AI assistant
Yunkang Group Limited Proxy Solicitation & Information Statement 2024
50524_rns_2024-12-04_7610fc76-999b-4a2f-a92d-65804c3a0540.pdf
Proxy Solicitation & Information Statement
Open in viewerOpens in your device viewer
THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Yunkang Group Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.
乙康
YUNKANG
Yunkang Group Limited
云康集团有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 2325)
(1) RENEWAL OF CONTINUING CONNECTED
TRANSACTIONS; AND
(2) NOTICE OF EXTRAORDINARY GENERAL MEETING
Independent Financial Adviser to the Independent Board Committee and
the Independent Shareholders
Gram Capital Limited
嘉林資本有限公司
A notice convening the Extraordinary General Meeting of Yunkang Group Limited to be held on Friday, December 27, 2024 at 10:00 a.m. at No. 9 Yayingshi Road, Science City, Huangpu District, Guangzhou, PRC is set out on pages 29 to 30 of this circular. A form of proxy for use at the Extraordinary General Meeting is also enclosed. Such form of proxy is also published on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.yunkanghealth.com) respectively.
Whether or not you intend to attend the Extraordinary General Meeting, you are required to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company's share registrar in Hong Kong, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the Extraordinary General Meeting (i.e. not later than 10:00 a.m. on Wednesday, December 25, 2024) or any adjournment thereof. Delivery of any instrument appointing a proxy shall not preclude you from attending and voting in person at the Extraordinary General Meeting (or any adjourned meeting thereof) and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
References to dates and time in this circular are to Hong Kong dates and time. Where the context so permits or requires in this circular, words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders and vice versa.
December 5, 2024
CONTENTS
Page
DEFINITIONS 1
LETTER FROM THE BOARD. 4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. 13
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER 15
APPENDIX - GENERAL INFORMATION 25
NOTICE OF EXTRAORDINARY GENERAL MEETING 29
- i -
DEFINITIONS
In this circular, unless otherwise defined or the context otherwise requires, the following terms or expressions shall have the following meanings:
“2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement” the Reagents, Consumables and Equipment Procurement Framework Agreement dated November 11, 2024 entered into between the Company and Da An Gene
“Announcement” the announcement of the Company dated November 11, 2024
“Board” the board of Directors
“Company” Yunkang Group Limited 云康集团有限公司, an exempted company with limited liability incorporated in the Cayman Islands, the Shares of which were listed on the main board of the Stock Exchange (stock code: 2325)
“COVID-19” coronavirus disease 2019, a disease caused by a novel virus designated as severe acute respiratory syndrome coronavirus 2
“Da An Gene” Daan Gene Co., Ltd. (廣州達安基因股份有限公司), a company limited by shares established in the PRC whose shares are listed on the SME Board of the Shenzhen Stock Exchange (Stock Code: 002030.SZ)
“Da An Gene Group” Da An Gene and its subsidiaries
“Daan International” Daan International Holdings Limited (達安國際集團有限公司), a company incorporated in Hong Kong with limited liability, a subsidiary of Da An Gene and one of the controlling shareholders of the Company
“Director(s)” the director(s) of the Company
“Existing Reagents, Consumables and Equipment Procurement Framework Agreement” the Reagents, Consumables and Equipment Procurement Framework Agreement dated February 18, 2022 entered into between the Company and Da An Gene
“Extraordinary General Meeting” an extraordinary general meeting of the Company to be convened and held to consider and, if thought fit, approve the continuing connected transactions and the proposed annual caps contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement
- 1 -
DEFINITIONS
"Group"
The Company, its subsidiaries and consolidated affiliated entities
"HK$"
Hong Kong dollar, the lawful currency of Hong Kong
"Hong Kong"
The Hong Kong Special Administrative Region of the PRC
"Independent Board Committee"
an independent committee of the Board comprising all the independent non-executive Directors established for the purpose of advising the Independent Shareholders on the approval of the continuing connected transactions and the proposed annual caps contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement
"Independent Financial Adviser"
Gram Capital Limited, a corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and the independent financial adviser to the Independent Board Committee and the Independent Shareholders on the approval of the continuing connected transactions and the proposed annual caps contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement
"Independent Shareholder(s)"
Shareholder(s) other than Daan International
"Latest Practicable Date"
November 29, 2024, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
"Listing Rules"
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
"PRC" or "China"
the People's Republic of China, but for the purpose of this circular and for geographical reference only and except where the context requires otherwise, references in this circular to "China" and the "PRC" do not apply to Hong Kong, Macau and Taiwan
"Prospectus"
the prospectus of the Company dated May 5, 2022
- 2 -
DEFINITIONS
"Revised Annual Caps (Second Revision)" the second revised annual caps in respect of the procurement of reagents, consumables and equipment from Da An Gene Group by the Group under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement for the financial years ended/ending December 31, 2022, 2023, 2024, which were approved by the Independent Shareholders at the extraordinary general meeting of the Company held on October 31, 2022
"RMB" Renminbi, the lawful currency of the PRC
"SFO" the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time
"Share(s)" ordinary share(s) of nominal or par value of US$0.000002 each in the issued share capital of the Company or if there has been a subsequent sub-division, consolidation, reclassification or reconstruction of the share capital of the Company, shares forming part of the ordinary equity share capital of the Company
"Shareholder(s)" holder(s) of the Share(s) from time to time
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"US$" United States dollars, the lawful currency of the United States of America
"%" per cent.
In this circular, unless the context otherwise requires, the terms "associate(s)", "connected person(s)", "connected transaction(s)", "controlling shareholder(s)", "percentage ratio(s)", "subsidiary(ies)" and "substantial shareholder(s)" shall have the meanings given to such terms in the Listing Rules.
Certain amounts and percentage figures set out in this circular have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables and the currency conversion or percentage equivalents may not be an arithmetic sum of such figures.
-
The English name is a translation of its Chinese name and is included for identification purposes only.
