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Hephaestus Holdings Limited M&A Activity 2007
51310_rns_2007-05-08_945b1b20-6502-488e-9ebe-a58155ae093c.pdf
M&A Activity
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or otherwise transferred all your shares in Intelli-Media Group (Holdings) Limited, you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).
This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities.
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
智庫媒體集團（控股）有限公司
Intelli-Media Group (Holdings) Limited
(Formerly known as “Panorama International Holdings Limited”)
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 8173)
PROPOSED DISCLOSEABLE TRANSACTION: ACQUISITION OF
COPYRIGHT IN A FILM LIBRARY
INVOLVING THE ISSUANCE OF CONVERTIBLE BOND
Financial adviser to the Company
WALLBANCK BROTHERS
Securities (Hong Kong) Limited
A letter from the board of directors of the Company is set out on pages 3 to 9 of this circular.
This circular will remain on the GEM website at http://www.hkgem.com on the “Latest Company Announcements” page for seven days from the date of its publication.
8 May 2007
CHARACTERISTICS OF GEM
GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.
Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.
The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.
- i -
CONTENTS
Page
Definitions 1
Letter from the Board 3
Appendix I – Valuation Report 10
Appendix II – General information 15
- ii -
DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
"Acquisition" the acquisition of the copyright in the film library under the Acquisition Agreement
"Acquisition Agreement" the agreement dated 16 April 2007 and entered into between the Purchaser and the Vendor in relation to the Acquisition
"associate(s)" has the meaning ascribed to it under the GEM Listing Rules
"Board" the board of Directors
"Bondholder" the Vendor or its nominee
"Business Day" a day (other than a Saturday and Sunday) on which banks are open for business in Hong Kong
"Company" Intelli-Media Group (Holdings) Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM
"Completion" completion of the Acquisition in accordance with the terms and conditions of the Acquisition Agreement
"connected person" has the meaning ascribed to it under the GEM Listing Rules
"Consideration" HK$15 million, being consideration for the Acquisition
"Convertible Bond" a non-interest bearing convertible bond in the principal amount of HK$6 million due 2009 carrying a right to subscribe for the Shares at HK$0.328 per Share at any time during the period commencing from the date of issue and ending on the date of final maturity
"Directors" the directors of the Company
"Existing General Mandate" the general mandate granted to the Directors at the Previous Meeting to allot, issue or otherwise deal in up to 96,972,000 Shares
"GEM" the Growth Enterprise Market of the Stock Exchange
"GEM Listing Rules" the Rules Governing the Listing of Securities on GEM
- 1 -
DEFINITIONS
| “Group” | the Company and its subsidiaries |
|---|---|
| “Hong Kong” | Hong Kong Special Administrative Region of the PRC |
| “Independent Third Party(ies)” | third party(ies) independent of the Company and connected persons (as defined under the GEM Listing Rules) of the Company and are not connected persons (as defined under the GEM Listing Rules) of the Company |
| “Latest Practicable Date” | 7 May 2007, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular |
| “SFO” | the Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong |
| “Nice Hill” | Nice Hill Investments Limited, a company incorporated in the British Virgin Islands with limited liability, which is wholly and beneficially owned by Mr. Chin Wai Keung, Richard an executive Director |
| “PRC” | the People’s Republic of China, which for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region and Taiwan |
| “Previous Meeting” | the extraordinary general meeting of the Company held on 4 January 2007 |
| “Purchaser” | CPE Program Distribution Limited, a wholly owned subsidiary of the Company |
| “Share(s)” | ordinary shares of HK$0.01 each in the share capital of the Company |
| “Shareholder(s)” | holder(s) of the Share(s) |
| “Stock Exchange” | The Stock Exchange of Hong Kong Limited |
| “Vendor” | 廣東原創動力文化傳播有限公司 |
| “HK$” | Hong Kong dollars, the lawful currency of Hong Kong |
| “%” | per cent. |
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LETTER FROM THE BOARD
智庫媒體集團（控股）有限公司
Intelli - Media Group (Holdings) Limited
