APPENDIX VII STATUTORY AND GENERAL INFORMATION
A. FURTHER INFORMATION ABOUT OUR COMPANY 1. Incorporation Our Company was incorporated in the Cayman Islands as an exempted company with limited liability under the Cayman Islands Companies Law on 23 March 2007. We have established a place of business in Hong Kong at Office Unit 9, 13/F, Tower Two, Lippo Centre, No. 89 Queensway, Hong Kong and have been registered as an overseas company under Part XI of the Hong Kong Companies Ordinance under the same address. Mr. Wong Chi Keung has been appointed as our agent for the acceptance of service of process and notices under the same address. As we are incorporated in the Cayman Islands, our corporate structure, and our Memorandum of Association and Articles of Association are subject to the relevant laws of the Cayman Islands. A summary of the relevant provisions of our Memorandum of Association and Articles of Association and certain relevant aspects of Cayman Islands Companies Law are set out in the section headed “Summary of the Constitution of our Company and Cayman Islands Law” Appendix VI to this prospectus.
2. Changes in share capital As at the date of our incorporation, our authorised share capital was US$50,000 divided into 5,000,000 shares of par value US$0.01 (“US$ Share”). The following sets out the changes in our share capital since the date of our incorporation: (a) On 23 March 2007, one US$ Share was allotted and issued as fully paid to Mapcal Limited as the initial subscriber. (b) On 27 March 2007, a subscriber’s resolution was passed to re-denominate the authorised share capital from US$50,000 to HK$390,000 by the creation of 390,000 shares of par value HK$1.00 (“HK$ Share”). One HK$ Share was issued to Mapcal Limited and the one US$ Share held by Mapcal Limited was repurchased with the proceeds received from the issue of the one HK$ Share. The authorised but unissued share capital was reduced by the cancellation of 5,000,000 US$ Shares. (c) On 5 April 2007, the one HK$ Share held by Mapcal Limited was transferred to Poseidon at par value and our Company allotted and issued a further of nine HK$ Shares to Poseidon for a consideration of HK$9.00. (d) On 9 May 2007, Shareholders’ resolutions were passed to approve the subdivision of each HK$ Share to 100 Shares of par value HK$0.01. (e) On 29 June 2007, in consideration of the transfer of an aggregate of 10,000 shares in Hong Kong Dongxiang by Poseidon, MS I and MS II to our Company, 7,999,000 Shares, 1,890,000 Shares and 110,000 Shares, were allotted and issued credited as fully paid to Poseidon, MS I and MS II, respectively. (f) On 12 September 2007, Shareholders’ resolutions were passed to approve, among other things, (i) the increase of authorised share capital of our Company and (ii) the Capitalisation Issue, details of which are set out below.
Assuming that the Global Offering becomes unconditional and the Offer Shares and the Shares under the Capitalisation Issue are issued and the Over-allotment Option and the options under the Pre- IPO Share Option Scheme are not exercised, our authorised share capital upon completion of the Capitalisation Issue and the Global Offering will be HK$100,000,000 divided into 10,000,000,000
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Shares of HK$0.01 each of which 5,500,000,000 Shares will be allotted and issued as fully paid or credited as fully paid, and 4,500,000,000 Shares will remain unissued. On the basis that only the Over- allotment Option is exercised in full, 5,677,150,000 Shares will be allotted and issued as fully paid or credited as fully paid and 4,322,850,000 Shares will remain unissued. Other than pursuant to the exercise of the Over-allotment Option or any options granted under the Pre-IPO Share Option Scheme or any options which may be granted under the Share Option Scheme, there is no present intention to issue any of the authorised but unissued share capital of the Company and, without the prior approval of the Shareholders at a general meeting, no issue of Shares will be made which would effectively alter the control of our Company.
Save as disclosed in this Appendix, there has been no alteration in our share capital since the date of our incorporation.
3. Resolutions of our Shareholders Pursuant to the resolutions passed by our Shareholders at an extraordinary general meeting held on 12 September 2007: (a) The authorised share capital of our Company increased from HK$390,000 to HK$100,000,000 by the creation of 9,961,000,000 new Shares. (b) Our Company approved and adopted the Pre-IPO Share Option Scheme and our Directors were authorised subject to such conditions as set out in the Pre-IPO Share Option Scheme to grant options to subscribe for Shares thereunder and to allot, issue and deal with the Shares pursuant to the exercise of the options granted under the Pre-IPO Share Option Scheme and to take all such actions as they consider necessary and/or desirable to implement and give effect to the Pre-IPO Share Option Scheme. (c) The Articles of Association were approved and adopted with immediate effect. (d) Conditional upon the conditions for completion of the Global Offering being fulfilled: (i) the Global Offering and the Over-allotment Option were approved and our Directors were authorised to allot and issue the Offer Shares pursuant to the Global Offering and such number of Shares as may be allotted and issued upon the exercise of the Over-allotment Option; and (ii) the Share Option Scheme was approved and adopted and our Directors were authorised to grant options to subscribe for Shares thereunder and to allot, issue and deal with the Shares pursuant to the exercise of the options which may be granted under the Share Option Scheme and to take all such actions as they consider necessary and/or desirable to implement and give effect to the Share Option Scheme. (e) Subject to the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the issue of Offer Shares pursuant to the Global Offering, our Directors are authorised to allot and issue a total of 4,309,000,000 Shares credited as fully paid at par to the holders of Shares on the register of members of our Company at the close of business on 12 September 2007 (or as they may direct) in proportion to their respective shareholdings (save that no Shareholder shall be entitled to be allotted or issued any fraction of a Share) by way of capitalisation of the sum of HK$43,090,000 standing to the credit of the share premium account of our Company, and
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the Shares to be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the existing issued Shares (“Capitalisation Issue”). (f) A general unconditional mandate was granted to our Directors to allot, issue and deal with Shares with an aggregate nominal value not exceeding the sum of: (i) 20% of the aggregate nominal value of the share capital of our Company in issue immediately following the Global Offering and the completion of the Capitalisation Issue referred to in sub-paragraph (e) above; and (ii) the aggregate nominal amount of the share capital of our Company repurchased pursuant to the authority granted to our Directors referred to in sub-paragraph (f) below. This mandate does not cover Shares to be allotted, issued, or dealt with under a rights issue or upon the exercise of the Over-allotment Option or the options granted under the Pre-IPO Share Option Scheme or the options to be granted under the Share Option Scheme. Such mandate will expire: (i) at the conclusion of the next annual general meeting of our Company; (ii) at the end of the period within which the next annual general meeting of our Company is required to be held under the applicable laws or the Memorandum of Association and the Articles of Association; or (iii) when revoked or varied by ordinary resolution of our Shareholders at a general meeting of our Company, whichever occurs first. (g) A general unconditional mandate was given to our Directors to exercise all powers of our Company to repurchase Shares with an aggregate nominal value not exceeding 10% of the aggregate nominal value of the share capital of our Company in issue immediately following the Capitalisation Issue and the Global Offering (excluding Shares which may be allotted and issued under the Over-allotment Option or pursuant to the exercise of the options granted under the Pre-IPO Share Option Scheme or the options to be granted under the Share Option Scheme): This mandate only relates to repurchase made on the Stock Exchange or on any other stock exchange on which the Shares may be listed (and which is recognised by the SFC and the Stock Exchange for this purpose) and which are in accordance with all applicable laws and regulations. Such mandate will expire: (i) at the conclusion of the next annual general meeting of our Company; (ii) at the end of the period within which the next annual general meeting of our Company is required to be held under the applicable laws or Memorandum of Association and the Articles of Association; or (iii) when revoked or varied by ordinary resolution of our Shareholders at a general meeting of our Company; whichever occurs first.
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4. Changes in share capital of our subsidiaries Our subsidiaries are referred to in the Accountants’ Report on our Company as set out in Appendix I to this prospectus. The following alterations in the share capital (or registered capital, as the case maybe) of our subsidiaries have taken place within the two years preceding the date of this prospectus:
(a) Hong Kong Dongxiang Sports Development Holdings Limited On 4 April 2006, one share of par value HK$1.00 in Hong Kong Dongxiang was allotted and issued to LFDI Nominees Limited for a consideration of HK$1.00.
On 10 April 2006, one share of par value HK$1.00 in Hong Kong Dongxiang was transferred by LFDI Nominees Limited to Ms. Liu Yueh-Er.
On 9 May 2006, one share of par value HK$1.00 in Hong Kong Dongxiang was transferred by Ms. Liu Yueh-Er to Poseidon.
On 30 May 2006, 7,999 shares of par value HK$1.00 in Hong Kong Dongxiang were allotted and issued to Poseidon in consideration of Poseidon discharging a loan of US$3 million owing by Hong Kong Dongxiang to it.
On 20 April 2007, 1,890 shares and 110 shares of par value HK$1.00 in Hong Kong Dongxiang were allotted and issued to MS I and MS II, respectively, in consideration of the assignment of the Notes, and Trademark Recordation Notes to Hong Kong Dongxiang and the cancellation of the Bridge Notes by Hong Kong Dongxiang.
On 29 June 2007, 10,000 shares of par value HK$1.00 in Hong Kong Dongxiang were transferred to our Company by Poseidon and the Investors.
(b) Gaea Sports Limited On 4 April 2006, one share of par value HK$1.00 in Gaea Sports was allotted and issued to LFDI Nominees Limited for a consideration of HK$1.00.
On 10 April 2006, one share of par value HK$1.00 in Gaea Sports was transferred by LFDI Nominees Limited to Hong Kong Dongxiang.
(c) Achilles Sports Pte. Ltd. On 20 April 2006, 10 shares of par value US$1.00 in Achilles were allotted and issued to Hong Kong Dongxiang for a consideration of US$10.00.
On 30 April 2007, 99,990 shares of par value US$1.00 in Achilles were allotted and issued to Hong Kong Dongxiang in consideration of the cancellation of the Notes and Trademark Recordation Notes by Hong Kong Dongxiang.
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(d) Shanghai Taitan Sporting Goods Co., Limited Pursuant to an agreement dated 18 September 2005, Mr. Chen transferred 35% of the registered capital of Shanghai Taitan held by him to Mr. Chen Yiliang.
Pursuant to an agreement dated 10 April 2006, Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying and Mr. Qin transferred 45%, 35%, 13% and 7% of the registered capital of Shanghai Taitan held by them respectively to Gaea Sports. Upon completion of the transfer, Shanghai Taitan became a wholly foreign owned enterprise on 3 July 2006.
(e) Shanghai Leide Sporting Goods Co., Limited Pursuant to an agreement dated 10 April 2006, Mr. Chen and Mr. Chen Yiliang, transferred 59.46% and 40.54% of the registered capital of Shanghai Leide held by them respectively to Gaea Sports. Upon completion of the transfer, Shanghai Leide became a wholly foreign owned enterprise on 3 July 2006.
(f) Shanghai Kappa Sporting Goods Co., Limited On 26 January 2007, Shanghai Kappa was established in the PRC by Shanghai Taitan with a registered capital of RMB20,000,000.
(g) Beijing Dongxiang Sports Development Co., Limited On 24 August 2007, the registered capital of Beijing Dongxiang was increased from RMB800,000 to RMB10,000,000.
Save as disclosed in this prospectus, there has been no other alteration in the share capital of our subsidiaries in the two years preceding the date of this prospectus.
5. The Reorganisation We underwent the Reorganisation to rationalise the business and the structure of our Company in anticipation of the Global Offering. Following the Reorganisation, our Company became the holding company. For further information about our Reorganisation, please refer to the section headed “Our History and Structure — Reorganisation” in this prospectus.
6. Repurchases of our own securities This section includes information relating to the repurchase of our Shares, including information required by the Stock Exchange to be included in this prospectus concerning such repurchase.
(a) Relevant Legal and Regulatory Requirements The Hong Kong Listing Rules permit our Shareholders to grant to our Directors a general mandate to repurchase our Shares that are listed on the Stock Exchange. Such mandate is required to be given by way of an ordinary resolution passed by our Shareholders at a general meeting.
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(b) Shareholders’ Approval All proposed repurchases of Shares (which must be fully paid up) must be approved in advance by ordinary resolutions of our Shareholders at a general meeting, either by way of general mandate or by specific approval of a particular transaction.
