History, Reorganisation and Corporate Structure

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History, Reorganisation and Corporate Structure THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this Web Proof Information Pack. HISTORY, REORGANISATION AND CORPORATE STRUCTURE OUR HISTORY 3rd Sch21 Corporate development The history of our Group can be traced back to the incorporation of Jiangsu Springland (formerly known as 宜興華地企業 (Yixing Springland Enterprise)) in February 1996. Jiangsu Springland, one of our A1A 28(2) major subsidiaries and an investment holding company of our other subsidiaries, was incorporated as a collectively-owned enterprise by 宜興市供銷企業(集團)公司 (Yixing City Sales and Supply Enterprise (Group) Company) (“Yixing Sales and Supply Enterprise”). Upon incorporation of Jiangsu Springland, Yixing Sales and Supply Enterprise injected assets of a department store located in Yixing, known as the Yixing Springland Store, into Jiangsu Springland and thereafter Jiangsu Springland had been primarily engaged in department store operations. Our executive Director, chairman and chief executive officer, Mr Chen, joined the Yixing Springland Store as its general manager at the time of its establishment and has been actively participating in the management of our Group since then. In 1998, in response to the then economic environment in the PRC, Jiangsu Springland was converted from a collectively-owned enterprise into a joint-stock company with Yixing Sales and Supply Enterprise, 宜 興華地企業工會 (Yixing Springland Enterprise Employee Committee, whose name was subsequently changed to 華地股份工會 (Springland Stock Employee Committee) and further to 江蘇華地企業集團有限 公司工會委員會 (Jiangsu Springland Group Company Limited Employee Committee)) (“Jiangsu Springland Employee Committee”), Mr Chen and 32 other individual investors as promoters. Immediately after its conversion, Jiangsu Springland was owned as to 35.15% by Yixing Sales and Supply Enterprise, as to 31.85% SFCI-6 by Jiangsu Springland Employee Committee, as to 5% by Mr Chen and the remaining 28% by 32 other individual investors. In August 2005, Jiangsu Springland was further converted into a limited liability company from a joint-stock company and it has undergone various reorganisations, transfers and capital injections from 1998 to 2006, amongst which Mr Chen had acquired a net total of 46% equity interest for a net aggregate consideration of RMB20,600,000 and contribution of RMB100,290,000 as capital injection into Jiangsu Springland, while Jiangsu Springland Employee Committee, which was collectively owned by the then employees of Jiangsu Springland, had acquired a net total of 17.15% equity interest through various transfers and capital injections involving a total net investment cost of RMB110,740,000. As at 15 June 2006, upon the completion of the various reorganisations as described above and immediately before it was transferred to our Company pursuant to the Reorganisation, Jiangsu Springland was owned by Mr Chen as to 51% of its equity interest and Jiangsu Springland Employee Committee as to 49% of its equity interest. For further information about the Reorganisation, please refer to the section headed “The Reorganisation” below. Business development Our first department store, the Yixing Springland Store, commenced operations in December 1994 and was injected into Jiangsu Springland by Yixing Sales and Supply Enterprise upon the establishment of Jiangsu Springland in February 1996. Following the success of our first store, the Yixing Springland Store, we have expanded our department store operations into other cities in the Yangtze River Delta through opening of seven more department stores located at prime locations in the Yangtze River Delta since 2002, and acquiring two department stores situated in Wuxi, Jiangsu (the “Wuxi Yaohan Store”) and Nantong, Jiangsu (the “Nantong Yaohan Store”) in 2006 and 2009, respectively. For further information about our acquisitions of the Wuxi Yaohan Store and the Nantong Yaohan Store, please refer to sections headed —60— THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this Web Proof Information Pack. HISTORY, REORGANISATION AND CORPORATE STRUCTURE “Our History — Acquisition of the Wuxi Yaohan Store” and “Our History — Acquisition of the Nantong Yaohan Store” below. Through our ten department stores located in various cities operating under the trade nameof“華地” (“Springland”) and “八佰伴” (“Yaohan”), our Directors believe that we have made significant progress in establishing our brand names and market penetration in the Yangtze River Delta. Capitalising on our success in department store operations, from