-
3 -
LETTER FROM THE BOARD
乙康 YUNKANG
Yunkang Group Limited
云康集团有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 2325)
Executive Director:
Mr. Zhang Yong (張勇)
(Chairman of the Board and Chief Executive Officer)
Non-Executive Directors:
Ms. Huang Luo (黃珞)
Dr. Wang Pinghui (王憑慧)
Dr. Wang Ruihua (王瑞華)
Independent Non-Executive Directors:
Mr. Yu Shiyou (喻世友)
Mr. Lan Fenghui (藍達輝)
Mr. Xie Shaohua (謝少華)
Registered Office:
P.O. Box 31119 Grand Pavilion
Hibiscus Way
802 West Bay Road
Grand Cayman KY1-1205
Cayman Islands
Head Office and Principal Place of Business in the PRC:
No. 9 Yayingshi Road
Science City
Huangpu District
Guangzhou, PRC
Principal Place of Business in Hong Kong:
4/F, Jardine House
1 Connaught Place
Central
Hong Kong
December 5, 2024
To the Shareholders
Dear Sir or Madam,
(1) RENEWAL OF CONTINUING CONNECTED TRANSACTIONS; AND
(2) NOTICE OF EXTRAORDINARY GENERAL MEETING
INTRODUCTION
The purpose of this circular is to provide Shareholders with, among other things, (i) the details of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement; (ii) a letter of recommendation from the Independent Board Committee; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement; and (iv) a notice of the Extraordinary General Meeting.
LETTER FROM THE BOARD
RENEWAL OF CONTINUING CONNECTED TRANSACTIONS
References are made to the (i) Prospectus of the Company in relation to, among others, the entering into of the Existing Reagents, Consumables and Equipment Procurement Framework Agreement and the continuing connected transactions thereunder, which will expire on December 31, 2024; and (ii) the announcements dated May 30, 2022 and September 29, 2022 and the circulars dated June 9, 2022 and October 14, 2022 of the Company in relation to, among other things, the revision of annual caps for the transactions contemplated under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement. Under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement, the Group shall procure reagents, consumables and equipment from Da An Gene Group from time to time during the term thereof.
In order to continue to secure a reliable supply of reagents, consumables and equipment for the Group's business operations, the Company and Da An Gene entered into the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement on November 11, 2024.
Summary
1. Principal Terms
Date
November 11, 2024
Parties
(i) The Company; and
(ii) Da An Gene
Major terms
According to the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, Da An Gene agrees to provide reagents, consumables and equipment to the Group.
Term
The term of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement is three (3) years from January 1, 2025 to December 31, 2027.
LETTER FROM THE BOARD
Termination
Either party shall have the right to terminate the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement by serving a thirty (30) business days' prior written notice to the other party.
- Pricing Policy
The prices of the reagents, consumables and equipment under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement shall be determined by both parties through arm's length negotiation with reference to the prevailing market price of similar reagents, consumables and equipment offered by independent suppliers. The Group will obtain quotations from not less than two independent suppliers that provide similar reagents, consumables and equipment before placing orders with Da An Gene Group. Based on the fee quotes provided by other independent suppliers, the Group will be able to ensure that the purchase price to be paid to Da An Gene Group by the Group represents the prevailing market price and on normal commercial terms. The Directors are of the view that the independent suppliers in the market could supply the same or similar reagents, consumables and equipment covered under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement with Da An Gene.
Typically, there are two to five alternative independent suppliers for each type of reagents, consumables and equipment covered under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement. The Directors are also further of the view that there will not be any material difference if the Group has to procure reagents, consumables and equipment from alternative suppliers as the procurement price with Da An Gene Group represents the prevailing market price and on normal commercial terms. Even if the Group purchases from other independent suppliers other than Da An Gene Group, the Group will still obtain quotations from not less than two independent suppliers that provide similar reagents, consumables and equipment before placing orders to ensure that the procurement price is consistent with the market price.
The independent non-executive Directors will review the transactions on a half-yearly basis to assess whether such transactions are conducted in the ordinary and usual course of business of the Group, on normal commercial terms or better, in accordance with the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, on terms that are fair and reasonable and in the interests of the Shareholders as a whole.
The Company's external auditors will review the transactions annually to confirm, among others, whether the pricing terms have been adhered to and whether the annual caps have been exceeded.
The Directors consider that the internal control system of the Group is adequate to ensure that the transactions will be on normal commercial terms and no less favorable to the Group than those offered by independent third parties.
- 6 -
LETTER FROM THE BOARD
3. Existing Annual Caps and Historical Amounts
The actual transaction amounts under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement for the years ended December 31, 2022 and 2023 and the nine months ended September 30, 2024 are approximately as follows:
| For the year ended December 31, 2022 (RMB'000) | For the year ended December 31, 2023 (RMB'000) | For the nine months ended September 30, 2024 (RMB'000) | |
|---|---|---|---|
| Actual transaction amounts | 563,219 | 17,945 | 22,753(Note 1) |
| Revised Annual Caps (Second Revision) | 563,285 | 591,450 | 621,022 |
| Utilization rates (%) | 99.99% | 3.03% | 3.66%(Note 2) |
Note 1: The final transaction amount for the year ending December 31, 2024 is not expected to exceed the Revised Annual Caps (Second Revision) of RMB621.0 million for the year ending December 31, 2024 under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement.
Note 2: The utilization rate for the nine months ended September 30, 2024 is calculated by dividing the actual transaction amount for the nine months ended September 30, 2024 by the Revised Annual Caps (Second Revision) of RMB621.0 million for the year ending December 31, 2024 under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement.
