19 March 2018
CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE
– i –
GEM has been positioned as a market designed to accommodate small and mid-
sized companies to which a higher investment risk may be attached than other companies
listed on the Stock Exchange. Prospective investors should be aware of the potential risks
of investing in such companies and should make the decision to invest only after due and
careful consideration.
Given that the companies listed on GEM are generally small and mid-sized
companies, there is a risk that securities traded on GEM may be more susceptible to high
market volatility than securities traded on the Main Board and no assurance is given that
there will be a liquid market in the securities traded on GEM.
CONTENTS
– ii –
Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . I-1
APPENDIX II – ACCOUNTANT’S REPORT ON
THE JOINT VENTURE COMPANY . . . . . . . . . . . . . . . . . . . . . II-1
APPENDIX III – PRO FORMA FINANCIAL INFORMATION OF
THE ENLARGED GROUP
ASSUMING COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
APPENDIX IV – GENERAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . IV-1
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EGM-1
DEFINITIONS
– 1 –
In this circular, unless the context requires otherwise, the following expressions shall have
the following meanings:
“Announcement” the announcement of the Company dated 29 December 2017
relating to the Proposed Additional Capital Contribution
“Articles” The articles of association of the Joint Venture Company
“associate(s)” has the meaning ascribed to it in the GEM Listing Rules
“Board” the board of Directors
“Business Day” a day (other than a Saturday or Sunday) on which licensed
banks are generally open for business in Hong Kong
throughout their normal business hours
“Company” Sinofortune Financial Holdings Limited, a company
incorporated in the Cayman Islands with limited liability
and the issued Shares of which are listed on GEM (stock
code: 8123)
“Completion” completion of the Proposed Additional Capital Contribution
“connected person(s)” has the meaning ascribed to it in the GEM Listing Rules
“Director(s)” the director(s) of the Company
“EGM” the extraordinary general meeting of the Company to be
convened for the purpose of considering and, if thought fit,
approving the Proposed Additional Capital Contribution
“Enlarged Group” the Group immediately after the Completion
“GEM” the GEM of the Stock Exchange
“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM
“Group” the Company and its subsidiaries
DEFINITIONS
– 2 –
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Third Party(ies)” third party(ies) who is/are independent of, and not
connected with, the Company and/or its connected persons
“Initial Capital Contribution” the initial capital contribution of RMB90,000,000 by the
Company to the Joint Venture Company on its formation on
2 August 2017
“Joint Venture Agreement” the joint venture agreement entered into between the
Company and the Joint Venture Partner on 4 July 2017 for
the formation of the Joint Venture Company
“Joint Venture Announcements” the announcements of the Company dated 4 July 2017 and
17 October 2017 relating to the entering into between the
Company and the Joint Venture Partner of the Joint Venture
Agreement and the formation of the Joint Venture Company
respectively
“Joint Venture Company” /
“Target Company”
重慶盛渝泓嘉國際貿易有限公司 ( t ransl i terated as
Chongqing Sheng Yu Hong Jia International Trading
Company Limited), a sino-foreign joint venture company
formed on 2 August 2017 which is 90% owned by the
Company and 10% owned by the Joint Venture Partner
“Joint Venture Partner” 深圳美麗生態股份有限公司 (transliterated as Shenzhen
Ecobeauty Co. , Ltd) , a l imited l iabi l i ty company
established in the PRC whose shares are listed on the
Shenzhen Stock Exchange under stock code 000010
“Latest Practicable Date” 12 February 2018 being the latest practicable date prior to
the printing of this circular for the purpose of ascertaining
certain information contained in this circular
“PRC” the People’s Republic of China
DEFINITIONS
– 3 –
“Proposed Additional
Capital Contribution”
the proposed additional contribution of RMB50,000,000
(equivalent to approximately HK$61,801,000) by the
Company to the registered capital of the Joint Venture
Company
“RMB” Renminbi, the lawful currency of the PRC
“SFO” The Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong)
“Share(s)” the ordinary share(s) of HK$0.01 each in the share capital
of the Company
“Shareholder(s)” holder(s) of the Share(s)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“%” per cent
LETTER FROM THE BOARD
– 4 –
華 億 金 控 集 團 有 限 公 司SINOFORTUNE FINANCIAL HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 08123)
Executive Directors:
Mr. Wang Jiawei
(Chairman and Chief Executive Officer)
Ms. Lai Yuk Mui
Non-executive Directors:
Mr. Liu Runtong
Mr. James Beeland Rogers Jr.
Independent Non-executive Directors:
Professor Zhang Benzheng
Mr. Li Jianxing
Professor Chen Shu Wen
Registered office:
Cricket Square,
Hutchins Drive,
P.O. Box 2681,
Grand Cayman KY1-1111,
Cayman Islands
Head office and principal place of
business in Hong Kong:
16th Floor,
CMA Building,
No. 64-66 Connaught Road Central,
Hong Kong
19 March 2018
To the Shareholders
Dear Sir or Madam,
MAJOR TRANSACTION IN RELATION TO
THE PROPOSED ADDITIONAL CAPITAL CONTRIBUTION TOJOINT VENTURE COMPANY
ANDNOTICE OF EXTRAORDINARY GENERAL MEETING
INTRODUCTION
Reference is made to the Joint Venture Announcements and the Announcement in relation
to, among other things, the entering into between the Company and the Joint Venture Partner of the
Joint Venture Agreement, the formation of the Joint Venture Company and the Proposed Additional
Capital Contribution.
LETTER FROM THE BOARD
– 5 –
On 2 August 2017, the Joint Venture Company was formed in Chongqing City, PRC to which
the Company had contributed 90% of its registered capital in the sum of RMB90,000,000.
The Company intends to make the Proposed Additional Capital Contribution to the Joint
Venture Company.
As one or more of the applicable percentage ratios (as defined under the GEM Listing
Rules) of the Proposed Additional Capital Contribution when aggregated with the Initial Capital
Contribution under Rule 19.22 of the GEM Listing Rules will exceed 25% but are less than 100%,
the Proposed Additional Capital Contribution will constitute a major transaction for the Company
and is therefore subject to the reporting, announcement and Shareholders’ approval requirements
under Chapter 19 of the GEM Listing Rules.
The purpose of this circular is to provide you with, among other things, (i) further
information on the Joint Venture Company and the Proposed Additional Capital Contribution; (ii)
accountants’ report of the Joint Venture Company; (iii) pro forma financial information on the
Enlarged Group assumption Completion; and (iv) notice of the EGM.
BACKGROUND
On 4 July 2017 the Company and the Joint Venture Partner entered into the Joint Venture
Agreement to form the Joint Venture Company in Chongqing City, PRC.
The Joint Venture Agreement
The principal terms of the Joint Venture Agreement are summarized below:
Date 4 July 2017.
Parties and shareholding ratio (1) the Company (90%); and
(2) the Joint Venture Partner (10%).
Name of the Joint Venture Company 重慶盛渝泓嘉國際貿易有限公司 (transliterated
as Chongqing Sheng Yu Hong Jia International
Trading Company Limited).
LETTER FROM THE BOARD
– 6 –
Purpose of the Joint Venture Company To strengthen economic cooperation through
advanced and scientific management methods to
open up market for economic benefits to allow
the joint venture parties to achieve satisfactory
economic benefits.
Registered capital of
the Joint Venture Company
RMB100,000,000.
Contribution to the registered capital of
the Joint Venture Company
The Company shall be responsible to contribute
90% of the registered capital of the Joint
Venture Company in the sum of RMB90,000,000
(equivalent to approximately HK$102,240,000
as at 4 July 2017) in cash and the Joint Venture
Partner shall be responsible to contribute 10%
of the registered capital of the Joint Venture
Company in the sum of RMB10,000,000 in cash.
The Company and the Joint Venture Partner shall
each make their own respective contribution
to the registered capital of the Joint Venture
Company within one year of its establishment.
Scope of business of
the Joint Venture Company
Sales of motor vehicles, motor vehicle parts
and motor vehicle products; sales of used motor
vehicles; motor vehicles rental (excluding motor
vehicles finance leasing); motor vehicles repair
and maintenance; motor vehicles insurance
agency; import, export and domestic trading
businesses; e-commerce business; international
f r e igh t fo rward ing se rv ices ; in fo rmat ion
consultancy (excluding restricted items); and
investment in industrial enterprises (specific
items will be separately disclosed).
Distribution of profits Profits of the Joint Venture Company shall be
distributed to the shareholders in accordance with
the shareholding proportions of the shareholders
in the Joint Venture Company.
LETTER FROM THE BOARD
– 7 –
Board composition The board of directors of the Joint Venture
Company will consist of three directors of whom
the Company is entitled to appoint two directors
and the Joint Venture Partner is entitled to appoint
one director. The chairman of the board of the
Joint Venture Company shall be appointed by the
Company and shall act as the legal representative
of the Joint Venture Company.
The vice chairman of the board of the Joint
Venture Company shall be appointed by the Joint
Venture Partner.
Each director of the Joint Venture Company shall
have one vote and decisions of the board of the
Joint Venture Company on matters within the
power of the board of the Joint Venture Company
under the Articles shall be made on a two-third
majority basis save that decisions of the board
of the Joint Venture Company on the following
matters shall be approved by the board of the
Joint Venture Company unanimously:–
– amendment to the Articles;
– provision of third-party guarantee;
– increase the registered capital of the Joint
Venture Company; and
– merger, spinoff, change of structure,
dissolution or liquidation, etc.
Term of operation of
the Joint Venture Company
50 years from the issuance of the business
license.
LETTER FROM THE BOARD
– 8 –
Other terms (1) If a party fails to perform the obligations
stipulated in the Joint Venture Agreement
and the Articles or seriously violates the
provisions of the Joint Venture Agreement
and/or the Articles so that the Joint Venture
Company cannot operate or cannot meet
the business purpose stipulated in the
Joint Venture Agreement will constitute
a breach of the Joint Venture Agreement
and the innocent party shall have the right
to terminate the Joint Venture Agreement
and to claim damages from the defaulting
party.
(2) If a party intends to transfer all or part
of its shareholding in the Joint Venture
Company, it shall obtain the written
approval of the other party and the other
party shall have a pre-emptive right on the
shareholding intended to be transferred.
(3) The Joint Venture Company shall have
a supervisory committee made up of
three members of whom two shall be
appointed by the Company and one shall
be appointed by the Joint Venture Partner.
The supervisory committee shal l be
responsible for, among other things, the
monitoring of the Joint Venture Company’s
finance information and the supervision of
the directors and senior executives of the
Joint Venture Company in discharging their
duties.
(4) The Joint Venture Agreement shall be
governed by the laws of the PRC.
LETTER FROM THE BOARD
– 9 –
The Joint Venture Partner
To the best of the Directors’ knowledge, information and belief having made all reasonable
enquiry, the Joint Venture Partner and its ultimate beneficial owners are third parties independent of
the Group and connected persons of the Group.
INFORMATION ON THE JOINT VENTURE COMPANY
Formation of the Joint Venture Company
The Joint Venture Company was formed on 2 August 2017 in Chongqing City, PRC and
is licensed to carry out the businesses of sales of motor vehicles, motor vehicle parts and motor
vehicle products; motor vehicles rental (excluding motor vehicles finance leasing, passenger
vehicles transportation rental and road passenger and freight transport operations); international
freight forwarding services; import and export businesses; motor vehicles information consultancy
(excluding restricted items); motor vehicles repair and maintenance (for business items that
require approval, shall only be carried out after obtain approvals) and agency for motor vehicles
registration, transfer and scrap procedures for 50 years from 2 August 2017 until 1 August 2067.
Capital contribution
Following the formation of the Joint Venture Company, the Company had made the Initial
Capital Contribution and the Joint Venture Partner had made its capital contributions to the Joint
Venture Company of RMB10,000,000 pursuant to the Joint Venture Agreement respectively.
Board of directors and senior management
The Joint Venture Company has three directors, two of whom are appointed by the Company
and the remaining one appointed by the Joint Venture Partner.
Name Title
Date of joining the
Joint Venture Company
Role and
responsibilities
Mr. Wang Jiawei(王嘉偉) Chairman of the board
and legal representative
August 2017 Responsible for overall
strategic planning and
business direction
Mr. Wang Rui(王銳) Vice chairman of
the board
August 2017 Responsible for overall
strategic planning and
business direction
LETTER FROM THE BOARD
– 10 –
Name Title
Date of joining the
Joint Venture Company
Role and
responsibilities
Mr. Yang Wei(楊威) Director and
vice general manager
August 2017 Responsible for
overseeing day to day
operations and finance
division
Mr. Zeng Wei(曾偉) General manager September 2017 Responsible for
overseeing import and
export activities and
sales operations
Ms. Lan Hang(藍航) Vice general manager September 2017 Responsible for
overseeing day to
day operations and
management
Mr. Wang Jiawei(王嘉偉)is the chairman, chief executive officer and executive director
of the Company. Mr. Wang is the chairman and legal representative of the Joint Venture Company.
Mr. Wang obtained a Bachelor of Science in Mathematics at Imperial College London in the United
Kingdom in 2009 and a Master of Science in Finance at City University London in the United
Kingdom in 2010. From October 2010 to July 2011, he was a market analyst of the investment
department in Shenzhen Shouguan Investment Co., Limited. Since August 2011, Mr. Wang has been
a manager of Sinofortune Securities Limited, a subsidiary of the Company. Mr. Wang Jiawei has
extensive experience in project management and is responsible for the overall strategic planning and
business direction of the Joint Venture Company.
