TEST BANK For Corporate Finance, 13th Edition By Stephen Ross, Randolph Weste...
2009 convoy financial services hk
1.
2. IMPORTANT
If you are in any doubt about this prospectus, you should obtain independent professional advice.
CONVOY FINANCIAL SERVICES HOLDINGS LIMITED
(incorporated in the Cayman Islands with limited liability)
LISTING ON THE MAIN BOARD OF
THE STOCK EXCHANGE OF HONG KONG LIMITED
BY WAY OF
PLACING AND PUBLIC OFFER
Number of Offer Shares: 100,000,000 Shares
Number of Placing Shares: 90,000,000 Shares (subject to re-allocation)
Number of Public Offer Shares: 10,000,000 Shares (subject to re-allocation)
Offer Price: Not more than HK$1.20 per Offer Share and expected to be
not less than HK$1.00 per Offer Share, plus brokerage of
1%, SFC transaction levy of 0.004% and Stock Exchange
trading fee of 0.005% (payable in full on application in
Hong Kong dollars and subject to refund)
Nominal value: HK$0.10 per Share
Stock code: 1019
SPONSOR JOINT LEAD MANAGERS BOOKRUNNER
QUAM CAPITAL QUAM SECURITIES CONVOY INVESTMENT QUAM SECURITIES
LIMITED COMPANY LIMITED SERVICES LIMITED COMPANY LIMITED
CO-LEAD MANAGERS
Celestial Securities Limited China Merchants Securities (HK) UOB Kay Hian (Hong Kong)
Co., Limited Limited
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited
take no responsibility for the contents of this prospectus, 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 prospectus.
A copy of this prospectus, having attached thereto the documents specified under the paragraph headed “Documents delivered to the Registrar of
Companies in Hong Kong” in Appendix VI to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by
section 342C of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the
Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any other documents referred to above.
The Offer Price is expected to be determined by agreement between the Joint Lead Managers (for themselves and on behalf of the Underwriters) and
us on or before Tuesday, 6 July 2010 or such later date as may be agreed by the Joint Lead Managers (for themselves and on behalf of the
Underwriters) and us. The Offer Price will not be more than HK$1.20 per Offer Share and is currently expected to be not less than HK$1.00 per Offer
Share unless otherwise announced. Investors applying for the Public Offer Shares must pay, on application, the indicative maximum offer price of
HK$1.20 per Offer Share together with brokerage of 1%, SFC transaction levy of 0.004% and Stock Exchange trading fee of 0.005%, subject to
refund.
The Joint Lead Managers (for themselves and on behalf of the Underwriters), with our consent, may reduce the indicative Offer Price range stated in
this prospectus and/or the number of Offer Shares being offered pursuant to the Share Offer at any time prior to the morning of the last day for
lodging applications under the Public Offer. In such a case, a notice of the reduction of the indicative Offer Price range and/or the number of Offer
Shares will be published in The Standard (in English) and the Hong Kong Economic Times (in Chinese), and on our website at www.convoy.com.hk
and the Stock Exchange’s website at www.hkexnews.hk, not later than the morning of the last day for lodging applications under the Public Offer. If
applications for the Public Offer Shares have been submitted prior to the day which is the last day for lodging applications under the Public Offer,
then even if the Offer Price range and/or the number of Offer Shares is so reduced, such applications cannot subsequently be withdrawn.
If, for any reason, the Offer Price is not agreed between the Joint Lead Managers (for themselves and on behalf of the Underwriters) and us on or
before Tuesday, 6 July 2010 or such later date as may be agreed by the Joint Lead Managers (for themselves and on behalf of the Underwriters) and
us, the Share Offer will not proceed and will lapse.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus, including the
risk factors set out in the section headed “Risk factors” in this prospectus.
Prospective investors of the Offer Shares should note that the Underwriters are entitled to terminate their obligations under the Underwriting
Agreement by notice in writing to be given by the Joint Lead Managers (for themselves and on behalf of the Underwriters) upon the occurrence of any
of the events set forth under the paragraph headed “Grounds for termination” in the section headed “Underwriting” in this prospectus at any time prior
to 8:00 a.m. (Hong Kong time) on the Listing Date. Further details of these termination provisions are set out under the paragraph headed “Grounds for
termination” in the section headed “Underwriting” in this prospectus. Prospective investors should carefully refer to that section for further details.
29 June 2010
3. EXPECTED TIMETABLE
We will publish an announcement in Hong Kong in The Standard (in English) and the Hong
Kong Economic Times (in Chinese), and on our website at www.convoy.com.hk and the website of the
Stock Exchange at www.hkexnews.hk, if there is any change in the following expected timetable of the
Public Offer.
