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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
licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or
other professional adviser.
If you have sold or transferred all your shares in Rosedale Hotel Holdings Limited, you should at once hand this
circular together with the accompanying form of proxy to the purchaser or the transferee, or to the bank, the licensed
securities dealer or registered institution in securities or other agent through whom the sale or transfer 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.
Rosedale Hotel Holdings Limited珀麗酒店控股有限公司
(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)
VERY SUBSTANTIAL DISPOSALS ANDCONNECTED TRANSACTIONS
IN RELATION TO THE DISPOSALS OF THE SHARES IN AND SHAREHOLDER’S LOANS TO
MAKERSTON LIMITED AND EAGLE SPIRIT HOLDINGS LIMITED
Financial Adviser to Rosedale Hotel Holdings Limited
Independent Financial Adviser to the Independent Shareholders
Terms used in this cover page have the same meanings as defined in this circular.
A notice convening the SGM to be held at 3:30 p.m. on Thursday, 27 November 2014 at Gemini Room, 33rd Floor,
Rosedale on the Park, 8 Shelter Street, Causeway Bay, Hong Kong is set out on pages SGM-1 to SGM- 2 of this
circular. A form of proxy for use at the SGM or any adjournment thereof (as the case may be) is enclosed with this
circular. Whether or not you intend to attend such meeting, please complete the accompanying form of proxy in
accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong
Kong, Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon
as possible and in any event not less than 48 hours before the time appointed for holding such meeting. Completion
and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any
adjournment thereof (as the case may be) if you so wish.
10 November 2014
CONTENTS
– i –
Page
Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Letter from Centurion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . I – 1
Appendix II – Financial information of the Eagle Spirit Group . . . . . . . . . . . . . . . . . II – 1
Appendix III – Financial information of the Maker ston Group . . . . . . . . . . . . . . . . . . III – 1
Appendix IV – Pro forma financial information of the Remaining Group . . . . . . . . . . IV – 1
Appendix V – Valuation reports on the propert ies . . . . . . . . . . . . . . . . . . . . . . . . . . . . V – 1
Appendix VI – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI – 1
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM – 1
DEFINITION
– 1 –
In this circular, unless the context otherwise requires, the following expressions shall have the
following meanings:
“Agreements” collectively, the Eagle Spirit Agreement and the Ma kerston
Agreement
“Apex” Apex Quality Group Limited, a company incorporated in the
BVI with limited liability which was beneficially owned as
to approximately 89.40% by the Company as at the Latest
Practicable Date
“Beijing Hotel” the hotel situated at No. 8, Jiang Tai Road West, Chao Yang
District, Beijing, the PRC and is now known as Rosedale Hotel &
Suites, Beijing
“Board” the board of Directors
“Business Day” a day (other than Saturdays, Sundays, public holidays and any day
on which a tropical cyclone warning no. 8 or above or a “black”
rainstorm warning signal is hoisted at any time between 9:00 a.m.
and 5:00 p.m.) on which licensed banks in Hong Kong are generally
open for business
“BVI” the British Virgin Islands
“Capital Increase Agreement” the capital increase agreement dated 31 May 2013 entered
into among DS Eastin, the Investor, Rosedale Beijing and the
Company in relation to the capital contribution of US$68.8
million (equivalent to approximately HK$533.2 million) by a
subsidiary of the Investor for the increase in the registered capital
of Rosedale Beijing
“CEL” China Enterprises Limited, a company incorporated in Bermuda
with limited liability, the shares of which are traded in the over-
the-counter securities market in the United States of America and
is an associated company of Hanny
DEFINITION
– 2 –
“Centurion” Centurion Corporate Finance Limited, a licensed corporation
to carry out Type 1 (dealing in securities), Type 4 (advising on
securities), Type 6 (advising on corporate finance) and Type
9 (asset management) regulated activities under the SFO and
the independent financial adviser to advise the Independent
Shareholders in relation to the Transactions
“close associate(s)” has the same meaning ascribed to it under the Listing Rules
“Company” Rosedale Hotel Holdings Limited, a company incorporated in
Bermuda with limited liability, the issued shares of which are
listed on the Main Board of the Stock Exchange (Stock Code:
1189)
“Compensated Amount” the amount of compensation receivable by DS Eastin from the
Investor pursuant to the Capital Increase Agreement
“connected person(s)” has the same meaning ascribed to it under the Listing Rules
“Director(s)” director(s) of the Company
“Domain Name” the domain name “kowloon.rosedalehotels.com”, including email
addresses using such domain name, namely, “@rosedalehotels.com”,
created by Rosedale Kowloon as the licensee or by the Licensor at
the request of Rosedale Kowloon (as the case may be)
“DS Eastin” DS Eastin Limited, a company incorporated in Hong Kong with
limited liability and a wholly-owned subsidiary of Makerston
“DS Eastin Dividend” a dividend declared prior to MS Completion by DS Eastin to
Makerston in an amount equal to the lesser of all the distributable
profits of DS Eastin and the Compensated Amount, payable on
receipt of the Compensated Amount
“Eagle Spirit” Eagle Spirit Holdings Limited, a wholly-owned subsidiary of ES
Vendor prior to ES Completion, which was incorporated in the
BVI with limited liability
“Eagle Spirit Agreement” the agreement dated 11 April 2014 entered into between the ES
Vendor, the Purchaser, the Company and ITCP in relation to the
sale and purchase of the ES Sale Share and the ES Sale Loan
DEFINITION
– 3 –
“Eagle Spirit Group” collectively, Eagle Spirit and its subsidiaries
“ES Completion” completion of the sale and purchase of the ES Sale Share and the
assignment of the ES Sale Loan under the Eagle Spirit Agreement
“ES Completion Accounts” (i) the unaudited management accounts of Eagle Spirit (on a non-
consolidated basis); (ii) the unaudited consolidated management
accounts of the More Star Group; (iii) the unaudited management
accounts of Rosedale Kowloon; (iv) the unaudited consolidated
management accounts of the HK Macau Group; and (v) the
unaudited combined management accounts of the Rosy Universe
Group, each comprising an income statement for the period from
1 January 2014 to the ES Completion Date and a statement (or
consolidated statement as the case may be) of financial position as
at the ES Completion Date
“ES Completion Date” the date on which the ES Completion takes place
“ES Consideration” the aggregate consideration for the ES Sale Share and the ES Sale
Loan pursuant to the terms of the Eagle Spirit Agreement
“ES Long Stop Date” 29 December 2014 or such other date as the Purchaser , the ES
Vendor, the Company and ITCP may agree in writing
“ES Net Current Assets” the aggregate of all current assets (excluding deferred tax assets
and the TKT Hotel) less all liabilities (excluding deferred tax
liabilities and the ES Sale Loan), as at the ES Completion Date
“ES Note” the loan note in the principal amount of HK$250 million to
be issued by ITCP to the ES Vendor or its nominee in partial
settlement of the ES Consideration upon the ES Completion
“ES Sale Loan” the amounts due from Eagle Spirit to the ES Vendor as at the ES
Completion Date
“ES Sale Share” one (1) ordinary share of US$1 in the capital of Eagle Spirit
representing the entire issued share capital as at the date of the
Eagle Spirit Agreement and at ES Completion
DEFINITION
– 4 –
“ES Vendor” Easy Vision Holdings Limited, a direct wholly-owned subsidiary
of the Company, which was incorporated in the BVI with limited
liability
“GAAP” generally accepted accounting principles
“Group” the Company and its subsidiaries
“Hanny” Hanny Holdings Limited, a company incorporated in Bermuda
with limited liability and the issued shares of which are listed on
the Main Board of the Stock Exchange (Stock Code: 275)
“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the PRC
“HK Macau” Hongkong Macau (Internat ional) BVI Limited, a direct
wholly-owned subsidiary of Eagle Spirit, which was incorporated
in the BVI with limited liability
“HK Macau Group” collectively, HK Macau and its subsidiary
“Independent Shareholder(s)” Shareholders other than those who are required to abstain from
voting on the resolution(s) relating to the Transactions under the
Listing Rules
“Investor” China Private Ventures Ltd., a company incorporated in the BVI
with limited liability
“ITCC” ITC Corporation Limited, a company incorporated in Bermuda
with limited liability, the issued shares of which are listed on the
Main Board of the Stock Exchange (Stock Code: 372)
“ITCP” ITC Properties Group Limited, a company incorporated in
Bermuda with limited liability, the issued shares of which are
listed on the Main Board of the Stock Exchange (Stock Code:
199)
“Latest Practicable Date” 6 November 2014, being the latest practicable date prior to the
printing of this circular for the purpose of ascertaining certain
information contained in the circular
DEFINITION
– 5 –
“Licence Agreement” the agreement to be entered into between the Licensor and
Rosedale Kowloon in relation to the grant of the non-exclusive use
of the Trademarks by Rosedale Kowloon
“Licensor” Rosedale Oriental Hotel Mgt. Inc., an indirect non wholly -owned
subsidiary of the Company
“Listing Rules” the Rules Governing the Listing of Securities on the Stock
Exchange
“Macau” the Macau Special Administrative Region of the PRC
“Makerston” Makerston Limited, a wholly-owned subsidiary of MS Vendor
prior to MS Completion, which was incorporated in the BVI with
limited liability
“Makerston Agreement” the agreement dated 11 April 2014 entered into among the MS
Vendor, the Purchaser, the Company and ITCP in relation to the
sale and purchase of the MS Sale Share and the MS Sale Loan
“Makerston Dividend” a dividend declared prior to MS Completion by Makerston to the
MS Vendor in an amount equal to the lesser of all distributable
profits of Makerston or the DS Eastin Dividend, subject to receipt
of the DS Eastin Dividend
“Makerston Group” collectively, Makerston and its subsidiar y
“Master Lease” the lease dated 14 March 2014 entered into between the Property
Company as lessor and Rosedale Kowloon as lessee
“More Star” More Star Limited, a company incorporated in the BVI with
limited liability, 40% equity interest of which is owned by Eagle
Spirit
“More Star Group” collectively, More Star and its subsidiary
DEFINITION
– 6 –
“MS Completion” completion of the sale and purchase of the MS Sale Share and the
assignment of the MS Sale Loan under the Makerston Agreement
“MS Completion Accounts” (i) the unaudited management accounts of Makerston (on a non-
consolidated basis); (ii) the unaudited management accounts of
DS Eastin (on a non-consolidated basis); and (iii) the unaudited
management accounts of Rosedale Beijing, each comprising an
income statement for the period from 1 January 2014 to the MS
Completion Date and a statement of financial position as at the
MS Completion Date
“MS Completion Date” the date on which the MS Completion takes place
“MS Consideration” the aggregate consideration for the MS Sale Share and the MS
Sale Loan pursuant to the terms of the Makerston Agreement
“MS Long Stop Date” 29 December 2014 or such other date as the Purchaser , the MS
Vendor, the Company and ITCP may agree in writing
“MS Net Current Assets” the aggregate of all current assets (excluding interest in an
associated company, deferred tax assets, the Compensated
Amount, net asset adjustment receivable under the Capital
Increase Agreement and the Beijing Hotel) less all liabilities
(excluding all unpaid land premium, professional fees and other
costs and expenses incurred in relation to the proposed expansion
and renovation of the Beijing Hotel up to an amount of available
cash of Rosedale Beijing, the PRC tax liabilities on disposal of
80% interest in Rosedale Beijing pursuant to the Capital Increase
Agreement, deferred tax liabilities and the MS Sale Loan), as at
the MS Completion Date
“MS Note” the loan note in the principal amount of HK$250 million to be
issued by ITCP to the MS Vendor or its nominee upon the MS
Completion
“MS Sale Loan” the amounts due from Makerston to the MS Vendor at the MS
Completion Date
DEFINITION
– 7 –
“MS Sale Share” one (1) ordinary share of US$1 in the capital of Makerston,
representing the entire issued share capital as at the date of the
Makerston Agreement and at MS Completion
“MS Vendor” Rosedale Hotel Group Limited, a wholly-owned subsidiary of
Apex, which was incorporated in the BVI with limited liability
“PRC” the People’s Republic of China, and for the purpose of this
circular, excluding Hong Kong, Macau and Taiwan
“Property Company” Fortress State International Limited, a wholly-owned subsidiary
of More Star, which was incorporated in Hong Kong with limited
liability
“Purchaser” Silver Infinite Limited, a direct wholly-owned subsidiary of ITCP,
which was incorporated in the BVI with limited liability
“Remaining Group” the Group upon ES Completion and MS Completion
“RD Group Management” Rosedale Group Management Limited, a wholly-owned subsidiary
of Rosy Universe, which was incorporated in Hong Kong with
limited liability
“RD Hotel Management” Roseda le Ho te l Managemen t In t e rna t iona l L imi t ed , a
wholly-owned subsidiary of Rosy Universe, which was
incorporated in the BVI with limited liability
“Rosedale Beijing” Rosedale Hotel Beijing Co., Ltd., a sino-foreign joint venture
company established in the PRC which is held as to 80% by a
subsidiary of the Investor and 20% by DS Eastin
“Rosedale Catering” Rosedale Restaurant and Cater ing Limited, an indirect
wholly-owned subsidiary of Eagle Spirit, which was incorporated
in Hong Kong with limited liability
“Rosedale Kowloon” Rosedale Hotel Kowloon Limited, a direct wholly-owned
subsidiary of Eagle Spirit, which was incorporated in Hong Kong
with limited liability
DEFINITION
– 8 –
“Rosedale Share Agreement” the agreement dated 11 April 2014 entered into among ITCC, ITC
Investment Holdings Limited as the vendor, Hanny and Hanny
Investment Group Limited as the purchaser in relation to the
sale and purchase of the entire issued share capital of Leaptop
Investments Limited which through its wholly-owned subsidiary
held approximately 29.76% of the issued share capital of the
Company
“Rosy Universe” Rosy Universe Limited, a wholly-owned subsidiary of Eagle
Spirit, which was incorporated in the BVI with limited liability
“Rosy Universe Group” collectively, Rosy Universe and its subsidiaries
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong)
“SGM” the special general meeting of the Company to be convened and
held for the Independent Shareholders to consider and, if thought
fit, approve the disposals of shares in and shareholder’s loans
to Eagle Spirit and Makerston under the Agreements and the
transactions contemplated thereunder
“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the
Company
“Shareholders(s)” holder(s) of the Share(s)
“Shaw” Shaw Holdings Inc., a company incorporated in the Republic of
Nauru
“Shaw Agreement” the sale and purchase agreement dated 5 November 2013 entered
into between Eagle Spirit as vendor and Shaw as purchaser in
relation to the sale and purchase of 60% equity interest in More
Star at a cash consideration of approximately HK$789.2 million
“Stock Exchange” The Stock Exchange of Hong Kong Limited
DEFINITION
– 9 –
“substantial shareholder” has the same meaning ascribed to it under the Listing Rules
“TKT Hotel” the hotel building situated at No. 86 Tai Kok Tsui Road, Tai Kok
Tsui, Kowloon, Hong Kong, registered in the Land Registry as
Kowloon Inland Lot No. 11208
“Trademarks” (i) the trademark registrations in Hong Kong numbered
200212784AA, 300188811, 300188802 and 300188794 in relation
to the “Rosedale” brand; (ii) such other marks which are from
time to time used by, owned by, or registered in the name of the
Licensor or any of its wholly-owned subsidiaries; and (iii) the
Domain Name
“Transactions” collectively, the transactions contemplated under the Agreements
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“US$” United States dollars, the lawful currency of the United States of
America
“m2” square metres
“%” per cent.
In this circular, amounts in RMB are translated into HK$ on the basis of RMB1 = HK$1.26 and
US$ are converted into HK$ on the basis of US$1 = HK$7.75. The conversion rates are for illustration
purpose only and should not be taken as a representation that RMB and US$ could actually be converted
into HK$ at the respective rates or at all.
LETTER FROM THE BOARD
– 10 –
Rosedale Hotel Holdings Limited珀麗酒店控股有限公司
(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)
Executive Directors:
Mr. Cheung Hon Kit (Chairman)
Ms. Chan Ling, Eva (Managing Director)
Mr. Chan Pak Cheung, Natalis
Independent Non-executive Directors:
Mr. Kwok Ka Lap, Alva
Mr. Poon Kwok Hing, Albert
Mr. Sin Chi Fai
Registered office:
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
Head office and
principal place of business:
31st Floor
Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
10 November 2014
To the Shareholders
Dear Sir or Madam,
VERY SUBSTANTIAL DISPOSALS ANDCONNECTED TRANSACTIONS
IN RELATION TO THE DISPOSALS OF THE SHARES IN AND SHAREHOLDER’S LOANS TO
MAKERSTON LIMITED AND EAGLE SPIRIT HOLDINGS LIMITED
INTRODUCTION
The Company announced on 23 April 2014, among other things, that
(i) on 11 April 2014, the ES Vendor (a direct wholly-owned subsidiary of the Company), the
Purchaser (a direct wholly-owned subsidiary of ITCP), the Company and ITCP entered into
the Eagle Spirit Agreement, pursuant to which the ES Vendor has conditionally agreed to
sell, and the Purchaser has conditionally agreed to purchase, the ES Sale Share and the ES
Sale Loan for an aggregate consideration of not exceeding HK$566 million ; and
LETTER FROM THE BOARD
– 11 –
(ii) on 11 April 2014, the MS Vendor (a non wholly -owned subsidiary of the Company), the
Purchaser (a direct wholly-owned subsidiary of ITCP), the Company and ITCP entered into
the Makerston Agreement, pursuant to which the MS Vendor has conditionally agreed to sell,
and the Purchaser has conditionally agreed to purchase, the MS Sale Share and the MS Sale
Loan for an aggregate consideration of not exceeding HK$324 million.
The Company further announced on 23 September 2014, among other things, that (i) the Purchaser,
the ES Vendor, the Company and ITCP have agreed in writing on 23 September 2014 to extend the ES
Long Stop Date to 29 December 2014 or such other date as the parties thereto may agree in writing; and
(ii) the Purchaser, the MS Vendor, the Company and ITCP have agreed in writing on 23 September 2014 to
extend the MS Long Stop Date to 29 December 2014 or such other date as the parties thereto may agree in
writing.
As one or more of the applicable percentage ratios in respect of the Transactions under Rule 14.07
of the Listing Rules exceed(s) 75%, the Transactions constitute very substantial disposals for the Company
under the Listing Rules which are subject to reporting, announcement and shareholders’ approval
requirements. As ITCC, being the substantial shareholder of the Company, was indirectly interested in
approximately 30.65% of the issued share capital of ITCP as at the date of the Agreements, the Purchaser
(being a wholly-owned subsidiary of ITCP) is a connected person of the Company. Accordingly, the
Transactions also constitute connected transactions for the Company under Chapter 14A of the Listing
Rules, which are subject to approval of the Independent Shareholders at the SGM by way of poll.
The purpose of this circular is to provide you with, among other things, (i) details of the
Agreements; (ii) financial information on the Eagle Spirit Group and the Make rston Group ; ( iii) unaudited
pro forma financial information of the Remaining Group; (iv) the letter of advice from Centurion to the
Independent Shareholders; (v) the valuation report on the properties held by the Eagle Spirit Group and
the Make rston Group; and ( vi) the notice of SGM.
THE EAGLE SPIRIT AGREEMENT
Date
11 April 2014
Parties
(i) ES Vendor: Easy Vision Holdings Limited, a direct wholly-owned
subsidiary of the Company;
(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned subsidiary of
ITCP;
(iii) ES Vendor’s guarantor: the Company; and
(iv) Purchaser’s guarantor: ITCP.
LETTER FROM THE BOARD
– 12 –
To the best of the Director’s knowledge, information and belief having made all reasonable
enquiries, ITCP was owned as to 30.65% by ITCC, which is a substantial shareholder holding 29.76%
of the issued share capital of the Company as at the date of the Eagle Spirit Agreement, and therefore
the Purchaser (being a direct wholly-owned subsidiary of ITCP) is a connected person of the Company
under Chapter 14A of the Listing Rules. The Purchaser is an investment holding company. ITCP and its
subsidiaries are principally engaged in property development and investment in Macau, the PRC and Hong
Kong.
Interests to be disposed of
The assets to be disposed of by the ES Vendor comprise the ES Sale Share and the ES Sale Loan.
The ES Sale Share represents the entire issued share capital of Eagle Spirit as at the date of the Eagle
Spirit Agreement and at the ES Completion. The ES Sale Loan represents the aggregate amount owing by
Eagle Spirit to the ES Vendor as at the ES Completion Date. As at the Latest Practicable Date, the ES Sale
Loan amounted to approximately HK$ 33 million.
Details of the Eagle Spirit Group are set out in the section headed “Information on Eagle Spirit and
Makerston” below.
ES Consideration
The ES Consideration is to be determined in accordance with the following formula:
ES Consideration = HK$530 million
+ 40% of the consolidated ES Net Current Assets of More Star
+ the ES Net Current Assets of Eagle Spirit
+ the ES Net Current Assets of Rosedale Kowloon
+ the consolidated ES Net Current Assets of HK Macau
+ the combined ES Net Current Assets of Rosy Universe,
subject to a maximum of HK$566 million.
Although the ES Net Current Assets of the respective entity (as disclosed in the above formula)
include intercompany balances that should be eliminated on consolidation, the effect of the intercompany
balances would be eliminated upon summation of the ES Net Current Assets of the abovementioned
entities. Accordingly, the ES Consideration calculation has taken into account the elimination of
intercompany balances. Based on the un audited financial information of the Eagle Spirit Group as at 30
June 2014, the ES Consideration is estimated to be approximately HK$ 504 million.
The ES Consideration attributable to the ES Sale Loan is the face value of the ES Sale Loan on a
dollar-for-dollar basis, with the balance of the ES Consideration being attributable to the ES Sale Share.
LETTER FROM THE BOARD
– 13 –
The ES Consideration is to be paid by the Purchaser to the ES Vendor on the ES Completion Date in
the following manner:
(i) as to HK$250 million payable by way of issue of the ES Note; and
(ii) as to the balance of the ES Consideration payable in cash.
At ES Completion, the ES Consideration will be determined based on the draft ES Completion
Accounts prepared by the ES Vendor. The ES Vendor shall finalise and agree the ES Completion Accounts
with the Purchaser within two (2) months after the ES Completion Date. The Purchaser will make up any
shortfall of the ES Consideration paid to the ES Vendor, or (as the case may be) the ES Vendor will return
any excess ES Consideration received based on the ES Completion Accounts, within ten (10) Business
Days after the finalisation of the agreed ES Completion Accounts.
The ES Consideration was determined after arm’s length negotiations between the ES Vendor and
the Purchaser with reference to (i) the preliminary valuation of the TKT Hotel as at 31 March 2014 by
an independent property valuer and the ES Net Current Assets of each member of the Eagle Spirit Group
and on the basis that the Eagle Spirit Group will have no material debts at ES Completion other than the
ES Sale Loan; and (ii) the indemnity given by the ES Vendor and the Company in favour of the Purchaser
against all tax liabilities that may arise from the disposal of 60% equity interest in More Star pursuant to
the Shaw Agreement and other liabilities arising under the Shaw Agreement, as no provision against such
liabilities have been made for the purposes of determining the ES Consideration. For the avoidance of
doubt, the ES Vendor and the Purchaser have not taken into account the entering into and/or completion of
the Rosedale Share Agreement when determining the ES Consideration.
Conditions precedent
Completion of the Eagle Spirit Agreement is conditional upon fulfillment or waiver (as the case
may be) of the following conditions:
(i) the approval by the Independent Shareholders of the Eagle Spirit Agreement and the
transactions contemplated thereunder at the SGM in compliance with the Listing Rules
having been obtained;
(ii) the written approval by the shareholders of ITCP or approval by the shareholders of ITCP
(other than those, if any, who are required to abstain from voting under the Listing Rules or
the applicable laws, rules and regulations) of the Eagle Spirit Agreement and the transactions
contemplated thereunder at the special general meeting of ITCP in compliance with the
Listing Rules having been obtained;
LETTER FROM THE BOARD
– 14 –
(iii) the Purchaser being satisfied with the results of the due diligence review on the Eagle Spirit
Group, each member of the More Star Group and the TKT Hotel;
(iv) each of the warranties given under the Eagle Spirit Agreement being true and accurate
in all material respects and not misleading as at the date of the Eagle Spirit Agreement
and remaining true and accurate in all material aspects and not misleading as at the ES
Completion Date;
(v) there being no material adverse change in the financial position of the Eagle Spirit Group and
each member of the More Star Group from 31 March 2014 up to and as at the ES Completion
Date; and
(vi) the Property Company having given its consent in writing to the indirect disposal of
Rosedale Kowloon under the Master Lease.
The Purchaser may at its discretion at any time waive in writing any conditions set out above,
except for conditions (i), (ii) and (vi).
If any of the conditions (i), (ii) and (vi) is not fulfilled on or before the ES Long Stop Date, and/
or the conditions (iii), (iv) and (v) do not remain fulfilled or waived (as the case may be), the Eagle Spirit
Agreement shall be of no further effect and the rights and obligations of the parties under the Eagle Spirit
Agreement shall lapse except for antecedent breach. As at the Latest Practicable Date, conditions ( iii) and
(vi) ha d been fulfilled.
ES Completion
ES Completion is, subject to all conditions precedent being fulfilled or waived (as the case may be),
to take place on the seventh (7th) Business Day after fulfillment of the conditions (i), (ii) and (vi) referred
to above, or such other date as the parties may agree in writing.
Upon ES Completion, the Company will not have any equity interest in Eagle Spirit, and Eagle
Spirit will cease to be a subsidiary of the Company. The financial results of the Eagle Spirit Group will no
longer be consolidated into the financial statements of the Group.
LETTER FROM THE BOARD
– 15 –
THE MAKERSTON AGREEMENT
Date
11 April 2014
Parties
(i) MS Vendor: Rosedale Hotel Group Limited, which is beneficially owned
as to approximately 89.40% by the Company;
(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned subsidiary of
ITCP;
(iii) MS Vendor’s guarantor: the Company; and
(iv) Purchaser’s guarantor: ITCP.
Details of the Purchaser and its relationship with ITCC are set out in the paragraph headed “Parties”
in the section headed “The Eagle Spirit Agreement” above.
Interests to be disposed of
The assets to be disposed of under the Makerston Agreement comprise the MS Sale Share and the
MS Sale Loan. The MS Sale Share represents the entire issued share capital of Makerston as at the date of
the Makerston Agreement and at the MS Completion. The MS Sale Loan represents the aggregate amount
owing by Makerston to the MS Vendor as at the MS Completion Date. As at the Latest Practicable Date,
the MS Sale Loan amounted to approximately HK$ 207 million.
The principal asset of the Makerston Group is the holding of a 20% interest in Rosedale Beijing
which holds the Beijing Hotel. Following completion of the Capital Increase Agreement on 29 November
2013, Makerston’s interest in Rosedale Beijing was diluted from 100% to 20%. Further information
relating to the Makerston Group is set out in the section headed “Information on Eagle Spirit and
Makerston” below.
LETTER FROM THE BOARD
– 16 –
MS Consideration
The MS Consideration is to be determined in accordance with the following formula:
MS Consideration = HK$256 million
+ the MS Net Current Assets of Makerston
+ the MS Net Current Assets of DS Eastin
+ 20% of the MS Net Current Assets of Rosedale Beijing
+ 20% of the amount of land premium paid by Rosedale Beijing out of
its cash on hand during the period between the date of the Makerston
Agreement and the MS Completion Date,
subject to any upward adjustment in connection with the Compensated Amount as described under the
paragraph headed “Arrangement in respect of the Compensated Amount” below and a maximum of
HK$324 million. The upward adjustment for the land premium paid by Rosedale Beijing is to recognise
the value of the cash that is currently held by Rosedale Beijing (which would be counted towards the MS
Net Current Assets if not applied towards payment of land premium, as land premium once paid is not
considered as “current assets” of Rosedale Beijing).
Although the MS Net Current Assets of the respective entity (as disclosed in the above formula)
include intercompany balances that should be eliminated on consolidation, the effect of the intercompany
balances would be eliminated upon summation of the MS Net Current Assets of the abovementioned
entities. Accordingly, the MS Consideration calculation has taken into account the elimination of
intercompany balances. Based on the un audited financial information of the Makerston Group as at 30
June 2014, the MS Consideration is estimated to be approximately HK$ 302 million.
The MS Consideration attributable to the MS Sale Loan is the face value of the MS Sale Loan on a
dollar-for-dollar basis, with the balance of the MS Consideration being attributable to the MS Sale Share.
The MS Consideration is to be paid by the Purchaser to the MS Vendor on the MS Completion Date
in the following manner:
(i) as to HK$250 million payable by way of the issue of the MS Note; and
(ii) as to the balance of the MS Consideration payable in cash.
At MS Completion, the MS Consideration will be determined based on the draft MS Completion
Accounts prepared by the MS Vendor. The MS Vendor shall finalise and agree the MS Completion
Accounts with the Purchaser within two (2) months after the MS Completion Date. The Purchaser will
make up any shortfall of the MS Consideration paid to the MS Vendor, or (as the case may be) the MS
Vendor will return any excess MS Consideration received based on the MS Completion Accounts, within
ten (10) Business Days after the finalisation of the agreed MS Completion Accounts.
LETTER FROM THE BOARD
– 17 –
The MS Consideration was determined after arm’s length negotiations between the MS Vendor and
the Purchaser with reference to the preliminary valuation of the Beijing Hotel as at 31 March 2014 by an
independent property valuer and the MS Net Current Assets of the Makerston Group and on the basis that
the Makerston Group will have no material debts at MS Completion other than the MS Sale Loan. For the
avoidance of doubt, the MS Vendor and the Purchaser have not taken into account the entering into and/or
completion of the Rosedale Share Agreement when determining the MS Consideration.
Conditions precedent
MS Completion is conditional upon fulfillment or waiver (as the case may be) of the following
conditions:
(i) the approval by the Independent Shareholders of the Makerston Agreement and the
transactions contemplated thereunder at the SGM in compliance with the Listing Rules
having been obtained;
(ii) the written approval by the shareholders of ITCP or approval by the shareholders of ITCP
(other than those, if any, who are required to abstain from voting under the Listing Rules or
the applicable laws, rules and regulations) of the Makerston Agreement and the transactions
contemplated thereunder at the special general meeting of ITCP in compliance with the
Listing Rules having been obtained;
(iii) the Purchaser being satisfied with the results of the due diligence review on the Makerston
Group, Rosedale Beijing and the Beijing Hotel;
(iv) requisite consent having been obtained in respect of the transfer of the MS Sale Share under
the Makerston Agreement;
(v) each of the warranties given under the Makerston Agreement being true and accurate
in all material respects and not misleading as at the date of the Makerston Agreement
and remaining true and accurate in all material aspects and not misleading as at the MS
Completion; and
(vi) there being no material adverse change in the financial position of the Makerston Group from
31 March 2014 up to and as at the MS Completion Date.
The Purchaser may at its discretion at any time waive any of the conditions set out above, except for
conditions (i), (ii) and (iv). If any of the above conditions is not fulfilled or waived (as the case may be)
on or before the MS Long Stop Date and/or conditions (iii), (v) and (vi) above do not remain fulfilled or
waived (as the case may be) on the MS Completion Date, the Makerston Agreement shall be of no further
effect and the rights and obligations of the parties under the Makerston Agreement shall lapse except for
antecedent breach. As at the Latest Practicable Date, condition (iii) had been fulfilled.
LETTER FROM THE BOARD
– 18 –
Arrangement in respect of the Compensated Amount
Pursuant to the Capital Increase Agreement, the Investor has agreed to pay DS Eastin the
Compensated Amount on or before six (6) months after completion of the Capital Increase Agreement . As
disclosed in the announcements of the Company dated 5 June 2013, 27 September 2013 and 29 November
2013, completion of the deemed disposal of a 80% interest in Rosedale Beijing by DS Eastin to a
subsidiary of the Investor under the Capital Increase Agreement took place on 29 November 2013 and as a
result, a receivable of the Compensated Amount from the Investor of approximately HK$665 million under
the Capital Increase Agreement was recorded in the accounts of DS Eastin as at the date of the Makerston
Agreement.
In respect of the Compensated Amount, pursuant to the Makerston Agreement, the Purchaser
acknowledges and consents to the resolutions of Makerston to declare the DS Eastin Dividend and the
resolutions of the MS Vendor to declare the Makerston Dividend and the payment of the DS Eastin
Dividend and the Makerston Dividend upon receipt of the Compensated Amount (or any amount thereof),
the effect of which is to enable the upstream payment of the Compensated Amount to the MS Vendor by
way of dividend payment. As disclosed in the announcement of the Company dated 8 September 2014,
the principal amount of the Compensated Amount has been fully settled by the Investor. As at the Latest
Practicable Date, the DS Eastin Dividend and the Makerston Dividend had been declared and paid to
Makerston and the MS Vendor respectively.
The MS Completion
The MS Completion is, subject to all conditions precedent being fulfilled or waived (as the case
may be), to take place on the seventh (7th) Business Day after fulfillment of the conditions (i), (ii) and (iv)
referred to above, or such other date as the parties to the Maker ston Agreement may agree in writing.
Upon MS Completion, the Company will not have any equity interest in Makerston and therefore
Makerston will cease to be a subsidiary of the Company . The financial results of the Makerston Group will
no longer be consolidated into the financial statements of the Group.
LETTER FROM THE BOARD
– 19 –
THE ES NOTE AND THE MS NOTE
The principal terms of the ES Note and the MS Note (both unsecured) are set out as follows:
Issuer: ITCP
Noteholders: the ES Vendor for the ES Note and the MS Vendor for the MS Note or
their respective nominees
Principal amounts: HK$250 million for each of the ES Note and the MS Note
Interest: 5% per annum, payable semi-annually in arrears
Maturity: second anniversary of the respective dates of the issue of the ES Note
and the MS Note, but ITCP may prepay all or part of the outstanding
principal amount (at the minimum amount of HK$5,000,000) at any
time prior to the maturity date without any penalty, prepayment or other
fees by giving the noteholders not less than seven (7) days’ prior written
notice together with all interest accrued on the amount to be prepaid
Transferability: the noteholders are not entitled to assign the outstanding amount under
the ES Note or the MS Note or any of their rights, interests or benefits
thereunder without the prior written consent of ITCP
LETTER FROM THE BOARD
– 20 –
INFORMATION ON EAGLE SPIRIT AND MAKERSTON
Set out below was the existing structure of the Makerston Group and the Eagle Spirit Group as at
the Latest Practicable Date:
100%
100%
100%
100% 100% 100%
100%
100%
100%40%
100%
100%
100%
20%
89.4%
The Company
(Bermuda)
ES Vendor
(BVI)
Apex
(BVI)
(Note 1)
Eagle Spirit
(BVI)
MS Vendor
(BVI)
Rosy Universe
(BVI)
More Star
(BVI)
Rosedale Kowloon
(HK)
HK Macau
(BVI)
Makerston
(BVI)
RD Group
Management
(HK) (BVI)
RD Hotel
Management
DS Eastin
(HK) TKT
Hotel
Rosedale Beijing
(PRC)
Beijing Hotel
indirect holding
The Property
Company
(HK)
Rosedale
Catering
(HK)
Notes:
1. On 29 August 2014, the ES Vendor acquired 2,079,000 ordinary shares of US$0.02 each in the share capital of Apex,
representing approximately 0.75% of the issued share capital of Apex. Accordingly, the ES Vendor directly held
approximately 6.25% and indirectly held approximately 83.15% of Apex.
2. Places in parentheses represent places of incorporation.
LETTER FROM THE BOARD
– 21 –
The Eagle Spirit Group
Eagle Spirit
Eagle Spirit, which is an investment holding company incorporated in the BVI, is wholly -owned by
the ES Vendor. Its principal assets comprise (i) 100% equity interest in Rosy Universe, which holds the
entire equity interest in both RD Group Management and RD Hotel Management, which are principally
engaged in corporate management and secretarial services, and hotel management and consultancy
services respectively; (ii) 40% equity interest in More Star, the sole asset of which is its investment in
the Property Company which currently holds the ownership of the TKT Hotel, namely Rosedale Hotel
Kowloon; (iii) 100% equity interest in Rosedale Kowloon, which has entered into the Master Lease with
the Property Company for the lease of the TKT Hotel and is to be granted a non-exclusive use of the
Trademarks under the Licence Agreement; and (iv) 100% equity interest in HK Macau which holds 100%
equity interest in Rosedale Catering, which is a food and beverage operator. Details of each member of the
Eagle Spirit Group are set out as follows:
(i) Rosy Universe Group
Rosy Universe, which is an investment holding company incorporated in the BVI, is wholly -
owned by Eagle Spirit. The principal assets of Rosy Universe are its holding of the entire equity
interest in RD Group Management and RD Hotel Management.
RD Group Management is a company incorporated in Hong Kong and has recruited a team of
staff for the provision of corporate management and secretarial services. RD Hotel Management is a
company incorporated in the BVI and its principal activities are the provision of hotel management
and consultancy services. Currently, it has entered into consultancy contracts with two (2) hotels in
the PRC, one in Guangzhou and one in Beijing, for the provision of consultancy services which are
to be expired on 31 December 2014. The contracts will be terminated prior to ES Completion.