As illustrated in the table above, the historical transaction amounts under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement were approximately RMB563.2 million and RMB17.9 million for the years ended December 31, 2022 and 2023, respectively, representing approximately $99.99\%$ and $3.03\%$ of the existing annual caps for the same years. The existing annual caps (i.e. the Revised Annual Caps (Second Revision)) were determined primarily with an aim to meet the anticipated significant increase in demand for COVID-19 testing at the particular point of time in 2022 due to the outbreak of the COVID-19 pandemic and the introduction of government measures to control the spread of the virus, which had led to an unexpected surge in demand for reagents, consumables and equipment. Taking into account the unexpected increase in demand since the third quarter of 2022, such caps were formulated to cater for any potential additional unforeseen transactions that may be conducted in the years ending December 31, 2022, 2023 and 2024. However, since the end of the COVID-19 pandemic in 2023, the demand for phased testing and screening has weakened nationwide, and the actual procurement needs of government and hospital clients for testing services have significantly reduced. This has led to a decrease in diagnostic testing services conducted by the Group throughout the year ended December 31, 2023 and the nine months ended September 30, 2024. As a result, the utilization rate of the existing annual cap was low in 2023, and it is expected that the utilization rate of the existing annual cap for the year ending December 31, 2024 will remain at a low level.
LETTER FROM THE BOARD
4. Proposed Annual Caps and Basis of Determination
The following table sets out the proposed annual caps for the procurement of reagents, consumables and equipment under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement:
| For the year ending December 31, 2025 (RMB'000) | For the year ending December 31, 2026 (RMB'000) | For the year ending December 31, 2027 (RMB'000) | |
|---|---|---|---|
| Proposed annual caps | 41,083 | 51,354 | 64,193 |
The proposed annual caps are determined with reference to the following factors:
(i) the historical transactions and the low utilization rates of annual caps under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement and the market condition (including the continual reducing effect of the COVID-19 pandemic) when determining the fairness and reasonableness of the proposed annual caps. Accordingly, the proposed annual caps are significantly reduced; and
(ii) the estimated transaction amounts under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, which are based on the adjusted annualized transaction amount for 2024 (the “Adjusted 2024 Annualized Transaction Amount”) and a growth rate of 25%. The Adjusted 2024 Annualized Transaction Amount is derived by annualizing the actual transaction amount for the nine months ended September 30, 2024 and adding a buffer equivalent to one month's transaction amount. This adjustment accounts for potential fluctuation in diagnostic testing demand. The growth rate of 25%Note is then applied to the Adjusted 2024 Annualized Transaction Amount to account for anticipated increases in market demand. Therefore, the proposed annual cap for 2025 is set at approximately RMB41.1 million, which is calculated by multiplying the Adjusted 2024 Annualized Transaction Amount by the growth rate of 25%. The transaction amounts for the years ending December 31, 2026 and 2027 are projected to be approximately RMB51.4 million and RMB64.2 million, respectively, which are calculated by applying a consistent growth rate of 25% per year.
Note: Such growth rate is estimated based on (i) the expected compound annual growth rate (CAGR) of the global genetic testing market, which is expected to be 22.0% from 2024 to 2030, (ii) the CAGR of the global diagnostic testing market, which is expected to be 7.9% from 2024 to 2033, and (iii) the expected increase in procurement volume from Da An Gene based on the comprehensive consideration of quality and quantity after a fair evaluation of third-party independent suppliers in the market.
LETTER FROM THE BOARD
5. Reasons for and Benefits of Entering into the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement
Da An Gene Group has been a reliable supplier in the long-time cooperation with the Group. It is also one of the leading suppliers of certain testing reagents in the industry. The Company believes that it is in the Group’s ordinary course of business to procure reagents, consumables and equipment to support the Group’s diagnostic testing service from Da An Gene Group as if procuring from other suppliers.
Information on the Parties
The Group is a China-based company mainly engaged in the provision of diagnostic testing services.
Da An Gene is a biomedical high-tech company listed on the SME Board of the Shenzhen Stock Exchange (Stock Code: 002030.SZ) with a focus on molecular diagnostic technology and is primarily engaged in the research and development, production, and sales of clinical test reagents, instruments, and supporting consumables.
Listing Rules Implications
Da An Gene is a controlling shareholder of the Company and is thus a connected person of the Company under Rule 14A.07(1) of the Listing Rules.
As the highest applicable percentage ratio (other than the profits ratio) for the highest annual cap in respect of the procurement of reagents, consumables and equipment exceeds 5% and the total consideration is not less than HK$10,000,000, the transactions contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement shall be subject to annual review, annual reporting, announcement, circular (including independent financial advice) and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
Directors’ Views
The Directors (other than Ms. Huang Luo and including the independent non-executive Directors) are of the view that the continuing connected transactions and the proposed annual caps contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement are entered into (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms or better; and (iii) on terms that are fair and reasonable and in the interests of the Company and its Shareholders as a whole.
As Ms. Huang Luo is the general manager and a director at Da An Gene, Ms. Huang had abstained from voting on the resolution at the meeting of the Board for approving the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement and the transactions contemplated thereunder.
LETTER FROM THE BOARD
Independent Board Committee and Independent Financial Adviser
The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders on the fairness and reasonableness of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, after taking into account the recommendations of the Independent Financial Adviser. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.
Reference is made to the Announcement in relation to, among others, the entering into of 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement. As disclosed in the Announcement, Topleap Financial Capital Limited ("Topleap") was appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders of the Company on the fairness and reasonableness of terms of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement and the transactions contemplated thereunder (the "Appointment"). As the Company and Topleap could not reach a consensus on the timetable under the Appointment, the Company and Topleap have mutually agreed to terminate the Appointment and Gram Capital Limited has been appointed to act as the Independent Financial Adviser in substitution for Topleap.
EXTRAORDINARY GENERAL MEETING
An Extraordinary General Meeting will be convened and held at which the Independent Shareholders will consider, and, if thought fit, approve the continuing connected transactions and the proposed annual caps contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement.
Under Rule 14A.36 of the Listing Rules, any Shareholder who has a material interest in a proposed transaction must abstain from voting at the relevant general meeting on the relevant resolution(s). In view of the potential interests of Da An Gene in the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, Daan International will be required to abstain from voting in relation to the approval for the continuing connected transactions and the proposed annual caps contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement at the Extraordinary General Meeting. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, save for and except Daan International, no other Shareholder has a material interest in the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, and therefore, no other Shareholder will be required to abstain from voting at the Extraordinary General Meeting.