On 12 September 2007, our Directors were granted a general unconditional mandate to repurchase up to 10% of the aggregate nominal value of the share capital of our Company in issue immediately following the Capitalisation Issue and completion of the Global Offering (excluding Shares which may be allotted and issued under the Over-allotment Option or pursuant to the exercise of the options granted under the Pre-IPO Share Option Scheme or the options to be granted under the Share Option Scheme) on the Stock Exchange or on any other stock exchange on which our securities may be listed and which is recognised by the SFC and the Stock Exchange for this purpose. This mandate will expire at the earliest of (i) the conclusion of our next annual Shareholders’ general meeting; (ii) the date by which our next Shareholders’ general meeting is required by applicable laws and our Articles of Association to be held; or (iii) such mandate being revoked or varied by ordinary resolutions of our Shareholders at a general meeting of our Company (the “Relevant Period”).
(c) Source of Funds Our repurchase of the Shares listed on the Stock Exchange must be funded out of funds legally available for the purpose in accordance with our Memorandum of Association and Articles of Association and the applicable laws of the Cayman Islands. We may not repurchase our Shares on the Stock Exchange for consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange. Subject to the foregoing, we may make repurchases out of our profit or out of the proceeds of a fresh issue of Shares for the purpose of the repurchase. Any amount of premium payable on the purchase over the par value of our Shares to be repurchased must be out of profits of our Company or out of our Company’s share premium account. If authorised by our Articles of Association and subject to the Cayman Islands Companies Law, repurchase may also be made, out of capital.
(d) Reasons for Repurchases Our Directors believe that it is in our and our Shareholders’ best interests for our Directors to have general authority to execute repurchases of our Shares in the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made where our Directors believe that such repurchases will benefit us and our Shareholders.
(e) Funding of Repurchases In repurchasing securities, we may only apply funds legally available for such purpose in accordance with our Memorandum of Association and Articles of Association and the Hong Kong Listing Rules.
On the basis of the current financial position of our Company as disclosed in this prospectus and taking into account the current working capital position of our Company, our Directors believe that, if the repurchase mandate were to be exercised in full, it might have a material adverse effect on our working capital and/or the gearing position as compared with the position disclosed in this
VII-6 APPENDIX VII STATUTORY AND GENERAL INFORMATION prospectus. However, our Directors do not propose to exercise the repurchase mandate to such an extent as would, in the circumstances, have a material adverse effect on the working capital requirements of our Company or the gearing levels which in the opinion of our Directors are from time to time appropriate for us.
(f) Share Capital The exercise in full of the current repurchase mandate, on the basis of 5,500,000,000 Shares in issue immediately after the Global Offering (without taking into account the exercise of the Over- allotment Option or the options granted under the Pre-IPO Share Option Scheme or the options to be granted under the Share Option Scheme), could accordingly result in up to 550,000,000 Shares being repurchased by us during the Relevant Period.
(g) General None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their associates (as defined in the Hong Kong Listing Rules) currently intends to sell any of our Shares to us.
Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the repurchase mandate in accordance with the Hong Kong Listing Rules, the Memorandum of Association and Articles of Association, the Cayman Islands Companies Law and any other applicable laws of the Cayman Islands.
If, as a result of any repurchase of our Shares, a Shareholder’s proportionate interest in our voting rights is increased, such increase will be treated as an acquisition for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain or consolidate control of us and become obliged to make a mandatory offer in accordance with rule 26 of the Takeovers Code. Our Directors are not aware of any consequences of repurchases which would arise under the Takeovers Code.
No connected person as defined by the Hong Kong Listing Rules has notified us that he has a present intention to sell his Shares to us, or has undertaken not to do so, if the repurchase mandate is exercised.
B. FURTHER INFORMATION ABOUT OUR BUSINESS 1. Summary of material contracts We have entered into the following contracts (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of this prospectus that are or may be material: (a) the property sales agreement dated 13 October 2005 entered into between Beijing Dongxiang and (Beijing Jing Kai Investment Development Shareholding Co., Ltd.)* pursuant to which, Beijing Dongxiang agreed to purchase the premises located at (No. 101, Block/Tower 21, BDA International Enterprises Road, Economic Development and Technology Park)* (now known as (No. 21, BDA International Enterprise Road, No. 2 Jingyuanbei Street, Beijing Economic Technology Development Area)*) for a consideration of RMB17,539,791;
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(b) the property sales agreement dated 18 December 2005 entered into between Beijing Dongxiang and (Beijing Jing Kai Investment Development Shareholding Co., Ltd.)* pursuant to which, Beijing Dongxiang agreed to purchase the premises located at (Block/Tower 22, BDA International Enterprises Road, Economic Development and Technology Park)* (now known as (No. 22, BDA International Enterprise Road, No. 2 Jingyuanbei Street, Beijing Economic Technology Development Area)*) for a consideration of RMB11,256,064; (c) the property sales agreement dated 25 May 2006 entered into between Beijing Dongxiang and (Beijing Jing Kai Investment Development Shareholding Co., Ltd.)* pursuant to which, Beijing Dongxiang agreed to purchase the premises located at (No. 0101, 1/F, Block/Tower 37, Phase 3, BDA Enterprises Road)* (now known as (No. 37, BDA International Enterprise Road, No. 2 Jingyuanbei Street, Beijing Economic Technology Development Area)*) for a consideration of RMB11,566,636; (d) the deed of guarantee and license dated 26 March 2006 entered into amongst BasicNet S.p.A., Basic Properties B.V., Basic Trademark S.A. (collectively, the “Basic Group”), Beijing Dongxiang and Diamond King International Limited (“Diamond King”), pursuant to which, BasicNet S.p.A. and Basic Properties B.V. guaranteed the performance of Basic Trademark S.A. and Beijing Dongxiang guaranteed the performance of Diamond King of their respective obligations under the sale and purchase agreement dated 26 March 2006 (“Sale and Purchase Agreement”) entered into between Basic Trademark S.A. and Diamond King; and BasicNet S.p.A. and Basic Properties B.V. granted a licence to Diamond King to use and exploit the know-how developed by the Basic Group in respect of the Kappa products for a fee of 2% of the gross revenues (less applicable deductions); (e) equity interest transfer agreement dated 10 April 2006 entered into amongst Gaea Sports, Mr. Chen and Mr. Chen Yiliang, pursuant to which, Mr. Chen and Mr. Chen Yiliang agreed to transfer 59.46% and 40.54%, representing all their interests in Shanghai Leide to Gaea Sports for a consideration of RMB1,682,718 and RMB1,147,282, respectively; (f) the equity interest transfer agreement dated 10 April 2006 entered into amongst Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying, Mr. Qin and Gaea Sports pursuant to which, Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying and Mr. Qin agreed to transfer 45.0%, 35.0%, 13.0% and 7.0%, representing all their interests in Shanghai Taitan to Gaea Sports for a consideration of RMB15,336,000, RMB11,928,000, RMB4,430,400 and RMB2,385,600, respectively; (g) the investment agreement dated 10 May 2006 entered into amongst MS I, MS II, Poseidon, Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying, Mr. Qin, Achilles and Gaea Sports Holdings Limited (now known as Hong Kong Dongxiang), pursuant to which, MS I and MS II agreed to subscribe for promissory notes in Achilles amounting to an aggregate of US$29 million (“Notes”), promissory notes in Hong Kong Dongxiang amounting to an aggregate of US$6 million (“Bridge Notes”) and promissory notes in Achilles amounting to an aggregate of US$3 million (“Trademark Recordation Notes”) subject to the terms and conditions therein contained; (h) the shareholder and noteholder agreement dated 10 May 2006 entered into amongst MS I, MS II, Poseidon, Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying, Mr. Qin, Achilles and Gaea Sports Holdings Limited (now known as Hong Kong Dongxiang) and amended by
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the amendment No. 1 deed dated 17 April 2007 entered into among the same parties (collectively, “Shareholder Agreement”) to regulate the affairs of Hong Kong Dongxiang; (i) the assignment, waiver and subscription agreement dated 10 May 2006 entered into amongst MS I, MS II, Poseidon, Mr. Chen, Achilles, Diamond King and Gaea Sports Holdings Limited (now known as Hong Kong Dongxiang) pursuant to which, amongst others, Diamond King agreed to assign its obligation to pay Mr. Chen an amount of US$3 million (“Loan”) to Achilles and Achilles agreed to assign the Loan to Hong Kong Dongxiang for US$1.00 and Mr. Chen agreed to assign his right to repayment of the Loan to Poseidon for US$1.00; (j) the assignment and waiver agreement dated 10 May 2006 entered into amongst Diamond King, Achilles, Basic Group and Beijing Dongxiang, pursuant to which, Diamond King agreed to assign to Achilles all its rights and obligations under the Sale and Purchase Agreement and the deed of guarantee and license mentioned in sub-paragraph (d) above for US$1.00; (k) the deed of guarantee and pledge dated 10 May 2006 entered into between Hong Kong Dongxiang, MS I and MS II, pursuant to which, Hong Kong Dongxiang agreed to pledge in favour of MS I and MS II all issued and outstanding ordinary shares of Achilles and all proceeds derived from the ownership of such shares as security; (l) the deed of assignment dated 30 May 2006 entered into between Basic Trademark S.A. and Achilles pursuant to which, Basic Trademark S.A. assigns all rights and interests in trademark registration certificates Nos. N/010665, N/010663, N/010666, N/010664, 10649M and 10650M to Achilles; (m) the mortgage and borrowing agreement dated 11 August 2006 entered into among Beijing Dongxiang, Bank of Communications, Beijing Economic Technology Development Area branch (“Bank of Communications”) (Beijing Jing Kai Investment Development Shareholding Co., Ltd.)* pursuant to which, Beijing Dongxiang agreed to borrow an amount of RMB5,780,000 from the Bank of Communication and to provide its premises at (No. 37, BDA International Enterprise Road, No. 2 Jingyuanbei Street, Beijing Economic Technology Development Area)* as security for the loan; (n) the asset transfer agreement dated 30 August 2006 entered into between Beijing Dongxiang and (Guangdong Fang De Trading Co., Ltd.)* (“Guangdong Fang De”) pursuant to which, Beijing Dongxiang agreed to transfer certain assets under its Guangzhou branch to Guangdong Fang De for a consideration of RMB4,770,000; (o) the agreement to purchase state-own land dated 9 November 2006 entered into between (Taicang Land Resources Authority, Jiangsu Province, PRC)* and Shanghai Taitan, Taicang branch pursuant to which, Shanghai Taitan, Taicang branch agreed to purchase from Taicang Land Resources Authority the land located at (Taicang City Economic Development Region Beijing Road South)* for a consideration of RMB3,138,263; (p) a contribution agreement dated 20 April 2007 entered into between MS I, MS II and Hong Kong Dongxiang pursuant to which Hong Kong Dongxiang assumes all the rights and obligations of MS I and MS II under the Notes and Trademark Recordation Notes in consideration of Hong Kong Dongxiang allotting and issuing 1,591 and 93 shares to MS I and MS II, respectively;
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(q) a share swap agreement dated 29 June 2007 entered into amongst Poseidon, MS I, MS II, Mr. Chen, Ms. Liu Peiying, Mr. Qin, Hong Kong Dongxiang and our Company pursuant to which, an aggregate of 10,000 shares of HK$1.00 each held by Poseidon, MS I and MS II in Hong Kong Dongxiang were sold to our Company in consideration of our Company allotting and issuing 7,999,000 Shares, 1,890,000 Shares and 110,000 Shares credited as fully paid to Poseidon, MS I and MS II respectively; (r) an assignment and assumption agreement dated 29 June 2007 entered into amongst MS I, MS II, Poseidon, Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying, Mr. Qin, Achilles, Hong Kong Dongxiang and our Company pursuant to which Hong Kong Dongxiang assigned to our Company all its rights and obligations under the investment agreement and the Shareholder Agreement mentioned in sub-paragraphs (g) and (h) above for US$1.00; (s) the Placing Agreement dated 3 September 2007 between the Company, China Life Insurance Company Limited, Deutsche Bank and Merrill Lynch International in relation to the purchase of such number of Shares that may be purchased at the Offer Price with HK$275.1 million as referred to in the section headed “Cornerstone Investors” of this prospectus; (t) the Placing Agreement dated 3 September 2007 between the Company, Tiger Global, L.P., Tiger Global II, L.P., Tiger Global, Ltd., Deutsche Bank and Merrill Lynch International in relation to the purchase of such number of Shares that may be purchased at the Offer Price with HK$275.1 million as referred to in the section headed “Cornerstone Investors” of this prospectus; (u) the Placing Agreement dated 3 September 2007 between the Company, Intime Department Store (Group) Company Limited, Deutsche Bank and Merrill Lynch International in relation to the purchase of such number of Shares that may be purchased at the Offer Price with HK$78.6 million as referred to in the section headed “Cornerstone Investors” of this prospectus; (v) a deed of termination dated 12 September 2007 entered into amongst Poseidon, Mr. Chen, Mr. Chen Yiliang, Ms. Liu Peiying, Mr. Qin, Achilles, our Company, MS I and MS II pursuant to which, the Shareholder Agreement mentioned in sub-paragraph (h) was terminated with effect from the completion of the Global Offering; (w) a deed of indemnity dated 12 September 2007 entered into between Mr. Chen and our Company pursuant to which, Mr. Chen agreed to give certain indemnities in relation to tax and other matters in favour of our Company; and (x) the Hong Kong Underwriting Agreement dated 24 September 2007 entered into amongst our Company, Mr. Chen, Poseidon, Deutsche Bank and Merrill Lynch Far East Limited in relation to the underwriting of the Hong Kong Public Offer by the Hong Kong Underwriters as referred to in the section headed “Underwriting” of this prospectus. * denotes an English translation of a Chinese name
2. Intellectual property rights As of the Latest Practicable Date, our Company has registered or has applied for the registration of the following intellectual property rights.