(i i) More Star Group
More Star is an investment holding company incorporated in the BVI with limited liability.
Its sole asset is its investment in the Property Company. On 14 March 2014, the disposal of 60%
equity interest in More Star by Eagle Spirit to Shaw under the Shaw Agreement was completed and
thus as at the Latest Practicable Date, Eagle Spirit held 40% equity interest in More Star.
The Property Company is a company incorporated in Hong Kong with limited liability and
is principally engaged in the business of property holding. Its principal asset is the ownership of
the TKT Hotel, which is located at No. 86 Tai Kok Tsui Road, Tai Kok Tsui, Kowloon, Hong Kong.
It is a 4-star rated hotel currently known as “Rosedale Hotel Kowloon” with gross floor area of
approximately 10,300 m2 and 435 guest rooms. Based on the valuation report on the TKT Hotel
LETTER FROM THE BOARD
– 22 –
as set out in Appendix V to this circular prepared by Asset Appraisal Limited, an independent
property valuer, the market value of the TKT Hotel as at 30 September 2014 was estimated to be
approximately HK$ 1,285 million.
(iii) HK Macau Group
HK Macau is an investment holding company incorporated in the BVI which owns the entire
issued share capital of Rosedale Catering. Rosedale Catering is mainly engaged in the operation of
food and beverage outlets.
(i v) Rosedale Kowloon
Rosedale Kowloon is a company incorporated in Hong Kong with limited liability and is
the operator of the TKT Hotel. On 14 March 2014, Rosedale Kowloon and the Property Company
entered into the Master Lease pursuant to which Rosedale Kowloon leases the TKT Hotel for
its hotel operation for a term of six (6) years, the material terms of which are set out in the
announcement of the Company dated 10 November 2013 and the circular of the Company dated 18
February 2014. For the continuing use of the Trademarks after the ES Completion, the Licensor will
grant a non-exclusive and non-transferrable licence to use the Trademarks to Rosedale Kowloon
under the Licence Agreement for a period commencing from the ES Completion Date to 31 March
2020 (being the date on which the Master Lease expires).
Financial information of the Eagle Spirit Group
Set out below is the unaudited consolidated financial information of the Eagle Spirit Group
(with 100% interest in the More Star Group, given the disposal of 60% equity interest in the More Star
Group was completed after 31 December 2013) prepared in accordance with the HK GAAP as set out in
Appendix II to this circular:
For the year ended
31 December
For the
six months
ended 30 June
2012 2013 2014
HK$’000 HK$’000 HK$’000
Revenue 55,943 125,179 70,126
Profit before taxation 14,581 33,353 470,589
Profit after taxation 13,118 31,839 469,832
LETTER FROM THE BOARD
– 23 –
As the TKT Hotel commenced business in July 2012, the revenue of the Eagle Spirit Group for the
year ended 31 December 2012 only covered of results of the TKT Hotel from July to December in 2012.
The significant increase in revenue of the Eagle Spirit Group for the year ended 31 December 2013 was
mainly due to the contribution from the full year results of the TKT Hotel in 2013. On 5 November 2013,
Eagle Spirit and Shaw entered into the Shaw Agreement in relation to the disposal of 60% equity interest
in More Star by Eagle Spirit to Shaw. Accordingly, the property, plant and equipment of the Eagle Spirit
Group had been reclassified to assets held for sale as at 31 December 2013.
As at 30 June 2014, the unaudited consolidated net assets of the Eagle Spirit Group ( after
completion of the disposal of 60% equity interest in the More Star Group ) was approximately HK$ 44 6. 4
million.
The Makerston Group
Makerston, which is an investment holding company incorporated in the BVI, is wholly -owned by
the MS Vendor. Its principal asset is its holding of the entire issued share capital of DS Eastin, which is an
investment holding company incorporated in Hong Kong holding 20% of the paid-up capital of Rosedale
Beijing.
On 31 May 2013, DS Eastin, the Investor, Rosedale Beijing and the Company entered into the
Capital Increase Agreement, pursuant to which the Investor agreed to procure the capital contribution of
US$68.8 million ( equivalent to approximately HK$533.2 million) in cash for the increase in the registered
capital of Rosedale Beijing. Upon completion of the capital increase by a subsidiary of the Investor
under the Capital Increase Agreement which took place on 29 November 2013, Rosedale Beijing has
become a sino-foreign joint venture company with a registered capital of US$86 million ( equivalent to
approximately HK$666.5 million) held as to 80% by a subsidiary of the Investor and 20% by DS Eastin.
Pursuant to a joint venture agreement dated 18 October 2013 entered into between the subsidiary of the
Investor and DS Eastin, profits of Rosedale Beijing are to be shared by both parties to the joint venture
agreement in accordance with their respective ratio of capital contribution.
Rosedale Beijing is principally engaged in hotel ownership and operation and its principal asset
is the ownership of the Beijing Hotel. According to the legal opinion from the PRC legal adviser of the
Company, Rosedale Beijing has obtained the necessary business license . The Beijing Hotel has gross
floor area of approximately 37,173 m2 with 462 guest rooms and a shopping arcade. In January 2013, an
approval for an extension of the Beijing Hotel by the Beijing Municipal Commission of Urban Planning
was obtained. Pursuant to the Capital Increase Agreement, it was agreed that the maximum amount to
be contributed by DS Eastin to Rosedale Beijing in respect of such extension will not exceed RMB30
million. As part of the modification procedures for the said extension, Rosedale Beijing entered into a
supplemental agreement dated 9 June 2014 with the Beijing Municipal Bureau of Land and Resources,
whereby the additional premium payable by Rosedale Beijing was agreed to be RMB67,420,150 and such
additional premium has been paid by Rosedale Beijing in June 2014 in accordance with the terms thereof
from its cash on hand. Under the supplemental agreement, the total permissible floor area was increased to
54,780 m2 (superstructure) and the land use was amended to commercial and finance (which covered the
existing use for hotel) with a corresponding change of the term of the land use right from 50 years to 40
years. Based on the valuation report on the Beijing Hotel as set out in Appendix V to this circular prepared
by Asset Appraisal Limited, an independent property valuer, the market value of the Beijing Hotel was
estimated to be approximately HK$ 1, 300 million as at 30 September 2014 .
LETTER FROM THE BOARD
– 24 –
Financial information of the Makerston Group
Set out below is the unaudited consolidated financial information of the Makerston Group prepared
in accordance with the HK GAAP as set out in Appendix III to this circular:
For the year ended
31 December
For the
six months
ended 30 June
2012 2013 2014
HK$’000 HK$’000 HK$’000
Revenue 96,125 80,075 –
(Loss)/profit before taxation ( 16,161) 640,446 (3,149)
(Loss)/profit after taxation ( 10,771) 580,297 (3,149)
The significant profit before and after taxation of the Makerston Group for the year ended 31
December 2013 was mainly attributable to a one-off gain on the deemed disposal of Rosedale Beijing of
approximately HK$ 656.2 million . DS Eastin was entitled to the Compensated Amount of approximately
HK$665 million under the Capital Increase Agreement, resulting in a significant gain on deemed disposal
of Rosedale Beijing.
As at 30 June 2014, the unaudited consolidated net asset value of the Makerston Group was
approximately HK$ 645.0 million .
REASONS FOR AND BENEFITS OF THE TRANSACTIONS
The Group is principally engaged in hotel operations and trading of securities.
The existing hotel operations of the Group comprise the operation of three “Rosedale” branded
4-star rated hotels (of which two are leased-and-operated hotels in Hong Kong), Times Plaza Hotel ,
Shenyang and Luoyang Golden Gulf Hotel. As disclosed in the Company’s interim report for the six
months ended 30 June 2013, slower pace of economic growth of the PRC and signs of the retreat of hot
money from Asia give a hard time to the Group’s hotel operations, the performance of which depends
heavily on the ups and downs of the world economic atmosphere. Facing this situation, the Group intended
to continue to enhance its hotel chain and to explore further income streams so as to stay ahead of its
competitors and to maximise value for the Shareholders.
The Directors are of the view that the Transactions allow the Group to realise its minority stake
in the TKT Hotel and the Beijing Hotel. The proceeds arising from the Transactions would provide
necessary financial resources for the Group to repay its borrowings when they fall due so as to strengthen
its financial position, enhance the Group’s capability to capture any future investment opportunities, and
focus its resources on other hotels of the Remaining Group.
LETTER FROM THE BOARD
– 25 –
After the ES Completion and MS Completion, the Remaining Group and the hotel portfolio will
comprise Rosedale Hotel and Suites , Guangzhou, Times Plaza Hotel , Shenyang, Luoyang Golden Gulf
Hotel, and Rosedale on the Park which is a leased-and-operated hotel located in Hong Kong. Having taken
into account these four hotels being under the management of the Remaining Group and the financial
effect of each of the ES Completion and the MS Completion set out in the section headed “ Financial
effects of the Transactions” below, the Directors consider that the Remaining Group has a sufficient level
of operations and tangible assets of sufficient value to warrant the continued listing of the Shares on the
Stock Exchange as required under Rule 13.24 of the Listing Rules. In addition, given that the Remaining
Group has identified specific use of the net proceeds from the Transactions as described below, the
Directors consider that the Remaining Group would not become a cash company upon ES Completion and
MS Completion.
As at the Latest Practicable Date, the Company did not have any intention to dispose of any assets
and business of the Remaining Group. As disclosed in the Company’s annual report for the year ended 31
December 2013, the Group will explore further the leased-and-operated hotel and franchising business to
supplement its traditional owner-operated hotel business, and will from time to time revisit its business
strategy and composition of its hotel portfolio to cope with market changes and to explore further income
streams so as to maximise the wealth of the Shareholders.
Having considered the above, the Directors are of the view that the terms of the Eagle Spirit
Agreement and the Makerston Agreement are fair and reasonable and the Transactions are in the interests
of the Company and the Shareholders as a whole.
The net proceeds from the transactions contemplated under the Eagle Spirit Agreement and
the Makerston Agreement are estimated to be approximately HK$ 502 million and HK$30 0 million
respectively. The Group intends to apply the net proceeds from the Transactions as to approximately
(i) HK$250 million for repayment of other borrowings; (ii) HK$66 million for payment of the special
dividend , details of which were disclosed in the announcement of the Company dated 12 May 2014 ; and
(iii) the remaining balance for future investment opportunities of the Group as and when appropriate.
Completion of the disposals under the Eagle Spirit Agreement and the Makerston Agreement are not
inter-conditional on each other. If only MS Completion takes place, the net proceeds therefrom may be
insufficient for repayment of other borrowings and payment of the special dividend, the shortfall will be
funded by internal resources of the Group. The Company has been in discussions with an independent
third party in relation to the possible acquisition of equity interest in a company engaging in hotel related
business in the PRC. As at the Latest Practicable Date, the parties had not yet reached any agreement on
the specific terms of the possible acquisition, and the possible acquisition may or may not proceed. Save
for the above, as at the Latest Practicable Date, there were no agreement, understanding, intention or
negotiation regarding potential acquisition by the Group.
LETTER FROM THE BOARD
– 26 –
FINANCIAL EFFECTS OF THE TRANSACTIONS
In respect of disposal of the Eagle Spirit Group
Assuming the disposal of the Eagle Spirit Group had been completed on 30 June 2014, the
Group would recognise a loss of approximately HK$ 14.2 million which is calculated based on the fair
value of the ES Consideration of approximately HK$ 470.8 million (comprising cash consideration of
approximately HK$ 253.8 million and fair value of the ES Note of approximately HK$ 217.0 million) after
deducting (i) the carrying amount of the net assets of the Eagle Spirit Group of approximately HK$44 6. 4
million as at 30 June 2014; (ii) the carrying amount of the ES Sale Loan of approximately HK$ 36.6
million as at 30 June 2014; and (iii) the estimated costs of approximately HK$2.0 million directly
attributable to the disposal of the ES Sale Share and the ES Sale Loan.
Based on the unaudited pro forma financial information of the Remaining Group as set out in
Appendix IV to this circular, (i) assuming the disposal of the Eagle Spirit Group had been completed
on 30 June 2014, the total assets of the Group would have been decreased by approximately HK$ 33.4
million from approximately HK$ 3,084.2 million as at 30 June 2014 to approximately HK$ 3,050.8
million, and total liabilities of the Group would have been decreased by approximately HK$ 19.2 million
from approximately HK$ 479.4 million as at 30 June 2014 to approximately HK$ 460.2 million ; and (ii)
assuming the disposal of the Eagle Spirit Group had been completed on 1 January 2013 , the Group’s
results would have been decreased by approximately HK$ 17.9 million from net profit attributable to the
owners of the Company of approximately HK$ 382.0 million for the year ended 31 December 2013 to
approximately HK$ 364.1 million.
In respect of disposal of the Makerston Group
Assuming the disposal of the Makerston Group had been completed on 30 June 2014, the Group
would recognise a gain of approximately HK$ 3.2 million which is calculated based on the fair value of the
MS Consideration of approximately HK$ 268. 7 million (comprising cash consideration of approximately
HK$ 51.8 million and fair value of the MS Note of approximately HK$217.0 million), after deducting (i)
the carrying amount of the net assets of the Makerston Group of approximately HK$ 645.0 million as at
30 June 2014; (ii) the carrying amount of the MS Sale Loan of approximately HK$ 217.7 million as at 30
June 2014; (iii) tax indemnity payable of approximately HK$66.7 million undertaken by the Remaining
Group; and (i v) the estimated costs of approximately HK$2.0 million directly attributable to the disposal
of the MS Sale Share and the MS Sale Loan, and adjusted by the Compensated Amount recoverable from
the Investor of approximately HK$ 66 5.9 million .
LETTER FROM THE BOARD
– 27 –
Based on the unaudited pro forma financial information of the Remaining Group as set out in
Appendix IV to this circular, (i) assuming the disposal of the Makerston Group had been completed on 30
June 2014 , the total assets of the Group would have been increased by approximately HK$ 3.2 million from
approximately HK$ 3,084.2 million as at 30 June 2014 to approximately HK$ 3, 087.4 million, while total
liabilities of the Group would remain unchanged; and (ii) assuming the disposal of the Makerston Group
had been completed on 1 January 2013 , the Group’s results would have been decreased by approximately
HK$ 609.7 million from net profit attributable to the owners of the Company of approximately HK$ 382.0
million for the year ended 31 December 2013 to net loss attributable to the owners of the Company of
approximately HK$ 227.7 million.
Shareholders should note that the actual gain or loss from the Transactions to be recorded by the
Company will depend on the financial position of the Eagle Spirit Group and the Makerston Group as at
the ES Completion Date and the MS Completion Date respectively.
FINANCIAL AND TRADING PROSPECTS OF THE GROUP
As mentioned in the paragraph headed “Reasons for and benefits of the Transactions” above, the
Group intends to repay other borrowing of approximately HK$250 million out of the net proceeds from
the Transactions. By removing these liabilities from its statement of financial position, the gearing ratio
and the financial position of the Company shall be enhanced to a considerable extent. Furthermore, the
bottom line of the Group in the future shall be improved by reducing the finance costs incurred on the
said borrowings. After the ES Completion and MS Completion, the Group will continue to engage in hotel
operations and trading of securities.
LISTING RULES IMPLICATIONS
As one or more of the applicable percentage ratios in respect of the Transactions under Rule 14.07
of the Listing Rules exceed(s) 75%, the Transactions constitute very substantial disposals for the Company
under the Listing Rules which are subject to the reporting, announcement and shareholders’ approval
requirements.
As ITCC, being the substantial shareholder of the Company, was indirectly interested in
approximately 30.65% of the issued share capital of ITCP as at the date of the Agreements, the Purchaser
(being a direct wholly-owned subsidiary of ITCP) is a connected person of the Company. Accordingly, the
Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules,
which are subject to approval from the Independent Shareholders at the SGM by way of poll.
LETTER FROM THE BOARD
– 28 –
As completion of the Rosedale Share Agreement (details of which were set out in the
announcements of ITCC and Hanny both dated 9 May 2014) is conditional on the ES Completion and the
MS Completion, CEL, an associated company of Hanny , is considered to have a material interest in the
Transactions. Accordingly, ITCC , its close associates and directors (who hold any Shares), CEL and its
close associates shall abstain from voting in respect of the resolutions relating to the Agreements and the
transactions contemplated thereunder at the SGM. Dr. Chan Kwok Keung, Charles (by virtue of his being
a director and controlling shareholder of ITCC) will also abstain from voting in respect of the resolutions
relating to the Agreements and the transactions contemplated thereunder at the SGM. As at the Latest
Practicable Date, ITCC held 195,706,000 Shares, representing approximately 29.76% of the issued share
capital of the Company ; CEL held 48,660,424 Shares, representing approximately 7.40% of the issued
share capital of the Company ; and Dr. Chan Kwok Keung, Charles held 1,132,450 Shares, representing
approximately 0.17% of the issued share capital of the Company.
Mr. Cheung Hon Kit (by virtue of his being director of both ITCP and the Company) did not
attend the meeting of the Board in relation to the approval of the Agreements. Mr. Kwok Ka Lap, Alva
(by virtue of his being director of Hanny, ITCP and the Company), Mr. Poon Kwok Hing, Albert and Mr.
Sin Chi Fai (by virtue of their being directors of both Hanny and the Company) abstained from voting on
the relevant resolution(s) approving the Agreements in the meeting of the Board. As all the independent
non-executive Directors have material interest in the Transactions, no independent board committee is
formed. Mr. Cheung Hon Kit, Mr. Poon Kwok Hing, Albert, Mr. Sin Chi Fai (who did not hold any Shares)
and Mr. Kwok Ka Lap, Alva, beneficially held 7,500 Shares in aggregate as at the Latest Practicable
Date (representing approximately 0.001% of the issued share capital of the Company) will also abstain
from voting in respect of the resolutions relating to the Agreements and the transactions contemplated
thereunder at the SGM.
THE SGM
The SGM will be held at 3:30 p.m. on Thursday, 27 November 2014 at Gemini Room, 33rd Floor,
Rosedale on the Park, 8 Shelter Street, Causeway Bay, Hong Kong to consider and, if thought fit, approve
the disposals of shares in and shareholder’s loans to Eagle Spirit and Makerston under the Agreements
and the transactions contemplated thereunder. A notice convening the SGM is set out on pages SGM-1
to SGM- 2 of this circular. Whether or not you are able to attend the SGM, you are requested to complete
the accompanying form of proxy in accordance with the instructions printed thereon and return the same
to the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at Level 22, Hopewell
Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than
48 hours before the time appointed for the holding of the SGM or any adjournment thereof (as the case
may be). Completion and return of the form of proxy shall not preclude you from attending and voting in
person at the SGM or any adjournment meeting thereof (as the case may be) if you so wish.
LETTER FROM THE BOARD
– 29 –
The resolutions to approve the disposals of shares in and shareholders’s loans to Eagle Spirit and
Makerston under the Agreements and the transactions contemplated thereunder at the SGM will be taken
by way of poll and an announcement will be made by the Company after the SGM on the results of the
SGM.
RECOMMENDATIONS
Your attention is drawn to the letter from Centurion set out on pages 30 to 73 of this circular which
contains its advice to the Independent Shareholders regarding the Transactions.
The Directors consider that the terms of the Agreements are fair and reasonable so far as the
Independent Shareholders are concerned and the Transactions are in the interests of the Company and the
Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote
in favour of the ordinary resolutions to be put forward to the Independent Shareholders at the SGM to
consider and, if thought fit, approve the disposals of shares in and shareholder’s loans to Eagle Spirit and
Makerston under the Agreements and transactions contemplated thereunder.
ADDITIONAL INFORMATION
Your attention is drawn to the additional information set out in the appendices to this circular.
Yours faithfully,
For and on behalf of
Rosedale Hotel Holdings Limited
Cheung Hon Kit
Chairman
LETTER FROM CENTURION
– 30 –
The following is the text of the letter of advice to the Independent Shareholders from Centurion
Corporate Finance Limited dated 10 November 2014 for incorporation in this circular:–
10 November 2014
To the Independent Shareholders of
Rosedale Hotel Holdings Limited
Dear Sirs,
VERY SUBSTANTIAL DISPOSALS ANDCONNECTED TRANSACTIONS
IN RELATION TO THE DISPOSALS OFTHE SHARES IN, AND SHAREHOLDER’S LOANS TO,
MAKERSTON LIMITED AND EAGLE SPIRIT HOLDINGS LIMITED
INTRODUCTION
We have been engaged as the independent financial adviser to advise the Independent Shareholders
with respect to the Transactions, the terms and conditions of Agreements and the transactions
contemplated thereunder. Details of the Transactions and the Agreements are outlined in the “Letter From
The Board” set out from pages 10 to 29 of the circular dated 10 November 2014 to the Shareholders
(“Circular”) of which this letter forms a part.
As set out in the “Letter From The Board”, the Transactions constitute very substantial disposals
and connected transactions for the Company under the Listing Rules, which are subject to approval from
the Independent Shareholders at the SGM by way of poll.
For the reason as set out in the “Letter From The Board”, all the independent non-executive
Directors have material interest in the Transactions and as such, no independent board committee is
formed. We have therefore been appointed to address this letter of independent advice to the Independent
Shareholders directly and (i) to give an opinion as to whether the Transactions, the terms and conditions
of the Agreements and the transactions contemplated thereunder are of normal commercial terms, are in
the ordinary and usual course of business of the Group and are fair and reasonable and in the interests of
the Company and its Shareholders as a whole; and (ii) to recommend to the Independent Shareholders how
to vote at the SGM. Capitalised terms used in this letter shall have the same meanings as defined in the
Circular unless the context otherwise requires.
LETTER FROM CENTURION
– 31 –
As completion of the Rosedale Share Agreement (details of which were set out in the
announcements of ITCC and Hanny both dated 9 May 2014) is conditional on the ES Completion and the
MS Completion, CEL, as an associated company of Hanny, is considered to have a material interest in the
Transactions. Accordingly, ITCC, its close associates and directors (who hold any Shares), CEL and its
close associates shall abstain from voting in respect of the ordinary resolutions approving the Agreements
and the transactions contemplated thereunder at the SGM. Dr. Chan Kwok Keung, Charles (by virtue of
his being a director and controlling shareholder of ITCC) will also abstain from voting at the SGM. For
further details, please refer to the sections headed “Listing Rules Implications” and “The SGM” as set out
in the “Letter From The Board”.
The Company further announced on 23 September 2014 the extension of the ES Long Stop Date
and the MS Long Stop Date to 29 December 2014 or such other date as the parties thereto may agree in
writing.
Mr. Baldwin Lee, the author of this letter of independent advice, has over 25 years of experience in
investment banking and corporate finance. He has been the managing director of our firm since 1994. Prior
to his present posting, he was a director at Sun Hung Kai International Limited, the investment banking
arm of Sun Hung Kai & Co. Limited. Prior to his return to Hong Kong in early 1991 from Canada, he was
a corporate finance professional at the Toronto’s head office of Walwyn Stodgell Cochran Murray Limited,
an investment banking firm in Canada. He was educated in Canada and holds an M.B.A. degree and a B.
Comm. degree. He is also a Fellow member of the Institute of Canadian Bankers and a Fellow member of
the Hong Kong Securities Institute.
We are not associated with the Company or any other parties to the Agreements or their respective
substantial shareholders or connected persons, as defined under the Listing Rules. Apart from the normal
professional fees payable to us in relation to this appointment, no arrangement exists whereby we will
receive any fee or benefit from the Company or any of the parties to the Agreements or their respective
substantial shareholders or connected persons. We have never acted for the Company prior to this
appointment.
LETTER FROM CENTURION
– 32 –
BASIS OF OUR OPINION
In formulating our opinion and recommendation, we have relied on the accuracy of the information,
opinions and representations contained in the Circular and other documents (including but not limited to
the bases and assumptions for the valuation reports on the hotel properties and promissory notes) which
have been provided to us by the Directors and for which they shall take full responsibility. The Directors
have declared in a responsibility statement set out in Appendix VI to the Circular that they collectively
and individually accept full responsibility for the accuracy of the information contained in the Circular.
We have also assumed that all statements, information, opinions and representations made or referred to in
the Circular and other circulars of the Company in relation to its previous disposals of the majority stakes
in TKT Hotel and Beijing Hotel were true at the time they were made and continued to be true at the date
of this Circular. We have also assumed that all statements of belief, opinion and intention made by the
Directors in the Circular are reasonably made after due and careful enquiry.
In respect of the financial information of each of the Group, the Remaining Group, the Eagle Spirit
Group and the Makerston Group, we have relied principally on their respective audited and/or unaudited
financial statements (including unaudited pro forma financial information of the Remaining Group), such
financial statements and information are prepared by the Company and for which the Directors take full
responsibility. We have also sought and obtained confirmation from the Directors that, having made all
reasonable enquiries and to the best of their knowledge and belief, no material facts have been omitted
from the information provided and/or referred to in the Circular.
We have no reason to doubt the truth, accuracy and completeness of the information and
representations provided to us by the Directors. We consider that we have reviewed sufficient financial
information and have taken reasonable steps as required under the Listing Rules, which enable us to
reach an informed view and to justify our reliance on the accuracy of the information as contained in the
Circular and to provide us with a reasonable basis for our opinion. We have not, however, conducted any
form of independent or in-depth investigation into the businesses and affairs or the prospects (including
the pro forma financial effects) of each of the Group, the Remaining Group, the Eagle Spirit Group and
the Makerston Group, or any of their respective subsidiaries, associates or parent companies, nor have we
independently verified any of the information supplied to us.
LETTER FROM CENTURION
– 33 –
PRINCIPAL FACTORS AND REASONS CONSIDERED
In formulating our recommendation, we have taken into consideration the following principal
factors and reasons:
1. Background Information
1.1 Background of the Group
The principal business activities of the Group are in hotel operations and trading
of securities. The existing hotel operations of the Group comprise the operation of the
three “Rosedale” branded 4-star rated hotels (of which two hotels are leased-and-operated
hotels in Hong Kong), Times Plaza Hotel, Shenyang and the Luoyang Golden Gulf Hotel.
Upon Completion, the Remaining Group shall comprise the Rosedale Hotel and Suites in
Guangzhou, the Times Plaza Hotel in Shenyang, the Luoyang Golden Gulf Hotel and shall
continue to manage the leased-and-operated Rosedale On the Park hotel in Hong Kong.
The following is an overview of the breakdown in segment revenue of the Group
for the years ended 31 December 2011, 2012 and 2013 by activity as extracted from the
Company’s 2012 and 2013 annual reports respectively:–
Table A: Audited segment revenue and results of the Group for the three
years ended 31 December 2011, 2012 and 2013 respectively
For the year ended 31 December 2011 2012 2013(HK$’000) (in %) (HK$’000) (in %) (HK$’000) (in %)
Segment revenues and resultsTurnover from hotel operations 391,023 100.0% 429,466 100.0% 447,220 100.0%
Turnover from securities trading – 0.0% – 0.0% – 0.0%
Total 391,023 100.0% 429,466 100.0% 447,220 100.0%
Segment profit/(loss)From hotel operations (163,499) (94.5%) (137,884) (101.4%) 624,437
(Note)
99.9%
From securities trading (9,549) (5.5%) 1,845 1.4% 239 0.1%
Total (173,048) 100.0% (136,039) 100.0% 624,676 100.0%
Profit (loss) for the year
attributable to Shareholders (206,643) (143,188) 381,966
Note: Included gain on deemed disposal of Rosedale Beijing of HK$781,773,000 as a result of a capital
injection
Source: 2012 and 2013 Annual Reports of the Company dated 22 March 2013 and 27 March 2014
respectively
LETTER FROM CENTURION
– 34 –
For the year ended 31 December 2013, hotel operations of the Group comprise the
operation of the four “Rosedale” branded 4-star rated hotels. Turnover increased by 4.1%
to HK$447.2 million (HK$429.5 million for the year ended 31 December 2012), with the
contribution from the full year results of Rosedale Hotel Kowloon opened in July 2012.
Segment profit for the year ended 31 December 2013 was HK$624.4 million (loss of
HK$137.9 million for the year ended 31 December 2012), after taking into account the
gain on deemed disposal of Rosedale Beijing of HK$781.8 million (section 1.6 and section
7.2.1 below under the heading “Possible effects on earnings” further explain this one-off
gain item). Profit from securities trading for the year ended 31 December 2013 was HK$0.2
million (HK$1.8 million for the year ended 31 December 2012).
As set out in Appendix I to the Circular, for the year ended 31 December 2013,
turnover of the Remaining Group attained HK$242.0 million, represented a decrease of
12.8% as compared to HK$277.4 million of 2012. The results of the Remaining Group
for the year ended 31 December 2013 was a loss of HK$294.6 million (2012: HK$151.4
million). On a segment results basis, the hotel operations of the Remaining Group comprise
the operation of the three “Rosedale” branded 4-star rated hotels, Times Plaza Hotel,
Shenyang and Luoyang Golden Gulf Hotel. Turnover decreased by 12.8% to HK$242.0
million for the year ended 31 December 2013 (2012: HK$277.4 million). Segment loss for
the reporting year was HK$140.0 million (2012: HK$124.3 million). For details, please refer
to page I-11 in Appendix I to the Circular.
The following is an overview of the consolidated net assets of the Group:–
Table B: Audited and unaudited consolidated net assets of the Group
Audited net assets of
the Group as at 31 December 2013
(Note A)
Unaudited consolidated net assets of
the Group as at 30 June 2014
(Note B)
(HK$’000) (HK$’000)
Total assets 3,567,266 3,084,207
Less: Total liabilities 1,348,673 479,393
Net assets 2,218,593 2,604,814
Equity attributable to the Shareholders 1,976,154 2,369,223
Sources:
Note A: as extracted from the 2013 annual report of the Company
Note B: as extracted from Appendix IV to the Circular
LETTER FROM CENTURION
– 35 –
1.2 Group structure of the Eagle Spirit Group and the Makerston Group
Set out below was the existing structure of the Eagle Spirit Group and the Makerston
Group as at the Latest Practicable Date:
100%
100%
100%
100% 100% 100%
100%
100%
100%40%
100%
100%
100%
20%
89.4%
The Company
(Bermuda)
ES Vendor
(BVI)
Apex
(BVI)
(Note 1)
Eagle Spirit
(BVI)
MS Vendor
(BVI)
Rosy Universe
(BVI)
More Star
(BVI)
HK Macau
(BVI)
Rosedale Kowloon
(HK)
Makerston
(BVI)
RD Group
Management
(HK) (BVI)
RD Hotel
Management
DS Eastin
(HK) TKT
Hotel
Rosedale Beijing
(PRC)
Beijing Hotel
indirect holding
The Property
Company
(HK)
Rosedale
Catering
(HK)
Notes:
1. On 29 August 2014, the ES Vendor acquired 2,079,000 ordinary shares of US$0.02 each in the share
capital of Apex, representing approximately 0.75% of the issued share capital of Apex. Accordingly,
the ES Vendor directly held approximately 6.25% and indirectly held approximately 83.15% of
Apex.
2. Places in parentheses represent places of incorporation.
LETTER FROM CENTURION
– 36 –
1.3 The Eagle Spirit Group proposed to be disposed
Eagle Spirit, which is an investment holding company incorporated in the BVI, is
wholly-owned by ES Vendor. Its principal assets comprise (i) 100% equity interest in Rosy
Universe; (ii) 40% equity interest in More Star, the sole asset of which is its investment
in the Property Company which holds the ownership of the TKT Hotel; (iii) 100% equity
interest in Rosedale Kowloon, which has entered into the Master Lease with the Property
Company for the lease of the TKT Hotel and is to be granted a non-exclusive use of the
Trademarks under the Licence Agreement; and (iv) 100% equity interest in HK Macau.
Details of each of these members of the Eagle Spirit Group are set out below:
(i) Rosy Universe Group
Rosy Universe, which is an investment holding company incorporated in the
BVI, is wholly-owned by Eagle Spirit. The principal assets of Rosy Universe are
its holding of the entire equity interest in RD Group Management and RD Hotel
Management.
RD Group Management is a company incorporated in Hong Kong and has
recruited a team of staff for the provision of corporate management and secretarial
services. RD Hotel Management is a company incorporated in the BVI and its
principal activities are the provision of hotel management and consultancy services.
Currently, it has entered into consultancy contracts with two hotels in the PRC, one
in Guangzhou and one in Beijing, for the provision of consultancy services which
will expire on 31 December 2014. The contracts will be terminated prior to ES
Completion.
( ii) More Star Group
More Star is an investment holding company incorporated in the BVI with
limited liability. Its sole asset is its investment in the Property Company. On 14 March
2014, the disposal of 60% equity interest in More Star by Eagle Spirit to Shaw under
the Shaw Agreement was completed and thus as at the Latest Practicable Date, Eagle
Spirit held 40% equity interest in More Star.
LETTER FROM CENTURION
– 37 –
The Property Company is a company incorporated in Hong Kong with limited
liability and is principally engaged in the business of property holding. Its principal
asset is the ownership of the TKT Hotel. It is a 4-star rated hotel currently known
as “Rosedale Hotel Kowloon” with a gross floor area of approximately 10,300 sq.
m. and 435 guest rooms. Based on the valuation report on the TKT Hotel as set out
in Appendix V to the Circular by Asset Appraisal Limited, an independent property
valuer, the market value of the TKT Hotel as at 30 September 2014 was estimated to
be approximately HK$1,285 million.
(iii) HK Macau Group
HK Macau is an investment holding company incorporated in the BVI which
owns the entire issued share capital of Rosedale Catering. Rosedale Catering is mainly
engaged in the operation of food and beverage outlets.
( iv) Rosedale Kowloon
Rosedale Kowloon is a company incorporated in Hong Kong with limited
liability and is the operator of the TKT Hotel. On 14 March 2014, Rosedale Kowloon
and the Property Company entered into the Master Lease, pursuant to which,
Rosedale Kowloon leasees the TKT Hotel for its hotel operation for a term of six (6)
years, the material terms of which are set out in the announcement of the Company
dated 10 November 2013 and the circular of the Company dated 18 February 2014.
For the continuing use of the Trademarks after the ES Completion, the Licensor
will grant a non-exclusive and non-transferrable licence to use the Trademarks to
Rosedale Kowloon under the Licence Agreement for a period commencing from the
ES Completion Date to 31 March 2020 (being the date on which the Master Lease
expires).
LETTER FROM CENTURION
– 38 –
1.4 Financial information of the Eagle Spirit Group
Set out below is a summary of the unaudited consolidated statements of profit or loss
and other comprehensive income of the Eagle Spirit Group for each of the three years ended
31 December 2013 and the six months ended 30 June 2013 and 2014 as set out in Appendix
II to the Circular:
Table C: Summarized unaudited consolidated statements of profit or loss and
other comprehensive income of the Eagle Spirit Group for each of
the three years ended 31 December 2013 and the six months ended 30
June 2013 and 2014
Unaudited consolidated statements of profit or loss and other comprehensive income highlights
For the year ended
31 December 2011
For the year ended
31 December 2012
For the year ended
31 December 2013
For the six months
ended 30 June
2013
For the six months
ended 30 June
2014(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)
Revenue – 55,943 125,179 56,861 70,126
Gross profit – 29,045 67,383 23,689 24,999
Other income 34,154 31,219 30,185 13,307 18,886
Administrative expenses (14,705) (39,182) (46,912) (18,801) (30,104)
Gain on disposal of
assets classified as held for sale – – – – 459,286
Share of result of a joint venture – – – – 954
Finance costs (569) (6,501) (17,303) (8,483) (3,432)
Profit before taxation 18,880 14,581 33,353 9,712 470,589
Profit after taxation and total
comprehensive income
for the year/period 17,502 13,118 31,839 8,949 469,832
Source: Appendix II to the Circular
As the TKT Hotel commenced business in July 2012, the revenue of the Eagle Spirit
Group for the year ended 31 December 2012 only covered the results of the TKT Hotel
from July to December 2012. The significant increase in revenue of the Eagle Spirit Group
for the year ended 31 December 2013 was mainly due to the contribution from the full year
results of the TKT Hotel in 2013. On 5 November 2013, Eagle Spirit and Shaw entered into
the Shaw Agreement in relation to the disposal of 60% equity interest in More Star by Eagle
Spirit to Shaw. Accordingly, the property, plant and equipment of the Eagle Spirit Group
had been reclassified to assets held for sale as at 31 December 2013 and resulted in the
approximately HK$459.3 million “Gain on disposal of assets classified as held for sale” for
the six months ended 30 June 2014 as set out above.
LETTER FROM CENTURION
– 39 –
As at 30 June 2014, the unaudited consolidated net assets of the Eagle Spirit Group
(after completion of the disposal of 60% equity interest in the More Star Group) was
approximately HK$446.4 million. Please refer to page II-4 in Appendix II to the Circular
for details of the unaudited consolidated statements of financial position providing such net
assets of the Eagle Spirit Group.
Upon ES Completion, Eagle Spirit will cease to be a subsidiary of the Company and
its financial results will no longer be consolidated into the financial statements of the Group.
1.5 The Makerston Group proposed to be disposed
Makerston, which is an investment holding company incorporated in the BVI, is
wholly-owned by the MS Vendor. Its principal asset is its holding of the entire issued share
capital of DS Eastin, which is an investment holding company incorporated in Hong Kong
holding 20% of the paid-up capital of Rosedale Beijing.