Mr. Wang Rui(王銳)is the vice chairman of the Joint Venture Company. Prior to joining
the Joint Venture Company, Mr. Wang held position as trading manager of China Electronics
Engineering Construction Development Company (Hainan Branch)(中國電子工程建設開發公司海南公司), director of Haikou Zhouhai Trading Company(海口市洲海貿易公司), chief
executive officer of Shenzhen Huaxin Company Limited(深圳市華新股份有限公司), general
manager and chief financial officer of Beijing Shenhuaxin Company Limited(北京深華新股份有限公司). He is currently the director of Beijing Shenhuaxin Company Limited(北京深華新股份有限公司). Mr. Wang is responsible for overall strategic planning and business direction of the
Joint Venture Company.
LETTER FROM THE BOARD
– 11 –
Mr. Yang Wei(楊威)is the director and vice general manager of the Joint Venture Company.
Mr. Yang obtained a Bachelor of International Economic Law in Shenzhen University in 2001 and
he is a candidate of Master of Business Administration in Beijing University Guanghua School of
Management. From 2001 to 2004, he was a manager in the sales department in Ping An Insurance
(Group) Company Of China Ltd Shenzhen Branch. From 2004 to 2005, he was an executive
manager in Shenzhen Erdos Asset Management Company Limited(深圳市鄂爾多斯資產管理有限公司). From 2005 to 2009, he was an executive manager in Shenzhen Yibaohua Industrial
Company Limited(深圳市益寶華實業有限公司). From 2010 to 2013, he was a manager in the
legal department of Guangdong Brightzone Securities Investment Company Limited (Shenzhen
Branch)(廣東博眾證券投資咨詢有限公司深圳分公司). From 2013 to 2014, he was a
compliance manager of Shenzhen Guoyin Brilliant Precious Metals Limited(深圳國銀盛世貴金屬經營有限公司). From 2014 to 2015 he was an assistant to president and compliance manager
of Shenzhen Qianhai First China International Commodities Exchange Centre Limited(深圳前海首華國際商品交易中心有限公司). He currently a vice general manager of Shenzhen Tianze
Capital Investment Company Limited(深圳市天澤資本投資有限公司). Mr. Yang has extensive
experience in sales operation and corporate compliance matters is responsible for overseeing day to
day operations and finance division of the Joint Venture Company.
Mr. Zheng Wei(曾偉)is the general manager of the Joint Venture Company. Mr. Zheng
obtained his tertiary degree in infrastructure finance in 1991 and Master in Business Administration
(Sociology) in Beijing University in 2001. From 1991 to 1999, he was a credit section leader of
China Construction Bank. From 1999 to 2006, he was a senior vice manager of China Cinda Assets
Management Company Limited, Chongqing Branch. From 2006 to 2008, he was a branch manager
of Shenzhen Zhongrong Insurance Brokers Company Limited (Chongqing Branch)(深圳中融保險經濟有限公司). From 2008 to 2011, he was the Chongqing district manager of Chongqing
Shenhuaxin Investment Company Limited(重慶市深華新投資有限公司). From 2011 to 2014,
he was the general manager and managing director of China Finance Leasing Company Limited
(Chongqing Branch)(中國融資租賃有限公司重慶分公司). From 2014 to 2016, he was the
general manager of Chongqing Wanlong Finance Leasing Company Limited(重慶萬隆融資租賃有限公司). From 2016 to 2017, he was the general manager of Zhongken Finance Leasing
Corporation(中墾融資租賃股份有限公司), responsible for the trading of parallel imported
vehicles. Mr. Zheng is responsible for overseeing import and export activities and sales operations
in the Joint Venture Company.
LETTER FROM THE BOARD
– 12 –
Ms. Lan Hang(藍航)is the vice general manager of the Joint Venture Company. Ms. Lan
obtained her tertiary degree in Chinese literature in Southwest China Normal University(西南師範大學)in 1994 and Bachelor in Business Administration in China Central Radio & Television
University(中央廣播電視大學)in 2008. From 1996 to 2001, she was the executive manager in
Sichuan Taiji Pharmaceutical Company Limited(四川太極製藥公司). From 2001 to 2003, she
was the executive manager in Chongqing Financing Equipment Installation Engineering Company
(重慶融資設備安裝工程公司). From 2003 to 2008, she was the client development manager,
executive manager and human resources manager in METRO Jinjiang Cash & Carry Company
Limited (Chongqing Branch)(錦江麥德龍現購自運有限公司). From 2008 to 2011, she was the
vice general manager of Chongqing Beisiji Commercial Trading Company Limited(重慶倍斯吉商貿有限公司). From 2011 to 2014, she was the managing director and responsible person of
the comprehensive department of China Finance Leasing Company Limited (Chongqing Branch)
(中國融資租賃有限公司重慶分公司). From 2014 to 2016, she was the head of executive, head
of market finance and company to the board of director of Chongqing Wanlong Finance Leasing
Company Limited(重慶萬隆融資租賃有限公司). From 2016 to 2017, she was the head of
finance department of Zhongken Finance Leasing Corporation(中墾融資租賃股份有限公司)and
she was also responsible for the trading of parallel imported vehicles. Ms. Lan is responsible for
overseeing day to day operations and management in the Joint Venture Company.
Mr. Zheng Wei and Ms. Lan Hang have prior experience in trading of parallel imported
vehicles before joining the Joint Venture Company and have a wide network of business and
working relationships in the industry of trading of parallel imported vehicles. They play a vital
role in leading the sales business in the Joint Venture Company and have assisted the board of the
directors of the Joint Venture Company with their expertise.
Business model
Since Shanghai Free Trade Zone became the first place in the PRC authorizing dealers to
parallel import motor vehicles directly from overseas into the PRC in the beginning of 2015, the
numbers of parallel imported motor vehicles in the PRC have growth significantly. According to
data reported in a feature report dated 21 August 2017 entitled “Pingxing Ce•Report | Analysis on
the information of parallel imported motor vehicles for the first half of 2017 released, this free
trade zone accounts for 70%” (“平行策 •報告 | 2017年上半年平行進口車資料分析報告出爐這家自貿區獨佔七成”) published by the National Business Daily(每日經濟新聞)*, in the first 6
months of 2017, the number of parallel imported motor vehicles was 81,649, an increase of 49.7%
over the same period of 2016 and accounting for 14.1% of the total imported motor vehicles in the
PRC, up from 12.7% in 2016. Parallel imports refers to motor vehicles that are being imported by
traders into the PRC for sale without the authorisation of the manufacturer and is in competition
with the motor vehicles imported into the PRC for sale through dealers that are authorised by the
manufacturer. The costs of parallel imported motor vehicles are generally lower and hence they can
be offered to customers at a lower price than those offered by the authorized dealers in the PRC.
* National Business Daily(每日經濟新聞)is a financial integrated media platform providing financial and corporate
news in the PRC who had jointly published studies with Tsinghua University School of Economics and Management
(清華大學經濟管理學院)
LETTER FROM THE BOARD
– 13 –
The Joint Venture Company carries out its business as proprietary trader where it parallel
imports motor vehicles of its own choice and sells to its own customers. The Joint Venture
Company will study the demands of the imported motor vehicles market in the PRC and will target
at those models that have good profit margins and demands. Since its formation, the Joint Venture
Company has mostly been targeting on the segment of mid to high range European and Japanese
sport utility vehicles (“SUV”) of the PRC market and has been parallel importing models like
Patrol manufactured by Nissan and Evoque Sports manufactured by Range Rover into the PRC. The
Joint Venture Company has also imported a small number of other models of SUV like GLS450
manufactured Mercedes Benz and Evoque manufactured by Range Rover into the PRC. The Joint
Venture Company will earn its profits from the difference between the sale price of the motor
vehicles and the cost for importing them into the PRC.
The Company and the Joint Venture Partner decided to set up the Joint Venture Company in
Chongqing City because of its strategic location at the terminus of the Chongqing-Xinjiang-Europe
International Railway(渝新歐鐵路)which offers an alternative route of transporting goods from
Europe into the PRC by land in addition to the traditional route of transporting goods from Europe
into the PRC by sea as well as the favourable policies and incentives offered by the Chongqing City
authorities to import and export businesses under the Silk Road Economic Belt and the 21st-century
Maritime Silk Road, better known as the One Belt and One Road Initiative (“OBOR”) proposed by
the central government of the PRC.
The Joint Venture Company is located in the China (Chongqing) Pilot Free Trade Zone
(重慶自貿試驗區)which offers a series of staggered subsidies policies of up to a maximum of
RMB9,000 per vehicle. Moreover, the Joint Venture Company is also the only business within the
motor vehicle import and export category under the Chongqing City Open-up Inland and Highland
Development Trade Fair Project(重慶市內陸開放高地建設招商項目)under which subsidies
of up to RMB6,500 per vehicle are offered by government authorities of various levels. Since
the formation of the Joint Venture Company until the Latest Practicable Date it has applied to
the Chongqing City authorities for subsidies for a total of 227 imported motor vehicles and has
received total subsidies of approximately RMB1.4 million.
Moreover, under the “3 + N” Scheme(“3 + N”機制), meaning “Government + State Owned
Foreign Trade Groups + Banks” scheme run by the Chongqing City government as an incentive to
promote import and export trade under OBOR, when the Joint Venture Company opens letter of
credit to overseas manufacturer to import motor vehicles with banks participating the scheme, the
banks will provide discount subsidies of up to 1% of the amount of the letter of credit to the Joint
Venture Company, hence, further reducing its cost.
LETTER FROM THE BOARD
– 14 –
Major suppliers
The table below sets out the business scope of the Joint Venture Company’s top 3 suppliers
during the period commencing from its formation and up to 31 January 2018:–
Supplier Business activities
Percentage by
reference to
cost of sales
Percentage by
reference to
number of
vehicles purchased
Credit terms
and payment
method
Supplier A The sole distributor of Nissan
motor vehicles in a country and
region in the Middle East
86% 91% No credit term
By irrevocable letter of credit at sight
Supplier B A supplier of Land Rover motor
vehicles in Germany
10% 5% No credit term
By irrevocable letter of credit at sight
Supplier C A supplier of Land Rover motor
vehicles in the United Kingdom
4% 2% No credit term
By irrevocable letter of credit at sight
The Joint Venture Company has not entered into any long-term supply agreement with its
suppliers that obliges the Joint Venture Company to commit to any minimum purchase from its
suppliers.
To the best of the Directors’ knowledge, information and belief having made all reasonable
enquiry, all the above-mentioned major suppliers of the Joint Venture Company and their respective
ultimate beneficial owners are third parties independent of the Group and connected persons of the
Group.
LETTER FROM THE BOARD
– 15 –
Major customer
During the period commencing from its formation and up to 31 January 2018, the Joint
Venture Company had 1 major customer, which is a wholesaler and retailer of parallel imported
motor vehicles in the PRC. The table below sets out the business scope of the major customer:–
Customer
Percentage by
reference to revenue
Percentage by
reference to number
of vehicles sold Credit terms and payment method
Customer A 98% 98% No credit term
Customer shall pay the total price by cash
to Joint Venture Company within 5-15
days (as specified in the agreement)
after the signing of the agreement
The Joint Venture Company has not entered into any long-term sales agreement with
its customers that obliges the Joint Venture Company to commit to any minimum supply to its
customers.
Although the business activities of the above-mentioned major customer of the Joint Venture
Company are similar to those of the Joint Venture Company, the Joint Venture Company considers
that its business relationship with the said major customer in the short to medium term is one of
mutual benefit to both parties whereas on the one hand the said major customer has established
sales network which can help to provide the required level of demands for the sales of the Joint
Venture Company as a newly set up importer of parallel imported motor vehicles and save it from
having to invest heavily to build up its own sales team and sales channels and on the other hand
the business of trading in parallel imported motor vehicles requires substantial capital to which the
Joint Venture Company being subsidiary of the Company that is listed on GEM has an advantage of
being in a better position to obtain more favourable financing terms from banks and other financial
institutions and with the additional motor vehicles that the Joint Venture Company parallel imported
into the PRC that major customer can also increase its business volume. As the market of parallel
imported motor vehicles in the PRC is large enough to absorb the motor vehicles imported by both
the Joint Venture Company and the said major customer and many more, the Joint Venture Company
does not consider that it is in competition with the said major customer.
To the best of the Directors’ knowledge, information and belief having made all reasonable
enquiry, all the above-mentioned major customer of the Joint Venture Company and its respective
ultimate beneficial owners are third parties independent of the Group and connected persons of the
Group.
LETTER FROM THE BOARD
– 16 –
Sale and marketing
As a newly set up company striving to establish a reputation in the market of parallel
imported motor vehicles and to obtain a significant market share, the Joint Venture Company has
been mainly targeting at motor vehicles wholesaler customers which are able to placed high volume
purchase orders with the Joint Venture Company. The Joint Venture Company’s pricing policy is to
add a profit sum on top of the imported cost of each motor vehicle and then offer a discount on the
profit sum by categorizing its customers in terms of their market influence and sales rates and larger
discount will be offered and more competitive prices will be offered to customers when they place
larger volume of purchase orders.
Risk management and internal control systems
The directors and senior management of the Joint Venture Company are responsible for
formulating its internal control measures and risk management system. The Joint Venture Company
adopts a series of internal control policies and procedures which require all employees to observe to
ensure smooth operations and minimise external and internal risk.
To minimize counterparty risk, the export and import department of the Joint Venture
Company will, according to the procurement management policy, conduct review on new potential
suppliers before entering into contractual relationship based on the following criteria:–
– background
– credibility
– compliance of law and regulations
– financial ability
– operational procedure
– source and quality of product
– opportunity to establish long term stable business relationship
– arrangements on exporting and importing
LETTER FROM THE BOARD
– 17 –
Every procurement proposal by the sales department will be reviewed by the sales
department itself, the export and import department, the operation department, the finance
department, the vice general manager and the general manager. The sales department will determine
whether the procurement proposal is reasonable and in line with the business strategy of the Joint
Venture Company. The export and import department will focus on shipment arrangement and time
required for delivery. The operation department will examine the risk involved in the fluctuation of
the exchange currency, financing costs, pricing and prepare costs and profit forecasts. The finance
department will review on sufficiency of resources for procurement expenses and cash flow.