(Formerly known as “Panorama International Holdings Limited”)
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 8173)
Executive Directors:
Mr. Chin Wai Keung, Richard (Chairman)
Mr. Fung Yu Hing, Allan
Mr. Fung Yee Sang
Mr. So Wing Lok, Jonathan
Mr. Lo Wing Keung
Mr. Chow Alvin Chiyiu
Mr. Ling Macadam
Independent Non-executive Directors:
Mr. Chow Shiu Ki
Mr. Hung Tik
Mr. Lam Wai Leung
Registered office:
P.O. Box 309
Ugland House
South Church Street
George Town
Grand Cayman
Cayman Islands
British West Indies
Head office and principal place of business in Hong Kong:
Room 706-709,
7/F Westin Centre,
26 Hung To Road,
Kwun Tong,
Kowloon, Hong Kong
8 May 2007
To the Shareholders
Dear Sir or Madam,
PROPOSED DISCLOSEABLE TRANSACTION: ACQUISITION OF COPYRIGHT IN A FILM LIBRARY INVOLVING THE ISSUANCE OF CONVERTIBLE BOND
INTRODUCTION
The Company announced on 17 April 2007 that on 16 April 2007, the Purchaser, a wholly-owned subsidiary of the Company, CPE Program Distribution Limited, entered into the Acquisition Agreement with the Vendor to acquire the copyright of a film library for the Consideration.
The Acquisition constitutes a discloseable transaction on the part of the Company under the GEM Listing Rules.
The Consideration is determined after arm’s length negotiation between the Purchaser and the Vendor with reference to the independent valuation of the copyright of a film library, which will be satisfied by the Company issuing to the Vendor upon Completion the Convertible Bond in the principal amount of HK$6 million and the cash payment of HK$9 million.
LETTER FROM THE BOARD
The purpose of this circular is to provide you with further details of the Acquisition.
DISCLOSABLE TRANSACTION
The Acquisition Agreement
Date: 16 April 2007
Parties:
(1) 廣東原創動力文化傳播有限公司 (as vendor): The Company confirms that to the best of the Directors' knowledge, information and belief having made all reasonable enquiries, each of the Vendor and its ultimate beneficial owner is an Independent Third Party not connected with any of the directors, chief executive, management shareholders or substantial shareholders of the Company or any of its subsidiaries or any of their respective associates. The Vendor is principally engaged in TV program and cartoon production and film distribution in the PRC.
(2) A wholly-owned subsidiary of the Company, CPE Program Distribution Limited (as purchaser).
Assets to be acquired
The copyright of a film library which contains 150 episodes of television cartoons named "Pleasant Goat and Big Big Wolf" (喜羊羊與灰太狼). The length of each episode is approximately 15 minutes. Immediately prior to the Completion, the copyright of the film library is beneficially owned by the Vendor, an Independent Third Party. After Completion, the Company will indirectly become the copyright holder of the said film library through its wholly-owned subsidiary.
Consideration
The Consideration is HK$15 million comprising Convertible Bond in the principal amount of HK$6 million and the cash payment of HK$9 million according to the payment schedule set forth below.
Cash Consideration
Payment term:
- an initial deposit of HK$250,000 will be payable within 3 days upon signing of the Acquisition Agreement. The said initial deposit has already been paid;
- the second payment of HK$4,250,000 will be made within 1 week upon the Completion; and
- the remaining balance of HK$4,500,000 will be payable 3 months after the Completion.
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LETTER FROM THE BOARD
If the subject matter fails to proceed to completion, the initial deposit will be fully refunded to the Purchaser within three Business Days without interest.
The Directors are arranging for equity financing and/or debt financing. As disclosed in the announcement of the Company dated 20 April 2007, the Company has carried out a top-up placing of 37,310,000 existing Shares at a price of HK$0.268 per Share to finance the aforementioned cash consideration of HK$9 million.
Principal terms of the Convertible Bond
Principal amount:
HK$6 million
Interest:
The Convertible Bond does not bear any interest
Maturity:
The second anniversary of the date of issue of the Convertible Bond
Conversion rights:
The Bondholder will have the right to convert on any Business Day on or prior to the maturity date, the whole or any part(s) of the principal amount of the Convertible Bond in integral multiples of HK$1,000,000 into the Shares at the then applicable conversion price.