Upon completion of the capital increase under the Capital Increase Agreement which
took place on 29 November 2013, Rosedale Beijing has since become a sino-foreign joint
venture company and been held as to 80% by a subsidiary of the Investor and 20% by DS
Eastin. For further details, please refer to section 4.3 below.
Rosedale Beijing is principally engaged in hotel ownership and operation and its
principal asset is the ownership of the Beijing Hotel. According to the legal opinion from
the PRC legal adviser of the Company, Rosedale Beijing has obtained the necessary business
license to operate. The Beijing Hotel has gross floor area of approximately 37,173 sq. m.
with 462 guest rooms and a shopping arcade. Please refer to the “Letter From The Board”
for details on the approval for an extension of the Beijing Hotel which would result in an
increase in its total permissible floor area and the additional premium paid by Rosedale
Beijing. Based on the valuation report on the Beijing Hotel as set out in Appendix V to the
Circular prepared by Asset Appraisal Limited, an independent property valuer, the market
value of the Beijing Hotel was estimated to be approximately HK$1,300 million as at 30
September 2014.
LETTER FROM CENTURION
– 40 –
1.6 Financial information of the Makerston Group
Set out below is a summary of the unaudited consolidated statements of profit or loss
of the Makerston Group for each of the three years ended 31 December 2013 and the six
months ended 30 June 2013 and 2014 as set out in Appendix III to the Circular:
Table D: Summarized unaudited consolidated statements of profit or loss of
the Makerston Group for each of the three years ended 31 December
2013 and the six months ended 30 June 2013 and 2014
Unaudited consolidated statements of profit or loss highlights
For the year ended
31 December 2011
For the year ended
31 December 2012
For the year ended
31 December 2013
For the six months
ended 30 June
2013
For the six months
ended 30 June
2014(HK$’000) (HK$’000) (HK$’000) (HK$’000) (HK$’000)
Revenue 85,490 96,125 80,075 40,200 –
Gross profit 23,948 29,779 22,753 9,666 –
Other income 20,832 4,757 7,152 6,442 5,486
Administrative expenses (45,556) (42,671) (37,352) (20,583) (6,143)
Gain on disposal of
assets classified as held for
sale (see below for details) – – 656,230 – –
Share of result of an associate – – (1,223) – (2,463)
Finance costs (8,682) (8,026) (7,114) (3,839) (29)
(Loss) profit before tax (9,458) (16,161) 640,446 (8,314) (3,149)
(Loss) profit after tax for
the year/period (5,737) (10,771) 580,297 (5,616) (3,149)
Source: Appendix III to the Circular
The significant profit before and after taxation of the Makerston Group for the
year ended 31 December 2013 was mainly attributable to an one-off gain on the deemed
disposal of Rosedale Beijing of approximately HK$656.2 million. DS Eastin was entitled
to the Compensated Amount of approximately HK$665 million under the Capital Increase
Agreement, resulting in a significant gain on deemed disposal of Rosedale Beijing.
As at 30 June 2014, the unaudited consolidated net asset value of the Makerston
Group was approximately HK$645.0 million.
Upon MS Completion, Makerston will cease to be a subsidiary of the Company and its
financial results will no longer be consolidated into the financial statements of the Group.
LETTER FROM CENTURION
– 41 –
2. The Transactions
Details of the Transactions as extracted from the “Letter From The Board” and to be opined
by us are set out below:–
2.1 The Eagle Spirit Agreement
Parties
The following are the parties to the Eagle Spirit Agreement:–
(i) ES Vendor: Easy Vision Holdings Limited, a direct
wholly-owned subsidiary of the Company;
(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned
subsidiary of ITCP;
(iii) ES Vendor’s guarantor: the Company; and
(iv) Purchaser’s guarantor: ITCP.
As set out in the “Letter From The Board”, as at the date of the Eagle Spirit
Agreement, ITCP was owned indirectly as to 30.65% by ITCC, which is a substantial
shareholder holding 29.76% of the issued share capital of the Company. The Purchaser
(being a direct wholly-owned subsidiary of ITCP) is thus a connected person of the
Company under Chapter 14A of the Listing Rules.
2.1.1 Interests to be disposed of
The assets to be disposed of by the ES Vendor comprise the ES Sale Share
and the ES Sale Loan. The ES Sale Share represents the entire issued share capital of
Eagle Spirit as at the date of the Eagle Spirit Agreement and at the ES Completion.
The ES Sale Loan represents the aggregate amount owing by Eagle Spirit to the ES
Vendor as at the ES Completion Date. As at the Latest Practicable Date, the ES Sale
Loan amounted to approximately HK$33 million.
LETTER FROM CENTURION
– 42 –
2.1.2 ES Consideration
The ES Consideration is to be determined in accordance with the following
formula:
ES Consideration = HK$530 million
+ 40% of the consolidated ES Net Current Assets of
More Star
+ the ES Net Current Assets of Eagle Spirit
+ the ES Net Current Assets of Rosedale Kowloon
+ the consolidated ES Net Current Assets of HK
Macau
+ the combined ES Net Current Assets of Rosy
Universe,
subject to a maximum of HK$566 million.
As set out in the “Letter From The Board”, although the ES Net Current
Assets of respective entity (as disclosed in the above formula) include intercompany
balances that should be eliminated on consolidation, the effect of the intercompany
balances would be eliminated upon summation of the ES Net Current Assets of the
abovementioned entities. Accordingly, the ES Consideration calculation has taken into
account the elimination of intercompany balances.
Based on the unaudited financial information of the Eagle Spirit Group as at 30
June 2014, the ES Consideration is estimated to be approximately HK$504 million.
Table E below contains a breakdown of how this HK$504 million is arrived at.
The ES Consideration attributable to the ES Sale Loan is the face value of the
ES Sale Loan on a dollar-for-dollar basis, with the balance of the ES Consideration
being attributable to the ES Sale Share.
The ES Consideration is to be paid by the Purchaser to the ES Vendor on the ES
Completion Date in the following manner:
(i) as to HK$250 million payable by way of issue of the ES Note; and
(ii) as to the balance of the ES Consideration payable in cash.
LETTER FROM CENTURION
– 43 –
At ES Completion, the ES Consideration will be determined based on the draft
ES Completion Accounts prepared by the ES Vendor. The ES Vendor shall finalise
and agree the ES Completion Accounts with the Purchaser within two (2) months
after the ES Completion Date. The Purchaser will make up any shortfall of the ES
Consideration paid to the ES Vendor, or (as the case may be) the ES Vendor will return
any excess ES Consideration received based on the ES Completion Accounts, within
ten (10) Business Days after the finalisation of the agreed ES Completion Accounts.
The ES Consideration was determined after arm’s length negotiations between
the ES Vendor and the Purchaser with reference to (i) the preliminary valuation of the
TKT Hotel as at 31 March 2014 by Asset Appraisal Limited, an independent property
valuer and the ES Net Current Assets of each member of the Eagle Spirit Group and
on the basis that the Eagle Spirit Group will have no material debts at ES Completion
other than the ES Sale Loan; and (ii) the indemnity given by the ES Vendor and the
Company in favour of the Purchaser against all tax liabilities that may arise from
the disposal of 60% equity interest in More Star pursuant to the Shaw Agreement
and other liabilities arising under the Shaw Agreement, as no provision against such
liabilities have been made for the purposes of determining the ES Consideration.
Our views
Section 4.2 below contains details of the past transaction in respect of the
sale of 60% interest in the TKT Hotel. The following summarizes the pricing
comparisons for the ES Consideration and this past transaction insofar as
implied value of the TKT Hotel vs. its market value are concerned:
TKT Hotel on a 100% basis
Implied valuation
under the
consideration vs.
Market value
determined by the
valuation report
Under the ES Consideration HK$1,281.5 million
(Note)
HK$1,285.0 million
Consideration as set out
in the Company’s circular dated
18 February 2014
HK$1,280.0 million HK$1,285.0 million
Note: Implied valuation is calculated based on “valuation of the TKT Hotel based on ES
Consideration” and the face value of the ES Note as set out in Table E below of
HK$512.60 million divided by 40% = HK$1,281.5 million
LETTER FROM CENTURION
– 44 –
The implied valuation of the TKT Hotel under the ES Consideration
(assuming its face value) is thus very close to its market value as determined
by the valuation, which is also consistent with the aforesaid past transaction
involving the sale of 60% interest in the TKT Hotel. That said, the HK$250
million ES Note is valued at a discount and as such, the fair value of the ES
Consideration is thus less than its face value, details of which are set out in
Table E below.
Under the ES Consideration, Rosedale Kowloon, HK Macau and
Rosy Universe are also to be disposed of based on their net assets. We have
reviewed the unaudited management-prepared financial statements of each of
these subsidiaries of the Eagle Spirit Group and on the basis that their recent
historical profit and loss records were either insignificant, lack of a consistent
earnings record, or principal contracts that generated management fee income
are to be terminated, all of which would render a price-earnings multiple or
a cash flow multiple approach inappropriate, we concur with the Directors
of their basis to use the net asset values of such subsidiaries as consideration
under the ES Consideration.
2.1.3 Conditions precedent
Completion of the Eagle Spirit Agreement is conditional upon fulfillment or
waiver (as the case may be) of certain conditions precedent, details of which are set
out in the “Letter From The Board”. If any of these conditions is not fulfilled, remains
fulfilled or waived (as the case may be), the rights and obligations of the parties under
the Eagle Spirit Agreement shall lapse and be of no further effect.
Our views
The conditions precedent of the Eagle Spirit Agreement include, among
others, approval by the Independent Shareholders at the SGM; results of the
due diligence review and no material adverse change in the financial position of
the Eagle Spirit Group and each member of the More Star Group, we consider
such conditions precedent being fairly standard and they are therefore, fair and
reasonable.
LETTER FROM CENTURION
– 45 –
2.2 The Makerston Agreement
The parties to the Makerston Agreement are as follows:–
(i) MS Vendor: Rosedale Hotel Group Limited, which is
beneficially owned as to approximately 89.4%
by the Company;
(ii) Purchaser: Silver Infinite Limited, a direct wholly-owned
subsidiary of ITCP;
(iii) MS Vendor’s guarantor: the Company; and
(iv) Purchaser’s guarantor: ITCP.
Background of the Purchaser and its relationship with ITCC are set out in the
paragraph headed “The Eagle Spirit Agreement” above.
2.2.1 Interests to be disposed of
The assets to be disposed of under the Makerston Agreement comprise the MS
Sale Share and the MS Sale Loan. The MS Sale Share represents the entire issued
share capital of Makerston as at the date of the Makerston Agreement and at the MS
Completion. The MS Sale Loan represents the aggregate amount owing by Makerston
to the MS Vendor as at the MS Completion Date. As at the Latest Practicable Date, the
MS Sale Loan amounted to approximately HK$207 million.
The principal asset of the Makerston Group is the holding of a 20% interest in
Rosedale Beijing which holds the Beijing Hotel. Following completion of the Capital
Increase Agreement on 29 November 2013, Makerston’s interest in Rosedale Beijing
was diluted from 100% to 20%.
LETTER FROM CENTURION
– 46 –
2.2.2 MS Consideration
The MS Consideration is to be determined in accordance with the following
formula:
MS Consideration = HK$256 million
+ the MS Net Current Assets of Makerston
+ the MS Net Current Assets of DS Eastin
+ 20% of the MS Net Current Assets of Rosedale
Beijing
+ 20% of the amount of land premium paid by
Rosedale Beijing out of its cash on hand during
the period between the date of the Makerston
Agreement and the MS Completion Date,
subject to a maximum of HK$324 million, subject to any upward adjustment in
connection with the Compensated Amount as described under the paragraph headed
“Arrangement in respect of the Compensated Amount” below. The upward adjustment
for the land premium paid by Rosedale Beijing is to recognise the value of the cash
that is currently held by Rosedale Beijing (which would be counted towards the MS
Net Current Assets if not applied towards payment of land premium, as land premium
once paid is not considered as “current assets” of Rosedale Beijing).
As set out in the “Letter From The Board”, although the MS Net Current Assets
of the respective entity (as disclosed in the above formula) include intercompany
balances that should be eliminated on consolidation, the effect of the intercompany
balances would be eliminated upon summation of the MS Net Current Assets
of the abovementioned entities. Accordingly, the MS Consideration calculation
has taken into account the elimination of intercompany balances. Based on the
unaudited financial information of the Makerston Group as at 30 June 2014, the
MS Consideration is estimated to be approximately HK$302 million. Table E below
contains a breakdown of how this HK$302 million is arrived at.
The MS Consideration attributable to the MS Sale Loan is the face value of the
MS Sale Loan on a dollar-for-dollar basis, with the balance of the MS Consideration
being attributable to the MS Sale Share.
LETTER FROM CENTURION
– 47 –
The MS Consideration is to be paid by the Purchaser to the MS Vendor upon the
MS Completion Date in the following manner:
(i) as to HK$250 million payable by way of the issue of the MS Note; and
(ii) as to the balance of the MS Consideration payable in cash.
At MS Completion, the MS Consideration will be determined based on draft
MS Completion Accounts prepared by the MS Vendor. The MS Vendor shall finalise
and agree the MS Completion Accounts with the Purchaser within two (2) months
after MS Completion Date. The Purchaser will make up any shortfall of the MS
Consideration paid to the MS Vendor, or (as the case may be) the MS Vendor will
return any excess MS Consideration paid based on the MS Completion Accounts,
within ten (10) Business Days after the finalisation of the agreed MS Completion
Accounts.
The MS Consideration was determined after arm’s length negotiations between
the MS Vendor and the Purchaser with reference to the preliminary valuation of
the Beijing Hotel as at 31 March 2014 by Asset Appraisal Limited, an independent
property valuer and the MS Net Current Assets of the Makerston Group and on the
basis that the Makerston Group will have no material debts at MS Completion other
than the MS Sale Loan.
Our views
Section 4.3 below contains details of the past transaction in respect of
the sale of 80% interest in the Beijing Hotel. The following summarizes the
pricing comparisons for the MS Consideration and the past transaction insofar
as implied value of the Beijing Hotel vs. its market value are concerned:
Beijing Hotel on a 100% basis
Implied valuation
under the
consideration vs.
Market value
determined by the
valuation report
Under the MS Consideration HK$1,280.0 million
(Note)
HK$1,300.0 million
Consideration as set out in the
Company’s circular dated
26 July 2013
RMB1,000.0 million
(approximately
HK$1,260.0 million)
HK$1,190.7 million
(approximately
RMB945.0 million)
Note: Implied valuation is calculated based on “valuation of the Beijing Hotel based on
MS Consideration” and the face value of the MS Note as set out in Table E below
of HK$256.00 million divided by 20% = HK$1,280.0 million
LETTER FROM CENTURION
– 48 –
The implied valuation of the Beijing Hotel under the MS Consideration
(assuming its face value) is thus very close to its market value as determined by the
valuation, which is also consistent with the aforesaid past transaction involving the
sale of 80% interest in the Beijing Hotel. That said, the HK$250 million MS Note is
valued at a discount and as such, the fair value of the MS Consideration is thus less
than its face value, details of which are set out in Table E below.
2.2.3 Conditions precedent
MS Completion is conditional upon fulfillment or waiver (as the case may
be) of certain conditions precedent, details of which are set out in the “Letter From
The Board”. If any of these conditions is not fulfilled, remains fulfilled or waived
(as the case may be), the rights and obligations of the parties under the Eagle Spirit
Agreement shall lapse and be of no further effect.
Our views
The conditions precedent of the Makerston Agreement include, among
others, approval by the Independent Shareholders at the SGM; results of the due
diligence review and no material adverse change in the financial position of the
Makerston Group, we consider such conditions precedent being fairly standard
and they are therefore, fair and reasonable.
2.3 The ES Note and the MS Note
Both of the ES Note and the MS Note shall be unsecured, the principal terms of which
are set out in the “Letter From The Board”, a brief summary of which is as follows:
Issuer: ITCP
Noteholders: the ES Vendor for the ES Note and the MS Vendor for the
MS Note or their respective nominees
Principal amounts: HK$250 million for each of the ES Note and the MS Note
Interest: 5% per annum, payable semi-annually in arrears
Maturity: Second anniversary of the respective dates of the issue of
the ES Note and the MS Note, but ITCP may prepay all or
part of the outstanding principal amount (at the minimum
amount of HK$5,000,000) without any penalty.
LETTER FROM CENTURION
– 49 –
Our views
Valuation of the TKT Hotel and the Beijing Hotel
The Company engaged Asset Appraisal Limited to assess the market values of
the properties of the TKT Hotel and the Beijing Hotel and to prepare the valuation
reports as set out in Appendix V to the Circular. In order to assess the property
valuations, we have performed work pursuant to Note 1(d) to Rule 13.80 of the Listing
Rules, including reviewing the terms of engagement of Asset Appraisal Limited, its
scope of work under the engagement, the valuation reports and discussing with Asset
Appraisal Limited on the methodologies adopted and bases and assumptions made in
arriving at such property valuations. For the findings and reasons set out below, we are
satisfied with the result of our review.
In our discussion with Asset Appraisal Limited about its experience in similar
property valuations, we have also assessed the experience and qualification of
Asset Appraisal Limited and are satisfied with such assessment. As set out in the
valuation reports, both the TKT Hotel and the Beijing Hotel have been valued by the
“comparison method” where comparison based on prices realized or market prices
of comparable properties is made. In the case of TKT Hotel, the valuation results
obtained from the comparison method have been cross-checked against the Income
Capitalization Approach. We have also reviewed the analysis involving investment
yield and the present value factors in so far as valuation of the TKT Hotel is
concerned.
We understand from Asset Appraisal Limited that the rationale for the
comparison method adopted for its valuation methodology is because such approach is
the most appropriate, when market prices of comparable properties are available. We
have discussed details of the TKT Hotel and the Beijing Hotel set out in the valuation
reports with Asset Appraisal Limited and the major assumptions thereof. We are
satisfied with such discussions with Asset Appraisal Limited.
In light of the above and based on our discussions with Asset Appraisal
Limited, we are of the view that the valuation methodology adopted and the major
assumptions thereof are consistent with market practice and are fair and reasonable.
We have also noted that in the valuation reports, Asset Appraisal Limited specifically
stated that it has complied with the requirements set out in Chapter 5 (and in the case
of the Beijing Hotel, Practice Note 12) of the Listing Rules and the HKIS Valuation
Standards (2012 Edition) by the Hong Kong Institute of Surveyors. Having considered
the aforesaid, we are of the view that the valuation reports provide a valid basis for the
Directors to assess the fairness and reasonableness of the market values of the TKT
Hotel and the Beijing Hotel.
LETTER FROM CENTURION
– 50 –
Fair value of the ES Notes and the MS Notes
The Company has also engaged Asset Appraisal Limited to value the ES Notes
and the MS Notes and to assess their respective fair values for the purpose of the
Company’s preparation of the pro forma financial information set out in the Circular.
In order to assess such valuations and notwithstanding the report of such valuations
is not required to be set out in the Circular, we have performed work, to the extent
applicable, works similar to those mentioned above for the hotel property valuations
pursuant to Note 1(d) to Rule 13.80 of the Listing Rules, including reviewing the
terms of engagement of Asset Appraisal Limited, its scope of work under a separate
engagement letter, the valuation reports and discussing with Asset Appraisal Limited
on the methodologies adopted and bases and assumptions made in arriving at such
valuations. For the findings set out below, we are satisfied with the result of our
review.
We have discussed with Asset Appraisal Limited on the methodology adopted
and its bases and assumptions made in arriving at the fair values of the ES Notes
and the MS Notes. The methodology adopted involves a model which has taken into
account the credit profile of ITCP, the issuer of the ES Notes and the MS Notes,
the market yields of promissory notes issued by other issuers of similar credit
profile to that of ITCP and the resulting credit spread thereof. Having considered
the said methodology adopted and its bases and assumptions, we are of the view
that the valuations provide a valid basis for the Directors to assess the fairness and
reasonableness of the fair values of the ES Notes and the MS Notes.
Fair value is defined under Hong Kong Financial Reporting Standard 13 as the
price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the valuation date. Both the ES Notes and
the MS Notes are unsecured promissory notes carrying an annual interest rate of 5%,
which when measured against market yields of promissory notes of similar credit
profile, is viewed by Asset Appraisal Limited as inadequate. The present value of
such difference in yields over the 2-year life span of each of the ES Notes and the MS
Notes produce the following fair values under the valuation:–
Face value: Fair value as determined by valuation
HK$250 million ES Notes HK$217.0 million
HK$250 million MS Notes HK$217.0 million
Given the fair values of the ES Notes and the MS Notes are valued at a
discount to their face values, the following is a discount analysis of each of the ES
Consideration and the MS Consideration.
LETTER FROM CENTURION
– 51 –
Table E: Discounts as represented by the ES Consideration and the MS
Consideration based on fair values of the ES Notes and the MS
Notes
ES ConsiderationAs at
30 June 2014
ES Consideration based on
face value of the ES Note
ES Consideration based on
fair value of the ES Note
% of discount to the face
value of the ES Note
(HK$’ million) (HK$’ million) (HK$’ million)
Valuation of the TKT Hotel
(on a 40% basis) based on
the ES Consideration
512.60 Cash
ES Note
262.60
250.00
262.60
217.00
Sub-total 512.60 479.60 6.4%
Other non current assets of
the Eagle Spirit Group
(unaudited consolidated)
17.40 Assumed paid by
cash on a dollar-
for-dollar basis
17.40 17.40 Nil
Other “ES Net Current
Assets/(Liabilities)”*
(26.19) –Ditto– (26.19) (26.19) Nil
Total 503.81 503.81 470.81
MS ConsiderationAs at
30 June 2014
MS Consideration based on
face value of the MS Note
MS Consideration based on
fair value of the MS Note
% of discount to the face
value of the MS Note
(HK$’ million) (HK$’ million) (HK$’ million)
Valuation of the Beijing Hotel
(on a 20% basis) based on
the MS Consideration
256.00 Cash
MS Note
6.00
250.00
6.00
217.00
Sub-total 256.00 223.00 12.9%
Other “MS Net
Current Assets”**
45.76 Assumed paid by
cash on a dollar-
for-dollar basis
45.76 45.76 Nil
Total 301.76 301.76 268.76
* Note: Note (3)(a) to Pro Forma Financial Information under Scenario I on page IV-8 in
Appendix IV to the Circular
** Note: Note ( 4)(a) to Pro Forma Financial Information under Scenario II on page IV-16 in
Appendix IV to the Circular
Sources: Appendix IV to the Circular, note 3(a) to Scenario I and note 4(a) to Scenario II.
LETTER FROM CENTURION
– 52 –
Discounts as represented by the ES Consideration and the MS Consideration
Our findings on the discounts to the face value of the ES Consideration and MS
Consideration as represented by the fair value of ES Notes and the MS Notes are:–
(i) The Directors did not envisage there would be a discount as represented
by the non cash component of the ES Consideration and MS
Consideration i.e. the payment-in-kind as represented by each of the ES
Notes and the MS Notes.
(ii) As set out in sections 4.2 and 4.3 below, the recent disposal of 60%
of the TKT Hotel and 80% of the Beijing Hotel involved majority and
control stakes, whose values were in line with market values determined
by independent valuation reports. It is therefore reasonable to expect
the proposed disposal of the Group’s remaining minority interests in the
TKT Hotel and the Beijing Hotel under the Transactions to command
a price at a discount to their respective control stake values achieved
earlier. The question is now much “discount” would be reasonable and
in this regard, we referred to findings set out in the book “Valuing A
Business, The Analysis and Appraisal of Closely Held Companies,
5th Edition, by Shannon P. Pratt and Alina V. Niculita”. Chapter 15 of
this book concludes that a discount of up to 20% for minority interest
discount is considered reasonable. It should be noted that both the 6.4%
and 12.9% discounts as set out in Table E above are within this 20%
range. It can also be rationalized that, although unintentional, the smaller
discount of 6.4% represents a larger minority stake of 40%, when viewed
against the larger discount of 12.9% for a smaller minority stake of 20%.
Based on the above analysis, we are of the view that the discounts to the face
value of the ES Consideration and MS Consideration as represented by the fair value
of ES Notes and the MS Notes are fair and reasonable.
LETTER FROM CENTURION
– 53 –
3. Reasons for and Benefits of the Transactions
The following is a summary of the section headed “Reasons For And Benefits Of The
Transactions” as set out in the “Letter From The Board”:–
• As disclosed in the Company’s interim report for the six months ended 30 June 2013,
the slower pace of economic growth of the PRC and signs of the retreat of hot money
from Asia give a hard time to the Group’s hotel operations, the performance of which
depends heavily on the ups and downs of the world economic atmosphere. Facing this
situation, the Group intended to continue to enhance its hotel chain and to explore
further income streams so as to stay ahead of its competitors and to maximise value
for the Shareholders; and
• The Directors are of the view that the Transactions allow the Group to realise its
minority stakes in the TKT Hotel and the Beijing Hotel. The proceeds arising from the
Transactions would provide the necessary financial resources for the Group to repay
its borrowings when they fall due so as to strengthen its financial position, enhance
the Group’s capability to capture any future investment opportunities, and focus its
resources on other hotels of the Remaining Group.
Apart from the aforesaid reasons and benefits, the Directors has also taken into account the
hotels being under management of the Remaining Group and the financial effect of each of the
ES Completion and the MS Completion as set out in the “Letter From The Board”, the Directors
consider that the Remaining Group has a sufficient level of operations and tangible assets of
sufficient value to warrant its continued listing of the Shares on the Stock Exchange as required
under Rule 13.24 of the Listing Rules. In addition, given that the Remaining Group has identified
specific use of the net proceeds from the Transactions, the Directors consider that the Remaining
Group would not become a cash company upon ES Completion and MS Completion.
Having considered the above, the Directors are of the view that the terms of the Eagle Spirit
Agreement and the Makerston Agreement are fair and reasonable and the Transactions are in the
interests of the Company and the Shareholders as a whole.
Our views
Having considered the findings of the hotel industry in Hong Kong and Beijing in the
section headed “Hotel Industry Overview” below, we concur with the Directors of their view
on the slower pace of economic growth of the PRC and signs of possible retreat of hot money
from Asia are supported by recent press reports and statistical data for both Hong Kong and
Beijing, details of which are set out in section 6 below.
LETTER FROM CENTURION
– 54 –
We have also noted the disposal of the 60% of the TKT Hotel and the deemed disposal
of the 80% interest in the Beijing Hotel set out in section 4 below, the Transactions would
allow the Group to realise its residual minority interests in each of the TKT Hotel and the
Beijing Hotel, and based on the fair value of the ES Note and MS Note, at a price slightly at
a discount to each of the considerations for the majority stakes disposed earlier.
As the net proceeds from the transactions contemplated under the Eagle Spirit
Agreement and the Makerston Agreement are estimated to be approximately HK$502 million
and HK$300 million respectively, the Group intends to apply the net proceeds from the
Transactions as to approximately (i) HK$250 million for repayment of other borrowings;
(ii) HK$66 million for payment of the special dividend, details of which were disclosed in
the announcement of the Company dated 12 May 2014 (please note section 4.4 below); and
(iii) the remaining balance for future investment opportunities of the Group as and when
appropriate, we also concur with the Directors about their reasons and benefits in so far
as additional financial resources for the Group to repay its borrowings so as to strengthen
its financial position and to enhance the Group’s capability to capture future investment
opportunities are concerned. In this regard, your attention is also drawn to the “Letter From
The Board” which discloses that the Company has been in discussions with an independent
third party in relation to the possible acquisition of equity interest in a company engaging in
hotel-related business in the PRC.
Finally, Independent Shareholders should also note that as set out in the
announcements of ITCC and Hanny both dated 9 May 2014, completion of the Rosedale
Share Agreement (details were set out in the said announcements) is conditional on the ES
Completion and the MS Completion. In the said announcement released by Hanny, it was
disclosed that (i) the completion of the Rosedale Share Agreement will enable Hanny, its
subsidiaries and associated companies to hold approximately 29.98% of the issued share
capital of the Company; and (ii) citing proceeds from the Transactions would strengthen the
Remaining Group’s financial position, completion of the Rosedale Share Agreement is thus
made conditional on, among other things, the ES Completion and the MS Completion (or the
wavier of such condition by Hanny).
For the avoidance of doubt, completion of the Transactions is not conditional on
completion of the Rosedale Share Agreement and as set out in the “Letter From The Board”.
For further details, please refer to the announcement issued by Hanny dated 9 May 2014.
LETTER FROM CENTURION
– 55 –
4. Relevant past transactions announced by the Company
We have also reviewed the following past transactions announced by the Company for the
purpose of our independent advice as set out herein.
4.1 Proposed disposal of the TKT Hotel which was lapsed
On 13 February 2012, the Company announced a proposed sale of the TKT Hotel in
the form of a disposal of all the then equity interest in and shareholders’ loan from More Star
for a total consideration of approximately HK$1,317.7 million, which was arrived at based
on an agreed value of HK$1,314.6 million for the 100% of the TKT Hotel and an estimated
value of HK$3.1 for the net asset value of the disposal group less the consideration for
the sale loan. This consideration was arrived at, among other things, with reference to the
preliminary valuation of the TKT Hotel in its existing state of HK$1,100 million.
The purchaser, which was an independent third party, was a company incorporated
in Singapore. The completion of this proposed disposal was subject to, among other things,
the successful completion of the initial public offering of units in a real estate investment
trust (“REIT”), the listing of which would have been on the Singapore Exchange Securities
Trading Limited. 5% of the consideration would have been paid in the form of these REIT
units and the remaining 95% payment would have been in cash. This condition on listing
could not become unconditional and the lapsed disposal was announced by the Company on
29 June 2012.
Our views
Whilst the abovementioned lapsed disposal of 100% of the TKT Hotel might
have been priced at a 19.5% premium to valuation, we note that such disposal was
intended to be part of a listing of a REIT in Singapore and had it proceeded, 5% of
the consideration would have been paid in the relevant REIT units. At the end, the
listing did not proceed and as a result, the proposed disposal lapsed. We therefore
take the view that the intended pricing of this lapsed disposal is not relevant to our
consideration of the pricing under the ES Consideration.
LETTER FROM CENTURION
– 56 –
4.2 Disposal of 60% the TKT Hotel
The disposal of the 60% of the TKT Hotel was in the form of the disposal of 60%
equity interest in, and corresponding shareholders’ loan due by, More Star to Shaw, an
independent third party purchaser, details of which were disclosed in the circular of the
Company dated 18 February 2014. Consideration for this disposal was based on HK$768
million plus 60% of the net asset value of the disposal Group (consisted of More Star and
the Property Company), subject to adjustment to such net asset value. This consideration
suggested approximately HK$1,280.0 million was the agreed value attributable to 100%
of the TKT Hotel, viewed against the valuation report on the TKT Hotel which indicated a
market value of HK$1,285.0 million then. This disposal was completed on 14 March 2014.
Our views
The consideration for the disposal of the 60% of the TKT Hotel was in line with
the value determined by a valuation report. The consideration for the disposal group
consisted of More Star and the Property Company was on a net current assets value
basis. These are therefore, comparable to the underlying pricing rationale of the ES
Consideration.
4.3 Deemed disposal of interest in the Beijing Hotel
On 31 May 2013, DS Eastin, the Investor, Rosedale Beijing and the Company entered
into the Capital Increase Agreement, pursuant to which the Investor agreed to procure the
capital contribution of US$68.8 million (representing approximately HK$533.2 million) in
cash for the increase in the registered capital of Rosedale Beijing. Upon completion of the
capital increase under the Capital Increase Agreement which took place on 29 November
2013, Rosedale Beijing has become a sino-foreign joint venture company with a registered
capital of US$86 million (representing approximately HK$666.5 million) held as to 80% by
a subsidiary of the Investor and 20% by DS Eastin (or 17.7%, in so far as the Company’s
indirect effect equity interest is concerned). The Investor is an independent third party.
Details of this deemed disposal were disclosed in the circular of the Company dated 26 July
2013 (“Beijing Hotel Circular”).
We have sought confirmation from the management of the Company and we are given
to understand that under the Compensated Amount set out in the Beijing Hotel Circular, the
agreed value attributable to the Beijing Hotel was then RMB1,000 million (hence RMB800
million less the adjustments set out on page 9 of the Beijing Hotel Circular). The valuation
report on the Beijing Hotel as disclosed in the Beijing Hotel Circular indicated a market
value of HK$1,190.7 million (approximately RMB945.0 million) then.
LETTER FROM CENTURION
– 57 –
Our views
The consideration for the deemed disposal of 80% of the Beijing Hotel was in
line with the value determined by a valuation report. This is therefore, comparable to
the underlying pricing rationale of the MS Consideration.
4.4 Declaration of Special Dividend
The Company announced on 12 May 2014 that the Board has resolved to declare a
special dividend of HK$0.10 per Share subject to either ES Completion or MS Completion
(“Special Dividend”). Based on 657,675,872 Shares in issue as at the date of the said
announcement, the Special Dividend in aggregate would amount to approximately HK$66
million. The record date of the Special Dividend will be determined and announced by the
Company at a later date.
Our views
The Company changed its name to its current name in April 2010 and
announced that such name change was to more accurately reflect the principal
activities and to highlight the business focus of the Group. Following such name
change, the Company had declared an interim special dividend of HK$0.10 per Share
in its 2010 interim results announcement dated 27 August 2010. Subsequently, the
Company did not declare any dividend until on 12 May 2014, when the directors of
the Company declared the Special Dividend.
The Special Dividend will give all Shareholders an equal opportunity to
participate in such distribution and will allow those Shareholders the flexibility to
either reinvest their cash dividends in other investments or treat such dividends as
partial return for their investments in the Company. Therefore, we are of the view that
the Special Dividend is in the interests of the Independent Shareholders.
5. Share price performance of the shares vs. comparables
As the ES Consideration and the MS Consideration are determined based on net asset
value and adjustment to such net assets as a result of both the property and promissory notes
valuations, we take the view that a price-to-book discount as represented by the net assets of the
hotel properties and the fair value of each of the ES Note and MS Note is the underlying pricing
rationale for the Transactions. The 6.4% discount and 12.9% discount based on the fair value of the
ES Note and MS Note respectively as set out in Table E above would therefore represent a price-
LETTER FROM CENTURION
– 58 –
to-book discount of respectively, 0.936 time (i.e. 1–0.064) and 0.871 time (i.e. 1–0.129). On this
basis, we have reviewed the share price performance of the Shares so as to analyse how the market
values the Shares and ultimately, the underlying net assets of the Group. We noted that the market
price as commanded by the Shares was consistently at a discount to the Group’s net book value.
On this issue, set out below is a chart which summarizes the historical price-to-book discount as
commanded by the Shares.
Chart I A general overview of the historical price/book discount as commanded by
the Shares since August 2010 (closing price per Share to reported net asset
value of the Group) vs. the price/book discounts of the Transactions
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
31
-Mar
-14
28
-Feb
-14
30
-Jan
-14
31
-Dec
-13
29
-Nov
-13
31
-Oct
-13
30
-Sep
-13
30
-Au
g-1
33
1-J
ul-
13
28
-Ju
n-1
33
1-M
ay-1
33
0-A
pr-
13
28
-Mar
-13
28
-Feb
-13
31
-Jan
-13
31
-Dec
-12
30
-Nov
-12
31
-Oct
-12
28
-Sep
-12
31
-Au
g-1
2
31
-Ju
l-1
22
9-J
un
-12
31
-May
-12
30
-Ap
r-1
23
0-M
ar-1
2
29
-Feb
-12
31
-Jan
-12
30
-Dec
-11
31
-Oct
-11
30
-Sep
-11
31
-Au
g-1
1
29
-Ju
l-1
13
0-J
un
-11
31
-May
-11
29
-Ap
r-1
13
1-M
ar-1
1
28
-Feb
-11
31
-Jan
-11
31
-Dec
-10
30
-Nov
-10
31
-Oct
-10
30
-Sep
-10
30
-Au
g-1
0
30
-Nov
-11
P/B 0.936 as represented by the ES Consideration based on the fair value of the ES Note
Tim
es
P/B 0.871 as represented by the MS Consideration based on the fair value of the MS Note
30 August 2010, the next trading date
following the first interim results
were published and after
the change of Company’s name
11 April 2014 the last trading date
preceding the announced of the Transactions
Source: Annual and interim reports of the Company
The above chart tracks the performance of the Shares since 30 August 2010, the next trading
date following the publication of the interim results of the Group for the six-month ended 30 June
2010 on 27 August 2010, being the first results announcement under the Company’s current name.
The Company changed its name to its current name in April 2010 and announced that such name
change was to more accurately reflect the principal activities and to highlight the business focus of
the Group. Based on the above chart, the Share price has been trading at a discount to the Group’s
book value since August 2010. When viewed against such Share price performance, the implied
price-to-book discounts of 0.936 and 0.871 time as represented by the ES Consideration and the MS
Consideration respectively are in our view, fair and reasonable, as such discounts are substantially
less than that commanded by the Share price as set out in the above chart.