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A. Trademarks (a) Trademarks assigned to our Company of which our Company has become the registered owner
Pursuant to the trademark sale and purchase agreement dated 26 March 2006 entered into between Basic Trademark S.A. and Diamond King, Basic Trademark S.A. has assigned the registered trademarks to Diamond King and after the transfer of the trademarks pursuant to an assignment and waiver agreement dated 10 May 2006 entered into between inter alia Diamond King and Achilles, our Company became the registered owner of the following trademarks through Achilles:
Registration Trademark Place of Registration Class(1) Number Effective Period International Bureau of the 3, 9, 18, G666005A 14 November 1996 - World Intellectual Property 25, 28 14 November 2016 Organization(2) International Bureau of the 3, 9, 18, G697410A 17 July 1998 - World Intellectual Property 25, 28 17 July 2008 Organization(3) International Bureau of the 9, 14, 16, G814630A 13 October 2003 - World Intellectual Property 18, 25, 28 13 October 2013 Organization(3) KAPPA (text) International Bureau of the 9, 16, 18, G820762A 13 October 2003 - World Intellectual Property 25, 28 13 October 2013 Organization(3) ROBE DI KAPPA International Bureau of the 9, 16, 18, G871998A 21 June 2005 - (text) World Intellectual Property 25 21 June 2015 Organization(3) KAPPA Macau(4) 18 N/010663 5 March 2003 - 5 March 2010 KAPPA Macau(4) 28 N/010664 5 March 2003 - 5 March 2010 Macau(4) 18 N/010665 5 March 2003 - 5 March 2010
Macau(4) 28 N/010666 5 March 2003 - 5 March 2010
Macau(4) 25 10650-M 10 October 1997 - 10 October 2007(7)
Macau(4) 25 10649-M 10 October 1997 - 10 October 2007(7)
KAPPA (text) PRC(5) 18 3784888 7 October 2006 - 6 October 2016
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Registration Trademark Place of Registration Class(1) Number Effective Period
KAPPA (text) PRC(5) 25 3784858 7 October 2006 - 6 October 2016 PRC(6) 25 231493 15 August 2005 - 14 August 2015
PRC(5) 25 568045 10 October 2001 - 9 October 2011
PRC(5) 18 3786129 7 October 2006 - 6 October 2016
PRC(5) 25 3786130 7 October 2006 - 6 October 2016
(character) PRC(5) 25 1152458 21 February 1998 - 20 February 2008 (character) PRC(5) 25 1152469 21 February 1998 - 20 February 2008 (character) PRC(5) 25 1152468 21 February 1998 - 20 February 2008 (character) PRC(5) 18 3085725 14 May 2003 - 13 May 2013 (character) PRC(6) 25 3085724 14 April 2007 - 13 April 2017 (character) PRC(5) 28 3085723 14 June 2003 - 13 June 2013
(1) Class 3 relates to cosmetics and cleaning preparations bleaching preparations and other substances for laundry use; cleaning, polishing, scouring and abrasive preparations; soaps; perfumery, essential oils, cosmetics, hair lotions; dentifrices. Class 9 relates to electrical and scientific apparatus — scientific, nautical, surveying, electric, photographic, cinematographic, optical, weighing, measuring, signaling, checking (supervision), lifesaving and teaching apparatus and instruments; apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs; automatic vending machines and mechanisms for coin operated apparatus; cash registers, calculating machines, data processing equipment and computers; fire-extinguishing apparatus. Class 14 relates to jewelry — precious metals and their alloys and goods in precious metals or coated therewith, not included in other classes; jewelry, precious stones; horological and chronometric instruments. Class 16 relates to paper goods and printed matter—paper, cardboard and goods made from these materials, not included in other classes; printed matter; bookbinding material; photographs; stationery; adhesives for stationery or household purposes; artists’ materials; paint brushes; typewriters and office requisites (except furniture); instructional and teaching material (except apparatus); plastic materials for packaging (not included in other classes); playing cards; printers’ type; printing blocks. Class 18 relates to leather goods — leather and imitations of leather, and goods made of these materials and not included in other classes; animal skins, hides; trunks and travelling bags; umbrellas, parasols and walking sticks; whips, harness and saddlery. Class 25 relates to clothing — clothing, footwear, headgear. Class 28 relates to toys and sporting goods — games and playthings; gymnastic and sporting articles not included in other classes; decorations for Christmas trees.
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(2) Achilles obtained partial assignments from Basic Trademark S.A., who is the registered owner of Kappa and Robe Di Kappa trademarks (registration number: 666005A) with the International Bureau of the World Intellectual Property Organization (“WIPO”) under the Madrid Agreement and Protocol with respect to the registration in China. The application for trademark protection to be extended to China has been applied for and upon grant, as advised by our PRC legal adviser, Achilles would enjoy the same trademark right as those trademarks registered with WIPO in the PRC. (3) Achilles obtained partial assignments from Basic Trademark S.A., who is the registered owner of the Kappa and Robe Di Kappa trademarks (registration numbers: 814630A, 820762A, 697410A, 666005A, 871998A) with WIPO under the Madrid Agreement and Protocol with respect to the registration in China. The application for trademark protection to be extended to China has been applied for and upon grant, as advised by our PRC legal adviser, Achilles would enjoy the same trademark right as those trademarks registered with WIPO in the PRC. (4) the trademark was assigned to Achilles by Basic Trademark S.A. and the assignment was registered and effective as of 7 June 2006. (5) the trademark was assigned to Achilles by Basic Trademark S.A. and the assignment was registered and effective as of 14 March 2007. (6) the trademark registration application in PRC was assigned to Achilles by Basic Trademark S.A. and the assignment was registered and effective as of 23 January 2007. (7) application for renewal had been made to the Macau Trade Marks Office.
(b) Trademarks licensed to our Group by L-Fashion Group Pursuant to the distribution and licence agreement dated 16 October 2005 (as amended by an amendment agreement dated 18 August 2006), and the trademark license contract dated 18 August 2006 entered into between L-Fashion Group and Shanghai Taitan, L-Fashion Group granted to us the license to use the following registered trademark for the period from 18 August 2006 to 31 December 2011:
Trademark Place of Application Class(1) Registration Number Effective Period European Union(2) 25 G835271 18 October 2004 – 18 October 2014 and the following trademarks (which are pending registration) for the period from 18 August 2006 to 31 December 2011: Trademark Place of Application Class(1) Application Number Application Date (character) PRC 25 4938335 12 October 2005 PRC 25 4977764 2 November 2005 PRC 18 5005326 16 November 2005 PRC 25 4938338 12 October 2005 (character) RUKKA PRC 25 4961991 25 October 2005
Notes : (1) Class 18 relates to leather goods — leather and imitations of leather, and goods made of these materials and not included in other classes; animal skins, hides; trunks and travelling bags; umbrellas, parasols and walking sticks; whips, harness and saddlery. Class 25 relates to clothing — clothing, footwear, and headgear. (2) application for trademark registration to be extended to the PRC had been made.
VII-13 APPENDIX VII STATUTORY AND GENERAL INFORMATION
(c) Trademarks applied for by our Company for which registration has been granted As of the Latest Practicable Date, we have applied for and has been granted the registration of a number of trademarks, details of which are as follows:
Place of Registration Trademark Registration Class Number Effective Period
2 May 2007 - Singapore 9(1) T07/09320C 1 May 2017
2 May 2007 - Singapore 14(2) T07/09321A 1 May 2017
2 May 2007 - Singapore 28(3) T07/09324F 1 May 2017
19 May 2007 - Singapore 9(4) T07/11028J 18 May 2017
19 May 2007 - Singapore 18(5) T0711030B 18 May 2017
19 May 2007 - Singapore 28(3) T07/11032I 18 May 2017
Note:
(1) Class 9 relates to optical appliances and instruments other than for medical use, namely spectacles and sunglasses, optical frames; optical lenses, protective eyeglasses, including ski eyewear, protective eyewear for dust, diving goggles, goggles for aviators, visors protective; spectacle cases.
(2) Class 4 relates to timepieces and parts thereof; horological instruments; chronometers, clocks and watches; watchstraps; jewellery; precious stones; precious metals and their alloys; goods made of precious metals and their alloys or coated therewith not included in other classes.
(3) Class 28 relates to gymnastics and sports articles not included in other classes, including footballs.
(4) Class 9 relates to optical appliances and instruments, namely spectacles and sunglasses, frames; optical lenses, protective eyeglasses, including ski eyewear, protective eyewear for dust, diving goggles, goggles for aviators, visors and spectacle cases.
(5) Class 18 relates to trunks and suitcases, sports bags (not adapted to the products they are intended to contain), handbags, rucksacks and kitbags, purses, umbrellas, parasols.