Conversion price:
HK$0.328 per Share
The conversion price is subject to adjustments in the event of, among others, consolidation, sub-division or reclassification, capitalization of profits or reserves, capital distribution, rights issue and other dilutive events.
The conversion price is determined after arm's length negotiation taking into account the two-year tenor of the Convertible Bond and the potential dilution effect on the shareholding structure of the Company. The conversion price represents (i) a discount of approximately 19.01% to the closing price of the Shares of HK$0.405 on 16 April 2007 (being the day of the suspension of Shares on 16 April 2007); (ii) a discount of approximately 2.38% to the average closing price of the Shares of HK$0.336 on the Stock Exchange for the 5 trading days immediately before 16 April 2007 (being the day of the suspension of Shares on 16 April 2007); (iii) a premium of approximately 2.82% over the average closing price of the Shares of HK$0.319 on the Stock Exchange for the 10 trading days immediately before 16 April 2007 (being the day of the suspension of Shares on 16 April 2007) and (iv) a premium of approximately 111.61% over the net asset value per Share of
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LETTER FROM THE BOARD
approximately HK$0.155, based on the unaudited consolidated accounts of the Group as at 30 September 2006 and the then number of Shares in issue.
The Directors consider that based on the market price of the Shares, the conversion price and the terms and conditions of the Convertible Bond are fair and reasonable and in the best interests of the Company and the Shareholders as a whole.
Status of the Shares:
The Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bond will rank pari passu in all respects with the Shares in issue as at the date of allotment and issue of the conversion Shares.
Based on the conversion price of HK$0.328 per Share, a maximum amount of 18,292,682 Shares will fall to be allotted and issued upon full conversion of the Convertible Bond, representing approximately 3.50% of the existing issued share capital of the Company or approximately 3.39% of the enlarged issued share capital of the Company upon full exercise of the conversion rights attaching to the Convertible Bond.
Mandate to issue Shares:
The Existing General Mandate was granted to the Directors pursuant to an ordinary resolution of the Company passed in its Previous Meeting on 4 January 2007 to allot and issue up to 20% of the aggregate nominal amount of the share capital of the Company in issue on that date, being HK$969,720 and divided into 96,972,000 Shares.
The Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bond will be allotted and issued under the Existing General Mandate which authorises the Directors to issue Shares not exceeding 20% of the aggregate nominal amount of the Shares in issue as at the date of Previous Meeting, which was 96,972,000 Shares. According to the announcement of the Company dated 20 April 2007, Nice Hill, the controlling Shareholder had, upon the request of the Company, placed 37,310,000 Shares to not less than six places who are Independent Third Parties. On 2 May 2007, Nice Hill subsequently subscribed for 37,310,000 new Shares. As a result, only 59,662,000 Shares of the Existing General Mandate remained unused. Assuming the rights attaching to the Convertible Bond has been fully exercised by the Bondholder, the 18,292,682 Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bond will utilise approximately 30.66% of the unused Existing General Mandate which is sufficient for the present purpose.
Application for listing:
Application has been made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Shares which may be issued upon the exercise of the conversion rights attaching to the Convertible Bond. However, no application will be made for the listing of the Convertible Bond on the Stock Exchange or any other stock exchange.
- 6 -
LETTER FROM THE BOARD
Transferability:
The Convertible Bond or any part(s) thereof may be transferred to any third party subject to prior notification of the Company. Any transfer of the Convertible Bond to any connected person will be subject to the consent of the Company, and if required, the approval of the Stock Exchange.
Early Redemption:
The Bondholder has the option to request the Company to redeem the Convertible Bond at any time between six months after the issue of the Convertible Bond till the maturity date of the Convertible Bond in integral multiples of HK$1,000,000.
The Company has the right to either require the Bondholder to mandatorily convert any Convertible Bond remaining outstanding at maturity into Shares at the then applicable Conversion Price or redeem any Convertible Bond remaining outstanding at maturity at its nominal value.
The Company will, subject to the conditions of the Acquisition Agreement, issue the Convertible Bond to the Bondholder upon Completion.