The Joint Venture Company’s inventory asset management measures require its inventory
management personnel to inspect the quality of the goods received from suppliers before registering
to inventory, perform regular stock-taking and confirm with the operation department and finance
department that payment from customers has been received before dispatching the goods.
As a newly set up company, the Joint Venture Company has been relying heavily on the
established sales network of one major customer which can provide the required level of demands
for the Joint Venture Company’s motor vehicles instead of building up its own sales team to market
to retail customers directly which would be time consuming and costly.
In order to minimise concentration risk and expand its customer base, the Joint Venture
Company is in the progress of negotiating with 14 potential corporate customers who are also
wholesalers and retailers of motor vehicles in the PRC and will enter into binding contract upon
agreement on major terms.
The accounting and internal control personnel of the Company or other subsidiaries
of the Group that are independent from the operation of the Joint Venture Company will
conduct periodical internal checking and audit on the compliances and implementation of the
risk management and internal control systems adopted by the Joint Venture Company and the
effectiveness of such risk management and internal control systems.
Although the Board may not possess the expertise in the managing the business of the Joint
Venture Company, the Directors are satisfied that sufficient and effective risk management and
internal control systems are in place for the business carried out by the Joint Venture Company.
The Company has no current intention to appoint any members of the board of directors of
the Joint Venture Company to the Board or any current intention to change the composition of the
Board.
LETTER FROM THE BOARD
– 18 –
LEGAL AND REGULATORY
The Company has obtained a legal opinion from its PRC legal advisor Chong Qing Senswins
Law Firm(重慶盛世文輝律師事務所)on 10 February 2018 (the “Legal Opinion”) in relation to
the relevant laws and regulations governing imported goods and the legality of goods imported by
the Joint Venture Company.
According to the Legal Opinion, the relevant PRC laws and regulations are the PRC Customs
Law(中華人民共和國海關法), PRC Import and Export Trade Law(中華人民共和國進出口貿易法), PRC Import and Export Control Regulations(中華人民共和國貨物進出口管理條例), PRC Import and Export Commodity Inspection Law(中華人民共和國進出口商品檢驗法)and PRC Import and Export Commodity Inspection Implementation Regulations(中華人民共和國進出口商品檢驗法實施條例). Under the relevant laws and regulations, goods and technology
can be exported from and imported to the PRC freely subject to: (1) the type of imported goods
shall comply with the necessary requirements, prohibited types of goods shall not be imported
and prior approval shall be obtained for import of goods of restricted types; (2) import of goods
by traders dealing with overseas counterparty shall go through customs declaration and inspection
and all overseas procurement contracts, invoices, receipts and other documentation requested by
the customs authority shall be presented to the latter, goods not incompliance with the customs
requirements or not accompanied with complete documentation shall not be imported; and (3) all
licences, certificates, import and export documents shall be true and genuine.
Based on the information and documents provided by the Joint Venture Company, the
Legal Opinion also opines that (1) all goods imported by the Joint Venture Company since its
incorporation were whole vehicles complying with the requirements on types of imported goods;
and (2) up till the date of the Legal Opinion, in respect of all goods imported by the Joint Venture
Company, all normal customs declaration, inspection clearance procedures have been completed,
all necessary documentations such as overseas procurement contracts and receipts are true and
complete and in compliance with the with the relevant PRC laws and regulations governing import
and export trades.
LETTER FROM THE BOARD
– 19 –
FINANCIAL INFORMATION ON THE JOINT VENTURE COMPANY
The Joint Venture Company is newly formed on 2 August 2017.
According to the accountant’s report of the Joint Venture Company as set out in Appendix II
to this circular, set out below is the audited financial information of the Joint Venture Company as
prepared in accordance with Hong Kong Financial Reporting Standards for the period commencing
from 2 August 2017 (date of formation) and ended on 30 November 2017:
For the period
commencing from
2 August 2017 and
ended
30 November 2017
RMB’000
(audited)
Revenue –
Net loss before taxation (678)
Net loss after taxation (678)
According to the accountant’s report of the Joint Venture Company, it recorded an audited
net assets of approximately RMB99.3 million (equivalent to approximately HK$116.5 million) as at
30 November 2017.
MANAGEMENT DISCUSSION AND ANALYSIS OF THE JOINT VENTURE COMPANY
Set out below is the management discussion and analysis of the Joint Venture Company
for the period commencing from 2 August 2017 (date of its formation) to 30 November 2017
(the “Reporting Period”), which is based on detailed financial information of the Joint Venture
Company as set out in the accountants’ report in Appendix II to this circular.
LETTER FROM THE BOARD
– 20 –
Business review
The Joint Venture Company is principally engaged in sales of motor vehicles, motor
vehicle parts and motor vehicle products; motor vehicles rental (excluding motor vehicles
finance leasing, passenger vehicles transportation rental and road passenger and freight
transport operations); international freight forwarding services; import and export businesses;
motor vehicles information consultancy (excluding restricted items); motor vehicles repair
and maintenance (for business items that require approval, shall only be carried out after
obtain approvals) and agency for motor vehicles registration, transfer and scrap procedures.
During the Reporting Period, the Joint Venture Company had acquired motor vehicles
as inventory to be sold and has issued orders to acquire 138 motor vehicles in December
2017. The Target Company has sold 147 motor vehicles in December 2017.
Financial review
Revenue
During the Reporting Period, the Joint Venture Company did not record any revenue.
Administrative expenses
For the Reporting Period the administrative expenses of the Joint Venture Company
was approximately RMB603,978.
Finance costs
For the Reporting Period, the finance costs of the Joint Venture Company was
approximately RMB82,784.
Loss for the Reporting Period
Loss for the Reporting Period of the Joint Venture Company was approximately
RMB678,710.
LETTER FROM THE BOARD
– 21 –
Liquidity and financial resource
(i) As at 30 November 2017, cash and cash equivalents of the Joint Venture
Company amounted to approximately RMB15,666,744.
(ii) As at 30 November 2017, the current ratio (defined as total current assets
divided by total current liabilities) of the Joint Venture Company was
approximately 1091 times and the gearing ratio, being the ratio of the total
liabilities to total assets, was approximately 0.09%.
(iii) As at 30 November 2017, no plant and machinery of the Joint Venture Company
were held under finance lease.
Order book
For the Reporting Period, the Joint Venture Company had not yet received any order
for its proprietary trader business.
Capital commitment
The Joint Venture Company had no material capital commitment as at 30 November
2017.
Treasury policy
The Joint Venture Company had no formal treasury policy and did not enter into any
form of financial arrangement for hedging for the Reporting Period.
Exchange exposure
The Joint Venture Company is exposed to currency risk primarily through some
purchases that are denominated in a foreign currency, i.e. a currency other than the
functional currency of the operations to which the transactions relate. The currencies giving
rise to this risk are primarily Euros, United States Dollars and Japanese Yen. The Joint
Venture Company currently does not have a foreign currency hedging policy, however,
the management monitors foreign exchange exposure closely and will consider hedging
significant foreign currency exposure using forward exchange contracts should the need
arises.
LETTER FROM THE BOARD
– 22 –
Employees and remuneration policy
Remuneration for employees were maintained at a competitive level and determined
with reference to the general market condition and qualifications and experience of the
employees concerned. Employees’ salaries and wages for the Reporting Period was
approximately RMB91,131. As at 30 November 2017, the Joint Venture Company had 13
employees. Remuneration packages comprised salaries and defined contribution pension
fund. Apart from pension, discretionary bonus will also be granted to certain employees as
awards in accordance with individual performance. The Joint Venture Company has no share
option scheme.
Dividend
No dividend was declared during the Reporting Period.
Contingent liabilities
The Joint Venture Company did not have any material contingent liabilities as at 30
November 2017.
Significant investment
There was no significant investment held by the Joint Venture Company as at 30
November 2017.
Acquisitions and disposals of subsidiaries and affiliated company
The Joint Venture Company had no acquisitions or disposals of subsidiaries and
affiliated companies during the Reporting Period.
LETTER FROM THE BOARD
– 23 –
Charge on company assets
As at 30 November 2017, the Joint Venture Company transferred RMB70,480,140 as
pledged bank deposits for securing the letter of credit facility granted by its banker situated
in the PRC, for the purpose of buying the motor vehicles for sales.
Capital structure
The share capital of the Joint Venture Company was RMB100 million as at 30
November 2017.
Segment information
The Joint Venture Company principally engages in sales of motor vehicles in the PRC.
Management reviews the operating results of the business as one operating segment to make
decisions about resources to be allocated. The Chief Operating Decision Maker considers
that there is only one operating segment, which is used to make strategic decisions. The Joint
Venture Company did not have any revenue for the Reporting Period. As at 30 November
2017, all of the non-current assets were located in the PRC.
Future plans for material investment or capital assets
The Joint Venture Company has invested an amount of RMB9,000,000 in an
investment fund known as 財富寶 (transliterated as Cai Fu Bao) which is managed by China
Southern Asset Management Co., Ltd.(南方基金管理股份有限公司)in December 2017.
This investment fund bears floating return and can be refunded one day after instruction
given and is an ad hoc treasury placement of short term idle fund of the Joint Venture
Company and is not related to its principal business.
LETTER FROM THE BOARD
– 24 –
THE PROPOSED ADDITIONAL CAPITAL CONTRIBUTION
Prior to November 2017, the Joint Venture Company had mostly been targeting on the
segment of mid to high range European and Japanese SUV with 3,000 cc or bigger engines. Since
November 2017, the board of directors of the Joint Venture Company has adopted a new business
strategy and plan of targeting and concentrating in only 2 to 3 models of mid to low range European
and Japanese SUV with 3,000 cc or smaller engines and as Toyota Prado 2700, Nissan Patrol
and Mitsubishi Pajero which although command less expensive price tags but have higher market
demands. The Joint Venture Company has set a more aggressive sales target of 3,000 units for 2018
as compared with the sales target of 30 units for the 5 months from August to December 2017.
The table below sets out the newly adopted business plans of the Joint Venture Company
including sales target, time frame, capital expenditure and source of funding:–
Time frame
Sales target (units of
motor vehicles)Capital requirement (RMB) and
source of funding
1st quarter 2018 (from late
February to late April)
500 70 million Joint Venture Company’s own fund
80 million Bank credit facilities
20 million Financing from other financial
institutions by means of factoring or
financial leasing
Total: 170 million
2nd quarter 2018
(from May to July)
700 80 million Joint Venture Company’s own fund
100 million Bank credit facilities
80 million Financing from other financial
institutions by means of factoring or
financial leasing
Total: 260 million
3rd quarter 2018
(from August to October)
1,000 70 million Joint Venture Company’s own fund
200 million Bank credit facilities
100 million Financing from other financial
institutions by means of factoring or
financial leasing
Total: 370 million
4th quarter 2018
(from November 2018 to
January 2019)
800 80 million Joint Venture Company’s own fund
100 million Bank credit facilities
100 million Financing from other financial
institutions by means of factoring or
financial leasing
Total: 280 million
LETTER FROM THE BOARD
– 25 –
The Joint Venture Company shall make payments to its suppliers for the parallel imported
motor vehicles in accordance with the contracts. For further details of the credit terms and payment
methods of the Joint Venture Company with its major suppliers, please see the paragraph headed
“Major suppliers” in this circular.
If the sales target for 2018 could be achieved, it is estimated that the total sales would be
approximately RMB1 billion and the Joint Venture Company hopes that if the sales target for the
2 to 3 models of selected motor vehicles could be achieved, it would increase its bargaining power
on price with its suppliers or would allow it to approach and negotiate for purchases from the
manufacturer directly to lower its costs. In order to achieve the increased sales target under the new
business strategy and plan, the Joint Venture Company requires additional capital to finance the
increased number of motor vehicles to be purchased and imported by the Joint Venture Company to
shorten the transaction cycle for its motor vehicles.
On 9 November 2017 the board of directors of the Joint Venture Company had resolved
to increase the registered capital of the Joint Venture Company from RMB100,000,000 to
RMB150,000,000 and the Joint Venture Company had obtained approval for the increase of its
registered capital from RMB100,000,000 to RMB150,000,000 from the relevant government
authority of the PRC. The additional capital of RMB50,000,000 required by the Joint Venture
Company was determined by the board of directors of the Joint Venture Company after due
consideration of the market of imported motor vehicles in the PRC in general, the market segment
targeted by the Joint Venture Company mentioned above and the needs of the Joint Venture
Company to increase its capital base in order to negotiate for better banking finance arrangements
and other financing modes such as financial leasing.
The Joint Venture Partner had indicated that it would forgo its right to subscribe for and
contribute to its entitled 10% of the increased registered capital of the Joint Venture Company
in the sum of RMB5,000,000 as a result the Company intends to make the Proposed Additional
Capital Contribution and subscribe for the entire 100% of the increased registered capital of
RMB50,000,000 (equivalent to approximately HK$61,801,000) of the Joint Venture Company.
The Company will satisfy the Proposed Additional Capital Contribution in cash through its
internal resources and will settle within 60 days after the Company obtained approval for it from
the Shareholders.