(d) Trademarks under application As of the Latest Practicable Date, we have also applied for the registration of a number of trademarks, details of which are as follows:
Place of Application Trademark Application Class Number Application Date KAPPA (text) PRC(1) 25 4608484 18 April 2005 ROBE DI KAPPA (text) PRC(1) 25 4608483 18 April 2005
PRC(1) 25 4608482 18 April 2005
Singapore 9 T07/09326B 2 May 2007
VII-14 APPENDIX VII STATUTORY AND GENERAL INFORMATION
Place of Application Trademark Application Class Number Application Date
Singapore 28 T07/09330J 2 May 2007
Singapore 25 T07/09329G 2 May 2007
Singapore 18 T07/09328I 2 May 2007
Singapore 14 T07/09327J 2 May 2007 Singapore 9 T07/09315G 2 May 2007
Singapore 14 T07/09316E 2 May 2007
Singapore 18 T07/09317C 2 May 2007
Singapore 25 T07/09318A 2 May 2007
Singapore 28 T07/09319Z 2 May 2007
Dongxiang Singapore 25 T07/09323H 2 May 2007 Dongxiang Singapore 18 T07/09322Z 2 May 2007
Singapore 28 T07/09335A 2 May 2007
Singapore 9 T07/09331I 2 May 2007
Singapore 14 T07/09332G 2 May 2007
Singapore 18 T07/09333E 2 May 2007
Singapore 25 T07/09334C 2 May 2007
Singapore 14 T0711029I(2) 19 May 2007
Singapore 25 T0711031J(2) 19 May 2007 Macau 9 N/28786(3) 11 May 2007 Macau 14 N/28787(3) 11 May 2007 Macau 18 N/28788(3) 11 May 2007 Macau 25 N/28789(3) 11 May 2007 Macau 28 N/28790(3) 11 May 2007 Macau 9 N/28791(3) 11 May 2007 Macau 14 N/28792(3) 11 May 2007 Macau 18 N/28793(3) 11 May 2007 Macau 25 N/28794(3) 11 May 2007 Macau 28 N/28795(3) 11 May 2007
VII-15 APPENDIX VII STATUTORY AND GENERAL INFORMATION
Place of Application Trademark Application Class Number Application Date DONG XIANG Macau 9 N/28796(3) 11 May 2007 DONG XIANG Macau 14 N/28797(3) 11 May 2007 DONG XIANG Macau 18 N/28798(3) 11 May 2007 DONG XIANG Macau 25 N/28799(3) 11 May 2007 DONG XIANG Macau 28 N/28800(3) 11 May 2007
Macau 9 N/28801(3) 11 May 2007
Macau 14 N/28802(3) 11 May 2007
Macau 18 N/28803(3) 11 May 2007
Macau 25 N/28804(3) 11 May 2007
Macau 28 N/28805(3) 11 May 2007
Macau 9 N/28806(3) 11 May 2007
Macau 14 N/28807(3) 11 May 2007
Macau 18 N/28808(3) 11 May 2007
Macau 25 N/28809(3) 11 May 2007
Macau 28 N/28810(3) 11 May 2007 Hong Kong 9, 14, 18, 25, 28 300868753 11 May 2007 DONG XIANG Hong Kong 9, 14, 18, 25, 28 300868744 11 May 2007
Hong Kong 9, 14, 18, 25, 28 300868735 11 May 2007
Hong Kong 9, 14, 18, 25, 28 300868726 11 May 2007
Note: (1) the trademark application was assigned to Achilles by Basic Trademark S.A. and the assignment was registered and effective as of 23 January 2007. (2) the trademark application has been accepted for publication and advertised in the Singapore Trade Marks Journal. (3) the trademark application has been published on 1 August 2007 in the Macau Official Gazette.
VII-16 APPENDIX VII STATUTORY AND GENERAL INFORMATION
B. Domain Names As at the Latest Practicable Date, our Company had registered the following domain names through Beijing Dongxiang:
Domain name Expiry date Register cn-dongxiang.com 2 February 2010 ICANN china-dongxiang.com 2 February 2010 ICANN dxsport.com 7 January 2011 ICANN dxsourcing.com 2 February 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN 21 September 2010 ICANN kappa.com.cn 10 April 2009 CNNIC dxsport.com.cn 6 January 2010 CNNIC 21 September 2010 CNNIC 21 September 2010 CNNIC 21 September 2010 CNNIC 21 September 2010 CNNIC
3. Further information about our subsidiaries A summary of the corporate information and the principal terms of our subsidiaries are set out below.
A. Subsidiaries outside the PRC (a) Hong Kong Dongxiang Sports Development Holdings Limited
(i) Place of incorporation : Hong Kong (ii) Date of incorporation : 4 April 2006 (iii) Authorised share capital : HK$10,000 divided into 10,000 shares of par value HK$1.00 (iv) Issued share capital : 10,000 shares of HK$1.00 each (v) Percentage of equity interest owned by us : 100% (vi) General nature of business : Corporate (vii) Directors : Mr. Chen, Mr. Qin, Mr. Gao Yu
VII-17 APPENDIX VII STATUTORY AND GENERAL INFORMATION
(b) Gaea Sports Limited
(i) Place of incorporation : Hong Kong (ii) Date of incorporation : 4 April 2006 (iii) Authorised share capital : HK$10,000 divided into 10,000 shares of par value HK$1.00 (iv) Issued share capital : One share of HK$1.00 (v) Percentage of equity interest owned by us : 100% (vi) General nature of business : Corporate (vii) Directors : Mr. Chen, Mr. Qin, Mr. Gao Yu
(c) Achilles Sports Pte. Ltd.
(i) Place of incorporation : The Republic of Singapore (ii) Date of incorporation : 20 April 2006 (iii) Issued share capital : 100,000 shares of US$1.00 each (iv) Percentage of equity interest owned by us : 100% (v) General nature of business : General wholesale trade (including general importers and exporters) (vi) Directors : Mr. Chen, Mr. Qin, Mr. Gao Yu, Mr. Max Ng Chee Weng
(B) PRC subsidiaries (a) Shanghai Taitan Sporting Goods Co., Limited
(i) Economic nature : Wholly foreign owned enterprise (ii) Date of establishment : 14 March 2005 (iii) Term of operation : 14 March 2005 to 13 March 2035 (iv) Registered capital : RMB3,000,000 (fully and timely paid in compliance with the relevant PRC laws and regulations) (v) Percentage of equity interest owned by us : 100% (vi) General nature of business : Production, wholesale, sale by agency (except for auction), export and import and related ancillary services (including design and consulting services) of clothing, shoes, headwear and related accessories, sale of products (including the management of quota, specially regulated products processed in accordance with the relevant PRC laws and regulations). (vii) Legal representative : Mr. Chen
VII-18 APPENDIX VII STATUTORY AND GENERAL INFORMATION
(b) Shanghai Leide Sporting Goods Co., Limited (i) Economic nature : Wholly foreign owned enterprise (ii) Date of establishment : 9 September 2003 (iii) Term of operation : 9 September 2003 to 8 September 2033 (iv) Registered capital : RMB1,110,000 (v) Percentage of equity interest owned by us : 100% (vi) General nature of business : Design, consulting services (operate with administrative permit if such permit is required) of sports articles. (vii) Legal representative : Mr. Chen (c) Shanghai Kappa Sporting Goods Co., Limited (i) Economic nature : (one-person limited liability company of a foreign invested enterprise)* (ii) Date of establishment : 26 January 2007 (iii) Term of operation : 26 January 2007 to 25 January 2027 (iv) Registered capital : RMB20,000,000 (v) Percentage of equity interest owned by us : 100% (vi) General nature of business : Wholesale, sale by agency (except for auction), export and import and related ancillary services (including design and consulting services) of clothing, shoes, headwear and related accessories, organise cultural sports exchange activities (except for the organisation of sports competition). (vii) Legal representative : Mr. Chen (d) Beijing Dongxiang Sports Development Co., Limited (i) Economic nature : (Domestic foreign invested entity)* (ii) Date of establishment : 18 April 2002 (iii) Term of operation : 18 April 2002 to 17 April 2022 (iv) Registered capital : RMB10,000,000 (v) Percentage of equity interest owned by us : 100% (vi) General nature of business : Organise cultural sports exchange activities (except for the organisation of sports competition), sales and retail, information consultancy (does not include intermediary services), technical development, design and produce clothing. (vii) Legal representative : Mr. Chen * denotes an English translation of a Chinese name.
VII-19 APPENDIX VII STATUTORY AND GENERAL INFORMATION
C. FURTHER INFORMATION ABOUT OUR DIRECTORS, MANAGEMENT, STAFF AND EXPERTS 1. Disclosure of Interests Immediately following completion of the Capitalisation Issue and the Global Offering (without taking into account Shares which may be allotted and issued pursuant to the exercise of the Over- allotment Option and the options granted under the Pre-IPO Share Option Scheme), the interests of the Directors and chief executive of our Company in the equity or debt securities of our Company or any associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and/or short positions which they are taken or deemed to have under such provisions of the SFO) once the Shares are listed, or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein once the Shares are listed, or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules, to be notified to our Company and the Stock Exchange once the Shares are listed will be as follows:
Approximate percentage of interest in our Company immediately after the Global Name of Director Nature of interest Number and class of securities(1) Offering Mr.Chen...... Interest of a controlled 2,587,081,000 Shares (L) 47.04% corporation(2) Deemed Interest (3) 345,520,000 Shares (L) 6.28% Mr.Qin ...... Interest of a controlled 241,864,000 Shares (L) 4.40% corporation(4)
Notes: (1) The letter “L” denotes the person’s long position in such Shares. (2) Mr. Chen, Harvest Luck Development Limited and Talent Rainbow Far East Limited are deemed to be interested in the Shares held by Poseidon by virtue of Harvest Luck Development Limited and Talent Rainbow Far East Limited being entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of Poseidon and are in turn wholly-owned and controlled by Mr. Chen. Mr. Chen, the husband of Ms. Liu Peiying, is also deemed to be interested in his wife’s interests in our Company. (3) Ms. Liu Peiying is the spouse of Mr. Chen and Mr. Chen is therefore deemed to be interested in the Shares held by Ms. Liu Peiying through Colour Billion Limited. For further details, please refer to the section headed “Transfers and Arrangement in respect of our Company and Poseidon”. (4) Wise Finance Ltd. is wholly-owned and controlled by Mr. Qin and Mr. Qin is therefore deemed to be interested in the Shares held by Wise Finance Ltd.
VII-20 APPENDIX VII STATUTORY AND GENERAL INFORMATION
2. Substantial shareholders So far as our Directors are aware, immediately following completion of the Capitalisation Issue and the Global Offering (without taking into account any Shares which may be issued pursuant to the exercise of the Over-allotment Option and the options granted under the Pre-IPO Share Options Scheme), the following persons will have an interest or short position in Shares or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO or who will be, 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 our Company or any of our subsidiaries:
Approximate percentage of interest in our Company Number and class of immediately after Name of Shareholders Nature of interest securities(1) the Global Offering Poseidon ...... Corporate interest 2,587,081,000 Shares (L) 47.04% Talent Rainbow Far East 2,587,081,000 Shares (L) 47.04% Limited(2) ...... Interest in a controlled corporation Harvest Luck 2,587,081,000 Shares (L) 47.04% Development Limited(2) ...... Interest in a controlled corporation Mr. Chen(2) ...... Interest in a controlled 2,932,601,000 Shares (L) 53.32% corporation, deemed interest Colour Billion 345,520,000 Shares (L) 6.28% Limited(3) ...... Corporate interest Ms. Liu Peiying(3) ...... Interest in a controlled 2,932,601,000 Shares (L) 53.32% corporation, deemed interest Mr. Chen Yiliang(4) .... Interest in controlled 280,735,000 Shares (L) 5.10% corporations MSI ...... Corporate interest 632,961,000 Shares (L) 11.51% Morgan Stanley Private 632,961,000 Shares (L) 11.51% Equity Asia, L.P.(5) ..... Interest in a controlled corporation Morgan Stanley Private 632,961,000 Shares (L) 11.51% Equity Asia, L.L.C.(5) . . . Interest in a controlled corporation Morgan Stanley Private 632,961,000 Shares (L) 11.51% Equity Asia, Inc.(5) ..... Interest in a controlled corporation Morgan Stanley(5) ...... Interest in a controlled 632,961,000 Shares (L) 11.51% corporation
Notes: (1) The letter “L” denotes the person’s long position in such Shares.
(2) Mr. Chen, Harvest Luck Development Limited and Talent Rainbow Far East Limited are deemed to be interested in the Shares held by Poseidon by virtue of Harvest Luck Development Limited and Talent Rainbow Far East Limited being entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of Poseidon and are in turn wholly-owned and controlled by Mr. Chen. Mr. Chen, the husband of Ms. Liu Peiying, is also deemed to be interested in his wife’s interests in our Company.
VII-21 APPENDIX VII STATUTORY AND GENERAL INFORMATION
(3) Colour Billion Limited is wholly-owned by Ms. Liu Peiying, who is the wife of Mr. Chen. Ms. Liu Peiying is deemed to be interested in the Shares held by Colour Billion Limited and Mr. Chen’s interests in our Company. (4) Forever Step Investment Limited, Talent Hill Group Limited and Ease Luck Group Limited are all wholly-owned by Mr. Chen Yiliang. Mr. Chen Yiliang is deemed to be interested in the Shares held by Forever Step Investment Limited, Talent Hill Group Limited and Ease Luck Group Limited. (5) MS I is controlled by Morgan Stanley Private Equity Asia, L.P. (“MSPEA”), a fund managed by the private equity arm of Morgan Stanley. The general partner of MSPEA is Morgan Stanley Private Equity Asia, L.L.C., the managing member of which is Morgan Stanley Private Equity Asia, Inc., a wholly-owned subsidiary of Morgan Stanley. Each of MSPEA, Morgan Stanley Private Equity Asia, L.L.C., Morgan Stanley Private Equity Asia, Inc., and Morgan Stanley is deemed to be interested in the Shares held by MS I.