Shareholding structure upon completion of the Acquisition and conversion of the Convertible Bond
The shareholding structure of the Company (based on information received by the Company and notified pursuant to part XV of the SFO as at the Latest Practicable Date) immediately before and after Completion and full conversion of the Convertible Bond (assuming that there are no changes other than those contemplated in the Acquisition Agreement) is shown as follows:
| Immediately before Completion | After Completion, assuming no rights attaching to the Convertible Bond has been exercised by the Bondholder | After Completion, assuming the rights attaching to the Convertible Bond has been fully exercised by the Bondholder | ||||
|---|---|---|---|---|---|---|
| No. of Shares | Approximate % | No. of Shares | Approximate % | No. of Shares | Approximate % | |
| Nice Hill | 234,515,000 | 44.912 | 234,515,000 | 44.912 | 234,515,000 | 43.392 |
| Lo Wing Keung | 29,425,000 | 5.635 | 29,425,000 | 5.635 | 29,425,000 | 5.444 |
| So Wing Lok, Jonathan | 18,034,600 | 3.454 | 18,034,600 | 3.454 | 18,034,600 | 3.337 |
| Chow Alvin Chiyiu | 10,000 | 0.002 | 10,000 | 0.002 | 10,000 | 0.002 |
| Public Shareholders | ||||||
| - Vendor | - | - | - | - | 18,292,682 | 3.385 |
| - Other public Shareholders | 240,185,400 | 45.997 | 240,185,400 | 45.997 | 240,185,400 | 44.440 |
| Total | 522,170,000 | 100.000 | 522,170,000 | 100.000 | 540,462,682 | 100.000 |
LETTER FROM THE BOARD
Basis for Consideration
The Consideration was determined after arm's length negotiation between the Purchaser and the Vendor with reference to, among other things, the preliminary indicative valuation of the film library for HK$15 million as appraised by BMI Appraisals Limited, an independent professional valuer, on a market approach.
Conditions:
The Acquisition Agreement is conditional upon:
(a) all necessary consents, authorisations, licenses and approvals required to be obtained on the part of the Vendor in respect of the Acquisition Agreement and the transactions contemplated thereunder having been obtained;
(b) all necessary consents, authorisations, licenses and approvals required to be obtained on the part of the Purchaser and the Company in respect of the Acquisition Agreement and the transactions contemplated thereunder having been obtained;
(c) the obtaining of a PRC legal opinion issued by a firm of PRC lawyers acceptable to the Purchaser covering such matters of the PRC laws relevant to the transactions contemplated under the Acquisition Agreement in such form and substance to the absolute satisfaction of the Purchaser;
(d) the obtaining of a valuation report issued by a firm of independent and professional valuers appointed by the Purchaser showing the value of the copyright of the film library to be not less than HK$15 million;
(e) the warranties provided by the Vendor remaining true and accurate in all respects; and
(f) the GEM Listing Committee granting listing of and permission to deal in the conversion Shares upon exercise of the conversion rights under the Convertible Bond.
Completion
Completion will take place on the third Business Day after the fulfillment of all the conditions of the Acquisition Agreement. The Company will issue an announcement at the stage of Completion.
Reasons for the Acquisition
The Company, incorporated in the Cayman Islands with limited liability, is an investment holding company and its issued Shares are listed on GEM. The Group is an entertainment programme provider principally engaged in the distribution of video programmes in video compact disc and digital video disc formats for home entertainment in Hong Kong, Macau, PRC and other Asian regions including Taiwan, South Korea, Singapore, Thailand, and Malaysia and the Philippines.
LETTER FROM THE BOARD
As stated in the third quarterly report of the Group, the Group is contemplating to develop its animated business. The Acquisition will provide ample opportunities for the Group to develop its worldwide distribution network by entering distribution agreement for the film acquired to worldwide media channels. In particular, the film library is planned for global distribution, media distribution development and brand building of the Company. The Directors believe that the Acquisition will bring program distribution revenue to the Group and will open up worldwide media platform for the Group to develop its animated characters brand for further business development.