The notice of the Extraordinary General Meeting is set out on pages 29 to 30 of this circular.
- 10 -
LETTER FROM THE BOARD
For determining the eligibility to attend and vote at the Extraordinary General Meeting, the register of members of the Company will be closed from Friday, December 20, 2024 to Friday, December 27, 2024, both days inclusive, during which period no transfer of Shares will be registered. In order to be eligible to attend and vote at the Extraordinary General Meeting, all transfer of Shares documents, accompanied by the relevant share certificates, must be lodged with the Company's share registrar in Hong Kong, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong, for registration not later than 4:30 p.m. on Thursday, December 19, 2024.
PROXY ARRANGEMENT
A form of proxy for use at the Extraordinary General Meeting is enclosed with this circular. Such form of proxy is also published on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.hk) and the Company (www.yunkanghealth.com). Whether or not you intend to attend the Extraordinary General Meeting, you are required to complete and sign the form of proxy in accordance with the instructions printed thereon and return it to the Company's share registrar in Hong Kong, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong not less than 48 hours before the time appointed for holding the Extraordinary General Meeting (i.e. not later than 10:00 a.m. on Wednesday, December 25, 2024) or any adjournment thereof. Delivery of any instrument appointing a proxy shall not preclude you from attending and voting in person at the Extraordinary General Meeting (or any adjourned meeting thereof) and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
VOTING BY WAY OF POLL
Pursuant to Rule 13.39(4) of the Listing Rules, any resolution put to the vote of the Shareholders at a general meeting must be taken by poll except where the chairman of the Extraordinary General Meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. An announcement on the poll results will be published by the Company after the Extraordinary General Meeting in the manner prescribed under Rule 13.39(5) of the Listing Rules.
- 11 -
LETTER FROM THE BOARD
RECOMMENDATION
Your attention is drawn to the Letter from the Independent Board Committee set out on pages 13 to 14 of this circular. The Independent Board Committee, having taken into account the advice of Gram Capital Limited, the text of which is set out on pages 15 to 24 of this circular, consider that the terms of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement and the proposed annual caps contemplated thereunder are fair and reasonable and are in the interests of the Company and the Independent Shareholders. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favor of the resolution to be proposed at the Extraordinary General Meeting to approve the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, the transactions contemplate thereunder and the proposed annual caps. Based on the relevant information disclosed herein, the Directors (including the independent non-executive Directors whose views are set out in the Letter from the Independent Board Committee to this circular), consider that the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement was entered into in the ordinary and usual course of business of the Group after arm's length negotiation and on normal commercial terms and, together with the proposed annual caps, are fair and reasonable and in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders of the Company to vote in favor of the resolution in respect of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, the transactions contemplated thereunder and the proposed annual caps to be proposed at the Extraordinary General Meeting.
Yours faithfully,
By order of the Board
Yunkang Group Limited
Zhang Yong
Chairman and Executive Director
- 12 -
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
The following is a full text of the letter from the Independent Board Committee to the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.
Yunkang Group Limited
云康集团有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 2325)
December 5, 2024
To the Independent Shareholders
Dear Sir/Madam,
RENEWAL OF CONTINUING CONNECTED TRANSACTIONS
We refer to the circular dated December 5, 2024 issued by the Company to the Shareholders (the "Circular") of which this letter forms part. Terms used in this letter shall bear the same meanings as defined in the Circular unless the context otherwise requires.
We have been authorized by the Board to form the Independent Board Committee to consider and advise the Independent Shareholders as to whether, in its opinion, the terms of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement are fair and reasonable, and the transactions contemplated thereunder are on normal commercial terms or better, in the ordinary and usual course of business of our Group and in the interests of the Company and the Shareholders as a whole. Gram Capital Limited, the Independent Financial Adviser, has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.
We wish to draw your attention to the letter from the Board set out on pages 4 to 12 of the Circular and the letter from the Independent Financial Adviser set out on pages 15 to 24 of the Circular, both of which provide details of the adoption of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement.
Having considered, among other matters, the terms of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, the advice of the Independent Financial Adviser, and the relevant information contained in the letter from the Board, we are of the opinion that the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement was entered into in the ordinary and usual course of
- 13 -
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
business of the Group after arm's length negotiation, and the transactions and the proposed annual caps under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and its Shareholders as a whole. We therefore recommend that the Independent Shareholders of the Company vote in favor of the resolution(s) to be proposed at the Extraordinary General Meeting in respect of the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, the transactions and the proposed annual caps contemplated thereunder.
Yours faithfully,
The Independent Board Committee
Yunkang Group Limited
Mr. Yu Shiyou
Mr. Lan Fenghui
Mr. Xie Shaohua
Independent Non-executive Directors
- 14 -
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Transaction for the purpose of inclusion in this circular.
Gram Capital Limited
嘉林資本有限公司
Room 1209, 12/F.
Nan Fung Tower
88 Connaught Road Central/
173 Des Voeux Road Central
Hong Kong
5 December 2024
To: The independent board committee and the independent shareholders of Yunkang Group Limited
Dear Sir/Madam,
CONTINUING CONNECTED TRANSACTION
INTRODUCTION
We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the transactions contemplated under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement (the "Transaction") (including the relevant annual caps), details of which are set out in the letter from the Board (the "Board Letter") contained in the circular dated 5 December 2024 issued by the Company to the Shareholders (the "Circular"), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.
With reference to the Board Letter, under the Existing Reagents, Consumables and Equipment Procurement Framework Agreement, the Group shall procure reagents, consumables and equipment from Da An Gene Group from time to time during the term thereof. In order to continue to secure a reliable supply of reagents, consumables and equipment for the Group's business operations, the Company and Da An Gene entered into the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement on 11 November 2024.