LETTER FROM CENTURION
– 59 –
Following the above comparison, we are of the opinion that it is also important to extent such
comparison to other market comparables of the Company to provide a general overview of a sector-
based share price performance. Set out below are price-to-book multiples of issuers whose shares
are listed on the Stock Exchange and whose hotel business is reasonably comparable to that of the
Company. Our selection criteria is that these comparables (i) have over 75% of its turnover in hotel-
related operations in one of the two most recent annual results announced prior to 11 April 2014,
the date the Agreements were entered into; and (ii) given the size of the market capitalization of the
Company, have market capitalisation of less than HK$1 billion. We are of the view that any issuer
whose market capitalization is HK$1 billion or larger may be less comparable to the Company.
Based on such criteria, we consider the list of the comparables as set out in the table below
exhaustive. Due to the nature of this kind of comparison, which varies from issuers’ sizes, lines of
business, markets, levels of leverage, unlisted vs. listed assets etc., the comparison result should
only be considered in conjunction with other findings as set out herein.
Table F: Price-to-book comparable analysis of other issuers whose principal
business is in hotel operations
Company Name Stock Code
Market cap. based on
closing share price on
11 April 2014
Price-to-book based on
closing share price on,
and published annual or
interim results/ reports prior to,
11 April 2014(HK$’ million)
Capital Estate Limited 193 602 0.79
City e-Solutions Limited 557 417 0.73
Far East Hotels and
Entertainment Limited 37 114 0.34
Mexan Limited 22 334 0.97
Shun Cheong Holdings Limited 650 215 1.09
Shun Ho Resources Holdings Limited 253 487 0.21
Shun Ho Technology Holdings Limited 219 849 0.21
Minimum 0.21Maximum 1.09
Average 0.62
The Company 1189 388 0.20
Source: Stock Exchange’s website
LETTER FROM CENTURION
– 60 –
Based on the above table, the average price-to-book multiples of the comparable companies
is at a discount of 0.62 time and their minimum and maximum price-to-book multiples range from
0.21 time to 1.09 times, the implied price-to-book discounts of 0.936 and 0.871 time as represented
by the ES Consideration and the MS Consideration respectively are in our view, fair and reasonable,
as such discounts are substantially less than that commanded by most of these market comparables.
6. Hotel Industry Overview
Hong Kong
In a report in the Property section of the South China Morning Post titled “Hotels
Hit By Fall In Visitors From Mainland” published on 14 May 2014, it was reported that
(i) according to Immigration Department figures, the number of mainland tourists coming
to Hong Kong dropped 1.5% year-on-year during the Labour Day holiday; and (ii) it was
the first time those visitors decreased during the holiday since the introduction in 2003 of
the individual traveler scheme, which allows mainland tourists to visit Hong Kong without
joining tour groups. While overnight visitor arrivals grew by 8% to 25.66 million last year,
according to Hong Kong Tourism Board, the arrivals from other short-haul and long-haul
markets reportedly dipped 0.5% and 3.4% respectively. The fall in mainland tourists was
reported to be attributable to a combination of reasons including credit squeeze in the PRC,
the RMB depreciation against HK$, the anti-corruption campaign in the PRC and the recent
protests in Hong Kong against mainland tourists. The decrease in mainland tourists is said to
pose a challenge to the hotel industry in Hong Kong.
In another report on the front page of the South China Morning Post titled “Drop
In Retail Sales Biggest In Five Years” on 4 June 2014. Citing source from the Census and
Statistics Department, it was reported that the volume of Hong Kong’s retail sales in April
2014 dropped by 9.5% over a year earlier. This drop was reportedly to be the sharpest in five
years since February 2009, according to the Financial Secretary Mr. John Tsang Shun-wah.
Such poor performance was also reportedly, attributable to the slow down in growth rate in
mainland visitors to Hong Kong from 26.7% in March 2014 to 14.7% in April 2014.
The TKT Hotel is classified by the Hong Kong Tourism Board as a “Medium Tariff
Hotel” out of a total of four ratings. Against such classification, the following charts are
produced and these charts are with respect to all hotels in Hong Kong in general and hotels
classified under “Medium Tariff Hotel” category in particular.
LETTER FROM CENTURION
– 61 –
Chart II Number of hotel rooms supply since 2009 based on all the hotels and
those classified under “Medium Tariff Hotels” in Hong Kong
59,627
17,342 17,591 17,07219,566 20,048 20,812 20,854 21,429 21,234 21,234 21,234 21,396 21,482
60,42862,830
67,39470,017 70,083 70,630 70,630 70,786 70,814 71,066 71,304 71,887
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2009
2010
2011
2012
2013
All Hotels
No.
of
Roo
ms
Jan
2014
Feb 2
014
Mar
201
4
Apr
201
4
May
201
4
Jun
2014
Jul 2
014
Aug
201
4
Medium Tariff Hotels
Source: Insight & Research, Hong Kong Tourism Board
Based on the above chart, total number of hotel rooms of all the hotels in Hong Kong
has been growing since 2009 over the last 5 years period, at 70,017 hotel rooms by the end
of 2013. In comparison, total number of hotel rooms of the “Medium Tariff Hotels” category
saw a small decline in 2011 but has since resumed steady growth to 20,048 hotel rooms by
the end of 2013. For the first eight months in 2014, the number of hotel rooms appears to
be relatively stable for either all hotels or those classified under “Medium Tariff Hotels”
category.
LETTER FROM CENTURION
– 62 –
Chart III Hotel room occupancy rate and average room rate of the hotels
under the “Medium Tariff Hotels” category in Hong Kong
2009
2010
2011
2012
2013
Hotel Room Occupancy Rate (%)
Jan
2014
Feb 2
014
Mar
201
4
Apr
201
4
May
201
4
Jun
2014
Jul 2
014
Aug
201
4
Average Achieved Hotel Rate (HK$)
70%
75%
80%
85%
90%
95%
100%
HK$0
HK$100
HK$200
HK$300
HK$400
HK$500
HK$600
HK$700
HK$800
HK$900
80%
HK$481
HK$585
HK$710
HK$781 HK$758HK$745 HK$750
HK$757HK$786
HK$724
HK$676
HK$751
HK$790
90%
93%
92%91%
89%
92%95%
92%
88%91%
95% 96%(%
)O
ccup
ancy
Rat
e
Source: Insight & Research, Hong Kong Tourism Board
Based on the above chart, hotel room occupancy rate of hotels under the “Medium
Tariff Hotels” category had been steadily increasing between 2009 and 2011 to 93% in 2011
but such growth had since been replaced with a small decline trend for the years 2012 and
2013 to 92% and 91% respectively. Average room rate also had also been steadily increasing
until 2013, which saw a small decline on a year-on-year basis in 2013. Trends for the first
eight months in 2014 are for reference only, as fluctuations in occupancy rate and average
achieved room rate on a month-to-month basis are too short to be conclusive as a trend.
LETTER FROM CENTURION
– 63 –
Beijing
Beijing in general is considered one of the more sought after attractions in the PRC for
both domestic and international tourists and business visitors, given its political, economic
and cultural centre status. Beijing is also viewed as a strong conference market and ranks
as one of the more sought after destinations for “Meetings, Incentives, Conventions and
Exhibitions”. That said, the average room rate and average room occupancy trends for 4-star
hotels in Beijing have been, respectively, flat and declined slightly over the last two years of
2012 to 2013. This was reportedly, attributable to the scaling back of international visitors,
due to a range of reasons, including RMB appreciation, Beijing’s smog issue and European
debt crisis. Although domestic tourists appear to offset some of the decline in international
tourist numbers. Charts IV and V below are to summarise the 4-star hotel industry in which
the Beijing Hotel operates.
Chart IV Average room rate and average room occupancy rate in respect of
4-star hotels in Beijing
400
420
440
460
480
500
520
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
439.9 440.8
472.6
500.3 500.3502.5
496.3
468
506.4
482.7484.6
467.8 467.9
51.20%
59.10%
63.10% 62.60% 61.00%
47.80%
40.80%
57.50%60.20%
58.70% 57.70%
65.80% 66.70%
2009
2010
2011
2012
2013
Average Room Rate
(RMB/Room) (4-Star Hotels)
Jan
2014
Feb 2
014
Mar
201
4
Apr
201
4
May
201
4
Jun
2014
Jul 2
014
Aug
201
4
Average Room Occupancy (%)
(4-Star Hotels)
RM
B
Source: Beijing Municipal Bureau of Statistics
The above chart shows average room rate of 4-star hotels in Beijing had a sharp
increase from 2010 to 2012 but remained flat at RMB500.3 for 2012 and 2013. Average room
occupancy rate also peaked in 2011 and then leveled off with a small decline after 2011
to 61% in 2013. The monthly statistics on average room rate and room occupancy rate for
January to August 2014 are for reference only as the month-to-month trends fluctuated up
and down but are too short to be conclusive as a trend.
LETTER FROM CENTURION
– 64 –
Chart V Hotels’ revenue in aggregate in respect of 4-star hotels in Beijing
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1,000,000
700,986
780,070
849,921
933,198891,167
800,000
900,000
63,665 45,60966,413 68,763 68,613 65,839 69,611 72,123
0
2009
2010
2011
2012
2013
RM
B (
in m
illio
n)
Jan
2014
Feb 2
014
Mar
201
4
Apr
201
4
May
201
4
Jun
2014
Jul 2
014
Aug
201
4
Source: Beijing Municipal Bureau of Statistics
From the above chart, revenue for 4-star hotels in Beijing peaked in 2012 and declined
in 2013. For the first eight months ended 31 August 2014, apart from a small drop in revenue
for the month of February 2014, revenues appear to have been stable with relatively flat
growth rate.
Our views
The above Charts on Hong Kong’s and Beijing’s hotel industries in which the
TKT Hotel and Beijing Hotel respectively operates in do support the Board’s view on the
slower pace of economic growth in the PRC which has had an impact on the Group’s hotel
operations in general. Such impact would appear to be more visible in (i) Chart III, in so far
as the room occupancy rate of the “Medium Tariff Hotels” is concerned, which has a steady
but mild decline since 2011; and (ii) Chart V, as 4-star hotels’ revenue has declined from the
peak of 2012, on a year-on-year basis. Taken as a whole, we are of the opinion that these
trends generally support the economic reasons cited by the Board for the Transactions.
LETTER FROM CENTURION
– 65 –
7. Financial effects of the Transactions
7.1 Disposal of the Eagle Spirit Group
Assuming the disposal of the Eagle Spirit Group had been completed on 30 June 2014,
the Group would recognise a loss of approximately HK$14.2 million which is calculated as
follows:–
HK$’ million
Pro forma total fair value of the ES Consideration 470.8
Less: Estimated costs directly attributable to the disposal of
the ES Sale Share and the ES Sale Loan (2.0)
468.8
Less: Carrying amount of the net assets of the Eagle Spirit Group (446.4)
Less: Carrying amount of the ES Sale Loan (36.6)
Pro forma loss on
the disposal (14.2)
Source: Note (3) to the Pro Forma Financial Information under Scenario I in Appendix IV to the Circular
The loss of approximately HK$14.2 million as set out above is due to the fair value
of the ES Note being valued at HK$217 million, which is less than its face value of HK$250
million.
LETTER FROM CENTURION
– 66 –
7.1.1 Pro forma financial effects of the disposal of the Eagle Spirit Group
Based on the unaudited pro forma financial information of the Remaining
Group as set out in Appendix IV to the Circular, and assuming the disposal of the
Eagle Spirit Group had been completed on 30 June 2014 or on 1 January 2013, as
the case may be, the pro forma financial effects on the Group would have been as
follows:–
Table G: A summary of pro forma financial effects of the disposal of the
Eagle Spirit Group (HK$’ million)
Pro forma effects on Before the disposal
After the disposal
Pro forma financial effects
Total assets HK$3,084.2 HK$3,050.8 Decreased by
HK$33.4
or 1.1%
Total liabilities HK$479.4 HK$460.2 Decreased by
HK$19.2
or 4.0%
Net assets (attributable
to Shareholders)
HK$2,369.2 HK$2,355.0 Decreased by
HK$14.2
or 0.6%
Earnings (attributable
to Shareholders)
HK$382.0 HK$ 364. 1 Decreased by
HK$ 17. 9
or 4. 7%
Cash flow (Cash and
cash equivalents
at year end)
HK$427.3 HK$568.0 Increased by
HK$140.7
or 32.9%
Source: Appendix IV to the Circular under Scenario I
LETTER FROM CENTURION
– 67 –
Our views
Possible effects on assets
Based on the unaudited condensed consolidated statement of financial
position of the Group as at 30 June 2014 and assuming the disposal of the Eagle
Spirit Group had been completed on 30 June 2014, the total assets and net
assets of the Group would have been decreased by HK$33.4 million (or 1.1%)
and HK$14.2 million (or 0.6%) from approximately HK$3,084.2 million and
HK$2,369.2 million to approximately HK$3,050.8 million and HK$2,355.0
million respectively as set out in Table G above. Given the size of the Group’s
total assets and net assets as at 30 June 2014, such decreases are relatively
immaterial and are mainly due to the pro forma loss arising from the disposal of
the Eagle Spirit Group as set out above.
Possible effects on earnings
Based on the audited consolidated statement of profit or loss and other
comprehensive income of the Group for the year ended 31 December 2013
and assuming the disposal of the Eagle Spirit Group had been completed
on 1 January 2013, the Group’s results would have been decreased by
approximately HK$ 17. 9 million from the net profit attributable to Shareholders
of approximately HK$382.0 million for the year ended 31 December 2013 to
approximately HK$ 364. 1 million. This improvement is the result of a number
of pro forma adjustments, details of which are set out in Notes 4-7 on page
IV-9 in Appendix IV to the Circular. In particular, under the said Note 7, the
relevant pro forma adjustment represents the recognition of the pro forma loss
arising from the disposal of the Eagle Spirit Group as if such disposal were
completed and the Group’s control over the Eagle Spirit Group were lost on 1
January 2013. In considering the Eagle Spirit Group only holding 40% interest
in More Star in the transaction of the disposal of the Eagle Spirit Group, it is
not meaningful to calculate a pro forma gain or loss based on the assets and
liabilities of the Eagle Spirit Group as at 1 January 2013 since the Eagle Spirit
Group held 100% interest in More Star as at 1 January 2013. Therefore, for the
purposes of the pro forma consolidated statement of profit or loss and other
comprehensive income (and pro forma consolidated statement of cash flows),
it is more representative to assume that the pro forma loss on such disposal is
equal to HK$14,2 million as calculated on the same basis as set out in section
7.1 above. Such decrease is in our view, immaterial.
LETTER FROM CENTURION
– 68 –
Possible effects on cash flows
Based on the audited consolidated statement of cash flows of the Group
for the year ended 31 December 2013 and assuming the disposal of the Eagle
Spirit Group had been completed on 1 January 2013, the Group’s cash flow
would have been improved by approximately $140.7 million or 32.9% from
HK$427.3 million cash and cash equivalents for the year ended 31 December
2013 to approximately HK$568.0 million. This improvement is mainly
because of the net cash inflow of the cash proceeds from the disposal. Such
improvement is a positive effect.
7.2 Proposed disposal of the Makerston Group
Assuming the disposal of the Makerston Group had been completed on 30 June 2014,
the Group would recognise a gain attributable to Shareholders of approximately HK$2.9
million which is calculated as follows:–
HK$’ million
Pro forma total fair value of the MS Consideration 268.7
Estimated costs directly attributable to the disposal of
the MS Sale Share and the MS Sale Loan (2.0)
266.7
Less: Carrying amount of the net assets of the Makerston Group (645.0)
Add: Compensated Amount recoverable from the Purchaser 666.0
Less: Carrying amount of the MS Sale Loan (217.7)
Less: Tax indemnity payable undertaken by the Remaining Group (66.8)
Pro forma gain on the disposal (3.2)
Pro forma gain on the disposal attributable to Shareholders (2.9)
Source: Note (4) to the Pro Forma Financial Information under Scenario II in Appendix IV to the Circular
The gain of approximately HK$3.2 million only as set out above is due to the fair
value of the MS Note being valued at HK$217 million, which is less than its face value of
HK$250 million.
LETTER FROM CENTURION
– 69 –
7.2.1 Pro forma financial effects of the disposal of the Makerston Group
Based on the unaudited pro forma financial information of the Remaining
Group as set out in Appendix IV to the Circular, and assuming the disposal of the
Makerston Group had been completed on 30 June 2014 or on 1 January 2013, as
the case may be, the pro forma financial effects on the Group would have been as
follows:–
Table H: A summary of pro forma financial effects of the disposal of the
Makerston Group (HK$’ million)
Pro forma effects on Before the disposal
After the disposal
Pro forma financial effects
Total assets HK$3,084.2 HK$3,087.4 Increased by
HK$3.2
or 0.1%
Total liabilities HK$479.4 HK$479.4 Unchanged due
to rounding
(small change
if no rounding)
Net assets (attributable
to Shareholders)
HK$2,369.2 HK$2,372.1 Increased by
HK$2.9
or 0.1%
Earnings/(Loss) (attributable
to Shareholders)
HK$382.0 (HK$ 227. 7) Decreased by
HK$ 609. 7
or 159. 6%
Cash flow (Cash and cash
equivalents at year end)
HK$427.3 HK$456.0 Increased by
HK$28.7
or 6.7%
Source: Appendix IV to the Circular under Scenario II
LETTER FROM CENTURION
– 70 –
Our views
Possible effects on assets
Based on the unaudited condensed consolidated statement of financial
position of the Group as at 30 June 2014 and assuming the disposal of the
Makerston Group had been completed on 30 June 2014, the total assets and
net assets of the Group would have been increased by HK$3.2 million or 0.1%
and HK$2.9 million or 0.1% from approximately HK$3,084.2 million and
HK$2,369.2 million to approximately HK$3,087.4 million and HK$2,372.1
million respectively as set out in Table H above. Given the size of the Group’s
total assets and net assets as at 30 June 2014, such increases are relatively
immaterial.
Possible effects on earnings
Based on the audited consolidated statement of profit or loss and other
comprehensive income of the Group for the year ended 31 December 2013
and assuming the disposal of the Makerston Group had been completed on 1
January 2013, the Group’s results would have been decreased by approximately
HK$ 609. 7 million or 159. 6% from the net profit attributable to Shareholders
of approximately HK$382.0 million for the year ended 31 December 2013 to a
loss of approximately HK$ 227. 7 million. This “loss” is due to the adjustments
to the one-off “gain on deemed disposal of Rosedale Beijing” of HK$781.8
million (HK$656.2 million + HK$125.6 million as set out below), which turn
such account to nil, as follows:–
(i) adjustment represents the deconsolidation of the results
attributable to the Makerston Group and in particular, the
aforesaid one-off “gain on deemed disposal of Rosedale Beijing”
(amounted to HK$656.2 million), from the audited consolidated
statement profit or loss and other comprehensive income of the
Group for the year ended 31 December 2013 as if the proposed
disposal had taken place on 1 January 2013; and
(ii) adjustment represents the HK$:RMB exchange difference
arising from the accumulated translation difference (amounted to
HK$125.6 million) arising from Rosedale Beijing .
LETTER FROM CENTURION
– 71 –
For further details of the above adjustments, please refer to notes (5) ,
(7) and (10) on page IV-18 in Appendix IV to the Circular. In particular, under
the said note 10, the relevant pro forma adjustment represents the recognition
of the pro forma gain arising from the disposal as if the Makerston Group
were completed and the Group’s control over the Makerston Group were lost
on 1 January 2013. In considering the Makerston Group only holding 20%
interest in Rosedale Beijing in the transaction of the disposal of the Makerston
Group, it is not meaningful to calculate a pro forma gain or loss based on the
assets and liabilities of the Makerston Group as at 1 January 2013 since the
Makerston Group held 100% interest in Rosedale Beijing as at 1 January 2013.
Therefore, for the purposes of the pro forma consolidated statement of profit
or loss (and other comprehensive income and pro forma consolidated statement
of cash flows), it is more representative to assume that the pro forma gain on
such disposal is equal to the HK$3.2 million as calculated on the same basis as
set out in section 7.2 above. Given the “gain on deemed disposal of Rosedale
Beijing” was only an one-off accounting gain attributable to the results of the
Makerston Group, the pro forma adjustments thereof are one-off in nature
and are not expected to have a continuing effect on the Remaining Group. We
therefore do not consider this effect relevant to our analysis.
Possible effects on cash flows
Based on the audited consolidated statement of cash flows of the
Group for the year ended 31 December 2013 and assuming the disposal of
the Makerston Group had been completed on 1 January 2013, the Group’s
cash flow would have been improved by approximately HK$28.7 million or
6.7% from HK$427.3 million cash and cash equivalents for the year ended
31 December 2013 to approximately HK$456.0 million. This improvement is
mainly because of the net cash inflow of the cash proceeds from the disposal.
Such improvement is a positive effect.
Shareholders should note that (i) the actual gain or loss from the
Transactions to be recorded by the Company will depend on the financial
position of the Eagle Spirit Group and the Makerston Group as at the ES
Completion Date and the MS Completion Date respectively; and (ii) the
purpose of the abovementioned pro forma financial information is solely to
illustrate the impact of a significant event or transaction on unadjusted financial
information of the Group as if the event had occurred or the transaction had
been undertaken and accordingly, there is no assurance that the actual outcome
of the event or transaction would have been as presented.
LETTER FROM CENTURION
– 72 –
The disposal of the Eagle Spirit Group and the Makerston Group will
result in the Group recognising a loss and an insignificant gain respectively.
Had the fair value of each of the ES Notes and the MS Notes been valued at
par to their face value, the proposed disposal of the Eagle Spirit Group and the
Makerston Group would have been resulted in a gain and a more significant
gain from disposal respectively.
We are therefore of the opinion that the pro forma financial effects on
the Group as set out in the sections above are either for illustrative purpose,
inconclusive or are relatively immaterial.
8. Financial and Trading Prospects of the Group
Your attention is also drawn to the section headed “Financial And Trading Prospects Of The
Group” in the “Letter From The Board”, in particular, Group intends to repay other borrowing
out of the net proceeds from the Transactions and in so doing, lower the gearing ratio and better
enhance the financial position of the Company. The Remaining Group will also continue to engage
in hotel operations and trading of securities.
SUMMARY
The Group’s segment profit from its hotel operations for each of the past three years ended 31
December 2013 was consistently at a loss (the Group’s profit from hotel operation in 2013 was due to
the one-off gain of the deemed disposal of Rosedale Beijing only). The Group had tried unsuccessfully to
dispose of its 100% interest in the TKT Hotel in 2012 and was finally able to sell a majority stake in each
of the TKT Hotel and Beijing Hotel recently to independent third parties.
We concur with the Directors’ views that the Transactions would allow the Group to realise its
minority investments in the TKT Hotel and the Beijing Hotel, at terms which we find to be fair and
reasonable and the proceeds receivable from the Transactions would provide the necessary financial
resources for the Group to repay its borrowings when they fall due so as to strengthen its financial position
and to enhance the Group’s capability to capture any future investment opportunities.
The Board has resolved to declare the Special Dividend amounting to approximately HK$66 million
which Shareholders could redeploy for their other investments thus the Special Dividend would give them
more flexibility in their investment needs.
LETTER FROM CENTURION
– 73 –
The Directors’ intention was to price the Transactions based on net asset value and in the case of
hotel properties, supported by independent valuation report. However, the non-cash component of the
consideration, namely the ES Notes and the MS Notes which carry an annual interest rate of 5%, when
measured against market yields of promissory notes of similar credit profile, was viewed as inadequate
by the valuer. This resulted in the fair values of the ES Notes and the MS Notes being valued at less than
their face values and the fair values of the consideration represent a discount for the Transactions. We
have opined above that such discounts are fair and reasonable, given the minority stake nature of each of
the Transactions. That said, because of such discounts, the proposed disposal of the Eagle Spirit Group
and the Makerston Group will result in the Group having to recognise a loss of approximately HK$14.2
million and an insignificant gain of HK$2.9 million (attributable to Shareholders) respectively.
The pro forma financial effects on the Group as set out in above are either for illustrative purpose,
inconclusive or relatively immaterial. As we have also concurred with the Board’s views on its reasons for
and benefits of the Transactions, we take the view that the short term cost for undertaking the Transactions
is, of course, the adverse pro forma financial effects as set out above and the loss from disposals (or an
insignificant gain, in so far as the disposal of the Makerston Group is concerned) that the Group has to
recognise, as a result of the fair values of the ES Notes and the MS Notes being valued at less than their
face values.
Independent Shareholders who cannot accept these cost implications or do not share our view that
taken as a whole, the benefits of the Transactions outweigh these cost implications can vote against the
ordinary resolutions at the SGM. This is however not our recommendation, which is set out below.
RECOMMENDATION
Having considered the principal factors and reasons set out above, we consider that insofar
as the Transactions are concerned, the terms and conditions of the Agreements and the transactions
contemplated thereunder are of normal commercial terms, and whilst they may not be in the ordinary and
usual course of business of the Group, they are fair and reasonable and in the interests of the Company
and its Shareholders as a whole. We therefore advise the Independent Shareholders to vote in favour of
the ordinary resolutions to be put forward to the Independent Shareholders at the SGM and to approve
the disposal of shares in, and shareholders’ loans to, Eagle Spirit and Makerston respectively under the
Agreements and the transactions contemplated thereunder.
Yours faithfully,
for and on behalf of
Centurion Corporate Finance Limited
Baldwin LEE
Managing Director
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 1
1. FINANCIAL INFORMATION OF THE GROUP
Details of the financial information of the Group for each of the three financial years ended 31
December 201 1, 201 2 and 201 3, and the six months ended 30 June 2014 are disclosed in the following
documents which have been published on the website of the Stock Exchange (www.hkex.com.hk) and the
website of the Company (www.rhh.com.hk):
• annual report of the Company for the year ended 31 December 2011 published on 19 March
2012 (pages 33-161) ;
• annual report of the Company for the year ended 31 December 2012 published on 25 April
2013 (pages 40-157);
• annual report of the Company for the year ended 31 December 2013 published on 22 April
2014 (pages 43-173); and
• interim report of the Company for the six months ended 30 June 2014 published on
22 September 2014 (pages 1- 32) .
2. STATEMENT OF INDEBTEDNESS
At the close of business on 30 September 2014, being the latest practicable date for the purpose of
ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had outstanding
unsecured borrowings of approximately HK$260,000,000. No guarantee was given by any parties
regarding the borrowings.
Save as aforesaid and apart from intra-group liabilities, as at the close of business on 30 September
2014, the Group did not have any debt securities issued and outstanding or agreed to be issued, bank
overdrafts, loans or other similar indebtedness, liabilities under acceptance or acceptance credits,
debentures, mortgages, charges, hire purchase or finance lease commitments, guarantees or contingent
liabilities.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 2
3. WORKING CAPITAL
The Directors, after due and careful consideration, are of the opinion that after taking into account
the present internal resources available to the Group, the presently available facilities and the estimated
net proceeds from the Transactions, the Group has sufficient working capital for its present requirements,
that is for at least the next 12 months from the date of this circular, in the absence of any unforeseeable
circumstances.
4. MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors were not aware of any material adverse change in
the financial or trading position of the Group since 31 December 201 3, the date to which the latest audited
consolidated financial statements of the Company were made up.
5. MANAGEMENT DISCUSSION AND ANALYSIS
Set out below are the management discussion and analysis of the Remaining Group for each of the
years ended 31 December 201 1, 201 2 and 201 3, and the six months ended 30 June 2014.
For the year ended 31 December 2011
Review of operations
The Remaining Group attained a turnover of HK$ 305.5 million from its continuing
operations for the year ended 31 December 2011 . Gross profit for the year was HK$ 36.4
million for the year ended 31 December 2011 while the results of the Remaining Group for
the year ended 31 December 2011 was a loss of HK$ 231.1 million and was arrived at after
charging administrative expenses of HK$ 122.8 million ; finance costs of HK$ 14.6 million ;
impairment loss recognised in respect of other intangible assets arising from certain under-
performed hotel lease contracts of HK$ 10.1 million ; and impairment loss recognised in
respect of property, plant and equipment of HK$ 31.2 million ; and after crediting increase in
fair value of investment properties of HK$ 13.5 million .
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 3
Segment results
Hotel and Leisure Services
The hotel and leisure business of the Remaining Group comprises the two “Rosedale”
branded 4-star rated hotels, Times Plaza Hotel Shenyang, Luoyang Golden Gulf Hotel and
the Square Inn budget hotel chain. Turnover was HK$ 305.5 million for the year ended 31
December 2011 . The strong Renminbi and the expanding Square Inn budget hotel chain also
played an important role in this improving performance. Segment loss for the reporting year
was HK$ 157.4 million which was mainly attributable to the high depreciation charge on the
Remaining Group’s hotel properties and ancillary fixed assets.
Securities Trading
Loss from securities trading for the year ended 31 December 2011 was HK$ 9.5
million .
Material acquisitions and disposals
On 26 September 2011, the Remaining Group entered into a share sale agreement
with an independent third party in relation to the disposal of the entire issued share capital
of Gold Richly Limited at a consideration of RMB45,000,000. Gold Richly Limited was the
then subsidiary of the Company and its major activity was the holding of, through a wholly
foreign owned entity in the PRC, a resort hotel development with three blocks of one to two-
storey buildings erected on two parcels of land located at Hailing Island, Yangjiang City,
Guangdong Province, the PRC. The said share sale agreement was completed in October
2011.
Significant investment
There was no significant investment during the year ended 31 December 2011.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 4
Liquidity and financial resources
At the end of the reporting year, the Remaining Group’s total borrowings were as
follows:
At 31 December
2011
HK$ million
Loan from a related company 14.6
Borrowings – amount due within one year 68.1
82.7
The convertible notes issued in June 2006, which bore a fixed coupon at the rate of
2% per annum, matured on 7 June 2011 . Other borrowings of approximately HK$ 8.1 million
bore interest at a fixed rate of 10% per annum. All other borrowings bore floating interest
rates. The loan from a related company were repayable on demand within one year.
The gearing ratio as at 31 December 2011, expressed as a percentage of total
borrowings to equity attributable to owners of the Company, was 4.7% . The cash and cash
equivalents held by the Remaining Group were principally denominated in Hong Kong
dollars and Renminbi.
Pledge of assets
At 31 December 2011, the Remaining Group did not have any assets pledged to banks
for credit facilities.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 5
At 31 December 2011, the Remaining Group’s 10% interest in HKWOT (BVI)
Limited (“HKWOT”) was pledged to C-Travel International Limited (“C-Travel”) for the
purposes of accounting for the payment, discharge and performance of all present and future
obligations and liabilities (whether actual or contingent) of the Company to C-Travel arising
under or in respect of (i) any breach of warranties; (ii) any breach of protective covenants
or post completion adjustment under a conditional agreement dated 3 February 2010
between the Company and C-Travel in relation to the disposal of 90% interest in HKWOT
by the Company to C-Travel at a cash consideration of US$88.0 million; (iii) the deed of
indemnity dated 27 May 2010; (iv) the share charge dated 27 May 2010; and (v) any claims
or other losses arising under or in connection with any of items (i) to (iv) above (inclusive)
including, without limitation, damages in respect of any such claims as determined by a
court or arbitration of competent jurisdiction or amounts being the subject of a settlement or
otherwise agreed in writing between the Company and C-Travel for a year ending on the date
falling three years from 27 May 2010. The carrying amount of the Remaining Group’s 10%
interest in HKWOT as at 31 December 2011 was approximately HK56.2 million .
Contingent liabilities
The Remaining Group did not have any significant contingent liabilities as at 31
December 2011 .
Foreign currency exposure
The majority of the Remaining Group’s assets and liabilities and business transactions
were denominated in Hong Kong dollars and Renminbi. During the year ended 31 December
2011, the Remaining Group had not entered into any hedging arrangements. However,
the management would continue to monitor closely its foreign currency exposure and
requirements and to arrange for hedging facilities when necessary.
Employees
At 31 December 2011, the Remaining Group had 1,408 employees, of which 1,199
employees were stationing in the PRC. Competitive remuneration packages were structured
to commensurate with the responsibilities, qualifications, experience and performance of
individual employee. The Remaining Group also provided training programs, provident fund
scheme and medical insurance for its employees.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 6
Prospects
The world economy is on the brink of another major downturn. Global economic
growth started to decelerate in mid-2011 and is estimated to have averaged 2.8 % over the
previous year. This economic slowdown is expected to continue into 2012 and 2013. The
United Nations baseline forecast for the growth of world gross product (WGP) is 2.6 % for
2012 and 3.2 % for 2013, which is below the pre-crisis pace of global growth.
Persistent high unemployment in the United States and low wage growth are holding
back aggregate demand and, together with the prospect of prolonged depressed housing
prices, has heightened risks of a new wave of home foreclosures. Growth in the Euro zone
has slowed considerably since the beginning of 2011 and the ever-simmering sovereign
debt crisis heavily weighs on consumer and business confidence across Europe. The failure
of policymakers in developed countries to address unemployment and prevent sovereign
debt distress and financial sector fragility from escalating has posed the most acute risk for
the global economy in the outlook for 2012-2013. Meanwhile, developing countries and
economies in transition are expected to continue to stoke the engine of the world economy,
growing on average by 5.4 % in 2012 and 5.8 % in 2013 in the baseline outlook. Among the
major developing countries, growth in China and India is expected to remain robust.
The Remaining Group, with years of successful experience in the PRC hospitality
industry, has already got its place in this flourishing market. The Remaining Group’s four-
star rated Rosedale hotel chain comprises three self-owned hotels located in the PRC and
the leased-and-operated Rosedale on the Park located in Hong Kong currently running in
total of over 1, 100 guest rooms. Following the rapid expansion of the “Square Inn” budget
hotel chain during 2010 and 2011, the Remaining Group shall concentrate on procuring and
operating quality leased-and-operated hotels in the PRC. The Remaining Group has during
the year had approximately 50 “Square Inn” branded hotels in operation, located in the
Mainland mainly in decent cities such as Guangzhou and Beijing and popular tourists spots
like Wuyishan.
The Remaining Group would continue to put resources to strengthen its branding and
position in the market and to explore further quality investment opportunities to enhance
shareholders’ wealth.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 7
For the year ended 31 December 2012
Review of operations
The Remaining Group attained a turnover of HK$ 277.4 million from its continuing
operations for the year ended 31 December 2012, represented a decrease of 9.2% as
compared to that of HK$ 305.5 million in 2011. Gross profit for the year increased by 42.9%
to HK$ 52.0 million for the year ended 31 December 2012 (2011: HK$ 36.4 million). Loss for
the Remaining Group for the year ended 31 December 2012 was HK$ 151.4 million (2011:
HK$ 231.1 million). Loss for the year was arrived at after charging administrative expenses
of HK$ 69.6 million (2011: HK$ 122.8 million); finance costs of HK$ 4.1 million (2011:
HK$ 14.6 million); impairment loss recognised in respect of other intangible assets arising
from certain under-performed hotel lease contracts of HK$ 34.1 million (2011: HK$ 10.1
million); impairment loss recognised in respect of property, plant and equipment of HK$ 44.2
million (2011: HK$ 31.2 million) and loss on disposal of property, plant and equipment of
HK$ 26.3 million (2011: HK$ 24.6 million); and after crediting an increase in fair value of
investment properties of HK$ 10.0 million (2011: HK$ 13.5 million) and gain on disposal of
available-for-sale investment of HK$ 17.0 million (2011: Nil).
Segment results
Hotel operations
As at 31 December 2012, the hotel operations of the Remaining Group comprised
the three “Rosedale” branded 4-star rated hotels, Times Plaza Hotel Shenyang, Luoyang
Golden Gulf Hotel and the Square Inn budget hotel chain. Turnover decreased by 9.2% to
HK$ 277.4 million for the year ended 31 December 2012 (2011: HK$ 305.5 million), resulting
from the increasing average room rates and average occupancy rates. The strong Renminbi
also played an important role to this improving performance. The operating margin of the
Remaining Group was further improved subsequent to the surrender and disposal of certain
under-performed budget hotel leases during the year. Segment loss for the reporting year was
HK$ 124.3 million (2011: HK$ 157.4 million). Loss for the year was mainly attributable to
the high depreciation charge on the Remaining Group’s hotel properties and ancillary fixed
assets; impairment loss recognised on and loss on disposal of leasehold improvement in
respect of those under-performed budget hotel leases.
Securities Trading
Profits from trading of securities for the year ended 31 December 2012 was HK$ 1.8
million (2011: loss of HK$ 9.5 million).
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 8
Material acquisitions and disposals
On 13 January 2012, the Remaining Group entered into a conditional sale and
purchase agreement with an independent third party as vendor. Pursuant to the agreement,
the vendor agreed to sell and the Remaining Group agreed to purchase 14,000,000 ordinary
shares of US$0.02 each in the capital of Apex , representing approximately 5.05% of the
issued share capital of Apex , at a total cash consideration of HK$62,000,000. The said
agreement was completed in January 2012. Following completion of the transaction, the
Company’s equity interest in Apex increased to approximately 88.2% and Apex remains as an
indirect non wholly -owned subsidiary of the Company.
On 2 February 2012, the Company entered into a conditional agreement with C-Travel
and pursuant to which the Company conditionally agreed to sell and C-Travel conditionally
agreed to purchase the remaining 10% equity interest in the issued share capital of HKWOT
at a consideration of US$9.44 million. The consideration was paid by C-Travel as to US$9.18
million by way of cash at completion and as to the balance of US$0.26 million by way of
cash on the first anniversary of the completion date. The said agreement was completed in
February 2012.