3. Particulars of service contracts Each of Mr. Chen and Mr. Qin, both being our executive Directors, has entered into a service contract with our Company for an initial term of 3 years commencing from the Listing Date, until terminated by not less than 3 calendar months’ notice in writing served by either party on the other. The aggregate annual fees payable to each of our of the 2 executive Directors is HK$160,000.
Each of Mr. Gao Yu, being our non-executive Director, Dr. Xiang Bing, Mr. Xu Yudi and Mr. Mak Kin Kwong, being our independent non-executive Directors, has entered into a letter of appointment with our Company on 12 September 2007. Each letter of appointment is for an initial term of 1 year commencing from the Listing Date. The aggregate annual fees payable to each of our independent non-executive Director under the letters of appointment is HK$160,000. Our non-executive Director shall not be entitled to any director’s fees.
Save as disclosed above, none of our Directors has or is proposed to have a service contract with our Company or any of our subsidiaries (other than contracts expiring or determinable by the employer within one year without the payment of compensation other than the statutory compensation).
4. Directors’ remuneration
The aggregate amount of remuneration (including fees, salaries, contributions to pension schemes, housing allowances and other allowances and discretionary bonuses) which were paid to our Directors by our Company or any of our subsidiaries for the years ended 31 December 2004, 2005 and 2006 and for the five months ended 31 May 2007 were approximately nil, RMB80,000, RMB1,119,000 and RMB1,094,000, respectively.
It is estimated that remuneration equivalent to approximately RMB3.6 million in aggregate will be paid and granted to our Directors by us in respect of the financial year ending 31 December 2007 under arrangements in force at the date of this prospectus.
5. Fees or commissions received Save as disclosed in this prospectus, none of the Directors nor any of the persons whose names are listed in the section headed “— Other Information — Consents” in this Appendix had received any commissions, discounts, agency fee, brokerages or other special terms in connection with the issue or sale of any capital of our Company or any of our subsidiaries from our Company within the two years preceding the date of this prospectus.
VII-22 APPENDIX VII STATUTORY AND GENERAL INFORMATION
6. Related party transactions During the two years preceding that date of this prospectus, we were engaged in related party transactions as described under the section headed “Connected Transactions” and note 35 of Section II of the Accountants’ Report set out in Appendix I to this prospectus.
7. Interest in our largest suppliers or customers Save as disclosed in this prospectus, none of the Directors nor their associates, nor any Shareholder (which to the knowledge of the Director owns more than 5% of our Company’s share capital) has any interest in our five largest suppliers or our five largest customers.
D. DISCLAIMERS Save as disclosed in this prospectus: (a) none of the Directors or chief executive of our Company has any interests and short positions in the Shares, underlying shares and debentures of our Company or any associated corporation (within the meaning of Part XV of the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he is taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be entered into the register referred to therein, or will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to us and the Stock Exchange, in each case once our Shares are listed; (b) none of the Directors nor any of the parties listed in the section headed “— Other Information — Consents” in this Appendix has any direct or indirect interest in the promotion of our Company or any of our subsidiaries, or in any assets which have, within the two years immediately preceding the issue of this prospectus, been acquired or disposed of by or leased to our Company or any of our subsidiaries, or are proposed to be acquired or disposed of by or leased to our Company or any of our subsidiaries; (c) none of the Directors nor any of the parties listed in the section headed “— Other Information — Consents” in this Appendix is materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to our business; (d) save for the Underwriting Agreements, none of the parties listed in the section headed “— Other Information — Consents” in this Appendix: (i) is interested legally or beneficially in any of our Shares or any shares in any of our subsidiaries; or (ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribed for our securities; (e) none of the equity and debt securities of our Company is listed or dealt with in any other stock exchange nor is any listing or permission to deal being or proposed to be sought from any other stock exchange; (f) we have no outstanding convertible debt securities;
VII-23 APPENDIX VII STATUTORY AND GENERAL INFORMATION
(g) within the two years immediately preceding the date of this prospectus, no commissions, discounts, brokerages or other special items have been granted in connection with the issue or sale of any share or loan capital of our Company or any of our subsidiaries; (h) within the two years preceding the date of this prospectus, no commission has been paid or payable (except commissions to the Underwriters) for subscription, agreeing to subscribe, procuring subscription or agreeing to procure subscription of any Shares in or debentures of our Company; and (i) no amount or securities or benefit has been paid or allotted or given within the two years preceding the date of this prospectus to any of our promoters nor is any such securities or amount or benefit intended to be paid or allotted or given.
E. PRE-IPO SHARE OPTION SCHEME The purpose of the Pre-IPO Share Option Scheme is to give our employees an opportunity to share in our success and to motivate our employees to optimize their performance and efficiency, and also to retain our employees whose contributions are important to our long-term growth and profitability. The principal terms of the Pre-IPO Share Option Scheme, approved by resolutions of our Shareholders passed at the extraordinary general meeting held on 12 September 2007 are substantially the same as the terms of the Share Option Scheme except that: (a) the subscription price per Share under the Pre-IPO Share Option Scheme is at a discount of 30% to the Offer Price; (b) the total number of Shares which may be issued upon the exercise of all options granted under the Pre-IPO Share Option Scheme is 18,700,000 Shares, such option if exercised in full will represent approximately 0.339% of the enlarged issued share capital of our Company immediately after completion of the Capitalisation Issue and the Global Offering (assuming the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme are not exercised); (c) save for options which have been conditionally granted (details of which are set out below), no further options will be offered or granted as the right to do so will end upon the completion of the Global Offering; and (d) the options granted are valid for two years commencing from six months following the Listing Date and may be exercised at any time during that period.
Application has been made to the Listing Committee for the listing of, and permission to deal in, the Shares which may be issued pursuant to the exercise of the options granted under the Pre-IPO Share Option Scheme.
As at the date of this prospectus, options have been granted to our three independent non- executive Directors and our 50 employees by our Company for a consideration of HK$1.00 under the Pre-IPO Share Option Scheme. All the options were granted on 17 September 2007.
VII-24 APPENDIX VII STATUTORY AND GENERAL INFORMATION
Particulars of the option holders under the Pre-IPO Share Option Scheme are set out below:
Approximate percentage of the Shareholding upon the full Number of exercise of the Date of Joining and Shares subject to Option Grantee Position in our Company Residential Address the Option (Note 1) Director Xiang Bing 12 September 2007, 26H, Block 2, Meilan Garden, 200,000 0.0036 Independent Non-Executive 37 Zi Zhu Yuan Road, Haidian Director District, Beijing, PRC Xu Yudi 12 September 2007, No. 1209, 10/F, Shuang Yu 200,000 0.0036 Independent Non-Executive Shu Zhi Chun Dong Li, Director Haidian District, Beijing, PRC Mak Kin Kwong 12 September 2007, M6, Floral Villas, 18 Tso Wo 200,000 0.0036 Independent Non-Executive Road, Sai Kung, New Director Territories, Hong Kong Senior Management Ren Yi 1 March 2006, Vice General No. 303 Door 6, Building 31, 2,600,000 0.0473 Manager of Kappa Taipingqiaoxi Li, Fengtai District, Beijing Zhong Hua 1 September 2002, Head of No. 401, Building 602, 6th 1,900,000 0.0345 International Sourcing Area, Kexueyuan NanLi, Department Chaoyang District, Beijing Tang Lijun 13 May 2005, Head of Kappa No. 404, Building 24, 1,500,000 0.0273 Apparel Production Xihuanli, Changping District, Department Beijing Yang Chao 6 November 2006, Head of No. 1605, Building 5, No. 7 1,100,000 0.0200 Footwear Equipment and Yuan, Lianbao Road, Haidian Accessory Design and District, Beijing Development Centre Wong Chi Keung 8 May 2007, Chief Financial Flat E, 19/F, Tower 3, Metro 600,000 0.0109 Officer and Company Town, 8 King Ling Road, Secretary Tseung Kwan O, N.T., Hong Kong Other Employees Geng Lulu 18 February 2002, Manager of No. 49 Zhongtao Hutong, 700,000 0.0127 Product Planning Department Dongcheng District, Beijing of Shanghai Kappa Li Nannan 14 March 2003, Manager of No. 1101, 30th Floor, No. 76 600,000 0.0109 Sales Management Department Xueyuannan Road, Haidian of Shanghai Kappa District, Beijing Wang Ying 21 March 2003, Manager of No. 802, Building 9, 600,000 0.0109 Accounting Department Tuanjiehudong Li, Chaoyang District, Beijing Liang Hong 17 July 2006, Company No. 401, Unit 1, Building 8, 600,000 0.0109 Secretary Zhouzhuang Shanshuiwenyuan, Chaoyang District, Beijing Liu Hui 21 March 2002, Manager of No. 77, No.16 Yuan, Songtao 500,000 0.0091 Advertising and Marketing Li, Lushan Dao, Kedong Department of Shanghai District, Tianjin Kappa Sun Yanfei 12 March 2002, Manager of No. 587, Yangsongzhuang 400,000 0.0073 Sales Execution Department of Village, Yangsong Zhen, Shanghai Kappa Huairou Xian, Beijing Gu Haolan 15 April 2002, Manager of No. 8, Door 1, Building 31, 400,000 0.0073 Information Technology Hongmiaobei Li, Chaoyang Department District, Beijing
VII-25 APPENDIX VII STATUTORY AND GENERAL INFORMATION
Approximate percentage of the Shareholding upon the full Number of exercise of the Date of Joining and Shares subject to Option Grantee Position in our Company Residential Address the Option (Note 1) Huang Ping 1 October 2002, Manager of Room 404, No. 669 Hexiangxi 400,000 0.0073 Shoe Technology Department Road, Siming District, Xiamen, Fujian Province Tao Lixing 5 June 2003, Manager of No. 102, Building 4, No. 1 400,000 0.0073 Garment Technology Yuan, Yuanmingyuanxi Rd, Department of Shanghai Haidian District, Beijing Kappa Tang Aimin 23 June 2006, Manager of 23-101, Shuangshan Li, 300,000 0.0055 Sales Execution Department of Zhujiang Dao, Hexi District, Shanghai Kappa Tianjin Chen Peiyuan 1 January 2007, General No. 21, Lane 238, 300,000 0.0055 Manager of Taicang of Sec. 1, Muzha Road, Shanghai Taitan Taipei City Ma Xu 18 February 2002, Manager of No. 3, Unit 2, Building 405, 250,000 0.0045 Administration Department No. 85 Yongding Rd, Haidian District, Beijing Hu Haishen 1 August 2005, Manager of No. 302, Door 4, Building 6, 250,000 0.0045 Garment Manufacturing I Shuanghuiyuan Garden, Department of Shanghai Shuangqiao Rd, Chaoyang Kappa District, Beijing Gao Jun 24 October 2005, Manager of No. 202, Building 1, Liuhe 250,000 0.0045 Shoe Manufacturing Yuan, Shijingshan District, Department Beijing Wang Xiaozheng 6 December 2002, Manager of No. 401, Door 3, Building 5, 250,000 0.0045 International Product of the No. 40 Yuan, International Business System Zhangguozhuangnan Rd, Department Fengtai District, Beijing Lu Kun 7 November 2005, Project No. 601, Unit 4, Building 6, 250,000 0.0045 Manager Zaolinxi Li, Xuanwu District, Beijing Li Guozhuang 19 September 2006, Manager No. 10, No. 3 Pai, No. 260, 250,000 0.0045 of Equipment Department Yinmajing Village, Shibalidian Xiang, Chaoyang District, Beijing Wang Yirong 1 September 2006, Manager of No. 1103, Door 5, Building 15, 200,000 0.0036 Financial Department Shuangjin Yuan, Shijingshan District, Beijing Guo Jinghu 1 March 2005, Manager of the Room 101, Unit 4, Building 3, 200,000 0.0036 Logistic Department Xufengxincun, Xuefeng Rd, Beiguan Banshichu, Yongqiao District, Xuzhou, Anhui Province Wang Xiaojun 9 March 2005, Manager of No. 203, Door 1, No. 12, 200,000 0.0036 Sales Execution Department of Xidajie, Xuanwumen, Xuanwu Shanghai Kappa District, Beijing Zhang Peidong 26 June 2006, Manager of No. 212, Unit 2, West Building 200,000 0.0036 Human Resource Department 4, No. 15, Hepinglidong St, Dongcheng District, Beijing Zhang Xiang 4 January 2005, Officer of No. 404, Unit 2, Building 1, 200,000 0.0036 Shoes and Equipment Design No. 142 Yuan, Xuedong Rd, Centre Beishi District, Baoding, Hebei Province Tao Yi 5 April 2004, Officer of Sales No. 11, Jiangmidian, 150,000 0.0027 Management Department of Tongzhou Zhen, Tongzhou Shanghai Kappa District, Beijing