With reference to the Board Letter, the Transaction constitutes continuing connected transaction of the Company, and is therefore subject to the annual reporting, annual review, announcement and Independent Shareholders' approval requirements under the Chapter 14A of the Listing Rules.
- 15 -
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
The Independent Board Committee comprising Mr. Yu Shiyou, Mr. Lan Fenghui and Mr. Xie Shaohua (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Transaction (including the relevant annual caps) are on normal commercial terms and are fair and reasonable; (ii) whether the Transaction (including the relevant annual caps) are in the interests of the Company and the Shareholders as a whole and conducted in the ordinary and usual course of business of the Group; and (iii) how the Independent Shareholders should vote in respect of the resolution to approve the Transaction (including the relevant annual caps) at the EGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.
INDEPENDENCE
As at the Latest Practicable Date, we were not aware of any relationships or interests between Gram Capital and the Company during the past two years immediately preceding the Latest Practicable Date, or any other parties that could be reasonably regarded as hindrance to Gram Capital's independence to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders.
BASIS OF OUR OPINION
In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors' representation and confirmation that there is no undisclosed private agreement/arrangement or implied understanding with anyone concerning the Transaction. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.
The Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive,
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
and there are no other matters the omission of which would make any statement therein or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.
We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, Da An Gene or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Transaction. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.
Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In arriving at our opinion in respect of the Transaction, we have taken into consideration the following principal factors and reasons:
1. Information of the Group
With reference to the Company's annual report for the year ended 31 December 2023 ("FY2023") (the "2023 Annual Report"), the Group is a comprehensive and professional medical operation service provider in the PRC, which is committed to focusing on the health needs of customers, providing competitive solutions and services, and creating a happy life for the public. The Group has gradually become a leading medical operation platform through professional medical diagnostic services, strong standardization capabilities, and innovative business model of diagnostic testing services for medical institution alliances. The Group's service portfolio mainly includes diagnostic outsourcing services, diagnostic testing services for medical institution alliances and diagnostic testing services for non-medical institutions.
- 17 -
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
2. Information on Da An Gene
With reference to the Board Letter, Da An Gene is a biomedical high-tech company listed on the SME Board of the Shenzhen Stock Exchange (Stock Code: 002030.SZ) with a focus on molecular diagnostic technology and is primarily engaged in the research and development, production, and sales of clinical test reagents, instruments, and supporting consumables.
3. Reasons for and benefits of the Transaction
With reference to the Board Letter, Da An Gene Group has been a reliable supplier in the long-time cooperation with the Group. It is also one of the leading suppliers of certain testing reagents in the industry. The Company believes that it is in the Group's ordinary course of business to procure reagents, consumables and equipment to support the Group's diagnostic testing service from Da An Gene Group as if procuring from other suppliers.
As advised by the Directors, Da An Gene Group has been a major supplier of the Group and consistently supplying high-quality product to the Group with timely after-sales services. Based the information provided by the Company, (i) for FY2023, the Transaction amount represented approximately 8% of the Group's total procurement of reagents, consumables and equipment; and (ii) for the nine months ended 30 September 2024 ("9M2024"), the Transaction amount represented approximately 13% of the Group's total procurement of reagents, consumables and equipment.
Having considered the above and that the reagents, consumables and equipment procured under the Transaction are necessary for the daily operation of the Group, we are of the view that the Transaction is in the interests of the Company and the Shareholders as a whole and is conducted in the ordinary and usual course of business of the Group.
4. Principal terms of the Transaction
Agreement date
11 November 2024
Parties
(1) The Company; and
(2) Da An Gene
Subject matter
Pursuant to the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement, Da An Gene agrees to provide reagents, consumables and equipment to the Company.
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Term
From 1 January 2025 to 31 December 2027
Pricing policy
The prices of the reagents, consumables and equipment under the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement shall be determined by both parties through arm's length negotiation with reference to the prevailing market price of similar reagents, consumables and equipment offered by independent suppliers. The Group will obtain quotations from not less than two independent suppliers that provide similar reagents, consumables and equipment before placing orders with Da An Gene Group. Based on the fee quotes provided by other independent suppliers, the Group will be able to ensure that the purchase price to be paid to Da An Gene Group by the Group represents the prevailing market price and on normal commercial terms.
Further details of the pricing policy are set out under the section headed "2. Pricing Policy" of the Board Letter.
For our due diligence purpose, we conducted a sampling check on the historical Transaction as detailed below:
(a) We obtained a list of historical Transaction by products for each of the year ended 31 December 2022 ("FY2022"), FY2023 and 9M2024 and randomly selected one product for each period (three selected products in total) from the list.
(b) For each selected product, we randomly selected a month of corresponding year/period and requested the Company to provide list of orders for the selected product in the selected month.
(c) From the list of orders, we randomly selected three orders and the Company provided us with (i) invoices regarding the selected orders; and (ii) invoices regarding procurements of the selected product from independent third parties during the year/period or internal quotations comparison record duly signed by, among others, the Group's finance department and legal department (whereas the Group did not procure the selected product from independent third parties after comparing quotations provided).
We noted from the aforesaid documents that the unit prices of the selected products offered by Da An Gene Group were less than those offered by independent third parties.
Having considered historical Transaction amount for FY2022, FY2023 and 9M2024 and the populations of corresponding orders, we conducted the above sampling check on a three-dimension random selection basis (random selection on product, transaction month and orders) which covered the historical transaction period (up to the latest available month), we consider the number of samples reviewed to be (i) sufficient from an independent financial adviser's perspective; and (ii) fair and representative.
- 19 -
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
With reference to the Board Letter and as advised by the Directors, the Group adopted internal control system to govern connected transaction and the Directors consider that the internal control system of the Group is adequate to ensure that the Transaction will be on normal commercial terms and no less favourable to the Group than those offered by independent third parties.