LETTER FROM THE BOARD
– 26 –
Share structure
Set out below is the shareholding structure of the Joint Venture Company before and after
Completion:
(i) as at the date of this circular and before Completion:
90% 10%
Joint Venture Company
Company Joint Venture Partner
(ii) after Completion:
93.33% 6.67%
Joint Venture Company
Company Joint Venture Partner
REASONS FOR AND BENEFITS OF THE JOINT VENTURE COMPANY AND THE
PROPOSED ADDITIONAL CAPITAL CONTRIBUTION
As disclosed in the interim report 2017 of the Company published on 11 August 2017, due
to the continuing tightened policy of the PRC Government and the encouragement of the PRC
Government for the use of BeiDou Navigation Satellite System(北斗衛星導航系統)(“BeiDou
System”), the Group recorded a decrease of approximately HK$2.23 million or 36.9% of its
unaudited revenue recorded by the Group for the 6 months ended 30 June 2017 of approximately
HK$3.81 million as compared to approximately HK$6.04 million for the corresponding period
in 2016. Whilst the Group will continue to focus on improving the performance of its existing
businesses, it will also continue to develop other businesses and look for opportunities to expand
the income sources in order to enhance the revenue of the Group.
LETTER FROM THE BOARD
– 27 –
The Company is of the view that the entering into of the Joint Venture Agreement with the
Joint Venture Partner to establish the Joint Venture Company represents an opportunity for the
Group to expand its business in the sales of motor vehicles in the PRC market which is the largest
motor vehicles market in the world and there is still a huge growth potential for the market given
the relatively lower vehicle per capita compared with other developed markets of the world such as
the United States. The Company believes that the Joint Venture Company can expand the income
base of the Group and diversify its business portfolio.
The Directors consider that the Proposed Additional Capital Contribution, if approved by
the Shareholders, will further increase the Company’s equity interest in the Joint Venture Company
from 90% to 93.33% and the additional capital contribution of RMB50,000,000 by the Company
to the Joint Venture Company will significantly strengthen the capital base of the Joint Venture
Company and will increase its trading capacity and competitiveness in the parallel import motor
vehicle market of the PRC and is in the interests of the Company and the Shareholders as a whole.
In the event the Proposed Additional Capital Contribution is not approved by the
Shareholders, the Joint Venture Company will have to seek finances from banks and other financial
modes under its current capital base in order to satisfy its financial needs under the new business
strategy and plan, which may or may not be successful and if successful it may be on less
favourable terms and may increase the financial cost of the Joint Venture Company. In the event the
Joint Venture Company is unable to seek finances from banks and other financial modes to satisfy
its financial needs under, it may have to withhold the implementation of its new business strategy
and plan or to carry it out at lower pace or to abandon it altogether.
FINANCIAL IMPACT OF THE PROPOSED ADDITIONAL CAPITAL CONTRIBUTION
Based on the pro forma financial information of the Enlarged Group set out in Appendix
III to this circular and the bases and assumptions taken into account in preparing such pro forma
financial information, the Enlarged Group’s total assets and liabilities would be increased by
approximately HK$9,061,000 and approximately HK$107,000 respectively as a result of the
Proposed Additional Capital Contribution. The details of the financial effect of the Proposed
Additional Capital Contribution on the financial position of the Group together with the bases and
assumptions taken into account in preparing the pro forma financial information are set out, for
illustration purpose only, in Appendix III to this circular.
LETTER FROM THE BOARD
– 28 –
According to the accountants’ report of the Joint Venture Company as set out in Appendix II
to this circular, the Joint Venture Company recorded an audited loss for the period from 2 August
2017 (date of formation) to 30 November 2017. Upon Completion, the Joint Venture Company will
remain a non-wholly owned subsidiary of the Company and the financial results of the Joint Venture
Company will be consolidated into the Group’s results.
With the Proposed Additional Capital Contribution, the Joint Venture Company could
increase the volume of motor vehicles imported and traded by it without material additional
administrative expenses, hence, it is expected that both the net profit margin of the Joint Venture
Company and the earnings of the Group would be increased.
RISK FACTORS
Set out below are certain risk factors in relation to the Joint Venture Company and its
business:
Economic factors could affect the financial condition and results of the Joint Venture
Company
Financial condition and results of the Joint Venture Company could be impacted by external
factors such as the economic growth rate or interest rate. During periods of lagging economy
growth or rising interest rates, the automobile industry will likely underperform in general. It
is impracticable to predict the future economy or interest rate fluctuations, any of which could
materially and adversely affect the financial condition and results of the Joint Venture Company.
Reliance on a small number of suppliers
The Joint Venture Company has been sourcing its motor vehicles from a small number of
suppliers. The Joint Venture Company has not entered into long term supply agreement with these
suppliers. The largest 3 suppliers accounted for approximately 86%, 10% and 4% of the Joint
Venture Company’s cost of sales since its formation up to 31 January 2018. There is no assurance
that the existing major suppliers will not increase the cost of their motor vehicles in the future.
There is no assurance that the existing major suppliers will continue to supply to the Joint Venture
Company in the future. Should there be any disruption in the supply of motor vehicles by any of the
existing major supplier to the Joint Venture Company, it could materially and adversely affect the
business operation of the Joint Venture Company.
LETTER FROM THE BOARD
– 29 –
Reliance on a small number of customers
Since its formation and up to 31 January 2018, the Joint Venture Company had sold its
motor vehicles to one major customer. The Joint Venture Company has not entered into long term
sales agreement with this customer. The major customer accounted for 98% of the Joint Venture
Company’s revenue since its formation up to the Latest Practicable Date. There is no assurance that
this major customer will continue to purchase motor vehicles from the Joint Venture Company in
the future. Should there be any disruption in the purchase of motor vehicles by this major customer
from the Joint Venture Company, it could materially and adversely affect the business operation of
the Joint Venture Company.
Failure to retain or secure senior management and competent and experienced personnel
The business operation of the Joint Venture Company depends, to a large extent, on the
experience and skills of its current senior management and competent and experienced personnel.
There is no assurance that these persons will continue to work in the Joint Venture Company. If it
is unable to retain and recruit such competent and experienced personnel, the business operation of
the Joint Venture Company could be materially and adversely affected.
The Company may encounter difficulties in effectively implementing management control and
supervision of its investment in the Joint Venture Company
The Joint Venture Company is self-contained and independently operated in the PRC. The
Company as an investor may encounter difficulties in ensuring that the Joint Venture Company
is effectively and consistently managed. The Company needs to be able to effectively detect or
prevent on a timely basis operational or management problems, including fraud, bribery and other
misconduct, or ensure that information received is accurate, timely or sufficient. If the Company is
unable to effectively implement management control and supervision of its investment in the Joint
Venture Company, its business, results of operations, financial condition and prospects could be
materially and adversely affected.
LETTER FROM THE BOARD
– 30 –
The Joint Venture Company’s business strategy and plan may not be implemented successfully
The successful implementation of the Joint Venture Company’s new business strategy
and plan as set out in the paragraph headed “THE PROPOSED ADDITIONAL CAPITAL
CONTRIBUTION” of this circular depends on a number of factors including, among other things,
changes in the automobile industry and market of parallel import of motor vehicles in the PRC,
availability of funds, competition and the Joint Venture Company’s ability to retain and recruit
competent employees. Some of these factors are beyond the control of the Joint Venture Company
and by nature, are subject to uncertainty. There is no assurance that the new business strategy
and plan can be implemented successfully. Any failure or delay in the implementation of the new
business strategy and plan may have a material adverse effect on the profitability and business
operation of the Joint Venture Company.
Fluctuations in the value of the Renminbi against foreign currencies in which the Joint
Venture Company conducts its purchases in
The business operation of the Joint Venture Company is exposed to currency risk primarily
through purchases conducted in foreign currencies and sales conducted in Renminbi. Any
depreciation in the Renminbi against the foreign currency in which the Joint Venture Company
conducts its purchase could have a material adverse effect on the profitability of the Joint Venture
Company on those purchases. The Joint Venture Company currently does not have a foreign
currency hedging policy.
The performance and growth prospects may be materially and adversely affected by the
increasingly competitive nature of the PRC automobile industry and the market of parallel
import of motor vehicles
The PRC automobile industry and its market of parallel import of motor vehicles are
competitive. The business is affected by competition among authorized dealers and other parallel
importers in terms of quality, design and price. The Joint Venture Company competes with
authorized dealers of car manufacturers and other parallel importers of models of SUVs that it has
targeted and concentrated on. Increased competition among authorized dealers and other parallel
importers in the PRC could impact the Joint Venture Company’s profit margin and market share and
result in a decrease in the performance of the Joint Venture Company and could adversely affect
its growth prospects. Any change in the regulation of the automobile industry could allow new
market participants to enter the market both as dealer or parallel importers, which may intensify
competition and could materially and adversely affect the business and results of operations of the
Joint Venture Company.
LETTER FROM THE BOARD
– 31 –
Changes in PRC laws and regulations with respect to automobile industry and the market of
parallel import of motor vehicles may materially and adversely affect business performance of
the Joint Venture Company
There is no assurance that the PRC Government will maintain the existing laws and
regulations with respect to automobile industry and parallel import of motor vehicles. Any change
in the relevant laws or regulations may materially and adversely affect the business or financial
positions of the Joint Venture Company.
GEM LISTING RULES IMPLICATIONS
As one or more of the applicable percentage ratios (as defined under the GEM Listing
Rules) of the Proposed Additional Capital Contribution when aggregated with the Initial Capital
Contribution under Rule 19.22 of the GEM Listing Rules will exceed 25% but are less than 100%,
the Proposed Additional Capital Contribution will constitute a major transaction for the Company
and is therefore subject to the reporting, announcement and Shareholders’ approval requirements
under Chapter 19 of the GEM Listing Rules.
GENERAL
The EGM will be convened and held for the Shareholders to consider, and if thought fit, to
approve relevant resolutions in relation to the Proposed Additional Capital Contribution. A notice
convening the EGM is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for
use at the EGM is enclosed. Whether or not you are able to attend the EGM, you are requested to
complete and return the enclosed proxy form 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
EGM or any adjournment thereof to the office of the Company’s branch share registrar and transfer
office in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s
Road East, Wan Chai, Hong Kong. The completion and return of the proxy form will not preclude
you from attending and voting in person at the EGM or any adjournment thereof should you so
wish.
The voting in relation to the Proposed Additional Capital Contribution at the EGM will be
conducted by poll whereby any Shareholders and their close associates (as defined under the GEM
Listing Rules) who have a material interest in the Joint Venture Company, the Joint Venture Partner
and the Proposed Additional Capital Contribution shall abstain from voting on the resolution in
relation to the Proposed Additional Capital Contribution to be proposed at the EGM.
LETTER FROM THE BOARD
– 32 –
To the best of the Directors’ knowledge, information and belief, having made all reasonable
enquiries, no Shareholder had a material interest in the Joint Venture Company, the Joint Venture
Partner and the Proposed Additional Capital Contribution. Therefore, no Shareholder is required to
abstain from voting at the EGM.
RECOMMENDATION
The Directors consider that the Proposed Additional Capital Contribution is on normal
commercial terms and is fair and reasonable and in the interests of the Company and the
Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders should vote
in favour of the relevant resolution to be proposed at the EGM to approve the Proposed Additional
Capital Contribution.
ADDITIONAL INFORMATION
Your attention is also drawn to the additional information set out in the appendices to this
circular.
The English text of this circular, the notice of the EGM and the form of proxy for use at the
EGM shall prevail over the Chinese text in case of inconsistency.
By Order of the Board
Sinofortune Financial Holdings Limited
Wang Jiawei
Chairman
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 1
1. THREE-YEAR FINANCIAL INFORMATION
Audited financial information of the Group for each of the three financial years ended 31
December 2014, 2015 and 2016 was disclosed in the annual reports of the Company published on
31 March 2015, 31 March 2016 and 30 March 2017, respectively on both the website of the Stock
Exchange (www.hkexnews.hk) and the Company (www.sinofortune.hk).
2. INDEBTEDNESS STATEMENT
Statement of Indebtedness of the Enlarged Group
As at the close of business on 31 January 2018, being the latest practicable date for
the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged
Group had the following utilized facilities:
HK$’000
Bank mortgage loan – secured and guaranteed (Note 1) 6,388
Irrevocable letters of credit (Note 2) 7,679
14,067
Note 1: The mortgage loan were secured by charges over the Group’s land and buildings as well as
corporate guarantee issued by the Company.
Note 2: The irrevocable letters of credit were secured by the pledged deposits of the same amount owned by
the subsidiary which utilized such facility.
Save as disclosed above and normal trade and other payables in the ordinary course
of the business, the Enlarged Group did not have any other outstanding bank or other
borrowings, mortgages, charges, debentures or other loan capital, bank overdrafts, loans
or other similar indebtedness, guarantee, liabilities under acceptances (other than normal
trade bills), acceptance credits, hire purchase or other finance lease commitments or other
contingent liabilities as at the close of business of 31 January 2018.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 2
3. WORKING CAPITAL
The Directors are of the opinion that, after taking into account the existing cash and bank
balances and other internal resources available and also the effect of the Proposed Additional
Capital Contribution, the Group has sufficient working capital for its present requirements and for
at least 12 months from the date of this circular in the absence of unforeseen circumstances.
4. MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors confirm that they were not aware of
any material adverse change in the financial position or trading position of the Group since 31
December 2016, being the date to which the latest published audited financial statements of the
Group was made up, up to and including the Latest Practicable Date.
5. FINANCIAL AND TRADING PROSPECT OF THE GROUP
The Group is principally engaged in (i) provision of the precious metals spot trading and
brokerage services in the PRC; (ii) provision of securities and futures contracts trading services
and wealth management services in Hong Kong; (iii) trading and principal investments in the PRC
and Hong Kong; (iv) research, exploration and development of the student safety network project
and the electronic student card in the PRC; (v) provision of stock information and research services
through the internet network in the PRC; and (vi) trading in motor vehicles in the PRC.