The Directors consider that the Acquisition Agreement and the terms and conditions thereof are fair and reasonable and in the best interests of the Company and the Shareholders as a whole.
Financial effect of the Acquisition
The Directors anticipate and hold the view that upon Completion, there would be an increase in non-current assets of the Group. Despite the increase in liability as a result of the issuance of the Convertible Bond and decrease in cash as part of the Consideration, there would be expected licensing income attributable to the Group and increase in equity.
General
Your attention is drawn to the information set out in appendix II of this circular.
By order of the Board of
Intelli-Media Group (Holdings) Limited
(formerly known as "Panorama International Holdings Limited")
Wong Hoi Yan, Audrey
Chief Financial Officer and Company Secretary
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APPENDIX I
VALUATION REPORT
The following is the text of a letter prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuation as at 10 April 2007 of the market value of 150 TV cartoon episodes named “Pleasant Goat and Big Big Wolf” (喜羊羊舆灰太狼).
8 May 2007
BMI APPRAISALS
BMI Appraisals Limited 中和邦盟評估有限公司
Suite 11-18, 31/F., Shui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong
香港灣仔港灣道6-8號瑞安中心3111-18室
Tel電話：(852) 2802 2191 Fax傳真：(852) 2802 0863
Email電郵：[email protected] Website網址：www.bmintelligence.com
The Directors
Intelli-Media Group (Holdings) Limited
Units 706-709, 7th Floor
26 Hung To Road
Kwun Tong
Hong Kong
Dear Sirs,
INSTRUCTIONS
We refer to the instructions from Intelli-Media Group (Holdings) Limited (referred to as the "Company") for us to provide our opinion on the market value of 150 TV cartoon episodes named "Pleasant Goat and Big Big Wolf" (喜羊羊與灰太狼) (referred to as the "Episodes") that the Company intends to acquire. The date of valuation is 10 April 2007.
This report describes backgrounds of the Company and the Episodes, and the basis of valuation & assumptions. It also explains the valuation methodology utilized and presents our conclusion of value.
PURPOSE OF VALUATION
We understand that the purpose of our valuation is to express an independent opinion on the market value of the Episodes as at 10 April 2007 for your acquisition reference purposes only.
BASIS OF VALUATION
Our valuation was carried out on the basis of market value. Market value is defined as "the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion".
We have adopted "HKIS Valuation Standards on Trade-related Business Assets and Business Enterprises" in preparing the valuation.
APPENDIX I
VALUATION REPORT
BACKGROUND OF THE COMPANY
The Company is a Hong Kong-based media services company which was listed on the Hong Kong Stock Exchange on 9 May 2002. The Company's principal activity is the distribution of video programmes in video compact disc and digital video disc formats for home entertainment in Hong Kong, Macau, mainland China and other Asian regions including Taiwan, South Korea, Singapore, Thailand, Malaysia, and Indonesia. Also, the Company provides entertainment programmes to other platforms including notable sub-lisencing partners such as Hong Kong Cable Television Ltd, Pacific Century Cyber Works and now.com.hk.
DESCRIPTION OF THE EPISODES
The Episodes are 150 episodes of TV cartoons named "Pleasant Goat and Big Big Wolf". The length of each episode of the Episodes is approximately 15 minutes. After the acquisition, the Company will have the copyrights of distributing the Episodes worldwide.
SOURCE OF INFORMATION
For the purpose of our valuation, we were furnished with financial and operational data related to the Episodes, which was given by the senior management of the Company.
The valuation of the Episodes required consideration of all pertinent factors affecting the economic benefits of the Episodes and its abilities to generate future investment returns. The factors considered in the valuation included, but were not limited to the following:
- The nature of the Episodes;
- The financial information of the Episodes;
- The specific economic environment and competition for the market in which the Episodes is related to;
- Market-derived investment returns of entities engaged in similar lines of business; and
- The financial and business risks of the Episodes including the continuity of income.