With reference to the 2023 Annual Report:
(a) The independent non-executive Directors have reviewed and confirmed that the Group's continuing connected transactions (including the Transaction) for FY2023 have been entered into, (i) in the ordinary and usual course of business of our Group; (ii) on normal commercial terms or better to the Group; and (iii) are according to the agreement governing them on terms that are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
(b) The auditor of the Company was engaged to review and report on the Group's continuing connected transactions (including the Transaction) for FY2023 in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 (Revised) "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. The auditor has issued an unqualified letter containing the conclusions that nothing has caused them to believe that the continuing connected transactions (i) had not been approved by the Board; (ii) were not in accordance with the Company's pricing policies; (iii) were not entered into in accordance with the agreement governing them; and (iv) had exceeded the annual cap.
Proposed annual caps
Set out below are the details of (i) the historical transaction amounts of the Transaction for FY2022, FY2023 and 9M2024 (together with respective annual caps); and (ii) the proposed annual caps for the three years ending 31 December 2027 in respect of the Transaction (the "Proposed Cap(s)") as extracted from the Board Letter:
| For the year ended 31 December 2022 RMB'000 | For the year ended 31 December 2023 RMB'000 | For the year ending 31 December 2024 (“FY2024”) RMB'000 | |
|---|---|---|---|
| Historical transaction amounts | 563,219 | 17,945 | 22,753 (Note) |
| Existing annual caps | 563,285 | 591,450 | 621,022 |
| Utilisation rates | Approximately 99.99% | Approximately 3.03% | Undetermined |
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
| For the year ending 31 December 2025 (“FY2025”) RMB’000 | For the year ending 31 December 2026 (“FY2026”) RMB’000 | For the year ending 31 December 2027 (“FY2027”) RMB’000 | |
|---|---|---|---|
| Proposed Cap(s) | 41,083 | 51,354 | 64,193 |
Note: The historical transaction amount was for 9M2024.
The Proposed Caps were determined with reference to the factors as set out under the section headed "4. Proposed Annual Caps and Basis of Determination" of the Board Letter.
As depicted from the above table, the utilisation rate of existing annual cap dropped from approximately $99.99\%$ for FY2022 to approximately $3.03\%$ for FY2023. The Transaction amount for 9M2024 represented approximately $3.66\%$ of the existing annual cap for FY2024. With reference to the Board Letter, the existing annual caps were determined primarily with an aim to meet the anticipated significant increase in demand for COVID-19 testing at the particular point of time in 2022 due to the outbreak of the COVID-19 pandemic and the introduction of government measures to control the spread of the virus, which had led to an unexpected surge in demand for reagents, consumables and equipment. Nevertheless, since the end of the COVID-19 pandemic in 2023, the demand for phased testing and screening weakened nationwide, and the actual procurement needs of government and hospital clients for testing services significantly reduced. This led to a decrease in diagnostic testing services conducted by the Group throughout FY2023 and 9M2024. As a result, the utilization rate of the existing annual cap was low for FY2023, and it is expected that the utilization rate of the existing annual cap for FY2024 will remain at a low level.
In light of the above, we consider that it is reasonable for the Company to set the Proposed Caps lower than the existing annual caps for the three years ended 31 December 2024.
We noted that when the Company determines the Proposed Caps, the Company applied:
(i) annualised Transaction amount for FY2024, based on Transaction amount for 9M2024 (i.e. RMB22,753,000/9 × 12 = approximately RMB30,337,000);
(ii) a buffer of "one month Transaction amount" (i.e. RMB22,753,000/9 = approximately RMB2,528,000) (the "Buffer"); and
(iii) annual growth of $25\%$ from FY2024 to FY2027 (the "Growth").
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Based on the above, (a) the Proposed Cap of RMB41,083,000 for FY2025 equals to 125% of sum of figure (i) and (ii) above; (b) the Proposed Cap increases by 25% from FY2025 to FY2026; and (c) the Proposed Cap increases by 25% from FY2026 to FY2027.
The Buffer of “one month Transaction amount” represents a buffer of approximately 8.33% (i.e. 1/12). We also noted from other Hong Kong listed companies’ circulars regarding continuing connected transactions that the incorporation of buffer of 10% in proposed annual caps is not uncommon among companies listed on the Stock Exchange. Accordingly, we consider incorporation of the Buffer of below 10% to be justifiable.
As aforementioned, (i) the Group’s service portfolio mainly includes diagnostic outsourcing services, diagnostic testing services for medical institution alliances and diagnostic testing services for non-medical institutions; and (ii) the Group procures reagents, consumables and equipment under the Transactions to support the Group’s diagnostic testing services. With reference to the 2023 Annual Report and as confirmed by the Directors, the Group’s diagnostic testing services cover main disease areas such as infectious diseases, reproductive health and genetic diseases. Accordingly, to assess the Growth of 25%, we searched and identified the following market information:
(i) We noted from a report titled “Diagnostic Testing Market Size, Share, Trends & Growth Report, 2033” (https://www.novaoneadvisor.com/report/diagnostic-testing-market) published by Nova One Advisor that the global diagnostic testing market size was estimated at US$211.27 billion in 2023 and is projected to hit around US$449.78 billion by 2033, growing at a compound annual growth rate (“CAGR”) of 7.9% during the forecast period from 2024 to 2033. According to Nova One Advisor’s website, it is a Canada/India based company and one of the leading providers of strategic market insights, offering (a) executive-level blueprints of markets and solutions; and (b) flagship surveys.
(ii) We also noted from a report titled “Global Genetic Testing Market Size & Outlook, 2024-2030” (https://www.grandviewresearch.com/horizon/outlook/genetic-testing-market-size/global) published by Grand View Research that (i) the global genetic testing market generated revenue of US$8,811.0 million in year 2023 and is expected to reach US$35,349.0 million by year 2030; and (ii) the market is expected to grow at a CAGR of 22% by year 2030. According to the website of Grand View Research, Grand View Research is an India & United States based market research and consulting company, registered in the State of California and headquartered in San Francisco. Grand View Research provides syndicated research reports, customized research reports, and consulting services. Grand View Research database is used by the world’s renowned academic institutions and Fortune 500 companies to understand the global and regional business environment. Its database features thousands of statistics and in-depth analysis on 46 industries in 25 major countries worldwide.