As disclosed in 2016 annual report of the Company, total turnover of the Group amounted to
approximately HK$46.9 million for the year ended 31 December 2016. The Group recorded a loss
for the year ended 31 December 2016 amounted to approximately HK$244.9 million. Total assets
and total equity amount to approximately HK$500.3 million and approximately HK$462.8 million
respectively as at 31 December 2016.
Provision of the precious metals spot trading and brokerage services in the PRC
Due to continuing tightened policy of the PRC Government on regulating the precious
metals trading and brokerage business in the PRC, the business operation of this segment
of the Group has not yet been resumed. It is difficult to predict the policy of the PRC
Government on such activities in future.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 3
Provision of securities and futures contracts trading services and wealth management
services in Hong Kong
Hong Kong stock market had seen significant gains and pick up in 2017, but the
industry competition remains fierce. The Group is confident and optimistic about the
prospects of the Hong Kong stock and financial markets. The Group will closely monitor
the changes in the Hong Kong stock and financial markets conditions in order to improve
performance of this segment the Group.
Trading and principal investments in the PRC and Hong Kong
The stock markets in the PRC and Hong Kong had seen significant gained and picked
up in 2017 and the Group is optimistic about the prospect of the stock markets in the PRC
and Hong Kong and will closely monitor the changes in these stock markets in order to
improve performance of this segment of the Group’s businesses.
Research, exploration and development of the student safety network project and the
electronic student card in the PRC
Since the customers tend to prefer and use BeiDou System due to encouragement
from the PRC Government, the Group will endeavor to resolve the technical issue in order
to change the navigating chips of electronic cards and devices of the school safety network
to coordinate with the BeiDou System, however, the Group has encountered some technical
issues to change the navigating chips of electronic cards and devices of the school safety
network to coordinate with the BeiDou System and the Group will use its best endeavours to
resolve those technical issues in order to improve performance of this segment of the Group.
Provision of stock information and research services through the internet network in
the PRC
Due to continuing tightened policy of the PRC Government on regulating the
provision of stock information and research services through the internet network in the
PRC, the business operation of this segment of the Group has not yet been resumed. It is
difficult to predict the policy of the PRC Government on such activities in future.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 4
Trading in motor vehicles in the PRC
For the financial and trading prospect of this segment of the Group, please refer to the
sections headed “FINANCIAL INFORMATION ON THE JOINT VENTURE COMPANY”
and “MANAGEMENT DISCUSSION AND ANALYSIS OF THE JOINT VENTURE
COMPANY” in the Letter from the Board.
The Group does not have any current intention or negotiation and has not entered
into any agreement, arrangement or understanding to scale down its existing business and/or
regarding any potential acquisition or disposal.
The Group will continue to focus on improving the performance of its existing
businesses. Furthermore, the Group will continue to implement prudent investment principle
to identify investment opportunities that will enhance Shareholders’ value.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 1
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF SINOFORTUNE FINANCIAL HOLDINGS LIMITED
10/F., Allied Kajima Building,138 Gloucester Road, Wanchai, Hong Kong
Introduction
We report on the historical financial information of Chongqing Sheng Yu Hong Jia
International Trading Company Limited (the “Target Company”) set out on pages II-4 to II-31,
which comprises the statement of financial position as at 30 November 2017, and the statement of
profit or loss and other comprehensive income, statement of changes in equity and statement of cash
flows for the period from 2 August 2017 (date of formation) to 30 November 2017 (the “Reporting
Period”) and a summary of significant accounting policies and other explanatory information
(together, the “Historical Financial Information”). The Historical Financial Information set out
on pages II-4 to II-31 forms an integral part of this report, which has been prepared for inclusion in
the circular of Sinofortune Financial Holdings Limited (the “Company”) dated 19 March 2018 (the
“Circular”) in connection with the Proposed Additional Capital Contribution.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out in
Notes 2.1 to the Historical Financial Information, and for such internal control as the directors
determine is necessary to enable the preparation of Historical Financial Information that is free
from material misstatement, whether due to fraud or error.
The financial statements of the Target Company for the Reporting Period (“Underlying
Financial Statements”), on which the Historical Financial Information is based, were prepared
by the directors of the Company based on the financial statements of the Target Company for the
Reporting Period. The directors of the Target Company are responsible for the preparation and
fair presentation of the financial statements of the Target Company in accordance with Hong Kong
Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”), and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 2
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200, Accountant’s Reports on Historical Financial
Information in Investment Circulars issued by the HKICPA. This standard requires that we comply
with ethical standards and plan and perform our work to obtain reasonable assurance about whether
the Historical Financial Information is free from material misstatement.
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountant’s judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountant considers internal control relevant to the entity’s preparation
of Historical Financial Information that gives a true and fair view in accordance with the basis of
preparation set out in Notes 2 to the Historical Financial Information in order to design procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors,
as well as evaluating the overall presentation of the Historical 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 the Historical Financial Information gives, for the purposes of the
accountant’s report, a true and fair view of the statement of financial position as at 30 November
2017, and the statement of profit or loss and other comprehensive income, statement of changes
in equity and statement of cash flows for the Reporting Period in accordance with the basis of
preparation set out in Notes 2 to the Historical Financial Information.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 3
Report on matters under the GEM Listing Rules and Companies (Winding up and
Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying Financial
Statements have been made.
Dividends
No dividends have been paid by the Target Company in respect of the Reporting Period.
No historical financial statements for the Target Company
As at the date of this report, no statutory financial statements have been prepared for the
Target Company since its date of incorporation.
CHENG & CHENG LIMITED
Certified Public Accountants
Hong Kong, 19 March 2018
Cheng Hong Cheung
Practising Certificate number P01802
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 4
I. HISTORICAL FINANCIAL INFORMATION OF THE TARGET COMPANY
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of
this accountant’s report.
The Underlying Financial Statements, on which the Historical Financial Information
is based, were audited by CHENG & CHENG LIMITED in accordance with Hong Kong
Standards on Auditing issued by the HKICPA.
The Historical Financial Information is presented in Renminbi (“RMB”).
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 5
STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the period
from 2 August
2017 to
30 November
2017
Note RMB
Revenue 6 –
Cost of sales –
Gross profits –
Other income 7 8,052
Administrative expenses (603,978)
Finance cost (82,784)
Loss before tax 8 (678,710)
Income tax expense 10 –
Loss for the period (678,710)
Other comprehensive income –
Loss and total comprehensive loss attributable
to owners of the Target Company (678,710)
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 6
STATEMENT OF FINANCIAL POSITION
As at
30 November
2017
Note RMB
ASSET
Non-current assets
Plant and equipment 11 96,222
Intangible assets 12 87,379
Deposit paid 133,186
316,787
Current assets
Inventories 13 11,603,612
Deposits and prepayments 14 1,344,835
Pledged bank deposits 15 70,480,140
Cash and cash equivalents 15 15,666,744
99,095,331
Current liabilities
Other payables and accruals 16 90,828
Net current assets 99,004,503
Total assets less current liabilities 99,321,290
Capital and reserve
Registered capital 17 100,000,000
Accumulated losses (678,710)
Total equity 99,321,290
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 7
STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of
the Target Company
Registered
capital
Accumulated
losses Total equity
Note RMB RMB RMB
Paid up registered capital 17 100,000,000 – 100,000,000
Total comprehensive loss – (678,710) (678,710)
Balance as at
30 November 2017 100,000,000 (678,710) 99,321,290
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 8
STATEMENTS OF CASH FLOWS
For the period
from 2 August
2017 to
30 November
2017
RMB
Cash flows from operating activities
Loss before tax (678,710)
Adjustments for:
Interest income (8,052)
Operating cash flows before changes in working capital (686,762)
Increase in inventories (11,603,612)
Increase in deposits and prepayments (1,478,021)
Increase in other payables and accruals 90,828
Cash generated used in operations (13,677,567)
Interest income 8,052
Net cash generated used in operating activities (13,669,515)
Cash flows from investing activities
Purchase of plant and equipment and intangible assets (183,601)
Net cash used in investing activities (183,601)
Cash flows from financing activities
Capital contribution from owners 100,000,000
Net increase of pledged deposits for secure use (70,480,140)
Net cash generated from financing activities 29,519,860
Net increase in cash and cash equivalents and cash and
cash equivalents at the end of the period 15,666,744
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 9
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. General information
Chongqing Sheng Yu Hong Jia International Trading Company Limited (the “Target
Company”) was formed in the People’s Republic of China (the “PRC”) on 2 August 2017
as a limited liability company. The address of its registered office is 中國重慶市沙坪垻區土主鎮月台路18號(口岸貿易服務大廈)B1單元5樓503-136室 (transliterated as Flat 503-
136, 5/F., Unit B1, Port Trade Service Building, 18 Platform Road, Tu Zhu Town, Sha Ping
Ba District, Chongqing City, PRC).
The Target Company is principally engaged in the businesses of sales of motor
vehicles, motor vehicle parts and motor vehicle products; motor vehicles rental (excluding
motor vehicles finance leasing, passenger vehicles transportation rental and road passenger
and freight transport operations); international freight forwarding services; import and export
businesses; motor vehicles information consultancy (excluding restricted items); motor
vehicles repair and maintenance (for business items that require approval, shall only be
carried out after obtain approvals) and agency for motor vehicles registration, transfer and
scrap procedures.
During the Reporting Period, the Target Company had acquired motor vehicle as
inventory to be sold and has issued orders to acquire 138 motor vehicles in December 2017.
The Target Company has sold 147 motor vehicles in December 2017.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of the Historical Financial
Information are set out below. These policies have been consistently applied to periods
presented, unless otherwise stated.
2.1 Basis of preparation
The principal accounting policies applied in the preparation of the Historical
Financial Information which are in conformity with the Company’s accounting
policies and in accordance with the Hong Kong Financial Reporting Standards
(“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants
(“HKICPA”) are set out below. The Historical Financial Information has been
prepared under the historical cost convention.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 10
The preparation of the Historical Financial Information in conformity with
HKFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Target
Company’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the Historical
Financial Information are disclosed in Note 4.
All relevant standards, amendments and interpretations to the existing standards
that are effective during all the years and periods presented have been adopted by the
Target Company consistently throughout the periods.
The Historical Financial Information has been also prepared in accordance with
the applicable requirements of the Hong Kong Companies Ordinance (Cap. 622).
2.1.1 Changes in accounting policy and disclosures
Impact of new or revised standards and amendments to existing standards
that are effective on or after 1 January 2018.
The following new standards, amendments and interpretations to existing
standards which have been issued but are effective for the fiscal year beginning
on or after 1 January 2018 and have not been early adopted by the Target
Company:
Effective for annual periods beginning on or after
HKFRS 9 Financial instruments 1 January 2018
HKFRS 15 Revenue from contracts with customers 1 January 2018
HKFRS 16 Lease 1 January 2019
Amendments to
HKFRS 2
Classification and Measurement of
Share-based Payment Transactions
1 January 2018
Amendment to
HKFRS 10 and
HKAS 28
Sale or Contribution of assets between
an investor and its associate or
joint venture
Deferred
1 January 2018
Amendment to
HKFRIC 22
Foreign currency transactions and
advance consideration
1 January 2018
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 11
(i) HKFRS 9 Financial instruments
HKFRS 9 Financial Instruments addresses the classification,
measurement and recognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment model
for financial assets. The Target Company expects to adopt HKFRS 9
from 1 January 2018. The Target Company has performed a high-level
assessment of the impact of the adoption of HKFRS 9. This preliminary
assessment is based on currently available information and may be
subject to changes arising from further detailed analyses or additional
reasonable and supportable information being made available to the
Target Company in the future. The expected impacts arising from the
adoption of HKFRS 9 are summarised as follows:
(a) Classification and measurement
The Target Company does not expect that the adoption
of HKFRS 9 will have a significant impact on the classification
and measurement of its financial assets. There will be no impact
on the Target Company’s accounting for financial assets and
financial liabilities as the Target Company does not have any
financial assets and liabilities which requires the classification and
measurement changes mentioned in HKFRS 9.
(b) Impairment
The new impairment model requires the recognition of
impairment provisions based on expected credit losses (ECL)
rather than only incurred credit losses as is the case under HKAS
39. It applies to financial assets classified at amortized cost,
contract assets under HKFRS 15 Revenue from Contracts with
Customers and lease receivables. While the Target Company has
not yet completed the detailed assessment of how its impairment
would affect by the new model, it may result in an earlier
recognition of credit losses.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 12
(ii) HKFRS 15 Revenue from contracts with customers
The HKICPA has issued a new standard for the recognition of
revenue. This will replace HKAS 18 which covers revenue arising from
the sale of goods and the rendering of services and HKAS 11 which
covers construction contracts.
The core principle of HKFRS 15 is that an entity should recognise
revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. Specifically, the
standard introduces a 5-step approach to revenue recognition:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance
obligations in the contract
• Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation
Under HKFRS 15, an entity recognises revenue when (or as) a
performance obligation is satisfied, i.e. when “control” of the goods or
services underlying the particular performance obligation is transferred
to the customer. Additional guidances have been added in HKFRS 15
to deal with specific scenarios. Furthermore, extensive disclosures are
required by HKFRS 15 In 2016, the HKICPA issued Clarifications to
HKFRS 15 in relation to the identification of performance obligations,
principal versus agent considerations, as well as licensing application
guidance.