SCOPE OF WORKS
In the course of our valuation work for the Episodes, we have conducted the following steps to evaluate the reasonableness of the adopted bases and assumptions provided by the senior management of the Company:
- Interviewed with the senior management of the Company respectively;
APPENDIX I
VALUATION REPORT
- Obtained all relevant financial and operational information of the Episodes;
- Performed market researches and obtained statistical figures from public sources;
- Examined all relevant bases and assumptions in both the financial and operational information provided by the senior management of the Company;
- Prepared a business financial model to derive the indicated value of the Episodes; and
- Presented all relevant information on the backgrounds of the Company and the Episodes, valuation methodology, source of information, scope of works, major assumptions, comments and our conclusion of value in this report.
VALUATION ASSUMPTIONS
Given the changing environment in which the Episodes is related to, a number of assumptions had to be established in order to sufficiently support our concluded opinion of value of the Episodes. The major assumptions adopted in our valuation were:
- There will be no major changes in the existing political, legal, and economic conditions in the jurisdiction where the Episodes is related to;
- There will be no major changes in the current taxation law in the jurisdiction where the Episodes is related to, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;
- The financial information in respect of the Episodes has been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful considerations by the senior management of the Company;
- Exchange rates and interest rates will not differ materially from those presently prevailing;
- Economic conditions will not deviate significantly from economic forecasts.
VALUATION METHODOLOGY
Three generally accepted valuation methodologies have been considered in valuing the Episodes. They were the market approach, the cost approach and the income approach.
The market approach provides indications of value by comparing the subject to similar businesses, business ownership interests, and securities that have been sold in the market.
The cost approach provides indications of value by studying the amounts required to recreate the business for which a value conclusion is desired. This approach seeks to measure the economic benefits of ownership by quantifying the amount of fund that would be required to replace the future service capability of the business.
APPENDIX I
VALUATION REPORT
The income approach is the conversion of expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the project than an amount equal to the present worth of anticipated future benefits from the same or a substantially similar business with a similar risk profile.
Among the three approaches, the cost approach was regarded not appropriate in the valuations, as it only considers the cost of recreating the Episodes, and the cost may not represent the market value. The income approach was also considered inadequate in the valuation, as it involves much more assumptions compared to the other two approaches. Therefore, we determined that the market approach was the most appropriate approach for the valuation of the Episodes.
Market research was carried out and based on the research results, we determined that the value of each episode of the Episodes would be HK$130,000.
The concept of marketability deals with the liquidity of the Episodes, that is, how quickly and easily they can be converted to cash if the owner chooses to sell. The lack of marketability discount reflects the fact that there is no ready market for the Episodes. In the valuation, 25% was used as the discount for lack of marketability.
VALUATION COMMENTS
For the purpose of this valuation and in arriving at our opinion of value, we have referred to the information provided by the senior management of the Company to estimate the value of the Episodes. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied.
To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others, which have been used in formulating this analysis.
REMARKS
Neither the whole nor any part of this report nor any reference thereto may be included in any document, circular or statement without our written approval of the form and context in which it will appear.
Finally and in accordance with our standard practice, we must state that this report is for the exclusive use of the addressee and for the purpose stated herein. No responsibility is accepted to any third party for the whole or any part of its contents.
Unless otherwise stated, all money amounts stated are in Hong Kong Dollars (HK$).
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APPENDIX I
VALUATION REPORT
CONCLUSION OF VALUE
Our conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of a lot of uncertainties, not all of which can be easily ascertained or quantified.
Further, whilst the assumptions and consideration of such matters are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company or us.
Based on our investigation and analysis outlined in this report, it is of our opinion that the market value of the Episodes as at 10 April 2007 was HK$15,000,000 (Hong Kong Dollar Fifteen Million Only).
We hereby certify that we have neither present nor prospective interest in the Company, the Episodes or the value reported.
Yours faithfully
For and on behalf of
BMI APPRAISALS LIMITED
Marco T.C. Sze
B.Eng(Hon) MBA(Acct), CFA
Senior Manager
Dr. Tony Cheng
BSc, MUD, MBA(Finance), MSc(Eng), PhD(Econ),
MHKIS, MCIArb, AFA, SIFM, FCIM, MASCE,
MIET, MIEEE, MASME, MIIE
Director
Notes:
-
Mr. Marco Sze holds a Master's Degree of Business Administration in Accountancy from the City University of New York – Baruch College and is a holder of Chartered Financial Analyst. He has about 2 years' experience in valuing similar assets or companies engaged in similar business activities in Hong Kong, China and the Asia-Pacific Region.