On 24 October 2012, Enjoy Media Holdings Limited (“Enjoy Media”), a wholly-
owned subsidiary of the Company, entered into a memorandum of understanding (the
“MOU”) with an independent third party (the “Intended Purchaser”) in relation to the
possible disposal of the entire issued share capital of Square Inn Hotel Management Limited
(“Square Inn”) at a consideration of HK$52,000,000. If the parties fail to sign a formal
agreement on or before 31 January 2013 (the “Signing Date”) for whatever reason, the
MOU shall lapse automatically. Square Inn is principally engaged in the holding of a lease
contract for the operation of a three-star hotel in Macau (the “Hotel”). The Hotel has not yet
been in operation pending the grant of a hotel licence by the relevant government authority.
On 25 January 2013, Enjoy Media and the Intended Purchaser entered into a supplemental
memorandum of understanding, pursuant to which the parties agreed that, amongst other
things, the Signing Date be extended to a date falling on or before 30 April 2013 or such later
date as may be agreed by the parties in writing.
Significant investment
There was no significant investments during the year ended 31 December 2012.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 9
Liquidity and financial resources
At the end of the reporting year, the Remaining Group’s total borrowings were as
follows:
At
31 December
2012
HK$ million
Borrowings – amount due within one year 18.1
Borrowings – amount due after one year 250.0
268.1
Borrowings of approximately HK$ 8.1 million bore interest at a fixed rate of 10% per
annum. All other borrowings bore floating interest rates.
The gearing ratio as at 31 December 2012, expressed as a percentage of total
borrowings to equity attributable to owners of the Company, was 16.6% (2011: 4.7%). The
cash and cash equivalents held by the Remaining Group were principally denominated in
Hong Kong dollars and Renminbi.
Pledge of assets
At 31 December 2012, the Remaining Group did not have any assets pledged to banks
and financial institutions for credit facilities.
Contingent liabilities
The Remaining Group did not have any significant contingent liabilities as at 31
December 2012 (2011: Nil).
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 10
Foreign currency exposure
The majority of the Remaining Group’s assets and liabilities and business transactions
were denominated in Hong Kong dollars and Renminbi. During the year ended 31 December
2012, the Remaining Group ha d not entered into any hedging arrangements. However,
the management would continue to monitor closely its foreign currency exposure and
requirements and to arrange for hedging facilities when necessary.
Employees
At 31 December 2012, the Remaining Group had 994 employees, of which 653
employees were stationing in the PRC. Competitive remuneration packages were structured
to commensurate with the responsibilities, qualifications, experience and performance of
individual employee. The Remaining Group also provided training programs, provident fund
scheme and medical insurance for its employees.
Prospects
The World Economic Outlook projections imply that global growth would strengthen
gradually through 2013, averaging 3.5 % on an annual basis, a moderate uptick from 3.2 %
in 2012. A further strengthening to 4.1 % is projected for 2014, assuming recovery takes a
firm hold in the euro area economy. However, downside risks remain significant, including
renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation
in the United States. In the PRC, it is generally expected that the political and economic
environment will move into a new era following the successful handover of the sovereignty
to the new national leaders after the twelfth National People’s Congress held in March 2013.
The Remaining Group, with years of successful experience in the PRC and domestic
hospitality business, has already got its place in this flourishing market. Facing severe
competition from both local and international budget hotel brands, the Remaining Group
has surrendered and/or disposed of certain non-performed hotel leases during 2012. The
Remaining Group shall further review its business strategy on its budget hotel business and
to focus on retaining those hotels located in Guangdong Province and with good business
potentials that would provide positive contribution to the Remaining Group in the coming
years.
In the future, the Remaining Group would continue to put resources to strengthen its
branding and position in the hospitality industry and to explore further quality investment
opportunities to enhance shareholders’ wealth.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 11
For the year ended 31 December 2013
Review of operations
During the current reporting year, turnover of the Remaining Group attained
HK$ 242.0 million, represented a decrease of 12.8% as compared to HK$ 277.4 million of
2012. The results of the Remaining Group for the year ended 31 December 2013 was a loss
of HK$ 294.6 million (2012: HK$ 151.4 million) which was mainly attributable to gross
profit of HK$ 25.2 million (2012: HK$ 52.0 million); administrative expenses of HK$ 139.2
million (2012: HK$ 69.6 million); finance costs of HK$ 7.9 million (2012: HK$ 4.1 million);
impairment losses recognised in respect of available-for-sale investment of HK$ 32.2 million
(2012: Nil); impairment losses recognised in respect of property, plant and equipment of
HK$ 50.4 million (2012: HK$ 44.2 million) in respect of its hotel properties in the PRC based
on valuation reports conducted by independent professional valuers; loss on disposals of
subsidiaries of HK$ 20.1 million (2012: gain of HK$ 2.2 million); decrease in fair value of
investment properties of HK$ 30.1 million (2012: increase of HK$ 10.0 million); and income
tax credit of HK$ 2.6 million (2012: tax expenses of HK$4.9 million) .
Segment results
Hotel Operations
The hotel operations of the Remaining Group comprise the operation of the three
“Rosedale” branded 4-star rated hotels, Times Plaza Hotel Shenyang and Luoyang Golden
Gulf Hotel. Turnover decreased by 12.8% to HK$ 242.0 million for the year ended 31
December 2013 (2012: HK$ 277.4 million) . Segment loss for the reporting year was
HK$ 140.0 million (2012: HK$ 124.3 million) . Based on the valuation conducted by an
independent professional valuer and the unsatisfied results of the hotel operation and the
budget hotels in the PRC, the Directors determined that impairment of HK$ 50.4 million
(2012: HK$ 44.2 million) had to be recognised in respect of certain hotel properties and
leasehold improvement in the PRC.
Securities Trading
Profit from securities trading for the year ended 31 December 2013 was HK$ 0.2
million (2012: HK$ 1.8 million).
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 12
Material acquisitions and disposals
On 29 April 2013, Enjoy Media , entered into an agreement with three independent
third parties for the disposal of the entire issued share capital in Square Inn by Enjoy Media
at a consideration of HK$52,000,000. Completion took place immediately upon signing of
the agreement.
Significant investment
There was no significant investments during the year ended 31 December 2013.
Liquidity and financial resources
At the end of the reporting period, the Remaining Group’s total borrowings were as
follows:
At
31 December
2013
HK$ million
Borrowings – amount due within one year 10
Borrowings – amount due after one year 250
260
All borrowings bore floating interest rates.
The gearing ratio as at 31 December 2013, expressed as a percentage of total
borrowings to equity attributable to owners of the Company, was 20. 7% (2012: 16.6%).
Pledge of assets
At 31 December 2013, the Remaining Group did not have any assets pledged to banks
and financial institutions for credit facilities.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 13
Contingent liabilities
The Remaining Group did not have any significant contingent liabilities as at 31
December 2013 (2012: Nil).
Foreign currency exposure
The majority of the Remaining Group’s assets and liabilities and business transactions
were denominated in Hong Kong dollars and Renminbi. During the year ended 31 December
2013, the Remaining Group ha d not entered into any hedging arrangements. However, the
Company would continue to monitor closely its foreign currency exposure and requirements
and to arrange for hedging facilities when necessary.
Employees
At 31 December 2013, the Remaining Group had 870 employees, of which 531
employees were stationed in the PRC. Competitive remuneration packages were structured
to commensurate with the responsibilities, qualifications, experience and performance of
individual employee. The Remaining Group also provides training programs, provident fund
scheme and medical insurance for its employees.
Prospects
Global activity strengthened during the second half of 2013. International Monetary
Fund expected that activity shall improve further in 2014-15, largely on account of recovery
in the advanced economies. Global growth is now projected to be slightly higher in 2014, at
around 3.7%, rising to 3.9% in 2015. But following the US Federal Reserve Board’s tapering
its quantitative easing measures beginning from January 2014, downward revisions to growth
forecasts in some economies highlight continued fragilities, and downside risks remain. On
the other hand, growth in China rebounded strongly in the second half of 2013, due largely
to an acceleration in investment and is expected to moderate slightly to around 7.5% in 2014-
15.
There are five hotels under the management of the Remaining Group, of which
two located in Hong Kong are leased-and-operated hotel s. The Remaining Group shall
explore further this leased-and-operated hotel and franchising business to supplement its
traditional owner-operated hotel business. Nevertheless, the Remaining Group shall from
time to time revisit its business strategy and composition of its hotel portfolio to cope with
market changes and to explore further income streams so as to maximise the wealth of its
shareholders.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 14
For the six months ended 30 June 2014
Review of operations
During the six months ended 30 June 2014, turnover of the Remaining Group
attained HK$ 114.5 million . The results of the Remaining Group for the six months ended
30 June 2014 was a loss of HK$ 57.6 million which was mainly attributable to gross profit
of HK$ 28.4 million ; administrative expenses of HK$ 52.2 million ; finance costs of HK$ 4.0
million ; and decrease in fair value of investment properties of HK$ 15.7 million .
Segment results
Hotel Operations
The hotel operations of the Remaining Group comprise the operation of Rosedale
Hotel & Suites Guangzhou, Times Plaza Hotel Shenyang, Luoyang Golden Gulf Hotel and
two leased-and-operated hotels located in Hong Kong, being Rosedale on the Park and
Rosedale Hotel Kowloon. Turnover was HK$ 1 1 4.5 million for the six months ended 30 June
2014 . Segment loss for the reporting period was HK$ 1 7.2 million .
Securities Trading
Loss from securities trading for the six months ended 30 June 2014 was HK$ 0.2
million .
Material acquisitions and disposals
There were no material acquisitions and disposals during the six months ended 30
June 2014.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 15
Liquidity and financial resources
At the end of the reporting period, the Remaining Group’s total borrowings were as
follows:
At
30 June 2014
HK$ million
Borrowings – amount due within one year 10
Borrowings – amount due after one year 250
260
All borrowings bore floating interest rates.
The gearing ratio as at 30 June 2014, expressed as a percentage of total borrowings to
equity attributable to owners of the Company, was 20. 3% (as at 31 December 2013: 20.7%).
Pledge of assets
At 30 June 2014, the Remaining Group did not have any assets pledged to banks and
financial institutions for credit facilities.
Contingent liabilities
The Remaining Group did not have any significant contingent liabilities as at each of
30 June 2014 and 31 December 2013.
Foreign currency exposure
The majority of the Remaining Group’s assets and liabilities and business transactions
were denominated in Hong Kong dollars and Renminbi. During the six months ended 30
June 2014, the Remaining Group ha d not entered into any hedging arrangements. However
the management would continue to monitor closely its foreign currency exposure and
requirements and to arrange for hedging facilities when necessary.
APPENDIX I FINANCIAL INFORMATION OF THE GROUP
I – 16
Employees
At 30 June 2014, the Remaining Group had 935 employees, of which 610 employees
were stationed in the PRC. Competitive remuneration packages were structured to
commensurate with the responsibilities, qualifications, experience and performance of
individual employee. The Remaining Group also provide d training programs, provident fund
scheme and medical insurance for its employees.
Prospects
The International Monetary Fund (“IMF”) has lowered its growth forecast for the
Chinese economy in 2015 from 7.3% to 7% or lower. The IMF sees a steady build-up of debt,
particularly by local governments and in the shadow banking sector, as the biggest risk to the
economy. Despite concerns about a slowdown in the property market, it said this may only
be cyclical and that growth can resume once corrections take place to adjust for overheating.
Nevertheless, the IMF still believes that China can achieve the growth target of 7.5% for this
year as set by the PRC government .
Notwithstanding the expected slower economic growth of the PRC in the coming year
and the voice from the community to reduce the number of PRC individual visitors to Hong
Kong, the Remaining Group is still cautiously optimistic on the business of the Remaining
Group in the coming months since the market demand for four-star level hotels, the core
business focus of the Remaining Group, is still considerably strong.
The Company will revisit continuously its business strategy and composition of its
hotel chain to cope with market changes and to explore further income streams so as to stay
ahead of its competitors and to maximise the wealth of its shareholders.
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 1
REVIEW REPORT ON THE EAGLE SPIRIT GROUP
REPORT ON REVIEW OF UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF ROSEDALE HOTEL HOLDINGS LIMITED
(incorporated in Bermuda with limited liability)
Introduction
We have reviewed the unaudited consolidated financial information of Eagle Spirit Holdings
Limited (“Eagle Spirit”) and its subsidiaries (hereinafter collectively referred to as the “Eagle Spirit
Group”) set out on pages II-3 to II-10 which comprises the unaudited consolidated statements of financial
position as of 31 December 2011, 2012 and 2013 and 30 June 2014 and the related unaudited consolidated
statements of profit or loss and other comprehensive income, consolidated statements of changes in equity
and consolidated statements of cash flows for each of the years/period then ended (the “Relevant Period ”)
and explanatory notes (the “Unaudited Consolidated Financial Information”). The Unaudited Consolidated
Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by
Rosedale Hotel Holdings Limited (the “Company”) in connection with the proposed disposal of the entire
equity interest in and corresponding shareholder’s loan due from Eagle Spirit in accordance with Rule
14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited.
The directors of the Company are responsible for the preparation and presentation of the Unaudited
Consolidated Financial Information of the Eagle Spirit Group in accordance with the basis of preparation
set out in note 2 to the Unaudited Consolidated Financial Information and Rule 14.68(2)(a)(i) of the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The directors
of the Company are also responsible for such internal control as management determines is necessary
to enable the preparation of Unaudited Consolidated Financial Information that is free from material
misstatement, whether due to fraud or error. The Unaudited Consolidated Financial Information does not
contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong
Accounting Standard 1 “Presentation of Financial Statements” or an interim financial report as defined
in Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute
of Certified Public Accountants (the “HKICPA”). Our responsibility is to express a conclusion on this
Unaudited Consolidated Financial Information based on our review, and to report our conclusion solely to
you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this report.
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 2
Scope of review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410
(“HKSRE 2410”) “Review of Interim Financial Information Performed by the Independent Auditor of
the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong
Kong Listing Rules for a Very Substantial Disposal” issued by the HKICPA. A review of the Unaudited
Consolidated Financial Information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing
and consequently does not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Unaudited
Consolidated Financial Information of the Eagle Spirit Group for the Relevant Period is not prepared,
in all material respects, in accordance with the basis of preparation set out in note 2 to the Unaudited
Consolidated Financial Information.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
10 November 2014
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 3
UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013 AND
THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
Year ended 31 December
Six months ended
30 June
2011 2012 2013 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue – 55,943 125,179 56,861 70,126
Cost of sales and services – (26,898) (57,796) (33,172) (45,127)
Gross profit – 29,045 67,383 23,689 24,999
Other income 34,154 31,219 30,185 13,307 18,886
Administrative expenses (14,705) (39,182) (46,912) (18,801) (30,104)
Gain on disposal of assets classified
as held for sale – – – – 459,286
Share of result of a joint venture – – – – 954
Finance costs (569) (6,501) (17,303) (8,483) (3,432)
Profit before taxation 18,880 14,581 33,353 9,712 470,589
Income tax expense (1,378) (1,463) (1,514) (763) (757)
Profit and total comprehensive income
for the year/period 17,502 13,118 31,839 8,949 469,832
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 4
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAT 31 DECEMBER 2011, 31 DECEMBER 2012, 31 DECEMBER 2013 AND 30 JUNE 2014
As at 31 DecemberAs at
30 June2011 2012 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000
Non-current assetsProperty, plant and equipment 630,989 823,085 958 839
Club debentures – – 520 520
Rental deposit – – – 16,000
Interest in a joint venture – – – 193,725
Amount due from a joint venture – – – 299,078
630,989 823,085 1,478 510,162
Current assetsInventories – 414 577 550
Trade and other receivables 900 4,956 7,832 10,844
Amounts due from fellow subsidiaries 6,076 1,891 2,260 88
Pledged bank deposits 3,066 3,263 – –
Bank balances and cash 1,434 20,306 139,092 11,502
11,476 30,830 149,761 22,984
Assets classified as held for sale – – 837,306 –
11,476 30,830 987,067 22,984
Current liabilitiesTrade and other payables 28,745 47,772 16,493 19,262
Amount due to immediate
holding company – – – 36,619
Amounts due to fellow subsidiaries 178,681 335,986 269,112 30,880
Loan from a related company 14,000 – – –
Loan from a fellow subsidiary – 6,000 6,000 –
Bank borrowing – due within one year 405,000 435,000 – –
626,426 824,758 291,605 86,761
Liabilities associated with assets classified as held for sale – – 635,944 –
626,426 824,758 927,549 86,761
Net current (liabilities) assets (614,950) (793,928) 59,518 (63,777)
16,039 29,157 60,996 446,385
Capital and reservesShare capital – – – –
Reserves 16,039 29,157 60,996 446,385
Equity attributable to owner
of Eagle Spirit 16,039 29,157 60,996 446,385
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 5
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
Attributable to owner of Eagle Spirit
Share capital
(Accumulated
losses) profits Total
HK$’000 HK$’000 HK$’000
At 1 January 2011 – (1,463) (1,463)
Profit and total comprehensive income
for the year – 17,502 17,502
At 31 December 2011 – 16,039 16,039
Profit and total comprehensive income
for the year – 13,118 13,118
At 31 December 2012 – 29,157 29,157
Profit and total comprehensive income
for the year – 31,839 31,839
At 31 December 2013 – 60,996 60,996
Profit and total comprehensive income
for the period – 469,832 469,832
Dividend paid (Note) – (84,443) (84,443)
At 30 June 2014 – 446,385 446,385
At 1 January 2013 – 29,157 29,157
Profit and total comprehensive income
for the period – 8,949 8,949
At 30 June 2013 – 38,106 38,106
Note: The dividend was declared by Rosedale Hotel Management International Limited (“RHMIL”) to its then
sole shareholder, Rosedale Hotel Group Limited (“RHGL”) before the completion of the Eagle Spirt Group
Reorganisation (see note 1). After the payment of dividend, RHMIL was transferred from RHGL to Rosy Universe
Limited (“Rosy Universe”) as part of the Eagle Spirit Group Reorganisation.
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 6
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
Year ended 31 December
Six months ended
30 June
2011 2012 2013 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
OPERATING ACTIVITIES
Profit before taxation 18,880 14,581 33,353 9,712 470,589
Adjustments for:
Interest income (4) (3) (102) (46) (6,241)
Depreciation of property,
plant and equipment 128 5,211 12,396 8,712 144
Finance costs 569 6,501 17,303 8,483 3,432
Share of result of a joint venture – – – – (954)
Loss on disposal of property,
plant and equipment 7 – – – –
Gain on disposal of assets classified
as held for sale – – – – (459,286)
Operating cash flows before
movements in working capital 19,580 26,290 62,950 26,861 7,68 4
(Increase) decrease in inventories – (414) (163) (144) 27
Decrease (increase) in trade and
other receivables 202 (4,056) (2,833) 197 (19,012)
(Increase) decrease in amounts
due from fellow subsidiaries (5,884) 2,722 (1,399) (2,834) 1,415
Increase (decrease) in trade and
other payables 3,299 (14,674) 2,792 (2,659) 5,484
NET CASH FROM (USED IN)
OPERATING ACTIVITIES 17,197 9,868 61,347 21,421 (4,402)
INVESTING ACTIVITIES
Additions to property,
plant and equipment (394,922) (157,266) (29,535) (29, 179) (25)
Placement of pledged bank deposits (3,054) (197) (1,737) (1,737) –
Interest received 4 3 102 46 173
Proceeds from disposal of subsidiaries – – – – 762,843
Withdrawal of pledged bank deposits – – – – 5,000
Repayment from a joint venture – – – – 12,240
NET CASH (USED IN) FROM
INVESTING ACTIVITIES (397,972) (157,460) (31,170) (30,8 70) 780,231
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 7
FINANCING ACTIVITIES
New borrowing raised 405,000 435,000 630,000 630,000 –
Advance from (repayment to)
fellow subsidiaries 8,296 157,304 (66,874) (49,701) ( 237, 704)
Loan advanced from (repayment to)
a related company 14,000 (14,000) – – –
Advance from an immediate
holding company – – – – 45, 519
Repayment of bank borrowing (42,500) (405,000) (435,000) (435,000) (630,000)
Dividend paid to RHGL – – – – (84,443)
Repayment to an immediate
holding company – – – – (8,900)
Interest paid (3,043) (12,840) (17,403) (8,301) (4,005)
Loan advance from (repayment to)
a fellow subsidiary – 6,000 – – (6,000)
NET CASH FROM (USED IN)
FINANCING ACTIVITIES 381,753 166,464 110,723 136,998 (925,533)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 978 18,872 140,900 127,549 (149,704)
CASH AND CASH
EQUIVALENTS AT BEGINNING
OF THE YEAR/PERIOD 456 1,434 20,306 20,306 161,206
CASH AND CASH EQUIVALENTS
AT END OF THE YEAR/PERIOD,
represented by
Bank balances and cash 1,434 20,306 161,206 147,855 11,502
Bank balances included in assets
classified as held for sale – – (22,114) – –
1,434 20,306 139,092 147,855 11,502
Year ended 31 December
Six months ended
30 June
2011 2012 2013 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 8
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
1. General
Eagle Spirit Holdings Limited (“Eagle Spirit”) was incorporated on 6 May 2005 with limited
liability in the British Virgin Islands (the “BVI”). Its ultimate holding company is Rosedale Hotel
Holdings Limited (the “Company”), a company incorporated in Bermuda with its shares listed
on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its immediate holding
company is Easy Vision Holdings Limited (“Easy Vision”), a limited company also incorporated in
the BVI. The address of the registered office of Eagle Spirit is at Palm Grove House, P.O. Box 438,
Road Town, Tortola, BVI.
Eagle Spirit acts as an investment holding company. During the Relevant Period (as defined
below in note 2), Eagle Spirit and its subsidiaries (collectively referred to as the “Eagle Spirit
Group”) are engaged in (i) the business of operating a hotel known as “Rosedale Hotel Kowloon”,
which is located at No.86 Tai Kok Tsui Road, Tai Kok Tsui, Kowloon, Hong Kong (the “Property”);
(ii) hotel corporate management and consultancy services; and (iii) restaurant operation and hotel
operation.
On 11 April 2014, Easy Vision, Silver Infinite Limited (the “Purchaser”), a direct wholly-
owned subsidiary of ITC Properties Group Limited (“ITCP”), a company incorporated in Bermuda
with limited liability with its shares listed on the Stock Exchange , the Company and ITCP entered
into a sales and purchase agreement, pursuant to which Easy Vision has conditionally agreed
to sell and the Purchaser has conditionally agreed to purchase (1) the entire equity interest in
Eagle Spirit, which holds 40% of the equity interest in More Star Limited (“More Star”) and
(2) the shareholder’s loan due from Eagle Spirit for an aggregate consideration of not exceeding
HK$566,000,000 (the “ES Disposal”).
During the Relevant Period , the Eagle Spirit Group was formed through a series of
transactions (the “Eagle Spirit Group Reorganisation”) which were undertaken by Eagle Spirit as
follows:
( i) acquired the entire issued share capital of Hongkong Macau (International) BVI
Limited (“HK Macau”) from Apex Quality Group Limited (“Apex”), a fellow
subsidiary of Eagle Spirit ; and
(i i) acquired from a wholly -owned subsidiary of Apex the entire issued share capital
of Rosy Universe Limited (“Rosy Universe”) which holds 100% of the interest
in RHMIL and Rosedale Group Management Limited, which are engaged in the
provision of hotel corporate management consultancy services to hotels in Hong Kong
and People’s Republic of China (the “PRC”).
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 9
For the purpose of preparation of the proposed very substantial disposal of the Company’s
interest in Eagle Spirit, the Eagle Spirit Group Reorganisation, which commenced in November
2013, was completed during the period ended 30 June 2014, pursuant to which Eagle Spirit, as
holding company of the existing subsidiaries, has also bec ome the holding company of Rosy
Universe and its subsidiaries. These companies were under the common control of the Company
prior to and after the Eagle Spirit Group Reorganisation and therefore they are regarded as
continuing entity.
The Unaudited Consolidated Financial Information of the Eagle Spirit Group has been
prepared as if Eagle Spirit has been the holding company of the companies now comprising the
Eagle Spirit Group throughout the Relevant Period .
The unaudited consolidated statements of profit or loss and other comprehensive income and
the unaudited consolidated statements of cash flows which include the results and cash flows of the
companies now comprising the Eagle Spirit Group have been prepared by applying the principles
of merger accounting in accordance with Accounting Guideline 5 “Merger Accounting for Common
Control Combinations’’ as if the current group structure had been in existence throughout the
Relevant Period or since their respective dates of incorporation/establishment, where this is a
shorter period. The unaudited consolidated statements of financial position of the Eagle Spirit
Group as at 31 December 2011, 31 December 2012 and 31 December 2013 have been prepared to
present the assets and liabilities of the companies now comprising the Eagle Spirit Group as if the
current group structure had been in existence as at those dates.
The Unaudited Consolidated Financial Information is presented in Hong Kong dollars, which
is also the functional currency of Eagle Spirit.
2. Basis of preparation of the unaudited consolidated financial information
The Unaudited Consolidated Financial Information of the Eagle Spirit Group for the three
years ended 31 December 2013 and the six months ended 30 June 2014 (the “Relevant Period ”) has
been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of The Rules Governing the
Listing of Securities on The Stock Exchange , and solely for the purposes of inclusion in the circular
to be issued by the Company in connection with the proposed ES Disposal.
APPENDIX II FINANCIAL INFORMATION OF THE EAGLE SPIRIT GROUP
II – 10
The amounts included in the Unaudited Consolidated Financial Information of the Eagle
Spirit Group have been recognised and measured in accordance with the relevant accounting
policies of the Company adopted in the preparation of the consolidated financial statements of the
Company and its subsidiaries for the relevant years or period, which conform with Hong Kong
Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants
(the “HKICPA”). The Unaudited Consolidated Financial Information does not contain sufficient
information to constitute a complete set of financial statements as defined in Hong Kong
Accounting Standard ( “HKAS”) 1 “Presentation of Financial Statements” nor an interim report as
defined in HKAS 34 “Interim Financial Reporting” issued by the HKICPA.
In preparing the Unaudited Consolidated Financial Information of the Eagle Spirit Group,
the directors of Eagle Spirit have given careful consideration to the future liquidity and going
concern of the Eagle Spirit Group in light of the fact that the Eagle Spirit Group’s current liabilities
exceeded its current asset by HK$614,950,000, HK$793,928,000 and HK$ 63,777,000 as at 31
December 2011, 31 December 2012 and 30 June 2014, respectively. The directors of Eagle Spirit
are satisfied that the Eagle Spirit Group will have sufficient funds to meet its financial obligations
as they fall due for the foreseeable future, after taking into consideration that the Company has
agreed to provide adequate funds for the Eagle Spirit Group to meet in full its financial obligations
up to the date of the completion of the ES Disposal. Moreover, upon completion of the ES
Disposal, ITCP will provide financial support to the Eagle Spirit Group to meet in full its financial
obligations as they fall due in the foreseeable future.
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 1
REVIEW REPORT ON THE MAKE RSTON GROUP
REPORT ON REVIEW OF UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF ROSEDALE HOTEL HOLDINGS LIMITED
(incorporated in Bermuda with limited liability)
Introduction
We have reviewed the unaudited consolidated financial information of Makerston Limited
(“Makerston”) and its subsidiaries (hereinafter collectively referred to as the “Makerston Group”) set out
on pages III-3 to III-10 which comprises the unaudited consolidated statements of financial position as of
31 December 2011, 2012 and 2013 and 30 June 2014 and the related unaudited consolidated statements
of profit or loss and other comprehensive income, consolidated statements of changes in equity and
consolidated statements of cash flows for each of the years/period then ended (the “Relevant Period ”) and
explanatory notes (the “Unaudited Consolidated Financial Information”). The Unaudited Consolidated
Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by
Rosedale Hotel Holdings Limited (the “Company”) in connection with the proposed disposal of the entire
equity interest in and corresponding shareholder’s loan due from Makerston in accordance with Rule
14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited.
The directors of the Company are responsible for the preparation and presentation of the Unaudited
Consolidated Financial Information of the Makerston Group in accordance with the basis of preparation
set out in note 2 to the Unaudited Consolidated Financial Information and Rule 14.68(2)(a)(i) of the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The directors
of the Company are also responsible for such internal control as management determines is necessary
to enable the preparation of Unaudited Consolidated Financial Information that is free from material
misstatement, whether due to fraud or error. The Unaudited Consolidated Financial Information does not
contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong
Accounting Standard 1 “Presentation of Financial Statements” or an interim financial report as defined
in Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute
of Certified Public Accountants (the “HKICPA”). Our responsibility is to express a conclusion on this
Unaudited Consolidated Financial Information based on our review, and to report our conclusion solely to
you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not
assume responsibility towards or accept liability to any other person for the contents of this report.
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 2
Scope of review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410
(“HKSRE 2410”) “Review of Interim Financial Information Performed by the Independent Auditor of
the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong
Kong Listing Rules for a Very Substantial Disposal” issued by the HKICPA. A review of the Unaudited
Consolidated Financial Information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing
and consequently does not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Unaudited
Consolidated Financial Information of the Makerston Group for the Relevant Period is not prepared,
in all material respects, in accordance with the basis of preparation set out in note 2 to the Unaudited
Consolidated Financial Information.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
10 November 2014
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 3
UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
Year ended 31 December
Six months ended
30 June
2011 2012 2013 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue 85,490 96,125 80,075 40,200 –
Cost of sales and services (61,542) (66,346) (57,322) (30,534) –
Gross profit 23,948 29,779 22,753 9,666 –
Other income 20,832 4,757 7,152 6,442 5,486
Administrative expenses (45,556) (42,671) (37,352) (20,583) (6,143)
Gain on deemed disposal of
a subsidiary – – 656,230 – –
Share of result of an associate – – (1,223) – (2,463)
Finance costs (8,682) (8,026) (7,114) (3,839) (29)
(Loss) profit before tax (9,458) (16,161) 640,446 (8,314) (3,149)
Income tax credit (expense) 3,721 5,390 (60,149) 2,698 –
(Loss) profit for the year/period (5,737) (10,771) 580,297 (5,616) (3,149)
Other comprehensive income
(expense) for the year/period
Items that will not be reclassified to
profit or loss:
Exchange difference arising on
translation of functional currency
to presentation currency 5,729 523 16,732 726 (5,191)
Share of exchange difference of an
associate – – – – (3,652)
Other comprehensive income
(expense) for the year/period 5,729 523 16,732 726 (8,843)
Total comprehensive (expense)
income for the year/period (8) (10,248) 597,029 (4,890) (11,992)
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 4
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONAT 31 DECEMBER 2011, 31 DECEMBER 2012, 31 DECEMBER 2013 AND 30 JUNE 2014
As at 31 DecemberAs at
30 June2011 2012 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000
Non-current assetsProperty, plant and equipment 686,979 669,705 – –
Interest in an associate – – 269,627 263,512
Pledged bank deposits 11,867 11,780 – –
698,846 681,485 269,627 263,512
Current assetsInventories 2,594 2,535 – –
Trade and other receivables 10,241 13,883 665, 405 665,952
Amount due from a fellow subsidiary 272 367 – –
Pledged bank deposits – – 306,079 –
Bank balances and cash 8,004 8,991 443 61
21,111 25,776 971, 927 666,013
Current liabilitiesTrade and other payables 16,639 17,056 238 10
Tax payable 1,804 1,999 66,744 66,744
Derivative financial instrument 2,858 2,730 – –
Amount due to immediate
holding company 278,308 294,247 311, 588 217,725
Amounts due to fellow subsidiaries 4,593 830 – 54
Bank borrowings – due within one year 10,741 14,741 206,000 –
314,943 331,603 584, 570 284,5 33
Net current (liabilities) assets (293,832) (305,827) 387,357 381,480
Total assets less current liabilities 405,014 375,658 656,984 644,992
Non-current liabilitiesBank borrowings – due after one year 222,963 208,222 – –
Deferred tax liabilities 111,848 107,481 – –
334,811 315,703 – –
70,203 59,955 656,984 644,992
Capital and reservesShare capital – – – –
Reserves 70,203 59,955 656,984 644,992
Equity attributable to owner
of Makerston 70,203 59,955 656,984 644,992
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 5
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE THREE MONTHS ENDED 30 JUNE 2013 AND 2014
Attributable to owner of Makerston
Share
capital
Other
reserve
Translation
reserve
(Accumulated
losses)
profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Note)
At 1 January 2011 – (13,093) 108,251 (24,947) 70,211
Exchange difference arising on
translation of functional currency
to presentation currency – – 5,729 – 5,729
Loss for the year – – – (5,737) (5,737)
Total comprehensive expense
for the year – – 5,729 (5,737) (8)
At 31 December 2011 – (13,093) 113,980 (30,684) 70,203
Exchange difference arising on
translation of functional currency
to presentation currency – – 523 – 523
Loss for the year – – – (10,771) (10,771)
Total comprehensive expense
for the year – – 523 (10,771) (10,248)
At 31 December 2012 – (13,093) 114,503 (41,455) 59,955
Exchange difference arising on
translation of functional currency
to presentation currency – – 16,732 – 16,732
Profit for the year – – – 580,297 580,297
Total comprehensive income
for the year – – 16,732 580,297 597,029
Release upon deemed disposal
of a subsidiary – 13,093 – (13,093) –
Release of translation reserve upon
deemed disposal of a subsidiary – – (141,536) 141,536 –
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 6
At 31 December 2013 – – (10,301) 667,285 656,984
Exchange difference arising on
translation of functional currency
to presentation currency – – (5,191) – (5,191)
Share of exchange difference of
an associate – – (3,652) – (3,652)
Loss for the period – – – (3,149) (3,149)
Total comprehensive expense
for the period – – (8,843) (3,149) (11,992)
At 30 June 2014 – – (19,144) 664,136 644,992
At 1 January 2013 – (13,093) 114,503 (41,455) 59,955
Exchange difference arising on
translation of functional currency
to presentation currency – – 726 – 726
Loss for the period – – – (5,616) (5,616)
Total comprehensive expense
for the period – – 726 (5,616) (4,890)
At 30 June 2013 – (13,093) 115,229 (47,071) 55,065
Note: The other reserve of the Group arose from acquisition of additional interest in a subsidiary from non-controlling
interest in prior years.
Attributable to owner of Makerston
Share
capital
Other
reserve
Translation
reserve
(Accumulated
losses)
profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Note)
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 7
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
Year ended 31 December Six months ended
30 June2011 2012 2013 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
OPERATING ACTIVITIES
(Loss) profit before tax (9,458) (16,161) 640,446 (8,314) (3,149)
Adjustments for:
Interest income (74) (101) (80) (42) (3,205)
Finance costs 8,682 8,026 7,114 3,839 29
Depreciation of property,
plant and equipment 28,781 30,376 25,385 10,512 –
Fair value loss (gain) on derivative
financial instrument 2,858 (128) (650) (929) –
Share of loss of an associate – – 1,223 – 2,463
Loss on disposal of property,
plant and equipment 366 381 23 23 –
Gain on deemed disposal of
a subsidiary – – (656,230) – –
Operating cash flows before
movements in working capital 31,155 22,393 17,231 5,089 (3,862)
(Increase) decrease in inventories (230) 59 (158) ( 4) –
(Increase) decrease in trade and
other receivables (49 9) (3,643) ( 3, 509) (368) –
Increase ( decrease) in trade and
other payables 2,330 401 (4,468) (1,005) (53)
( Decrease) increase in amounts due
from/to fellow subsidiaries (29,383) (3,726) (463) 324 54
NET CASH FROM (USED IN)
OPERATING ACTIVITIES 3,373 15,484 8, 633 4,036 (3,861)
INVESTING ACTIVITIES
Additions to property,
plant and equipment (17,412) (8,619) (24,171) (2,051) –
Placement of pledged
bank deposits (11,581) – (297,331) – –
Withdrawal of pledged bank deposits – – – 249 306,079
Interest received 74 101 80 42 152
Proceeds from disposal of property,
plant and equipment 80 73 5 5 –
Proceeds from deemed disposal of
a subsidiary – – 291,073 – –
Settlement of derivative
financial instrument – – (2,080) – –
NET CASH (USED IN) FROM
INVESTING ACTIVITIES (28,839) (8,445) ( 32,424) ( 1,755) 306,231
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 8
FINANCING ACTIVITIES
New bank borrowings raised 226,072 – – – –
Repayment of loan from
a fellow subsidiary (118,576) – – – –
Advance from immediate
holding company 127,729 148,659 85,991 8,277 1,285
Repayment to immediate
holding company (202,305) (135,572) (56,027) – (97,833)
Interest paid (8,588) (8,011) (7,048) (3,823) (204)
Repayment of bank borrowings – (11,450) (8,505) (8,346) (206,000)
NET CASH FROM (USED IN)
FINANCING ACTIVITIES 24,332 (6,374) 14,411 (3,892) (302,752)
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (1,134) 665 (9,380) (1,611) (382)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF
THE YEAR/PERIOD 8,513 8,004 8,991 8,991 443
EFFECT OF FOREIGN EXCHANGE
RATE CHANGES 625 322 832 69 –
CASH AND CASH EQUIVALENTS
AT END OF THE YEAR/PERIOD,
represented by bank balances
and cash 8,004 8,991 443 7,4 49 61
Year ended 31 December
Six months ended
30 June
2011 2012 2013 2013 2014
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 9
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
FOR EACH OF THE THREE YEARS ENDED 31 DECEMBER 2013
AND THE SIX MONTHS ENDED 30 JUNE 2013 AND 2014
1. General
Makerston Limited (“Makerston”) was incorporated with limited liability in the British
Virgin Islands (the “BVI”). Its ultimate holding company is Rosedale Hotel Holdings Limited (the
“Company”), a company incorporated in Bermuda with its shares listed on The Stock Exchange of
Hong Kong Limited (the “Stock Exchange”). The address of the registered office of the Company
is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. Its immediate holding company
is Rosedale Hotel Group Limited (“RHGL”), a company incorporated in the BVI. The address of
the registered office of Makerston is located at P.O. Box 957, Offshore Incorporations Centre, Road
Town, Tortola, the BVI.