The directors of the Target Company anticipate that the
application of HKFRS 15 in the future may result in more disclosures,
however, the directors of the Target Company do not anticipate that the
application of HKFRS 15 will have a material impact on the timing and
amounts of revenue recognised in the respective reporting periods.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 13
(iii) HKFRS 16 Leases
HKFRS 16 was issued in January 2016. It will results in almost
all leases being recognized on the financial position for lessee, as the
distinction between operating and finance leases is removed. Under the
new standard, an asset (the right to use the leased item) and a financial
liability to pay rentals are recognized. The only exceptions are short-term
and low-value leases.
The directors do not expect the adoption of IFRS 16 as compared
with the current accounting policy would result in a significant impact
on the Target Company’s results but it is expected that a certain portion
of these lease commitments will be required to be recognised in the
statement of financial position as right-of-use assets and lease liabilities.
Some of the commitments may be covered by the exception for short-
term and low-value leases under HKFRS 16.
The standard is mandatory for first interim periods within annual
reporting periods beginning on or after 1 January 2019. At this stage, the
Target Company does not intend to adopt the standard before its effective
date.
2.2 Functional and presentation currency
Items included in the financial statements of the Target Company are measured
using the currency of the primary economic environment in which the entity operates
(the “functional currency”). The financial information are presented in Renminbi
(“RMB”), which is the Company’s functional and presentation currency.
2.3 Plant and equipment
Plant and equipment are stated at historical cost less depreciation. Historical
cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a
separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Target Company and the cost of the item can
be measured reliably. The carrying amount of the replaced part is derecognized. All
other repairs and maintenance are charged to the statement of profit or loss and other
comprehensive income during the financial period in which they are incurred.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 14
Depreciation on plant and equipment is calculated using the straight-line
method to allocate their cost to their residual values over their estimated useful lives,
as follows:
Office equipment and furniture 3 years
The depreciation is calculated when the assets are commenced to use. The
assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the
end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains or losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in the statement of profit or loss.
2.4 Intangible assets
The software has a finite useful life and is carried at cost less accumulated
amortization and impairment. Amortization is calculated using the straight-line
method to allocate the cost of software over its estimated useful life of 3 years. The
amortization is calculated when the intangible assets are commenced to use.
2.5 Impairment of non-financial assets
Assets that are subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at each reporting date.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 15
2.6 Financial assets
2.6.1 Classification
The Target Company’s financial assets fall into the category of loans and
receivables. Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. They are
included in current assets, except for the amounts that are settled or expected to
be settled more than 12 months after the end of the reporting period. These are
classified as non-current assets. The Target Company’s loans and receivables
comprise “deposits and prepayments” in the statement of financial position.
2.6.2 Recognition and measurement
Regular way purchases and sales of financial assets are recognized on the
trade-date – the date on which the Target Company commits to purchase or sell
the asset. Investments are initially recognized at fair value plus transaction costs
for all financial assets not carried at fair value through profit or loss. Loans
and receivables are subsequently carried at amortized cost using the effective
interest method.
2.7 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the
Statement of Financial Position when there is a legally enforceable right to offset
the recognised amount and there is an intention to settled on a net basic or realise
the assets and settle the liability simultaneously. The legally enforceable right must
not be contingent on future events and must be enforceable in the normal course of
business and in the event of default, insolvency or bankruptcy of the company or the
counterparty.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 16
2.8 Impairment of financial assets
Assets carried at amortized cost
The Target Company assesses at the end of each reporting period whether
there is objective evidence that a financial asset or group of financial assets
is impaired. A financial asset or a group of financial assets is impaired and
impairment losses are incurred only if there is objective evidence of impairment
as a result of one or more events that occurred after the initial recognition of
the asset (a “loss event”) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial assets
that can be reliably estimated.
Evidence of impairment may include indications that the debtors or
a group of debtors is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will
enter bankruptcy or other financial reorganization, and where observable data
indicate that there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables category, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been
incurred) discounted at the financial asset’s original effective interest rate. The
carrying amount of the asset is reduced and the amount of the loss is recognized
in the statement of profit or loss. If a loan has a variable interest rate, the
discount rate for measuring any impairment losses is the current effective
interest rate determined under the contract. As a practical expedient, the Target
Company may measure impairment on the basis of an instrument’s fair value
using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring after the
impairment was recognized (such as an improvement in the debtor’s credit
rating), the reversal of the previously recognized impairment loss is recognized
in the statement of profit or loss. A reversal of an impairment loss shall not
result in the asset’s carrying amount exceeding that which would have been
determined had no impairment loss been recognised in prior years.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 17
2.9 Leases
Leases in which a significant portion of the risks and rewards of ownership
are retained by the lessor are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessor) are charged to the
consolidated statement of profit or loss and other comprehensive income on a straight-
line basis over the period of the lease.
2.10 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is
determined using the weighted average method. The cost of finished goods is arrived
at based on purchase cost. It excludes borrowing costs. Net realizable value is the
estimated selling price in the ordinary course of business, less applicable variable
selling expenses.
2.11 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of three
months or less.
2.12 Registered capital
Registered capital is classified as equity.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 18
2.13 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is
recognized in the consolidated statement of profit or loss and other comprehensive
income, except to the extent that it relates to items recognized in other comprehensive
income or directly in equity. In this case the tax is also recognized in other
comprehensive income or directly in equity, respectively.
Current income tax
The current income tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the end of the reporting period in the
countries where the Target Company operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax
Inside basis differences
Deferred income tax is recognized, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognized if they arise from the initial
recognition of goodwill, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantively enacted by the
reporting period and are expected to apply when the related deferred income tax
asset is realized or the deferred income tax liability is settled.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 19
Deferred income tax assets are recognized only to the extent that it is
probable that future taxable profit will be available against which the temporary
differences can be utilized.
Outside basis differences
Deferred income tax liabilities are provided on taxable temporary
differences arising from investments in subsidiaries and associates, except for
deferred income tax liability where the timing of the reversal of the temporary
difference is controlled by the Target Company and it is probable that the
temporary difference will not reverse in the foreseeable future. Generally the
Target Company is unable to control the reversal of the temporary difference
for associates. Only when there is an agreement in place that gives the Target
Company the ability to control the reversal of the temporary difference in
the foreseeable future, deferred tax liability in relation to taxable temporary
differences arising from the associate’s undistributed profits is not recognized.
Deferred income tax assets are recognized on deductible temporary
differences arising from investments in subsidiaries and associates only to the
extent that it is probable the temporary difference will reverse in the future
and there is sufficient taxable profit available against which the temporary
difference can be utilized.
Offsetting
Deferred income tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes assets and liabilities relate to
income taxes levied by the same taxation authority on either the taxable entity
or different taxable entities where there is an intention to settle the balances on
a net basis.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 20
2.14 Employee benefits
Pension obligations
Retirement benefits to employees in the PRC are provided through a
defined contribution plan. The Target Company is required to participate in a
central pension scheme operated by the local municipal government. The Target
Company is required to contribute certain percentage of its payroll costs to the
central pension scheme. The contributions are charged to the statement of profit
or loss and other comprehensive income as they become payable in accordance
with the rules of the central pension scheme. The Target Company has no legal
or constructive obligations to pay further contributions after payment of the
fixed contribution.
2.15 Provisions
Provisions are recognized when the Target Company has a present legal or
constructive obligation as a result of past events; it is probable that an outflow of
resources will be required to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow
will be required in settlement is determined by considering the class of obligations as
a whole. A provision is recognized even if the likelihood of an outflow with respect to
any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation.
2.16 Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable, and represents amounts receivable for goods supplied, stated net of
discounts returns and value added taxes. The Target Company recognizes revenue
when the amount of revenue can be reliably measured; when it is probable that future
economic benefits will flow to the entity; and when specific criteria have been met for
each of the Target Company’s activities, as described below:
Interest income is recognized as it accrues using the effective interest method.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 21
2.17 Related parties
A party is considered to be related to the Target Company if:
(a) A person or a close member of that person’s family and that person
(i) has control or joint control over the Target Company;
(ii) has significant influence over the Target Company; or
(iii) is a member of the key management personnel of the Target
Company or of a parent of the Target Company;
(b) An entity is related to the Target Company if any of the following
conditions applies:
(i) the entity and the Target Company are members of the same
group;
(ii) one entity is an associate or joint venture of the other entity (or of
a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Target Company 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 Company or an entity related to the
Target Company;
(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); and
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 22
(viii) the entity, or any member of a group of which it is a part, provides
key management personnel services to the Target Company or to
the Target Company’s parent.
Close members of the family of a person are those family members who may be
expected to influence, or be influenced by, that person in their dealings with the entity.
3. Financial risk management
3.1 Financial risk factors
The Target Company’s activities expose it to a variety of financial risks: market
risk (mainly interest rate risk interest rate risk and foreign currency risk), credit risk
and liquidity risk. The Target Company’s overall risk management program focuses
on the unpredictability of financial markets and seeks to minimize potential adverse
effects on the Target Company’s financial performance.
(a) Market risk
(i) Cash flow and fair value interest rate risk
During the period ended 30 November 2017, the Target Company
is exposed to cash flow interest rate risk due to the fluctuation of the
prevailing market interest rate on bank deposits which carry prevailing
market interest rates. The directors considered that the Target Company’s
income and operating cash flows are substantially independent of
changes in market interest rates.
As at 30 November 2017, the Target Company’s cashflow interest
rate risk relates primarily to its variable bank deposits. The Target
Company currently does not use any derivative contracts to hedge its
exposure to interest rate risk. However, management will consider
hedging significant interest rate exposure should the need arise.
The directors of the Target Company believe that there is no
material interest rate risk related to the Target Company’s pledged
deposits and cash and cash equivalents.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 23
(ii) Foreign currency risk
The Target Company is exposed to currency risk primarily
through some purchases that are denominated in a foreign currency,
i.e. a currency other than the functional currency of the operations to
which the transactions relate. The currencies giving rise to this risk are
primarily Euros, United States Dollars and Japanese Yen. The Target
Company currently does not have a foreign currency hedging policy,
however, the management monitors foreign exchange exposure closely
and will consider hedging significant foreign currency exposure using
forward exchange contracts should the need arises.
(b) Credit risk
The Target Company reviews the recoverability of its financial assets
periodically to ensure that potential credit risk of the counterparty is managed
at an early stage and sufficient provision is made for possible defaults. In
addition, receivable balances are monitored on an ongoing basis and the Target
Company’s exposure to bad debts is not significant.
The credit risk of the Target Company’s financial assets relate mainly to
cash and cash equivalents, and other receivables. It arises from default of the
counterparty, with a maximum exposure equal to the carrying amounts of these
instruments. Management has a credit policy in place and the exposures to these
credit risks are monitored on an ongoing basis.
(c) Liquidity risk
Ultimate responsibility for liquidity risk management rests with the
board of directors. The Target Company manages liquidity risk by maintaining
adequate reserves by continuously monitoring forecast and actual cash flows.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 24
The maturity profile of the Target Company’s financial liabilities as at
the reporting period, based on the contractual undiscounted payments, was as
follows:
On demand
or within
1 year
Between
1 and 2 years
Between
2 and 5 years
Over
5 years
Total
undiscounted
cash flow
Total
carrying
amount
RMB RMB RMB RMB RMB RMB
As at 30 November 2017
Other payables and accruals 90,828 – – – 90,828 90,828
3.2 Capital risk management
The Target Company’s objectives when managing capital are to safeguard the
Target Company’s ability to continue as a going concern in order to provide returns
for owners and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Target Company may
adjust the amount of dividends paid to owners or issue new shares.
The Target Company monitors its capital structure on the basis of the debt-to-
adjusted capital ratio, which is calculated as total liabilities divided by total assets.
The debt-to-adjusted capital ratio of the Target Company as at 30 November 2017 was
as follows:
As at
30 November
2017
RMB
Total debt 90,828
Less: Bank balances and cash (15,666,744)
Net debt (15,575,916)
Total equity 99,321,290
Adjusted capital 99,321,290
Debt-to-adjusted capital ratio N/A
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 25
4. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
The Target Company makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are addressed below.
Estimated useful lives and impairment of plant and equipment
The Target Company has plant and equipment. The Target Company is required
to estimate the useful lives of plant and equipment in order to ascertain the amount of
depreciation charges for each reporting period.
The useful lives are estimated at the time of purchase of these assets after
considering business developments and the Target Company’s strategies. The Target
Company performs annual reviews to assess the appropriateness of the estimated
useful lives. Such review takes into account any unexpected adverse changes in
circumstances or events, including declines in projected operating results, negative
industry and economic trends. The Target Company extends or shortens the useful
lives and/or makes impairment provisions according to the results of the review.
5. Segment information
Management has determined the operating segments based on the reports reviewed by
Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible
for allocating resources and assessing performance of the operating segment, has been
identified as the executive directors of the Target Company.
The Target Company principally engages in sales of motor vehicles in the PRC.
Management reviews the operating results of the business as one operating segment to make
decisions about resources to be allocated. The Chief Operating Decision Maker considers
that there is only one operating segment, which is used to make strategic decisions. The
Target Company did not have any revenue for the Reporting Period. As at 30 November
2017, all of the non-current assets were located in the PRC.
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 26
6. Revenue
The Target Company did not have any revenue recognized during the period since its
business is in preparatory stage.
7. Other income
Period ended
30 November
2017
RMB
Interest income 8,052
8. Loss before income tax
Period ended
30 November
2017
RMB
Loss before tax has been arrived at after charging:
Operating lease rentals in respect of rented premises 181,578
9. Employee benefits expenses
Period ended
30 November
2017
RMB
Wages and salaries 91,131
Pension costs
– defined contribution schemes 1,005
Other staff welfare expenses 9,387
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 27
10. Income tax expense
The Target Company is subject to the PRC Enterprise Income Tax at the rate of 25%
for the period ended 30 November 2017. No provision for PRC Enterprise Income Tax has
been made in the financial statements as the Target Company incurred a tax loss for the
Reporting Period.