-
Dr. Tony Cheng is a member of the Hong Kong Institute of Surveyors (General Practice). He is also a member of the American Society of Civil Engineers, a member of the American Society of Mechanical Engineers and a member of Institute of Industrial Engineers (U.K.). He has 10 years' experience in valuing similar assets or companies engaged in similar business activities worldwide.
APPENDIX II
GENERAL INFORMATION
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:
(a) the information contained in this circular is accurate and complete in all material respects and is not misleading;
(b) there are no other matters the omission of which would make any statement in this circular misleading; and
(c) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.
2. DISCLOSURE OF INTERESTS
(a) Interests and short positions of the Directors in the Company and its associated corporations
As at the Latest Practicable Date, the interests or short positions of each Director in the Shares, options, warrants, derivatives, securities convertible into the Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company or the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of the SFO); (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange, were as follows:
Long positions in the Shares
| Name of Directors | Type of interests | No. of shares | Approximate percentage of shareholding |
|---|---|---|---|
| Mr. Chin Wai Keung, Richard | Interest of a controlled corporation | 234,515,000 | 44.912% |
| Mr. Lo Wing Keung | Beneficial | 29,425,000 | 5.635% |
| Mr. So Wing Lok, Jonathan | Beneficial | 18,034,600 | 3.454% |
| Mr. Chow Alvin Chiyiu | Beneficial | 10,000 | 0.002% |
APPENDIX II
GENERAL INFORMATION
Long positions in the share options
Particulars of the outstanding options which have been granted to the Directors under the share option scheme of the Company as at the Latest Practicable Date were as follows:
| Name of Directors | Date of grant | Exercise period | Exercise price per Share HK$ | Number of share option |
|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil |
Save as disclosed in this section (a), as at the Latest Practicable Date, none of the Directors, chief executives of the Company or their associates had any interest or short positions in the Shares, options, warrants, derivatives, securities convertible into the Shares or debentures of the Company or any of its associated corporations (which the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors to be notified to the Company and the Stock Exchange.
(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO
As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of the SFO, and so far as is known to any Director or chief executive or the Company, the following persons had, or were deemed or taken to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:
Long Position in the Shares
| Name of shareholders | Beneficial interest | Deemed interest | Total | Approximate percentage of shareholder |
|---|---|---|---|---|
| Nice Hill (Note) | 234,515,000 | – | 234,515,000 | 44.912% |
| Ms. Kwan Yuet | – | 234,515,000 | 234,515,000 | 44.912% |
| Wah Rosanna (Note) | (family interest) |
Note: Mr. Chin is the sole shareholder of Nice Hill and is deemed to be interested in 234,515,000 Shares held by Nice Hill. Ms Kwan Yuet Wah Rosanna is the spouse of Mr. Chin and thus is deemed to be interested in 234,515,000 Shares held by Nice Hill.
APPENDIX II
GENERAL INFORMATION
Save as disclosed in this section (b), the Directors and chief executive of the Company are not aware of any person who has an interest or short position in the Shares, or underlying Share which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.
3. COMPETING INTERESTS
As at the Latest Practicable Date, so far as the Directors are aware of, none of the Directors, management Shareholders (as defined in the GEM Listing Rules) or their respective associates had any interest in a business which competes or may compete with the business of the Group or any other conflicts of interest with the Group.
4. LITIGATION
As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened by or against any member of the Group.
5. SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).
6. EXPERT
The following is the qualification of the expert who has been named in this circular and has given opinions, letter of advice which is contained in this circular:
| Name | Qualifications |
|---|---|
| BMI Appraisals Limited | professional surveyors and valuers |
BMI Appraisals Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its names, in the form and context in which it appears. BMI Appraisals Limited does not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
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APPENDIX II
GENERAL INFORMATION
7. SHARE CAPITAL
The authorised and issued share capital of the Company as at the Latest Practicable Date was as follows:
| Authorised: | HK$ | |
|---|---|---|
| 1,500,000,000 | Shares | 15,000,000.00 |
| Issued and to be issued, fully paid up or credited as fully paid up: | ||
| 522,170,000 | Shares in issue as at the Latest Practicable Date | 5,221,700.00 |
| 18,292,682 | Shares to be allotted and issued upon exercise of Convertible Bonds | 182,926.82 |
| 540,462,682 | Shares | 5,404,626.82 |
8. GENERAL
(a) The registered office of the Company is at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies.
(b) The head office and principal place of business of the Company in Hong Kong is at Room 706-709, 7/F., Westin Centre, 26 Hung To Road, Kwun Tong, Kowloon, Hong Kong.
(c) The Company's Hong Kong branch share registrar and transfer office is Tengis Limited of 26th Floor, Tesbury Centre, 28 Queen's Road East, Wanchai, Hong Kong.
(d) The compliance officer is Mr. Fung Yee Sang.
(e) The company secretary and qualified account of the Company is Ms. Wong Hoi Yan, Audrey who is a member of the America Institute of Certified Public Accounts and the Hong Kong Institute of Certified Public Accountants.
(f) The Company has established an audit committee with written terms of reference in compliance with Rules 5.28 of the GEM Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal controls system of the Group and provide advices and comments on the Company's draft annual reports and accounts, interim reports and quarterly reports to the Directors. The audit committee comprises the three independent non-executive Directors, namely Mr. Chow Shiu Ki, Mr. Hung Tik and Mr. Lam Wai Leung.
APPENDIX II
GENERAL INFORMATION
Mr. Chow Shiu Ki, aged 38, was appointed as an independent non-executive Director and the chairman of audit committee and remuneration committee with effect from 3 November 2006. Mr. Chow holds a Diploma in Business Studies and is a fellow member of The Association of Chartered Certified Accountants and an associate member of The Hong Kong Institute of Certified Public Accountants. Mr. Chow has accumulated more than 18 years of experience in the auditing, accounting and corporate finance areas. Mr. Chow started his career by joining KPMG in 1987 and had accumulated about 4 years of professional auditing experience. Since then, he had worked for various private companies and listed companies, including Shun Tak Holdings Limited (Stock code: 242) from 2002 to 2004 and Wo Kee Hong (Holdings) Limited (Stock code: 720) from 1995 to 1999 at senior financial management level.
Mr. Hung Tik, aged 50, was appointed as an independent non-executive Director and a member of audit committee and remuneration committee with effect from 3 November 2006. Mr. Hung graduated from the Chinese University of Hong Kong with a bachelor degree. Mr. Hung is a seasoned professional with over 28 years of experience in the entertainment and broadcasting industries. Mr. Hung was involved in radio and television broadcasts in the early stage of his career. In 1984, Mr. Hung changed to develop his career in film production industry and at the same time acted as manager of certain local famous artists. In 1990, Mr. Hung joined EMI (Taiwan) as managing director and was later promoted to Senior Vice President (Greater China) of EMI (Asia Pacific), during which he had successfully packaged and promoted a number of famous artists including Eric Moo, Zhang Xinzhe, Zhang Yu, Gi Gi Leung, etc. In 2002, Mr. Hung further advanced his career by joining Universal Music Group, he is now the managing director of Universal Music Limited (Hong Kong & PRC).
Mr. Lam Wai Leung, aged 51, was appointed as an independent non-executive Director and a member of audit committee and remuneration committee with effect from 3 November 2006. Mr. Lam holds a Master of Philosophy degree in Journalism and Communication, Master of Law degree in International Business Law and Master of Arts degree in Education. Mr. Lam is a seasoned media professional with over 29 years of production and multimedia management experience in television broadcast channels and in-house media centre of universities, including Television Broadcasts Limited, Radio Television Hong Kong, City University of Hong Kong and Hong Kong University of Science & Technology. Mr. Lam had also been the Honorary Secretary and Vice-President of the Hong Kong Association for Educational Communications and Technology, and is currently an executive committee member of the Society of Motion Picture and Television Engineers (Hong Kong Section).
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