Makerston acts as an investment holding company. During the years ended 31 December
2011 and 2012, its principal subsidiary, Rosedale Hotel Beijing Co., Ltd. (“Rosedale Beijing”) was
engaged in the business of hotel operation.
During the year ended 31 December 2013, following the completion of a capital increase
agreement entered into with an independent third party, Makerston’s interest in Rosedale Beijing
was diluted from 100% to 20%. Accordingly, Rosedale Beijing ceased to be a subsidiary of
Makerston and became an associate after the completion of the capital increase transaction.
On 11 April 2014, RHGL, Silver Infinite Limited (the “Purchaser”), a direct wholly-owned
subsidiary of ITC Properties Group Limited (“ITCP”), a company incorporated in Bermuda with
limited liability with its shares listed on the Stock Exchange, the Company and ITCP further
entered into a sales and purchase agreement, pursuant to which RHGL has conditionally agreed
to sell and the Purchaser has conditionally agreed to purchase (1) the entire equity interest in
Makerston, which holds 20% of the equity interest in Rosedale Beijing and (2) the shareholder’s
loan due from Makerston with an aggregate consideration of not exceeding HK$324,000,000 (the
“MS Disposal”).
The functional currency of the Makerston is Renminbi. The Unaudited Consolidated
Financial Information is presented in Hong Kong dollars for management review purpose.
APPENDIX III FINANCIAL INFORMATION OF THE MAKE RSTON GROUP
III – 10
2. Basis of preparation of the unaudited consolidated financial information
The Unaudited Consolidated Financial Information of the Makerston Group for the three
years ended 31 December 2013 and the six months ended 30 June 2014 has been prepared in
accordance with paragraph 68(2)(a)(i) of Chapter 14 of The Rules Governing the Listing of
Securities on the Stock Exchange , and solely for the purposes of inclusion in the circular to be
issued by the Company in connection with the MS Disposal.
The amounts included in the Unaudited Consolidated Financial Information of the Makerston
Group have been recognised and measured in accordance with the relevant accounting policies of
the Company adopted in the preparation of the consolidated financial statements of the Company
and its subsidiaries for the relevant years or period, which conform with Hong Kong Financial
Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (the
“HKICPA”). The Unaudited Consolidated Financial Information does not contain sufficient
information to constitute a complete set of financial statements as defined in Hong Kong
Accounting Standard (“HKAS”) 1 “Presentation of Financial Statements” nor an interim report as
defined in HKAS 34 “Interim Financial Reporting” issued by the HKICPA.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 1
1. BASIS OF PREPARATION OF THE PRO FORMA FINANCIAL INFORMATION OF THE
REMAINING GROUP
The following is a summary of the illustrative pro forma consolidated statements of financial
position, pro forma consolidated statements of profit or loss and other comprehensive income and
pro forma consolidated statements of cash flows (collectively referred to as the “Pro Forma Financial
Information”), which have been prepared to illustrate the effects of (i) the disposal of the entire equity
interest in and corresponding shareholder’s loan due from Eagle Spirit Holdings Limited (the “ES
Disposal”) ; (ii) the disposal of the entire equity interest in and corresponding shareholder’s loan due from
Makerston Limited (the “MS Disposal”); and (iii) both of the ES Disposal and MS Disposal.
The Pro Forma Financial Information of the Group has been prepared by the Directors in
accordance with Paragraph 4.29 of the Listing Rules for illustrative purposes only, based on their
judgments, estimations and assumptions, and because of its hypothetical nature, it may not give a true
picture of the financial position of the Group as at 30 June 2014 or at any future date or the results and
cash flows of the Group for the year ended 31 December 2013 or for any future period.
Pro forma consolidated statement of financial position of the Remaining Group
The pro forma consolidated statement of financial position of the Remaining Group has
been prepared based on the unaudited condensed consolidated statement of financial position of
the Group as at 30 June 2014, which has been extracted from the published interim report of the
Company for the six months ended 30 June 2014, with the pro forma adjustments relating to the ES
Disposal and/or MS Disposal, which include, amongst others, the deconsolidation of the assets and
liabilities attributable to the ES Disposal and/or MS Disposal as explained in the notes below and
other adjustments directly attributable to the transactions and factually supportable.
Pro forma consolidated statement of profit or loss and other comprehensive income and pro
forma consolidated statement of cash flows of the Remaining Group
The pro forma consolidated statement of profit or loss and other comprehensive income and
pro forma consolidated statement of cash flows of the Remaining Group have been prepared based
on the audited consolidated statement of profit or loss and other comprehensive income and audited
consolidated statement of cash flows of the Group for the year ended 31 December 2013, which has
been extracted from the annual report of the Company for the year then ended, with the pro forma
adjustments relating to the ES Disposal and/or MS Disposal, which include, amongst others, the
deconsolidation of the results and the exclusion of the cash flows attributable to the ES Disposal
and/or MS Disposal respectively, as explained in the notes below and other adjustments directly
attributable to the transactions and factually supportable.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 2
The Pro Forma Financial Information should be read in conjunction with the historical
financial information of the Group as set out in the published interim report of the Company for the
six months ended 30 June 2014 and the published annual report of the Company for the year ended
31 December 2013 and other financial information included elsewhere in this circular.
The Pro Forma Financial Information of the Group is presented in three scenarios as follows:
Scenario I: Assuming the ES Disposal ha d been completed on 30 June 2014 or 1
January 2013 for the purposes of the pro forma consolidated statement of
financial position, pro forma consolidated statement of profit or loss and
other comprehensive income and pro forma consolidated statement of cash
flows respectively and the Makerston Agreement lapsed;
Scenario II: Assuming the MS Disposal ha d been completed on 30 June 2014 or 1
January 2013 for the purposes of the pro forma consolidated statement of
financial position, pro forma consolidated statement of profit or loss and
other comprehensive income and pro forma consolidated statement of cash
flows respectively and the Eagle Spirit Agreement lapsed; and
Scenario III: Assuming both the ES Disposal and MS Disposal ha d been completed on 30
June 2014 or 1 January 2013 for the purposes of the pro forma consolidated
statement of financial position, pro forma consolidated statement of profit or
loss and other comprehensive income and pro forma consolidated statement
of cash flows respectively.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 3
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2014
Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively and the Makerston Agreement lapsed
The Groupas at
30 June 2014 Pro forma adjustments
Subtotal ofpro forma
adjustments of ES Disposal
The RemainingGroup as at
30 June 2014after the
ES DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) Note 1 Note 2 Note 3
Non-current assetsProperty, plant and equipment 536,480 (839) – – (839) 53 5,641
Investment properties 279,000 – – – – 279,000
Interest in a joint venture 193,725 (193,725) – – (193,725) –
Interest in an associate 263,512 – – – – 263,512
Amount due from a joint venture 299,078 (299,078) – – (299,078) –
Promissory notes receivable – – – 217,000 217,000 217,000
Available-for-sale investments 31,638 – – – – 31,638
Club debentures, at cost less impairment 520 (520) – – (520) –
Other assets 16,000 (16,000) – – (16,000) –
1,619,953 (510,162) – 217,000 (293,162) 1,326,791
Current assetsInventories 3,315 (550) – – (550) 2,765
Trade and other receivables 794,688 (10,844) 30,880 – 20,036 814,724
Investments held for trading 368 – – – – 368
Amount due from fellow subsidiaries – (88) 88 – – –
Bank balances and cash 665,883 (11,502) – 251,807 240,305 906,188
1,464,254 (22,984) 30,968 251,807 259,791 1,724,045
Current liabilitiesTrade and other payables 74,518 (19,262) 88 – (19,174) 55,344
Tax liabilities 77,452 – – – – 77,452
Borrowings – amount due within one year 10,000 – – – – 10,000
Amount due to immediate holding company – (36,619) – 36,619 – –
Amounts due to fellow subsidiaries – (30,880) 30,880 – – –
Amount due to a non-controlling shareholder of a subsidiary 9,271 – – – – 9,271
171,241 (86,761) 30,968 36,619 (19,174) 152,067
Net current assets 1,293,013 63,777 – 215,188 278,965 1,571,978
Total assets less current liabilities 2,912,966 (446,385) – 432,188 (14,197) 2,898,769
Non-current liabilitiesBorrowings – amount due after one year 250,000 – – – – 250,000
Deferred taxation 58,152 – – – – 58,152
308,152 – – – – 308,152
2,604,814 (446,385) – 432,188 (14,197) 2,590,617
Capital & reservesShare Capital 6,577 – – – – 6,577
Reserves 2,362,646 – – (14,197) (14,197) 2,348,449
Equity attributable to owners of the parent 2,369,223 – – (14,197) (14,197) 2,355,026
Non-controlling interests 235,591 – – – – 235,591
Total equity 2,604,814 – – (14,197) (14,197) 2,590,617
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 4
PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013
Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively and the Makerston Agreement lapsed
The Groupfor the
year ended31 December
2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of ES Disposal
The RemainingGroup for the
year ended31 December
2013immediately
after theES Disposal
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 4 Note 5 Note 6 Note 7
Turnover 447,220 (125,17 9) – – – (125,17 9) 322,04 1
Direct operating costs (331,933) 57,796 – – – 57,796 (274,137)
Gross profit 115,287 (67,38 3) – – – (67,38 3) 47,90 4
Interest income 1,829 420 28,210 – 28,630 30,459
Other income, gains and losses 5,433 (30,185) 27,386 – – (2,799) 2,634
Distribution and selling expenses (4,613) – – – – – (4,613)
Administrative expenses (223,485) 46,912 (27,386) – – 19,526 (203,959)
Finance costs (32,283) 17,303 (420) – – 16,883 (15,400)
Gain on deemed disposal of a subsidiary 781,773 – – – – – 781,773
Impairment loss recognised in respect of
available-for-sale investment (32,239) – – – – – (32,239)
Impairment loss recognised in respect of
property, plant and equipment (50,407) – – – – – (50,407)
Impairment loss recognised in respect of other assets (11,160) – – – – – (11,160)
(Loss) gain on disopsal of subsidiaries (20,059) – – – (14,197) (14,197) (34,256)
Loss on disposal of property, plant and equipment (5,742) – – – – – (5,742)
Gain on disposal of a joint venture 5,166 – – – – – 5,166
Reversal of impairment losses on amount
due from a joint venture 7,089 – – – – – 7,089
Decrease in fair value of investment properties (30,108) – – – – – (30,108)
Share of result of an associate (1,223) – – – – – (1,223)
Share of result of a joint venture (3,074) – – – – – (3,074)
Profit before taxation 502,184 (33,35 3) – 28,210 (14,197) (19,340) 482,844
Income tax expenses (59,086) 1,51 4 – – – 1,51 4 (57,57 2)
Profit (loss) for the year 443,098 (31,839) – 28,210 (14,197) (17,826) 425,272
Other comprehensive (expense) incomeItems that may be reclassified subsequently to profit or loss
Exchange difference arising on translation of
financial statements of foreign operations 29,182 – – – – – 29,182
Reclassification of translation reserve to profit or
loss upon deemed disposal of a subsidiary (125,543) – – – – – (125,543)
Reclassification of translation reserve to profit or
loss upon disposal of a subsidiary (3,526) – – – – – (3,526)
(99,887) – – – – – (99,887)
Total comprehensive income (expense) for the year 343,211 (31,839) – 28,210 (14,197) (17,826) 325,385
Profit (loss) for the year attributable to:Owners of the Company 381,966 (3 1, 839) – 28,210 (14,197) (17,826) 364,140
Non-controlling interests 61,132 – – – – – 61, 132
443,098 (31,839) – 28,210 (14,197) (17,826) 425,272
Total comprehensive income (expense) attributable to:Owners of the Company 280,569 ( 31, 839) – 28,210 (14,197) (17,826) 262,743
Non-controlling interests 62,642 – – – – – 62,642
343,211 (31,839) – 28,210 (14,197) (17,826) 325,385
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 5
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2013
Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January
2013 for the purposes of the pro forma consolidated statement of financial position, pro forma
consolidated statement of profit or loss and other comprehensive income and pro forma
consolidated statement of cash flows respectively and the Makerston Agreement lapsed
The Groupfor the
year ended31 December
2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of ES Disposal
The RemainingGroup for the
year ended31 December
2013immediately
after theES Disposal
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 6 Note 7 Note 8 Note 9 Note 10
Cash flows from operating activities
Profit for the year 443,098 28,210 (14,197) (31,839) – – (17,826) 425,272
Adjustments for:
Share of result of an associate 1,223 – – – – – – 1,223
Share of result of a joint venture 3,074 – – – – – – 3,074
Income taxes – – – (1,51 4) – – (1,51 4) (1,514)
Depreciation of property, plant and equipment 95,859 – – (12,396) – – (12,396) 83,463
Interest income (1,829) (28,210) – 102 – – (28,108) (29,937)
Other interest expenses 32,283 – – (17,303) – – (17,303) 14,980
Loss on disposal of property, plant and equipment 5,742 – – – – – – 5,742
Fair value gain on derivative financial instrument (650) – – – – – – (650)
Impairment loss recognised in respect of
property, plant and equipment 50,407 – – – – – – 50,407
Impairment loss recognised in respect of other assets 11,160 – – – – – – 11,160
Impairment loss recognised in respect of
other receivables 7,871 – – – – – – 7,871
Gain on disposal of a joint venture (5,166) – – – – – – (5,166)
Reversal of impairment losses on amount
due from a joint venture (7,089) – – – – – – (7,089)
Impairment loss recognised in respect of
available-for-sale investment 32,239 – – – – – – 32,239
Increase in fair value of investments held for trading (245) – – – – – – (245)
Gain on deemed disposal of a subsidiary (715,029) – – – – – – (715,029)
Loss on disposal of subsidiaries 20,059 – 14,197 – – – 14,197 34,256
Loss on disposal of investments held for trading 162 – – – – – – 162
Decrease in fair value of investment properties 30,108 – – – – – – 30,108
Operating cash flows before movements in working capital 3,277 – – (62,9 50) – – (62,9 50) (59,67 3)
Movements in working capital
Increase in trade and other receivables (91,345) – – 2, 833 – – 2, 833 (88, 512)
Decrease in inventories 2,695 – – 163 – – 163 2,858
Increase in trade and other payables 18,391 – – ( 2, 792) 1,399 – ( 1, 393) 16, 998
Increase in amounts due from fellow subsidiaries – – – 1,399 (1,399) – – –
(70,259) – – 1, 603 – – 1, 603 ( 68, 656)
Cash used in operations (66,982) – – (61, 347) – – (61, 347) ( 128, 329)
Taxation paid in the People’s Republic of China (4,668) – – – – – – (4,668)
Net cash used in operating activities (71,650) – – (61, 347) – – (61, 347) ( 132, 997)
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 6
The Groupfor the
year ended31 December
2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of ES Disposal
The RemainingGroup for the
year ended31 December
2013immediately
after theES Disposal
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 6 Note 7 Note 8 Note 9 Note 10
Cash flows from investing activities
Additions to property, plant and equipment and
investment properties (62,473) – – 29,535 – – 29,535 (32,938)
Placement of pledged bank deposits (307,816) – – 1,737 – – 1,737 (306,079)
Disposal of derivative financial instrument (2,080) – – – – – – (2,080)
Disposal of interest in a joint venture 4 – – – – – – 4
Withdrawal of pledged bank deposits 11,780 – – – – – – 11,780
Proceeds from disposal of property, plant and equipment 264 – – – – – – 264
Repayment from an investee 41,077 – – – – – – 41,077
Interest received 1,829 12,500 – (102) – – 12,398 14,227
Repayment of amounts due from former fellow subsidiaries – – – – 66,874 – 66,874 66,874
Proceeds from disposals of subsidiaries 46,999 – – – – 231,501 231,501 278,500
Proceeds from deemed disposal of a subsidiary 297,311 – – – – – – 297,311
Net cash from investing activities 26,895 12,500 – 31, 170 66,874 231,501 342,045 368,940
Cash from financing activities
New borrowings raised 195,000 – – (195,000) – – (195,000) –
Repayment of bank and other borrowings (22,456) – – – – – – (22,456)
Purchase of shares of a subsidiary from
non-control shareholders (13,500) – – – – – – (13,500)
Decrease in amount due to fellow subsidiaries – – – 66,874 (66,874) – – –
Interest paid (32,283) – – 17,403 – – 17,403 (14,880)
Net cash from financing activities 126,761 – – (110,723) (66,874) – (177,597) (50,836)
Net increase (decrease) in cash and cash equivalents 82,006 12,500 – (140,900) – 231,501 103,101 185,107
Cash and cash equivalents at beginning of the year 364,066 – – (20,306) – – (20,306) 343,760
Effect of foreign exchange rate changes 3,315 – – – – – – 3,315
Cash and cash equivalents at end of the year, represented by
Bank balances and cash 449,387 12,500 – (161,206) – 231,501 82,795 532,182
Bank balances included in assets classified as held for sale (22,114) – – 22,114 – – 22,114 –
427,273 12,500 – (139,092) – 231,501 104,909 532,182
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 7
Notes to the Pro Forma Financial Information
Scenario I – Assuming the ES Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the
pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other
comprehensive income and pro forma consolidated statement of cash flows respectively and the Makerston Agreement
lapsed
(1) The adjustment represents the deconsolidation of the assets and liabilities of the Eagle Spirit Group as of 30 June
2014 , as extracted from the review report of the Eagle Spirit Group set out in Appendix II to this circular, from the
Group’s unaudited condensed consolidated statement of financial position as at 30 June 2014 as if the ES Disposal
were completed and the Group’s control over the Eagle Spirit Group were lost on 30 June 2014.
(2) The adjustment represents the reclassification of amounts due from (to) fellow subsidiaries to other payables and
other receivables respectively, as the Eagle Spirit Group is no longer fellow subsidiaries of the Group, as if the ES
Disposal were completed and control over the Eagle Spirit Group by the Group were lost on 30 June 2014.
(3) The adjustment represents the pro forma loss arising from the ES Disposal as if the ES Disposal were completed and
the Group’s control over the Eagle Spirit Group were lost on 30 June 2014 calculated as follows:
HK$’000
Pro Forma total fair value of ES Consideration (note a) 470,807
Estimated costs directly attributable to the ES Disposal (note b) (2,000)
468,807
Carrying amount of net assets of the Eagle Spirit Group (note c ) (446,385)
Carrying amount of the ES Sale Loan (note c) (36,619)
Pro forma loss on the ES Disposal (14,197)
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 8
(a) Pursuant to the Eagle Spirit Agreement, the ES Consideration is determined based on the financial
information of the Eagle Spirit Group as of ES Completion Date in accordance with the following formula:
Pro forma amounts
as at 30 June 2014
HK$’000
Cash consideration 530,000
Plus:
40% of the consolidated ES Net Current Assets (Liabilities) of More Star (2,035)
the ES Net Current Assets of Eagle Spirit 312,413
the ES Net Current Assets (Liabilities) of Rosedale Kowloon (21,765)
the consolidated ES Net Current Assets (Liabilities) of HK Macau (296,662)
the combined ES Net Current Assets (Liabilities) of Rosy Universe (18,144)
503,807
Pursuant to the Eagle Spirit Agreement, the ES Consideration shall not exceed HK$566,000,000. Given the
pro forma ES Consideration calculated by the above formula using the financial information as at 30 June
2014 as if it were the ES Completion Date does not exceed HK$566,000,000, for the purpose of preparation
of the pro forma consolidated statement of financial position, the pro forma ES Consideration is assumed to
be HK$ 503,807,000 which will be satisfied as follows:
(i) HK$250,000,000 by the issue of the ES Note ; and
(ii) the balance (i.e. HK$ 253,807,000) in cash.
An analysis of the pro forma fair value of the ES Consideration assuming the ES Disposal had taken
place on 30 June 2014 is set out as follows:
Face value
Pro forma
total fair value of
ES Consideration
HK$’000 HK$’000
ES Note 250,000 217,000
Cash consideration 253,807 253,807
Total consideration 503,807 470,807
The ES Note is to be issued by ITCP, bearing coupon interest at 5% per annum, payable semi-
annually in arrears, and with maturity period of 2 years. At initial recognition, the pro forma fair
value of the ES Note is estimated based on the valuation report issued by an independent firm of
valuers, which is measured at the present value of contractual future cash flows discounted at the
effective interest rate of 13% per annum, taking into account the credit standing of ITCP and the
remaining time to maturity. Pursuant to the terms of the ES Note, ITCP has an option to early
redeem the ES Note at par plus accrued outstanding interest. In the opinion of the Directors, the
fair value of the early redemption option is insignificant. The fair values of the ES Note and the
early redemption option embedded derivative are subject to change at ES Completion Date, so are
the costs of ES Disposal and carrying amounts of net assets of the Eagle Spirit Group and ES Sale
Loan, and therefore the actual gain or loss is subject to change at ES Completion Date.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 9
(b) The estimated direct transaction costs to be incurred in connection with the ES Disposal is assumed to be
approximately HK$2,000,000, and the actual costs of the ES Disposal is subject to change at ES Completion
Date.
(c) The amounts are extracted from the review report for the Eagle Spirit Group set out in Appendix II to this
circular .
(4) The adjustment represents the deconsolidation of the results attributable to the Eagle Spirit Group for the year ended
31 December 2013, as extracted from the review report for the Eagle Spirit Group set out in Appendix II to this
circular, from the audited consolidated statement of profit or loss and other comprehensive income of the Group for
the year ended 31 December 2013 as if the ES Disposal had taken place on 1 January 2013. This adjustment is not
expected to have a continuing effect on the Remaining Group.
(5) The adjustment represents the reinstatement of intra-group management fee and secondment fee income amounting
to HK$27,386,000 received from and interest expenses of HK$420,000 paid to former fellow subsidiaries of the
Eagle Spirit Group for the year ended 31 December 2013, and the related administrative expenses of HK$27,386,000
incurred and other income of HK$420,000 received by the Remaining Group, as the Eagle Spirit Group are no
longer fellow subsidiaries of the Remaining Group after completion of the ES Disposal. This adjustment is not
expected to have a continuing effect on the Remaining Group.
(6) The adjustment represents effective interest income of HK$28,210,000 in respect of the ES Note with principal
value of HK$250 million, discounted at the effective interest rate of 13% per annum. The interest received is
calculated based on its coupon interest at 5% per annum, which is reflected in the pro forma consolidated statement
of cash flows for the year ended 31 December 2013. This adjustment is expected to have a continuing effect on the
Remaining Group.
(7) The adjustment represents the recognition of the pro forma loss arising from the ES Disposal as if the ES Disposal
were completed and the Group’s control over the Eagle Spirit Group were lost on 1 January 2013. In considering the
Eagle Spirit Group only holding 40% interest in More Star in the transaction of the ES Disposal, it is not meaning to
calculate a pro forma gain or loss based on the assets and liabilities of the Eagle Spirit Group as at 1 January 2013
since the Eagle Spirit Group held 100% interest in More Star as at 1 January 2013. Therefore, for the purposes of
the pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated
statement of cash flows, it is more representative to assume that the pro forma loss on the ES Disposal is equal to
HK$14,197,000 as calculated on the same basis as set out in note 3 above.
(8) The adjustment represents the exclusion of the cash flows of the Eagle Spirit Group as extracted from the review
report for the Eagle Spirit Group set out in Appendix II to this circular, from the audited consolidated statement of
cash flows of the Group for the year ended 31 December 2013, as if the ES Disposal had taken place on 1 January
2013. This adjustment is not expected to have a continuing effect on the Remaining Group.
(9) The adjustment represents the reclassification of the intra-group cash flows for the amounts due from fellow
subsidiaries of HK$1,399,000 and decrease in amount due to fellow subsidiaries of HK$ 66,874,000, as the Eagle
Spirit Group is no longer related to the Remaining Group after completion of the ES Disposal. This adjustment is
not expected to have a continuing effect on the Remaining Group.
(10) The net cash inflow of the proceeds from the ES Disposal of HK$ 231,501,000 represents the pro forma estimated
cash consideration of HK$ 253,807,000 (note 3(a)) less (i) estimated pro forma direct costs of HK$2,000,000 such
as legal and professional fees; and (ii) cash and cash equivalents of the Eagle Spirit Group as at 1 January 2013 of
HK$20,306,000, as if the ES Disposal had taken place on 1 January 2013. This adjustment is not expected to have a
continuing effect on the Remaining Group.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 10
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2014
Scenario II – Assuming the MS Disposal ha d been completed on 30 June 2014 or 1 January
2013 for the purposes of the pro forma consolidated statement of financial position, pro forma
consolidated statement of profit or loss and other comprehensive income and pro forma
consolidated statement of cash flows respectively and the Eagle Spirit Agreement lapsed
The Groupas at
30 June 2014 Pro forma adjustments
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup as at
30 June 2014after the
MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) Note 1 Note 2 Note 3 Note 4
Non-current assetsProperty, plant and equipment 536,480 – – – – – 536,480
Investment properties 279,000 – – – – – 279,000
Interest in a joint venture 193,725 – – – – – 193,725
Interest in an associate 263,512 (263,512) – – – (263,512) –
Amount due from a joint venture 299,078 – – – – – 299,078
Promissory notes receivable – – – – 217,000 217,000 217,000
Available-for-sale investments 31,638 – – – – – 31,638
Club debentures, at cost less impairment 520 – – – – – 520
Other assets 16,000 – – – – – 16,000
1,619,953 (263,512) – – 217,000 (46,512) 1,573,441
Current assetsInventories 3,315 – – – – – 3,315
Trade and other receivables 794,688 (665,952) 665,952 54 54 794,742
Investments held for trading 368 – – – – – 368
Bank balances and cash 665,883 (61) – – 49,758 49,697 715,580
1,464,254 (666,013) 66 5,952 54 49,758 49,751 1,514,005
Current liabilitiesTrade and other payables 74,518 (10) – – – (10) 74,508
Tax liabilities 77,452 (66,744) – – – (66,744) 10,708
Tax indemnity payable – – – – 66,744 66,744 66,744
Borrowings – amount due within one year 10,000 – – – – – 10,000
Amount due to immediate holding company – (217,725) – – 217,725 – –
Amounts due to fellow subsidiaries – (54) – 54 – – –
Amount due to a non-controlling shareholder
of a subsidiary 9,271 – – – – – 9,271
171,241 (284,533) – 54 284,469 (10) 171,231
Net current assets 1,293,013 (381,480) 665,952 – (234,711) 49,761 1,342,774
Total assets less current liabilities 2,912,966 (644,992) 665,952 – (17,711) 3,249 2,916,215
Non-current liabilitiesBorrowings – amount due after one year 250,000 – – – – – 250,000
Deferred taxation 58,152 – – – – – 58,152
308,152 – – – – – 308,152
2,604,814 (644,992) 665,952 – (17,711) 3,249 2,608,063
Capital & reservesShare Capital 6,577 – – – – – 6,577
Reserves 2,362,646 – – – 2,882 2,882 2,365,528
Equity attributable to owners of the parent 2,369,223 – – – 2,882 2,882 2,372,105
Non-controlling interests 235,591 – – – 367 367 235,958
Total equity 2,604,814 – – – 3,249 3,249 2,608,063
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 11
PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
Scenario II – Assuming the MS Disposal ha d been completed on 30 June 2014 or 1 January
2013 for the purposes of the pro forma consolidated statement of financial position, pro forma
consolidated statement of profit or loss and other comprehensive income and pro forma
consolidated statement of cash flows respectively and the Eagle Spirit Agreement lapsed
The Groupfor the
year ended31 December
2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December 2013
immediatelyafter the
MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 5 Note 6 Note 7 Note 8 Note 9 Note 10
Turnover 447,220 (80,075) – – – – – (80,075) 367,145
Direct operating costs (331,933) 57,322 – – – – – 57,322 (274,611)
Gross profit 115,287 (22,753) – – – – – (22,753) 92,534
Interest income 1,829 – – – – 28,210 – 28, 210 30, 039
Other income, gains and losses 5,433 (7,15 2) – – 8,417 – – 1,26 5 6,69 8
Distribution and selling expenses (4,613) – – – – – – – (4,613)
Administrative expenses (223,485) 37,35 2 – – (8,417) – – 28,93 5 (194,55 0)
Finance costs (32,283) 7,114 – – – – – 7,114 (25,169)
Gain on deemed disposal of a subsidiary 781,773 (656,230) – (125,543) – – – (781,773) –
Impairment loss recognised in respect of
available-for-sale investments (32,239) – – – – – – – (32,239)
Impairment loss recognised in respect of
property, plant and equipment (50,407) – – – – – – – (50,407)
Impairment loss recognised in respect of other assets (11,160) – – – – – – – (11,160)
(Loss) gain on disposal of subsidiaries (20,059) – – – – – 3,249 3,249 (16,810)
Loss on disposal of property, plant and equipment (5,742) – – – – – – – (5,742)
Gain on disposal of a joint venture 5,166 – – – – – – – 5,166
Reversal of impairment losses on amount
due from a joint venture 7,089 – – – – – – – 7,089
Decrease in fair value of investment properties (30,108) – – – – – – – (30,108)
Share of result of an associate (1,223) 1,223 – – – – – 1,223 –
Share of result of a joint venture (3,074) – – – – – – – (3,074)
Profit (loss) before taxation 502,184 (640,446) – (125,543) – 28,210 3,249 (734,530) (232,346)
Income tax expenses (59,086) 60, 149 – – – – – 60,149 1,063
Profit (loss) for the year 443,098 ( 580, 297) – (125,543) – 28,210 3,249 (674,381) (231,283)
Other comprehensive (expense) incomeItems that may be reclassified subsequently to
profit or loss:
Exchange difference arising on translation of
financial statements of foreign operations 29,182 – – (16,732) – – – (16,732) 12,450
Reclassification adjustment of translation reserve
upon deemed disposal of a subsidiary (125,543) – – 125,543 – – – 125,543 –
Reclassification adjustment of
translation reserve upon disposal of a subsidiary (3,526) – – – – – – – (3,526)
(99,887) – – 108,811 – – – 108,811 8,924
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 12
The Groupfor the
year ended31 December
2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December 2013
immediatelyafter the
MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 5 Note 6 Note 7 Note 8 Note 9 Note 10
Item that will not be reclassified subsequently to
profit or loss:
Exchange difference arising on translation of
functional currency to presentation currency – (16,732) – 16,732 – – – – –
Total comprehensive income (expense) for the year 343,211 ( 597, 029) – – – 28,210 3,249 (565,570) (222,359)
Profit (loss) for the year attributable to:Owners of the Company 381,966 (580,297) 68,475 (125,543) – 24,881 2,866 (609,618) (227,652)
Non-controlling interests 61,132 – (68,475) – – 3,329 383 (64,763) (3,631)
443,098 ( 580, 297) – (125,543) – 28,210 3,249 (674,381) (231,283)
Total comprehensive income (expense) attributable to:Owners of the Company 280,569 (597,029) 70,449 – – 24,881 2,866 (498,833) (218,264)
Non-controlling interests 62,642 – (70,449) – – 3,329 383 (66,737) (4,095)
343,211 ( 597,029) – – – 28,210 3,249 (565,570) (222,359)
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 13
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2013
Scenario II – Assuming the MS Disposal ha d been completed on 30 June 2014 or 1 January
2013 for the purposes of the pro forma consolidated statement of financial position, pro forma
consolidated statement of profit or loss and other comprehensive income and pro forma
consolidated statement of cash flows respectively and the Eagle Spirit Agreement lapsed
The Groupfor the
year ended31 December 2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December 2013immediately after
the MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 7 Note 9 Note 10 Note 11 Note 12 Note 13
Cash flows from operating activities
Profit (loss) for the year 443,098 (125,543) 28,210 3,249 ( 580, 297) – – (674,381) (231,283)
Adjustments for:
Share of result of an associate 1,223 – – – (1,223) – – (1,223) –
Share of result of a joint venture 3,074 – – – – – – 3,074
Income tax – – – – 6,595 – – 6,595 6, 595
Depreciation of property, plant and equipment 95,859 – – – (25,385) – – (25,385) 70,474
Interest income (1,829) – (28,210) – 80 – – (28,130) (29,959)
Other interest expenses 32,283 – – – (7,114) – – (7,114) 25,169
Loss on disposal of property, plant and equipment 5,742 – – – (23) – – (23) 5,719
Fair value gain on derivative financial instrument (650) – – – 650 – – 650 –
Impairment loss recognised in respect of
property, plant and equipment 50,407 – – – – – – – 50,407
Impairment loss recognised in respect of other assets 11,160 – – – – – – – 11,160
Impairment loss recognised in respect of
other receivables 7,871 – – – – – – – 7,871
Gain on disposal of a joint venture (5,166) – – – – – – – (5,166)
Reversal of impairment losses on amount due
from a joint venture (7,089) – – – – – – – (7,089)
Impairment loss recognised in respect of
available-for-sale investment 32,239 – – – – – – – 32,239
Increase in fair value of investments held for trading (245) – – – – – – – (245)
Gain on deemed disposal of a subsidiary (715,029) 125,543 – – 589, 486 – – 715,029 –
Loss (gain) on disposal of subsidiaries 20,059 – – (3,249) – – – (3,249) 16,810
Loss on disposal of investments held for trading 162 – – – – – – – 162
Decrease in fair value of investment properties 30,108 – – – – – – – 30,108
Operating cash flows before movements
in working capital 3,277 – – – (17,231) – – (17,231) (13,954)
Movements in working capital
(Increase) decrease in trade and other receivables (91,345) – – – 3, 509 – – 3, 509 ( 87, 836)
Decrease in inventories 2,695 – – – 158 – – 158 2,853
Increase in trade and other payables 18,391 – – – 4,468 – 463 4,931 23,322
Decrease in amounts due to fellow subsidiaries – – – – 463 – ( 463) – –
(70,259) – – – 8, 598 – – 8, 598 ( 61, 661)
Cash used in operations (66,982) – – – ( 8, 633) – – ( 8, 633) ( 75, 615)
Taxation paid in the People’s Republic of China (4,668) – – (4,668)
Net cash used in operating activities (71,650) – – – ( 8, 633) – – ( 8, 633) ( 80, 283)
Cash flows from investing activities
Additions to property, plant and equipment and
investment properties (62,473) – – – 24,171 – – 24,171 (38,302)
Placement of pledged bank deposits (307,816) – – – 297,331 – – 297,331 (10,485)
Acquisition of subsidiaries – – – – – – – – –
Disposal of derivative financial instrument (2,080) – – – 2,080 – – 2,080 –
Disposal of interest in a joint venture 4 – – – – – – – 4
Withdrawal of pledged bank deposits 11,780 – – – – – – – 11,780
Proceeds from disposal of property,
plant and equipment 264 – – – (5) – – (5) 259
Repayment from an investee 41,077 – – – – – – – 41,077
Interest received 1,829 – 12,500 – (80) – – 12,420 14,249
Advance to Makerston – – – – – – (85,991) (85,991) (85,991)
Repayment from Makerston – – – – – – 62,265 62,265 62,265
Proceeds from disposal of subsidiaries 46,999 – – – – 40,767 – 40,767 87,766
Proceeds from deemed disposal of a subsidiary 297,311 – – – (297,311) – – (297,311) –
Net cash from investing activities 26,895 – 12,500 – 26,186 40,767 ( 23, 726) 55,727 82,622
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 14
Cash from financing activities
New borrowings raised 195,000 – – – – – – – 195,000
Repayment of bank and other borrowings (22,456) – – – 8,505 – – 8,505 (13,951)
Purchase of shares of a subsidiary
from non-control shareholders (13,500) – – – – – – – (13,500)
Advance from immediate holding company – – – – (85,991) – 85,991 – –
Repayment to immediate holding company – – – – 62,265 – (62,265) – –
Interest paid (32,283) – – – 7,048 – – 7,048 (25,235)
Net cash from financing activities 126,761 – – – ( 8, 173) – 23, 726 15,553 142,314
Net increase in cash and cash equivalents 82,006 – 12,500 – 9,380 40,767 – 62,647 144,653
Cash and cash equivalents at beginning of the year 364,066 – – – (8,991) – – (8,991) 355,075
Effect of foreign exchange rate changes 3,315 – – – (832) – – (832) 2,483
Cash and cash equivalents at end of the year,
represented by
Bank balances and cash 449,387 – 12,500 – (443) 40,767 – 52,824 502,211
Bank balances included in assets classified
as held for sale (22,114) – – – – – – – (22,114)
427,273 – 12,500 – (443) 40,767 – 52,824 480,097
The Groupfor the
year ended31 December 2013 Pro forma adjustments
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December 2013immediately after
the MS DisposalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 7 Note 9 Note 10 Note 11 Note 12 Note 13
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 15
Notes to the Pro Forma Financial Information
Scenario II – Assuming the MS Disposal had been completed on 30 June 2014 or 1 January 2013 for the purposes
of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and
other comprehensive income and pro forma consolidated statement of cash flows respectively and the Eagle Spirit
Agreement lapsed
(1) The adjustment represents the deconsolidation of the assets and liabilities of the Makerston Group as at 30 June
2014 , as extracted from the review report of the Makerston Group set out in Appendix III to this circular, from the
Group’s unaudited condensed consolidated statement of financial position as at 30 June 2014 as if the MS Disposal
were completed and the Group’s control over the Makerston Group were lost on 30 June 2014.