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Approximate percentage of the Shareholding upon the full Number of exercise of the Date of Joining and Shares subject to Option Grantee Position in our Company Residential Address the Option (Note 1) Zhang Jing 6 March 2002, Officer of 4-3-1, No. 43-1, Tengfeier St, 150,000 0.0027 Garment Manufacturing I Tiexi District, Shenyang Department of Shanghai Kappa Yan Hao 9 March 2005, Customer No. 6, Unit 2, Building 5, 150,000 0.0027 Manager of Sales Execution Dongsanlicunzhong, Chaoyang Department of Shanghai District, Beijing Kappa Xing Tong 23 December 2002, Manager No. 301, Building 1, No. 55 150,000 0.0027 of International Production Xinhuabei Rd, Urumqi Technology of the International Business Department Wang Ling 23 November 2005, Manager No. 502, Door 5, Building 12, 150,000 0.0027 of the Golf Project Team of No. 50 Yuan, Chaoyangbei Shanghai Kappa Rd, Chaoyang District, Beijing Shi Kai 8 May 2006, Officer of Sales Fu No. 2, No. 113 Guocikou, 150,000 0.0027 Management Department of Hanyang District, Wuhan Shanghai Kappa Zhao Yongpeng 5 September 2005, Designer of No. 301, Door 4, Building 11, 150,000 0.0027 Garment Design Centre Youaidong Li, Guangning Rd, Hedong District, Tianjin Niu Jianguo 23 August 2006, Manager of No. 8 Tianjin Rd, Shinan 150,000 0.0027 International Business District, Qingdao, Shandong Department Province Liu Xuefeng 25 September 2006, Assistant 35-2-452, Mojia Street, 100,000 0.0018 Manager of the Information Chengzhong District, Xining Technology Department Feng Hui 15 November 2005, Officer of Room 201, Unit 4, Building 8, 100,000 0.0018 International Business No. 8 Nanchi Rd, Xihu Department District, Nanchang Xie Fengting 26 June 2006, Officer of VMD 3-6-2 No. 63-1, Nanliuzhong 100,000 0.0018 of the Sales Department of Rd, Tiexi District, Shenyang Shanghai Kappa Meng Qingyun 1 March 2006, Manager of Nos. 37&38, Unit 2, Building 100,000 0.0018 Quality Control Department of 15, Nanhuan Li, Changping RUKKA District, Beijing Zhang Hui 17 January 2005, Designer of No. 12(Nei), No. 23 100,000 0.0018 Garment Design Centre Beihuanshan Li, Zhifu District, Yantai, Shandong Province Zhang Ying 11 March 2006, Officer of No. 202, Door 5, Building 3, 100,000 0.0018 Products Planning Department Bei Li, Tianningsiqian St, of Rukka Xuanwu District, Beijing Liu Xianghong 1 August 2006, Officer of No. 21 Fuxue Hutong, 100,000 0.0018 Garment Manufacturing I Dongcheng District, Beijing Department of Rukka Chen Yiduo 6 November 2006, Designer of No. 503, Door 1, Building 1, 100,000 0.0018 Shoe and Equipment Design 2nd Area, Dachengnan Li, Centre Fengtai District, Beijing Sun Yibing 6 November 2006, Designer of No. 707, Building 13, Fenghui 100,000 0.0018 Shoe and Equipment Design Yuan, Xicheng District, Centre Beijing Yang Xinmin 14 March 2005, Officer of No. 5012, Door 5, Building 12, 100,000 0.0018 Logistic Department Caoqiaodong Rd, Fengtai District, Beijing Ma Chonghua 15 June 2007, Manager of No. 105, Xiaoguanzi, 100,000 0.0018 Quality Control of Shoe Dongguan, Hanzhong, Shaanxi Manufacturing Department Province
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Approximate percentage of the Shareholding upon the full Number of exercise of the Date of Joining and Shares subject to Option Grantee Position in our Company Residential Address the Option (Note 1) Wang Shangmei 8 May 2007, Manager of No. 620, Zhongshanxi Rd, 100,000 0.0018 Materials Department and Changning District, Shanghai Supply Department of Shanghai Kappa Chen Yuhan 28 May 2007, Officer of the No. 63, 810 Nong, 100,000 0.0018 Costume Supply Chain Team Dongchangzhi Rd, Hongkou of Shanghai Kappa District, Shanghai Chen Yan 2 July 2007, Manager of VMD 2-7-2, No. 38, Nantongtian St, 100,000 0.0018 of the Sales Department of Shenhe District, Shenyang Shanghai Kappa Zhou Dongli 28 May 2007, Manager of No. 399, No. 300 Yuan, 100,000 0.0018 Sales Execution Department of Dongzhaitang Village, Shanghai Kappa Zhaitang Zhen, Mentougou District, Beijing 18,700,000 0.3400
Note 1: The percentage is calculated based on the number of issued Shares immediately following the Capitalisation Issue and the completion of the Global Offering and assuming that the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme have not been exercised.
Our independent non-executive Directors have undertaken to our Company that they will not exercise the options granted under the Pre-IPO Share Option Scheme to such extent that the Shares held by the public (as defined in the Listing Rules) after the Global Offering and Capitalisation Issue will fall below the required percentage set out in Rule 8.08 of the Listing Rules or such other percentage as approved by the Stock Exchange from time to time.
F. SHARE OPTION SCHEME The following is a summary of the principal terms of the Share Option Scheme conditionally adopted pursuant to the written resolutions of the Shareholders passed at the extraordinary general meeting held on 12 September 2007:
1. Purpose of the Share Option Scheme The purpose of the Share Option Scheme is to provide an incentive for employees of and persons contributing to our Company to work with commitment towards enhancing the value of our Company and the Shares for the benefit of our Shareholders and to retain and attract calibres and working partners whose contribution are or may be beneficial to the growth and development of our Company and its subsidiaries (our “Group”).
2. Participants of the Share Option Scheme and the basis of determining the eligibility of the participants The Board may from time to time grant options to any individual who is an employee of our Group (including executive Directors) or any entity in which our Company holds any equity interest (“Invested Entity”) and such other persons who has or will contribute to our Company as approved by the Board from time to time (the “Participants”) on the basis of their contribution to the development and growth of our Group.
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3. Status of the Share Option Scheme (a) Conditions of the Share Option Scheme The Share Option Scheme shall take effect subject to: (i) the commencement of dealing in the Shares on the Stock Exchange; (ii) the passing of the necessary resolutions to adopt the Share Option Scheme by the Shareholders; (iii) the obligations of the Underwriters under the Underwriting Agreements becoming unconditional and not being terminated in accordance with the terms or otherwise; and (iv) the Listing Committee approving the listing of and permission to deal in any Shares to be allotted and issued pursuant to the exercise of Options under the Share Option Scheme (the “Conditions”).
Application has been made to the Listing Committee of the Stock Exchange for listing of and permission to deal in the Shares which fall to be issued pursuant to the exercise of any Options which may be granted under the Share Option Scheme.
(b) Life of the Share Option Scheme The Share Option Scheme shall be valid and effective for 10 years (the “Scheme Period”) from the date (the “Adoption Date”) on which the last of the Conditions is fulfilled, after which time no further option may be granted but the provisions of the Share Option Scheme shall remain in full force and effect in all other respects.
4. Grant of options (a) Making of offer An offer of the grant of an option shall be made to a Participant by letter (“Offer Letter”) in such form as the Board may in its sole and absolute discretion from time to time determine, requiring the Participant to undertake to hold the option on the terms on which it is to be granted and to be bound by the provisions of the Share Option Scheme (including any operational rules made under the Share Option Scheme). The offer shall remain open for acceptance for a period of five business days from the date on which it is made (“Offer Date”) PROVIDED THAT no such offer shall be open for acceptance after the expiry of the Scheme Period or after the termination of the Share Option Scheme. Subject to the terms of the Offer Letter, there shall be no general performance target for the vesting or exercise of options.
(b) Acceptance of an offer An option shall be deemed to have been granted to and accepted by the Participant (the “Grantee”) and to have taken effect after the duplicate letter comprising acceptance of the option duly signed by the Grantee together with a remittance in favour of our Company of HK$1.00 by way of consideration for the grant of the option shall have been received by our Company on or before the last day for acceptance set out in paragraph 4(a) above. The remittance is not in any circumstances refundable. Once accepted, the option is granted as from the date on which it was offered to the Participant.
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(c) Restrictions on time of grant (i) No grant of options shall be made after a price sensitive event in relation to the securities of our Company has occurred or a price sensitive matter in relation to the securities of our Company has been the subject of a decision, until the price sensitive information has been announced pursuant to the requirements of the Listing Rules. In particular, no option shall be granted during the period of one month immediately preceding the earlier of: (1) the date of the Board meeting as shall have been notified to the Stock Exchange for the approval of our Company’s results for any year, half-year or quarterly or any other interim period (whether or not required under the Listing Rules); and (2) the deadline for our Company to publish an announcement of its results for any year or half-year under the Listing Rules or quarterly or other interim period (whether or not required under the Listing Rules), and ending or the date of the results announcement. The period during which no option may be granted will cover any period of delay in the publication of a results announcement. (ii) No grant of options shall be made to a Participant who is a Director during a period in which the Directors are prohibited from dealing in Shares pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers or our Company’s own equivalent Code.
(d) Grant to connected persons Any grant of options to a connected person must be approved by all the independent non-executive Directors (excluding any independent non-executive Director who is also a proposed Grantee of the options).
(e) Grants to substantial shareholders and independent non-executive Directors Without prejudice to paragraph 4(d) above, any grant of options to a substantial shareholder or an independent non-executive Director of our Company or any of their respective associates must be approved by the Shareholders in general meeting if the Shares issued and to be issued upon exercise of all options already granted and proposed to be granted to him (whether exercised, cancelled or outstanding) in the 12 month period up to and including the proposed date of such grant: (i) would represent in aggregate more than 0.1 per cent of the Shares then in issue; and (ii) the aggregate value of those options by reference to the closing price of the Shares at the date of each grant would be in excess of HK$5,000,000.
(f) Proceedings in general meeting to approve the grant of option At the general meeting to approve the proposed grant of options under paragraph (e), all connected persons of our Company must abstain from voting unless he is intending to vote against the proposed grant. At such general meeting, the vote to approve the grant of such options must be taken on a poll in accordance with the relevant provisions of the Listing Rules.
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5. Subscription price The price per Share at which a Grantee may subscribe for Shares upon exercise of an option (the “Subscription Price”) shall, subject to any adjustment pursuant to paragraph 7 below, be a price determined by the Board in its sole and absolute discretion but in any event shall be at least the highest of: (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheets on the Offer Date; (ii) the average of the closing prices of the Shares as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the Offer Date; and (iii) the nominal value of the Shares; except that for the purposes of calculating the Subscription Price under paragraph 5(ii) above for an option offered within five business days of the Listing Date, the price at which the Shares are to be offered for subscription pursuant to the Global Offering shall be used as the closing price for any business day falling within the period before the Listing Date.