Reconciliation between income tax expense and accounting loss at applicable tax
rates:
Period ended
30 November
2017
RMB
Loss before tax (678,710)
Notional tax expense on loss before taxation,
calculated at tax rate of 25% (169,678)
Tax effects of:
– Unused tax losses not recognized 169,678
Income tax expense –
11. Plant and equipment
Office
equipment and
furniture
RMB
As at 30 November 2017
Cost 96,222
Accumulated depreciation –
Net book amount 96,222
Period ended 30 November 2017
Addition during the period and closing net book amount 96,222
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 28
12. Intangible assets
Computer
software
RMB
As at 30 November 2017
Cost 87,379
Accumulated amortization –
Net book amount 87,379
Period ended 30 November 2017
Addition during the period and closing net book amount 87,379
13. Inventories
As at
30 November
2017
RMB
Finished goods 11,603,612
No amount of inventories recognized as an expense and included in “cost of sales” as
all the inventories are not yet sold as at 30 November 2017.
14. Deposits and prepayment
As at
30 November
2017
RMB
Other deposit and prepayment 1,344,835
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 29
15. Bank balances and cash
(a) Cash and cash equivalent
As at
30 November
2017
RMB
Cash at bank 15,666,744
Cash at banks earns interest at floating rates based on daily bank deposit rates.
The Target Company’s balances of cash at banks which are mainly denominated
in RMB are deposited with banks in the PRC.
(b) Pledged bank deposits
As at 30 November 2017, the Target Company transferred RMB70,480,140 as
pledged bank deposits for securing the letter of credit facility granted by its banker
situated in the PRC, for the purpose of buying the motor vehicles for sales.
16. Other payables and accruals
As at
30 November
2017
RMB
Accrued salaries 63,240
Other payable 27,588
90,828
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 30
17. Registered capital
As at
30 November
2017
RMB
Capital contribution by owners 100,000,000
During September and October 2017, the Target Company received the whole amount
of the registered capital from owners.
18. Reserve
Accumulated losses are the cumulative net losses of the Target Company sustained in
the business.
19. Banking facilities
The banking facilities representing the irrevocable letters of credit to the extent of
RMB70,480,140, the utilization of which are secured by the same amount of bank deposits.
As at 30 November 2017, the total amount of letters of credit issued was RMB70,480,140.
20. Operating lease commitments
As at
30 November
2017
RMB
No later than one year 563,478
Later than one year and no later than five years 1,075,731
1,639,209
APPENDIX II ACCOUNTANT’S REPORT ON THE JOINT VENTURE COMPANY
II – 31
21. Contingencies
The Target Company had no contingent liabilities outstanding as at 30 November
2017.
22. Subsequent events
There has been no significant event since the end of the Reporting Period.
23. Subsequent financial statements
No audited financial statements have been prepared by the Target Company in respect
of any period subsequent to 30 November 2017.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 1
A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED
GROUP
This unaudited pro forma consolidated statement of financial position (the “Unaudited Pro
Forma Financial Information”) has been prepared for the purpose of providing Shareholders of
the Company with information about the impact of the Proposed Additional Capital Contribution
to Joint Venture Company by illustrating how such Proposed Additional Capital Contribution might
have affected the financial position of the Group as at 30 June 2017, had the Completion taken
place on 30 June 2017.
The Unaudited Pro Forma Financial Information has been prepared based on a number
of assumptions, estimates and uncertainties. Accordingly, the Unaudited Pro Forma Financial
Information does not purport to describe the actual financial position of the Enlarged Group
that would have been attained had the Proposed Additional Capital Contribution to Joint Venture
Company been completed on 30 June 2017. Neither does the Unaudited Pro Forma Financial
Information purport to predict the future financial position of the Enlarged Group.
This Unaudited Pro Forma Financial Information has been prepared for illustrative purposes
only and because of its nature, it may not give a true picture of the financial position of the
Enlarged Group following the Completion.
The Unaudited Pro Forma Financial Information is prepared based on the unaudited
condensed consolidated statement of financial position of the Group as at 30 June 2017 as set
out in the interim report of the Company for the six months ended 30 June 2017, and the audited
statement of financial position of the Target Company as at 30 November 2017 as set out in the
accountants’ report on the Target Company included in Appendix II to this circular, after giving
effect to the pro forma adjustments described in the accompanying notes.
The Unaudited Pro Forma Financial Information should be read in conjunction with other
financial information included elsewhere in this circular. The Unaudited Pro Forma Financial
Information does not take into account any trading or other transactions subsequent to the dates of
the respective financial statements of the companies comprising the Enlarged Group.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 2
B. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL
POSITION OF THE ENLARGED GROUP
The Group
as at 30 June
2017
The Target
Company
as at
30 November
2017
Pro Forma Adjustments
Unaudited
pro forma of
the Enlarged
GroupNote 2.1 Note 2.2 Note 2.3 Note 2.4
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Non-current asset
Property, plant and equipment 34,622 113 34,735
Intangible assets – 103 103
Interest in subsidiary-Target
Company – – 107,955 57,271 (165,226) –
Statutory deposits and other assets 1,078 – 1,078
Interests in associates 33,749 – 33,749
Contingent consideration receivable 29,562 – 29,562
Deposit paid 305 157 462
Total non-current assets 99,316 373 99,689
Current Assets
Inventories 2,937 13,658 16,595
Trade receivables 8,934 – 8,934
Loans and receivables 34,604 – 34,604
Financial assets at fair value
through profit or loss 44,766 – 44,766
Prepayments, deposits and
other receivables 29,628 1,583 31,211
Amount due from former Directors 332 – 332
Pledged deposits to
secure banking facilities – 82,961 82,961
Bank balance and
cash – trust accounts 10,867 – 10,867
Bank balances and cash –
general accounts 230,441 18,441 (107,955) 140,927
Total current assets 362,509 116,643 371,197
Total assets 461,825 117,016 470,886
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 3
The Group
as at 30 June
2017
The Target
Company
as at
30 November
2017
Pro Forma Adjustments
Unaudited
pro forma of
the Enlarged
GroupNote 2.1 Note 2.2 Note 2.3 Note 2.4
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Current liabilities
Trade payables 10,807 – 10,807
Other payables and accruals 1,636 107 1,743
Borrowings 7,563 – 7,563
20,006 107 20,113
Net current assets 342,503 116,536 351,084
Total assets less current liabilities 441,819 116,909 450,773
Non-current liabilities
Deferred income tax liabilities 5,804 – 5,804
5,804 – 5,804
Net assets 436,015 116,909 444,969
Capital and reserves
Share capital 64,989 119,726 57,271 (176,997) 64,989
Share premium 1,614,799 – 1,614,799
Special reserve 4,779 – 4,779
Statutory reserve 3,912 – 3,912
Translation reserve (16,310) (1,959) 131 (18,138)
Share-based compensation reserve 31,146 – 31,146
Accumulated losses (1,273,475) (858) 57 (1,274,276)
Equity attributable to owners of
the Company 429,840 116,909 427,211
Non-controlling interests 6,175 – 11,771 (188) 17,758
Total equity 436,015 116,909 444,969
Note:
The exchange rate adopted in the unaudited pro forma consolidated statement of financial position of the Enlarged
Group in HK$ at 30 November 2017 is 1.17708.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 4
C. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE
ENLARGED GROUP
1. Basis of preparation
This Unaudited Pro Forma Financial Information has been prepared in accordance
with Rule 7.31 of the GEM Listing Rules and based upon: (i) the unaudited condensed
consolidated statement of financial position of the Group as at 30 June 2017, which has
been extracted from the unaudited interim financial information of the Group for the six
months ended 30 June 2017 and (ii) the audited statement of financial position of the Target
Company as at 30 November 2017, which has been extracted from the accountants’ report on
the Target Company included in Appendix II to this circular; and adjusted in accordance with
the pro forma adjustments described in note 2 below, as if the Proposed Additional Capital
Contribution had been completed on 30 June 2017.
2. Notes to the pro forma adjustments
The Company and the Joint Venture Partner entered into the Joint Venture Agreement
on 4 July 2017 to form the Target Company on 2 August 2017. The Company and the
Joint Venture Partner had made their capital contributions to the Target Company of
RMB90,000,000 and RMB10,000,000 respectively. The Company propose to make an
additional capital contribution and subscribe for the entire 100% of the increased registered
capital of RMB50,000,000 of the Target company.
Upon the Completion, the Company will increase the interests in the Target Company
from 90% to 93.33%.
2.1 The adjustment represents the cash payment for the capital contribution of
RMB90,000,000 to the Target Company on 14 September 2017.
2.2 The adjustment represents the cash payment for the additional capital
contribution of RMB50,000,000 to the Target Company as if the transactions
had taken place as at 30 June 2017.
2.3 The adjustment represents the elimination of the interests in subsidiary and the
share capital of the Target Company and reflect the capital contribution of the
Joint Venture Partner.
2.4 The adjustment represents the share of the loss for the period and translation
reserves of the Target Company by the Joint Venture Partner.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 5
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of Sinofortune Financial Holdings Limited
We have completed our assurance engagement to report on the compilation of unaudited
pro forma financial information of Sinofortune Financial Holdings Limited (the “Company”)
and its subsidiaries (collectively the “Group”), and Chongqing Sheng Yu Hong Jia International
Trading Company Limited (the “Target Company”) (collectively the “Enlarged Group”) by the
directors for illustrative purposes only. The unaudited pro forma financial information consists
of the unaudited pro forma consolidated statement of financial position as at 30 June 2017, and
related notes (the “Unaudited Pro Forma Financial Information”) set out on pages III-1 to
III-4 of the Company’s circular dated 19 March 2018, in connection with the proposed additional
capital contribution to the Target Company (the “Proposed Additional Capital Contribution”).
The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma
Financial Information are described in the circular.
The Unaudited Pro Forma Financial Information has been compiled by the directors to
illustrate the impact of the Proposed Additional Capital Contribution on the Group’s financial
position as at 30 June 2017 as if the Proposed Additional Capital Contribution had taken place at
30 June 2017. As part of this process, information about the Group’s financial position has been
extracted by the Directors from the Group’s unaudited interim financial information for the six
months ended 30 June 2017. Information about the financial position of the Target Company as at
30 November 2017 has been extracted by the Directors from the financial information of the Target
Company on which an accountants’ report has been published in Appendix II to the Circular.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 6
Directors’ responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial Information
in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the GEM
of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference
to Accounting Guideline (“AG”) 7 Preparation of Pro Forma Financial Information for Inclusion
in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (the
“HKICPA”).
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behavior.
Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that
Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services
Engagements, and accordingly maintains a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical requirements, professional
standards and applicable legal and regulatory requirements.
Reporting Accountants’ responsibilities
Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the GEM
Listing Rules, on the Unaudited 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 Unaudited 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 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 accountants plan and perform procedures to obtain reasonable assurance about whether
the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with
paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 7
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 Unaudited 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 Unaudited Pro Forma Financial Information.
The purpose of the Unaudited Pro Forma Financial Information included in the Circular
is solely to illustrate the impact of the Proposed Additional Capital Contribution on unadjusted
financial information of the Group as if the transaction had been undertaken at an earlier date
selected for purposes of the illustration. Accordingly, we do not provide any assurance that the
actual outcome of the transaction would have been as presented.
A reasonable assurance engagement to report on whether the Unaudited 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 Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the
significant effects directly attributable to the transaction, and to obtain sufficient appropriate
evidence about whether:
• The related pro forma adjustments give appropriate effect to those criteria; and
• The Unaudited Pro Forma Financial Information reflects the proper application of
those adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgment, having regard to the
reporting accountants’ understanding of the nature of the Group, the transaction in respect of which
the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement
circumstances.
The engagement also involves evaluating the overall presentation of the Unaudited Pro
Forma Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
APPENDIX III PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ASSUMING COMPLETION
III – 8
Opinion
In our opinion:
(a) the Unaudited 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 purpose of the Unaudited Pro Forma Financial
Information as disclosed pursuant to paragraph 7.31(7) of the GEM Listing Rules.
Yours faithfully,
CHENG & CHENG LIMITED
Certified Public Accountants
Hong Kong, 19 March 2018
Cheng Hong Cheung
Practising Certificate number P01802
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 1
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the GEM 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. DISCLOSURE OF INTERESTS
(a) Interest of Directors
As at Latest Practicable Date, the interests or short positions of the Directors and chief
executive of the Company 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 were
notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV
of the SFO (including interests or short positions which they are taken or deemed to have
taken under such provisions of the SFO), or which were required, pursuant to Section 352 of
the SFO, to be entered in the register referred to therein, or which were required, pursuant to
Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock
Exchange, were as follows:
(i) Long positions in Shares
Name of Directors Nature of interest Number of Shares
Approximatepercentage of
the issued share capital of
the Company
Wang Jiawei Personal 202,043,628 3.11%
Lai Yuk Mui Personal 2,780,127 0.04%
Liu Runtong Personal 2,646,000 0.04%
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 2
(ii) Long positions in underlying Shares
Name of Directors Nature of interest Number of Shares
Approximate percentage of
the issued share capital of
the Company
Lai Yuk Mui Personal 3,186,158 0.05%
Liu Runtong Personal 31,861,575 0.49%
James Beeland Rogers Jr. Personal 60,000,000 0.92%
Zhang Benzheng Personal 2,124,105 0.03%
Save as disclosed above, as at the Latest Practicable Date, none of the Directors or
chief executives of the Company have interest or short positions in the shares, underlying
shares and debentures of the Company or its associated corporations (within the meaning of
Part XV of the SFO) (i) which 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 or short
positions which they were taken or deemed to have under such provisions of the SFO) or
(ii) which were required, pursuant to Section 352 of the SFO, to be entered in the register
referred to therein, or (iii) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing
Rules relating to securities transactions by directors to be notified to the Company and the
Stock Exchange.