( 2) The adjustment represents, the arrangement pursuant to the Makerston Agreement in respect of which the
Compensated Amount from the Investor of approximately HK$ 665,952,000 under the Capital Increase Agreement
is recoverable by the MS Vendor from the Purchaser upon receipt of the Compensated Amount by the Makerston
Group.
( 3) The adjustment represents the reclassification of amounts due to fellow subsidiaries to other receivables, as the
Makerston Group will no longer be fellow subsidiaries of the Group after the completion of the MS Disposal, as if
the MS Disposal were completed and the Group’s control over the Makerston Group were lost on 30 June 2014.
( 4) The adjustment represents the pro forma gain on the disposal as if the MS Disposal were completed and the Group’s
control over the Makerston Group were lost on 30 June 2014 calculated as follows:
HK$’000
Pro forma total fair value of MS Consideration (note a) 268,758
Estimated costs directly attributable to the MS Disposal (note b) (2,000)
266,758
Carrying amount of net assets of the Makerston Group (note c) (644,992)
Compensated Amount recoverable from the Purchaser (note 2) 665,952
Carrying amount of MS Sale Loan (note c) ( 217,725)
Less: Tax indemnity payables undert aken by the Remaining Group (note d) (66,744)
Pro forma gain on the MS Disposal 3,249
Attributable to:
Owners of the Company 2,882
Non-controlling interests (approximately 11.3%) (note e) 367
3,249
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 16
Notes:
(a) Pursuant to the Makerston Agreement, the MS Consideration is determined based on the financial
information of the Makerston Group as of MS Completion Date in accordance with the following formula:
Pro forma amounts
as at 30 June 2014
HK$’000
Cash consideration 256,000
Plus:
the MS Net Current Assets of Makerston 152,764
the MS Net Current Assets (Liabilities) of DS Eastin (152,767)
20% of the MS Net Current Assets of Rosedale Beijing 28,933
20% of the amount of land premium paid by Rosedale Beijing out of
its cash on hand during the period between the date of
the Makerston Agreement and the MS Completion Date 16,828
Pro forma MS Consideration to be received by the Group 301,758
Pursuant to the Makerston Agreement, the MS Consideration is capped at HK$324,000,000. Given the pro
forma MS Consideration calculated by the above formula using the financial information as at 30 June 2014
as if it were the MS Completion Date does not exceed HK$324,000,000 , for the purpose of preparation of
this pro forma consolidated statement of financial position, the pro forma MS Consideration is assumed to
be HK$ 301,758,000 which will be satisfied as follows:
(i) HK$250,000,000 by issue of the MS Note ; and
(ii) the balance (i.e. HK$ 51,758,000) in cash.
An analysis of the pro forma fair value of the pro forma MS Consideration assuming the MS
Disposal had taken place on 30 June 2014 is set out as follows:
Face value
Pro forma
total fair value of
MS Consideration
HK$’000 HK$’000
MS Note 250,000 217,000
Cash consideration 51,758 51,758
Total consideration 301,758 268,758
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 17
The MS Note is to be issued by ITCP, bearing coupon interest at 5% per annum, payable semi-
annually in arrears, and with maturity period of 2 years. At initial recognition, the pro forma fair
value of the MS Note is estimated based on the valuation report issued by an independent firm of
valuers, which is measured at the present value of contractual future cash flows discounted at the
effective interest rate of 13% per annum, taking into account the credit standing of ITCP and the
remaining time to maturity. Pursuant to the terms of the MS Note, ITCP has an option to early
redeem the MS Note at par plus accrued outstanding interest. In the opinion of the Directors, the
fair value of the early redemption option is insignificant. The fair values of the MS Note and the
early redemption option embedded derivative are subject to change at MS Completion Date, so are
the costs of MS Disposal and carrying amounts of net assets of the Makerston Group and MS Sale
Loan, and therefore the actual gain is subject to change at MS Completion Date.
(b) The estimated direct transaction costs to be incurred in connection with the MS Disposal is assumed to
be approximately HK$2,000,000, and the actual costs of the MS Disposal is subject to change at MS
Completion Date.
(c) The amounts are extracted from the review report of the Makerston Group set out in Appendix III to this
circular .
( d) Pursuant to the terms of the Makerston Agreement, the MS Vendor undertakes, among other things, to
the Purchaser that it will fully indemnify the Purchaser, the Makerston Group and the PRC Company
against any taxation and related expenses arising from the Capital Increase Agreement and the transactions
contemplated thereunder.
The amount represents the estimated tax indemnity payables of HK$66,744,000 undertaken by the MS
Vendor in respect of the capital gain on the deemed disposal of Rosedale Beijing which was completed on
29 November 2013 .
(e) As at 1 January 2013, the Group held an effective interest of 88.2% of Makerston. On 21 June 2013, the
Group acquired an additional equity interests of approximately 0.5% of the issued share capital of Apex,
which is an intermediate holding company of Makerston. Following the completion of this transaction, the
Group’s equity interest in Makerston has been increased from approximately 88.2% to 88.7%. As at 30 June
2014, the non-controlling interests held 11.3% interest in Makerston Group.
( 5) The adjustment represents the deconsolidation of the results attributable to the Makerston Group for the year ended
31 December 2013, as extracted from the review report of the Makerston Group as set out in Appendix III to this
circular, from the audited consolidated statement profit or loss and other comprehensive income of the Group for
the year ended 31 December 2013 as if the MS Disposal had taken place on 1 January 2013. This adjustment is not
expected to have a continuing effect on the Remaining Group.
( 6) The amount represents the results attributable to the non-controlling interests of Apex of approximately of 11.8%
as at 1 January 2013 for deconsolidation of the results of the Makerston Group for the year ended 31 December
2013 as disclosed in note 5 above, as if the MS Disposal had taken place on 1 January 2013. This adjustment is not
expected to have a continuing effect on the Remaining Group.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 18
( 7) Since the functional currency of the Company is in HK$ whereas that of each of the Makerston Group companies
is RMB, the exchange difference arising from translation of the Makerston Group to HK$ presentation currency is
not subsequently reclassified to profit or loss as presented in the review report of the Makerston Group set out in
Appendix III to this circular; whereas at the Group level such translation difference may be subsequently reclassified
to profit or loss. Accordingly, the accumulated translation difference of HK$125,543,000 arising from Rosedale
Beijing is included as part of the gain on deemed disposal of subsidiaries in the Group’s consolidated statement of
profit or loss and other comprehensive income; whereas such translation difference is excluded from the calculation
of the gain on deemed disposal of subsidiary at the Makerston Group level. This adjustment takes the above into
account. This adjustment is not expected to have a continuing effect on the Remaining Group.
( 8) The adjustment represents the reinstatement of intra-group transactions eliminated for the year ended 31 December
2013 as the Makerston Group will no longer be fellow subsidiar ies of the Remaining Group after the completion of
the MS Disposal. This adjustment is not expected to have a continuing effect on the Remaining Group.
( 9) The adjustment represents the effective interest income of HK$28,210,000 in respect of the MS Note with principal
value of HK$250 million, discounted at the effective interest rate of 13% per annum. The interest received is
calculated based on its coupon interest at 5% per annum, which is reflected in the pro forma consolidated statement
of cash flows for the year ended 31 December 2013. This adjustment is expected to have a continuing effect on the
Remaining Group.
(10) The adjustment represents the recognition of the pro forma gain arising from the MS Disposal as if the MS Disposal
were completed and the Group’s control over the Makerston Group were lost on 1 January 2013. In considering
the Makerston Group only holding 20% interest in Rosedale Beijing in the transaction of the MS Disposal, it is
not meaning to calculate a pro forma gain or loss based on the assets and liabilities of the Makerston Group as at 1
January 2013 since the Makerston Group held 100% interest in Rosedale Beijing as at 1 January 2013. Therefore,
for the purposes of the pro forma consolidated statement of profit or loss and other comprehensive income and pro
forma consolidated statement of cash flows, it is more representative to assume that the pro forma gain on the MS
Disposal is equal to HK$3,249,000 as calculated on the same basis as set out in note 4 above.
As at 1 January 2013, the Group held an effective interest of 88.2% of Makerston, and the non-controlling interests
held 11.8% interest in Makerston Group, and therefore the pro forma gain on the MS Disposal is attributable to:
HK$’000
Owners of the Company 2,866
Non-controlling interests (approximately 11.8%) 383
3,249
( 11) The adjustment represents the exclusion of the cash flows of the Makerston Group, as extracted from the review
report of the Makerston Group set out in Appendix III to this circular, from the audited consolidated statement of
cash flows of the Group for the year ended 31 December 2013, as if the MS Disposal had taken place on 1 January
2013. This adjustment is not expected to have a continuing effect on the Remaining Group.
( 12) The net cash inflow of the proceeds from the MS Disposal of HK$ 40,767,000 represents the pro forma estimated
cash consideration of HK$ 51,758,000 (note 4 (a)) less (i) estimated pro forma direct costs of HK$2,000,000 such
as legal and professional fees; and (ii) cash and cash equivalents of the Makerston Group as at 1 January 2013 of
HK$8,991,000, as if the MS Disposal had taken place on 1 January 2013. This adjustment is not expected to have a
continuing effect on the Remaining Group.
( 13) The adjustment represents the reinstatement of intra-group transactions eliminated for the year ended 31 December
2013 as the Makerston Group is no longer fellow subsidiaries of the Remaining Group after completion of the MS
Disposal. This adjustment is not expected to have a continuing effect on the Remaining Group.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 19
PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2014
Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively
The Groupas at
30 June 2014
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup as at
30 June 2014after the
ES Disposaland
MS DisposalHK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) Note 1 Note 2
Non-current assetsProperty, plant and equipment 536,480 (8 39) – 535, 641
Investment properties 279,000 – – 279,000
Interest in a joint venture 193,725 (193,725) – –
Interest in an associate 263,512 – (263, 512) –
Amount due from a joint venture 299,078 (299,078) – –
Promissory notes receivable – 217,000 217,000 434,000
Available-for-sale investments 31,638 – – 31,638
Club debentures, at cost less impairment 520 (520) – –
Other assets 16,000 (16,000) – –
1,619,953 (293,162) (46,512) 1,280,279
Current assetsInventories 3,315 ( 550) – 2,7 65
Trade and other receivables 794,688 20, 036 54 814,778
Investments held for trading 368 – – 368
Bank balances and cash 665,883 240,305 49,697 955,885
1,464,254 259,791 49,751 1,773,796
Current liabilitiesTrade and other payables 74,518 (19,174) (10) 55,334
Tax liabilities 77,452 – (66,744) 10,708
Tax indemnity payables – – 66,744 66,744
Borrowings – amount
due within one year 10,000 – – 10,000
Amount due to a non-controlling
shareholder of a subsidiary 9,271 – – 9,271
171,241 (19,174) (10) 152,057
Net current assets 1,293,013 278,965 49,761 1,621,739
Total assets less current liabilities 2,912,966 (14,197) 3,249 2,902,018
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 20
Non-current liabilitiesBorrowings – amount due after one year 250,000 – – 250,000
Deferred taxation 58,152 – – 58,152
308,152 – – 308,152
2,604,814 (14,197) 3,249 2,593,866
Capital & reservesShare Capital 6,577 – – 6,577
Reserves 2,362,646 (14,197) 2,882 2,351,331
Equity attributable to owners of the parent 2,369,223 (14,197) 2,882 2,357,908
Non-controlling interests 235,591 – 367 235,958
Total equity 2,604,814 (14,197) 3,249 2,593,866
The Groupas at
30 June 2014
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup as at
30 June 2014after the
ES Disposaland
MS DisposalHK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) Note 1 Note 2
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 21
PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30
June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of
financial position, pro forma consolidated statement of profit or loss and other comprehensive
income and pro forma consolidated statement of cash flows respectively
The Groupfor the
year ended31 December
2013
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
Pro forma adjustment
The RemainingGroup for the
year ended31 December
2013immediately
after the ES Disposal
and MS Disposal
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 1 Note 2 Note 3
Turnover 447,220 (125,17 9) (80,075) – 241,96 6
Direct operating costs (331,933) 57,796 57,322 – (216,815)
Gross profit 115,287 (67,38 3) (22,753) – 25,15 1
Interest income 1,829 28,630 28,210 – 58,669
Other income, gains and losses 5,433 (2,799) 1,26 5 (6,200) (2,301)
Distribution and selling expenses (4,613) – – – (4,613)
Administrative expenses (223,485) 19,526 28,93 5 6,200 (168,824)
Finance costs (32,283) 16,883 7,114 – (8,286)
Gain on deemed disposal of a subsidiary 781,773 – (781,773) – –
Impairment loss recognised in respect of available-
for-sale investments (32,239) – – – (32,239)
Impairment loss recognised in respect of property,
plant and equipment (50,407) – – – (50,407)
Impairment loss recognised in respect of other
assets (11,160) – – – (11,160)
(Loss) gain on disposal of subsidiaries (20,059) (14,197) 3,249 – (31,007)
Loss on disposal of property,
plant and equipment (5,742) – – – (5,742)
Gain on disposal of a joint venture 5,166 – – – 5,166
Reversal of impairment losses on amount due from
a joint venture 7,089 – – – 7,089
Decrease in fair value of
investment properties (30,108) – – – (30,108)
Share of result of an associate (1,223) – 1,223 – –
Share of result of a joint venture (3,074) – – – (3,074)
Profit (loss) before taxation 502,184 (19,340) (734,530) – (251,686)
Income tax expenses (59,086) 1,51 4 60,149 – 2,577
Profit (loss) for the year 443,098 (17,826) (674,381) – (249,109)
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 22
Other comprehensive (expense) incomeItems that may be reclassified
subsequently to profit or loss:
Exchange difference arising on
translation of financial statements of
foreign operations 29,182 – (16,732) – 12,450
Reclassification adjustment of
translation reserve upon deemed
disposal of a subsidiary (125,543) – 125,543 – –
Reclassification adjustment of translation
reserve upon
disposal of a subsidiary (3,526) – – – (3,526)
(99,887) – 108,811 – 8,924
Total comprehensive income (expense) for the year 343,211 (17,826) (565,570) – (240,185)
Profit (loss) for the year attributable to:Owners of the Company 381,966 (17,826) (609,618) – (245,478)
Non-controlling interests 61,132 – (64,763) – (3,631)
443,098 (17,826) (674,381) – (249,109)
Total comprehensive income (expense) attributable to:Owners of the Company 280,569 (17,826) (498,833) – (236,090)
Non-controlling interests 62,642 – (66,737) – (4,095)
343,211 (17,826) (565,570) – (240,185)
The Groupfor the
year ended31 December
2013
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
Pro forma adjustment
The RemainingGroup for the
year ended31 December
2013immediately
after the ES Disposal
and MS Disposal
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 1 Note 2 Note 3
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 23
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWFOR THE YEAR ENDED 31 DECEMBER 2013
Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30 June 2014 or 1 January 2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement of profit or loss and other comprehensive income and pro forma consolidated statements of cash flow respectively
The Groupfor the
year ended31 December
2013
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December
2013immediately
after the ES Disposal
and MS Disposal
HK$’000 HK$’000 HK$’000 HK$’000(Audited) Note 1 Note 2
Cash flows from operating activitiesProfit (loss) for the year 443,098 (17,826) (674,381) (249,109)Adjustments for:
Share of result of an associate 1,223 – (1,223) –Share of result of a joint venture 3,074 – – 3,074Income tax – (1,51 4) 6,595 5, 081Depreciation of property,
plant and equipment 95,859 (12,396) (25,385) 58,078Interest income (1,829) (28,108) (28,130) (58,067)Other interest expenses 32,283 (17,303) (7,114) 7,866Loss on disposal of property,
plant and equipment 5,742 – (23) 5,719Fair value gain on derivative
financial instrument (650) – 650 –Impairment loss recognised
in respect of property, plant and equipment 50,407 – – 50,407
Impairment loss recognised in respect of other assets 11,160 – – 11,160
Impairment loss recognised in respect of other receivables 7,871 – – 7,871
Gain on disposal of a joint venture (5,166) – – (5,166)Reversal of impairment losses on
amount due from a joint venture (7,089) – – (7,089)Impairment loss recogn ised
in respect of available-for-sale investment 32,239 – – 32,239
Increase in fair value of investments held for trading (245) – – (245)
Gain on deemed disposal of a subsidiary (715,029) – 715,029 –
Loss on disposal of subsidiaries 20,059 14,197 (3,249) 31,007Loss on disposal of investments held
for trading 162 – – 162Decrease in fair value of
investment properties 30,108 – – 30,108
Operating cash flows before movements
in working capital 3,277 (62,9 50) (17,231) (76,90 4)
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 24
Movements in working capital
Increase in trade and other receivables (91,345) 2, 833 3, 509 ( 85, 003)
Decrease in inventories 2,695 163 158 3,016
Increase in trade and other payables 18,391 (1,393) 4,931 21,929
Increase (decrease) in amounts
due to fellow subsidiaries – – – –
(70,259) 1,603 8, 598 (60,058)
Cash used in operations (66,982) (61,347) ( 8, 633) (136,962)
Taxation paid in the
People’s Republic of China (4,668) – – (4,668)
Net cash used in operating activities (71,650) (61,347) ( 8, 633) (141,630)
Cash flows from investing activities
Additions to property,
plant and equipment and
investment properties (62,473) 29,535 24,171 (8,767)
Placement of pledged bank deposits (307,816) 1,737 297,331 (8,748)
Disposal of derivative
financial instrument (2,080) – 2,080 –
Disposal of interest in a joint venture 4 – – 4
Withdrawal of pledged bank deposits 11,780 – – 11,780
Proceeds from disposal of property,
plant and equipment 264 – (5) 259
Repayment from an investee 41,077 – – 41,077
Interest received 1,829 12,398 12,420 26,647
Advance to Makerston – – (85,991) (85,991)
Repayment from Makerston – – 62,265 62,265
Repayment of amounts due
from former fellow subsidiaries – 66,874 – 66,874
Proceeds from disposal of subsidiaries 46,999 231,501 40,767 319,267
Proceeds from deemed disposal of
a subsidiary 297,311 – (297,311) –
Net cash from investing activities 26,895 342,045 55,727 424,667
The Groupfor the
year ended31 December
2013
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December
2013immediately
after the ES Disposal
and MS Disposal
HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 1 Note 2
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 25
Cash from financing activities
New borrowings raised 195,000 (195,000) – –
Repayment of bank and
other borrowings (22,456) – 8,505 (13,951)
Purchase of shares of a subsidiary
from non-control shareholders (13,500) – – (13,500)
Interest paid (32,283) 17,403 7,048 (7,832)
Net cash from financing activities 126,761 (177,597) 15,553 (35,283)
Net increase in cash and cash equivalents 82,006 103,101 62,647 247,754
Cash and cash equivalents
at beginning of the year 364,066 (20,306) (8,991) 334,769
Effect of foreign exchange rate changes 3,315 – (832) 2,483
Cash and cash equivalents at end of the
year, represented by
Bank balances and cash 449,387 82,795 52,824 585,006
Bank balances included
in assets classified as held for sale (22,114) 22,114 – –
427,273 104,909 52,824 585,006
The Groupfor the
year ended31 December
2013
Subtotal ofpro forma
adjustments of ES Disposal
Subtotal ofpro forma
adjustments of MS Disposal
The RemainingGroup for the
year ended31 December
2013immediately
after the ES Disposal
and MS Disposal
HK$’000 HK$’000 HK$’000 HK$’000
(Audited) Note 1 Note 2
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 26
Notes to the Pro Forma Financial Information
Scenario III – Assuming both the ES Disposal and MS Disposal ha d been completed on 30 June 2014 or 1 January
2013 for the purposes of the pro forma consolidated statement of financial position, pro forma consolidated statement
of profit or loss and other comprehensive income and pro forma consolidated statement of cash flows respectively
(1) The details of pro forma adjustments on the ES Disposal are set out in Scenario I on pages IV-7 to IV-9.
(2) The details of pro forma adjustments on the MS Disposal are set out in Scenario II on pages IV-15 to IV-18.
(3) The amount represents the elimination of the intra-group transactions between Eagle Spirit Group and Makerston
Group for management fee income and secondment fee income amounting to HK$6,200,000 which have been
restated in terms of the pro forma adjustment on the ES Disposal and the MS Disposal in Scenario I and Scenario
II respectively, as neither the Eagle Spirit Group nor Makerston Group is part of the Remaining Group after
completion of the ES Disposal and MS Disposal. This adjustment is not expected to have a continuing effect on the
Remaining Group.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 27
2. INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
To the Directors of Rosedale Hotel Holdings Limited
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Rosedale Hotel Holdings Limited (the “Company”) and its subsidiaries
(hereinafter collectively referred to as the “Group”) by the directors of the Company (the
“Directors”) for illustrative purposes only. The pro forma financial information consists of the pro
forma consolidated statement of financial position as at 30 June 2014, the pro forma consolidated
statement of profit or loss and other comprehensive income for the year ended 31 December 2013,
the pro forma statement of cash flows for the year ended 31 December 2013 and related notes as
set out on pages IV-3 to IV-26 of the circular issued by the Company dated 10 November 2014 (the
“Circular”). The applicable criteria on the basis of which the Directors have compiled the pro forma
financial information are described on pages IV-1 and IV-2 of the Circular.
The pro forma financial information has been compiled by the Directors to illustrate
the impact of (i) the proposed very substantial disposal of the entire equity interest in and
corresponding shareholder’s loan due from Eagle Spirit Holdings Limited; and (ii) the proposed
very substantial disposal of the entire equity interest in and corresponding shareholder’s loan
due from Makerston Limited (collectively referred to as the “Transactions”) on the Group’s
financial position as at 30 June 2014 and the Group’s financial performance and cash flows for
the year ended 31 December 2013 as if the Transactions had taken place as at 30 June 2014 and
1 January 2013 respectively. As part of this process, information about the Group’s financial
position, financial performance and cash flows have been extracted by the Directors from the
Group’s condensed consolidated financial statements for the six months ended 30 June 2014 and
consolidated financial statements for the year ended 31 December 2013, on which a review report
and an audit report have been published respectively.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 28
Directors’ Responsibilities for the Pro Forma Financial Information
The Directors are responsible for compiling the pro forma financial information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline
7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”)
issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing
Rules, on the pro forma financial information and to report our opinion to you. We do not accept
any responsibility for any reports previously given by us on any financial information used in
the compilation of the pro forma financial information beyond that owed to those to whom those
reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements (“HKSAE”) 3420 Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus issued by the HKICPA. This standard requires that
the reporting accountant comply with ethical requirements and plan and perform procedures to
obtain reasonable assurance about whether the Directors have compiled the pro forma financial
information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7
issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any reports
or opinions on any historical financial information used in compiling the pro forma financial
information, nor have we, in the course of this engagement, performed an audit or review of the
financial information used in compiling the pro forma financial information.
The purpose of pro forma financial information included in an investment circular is solely
to illustrate the impact of a significant event or transaction on unadjusted financial information of
the Group as if the event had occurred or the transaction had been undertaken as at an earlier date
selected for purposes of the illustration. Accordingly, we do not provide any assurance that the
actual outcome of the event or transaction as at 31 December 2013 or 30 June 2014 would have
been as presented.
APPENDIX IV PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP
IV – 29
A reasonable assurance engagement to report on whether the pro forma financial information
has been properly compiled on the basis of the applicable criteria involves performing procedures
to assess whether the applicable criteria used by the Directors in the compilation of the pro forma
financial information provide a reasonable basis for presenting the significant effects directly
attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:
• The related pro forma adjustments give appropriate effect to those criteria; and
• The pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountant’s judgment, having regard to the
reporting accountant’s understanding of the nature of the Group, the event or transaction in respect
of which the pro forma financial information has been compiled, and other relevant engagement
circumstances.
The engagement also involves evaluating the overall presentation of the pro forma financial
information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion:
(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the pro forma financial information
as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong
10 November 2014
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 1
A. VALUATION REPORT ON THE TKT HOTEL
The following is the text of a letter and valuation certificate, prepared for the purpose of
incorporation in this circular, received from Asset Appraisal Limited, an independent valuer, in connection
with its valuation as at 30th September, 2014 of the TKT Hotel.
Rm 901, 9/F., On Hong Commercial Building 145 Hennessy Road, Wanchai, Hong Kong
145 9 901
Tel : (852) 2529 9448 Fax : (852) 3521 9591
10th November, 2014
The Board of Directors
Rosedale Hotel Holdings Limited
31/F Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Dear Sirs,
Rosedale Hotel Kowloon
No. 86 Tai Kok Tsui Road
Tai Kok Tsui
Kowloon Hong Kong
In accordance with the instructions from Rosedale Hotel Holdings Limited (referred to as the
“Company”) to value the captioned vested property interests (referred to as the “TKT Hotel”) situated in
Hong Kong, we confirm that we have carried out inspections of the TKT Hotel, made relevant enquiries
and obtained such further information as we consider necessary for the purpose of providing you with our
opinion of the market value of the TKT Hotel as at 30th September, 2014 (the “Valuation Date”).
BASIS OF VALUATION
Our valuation of the TKT Hotel represents the market value which we would define as intended to
mean “the estimated amount for which an asset or liability should exchange on the valuation date between
a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the
parties had each acted knowledgeably, prudently and without compulsion”.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 2
VALUATION METHODOLOGY
The TKT Hotel has been valued by the comparison method where comparison based on prices
realised or market prices of comparable properties is made. Comparable properties of similar size,
character and location are analysed and carefully weighed against all the respective advantages and
disadvantages of each property in order to arrive at a fair comparison of capital values.
As the TKT Hotel is held by the owner as long term investment for rental incomes, we have cross-
checked the valuation results obtained from the Market Approach by the Income Capitalization Approach.
The Income Capitalization Approach is based on the net rental income that can be generated from the
property under the Master Lease to be executed for the TKT Hotel with due allowance on the reversionary
interest upon expiry of the Master Lease.
As the TKT Hotel is currently being operated as hotels, we have valued it as an operational entity
on going concern basis assuming that the existing business operations therein shall be continued. Our
valuation also reflects the value of all chattels and fitting out within the TKT Hotel in association with the
hotel business operations.
ASSUMPTIONS
Our valuation has been made on the assumption that owners sell the property on the market in its
existing state without the benefit of deferred terms contracts, joint ventures, management agreements or
any similar arrangement which would serve to affect the value of the TKT Hotel.
As the TKT Hotel is held by the owner by means of long term Government lease granted by the
Government, we have assumed that the owner has free and uninterrupted rights to use the TKT Hotel for
the whole of the unexpired term of its leasehold interest.
Other special assumptions for our valuation (if any) would be stated out in the footnotes of the
valuation certificate attached herewith.
TITLESHIP
We have carried out title and encumbrance search for the TKT Hotel at the Hong Kong Land
Registry. However, we have not verified ownership of the TKT Hotel and the existence of any
encumbrances that would affect its ownership. According to the Land Registration Records obtained
from the Land Registry, the registered owner of the TKT Hotel is Fortress State International Limited
(registered via Conditions of Exchange No. 20129 of Kowloon Inland Lot No. 11208 and Certificate of
Compliance dated 12 December 2012).
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 3
All information in relation to property title is disclosed herein for reference only and we do not
accept the liability for any interpretation which we have placed on such information which is more
properly the sphere of the legal advisers of the instructing party. Neither have we verified the correctness
of any information supplied to us concerning the TKT Hotel. No responsibility of legal in nature is
assumed in this report.
LIMITING CONDITIONS
No allowance has been made in our report for any charges, mortgages or amounts owing on the
TKT Hotel nor for any expenses or taxation which may be incurred in effecting a sale. It is assumed that
the property is free from encumbrances, restrictions and outgoings of an onerous nature, which could
affect its value. Our valuation have been made on the assumption that the seller sells the TKT Hotel on the
market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or
any similar arrangement, which could serve to affect the value of the TKT Hotel.
We have relied to a very considerable extent on the information given by the Company and have
accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements,
particulars of occupancy, lettings, and all other relevant matters of the TKT Hotel.
We have not carried out detailed site measurements to verify the correctness of the site area and
floor areas in respect of the TKT Hotel but have assumed that the floor areas shown on the Government
documents handed to us are correct. All documents and contracts have been used as reference only and all
dimensions, measurements and areas are approximations.
The TKT Hotel was inspected on 4 June 2014 by TSE Wai Leung, who is a member of the Royal
Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors and a Registered
Professional Surveyor. However, no structural survey has been made for the TKT Hotel. In the course of
our inspection, we did not note any serious defects. We are unable to report whether the buildings and
structures of the TKT Hotel are free of rot, infestation or any other structural defects. No test was carried
out on any of the services of the buildings and structures of the TKT Hotel.
We have had no reason to doubt the truth and accuracy of the information provided to us by the
Company. We have also sought confirmation from the Company that no material factors have been omitted
from the information supplied. We consider that we have been provided with sufficient information
to reach an informed view, and we have no reason to suspect that any material information has been
withheld.
In valuing the TKT Hotel, we have complied with all the requirements contained in Chapter 5 to the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The HKIS
Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 4
The TKT Hotel has been valued in Hong Kong Dollars (HK$).
Our valuation certificate is attached herewith.
Yours faithfully,
For and on behalf of
Asset Appraisal Limited
Tse Wai Leung
MFin BSc MRICS MHKIS RPS(GP)
Director
Tse Wai Leung is a member of the Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors, a
Registered Professional Surveyor in General Practice and a qualified real estate appraiser in the PRC. He is on the list of Property
Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection
with Takeovers and Mergers of the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Business
Valuation Forum and has over ten (10) years’ of experience in valuation of properties in Hong Kong, Macau and the PRC.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 5
VALUATION CERTIFICATE
Property held by the Group for investment purpose
Property Description and tenureParticulars of occupancy
Market Value in existing state as at
30 September, 2014 HK$
Rosedale Hotel Kowloon
No. 86 Tai Kok Tsui Road
Tai Kok Tsui
Kowloon
Hong Kong
Section A and
the Remaining Portion
of Kowloon Inland
Lot No. 11208
The TKT Hotel comprises a site with an area of
approximately 845.4 square metres on which a
27-storey (plus one basement level) hotel building
was completed in December 2011.
The TKT Hotel has a total gross floor area of
approximately 10,300.455 square metres including
basement floor area of 476.562 square metres. It
is accommodating a total of 435 guest rooms (or
a total of 441 standard room modules). Functional
uses of each of the floor levels are set out as
follows:
Floor Level Functional Uses
Basement P lan t rooms , l oad ing a rea ,
fireman lift/disable lift, service
lift, car lift and carpark
G/F E n t r a n c e f oy e r, c o n c i e rg e ,
electrical rooms, staff entrance,
delivery entrance, taxi lay-by,
tour bus lay -by, vehicle turn
table, fireman lift/disable lift,
escalator, service lift, car lift and
carpark
1/F Reception & cashier counter,
seating area, gymnasium room,
electrical room, TBE room , dry
goods store room and escalator,
fireman/disable lift
2/F Restaurant, main kitchen, food
& beverage storage , dishwashing
area, plant room, LV switch
room, electrical room, fireman/
disable lift
3/F Back of house, staff canteen,
s t a f f c h a n g i n g r o o m s a n d
lavatories, plant rooms, electrical
room, fireman/disable lift
5/F Plant rooms, store room and
workshops
6/F to 29/F Guest rooms (accommodating
a total of 441 standard room
modules or 435 guest rooms),
electrical room
30/F Executive lounge, plant rooms
and store room
Roof Lift machine room
As at the Valuation Date, the
TKT Hotel is being operated
as a fully operational hotel.
(see Note 7 below)
1,285,000,000
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 6
4/F, 13/F, 14/F and 24/F are omitted in the hotel
The TKT Hotel is held under Conditions of
Exchange No. 20129 for a term of 50 years
commencing from 18th April, 2011 at an annual
Government rent based on 3% of the rateable value
from time to time.
Notes:
1. The registered owner of the TKT Hotel is Fortress State International Limited, a wholly-owned subsidiary of More Star Limited
of which 40% equity interest is held by the Company, via Condition of Exchange No. 20129. Certificate of Compliance
certifying that all the positive obligations imposed on the registered owner in respect of the subject land lot under the aforesaid
Conditions of Exchange was issued by the District Lands Office, Kowloon West, Lands Department on 12th December, 2012
and was registered via memorial no. 12121900700027.
2. Consent letter dated 9th May, 2012 to increase the maximum gross floor area of the TKT Hotel from 10,144.8 square metres to
10,300.455 square metres was registered via memorial no. 12051803140028.
3. Lease modification letter for rectification of lot boundary of the TKT Hotel dated 4th October, 2012 was registered via
memorial no. 12101002840019.
4. Occupation Permit No. KN39/2011(OP) in respect of the TKT Hotel was issued by the Building Authority on 12th December,
2011 and registered via memorial no. 12121900700014.
5. We have valued the TKT Hotel as an operational hotel on the assumption that the owner has obtained all necessary approvals
and permits for hotel operations in the TKT Hotel.
6. The subject site falls within an area currently zoned “Other Specified Uses (Business)” under the Mong Kok Outline Zoning
Plan No. S/K3/30 dated 31st May, 2013.
7. Rosedale Hotel Kowloon Limited (“Rosedale Kowloon”), a wholly-owned subsidiary of the Company, has entered into the
Master Lease with the owner of the TKT Hotel with effect on 1st April, 2014. The rent payable by Rosedale Kowloon shall
comprise monthly base rent and turnover rent as follows:
(a) Monthly base rent represents the amount for each Year as set out below divided by twelve (12):
(i) First Year – HK$64,000,000
(ii) Second Year – HK$67,200,000
(iii) Third Year – HK$70,400,000
(iv) Fourth Year – HK$73,600,000
(v) Fifth Year – HK$76,800,000
(vi) Sixth Year – HK$80,000,000
Property Description and tenure
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 7
(b) For any year during the term of the Master Lease, in the event the gross revenue (all revenue and income of any kind
derived from operations at the TKT Hotel) exceeds the threshold amount for such year, Rosedale Kowloon shall also
pay a turnover rent in an amount equal to 60% of the difference between the gross revenue and the following threshold
amounts for such year:
(i) First Year – HK$140,000,000
(ii) Second Year – HK$145,000,000
(iii) Third Year – HK$150,000,000
(iv) Fourth Year – HK$155,000,000
(v) Fifth Year – HK$160,000,000
(vi) Sixth Year – HK$165,000,000
No turnover rent shall be payable for that year if the gross revenue of a year is equal to or less than the threshold amount
for such year.
The above rental is exclusive of, and Rosedale Kowloon shall be responsible for and shall pay, all assessments, duties,
charges, impositions and outgoings of an annual or recurring nature assessed, incurred, imposed or charged on or in
respect of the TKT Hotel or upon the owner or occupier thereof by the government authority. The landlord shall be
responsible for all property tax, government rents and rates of the TKT Hotel during the term of the Master Lease.
8. Overview of the hotel property market of Hong Kong are set out as follows:
8.1 Market Demand
Benefiting from the strong growth in visitors from Mainland China, total visitor arrivals to Hong Kong grew by 11.7% in 2013
(approximately 54.3 million visitor arrivals) over the same of 2012. Total visitor arrivals to Hong Kong for the first 3 months
of 2014 grew by 18.1% (approximately 14.7 million visitor arrivals) over the same period of 2013. Out of the total visitor
arrivals for 2013, overnight visitors amounted to approximately 25.7 million (with an increase of 8% over the same of 2012).
Visitors from Mainland China accounted for 75% of the total visitor arrivals (approximately 40.75 million visitor arrivals) with
an increase of 16.7% over the same of 2012. Overnight visitors from Mainland China amounted to approximately 17.09 million
(with an increase of 13.15% over the same of 2012). Based on the information published by the Hong Kong Tourism Board, the
average hotel room occupancy for all the surveyed hotels under different categories in Hong Kong for 2013 was maintained at
the same level of last year of 89%.