6. Maximum number of Shares available for subscription (a) Scheme Mandate Subject to sub-paragraphs 6(b) and 6(c) below, the maximum number of Shares in respect of which options may be granted under the Share Option Scheme and any other share option schemes of our Company shall not in aggregate exceed the number of Shares that shall represent 10% of the total number of Shares in issue (without taking into account shares which may be allotted and issued pursuant to the exercise of the Over-allotment Option and the options granted under the Pre-IPO Share Option Scheme) as of the Listing Date (“Scheme Mandate”) which shall be 550,000,000 Shares. For the purpose of calculating the Scheme Mandate, options which have lapsed in accordance with the terms of the relevant scheme shall not be counted in calculating the 10 per cent limit.
(b) Renewal of Scheme Mandate Our Company may seek approval by our Shareholders in general meeting for renewing the Scheme Mandate provided that the total number of Shares in respect of which options may be granted under the Share Option Scheme and any other schemes of our Company under the Scheme Mandate as renewed must not exceed 10% of the total number of Shares in issue as of the date of shareholders’ approval. Options previously granted under the Share Option Scheme and any other share option schemes of our Company, whether outstanding, cancelled, lapsed in accordance with its applicable rules or already exercised, will not be counted for the purpose of calculating the limit as renewed.
For the purpose of seeking the approval of our Shareholders under this sub-paragraph 6(b), a circular containing the information required under Rule 17.02(2)(d) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules must be sent to our Shareholders.
(c) Grant of Options beyond Scheme Mandate Our Company may seek separate approval by our Shareholders in general meeting for granting options beyond the Scheme Mandate provided that the options in excess of the Scheme Mandate are granted only to Participants who are specifically identified before such approval is sought.
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For the purpose of seeking the approval of our Shareholders under this sub-paragraph (6)(c), our Company must send a circular to our Shareholders containing a generic description of the specified Grantees who may be granted such options, the number and terms of the options to be granted, the purpose of granting such options to the Grantees with an explanation as to how the terms of options serve such purpose and the information required under Rule 17.02(2)(d) of the Listing Rules and the disclaimer as required under Rule 17.02(4) of the Listing Rules.
(d) Maximum number of Shares issued pursuant to Options Notwithstanding anything to the contrary in the Share Option Scheme, the maximum limit on the number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other schemes of our Company must not exceed such number of Shares as shall represent 30% of the shares in issue from time to time. No options may be granted if such grant will result in this 30% limit being exceeded.
Shares issued or transferred pursuant to options or other rights granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity acquired by our Company or with which our Company combines shall not count against the limits in this sub-paragraph (6)(d).
(e) Grantee’s maximum holding Unless approved by our Shareholders in general meeting in the manner prescribed in the Listing Rules, the Board shall not grant options to any Grantee if the acceptance of those options would result in the total number of shares issued and to be issued to that Grantee on exercise of his options during any 12 month period exceeding 1% of the total Shares then in issue.
Where any further grant of options to a Grantee, if exercised in full, would result in the total number of Shares already issued or to be issued upon exercise of all options granted and to be granted to such Grantee (including exercised, cancelled and outstanding options) in any 12-month period up to and including the date of such further grant exceeding 1% of the total number of Shares in issue, such further grant must be separately approved by the Shareholders in general meeting with such Grantee and his associates abstaining from voting. Our Company must send a circular to our Shareholders and the circular must disclose the identity of the Grantee, the number and terms of the options to be granted and options previously granted to such Grantee and the information required under Rule 17.02(2)(d) of the Listing Rules and the disclaimer required under Rule 17.02(4) of the Listing Rules. The number and terms (including the Subscription Price) of the options to be granted to such Participant must be fixed before the Shareholders’ approval. The date of the meeting of the Board for proposing such further grant of option should be taken as the date of grant for the purpose of calculating the Subscription Price.
(f) Adjustment
The number of Shares subject to the options and to the Share Option Scheme may be adjusted in such manner as our Company’s independent financial adviser or auditors (acting as experts and not as arbitrators) shall certify in writing to the Board to be in their opinion fair and reasonable in accordance with sub-paragraph 7(b) below.
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7. Reorganisation of capital structure (a) Adjustment of options In the event of any alteration in the capital structure of our Company whilst any option becomes or remains exercisable, whether by way of capitalisation of profits or reserves, rights issue, consolidation, subdivision or reduction of the share capital of our Company (other than an issue of Shares as consideration in respect of a transaction to which our Company is a party), the Board shall make (and shall notify to the Grantee) such corresponding alterations (if any) in: (i) the number of Shares subject to any option so far as such option remains unexercised; (ii) the Subscription Price; or (iii) the number of Shares subject to the Share Option Scheme; that are required to give each Grantee the same proportion of the share capital as that to which the Grantee was previously entitled (as interpreted in accordance with the Supplementary Guidance attached to the letter from the Stock Exchange dated 5 September 2005 to all issuers relating to share option schemes), but not so that the effect would be to enable any Share to be issued to a Grantee at less than its nominal value, provided that no adjustments to the Subscription Price and number of Shares should be made to the advantage of the Participants without specific prior approval of our shareholders.
(b) Auditor’s certificate On any capital reorganisation other than a capitalisation issue, the auditors or an independent financial adviser shall certify in writing to the Board that the adjustments made by the Board pursuant to sub-paragraph 7(a) above are in their opinion fair and reasonable.
8. Cancellation of options Subject to the consent from the relevant Grantee, the Board may at its sole and absolute discretion cancel options previously granted to and yet to be exercised by a Grantee for the purpose of re-issuing new options to that Grantee provided that there are sufficient available unissued options under the Scheme Mandate as renewed from time to time (excluding such cancelled options) in accordance with the terms of this Scheme.
9. Assignment of options An option is personal to the Grantee and shall not be transferable or assignable. No Grantee shall sell, transfer, charge, mortgage, encumber or create any interest (legal or beneficial) in favour of any third party over or in relation to any option or attempt to do so (except that the Grantee may nominate a nominee, of which the Grantee is the sole beneficial owner, in whose name the Shares issued pursuant to the Share Option Scheme may be registered provided that evidence of such trust arrangement between the Grantee and the nominee has been provided to the satisfaction of, and on terms acceptable by, the Board).
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10. Options attached to the Shares The Shares to be allotted upon exercise of an option will be subject to all the provisions of our articles of association and will rank pari passu with the fully paid Shares in issue as from the day when the name of the Grantee is registered on the register of members of our Company (the “Registration Date”). Accordingly the Shares will entitle the holders to participate in all dividends or other distributions paid or made on or after the Registration Date other than any dividends or other distributions previously declared or recommended or resolved to be paid or made with respect to a record date which is before the Registration Date.
A Share issued upon the exercise of an option shall not carry any voting rights until the registration of the Grantee or his nominee as the holder of the Share on the register of members of our Company.
Unless otherwise regulated by applicable law, a Grantee shall have no rights as a Shareholder with respect to any Shares covered by an option before such Grantee exercises the option.
11. Exercise of options (a) General Subject to the terms of the Share Option Scheme and this paragraph 11, an option (to the extent that it is vested and/or exercisable pursuant to the terms and conditions set out in the Offer Letter) may be exercised by the Grantee (or his or her legal personal representatives) at any time during the period of 10 years commencing on the Offer Date (the “Option Period”) provided that the option has not lapsed for any reason set forth herein.
(b) Rights of Grantee upon his retirement or death If the Grantee ceases to be a Participant by reason of retirement, death or disability, the option shall vest immediately at the date of cessation and the Grantee or his legal personal representative shall be entitled within a period of 12 months from the date of retirement or death (or within such longer period as the Board may determine) to exercise the option (to the extent not already exercised).
(c) Rights of Grantee upon his cessation of employment under certain circumstances If the Grantee ceases to be a Participant for any reason other than his retirement or death or disability or termination of his employment on one or more of the grounds specified in sub-paragraph 12(iv) below or the termination of his business relation with the relevant member of our Group, the Grantee may exercise the option up to his or her entitlement at the date of cessation.
(d) Rights on a takeover In the event of a general or partial offer, whether by way of take-over offer, share re-purchase offer, or scheme of arrangement or otherwise in like manner is made to all the holders of Shares, or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror, our Company shall use all reasonable endeavours to procure that such offer is extended to all the Grantees on the same terms, mutatis mutandis, and assuming that they will become, by the exercise in full of the option granted to them, shareholders of our Company. If such offer becomes or is declared unconditional, the Grantee shall be entitled to exercise the option
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(to the extent not already exercised) to its full extent or to the extent specified in the Grantee’s notice to our Company in exercise of the option at any time before the expiry of the period of three business days following the date on which the offer becomes or is declared unconditional.
(e) Rights on a voluntary winding up In the event a notice is given by our Company to our Shareholders to convene a general meeting for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up our Company, our Company shall on the same date as or soon after it despatches such notice to each of our Shareholders give notice to all Grantees (together with a notice of the existence of the provisions of this sub-paragraph 11(e)). Upon receipt of such notice, each Grantee (or where permitted under sub-paragraph 11(b) his or her legal personal representative(s)) shall be entitled to exercise all or any of the option (to the extent which has become exercisable and not already exercised) at any time not later than two (2) business days prior to the proposed general meeting of our Company by giving notice in writing to our Company, accompanied by a remittance for the full amount of the aggregate Subscription Price for the Shares in respect of which the notice is given. Upon receipt of such notice together with the remittance by our Company, our Company shall as soon as possible and, in any event, no later than the business day immediately prior to the date of the proposed general meeting referred to above, allot the relevant Shares to the Grantee credited as fully paid. The allotted Shares shall rank pari passu with all other Shares in issue on the date prior to the passing of the resolution to wind-up our Company to participate in the distribution of assets of our Company available in liquidation.
(f) Rights on a compromise or arrangement If a compromise or arrangement between our Company and our Shareholders or creditors is proposed in connection with a scheme for the reconstruction of our Company or its amalgamation with any other company or companies, our Company shall give notice to the Grantee on the same day as it gives notice of the meeting to its shareholders or creditors to consider the compromise or arrangement. Upon receipt of the notice, the Grantee may, during the period commencing on the date of the notice and ending on the earlier of: (i) the date two calendar months thereafter; and (ii) the date on which such compromise or arrangement is sanctioned by the court; exercise the option (to the extent not already exercised), conditional upon the compromise or arrangement being sanctioned by the court and becoming effective. With effect from the date of such meeting, the rights of all Grantee to exercise their respective options shall forthwith be suspended. Our Company may require the Grantee to transfer or otherwise deal with the Shares issued as a result of the exercise of options in these circumstances so as to place the Grantee in the same position as nearly as would have been the case had such Shares been subject to the compromise or arrangement. If for any reason such compromise or arrangement is not approved by the court (whether upon the terms presented to the court or upon any other terms as may be approved by such court) the rights of Grantees to exercise their respective options shall with effect from the date of the making of the order by the court be restored in full and shall thereupon become exercisable (but subject to the other terms of this Share Option Scheme) as if such compromise or arrangement had not been proposed by our Company and no claim shall lie against our Company or any of its officers for any loss or damage sustained by any Grantee as a result of the aforesaid suspension.
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12. Lapse of options An option whether vested or unvested shall lapse automatically (to the extent not already exercised) on the earliest of: (i) the expiry of the Option Period; (ii) the expiry of the periods referred to in sub-paragraphs 11(a) to (e) above; (iii) in respect of a Grantee (being a Director or employee of our Group or Invested Entity) who ceases to be engaged by our Group or the Invested Entity by reasons other than termination of employment on grounds under paragraph 12(iv) below, the last date on which such Grantee was at work with our Group or the Invested Entity (whether salary is paid in lieu of notice or not); (iv) the date on which the Grantee (being a Director or employee of our Group or Invested Entity) ceases to be a Participant by reason of the termination of his employment on any one or more of the following grounds: (a) that he has been guilty of misconduct; or (b) that he has committed an act of bankruptcy or has become insolvent or has made an arrangement or composition with creditors generally; or (c) that he has been convicted of a criminal offence involving his integrity or honesty; or (d) any misconduct based on the sole and absolute option of our Company; or (e) and a resolution of the Board or the board of directors of the relevant subsidiary of our Company to the effect that the employment of a Grantee has or has not been terminated on one or more of the grounds specified in this sub-paragraph 12(iv) shall be conclusive; (v) in the event of the Grantee not being a Director or employee of our Group or Invested Entity, the date on which the Board in its sole and absolute discretion resolves that such Grantee ceases to be qualified as a Participant by reason of termination of its business relation with the relevant member of our Group or by reason of its failure to comply with the provisions of the relevant contracts or agreements and/or its breaches of its fiduciary duties under common law or otherwise on other grounds as the Board considers appropriate; (vi) the date on which the Grantee commits a breach of paragraph 9 above. (vii) if an option is granted subject to certain conditions, restrictions or limitation, the date on which the Board resolves that the Grantee has failed to satisfy or comply with such conditions, restrictions or limitation; and (viii) the occurrence of such event or expiry of such period as may have been specifically provided for in the Offer Letter, if any.