2010(1)
Application Lists open(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:45 a.m. on Monday, 5 July
Latest time for lodging white and yellow Application
Forms(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Monday, 5 July
Application Lists close(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Monday, 5 July
Expected Price Determination Date(3) ...................... Tuesday, 6 July
Announcement of the final Offer Price, the level of indications
of interest in the Placing, the level of applications in the Public
Offer, the basis of allotment of and results of allocations of the
Public Offer Shares under the Public Offer to be published (i)
in The Standard (in English) and the Hong Kong Economic
Times (in Chinese), and (ii) on our Company’s website at
www.convoy.com.hk and the Stock Exchange’s website at
www.hkexnews.hk on or before . . . . . . . . . . . . . . . . . . . . . . . . Monday, 12 July
Results of applications (with Hong Kong identity card/passport/
Hong Kong business registration numbers of successful
applicants) under the Public Offer to be available through a
variety of channels as described under the paragraph headed
“Publication of results” in the section headed “How to apply
for the Public Offer Shares” in this prospectus from . . . . . . . . Monday, 12 July
Despatch of share certificates of the Offer Shares in respect of
wholly or partially successful applications under the Public
Offer on or before(4) & (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 12 July
Despatch of refund cheques in respect of wholly successful (if
applicable) and wholly or partially unsuccessful applications
under the Public Offer on or before(5) & (6) . . . . . . . . . . . . . . . . . Monday, 12 July
Dealings in the Shares on the Main Board to commence at
9:30 a.m. on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 13 July
Notes:
(1) Unless otherwise stated, all times and dates refer to Hong Kong local times and dates.
(2) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong at any time
between 9:00 a.m. and 12:00 noon on Monday, 5 July 2010, the Application Lists will not open or close on that day. Please refer to the
paragraph headed “Effect of bad weather on the opening of the Application Lists” in the section headed “How to apply for the Public
Offer Shares” in this prospectus. If the Application Lists do not open and close on Monday, 5 July 2010, the dates mentioned in this
section headed “Expected timetable” may be affected.
(3) The Price Determination Date, being the date on which the Offer Price is to be determined, is expected to be on or about Tuesday, 6 July
2010 or such later date as may be agreed by the Joint Lead Managers (for themselves and on behalf of the Underwriters) and us. If, for
any reason, the final Offer Price is not agreed between the Joint Lead Managers (for themselves and on behalf of the Underwriters) and
us, the Share Offer (including the Public Offer) will not proceed and will lapse.
(4) Share certificates for the Offer Shares will only become valid certificates of title at 8:00 a.m. on Tuesday, 13 July 2010 provided that
(i) the Share Offer has become unconditional in all respects; and (ii) the Underwriting Agreement has not been terminated in accordance
with its terms. If the Share Offer does not become unconditional or the Underwriting Agreement is terminated in accordance with its
terms, we will make an announcement as soon as possible.
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4. EXPECTED TIMETABLE
(5) Refund cheques will be issued in respect of wholly or partially unsuccessful applications pursuant to the Public Offer and also in respect
of wholly or partially successful applications in the event that the final Offer Price is less than the price payable per Offer Share on
application. Part of the applicant’s Hong Kong identity card number or passport number, or, if the application is made by joint applicants,
part of the Hong Kong identity card number or passport number of the first-named applicant, provided by the respective applicant(s) may
be printed on the refund cheque (where applicable). Such data would also be transferred to a third party for refund purpose. The banker
of an applicant may require verification of the applicant’s Hong Kong identity card number or passport number before cashing the refund
cheque. Inaccurate completion of an applicant’s Hong Kong identity card number or passport number may lead to delay in encashment of
or may invalidate the refund cheque.
(6) Applicants who have applied on white Application Forms for 1,000,000 or more Public Offer Shares under the Public Offer and have
indicated in their Application Forms that they wish to collect any share certificate and/or refund cheque (where applicable) in person,
may do so from our Hong Kong branch share registrar and transfer office, Tricor Investor Services Limited, at 26th Floor, Tesbury
Centre, 28 Queen’s Road East, Wanchai, Hong Kong, between 9:00 a.m. to 1:00 p.m. on Monday, 12 July 2010 or on the date notified
by our Company as the date of despatch of share certificates and refund cheques.
Applicants being individuals who opt for personal collection must not authorise any other person to make collection on their behalf.
Applicants being corporations who opt for personal collection must attend by their authorised representatives bearing letters of
authorisation from their corporations stamped with the corporation’s chop. Both individuals and authorised representatives of
corporations, as the case may be, must produce, at the time of collection, identification and (where applicable) documents acceptable to
our Hong Kong branch share registrar and transfer office, Tricor Investor Services Limited, at the time of collection.
If an applicant has applied for less than 1,000,000 Public Offer Shares or has applied for 1,000,000 Public Offer Shares or more under
the Public Offer and has not indicated on the relevant Application Form that share certificate and/or refund cheque (where applicable)
will be collected in person then the share certificate and/or refund cheque (where applicable) will be sent to the address as appeared on
the relevant Application Form on the date of despatch by ordinary post at the applicant’s own risk.
Applicants who have applied on yellow Application Forms for 1,000,000 or more Public Offer Shares under the Public Offer may collect
their refund cheques (where applicable), in person but may not elect to collect their share certificates which will be deposited into
CCASS for credit to their designated CCASS Participants’ stock accounts or CCASS Investor Participant stock accounts, as appropriate.