- 22 -
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
In addition, (i) for FY2023, the Transaction amount represented approximately 8% of the Group's total procurement of reagents, consumables and equipment for FY2023; and (ii) for the 9M2024, the Transaction amount represented approximately 13% of the Group's total procurement of reagents, consumables and equipment. As aforementioned, it is the Group's pricing policy that the Group will obtain quotations from not less than two independent suppliers that provide similar reagents, consumables and equipment before placing orders with Da An Gene Group. Should Da An Gene Group offer products with satisfactory quality and more favourable prices in future, the Group may opt to place more orders with Da An Gene Group, hence increasing the proportion of procurement from Da An Gene Group and the Transaction amount. For illustration purpose only, every "1%" increase in proportion of the Transaction amount to the Group's total procurement of reagents, consumables and equipment (from approximately 13% for 9M2024) will cause an increase of approximately 8% (i.e. 1/13) of the Transaction amount.
Given the above, we consider the Growth of 25% to be justifiable.
In light of the above, we consider that the Proposed Caps for the three years ending 31 December 2027 are fair and reasonable.
Shareholders should note that as the Proposed Caps are relating to future events and were estimated based on assumptions which may or may not remain valid for the entire period up to 31 December 2027, and they do not represent forecasts of cost to be incurred under the Transaction. Consequently, we express no opinion as to how closely the actual cost to be incurred under the Transaction will correspond with the Proposed Caps.
Having considered the principal terms of the Transaction as set out above, we are of the view that the terms of the Transaction (including the Proposed Caps) are on normal commercial terms and are fair and reasonable.
5. Listing Rules implication
The Directors confirmed that the Company shall comply with the requirements of Rules 14A.53 to 14A.59 of the Listing Rules pursuant to which (i) the value of the Transaction must be restricted by the Proposed Caps; (ii) the terms of the Transaction (including the Proposed Caps) must be reviewed by the independent non-executive Directors annually; (iii) details of independent non-executive Directors' annual review on the terms of the Transaction must be included in the Company's subsequent published annual reports. Furthermore, it is also required by the Listing Rules that the auditors of the Company must provide a letter to the Board confirming, among other things, whether anything has come to their attention that causes them to believe that the Transaction (i) has not been approved by the Board; (ii) was not entered into, in all material respects, in accordance with the relevant agreement governing the Transaction; and (iii) has exceeded the Proposed Caps. In the event that the total amounts of the Transaction are anticipated to exceed the Proposed Caps, or that there is any proposed material amendment to the terms of the Transaction, as confirmed by the Directors, the Company shall comply with the applicable provisions of the Listing Rules governing continuing connected transaction.
- 23 -
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER
Given the above stipulated requirements for continuing connected transactions pursuant to the Listing Rules, we are of the view that there are adequate measures in place to monitor the Transaction and thus the interest of the Independent Shareholders would be safeguarded.
RECOMMENDATION
Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Transaction are on normal commercial terms and are fair and reasonable; and (ii) the Transaction is conducted in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Transaction and we recommend the Independent Shareholders to vote in favour of the resolution in this regard.
Yours faithfully,
For and on behalf of
Gram Capital Limited
Graham Lam
Managing Director
Note: Mr. Graham Lam is a licensed person registered with the Securities and Futures Commission and a responsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has around 30 years of experience in investment banking industry.
- 24 -
APPENDIX
GENERAL INFORMATION
RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.
MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading positions of the Company since December 31, 2023, being the date to which the latest published audited financial statement of the Company have been made up.
INTERESTS OF DIRECTORS
Save as disclosed in the section headed "Relationship with Controlling Shareholders" of the Prospectus, the Directors are not aware of any Director or his respective associates having as of the Latest Practicable Date, any interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group which would be required to be disclosed under the Listing Rules.
Save as disclosed in the section headed "Connected Transactions" of the Prospectus, no Director was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was significant to the business of the Group taken as a whole.
Save as disclosed in the section headed "Connected Transactions" of the Prospectus, none of the Directors has, or has had, any direct or indirect interest in any assets which have been acquired or disposed of by or leased to or which are proposed to be acquired, disposed of by or leased to, any member of the Group.
EXPERT AND CONSENT
The following is the qualification of the expert who has given opinions contained in and referred to in this circular:
| Name | Qualification |
|---|---|
| Gram Capital Limited | A licensed corporation under the SFO, licensed to carry out Type 6 (advising on corporate finance) regulated activities |
- 25 -
APPENDIX
GENERAL INFORMATION
The Independent Financial Adviser has given and has not withdrawn its consent to the issue of this circular with inclusion of its letter and reference to its name in the form and context in which they appear respectively.
As at the Latest Practicable Date, the Independent Financial Adviser had no shareholding in the Company or any other member of the Group or right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities of the Company or any other member of the Group.
As at the Latest Practicable Date, the Independent Financial Adviser had no direct or indirect interests in any assets which had been acquired or disposed of by or leased to any member of the Group since December 31, 2023 (the date to which the latest published audited consolidated financial statements of the Company were made up) or proposed to be so acquired, disposed of or leased to.
The letter and recommendations from the Independent Financial Adviser dated December 5, 2024 are set out on pages 15 to 24 of this circular and are given for incorporation in this circular.
DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN THE SECURITIES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS
As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was deemed or taken to have 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 the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code"), to be notified to the Company and the Stock Exchange, were as follows:
Interest in associated corporations of the Company
| Name of Director | Capacity/Nature of interests | Name of associated corporation | Percentage of shareholding in the associated corporation |
|---|---|---|---|
| Mr. Zhang Yong | Beneficial Owner | Huizekx Limited | 100% |
| Interested in a controlled corporation | YK Development Limited | 64.04% |
APPENDIX
GENERAL INFORMATION
Interests in the Shares or underlying Shares of the Company
| Name of Director | Capacity/Nature of interests | Number of Ordinary Shares | Approximate percentage of shareholding in the total issued share capital (%) |
|---|---|---|---|
| Mr. Zhang Yong | Interested in a controlled corporation | 250,108,000(1) (L) | 40.25% (L) |
(L) denotes a long position
Note:
(1) These shares are directly held by YK Development Limited, which is held as to 64.04% and controlled by Huizekx Limited, which is wholly-owned by Mr. Zhang Yong. Therefore, Huizekx Limited and Mr. Zhang Yong are deemed to be interested in the Shares held by YK Development Limited under the SFO. YK Development Limited has pledged a total of 201,108,000 shares of the Company, including (1) 140,493,220 shares pledged to China Construction Bank (Asia) Corporation Limited in favor of SPDB International (Hong Kong) Limited; and (2) 60,614,780 shares pledged directly to Guangzhou Wuyang Branch of Shanghai Pudong Development Bank Co., Ltd.
Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had registered an interest or a short position in the shares or underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was deemed or taken to have 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 the Model Code, to be notified to the Company and the Stock Exchange.
DIRECTORS' SERVICE CONTRACTS
As at the Latest Practicable Date, none of the Directors had entered into or proposed to enter into any 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)).
GENERAL
The Company's share registrar in Hong Kong is Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong.
The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text in the case of any inconsistency.
APPENDIX
GENERAL INFORMATION
DOCUMENTS ON DISPLAY
Copies of the following documents will be available for inspection on the website of the Stock Exchange at www.hkexnews.hk and our Company’s website at www.yunkanghealth.com for a period of 14 days from the date of this circular:
(a) the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement;
(b) the letter from the Independent Board Committee, the text of which is set out on pages 13 to 14 of this circular;
(c) the letter from the Independent Financial Adviser, the text of which is set out on pages 15 to 24 of this circular; and
(d) the written consent of the Independent Financial Adviser.
- 28 -
NOTICE OF EXTRAORDINARY GENERAL MEETING
乙康 YUNKANG
Yunkang Group Limited
云康集团有限公司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 2325)
NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the "Extraordinary General Meeting") of Yunkang Group Limited (the "Company") will be held on Friday, December 27, 2024 at 10:00 a.m. at No. 9 Yayingshi Road, Science City, Huangpu District, Guangzhou, PRC, for the following purposes:
ORDINARY RESOLUTION
- To consider and, if thought fit, approve, with or without modifications, the following resolution as ordinary resolution:
"THAT (1) the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement (as defined in the circular of the Company dated December 5, 2024) (the "Circular") entered into by and between the Company and Daan Gene Co., Ltd. (廣州達安基因股份有限公司) ("Da An Gene") dated November 11, 2024 (a copy of which has been produced to the Extraordinary General Meeting and marked "A" and initialed by a Director for the purpose of identification) (details of which are set out in the Circular) relating to the procurement of reagents, consumables and equipment by the Company and its subsidiaries (the "Group") from Da An Gene and its subsidiaries ("Da An Gene Group"), and all the transactions contemplated thereunder be and are hereby approved, ratified and confirmed; and (2) the proposed annual caps for the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement for the years ending December 31, 2025, 2026 and 2027 in the amounts of RMB41.083 million, RMB51.354 million and RMB64.193 million, respectively, be and are hereby approved and confirmed; and THAT any one or more directors of the Company be and are hereby authorized to do all such things and execute all such documents as they in their absolute discretion deem fit or appropriate to give effect to the 2025-2027 Reagents, Consumables and Equipment Procurement Framework Agreement and the implementation of all the transactions contemplated thereunder."
By order of the Board
Yunkang Group Limited
Mr. Zhang Yong
Chairman and Executive Director
Guangzhou, the PRC, December 5, 2024
NOTICE OF EXTRAORDINARY GENERAL MEETING
Notes:
(i) For the purpose of determining the identity of the shareholders of the Company entitled to attend and vote at the Extraordinary General Meeting, the register of members of the Company will be closed from Friday, December 20, 2024 to Friday, December 27, 2024, both dates inclusive, during which period no transfer of shares will be effected. All transfers accompanied by the relevant certificates must be lodged with the Company's share registrar in Hong Kong, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong for registration not later than 4:30 p.m. on Thursday, December 19, 2024.
(ii) A shareholder of the Company entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint one or, if he/she/it is the holder of two or more shares, more proxies to attend and vote instead of him/her/it. A proxy need not be a shareholder of the Company.
(iii) Where there are joint registered holders of any share, any one of such persons may vote at the Extraordinary General Meeting, either personally or by proxy, in respect of such share as if he/she were solely entitled thereto; but if more than one of such joint holders be present at the Extraordinary General Meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding.
(iv) In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his attorney duly authorized in writing, or if the appointor is a corporation, either under seal, or under the hand of an officer or attorney or other person duly authorized, and must be deposited with the share registrar in Hong Kong, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) not less than 48 hours before the time appointed for holding the Extraordinary General Meeting or any adjourned meeting (i.e. not later than 10:00 a.m. on Wednesday, December 25, 2024). Delivery of any instrument appointing a proxy shall not preclude you from attending and voting in person at the Extraordinary General Meeting (or any adjourned meeting thereof) and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
(v) The resolution at the Extraordinary General Meeting will be taken by poll (except where the chairman decides to allow a resolution relating to a procedural or administrative matter to be voted on by a show of hands) pursuant to the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The results of the poll will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company in accordance with the Listing Rules.
(vi) Shareholders attending the Extraordinary General Meeting in person or by proxy shall bear their own travelling and accommodation expenses, and shall produce their identity documents.
(vii) References to dates and time in this notice are to Hong Kong dates and time.
(viii) The English text of this notice shall prevail over the Chinese text for the purpose of interpretation.
As at the date of this notice, the Board comprises Mr. Zhang Yong as chairman and executive Director; Ms. Huang Luo, Dr. Wang Pinghui and Dr. Wang Ruihua as non-executive Directors; and Mr. Yu Shiyou, Mr. Lan Fenghui and Mr. Xie Shaohua as independent non-executive Directors.
- 30 -