13. Amendment of the Share Option Scheme (a) Amendments requiring Board approval Any amendment to the Share Option Scheme other than those set out in sub-paragraph 13(b) below must be approved by the majority of the Board or the scheme administrator of our Company.
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(b) Amendments requiring shareholder approval Subject to sub-paragraphs 13(c) and (d), the following matters require the prior sanction of a resolution of the Shareholders in general meeting: (i) any change to the provisions relating to: (1) the purpose of the Share Option Scheme; (2) the definitions of “Grantee”, “Option Period”, “Participant” and “Scheme Period” contained in the Share Option Scheme; (3) the provisions relating the Scheme Period, the basis of eligibility for options, the making of offer, the contents of offer letter, the acceptance of an option, the Subscription Price, granting options to connected persons, the exercise of options, the lapse of options, the maximum number of shares available for subscription, cancellation of options, reorganisation of capital structure, termination and amendments of the Share Option Scheme; which operates to the advantage of Participants or Grantees; (ii) any change to the authority of the Board or the scheme administrator; (iii) any amendment to the terms and conditions of the Share Option Scheme which are of a material nature except where such amendment takes effect automatically under the existing terms of the Share Option Scheme; and (iv) any amendment to the terms of options granted except where such amendment takes effect automatically under the existing terms of the Share Option Scheme.
(c) Amendments requiring the super majority consent from the Grantees Notwithstanding any approval obtained pursuant to sub-paragraphs 14(b) above, no amendment shall operate to adversely affect the terms of issue of any option granted or agreed to be granted prior to such amendment except with the consent or sanction in writing of such number of Grantees as shall together hold options in respect of not less than three-fourths in nominal value of all Shares then subject to the options granted under the Share Option Scheme, except where such amendment takes effect automatically under the existing terms of the Share Option Scheme.
(d) Amendments requiring the approval of the Stock Exchange Any amendment to the terms and conditions of the Share Option Scheme which are of a material nature shall first be approved by the Stock Exchange except where such amendment takes effect automatically under the existing terms of the Share Option Scheme.
15. Termination Our Company may at any time terminate the operation of the Share Option Scheme by resolution of the Board or resolution of our Shareholders in general meeting and in such event no further options will be offered but the provisions of the Share Option Scheme shall remain in force in all other respects to the extent necessary to give effect to the exercise of the options (to the extent not already exercised or expired) granted prior to the termination or otherwise or may be required in accordance with the provisions of the Share Option Scheme. All options granted prior to the
VII-37 APPENDIX VII STATUTORY AND GENERAL INFORMATION termination and yet to be exercised shall continue to be valid and exercisable in accordance with the terms of the Share Option Scheme.
As at the date of the prospectus, no option has been granted by our Company under the Share Option Scheme. Our Company will not grant options under the Share Option Scheme which will be exercisable within six months from the Listing Date.
G. OTHER INFORMATION 1. Tax and other indemnity Mr. Chen, being one of our Controlling Shareholders (the “Indemnifier”), has entered into a deed of indemnity in favour of our Company (being a material contract referred to in the section headed “— Further Information About our Business — Summary of material contracts” in this Appendix) to provide the following indemnities in favour of our Company.
Under the deed of indemnity, amongst others, the Indemnifier will indemnify each of our Company and our subsidiaries against (a) any depletion or diminution in the value of the assets of our Company as a direct or indirect consequence of, and in respect of any amount which our Company and our subsidiaries may hereafter become liable to pay, resulting from any taxation under sections 35 and 43 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) (“Estate Duty Ordinance”); (b) taxation falling on our Company and our subsidiaries resulting from, or relating to or in consequence of, any income, profits or gains earned, accrued or received (or deemed to be so earned, accrued or received) on or before the date when the Global Offering becomes unconditional or (c) any actions, claims, costs, penalties, fines, damages, losses, expenses and liabilities (including but not limited to relocation costs and expenses, losses from business interruption and/or increased lease payments) suffered or incurred by our Company and our subsidiaries arising from or as a result of the failure of the relevant landlords in obtaining registration of any of the relevant leases in respect of the relevant properties. The Indemnifier further undertakes to indemnify each of our Company and our subsidiaries on demand against any actions, claims, losses, damages, costs, charges or expenses which may be made, suffered or incurred in connection with any form of taxation or taxation claim or any foregoing property related loss or claim.
The Indemnifier will, however, not be liable under the deed of indemnity for taxation where, among others, (a) provision has been made for such taxation in the audited accounts of our Company; (b) the taxation falling on our Company and our subsidiaries in respect of any accounting period commencing on or immediately on or after 1 June 2007 unless liability for such taxation would not have arisen but for some event entered into by, the Indemnifier, our Company, our subsidiaries or any of them otherwise than in the course of normal day to day trading operations on or before the date on which the Global Offering becomes unconditional; and (c) the taxation arises or is incurred as a result of a retrospective change in law or regulation or the interpretation thereof or practice by the relevant tax authority coming into force after the date on which the Global Offering becomes unconditional or to the extent that the taxation arises or is increased by an increase in rates of taxation as a result of a change in law or regulation or interpretation thereof or practice by the relevant tax authority after the date on which the Global Offering becomes unconditional with retrospective effect.
Our Directors have been advised that no material liability for estate duty is likely to fall on our Company or any of our subsidiaries in the Cayman Islands or the PRC.
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2. Litigation As at the date of the prospectus, save as disclosed in the section headed “Business — Legal Proceedings” in this prospectus, we are not involved in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance was known to our Directors to be pending or threatened by or against our Company and our subsidiaries.
3. The Joint Sponsors The Joint Sponsors have made an application on behalf of our Company to the Listing Committee for listing of, and permission to deal in, the Shares in issue and to be issued as mentioned herein. All necessary arrangements have been made enabling the Shares to be admitted into CCASS.
4. Preliminary expenses
The estimated preliminary expenses incurred or proposed to be incurred by our Company are approximately HK$500,000 and are payable by our Company.
5. Promoter Our Company has no promoter for the purpose of the Hong Kong Listing Rules. Within the two years immediately preceding the date of this prospectus, no cash, securities or other benefit has been paid, allotted or given or is proposed to be paid, allotted or given to any promoter in connection with the Global Offering and the related transactions described in this prospectus.
6. Particulars of the Selling Shareholders MS I, a limited liability company incorporated in the Cayman Islands, with its registered office at M&C Corporate Services Limited, P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands is controlled by Morgan Stanley Private Equity Asia, L.P. (“MSPEA”), a fund managed by the private equity arm of Morgan Stanley. The general partner of MSPEA is Morgan Stanley Private Equity Asia, L.L.C., the managing member of which is Morgan Stanley Private Equity Asia, Inc., a wholly-owned subsidiary of Morgan Stanley.
MS II, a limited liability company incorporated in the Cayman Islands, with its registered office at M&C Corporate Services Limited, P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands is controlled by Morgan Stanley Private Equity Asia Employee Investors, L.P. (“MSPEAEI”), a fund managed by the private equity arm of Morgan Stanley. The general partner of MSPEAEI is Morgan Stanley Private Equity Asia, L.L.C., the managing member of which is Morgan Stanley Private Equity Asia, Inc., a wholly-owned subsidiary of Morgan Stanley.
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7. Qualifications of experts The qualifications of the experts (as defined under the Hong Kong Listing Rules and the Companies Ordinance) who have given their opinions or advice in this prospectus are as follows:
Name Qualifications Deutsche Bank AG, Hong Kong Branch Deemed licensed under the SFO for type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) as defined under the SFO Merrill Lynch Far East Limited Deemed registered institution under the SFO registered for type 1 (dealing in securities), type 4 (advising on securities) and, type 6 (advising on corporate finance), type 7 (providing automated trading services) and type 9 (asset management) as defined under the SFO. It is also a licensed bank under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) PricewaterhouseCoopers Certified public accountants Sallmanns (Far East) Limited Property valuers Haiwen & Partners PRC legal advisers Conyers Dill & Pearman Cayman Islands attorneys-at-law ZOU Marketing Limited Sports marketing and consulting agency
8. Consents Each of Deutsche Bank AG, Hong Kong Branch, Merrill Lynch Far East Limited, PricewaterhouseCoopers, Sallmanns (Far East) Limited, Haiwen & Partners, Conyers Dill & Pearman and ZOU Marketing Limited, has given and have not withdrawn their respective written consents to the issue of this prospectus with the inclusion of their reports and/or letters and/or valuation certificates and/or the references to their names included herein in the form and context in which they are respectively included.
None of the experts named above has any shareholding in our Company or any of our subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our Company or any of our subsidiaries.
9. Share register The register of members of our Company will be maintained in the Cayman Islands by Butterfield Fund Services (Cayman) Limited and a branch register of members will be maintained in Hong Kong by Computershare Hong Kong Investor Services Limited. Unless the Directors otherwise agree, all transfers and other documents of title to Shares must be lodged for registration with, and registered by, the branch share registers in Hong Kong and may not be lodged in the Cayman Islands.
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10. Miscellaneous Save as disclosed in this prospectus: (a) within the two years preceding the date of this prospectus: (i) no share or loan capital of our Company or any of our subsidiaries has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash; and (ii) no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any share or loan capital of our Company or any of our subsidiaries; (b) no share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option; (c) we have not issued or agreed to issue any founder shares, management shares or deferred shares; (d) since 31 May 2007, there has been no material adverse change in the financial or trading position or prospects of our Company; (e) there is no arrangement under which future dividends are waived or agreed to be waived; (f) the Global Offering does not involve the exercise of any right of pre-emption or the transfer of subscription rights; (g) as at the date of this prospectus, there is no restriction affecting the remittance of profits or repatriation of capital of our Company into Hong Kong from outside Hong Kong; (h) there has not been any interruption in the business of our Company which may have or has had a significant effect on the financial position of our Company in the 12 months preceding the date of this prospectus; (i) the English text of this prospectus shall prevail over the Chinese text; and (j) none of our Company or any of our subsidiaries is presently listed on any stock exchange or traded on any trading system.
11. Binding effect This prospectus shall have the effect, if an application is made in pursuant hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance so far as applicable.
12. Compliance Adviser Our Company will appoint Merrill Lynch Far East Limited as our compliance adviser upon listing in compliance with Rule 3A.19 of the Hong Kong Listing Rules.
We expect to enter into a compliance adviser’s agreement with our compliance adviser, the material terms of which we expect to be as follows: (a) we will appoint the compliance adviser as our compliance adviser for the purpose of Rule 3A.19 of the Hong Kong Listing Rules for a period commencing on the Listing Date and
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ending on the date on which we comply with Rule 13.46 of the Hong Kong Listing Rules in respect of our financial results for the first full financial year commencing after the Listing Date, or until the agreement is terminated, whichever is earlier; (b) the compliance adviser shall provide us with services, including guidance and advice as to compliance with the requirements under the Hong Kong Listing Rules and other applicable laws, regulations and codes, and to act as one of our principal channels of communication with the Stock Exchange; (c) we will agree to indemnify the compliance adviser for certain actions against and losses incurred by the compliance adviser arising out of or in connection with the performance by the compliance adviser of its duties under the agreement, or any material breach or alleged breach by us of the provisions of the agreement; and (d) we may terminate the appointment of any compliance adviser if the compliance adviser’s work is of an unacceptable standard as permitted by Rule 3A.26 of the Hong Kong Listing Rules. The compliance adviser may resign or terminate its appointment by service of three months’ notice to us.
13. Bilingual Prospectus The English language and Chinese language versions of this prospectus are being published separately in reliance upon the exemption provided by section 4 of the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).
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