(b) Interest of substantial Shareholders
As at the Latest Practicable Date, to the best knowledge of the Directors, the following
person (other than a Director and the chief executive of the Company) who had, or was
deemed to have, interests or short positions in the Shares or 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, or which were recorded in the register of interests
required to be kept by the Company pursuant to Section 336 of the SFO, or who was
expected, directly or indirectly, to be interested in 10% or more of the nominal value of any
class of share capital carrying rights to vote in all circumstances at general meetings of any
member of the Group:
(i) Long positions:
Name of Shareholders Nature of interest Number of Shares
Approximatepercentage of
the issued share capital of
the Company
Wang Wenming and
Chen Dongjin (Note 1)
Personal 595,328,957 9.16%
Zhu Wei Personal 350,004,000 5.39%
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 3
Note:
(1) Ms. Chen Dongjin held 145,116,650 shares of the Company. Ms. Chen Dongjin is the
spouse of Mr. Wang Wenming who held 450,212,307 shares of the Company. As such, they
were deemed to be collectively interested in 595,328,957 shares of the Company.
Save as disclosed above, so far as is known to the Directors or chief executives of
the Company, the Company had not been notified of any other interests or short positions
in the shares and underlying shares of the Company which would fall to be disclosed under
the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the
register required to be kept by the Company under section 336 of the SFO.
3. LITIGATION
As at the Latest Practicable Date, no member of the Group was engaged in any litigation
or arbitration or claim of material importance and no litigation or claim of material importance is
known to the Directors to be pending or threatened by or against any member of the Group.
4. SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had entered or proposed to entered
into any service contracts with any member of the Group, excluding contracts expiring or
determinable by the employer within one year without payment of any compensation (other than
statutory compensation).
5. COMPETING INTERESTS
As at the Latest Practicable Date, as far as the Directors were aware, none of the Directors
or controlling shareholders of the Company or any of their respective close associates (as defined
in the GEM Listing Rules) had any interest in a business which competes or may compete with the
business of the Group nor does any of them has or may have any other conflicts of interest with the
Group.
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 4
6. DISCLOSURE OF OTHER INTEREST
As at the Latest Practicable Date:
(a) none of the Directors has or had any direct or indirect interest in any assets which
have been acquired or disposed of by or leased to any member of the Group, or are
proposed to be acquired or disposed of by or leased to any member of the Group since
31 December 2016 (being the date to which the latest published audited accounts of
the Group were made up); and
(b) none of the Directors was materially interested, directly or indirectly, in any contract
or arrangement entered into by any member of the Group which is subsisting as at the
Latest Practicable Date and is significant in relation to the business of the Group.
7. MATERIAL CONTRACTS
The following contracts (being contracts not entered into in the ordinary course of business
of the Group) were entered into by members of the Group within two years immediately preceding
the date of this circular and are or may be material:
(a) The Joint Venture Agreement.
8. EXPERTS AND CONSENTS
The following is the qualification of the experts or professional advisers who have given
opinion or advice contained in this circular:
Name Qualification
CHENG & CHENG LIMITED Certified Public Accountants
As at the Latest Practicable Date, each of the above experts has given and has not withdrawn
its written consent to the issue of this circular with the inclusion herein of its letter and report and
references to its name in the form and context in which it appears.
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 5
As at the Latest Practicable Date, none of the above experts had any interest, either direct
or indirect, in any assets which have been, since 31 December 2016, being the date to which the
latest published audited consolidated financial statements of the Group were made up, acquired
or disposed of by or leased to or were proposed to be acquired or disposed of by or leased to any
member of the Group nor had any shareholding in any member of the Group nor any right (whether
legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any
member of the Group.
9. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection during normal business hours
on any weekday (except public holidays) at the principal place of business of the Company in Hong
Kong at 16th Floor, CMA Building, No. 64-66 Connaught Road Central, Hong Kong from the date
of this circular up to and including 9 April 2018 (both days inclusive):
(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the years ended 31 December 2015 and 2016
respectively;
(c) the accountants’ report on the Joint Venture Company, the text of which is set out in
Appendix II to this circular;
(d) the letter on the unaudited pro forma financial information of the Enlarged Group
assuming Completion issued by CHENG & CHENG LIMITED set out in Appendix III
to this circular;
(e) the consent letter referred to in the paragraph under the heading “Experts and
Consents” in this Appendix to this circular;
(f) the material contracts disclosed in the paragraph under the heading “Material
Contracts” in this Appendix to this circular; and
(g) this circular.
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 6
10. GENERAL
(a) The registered office of the Company is situated at Cricket Square, Hutchins Drive,
P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and its principal place
of business in Hong Kong is 16th Floor, CMA Building, No. 64-66 Connaught Road
Central, Hong Kong.
(b) The compliance officer of the Company is Ms. Lai Yuk Mui, who is an executive
Director since 1 August 2015. Ms. Lai received her Bachelor of Arts degree in
Financial Services from Edinburgh Napier University in Scotland.
(c) The company secretary of the Company is Ms. Woo Man Yi, who is an associate
member of the Hong Kong Institute of Chartered Secretaries and the Institute of
Chartered Secretaries and Administrators, United Kingdom.
(d) The Company’s audit committee (“Audit Committee”) comprises of three
independent non-executive Directors, namely, Professor Zhang Benzheng, Mr. Li
Jianxing and Professor Chen Shu Wen. The primary duties of the audit committee are
to review the Company’s annual report and accounts, semi-annual report and quarterly
reports and to provide advices and comments thereon to the Board. The biography of
the members of Audit Committee are set out below:
(i) Professor Zhang Benzheng (“Professor Zhang”), aged 78, has been an
independent non-executive Director of the Company since 30 September
2008. Professor Zhang graduated with a Bachelor Degree from the Faculty of
Engineering Physics of the Tsinghua University in 1965. He was a visiting
scholar in the Brookhaven National Laboratory of USA and the Stuttgart
University of Germany. He was the vice director of the Tsinghua University
R&D department and the general manager of Tsinghua University Science
and Technology Corporation. During the period from 1999 to 2002, he held
various senior positions in two companies listed on the Shenzhen Stock
Exchange, namely Tsinghua Unisplendour Limited and Tsinghua Unisplendour
Guhan Group Corporation. He was the chairman and legal representative of
Tsinghua Unisplendour Guhan Group Corporation and president of Tsinghua
Unisplendour Limited before he left these companies in 2002. He then joined
Tsinghua Unisplendour (Group) Corporation in 2002 and was its president
until 2004. Professor Zhang was the general vice president and secretary of the
Beijing Non-Governmental Science & Technology Entrepreneurs Association.
With his remarkable business leadership as well as exploratory initiatives,
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 7
Professor Zhang had made tremendous contribution to the companies he worked
for. He has not only gained compliments from the society at large, but has also
won a series of honors. In 1997, Professor Zhang received the national prize
of “The Third Term Science and Technology Light Award for Outstanding
Scientific and Technological Entrepreneur”. In 2000, he won the “Hong Kong
Bauhinia Cup Outstanding Entrepreneur Award” and the “Entrepreneurial
Talent” award issued by the Beijing Non-Governmental Science and
Technology Entrepreneurs Association. In 2002, he was selected as the first
lot of “Zhongguan Village Outstanding Entrepreneurs”. Professor Zhang is
currently the Chief Consultant of 容匯未來(北京)科技產業發展有限公司
(transliterated as Ronghui Future (Beijing) Technology Development Co., Ltd.).
(ii) Mr. Li Jianxing (“Mr. Li”), aged 60, has been an independent non-executive
Director and a member of the audit committee of the Company since 28 March
2011. He was also appointed as chairman of audit committee of the Company
with effect from 22 September 2015. Mr. Li graduated from Shanghai Maritime
University with a Bachelor Degree in accounting. He also received a Master
Degree in Business Administration from Canisius College of Buffalo. Mr. Li
has over 30-year experience working in the field of accounting and corporate
finance and has substantial experience in management in various listed
companies, investment business, investor relations and project management.
He was the senior manager of both the investment department and finance
department of China Everbright Holdings Co., Ltd from April 1998 to June
2000. He served as the Chief Finance Officer for Intermost Corporation from
June 2000 to 2003. From April 2003 to May 2004, he was a General Manager
of Investor Relations in China Resources Power Holdings Co., Ltd. He has been
a director of Concord Investment Holdings Limited since 2004.
APPENDIX IV GENERAL INFORMATION OF THE GROUP
IV – 8
(iii) Professor Chen Shu Wen (“Professor Chen”), aged 63, has been an
independent non-executive Director and a member of the audit committee of
the Company since 23 September 2011. Professor Chen graduated from 東北財經大學 (Dongbei University of Finance and Economics) with a Bachelor
Degree in Economics and obtained a Master Degree and a PhD in Economics
from 吉林大學 (Jilin University). He is a qualified PRC lawyer currently
practising at 遼寧天合律師事務所 (Liaoning Tianhe Law Firm). Professor
Chen has substantial management and leadership experience serving in the PRC
government. He commenced his career as the deputy county chief of the Benxi
Manchu Autonomous County, Liaoning Province, PRC, in 1992 and became
the director(主任)of 本溪市經濟體制改革委員會 (Benxi City Commission
for Restructuring the Economic Systems) from 1995. He was the vice director
general(副主任)of 本溪市對外經濟貿易合作委員會 (Benxi Foreign Trade &
Economic Cooperation Committee) from 1998 until 2001. From 2001 to 2009,
Professor Chen was the professor and the tutor for doctorate students at 大連理工大學管理學院 (Faculty of Management and Economics of Dalian University
of Technology). From 2010 to 2014, he was the dean at 大連理工大學公共管理與法學學院 (School of Public Administration and Law of Dalian University
of Technology). From 2010 to now, Professor Chen has been the professor and
the tutor for doctorate students at 大連理工大學公共管理與法學學院 (School
of Public Administration and Law of Dalian University of Technology). He is
currently an independent non-executive director of 魏橋紡織股份有限公司
(Weiqiao Textile Company Limited) (Hong Kong Stock Exchange Stock Code:
2698) and an independent director of 獐子島集團股份有限公司 (Zhangzidao
Group Co. Ltd.) (Shenzhen Stock Exchange Stock Code: 002069).
(e) The Hong Kong branch share registrar and transfer office of the Company is Hong
Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Wan
Chai, Hong Kong.
(f) For the purpose of this circular, unless otherwise specified, conversion of RMB into
HK$ is based on the approximate exchange rate of RMB1.00 to HK$1.23602.
(g) The English text of this circular and the accompanying form of proxy shall prevail
over this respective Chinese test in the case of inconsistency.
NOTICE OF EGM
EGM – 1
華 億 金 控 集 團 有 限 公 司SINOFORTUNE FINANCIAL HOLDINGS LIMITED
(Incorporated in the Cayman Islands with limited liability)
(Stock code: 08123)
NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Sinofortune
Financial Holdings Limited (the “Company”) will be held at 10:00 a.m. on Monday, 9 April 2018
at 4/F., Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong for the purpose of
considering and, if thought fit, passing with or without amendments the following resolution which
will be proposed as ordinary resolution of the Company:
ORDINARY RESOLUTION
1. “THAT the Proposed Additional Capital Contribution (as defined in the circular dated
19 March 2018 despatched to the shareholders of the Company (the “Circular”)),
a copy of which has been produced to this meeting marked “A” and signed by the
chairman hereof for the purpose of identification, be and are hereby approved,
confirmed and ratified.”
By Order of the Board
Sinofortune Financial Holdings Limited
Wang Jiawei
Chairman
Hong Kong, 19 March 2018
Registered Office:
Cricket Square,
Hutchins Drive,
P.O. Box 2681,
Grand Cayman KY1-1111,
Cayman Islands
Head office and principal place of
business in Hong Kong:
16th Floor,
CMA Building,
No. 64-66 Connaught Road Central,
Hong Kong
NOTICE OF EGM
EGM – 2
Notes:
1. Any shareholder entitled to attend and vote at the extraordinary general meeting shall be entitled to appoint another
person as his/her proxy to attend and vote instead of him/her. A shareholder who is the holder of two or more
shares may appoint more than one proxy to represent him/her and vote on his/her behalf. A proxy need not to be a
shareholder of the Company.
2. In order to be valid, a 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 Company’s branch share registrar and transfer
office in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan
Chai, Hong Kong not less than 48 hours before the time appointed for the extraordinary general meeting (or any
adjournment thereof).
3. The completion and delivery of a form of proxy shall not preclude a shareholder from attending and voting in
person at the extraordinary general meeting and in such event, the instrument appoint a proxy shall be deemed to be
revoked.
4. Where there are joint holders of any shares, any one of such joint holder may vote, either in person or by proxy in
respect of such shares as if he/she was solely entitled hereto; but if more than one of such joint holders be present at
the extraordinary general meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be
accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by
the order in which the names stand in the register of members of the Company.
5. A form of proxy for use at the extraordinary general meeting is attached herewith.
6. Any voting at the extraordinary general meeting shall be taken by poll.
7. The form of proxy shall be in writing under the hand of the appointer or his attorney duly authorised in writing
or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person
authorised to sign the same.
As at the date of this notice, the board of directors of the Company comprises Mr. Wang
Jiawei and Ms. Lai Yuk Mui being executive directors; Mr. Liu Runtong and Mr. James Beeland
Rogers Jr. being non-executive directors; and Professor Zhang Benzheng, Mr. Li Jianxing and
Professor Chen Shu Wen being independent non-executive directors.