which we had gained a deep understanding in the retail business in the Yangtze River Delta, we established our supermarket business under the trade name “大統華” (“Datonghua”) in 2001. We incorporated Jiangsu Datonghua in March 2001, which is principally engaged in supermarket operations in the PRC. Our first supermarket, namely the Yixing Datonghua Store, which is situated at the same commercial district of our Yixing Springland Store, was opened in May 2001. Following the success of our first two supermarkets, 16 supermarkets have come into operation in various cities in the Yangtze River Delta. As at the Latest Practicable Date, we have three new department stores under construction, namely the Changxing Springland Department Store, the Jintan Springland Department Store, and the Changzhou Yaohan Store, and ten new supermarkets under construction, details of which are set out in the “Business” section. SFCI-5 In line with the expansion of our retail network, we have also incorporated various operating companies to manage the operations of our department stores and supermarkets in various cities in the Yangtze River Delta. They were 江陰華地百貨有限公司 (Jiangyin Springland Store Co., Ltd.) (“Jiangyin Springland”) and 丹陽華地百貨有限公司 (Danyang Springland Department Store Co., Ltd.) (“Danyang Springland”), which were incorporated in June 2003 and March 2004, respectively. In contemplation of the opening of one of our major department stores, Jiangyin Springland Store, we incorporated Jiangyin Springland as a limited liability company in the PRC in June 2003. Jiangyin Springland, which currently has a registered capital of RMB130,000,000, manages the Jiangyin Springland Store, and operates four supermarkets within the same district, namely, Jiangyin Datonghua Store (City Centre), Jiangyin Datonghua Store (Shengang Branch), Jiangyin Datonghua Store (Chengxi Branch) and Jianyin Datonghua Store (Hongqiao Branch). In contemplation of the opening of one of our major department stores, Danyang Springland Store, Danyang Springland was incorporated as a limited liability company in the PRC in March 2004, and was held as to 90% by our Group and 10% by 丹陽華地置業有限公司 (Danyang Springland Real Estate Co., Ltd.). Danyang Springland has become our wholly-owned subsidiary in May 2006 following our acquisition of the remaining interests then held by Dangyang Springland Real Estate Co., Ltd. for a total consideration of RMB15,000,000, which was arrived at arm’s length negotiation between the parties based on the actual equity contribution made by Danyang Real Estate Co., Ltd. to Danyang Springland. Danyang Springland, which currently has a registered capital of RMB60,000,000, manages Danyang Springland Store, and operates three supermarkets within the same district, being Danyang Datonghua Store (Development Zone Branch), Danyang Datonghua Store (Dagang Branch) and [Danyang Datonghua Store (City Centre)]. As an ancillary service to our supermarket business, we also incorporated our wholly-owned subsidiary 無錫匯全物流有限公司 (Wuxi Huiquan Logistics Co., Ltd.) (“Huiquan Logistics”) in April 2007, which principally engages in logistics and delivery of products including fresh food products. Since then, we have established our own transportation and logistic system which includes a cold chain delivery system, providing an appropriate temperature environment for the transportation process of fresh food. —61— THIS WEB PROOF INFORMATION PACK IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Web Proof Information Pack must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this Web Proof Information Pack. HISTORY, REORGANISATION AND CORPORATE STRUCTURE Acquisition of the Wuxi Yaohan Store To leverage on the rapid economic growth in the PRC and the continued increase in disposable income and spending power of our customers, we expanded our retail network by establishing our presence in other cities in the Yangtze River Delta. To achieve this objective, we extended our department store network to Wuxi, Jiangsu by acquiring the Wuxi Yaohan Store. Pursuant to a letter of intent dated July 2005 between Hong Kong Springland and 無錫市國聯發展(集團)有限公司 (Wuxi Guolian Development (Group) Company Limited) (“Wuxi Guolian”), being the then beneficial owner of the Wuxi Yaohan Store, we agreed to make our investment in, and to acquire the entire interest in, 無錫華地投資管理有限公司 (Wuxi Springland Investment Management Co., Ltd.) (“Wuxi Springland”), Wuxi Yaohan Commerce & Trade and 無錫八佰伴經濟管理有限公司 (Wuxi Yaohan Economic Management Co., Ltd.) (“Wuxi Yaohan Management”), being the entities collectively holding the equity interests in, and
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