8.2 Market Supply
By end of July 2013, Hong Kong has a total of 217 hotels, with 68,753 guest rooms. Total room supply increased by 3,808
rooms or 5.9% than in July 2012. To cater for the increasing demand for hotel rooms from visitors, the Government has
undertaken a number of initiatives to promote hotel developments to meet diversified needs from visitors. For instance, a
number of development sites in different parts of Hong Kong have been designated for “Hotel only” use. There are also
initiatives to allow conversion of old industrial buildings and re-vitalisation of heritage buildings into hotels. By end of 2014,
the total number of hotels of Hong Kong is expected to increase to 263 with a total of about 71,959 guest rooms.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 8
8.3 Asset Performance
Based on the information published by the Hong Kong Tourism Board, the average achieved hotel room rate for 2013 is
HK$1,447, dropped by about 2.8% year on year.
9. Given the assessed market value of HK$1,285,000,000 of the TKT Hotel, the agreed base rent of the Master Lease shall
generate a gross investment yield of 5. 69% which is in line with the prevailing market investment yield of commercial
properties in Hong Kong:
Year
Annual Rent/
Reversion Value Yield PV Factor Present Value
1 21,333,333 ( 3 months ended
31st December, 2014) 5.69% 0.9861 21,037,607
2 66,400,000 5.69% 0.9330 61,951,804
3 69,600,000 5.69% 0.8826 61,429,569
4 72,800,000 5.69% 0.8351 60,792,198
5 76,000,000 5.69% 0.7901 60,045,201
6 79,200,000 5.69% 0.7475 59,202,239
7 1,285,000,000 5.69% 0.7475 960,541,381
Total 1,285,000,000
Therefore, we are of the opinion that the market value of the TKT Hotel as measured by Income Capitalization Approach (on
the basis that it is subject to the Master Lease as at the Valuation Date) shall have no material difference from the amount
measured by the Market Approach.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 9
B. VALUATION REPORT ON THE BEIJING HOTEL
The following is the text of a letter and valuation certificate, prepared for the purpose of
incorporation in this circular, received from Asset Appraisal Limited, an independent valuer, in connection
with its valuation as at 30th September, 2014 of the Beijing Hotel.
Rm 901, 9/F., On Hong Commercial Building 145 Hennessy Road, Wanchai, Hong Kong
145 9 901
Tel : (852) 2529 9448 Fax : (852) 3521 9591
10 November, 2014
The Board of Directors
Rosedale Hotel Holdings Limited
31/F Paul Y. Centre
51 Hung To Road
Kwun Tong
Kowloon
Hong Kong
Dear Sirs,
Rosedale Hotel & Suites, Beijing
No. 8 Jiang Tai Road West, Chao Yang District, Beijing, the PRC
In accordance with the instructions from Rosedale Hotel Holdings Limited (referred to as the
“Company”) to value the captioned property interests (referred to as the “Beijing Hotel”) situated in the
People’s Republic of China (the “PRC”), we confirm that we have carried out inspections of the Beijing
Hotel, made relevant enquiries and obtained such further information as we consider necessary for the
purpose of providing you with our opinion of the market value of the Beijing Hotel as at 30th September,
2014 (the “Valuation Date”).
BASIS OF VALUATION
Our valuation of the Beijing Hotel represents the market value which we would define as intended
to mean “the estimated amount for which an asset or liability should exchange on the valuation date
between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and
where the parties had each acted knowledgeably, prudently and without compulsion”.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 10
VALUATION METHODOLOGY
The Beijing Hotel has been valued by the comparison method where comparison based on prices
realised or market prices of comparable properties is made. Comparable properties of similar size,
character and location are analysed and carefully weighed against all the respective advantages and
disadvantages of each property in order to arrive at a fair comparison of capital values.
As the Beijing Hotel is currently being operated as a hotel, we have valued it as an operational
entity on going concern basis assuming that the existing business operations therein shall be continued.
Our valuation also reflects the value of all chattels and fitting out within the Beijing Hotel in association
with the hotel business operations.
ASSUMPTIONS
Our valuation has been made on the assumption that owners sell the Beijing Hotel on the market
in its existing state without the benefit of deferred terms contracts, leaseback, joint ventures, management
agreements or any similar arrangement which would serve to affect the value of the Beijing Hotel.
As the Beijing Hotel is held by the owner by means of long term land use rights granted by the PRC
Government, we have assumed that the owner has free and uninterrupted rights to use the property for
the whole of the unexpired term of its land use rights. Unless stated as otherwise, we have also assumed
that the Beijing Hotel can be freely transferred on the market free from any land premium or expenses of
substantial amount payable to the PRC Government.
Other special assumptions for our valuation (if any) would be stated out in the footnotes of the
valuation certificate attached herewith.
TITLESHIP
We have been provided with copies of legal documents regarding the Beijing Hotel. However, we
have not verified ownership of the Beijing Hotel and the existence of any encumbrances that would affect
ownership of the Beijing Hotel.
We have also relied upon the legal opinion provided by the PRC legal adviser, namely Zhong Lun
Law Firm(中倫律師事務所), to DS Eastin Limited on the relevant laws and regulations in the PRC, on
the nature of land use rights and the owner’s interests in the Beijing Hotel.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 11
LIMITING CONDITIONS
No allowance has been made in our report for any charges, mortgages or amounts owing on the
property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise
stated, it is assumed that the Beijing Hotel is free from encumbrances, restrictions and outgoings of an
onerous nature, which could affect its value. Our valuation have been made on the assumption that the
seller sells the Beijing Hotel on the market without the benefit of a deferred term contract, leaseback, joint
venture, management agreement or any similar arrangement, which could serve to affect the value of the
Beijing Hotel.
We have relied to a very considerable extent on the information given by the Company and have
accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements,
particulars of occupancy, lettings, and all other relevant matters of the Beijing Hotel.
We have not carried out detailed site measurements to verify the correctness of the site area and
floor areas in respect of the Beijing Hotel but have assumed that the floor areas shown on the Government
documents handed to us are correct. All documents and contracts have been used as reference only and all
dimensions, measurements and areas are approximations.
The Beijing Hotel was inspected on 29 May 2014 by Zhou Tong, who is a PRC Registered
Land Appraiser. However, no structural survey has been made for the Beijing Hotel. In the course of
our inspection, we did not note any serious defects. We are unable to report whether the buildings and
structures of the Beijing Hotel are free of rot, infestation or any other structural defects. No test was
carried out on any of the services of the buildings and structures of the Beijing Hotel.
We have had no reason to doubt the truth and accuracy of the information provided to us by the
Company. We have also sought confirmation from the Company that no material factors have been omitted
from the information supplied. We consider that we have been provided with sufficient information
to reach an informed view, and we have no reason to suspect that any material information has been
withheld.
In valuing the Beijing Hotel, we have complied with all the requirements contained in Chapter 5
and Practice Note 12 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited and The HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of
Surveyors.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 12
The Beijing Hotel has been valued in Hong Kong Dollars (HK$). Whenever applicable, an exchange
rate of Renminbi (RMB) 1 to HK$ 1.2619 has been adopted for currency conversion.
Our valuation certificate is attached herewith.
Yours faithfully,
For and on behalf of
Asset Appraisal Limited
Tse Wai Leung
MFin BSc MRICS MHKIS RPS(GP)
Director
Tse Wai Leung is a member of the Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors, a
Registered Professional Surveyor in General Practice and a qualified real estate appraiser in the PRC. He is on the list of Property
Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection
with Takeovers and Mergers of the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Business
Valuation Forum and has over ten (10) years’ experience in valuation of Property in Hong Kong, Macau and the PRC.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 13
VALUATION CERTIFICATE
Property held and operated by the owner
Property Description and tenure
Particulars of
occupancy
Market Value in
existing state as at
30th September, 2014
HK$
Rosedale Hotel &
Suites, Beijing
No. 8 Jiang Tai
Road West
Chao Yang District
Beijing
the PRC
The Beijing Hotel comprises a site with an
area of 18,711.62 square metres on which
a 20-storey hotel building is erected. In
addition, 2 basement levels are provided
underneath. The Beijing Hotel was completed
in 1990. The Beijing Hotel also includes 3
blocks of single to 2-storey ancillary building.
As at the Valuation Date, the Beijing Hotel
was not in the process of being developed.
The Beijing Hotel has a total gross floor
area of 37,173.20 square metres (including
superstructure gross floor area of 29,810.80
square metres and substructure gross floor
area of 7,362.40 square metres).
The Beijing Hotel comprises a total of 462
guest rooms, a shopping arcade, restaurant,
lobby lounge, bar, executive lounge, coffee
shop, fitness centre, ballroom, multi-purpose
function rooms, business centre and car
parking spaces.
The Beijing Hotel is situated at the east part
of Beijing and is less than 30 minutes’ drive
from the Beijing Capital International Airport.
It is falling within a well developed area and
is in close proximity with the East embassy
area, the China International Exhibition
Centre and the central business area of
Chaoyang District, two sprawling public parks
namely the Si De Park(四得公園)and the Li
Do Park(麗都公園)are found opposite to the
Beijing Hotel and offering open view to the
subject development.
The Beijing Hotel is held for a land use right
term of 40 years (see notes 4 and 8 below).
As at the date of our
inspection, the Beijing
Hotel was being operated
as a fully operational
hotel.
1,300,000,000
See notes 4, 5 and 8
below
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 14
Notes:
1. According to a State-owned Land Use Right Certificate ( Serial No. 京朝國用(2011出)第00112號) dated 23rd March, 2011
and a Building Ownership Certificate ( Serial No. 京房權証市朝港澳台字第10156號) dated 22nd November, 2005, the Beijing
Hotel is held by Rosedale Hotel Beijing Co., Ltd.(北京珀麗酒店有限責任公司) .
2. According to the Joint Venture Agreement (the “PRC JV Agreement”) dated 18 October 2013, Rosedale Hotel Beijing Co., Ltd.
is a Sino-foreign jointly owned entity owned as to 80% by Beijing Baijun Investment Limited(北京百駿投資有限公司)and as
to 20% by DS Eastin Limited (a wholly-owned subsidiary of Makerston Limited). Pursuant to the PRC JV Agreement :
2.1 both the paid up and registered capital of Rosedale Hotel Beijing Co., Ltd. is US$86,000,000, of which US$68,800,000
and US$17,200,000 are contributed by Beijing Baijun Investment Limited and DS Eastin Limited respectively ; and
2. 2 profits of Rosedale Hotel Beijing Co., Ltd. are to be shared by both parties to the PRC JV Agreement in accordance with
their respective ratio of capital contribution.
3. We have valued the Beijing Hotel as an operational entity on going concern basis on the assumption that the existing business
operations in the Beijing Hotel will be continued. Our valuation reflects the value of all chattels and fitting out within the
Beijing Hotel in association with the hotel business operations.
4. According to a Supplemental Agreement entered into between the Beijing Land Administration Bureau (as Grantor) and
Rosedale Hotel Beijing Co., Ltd. (as Grantee) on 9 June 2014 at a top up land premium of RMB67,420,150 payable by the
Grantee to the Grantor with the following terms:
Planned land use : Commercial and Finance
Land area : 14,692.85 square metres
Permissible Gross Floor Area : 54,780 square metres (Superstructure)
Permissible Building Height : 100 metres
Land Use Right Term : 40 years
5. According to the aforesaid Supplemental Agreement and given the total gross floor area of the existing buildings of the Beijing
Hotel, the development potential of the subject land parcel has not yet been fully utilized. In this regard , the Company has
planned to develop a luxurious hotel tower accommodating a total of 250 guest rooms and additional conferencing facilities
(the “Extension Project”) within the subject land parcel. As at the Valuation Date, no formal architectural plan for the
Extension Project was prepared and submitted and hence no planning approval on the development scheme was obtained. In
our valuation, we have taken into account the market value of the unutilized development potential of the Beijing Hotel on
the assumption that Rosedale Hotel Beijing Co., Ltd shall have no legal impediment in obtaining all necessary approvals and
consents from the Government for the construction of the Extension Project.
6. In accordance with the information provided by the Company, the status of title and grant of major approvals and licences are
as follows:
State-owned Land Use Rights Certificate : Yes
Building Ownership Certificate : Yes
Business Licence : Yes
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 15
7. According to the opinion from the PRC legal adviser of the Company on the Beijing Hotel :
i. In accordance with the State-owned Land Use Right Certificate (Serial No.京朝國用(2011出)第00112號) issued by the
Beijing People’s Government of Chao Yang District on 23rd March, 2011 and the Building Ownership Certificate ( Serial
No.京房權証市朝港澳台字第10156號) issued by the Beijing Municipal Construction Commission on 22nd November,
2005, Rosedale Hotel Beijing Co., Ltd.(北京珀麗 酒店有限責任公司) has the sole legal title to the land use right and is
the sole legal owner of the buildings of the Beijing Hotel for a land use right term expiring on 21st November, 2044.
ii. On 26th February, 1994, the Beijing Municipal Administration of Building and Land entered into a State-owned
Land Use Right Grant Contract with Rosedale Hotel Beijing Co., Ltd. (formerly known as 新萬壽實館有限責任
公司), pursuant to which the former agreed to grant to the latter the land use right of the Beijing Hotel with a land
area of 18,699.6 square metres for a term of 50 years for hotel use (with a plot ratio of 1.9) at a land premium of
RMB11,287,400.
iii. Rosedale Hotel Beijing Co., Ltd. proposed to conduct an the Extension Project , after completion of which the total gross
floor area of the Beijing Hotel would be increased to approximately 54,780 square metres. Pursuant to the reply letter
(北京市國土資源局關於北京珀麗酒店改擴建項目征求意見的覆函, (京國土利函[2012]37號)) issued by the Beijing
Municipal Bureau of Land and Resources on 16th January 2012, the Extension Project was approved by the Bureau in
principle on the condition that the existing land use right area, the range and the use of the Beijing Hotel will remain
unchanged subject to the urban planning conditions for the Extension Project. Rosedale Hotel Beijing Co., Ltd was also
required to complete relevant modification procedures for the State-owned Land Use Right Grant Contract and to pay
additional land premium as reviewed and decided by the Bureau in accordance with the applicable policies.
iv. Rosedale Hotel Beijing Co., Ltd. has submitted an application in connection with the Extension Project to the Beijing
Municipal Commission of Urban Planning for approval of the relevant urban planning conditions thereof on 14
September 2012.
v. Pursuant to the construction Project Urban Planning Conditions issued on 24th January, 2013 by the Beijing Municipal
Commission of Urban Planning has approved the relevant planning conditions in connection with the Extension Project .
A summary of the material conditions is as follow:
• Developable Land Area : 14,700 square metres
• Land Use : Commerce and Finance
• Use of Building : Hotel
• Total Floor Area : not more than 54,780 square metres
• Total Building Height : not more than 100 metres
vi. On 20 June 2013, Chaoyang District Commission of Development and Reform of Beijing Municipality issued the Notice
of Preliminary Examination of the Land Used for Construction Projects(建設項目土地預審告知單), pursuant to which
Rosedale Beijing is urged to launch application to the Beijing Municipal Bureau of Land and Resources for performing
land use evaluation in accordance with the prescribed procedures.
vii. On 26 February 2014, the Beijing Municipal Commission of Development and Reform issued the approval letter ( 北京市
發展和改革委員會關於北京珀麗酒店項目改擴建核准的批 覆,京發改[2014]425號), pursuant to which the Extension
Project is approved in principle on the condition that the total land use right area, the range and the location shall be
consistent with the approval letter.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 16
viii. Disclosed in (iii) abov e, Rosedale Hotel Beijing Co., Ltd. has handled the relevant modification procedures in respect of
the Extension Project and entered into a supplemental agreement to the State-owned Land Use Right Grant Contract (the
“Supplemental Agreement”) with the Beijing Municipal Bureau of Land and Resources and paid up the add itional land
premium on 20th June 2014. Rosedale Hotel Beijing Co., Ltd. can legally carry out the Extension Project provided that
Rosedale Hotel Beijing Co., Ltd. will have duly obtained the relevant environmental approval, the Construction Land
Planning Permit, the Construction Project Planning Permit and the Construction Permit in connection with the Extension
Project before commencing the construction.
ix. In accordance with the relevant laws, the use of the land for commercial and finance as stated in the Supplemental
Agreement shall cover the existing use for hotel, and the maximum term of grant of land use right shall not exceed
40 years in the case of land for commercial, tourism or recreational purposes, subject to grant contract of the land use
rights. In addition, though the term of the land use right is stated at 40 years in the Supplemental Agreement, it does not
specify its commencement date or the expiry date. As advised by DS Eastin Limited, Rosedale Hotel Beijing Co., Ltd. is
in discussion with the relevant government authority for the revised term of the land use rights such that the expiry date
shall not be earlier than 21 November, 2044, i.e. the date specified in the State-owned Land Use Right Grant Contract as
mentioned in note (ii) above. The expiry date of the term of the land use right remains to be clarified with the relevant
government authorities upon the issue of the revised State-owned Land Use Right Certificate.
x. Rosedale Hotel Beijing Co., Ltd. has completed all necessary approvals, filings and business registration formalities with
respect to its incorporation and changes of shareholding, save as the change of shareholding occurred in 1987 which
is not evidenced by business registration records as sighted by the PRC Lawyer. Rosedale Beijing has obtained the
Business License with the registration number of 110000450003044, pursuant to which the registered capital of Rosedale
Hotel Beijing Co., Ltd. is USD86,000,000 and the legal representative is Ma Chi Kong, Karl (馬志剛). The business
scope of Rosedale Hotel Beijing Co., Ltd. is “operating cafeterias, bars, restaurants and sauna; retailing cigarettes;
operating fitness facilities, entertainment facilities and commercial service facilities including guest rooms, banquet
halls, auditoria, multifunction halls, gymnasia, massage rooms, shopping malls, business centers, laundry rooms, and
etc. According to the Certificate of Approval and the Business License dated 18 November 2013 and 31 March 2014
respectively, Rosedale Hotel Beijing Co., Ltd. as the owner of Beijing Hotel is validly existing and in good standing as a
Sino-Foreign Joint Venture under the PRC laws; the Business License of Rosedale Hotel Beijing Co., Ltd. is in full force
and effect. According to the Capital Verification Reports issued respectively by Beijing Certified Public Accountants
((88)京會字第801號、(89)京會字第167號、(90)京會字第0362號、(91)京會字第849號), Price Waterhouse Zhang Chen
CPAs (張陳驗字(98)第38號、張陳驗字(99)第19號) and Beijing Yuxing Certified Public Accountants Co., Ltd. (譽興驗
字[2013]第13A268305號), the registered capital of Rosedale Rosedale Hotel Beijing Co., Ltd. had been fully contributed
and paid up by its shareholders.
xi. Rosedale Hotel Beijing Co., Ltd., being the legal owner of the Beijing Hotel, is entitled to transfer, lease, mortgage or
otherwise dispose of the Beijing Hotel in accordance with the PRC laws and regulations throughout the unexpired land
use rights term of the Beijing Hotel.
xii. To the best knowledge of the PRC legal adviser, the Beijing Hotel is free from mortgage, charge, litigation, seizure order
and other third parties’ rights.
APPENDIX V VALUATION REPORTS ON THE PROPERT IES
V – 17
8. The Beijing Hotel has been equity accounted for in the financial statement of the Company as an interest in associate based
initially on the fair value of the 20% equity interest retained in Rosedale Beijing at completion of the Capital Increase
Agreement and subject to impairment test on the recoverable amount on the date of subsequent statements of financial position.
9. As stated in the Supplemental Agreement mentioned in note 4 above, the land use right term of the Beijing Hotel is 40
years but the commencement date and the expiry date had not been specified. As referred in Building Ownership Certificate
mentioned in Note 7(i) above, the land use right term of Beijing Hotel should be 50 years expiring on 21st November, 2044.
After the best enquiry by the management of the Company with China Private Ventures Limited, the beneficial controlling
shareholder of the PRC Company which is primarily responsible for the negotiation with the Beijing Municipal Bureau of Land
and Resources regarding the renewal of the Building Ownership Certificate, the expiry date of the land use right of the Beijing
Hotel shall probably expire at a date on or after 21st November, 2044. For the preparation of this valuation report, it is assumed
that the land use right term of the Beijing Hotel will expire on 21st November, 2044.
APPENDIX VI GENERAL INFORMATION
VI – 1
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the Listing Rules for the purpose of giving information with
regard to the Group. 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) Interests of Directors or chief executive of the Company
As at the Latest Practicable Date, the interests and short positions of the Directors or chief
executive of the Company in the shares, underlying shares or debentures of the Company or any of
its associated corporations (within the meaning of Part XV of the SFO), which were required (i) to
be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of
the SFO (including interests and short positions which they were taken or deemed to have under
such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register
referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors
of Listed Issuers set out in Appendix 10 to the Listing Rules (the “Model Code”) adopted by the
Company to be notified to the Company and the Stock Exchange, were as follows:–
Interests in the Shares
Name of Director
Long position/
Short position
Capacity/Nature
of interest
Number of
Shares held
Approximate
percentage
of the
issued share
capital of
the Company
Mr. Kwok Ka Lap, Alva Long position Beneficial owner 7,500 0.00%
Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief
executive of the Company had any interests or short positions in the shares, underlying shares and
debentures of the Company or its associated corporation (within the meaning of Part XV of the
SFO), which were required (i) to be notified to the Company and the Stock Exchange pursuant to
Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were
taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the
SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code adopted by
the Company to be notified to the Company and the Stock Exchange.
APPENDIX VI GENERAL INFORMATION
VI – 2
(b) Interests of substantial Shareholders
Save as disclosed below, so far as is known to the Directors or chief executive of the
Company, as at the Latest Practicable Date, the following persons (other than a Director or chief
executive of the Company) had an interest or a short position in the Shares and underlying Shares
which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part
XV of the SFO:
(i) Interests in the Shares
Name of ShareholderLong position/Short position
Capacity/Natureof interest
Number ofShares held
Approximate percentage
of the issued share
capital of the Company
(a) Dr. Chan Kwok Keung,
Charles (“Dr. Chan”)
(Note 1)
Long position Beneficial owner 1,132,450 0.17%
Long position Interest of controlled
corporation
195,706,000 29.76%
Ms. Ng Yuen Lan, Macy
(Note 1)
Long position Interest of spouse 196,838,450 29.93%
ITCC (Note 1) Long position Interest of controlled
corporation
195,706,000 29.76%
ITC Investment Holdings
Limited (“ITC Investment”) (Note 1)
Long position Interest of controlled
corporation
195,706,000 29.76%
Leaptop Investments Limited
(“Leaptop”) (Note 1)
Long position Interest of controlled
corporation
195,706,000 29.76%
Asia Will Limited (“AWL”)
(Note 1)
Long position Beneficial owner 195,706,000 29.76%
(b) Hanny (Note 2) Long position Interest of controlled
corporation
148,506,000 22.58%
Hanny Investment Group
Limited (“HIG”) (Note 2)
Long position Interest of controlled
corporation
148,506,000 22.58%
( c) CEL (Note 3) Long position Interest of controlled
corporation
48,660,424 7.40%
Cosmos Regent Ltd.
(Note 3)
Long position Beneficial owner 43,325,554 6.59%
APPENDIX VI GENERAL INFORMATION
VI – 3
Notes:
(1) AWL was interested in 195,706,000 Shares and was a wholly-owned subsidiary of Leaptop which
in turn was a wholly-owned subsidiary of ITC Investment. ITC Investment was a wholly-owned
subsidiary of ITCC. Dr. Chan directly and indirectly held a total of more than one third of the
issued share capital of ITC C. Accordingly, Leaptop, ITC Investment, ITCC and Dr. Chan were
deemed to be interested in the Shares held by AWL. Dr. Chan also personally held 1,132,450
Shares. Ms. Ng Yuen Lan, Macy, the spouse of Dr. Chan, was deemed to be interested in the Shares
held by AWL and Dr. Chan.
As part and parcel of the transactions contemplated in the Rosedale Share Agreement, ITC
Investment would procure AWL to place and/or donate 47,200,000 (or such other number as the
parties may agree) Shares to independent third party(ies) and/or such charitable body(ies) exempt
under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) and/or a combination
of both on such terms and conditions as ITC Investment might decide before completion, such that
immediately after completion, HIG and parties acting in concert with it will not hold in aggregate
30% or more of the voting rights of the Company. Subject to fulfillment of the conditions precedent
contained in the Rosedale Share Agreement (including without limitation, implementation and
completion of the aforesaid placement and/or donation), ITC Investment will cease to hold any
Shares after completion of the Rosedale Share Agreement.
(2) Pursuant to the Rosedale Share Agreement as mentioned in Note (1) above, 148,506,000 Shares
held by AWL would be acquired by HIG through the acquisition of the entire issued share capital
of Leaptop. HIG was a wholly-owned subsidiary of Hanny Magnetics (B.V.I.) Limited which in
turn was a wholly-owned subsidiary of Hanny. Accordingly, HIG and Hanny were deemed to be
interested in the 148,506,000 Shares held by AWL.
( 3) Million Good Limited and Cosmos Regent Ltd. were interested in 5,334,870 Shares and 43,325,554
Shares respectively and were wholly-owned subsidiaries of CEL. CEL was therefore deemed to be
interested in the Shares held by Million Good Limited and Cosmos Regent Ltd..
(4) As at the Latest Practicable Date, (i) Ms. Chan Ling, Eva, an executive Director, was also a director
of CEL and Cosmos Regent Ltd. ; (ii) Mr. Sin Chi Fai, an independent non-executive Director, was
also an independent non-executive director of Hanny and CEL ; and (iii) Mr. Kwok Ka Lap, Alva
and Mr. Poon Kwok Hing, Albert, independent non-executive Directors, were also independent
non-executive directors of Hanny.
(ii) Substantial shareholders of members of the Group
So far as is known to the Directors or chief executive of the Company, the following
persons (other than a Director or chief executive of the Company) were, directly or
indirectly, 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 the other members of the
Group as at the Latest Practicable Date:
Name of subsidiary Name of shareholder
Percentage of
shareholding
Tangula Group Limited TIL Capital Corporation 18.1%
Luoyang Golden Gulf Hotel
Company Limited
洛陽市電業局 40%
洛陽電力旅行社有限公司 洛陽市電力廣告有限公司 33.33%
APPENDIX VI GENERAL INFORMATION
VI – 4
Save as disclosed above, the Directors or chief executive of the Company were not aware
that there are any other persons (not being a Director or chief executive of the Company) who, as at
the Latest Practicable Date, had an interest or a short position in the Shares and underlying Shares
which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part
XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value
of any class of share capital carrying rights to vote in all circumstances at general meeting of any
other members of the Group, or had any options in respect of such capital.
3. DIRECTORS’ SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had any existing or proposed service
contracts with any member of the Group which is not determinable by such member of the Group within
one year without payment of compensation (other than statutory compensation).
4. DIRECTORS’ INTERESTS IN CONTRACTS
Save for the Eagle Spirit Agreement and the Makerston Agreement, as at the Latest Practicable
Date, none of the Directors was materially interested in any contract or arrangement subsisting and which
was significant in relation to the business of the Group.
5. DIRECTORS’ INTEREST IN COMPETING BUSINESS
As at the Latest Practicable Date, save as disclosed below, none of the Directors and their respective
close associates had any business which competes or is likely to compete, either directly or indirectly, with
the business of the Group.
Name of Director
Name of entity whose
businesses are considered
to compete or to be likely to
compete with the
businesses of the Group
Description of businesses of
the entity which are
considered to compete or
to be likely to compete with
the businesses of the Group
Nature of interest of
the Director in the entity
Mr. Cheung Hon Kit ITCP and its subsidiaries Property development and
investment and hotel operation
in the PRC
Chairman and executive
director of ITCP
As the Board is independent of the boards of the above entities, the Group is capable of carrying on
its business independently of, and at arm’s length, from the business of those entities.
APPENDIX VI GENERAL INFORMATION
VI – 5
6. DIRECTORS’ INTEREST IN ASSETS
Save for the ES Sale Share and the ES Sale Loan to be sold by the Group under the Eagle Spirit
Agreement and the MS Sale Share and the MS Sale Loan to be sold by the Group under the Makerston
Agreement, as at the Latest Practicable Date, none of the Directors had any interest, direct or indirect,
in any assets which had been acquired or disposed of by, or leased to, any member of the Group or were
proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December
201 3, being the date to which the latest published audited consolidated financial statements of the
Company were made up.
7. LITIGATION
As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims
of material importance and, so far as the Directors were aware, there was no litigation or claims of
material importance pending or threatened by or against any member of the Group.
8. MATERIAL CONTRACTS
The following contracts (not being contracts entered into in the ordinary course of business) have
been entered into by members of the Group within the two years immediately preceding the date of this
circular and ending on the Latest Practicable Date, which are or may be material:
(a) the memorandum of understanding dated 24 October 2012 and the supplemental
memorandum of understanding dated 25 January 2013 entered into between Enjoy Media
Holdings Limited (“Enjoy Media”), a subsidiary of the Company, and Mr. Kong Wa in
relation to the possible disposal of the entire issued share capital of Square Inn Hotel
Management Limited (“Square Inn”) by Enjoy Media at a consideration of HK$52,000,000;
(b) the agreement dated 29 April 2013 entered into between Enjoy Media, Mr. Kong Wa,
Mr. Tong Hon Va and Ms. Cheong Soi Un in relation to the disposal of the entire issued share
capital of Square Inn by Enjoy Media at a consideration of HK$52,000,000;
(c) the Capital Increase Agreement ;
(d) the Shaw Agreement; and
( e) the Agreements.
APPENDIX VI GENERAL INFORMATION
VI – 6
9. EXPERTS AND CONSENTS
The following are the qualifications of the experts who have given opinions or advice contained in
this circular:
Name Qualification
Deloitte Touche Tohmatsu (“Deloitte”) Certified Public Accountants
Centurion Independent financial advisor
Asset Appraisal Limited (“Asset Appraisal”) Independent professional valuer
Zhong Lun Law Firm (“Zhong Lun”) Legal advisers to the Company as to PRC laws
in relation to the Beijing Hotel
Deloitte , Centurion, Asset Appraisal and Zhong Lun have given and have not withdrawn their
written consent to the issue of this circular with the inclusion of their letters and references to their name
in the form and context in which they appear. As at the Latest Practicable Date, Deloitte , Centurion, Asset
Appraisal and Zhong Lun:
(a) did not have any shareholding in or any right (whether legally enforceable or not) to
subscribe for or to nominate persons to subscribe for securities in any member of the Group;
and
(b) did not have any direct or indirect interest in any assets which had been acquired or disposed
of by, or leased to, any member of the Group or were proposed to be acquired or disposed of
by or leased to any member of the Group since 31 December 201 3, being the date to which
the latest published consolidated financial statements of the Company were made up.
10. GENERAL
(a) The secretary of the Company is Ms. Law Sau Lai. She is an associate of The Hong
Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and
Administrators.
(b) The registered office of the Company is situated at Clarendon House, 2 Church Street,
Hamilton HM 11, Bermuda.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Tricor
Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong
Kong.
(d) The English text of this circular and the accompanying form of proxy shall prevail over the
Chinese text.
APPENDIX VI GENERAL INFORMATION
VI – 7
11. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection during normal business hours
at 31st Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong from the date of this
circular up to and including the date of the SGM:
(a) the memorandum of association and bye-laws of the Company;
(b) the material contracts referred to in the paragraph headed “Material Contracts” in this
Appendix;
(c) the review report on the Eagle Spirit Group and the Makerston Group, the texts of which are
set out in Appendix II and III to this circular;
(d) the review report on the unaudited pro forma financial information of the Remaining Group,
the texts of which are set out in Appendix IV to this circular;
(e) the annual reports of the Company for each of the two financial years ended 31 December
2012 and 2013, and the interim report of the Company for the six months ended 30 June
2014;
(f) the valuation reports on the properties prepared by Asset Appraisal as set out in Appendix V
to this circular;
(g) the PRC legal opinion issued by Zhong Lun as referred to in the valuation report on the
Beijing Hotel set out in Appendix V to this circular ;
(h) the written consents referred to in the paragraphs headed “Experts and Consents” above in
this Appendix;
( i) the circular of the Company dated 18 February 2014 which has been issued pursuant to the
requirements set out in Chapter 14 of the Listing Rules since 31 December 2013 (being the
date to which the latest published audited accounts of the Group were made up); and
( j) this circular .
NOTICE OF SGM
SGM – 1
Rosedale Hotel Holdings Limited珀麗酒店控股有限公司
(Incorporated in Bermuda with limited liability)
(Stock Code: 1189)
NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting”) of Rosedale Hotel
Holdings Limited (the “Company”) will be held at 3:30 p.m. on Thursday, 27 November 2014 at Gemini
Room, 33rd Floor, Rosedale on the Park, 8 Shelter Street, Causeway Bay, Hong Kong for the purpose
of considering and, if thought fit, passing, with or without modifications, the following resolutions as
ordinary resolutions of the Company:–
ORDINARY RESOLUTIONS
1. “THAT:
(a) the sale by Easy Vision Holdings Limited (“Easy Vision”), a direct wholly-owned
subsidiary of the Company, of 1 ordinary share with a par value of US$1 in the share
capital of Eagle Spirit Holdings Limited (“Eagle Spirit”) and the amounts due from
Eagle Spirit to Easy Vision as at the completion date for an aggregate consideration
of not exceeding HK$566 million, pursuant to the agreement dated 11 April 2014 (the
“Eagle Spirit Agreement”) entered into between Easy Vision as the vendor and Silver
Infinite Limited as the purchaser, the Company as the vendor’s guarantor and ITC
Properties Group Limited (“ITCP”) as the purchaser’s guarantor (a copy of which has
been produced to the Meeting and marked “A” and has been signed by the chairman
of the Meeting for the purpose of identification) and all the transactions contemplated
thereby, be and are hereby approved ; and
(b) any one director of the Company be authorised to do all such acts and things,
including agreeing to such amendments or extensions and execute all such documents
on behalf of the Company as he/she may consider necessary or expedient or desirable
to give effect to or in connection with the Eagle Spirit Agreement, or any of the
transactions contemplated thereby.”
2. “THAT:
(a) the sale by Rosedale Hotel Group Limited (“Rosedale Hotel”), a non wholly -owned
subsidiary of the Company, of 1 ordinary share with a par value of US$1 in the share
capital of Makerston Limited (“Makerston”) and the amounts due from Makerston
to Rosedale Hotel as at the completion date for an aggregate consideration of not
exceeding HK$324 million, pursuant to the agreement dated 11 April 2014 (the
“Makerston Agreement”) entered into between Rosedale Hotel as the vendor, Silver
Infinite Limited as the purchaser, the Company as the vendor’s guarantor and ITCP
as the purchaser’s guarantor (a copy of which has been produced to the Meeting and
marked “B” and has been signed by the chairman of the Meeting for the purpose
of identification) and all the transactions contemplated thereby, be and are hereby
approved ;
NOTICE OF SGM
SGM – 2
(b) any one director of the Company be authorised to do all such acts and things,
including agreeing to such amendments or extensions and execute all such documents
on behalf of the Company as he/she may consider necessary or expedient or desirable
to give effect to or in connection with the Makerston Agreement, or any of the
transactions contemplated thereby.”
By Order of the Board
Rosedale Hotel Holdings Limited
Law Sau Lai
Company Secretary
Hong Kong, 10 November 2014
Notes:
1. Any shareholder of the Company entitled to attend and vote at the Meeting shall be entitled to appoint another person as his/
her/its proxy to attend and vote instead of him/her/it. A shareholder who is the holder of two or more shares may appoint
more than one proxy to represent him/her/it and vote on his/her/its behalf at the Meeting . A proxy need not be a shareholder
of the Company. In addition, a proxy or proxies representing either an individual shareholder or a shareholder which is a
corporation, shall be entitled to exercise the same powers on behalf of the shareholder which he/she or they represent as such
shareholder could exercise.
2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in
writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.
The instrument appointing a proxy and the power of attorney, or other authority, if any, under which it is signed or notarially
certified copy of the power or authority shall be deposited at the branch share registrar of the Company in Hong Kong, Tricor
Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than forty-eight
(48) hours before the time for holding the Meeting or adjournment thereof (as the case may be) at which the person named in
the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.
3. Delivery of an instrument appointing a proxy shall not preclude a shareholder of the Company from attending and voting in
person at the Meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
4. Where there are joint holders of any share of the Company, any one of such holders may vote at the Meeting, either
personally or by proxy, in respect of such share as if he/she/it were solely entitled thereto, but if more than one of such
joint holders be present at the Meeting personally or by proxy, then the one of such holders whose name stands first on
the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof. Several
executors or administrators of a deceased shareholder in whose name any share stands shall for this purpose be deemed joint
holders thereof.
5. A form of proxy for use at the Meeting is enclosed herewith.
6. If a typhoon signal No. 8 or above, or a “black” rainstorm warn ing sign al is in effect any time after 12:30 p.m. on the date of
the Meeting, the Meeting will be postponed. The Company will post an announcement on the websites of the Company and
the Stock Exchange to notify shareholders of the Company of the date, time and place of the rescheduled Meeting.
7. As at the date of this notice, the Board comprises three executive Directors, namely Mr. Cheung Hon Kit (Chairman), Ms.
Chan Ling, Eva (Managing Director) and Mr. Chan Pak Cheung, Natalis; and three independent non-executive Directors,
namely Mr. Kwok Ka Lap, Alva, Mr. Poon Kwok Hing, Albert and Mr. Sin Chi Fai.