The procedures for collection of refund cheques for yellow Application Form applicants are the same as those for white Application
Form applicants. Uncollected share certificates (where applicable) and refund cheques (where applicable) will be despatched by ordinary
post at the applicants’ own risk to the addresses specified in the relevant Application Forms. Further information is set out under the
paragraph headed “Despatch/collection of share certificates and refund of application money” in the section headed “How to apply for
the Public Offer Share” in this prospectus.
Particulars of the structure of the Share Offer, including the conditions thereto, are set out in the
section headed “Structure and conditions of the Share Offer” in this prospectus.
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7. SUMMARY
This summary aims to give you an overview of the information contained in this
prospectus. Since it is a summary, it does not contain all the information that may be important to
you. You should read this prospectus in its entirety before you decide to invest in the Offer Shares.
There are risks associated with any investment in companies listed on the Stock Exchange.
Some of the particular risks in investing in the Offer Shares are set out in the section headed
“Risk factors” in this prospectus. You should read that section carefully before you decide to
invest in the Offer Shares.
OVERVIEW
Our Group is principally engaged in the insurance and MPF schemes brokerage business. We
negotiate and arrange contracts of insurance and MPF schemes in Hong Kong as the agent of our
customers, i.e. the policyholders, and advise on matters related to insurance. In pursuing the insurance
brokerage business, CFS commenced business in 1993, for carrying on long term (including linked
long term) and general insurance business, and to provide independent advisory services in connection
with insurance products. In October 1998, our Group started our brokerage business of Investment-
linked Assurance Scheme (“ILAS”), an insurance policy of the “linked long term” class as defined in
the First Schedule, Part 2 of the ICO, through CFS. In December 1999, our Group commenced MPF
schemes brokerage business to tap into the unexplored market of MPF which was launched in
December 2000. CFS is a corporate member of PIBA and corporate intermediary of MPFA. We carry
on our business under the Trademarks ( , , , and ) through a non-exclusive
licence granted by CTL, a wholly-owned subsidiary of CFG. Our Directors believe that the Listing will
be definitely conducive to the further enhancement of our Group’s image and our onward development
in the insurance and MPF schemes brokerage market in the future.
REGULATORY FRAMEWORK
The self-regulatory system for insurance intermediaries, i.e., insurance agents and brokers, is
supported by legislation which is contained in Part X of the ICO. Under section 65 of the ICO, a
person is prohibited from holding himself out as an insurance broker unless he is properly appointed or
authorised. A person intending to act as an insurance broker shall either seek authorisation from the IA
or apply to become a member of a body of insurance brokers approved by the IA. The appointment of
any person as a consultant by an insurance broker is subject to the confirmation and registration of the
IA or the relevant approved body of insurance brokers (as the case may be).
Under this self-regulatory system, CFS is approved as an insurance broker by PIBA, which is in
turn approved by the IA as a body of insurance brokers and all of its Consultants have obtained the
confirmation and registration of PIBA before their appointment by CFS as the Consultants.
On the other hand, the SFC has clarified in the SFC Circular that, among others, as a general
rule, the SFC considers that insurance intermediaries who are promoting, offering or selling ILAS to
the public are neither obliged nor permitted to be licensed under the SFO. As a result, an insurance
broker may arrange with his/her customers to purchase authorised ILAS without the need for
registration as an investment adviser or an investment representative under the SFO. Therefore, CFS is
not required and in fact is not licensed by the SFC. Our Company is advised by its legal advisers as to
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8. SUMMARY
Hong Kong law that their view are in line with the view of the SFC under the SFC Circular that, as a
general rule, insurance intermediaries who are dealing solely in ILAS and other insurance products are
neither obliged nor permitted to be licensed under the SFO.
OUR BUSINESS MODEL
The simplified diagram below illustrates our existing business model:
commissions
and supportive
operational platform
Our
Consultants
Group
introduction
financial needs of customers
brokerage commissions
analysis, advisory,
and recurring fees
recommendation and
(in connection with the
assistance in product
amount of contribution/
application provided
payments made by our
by the Consultants to
customers)
our customers contributions
and payments
Our
customers Product Issuers
(policyholders)
ILAS, MPF schemes
and general/conventional
insurance products
Note : The solid lines represent either payment of money or contractual relationship between the parties.
The dotted line represents provision of services.
CFS establishes business relationships with the Product Issuers by entering into the broker
agreements. Our customers are policyholders whom the Consultants provide services to. Our Group
delivers our services to the customers through the Consultants. In conducting the business, the
Consultants will (i) conduct financial needs analysis for customers who need long term insurance
products and schemes (including ILAS); and (ii) advise or make recommendations to the customers
concerning the selection by them of the underlying funds of ILAS. Our customers will pay
contributions to the Product Issuers directly. The Product Issuers, which developed the insurance
products, would remunerate our Group on a commission and recurring fee basis for services provided
by our Group to the customers.
The majority of our business is being generated from referrals, recurring business from existing
customers and the remaining is from direct marketing. Referrals, recurring business from existing
customers and direct marketing accounted for approximately 47.4%, 34.3% and 18.3% of the business
of our Group for the year ended 31 December 2009 respectively.
Being an independent insurance broker, our Group has certain competitive advantages in
respect of the services we provide as shown under the paragraph headed “Competitive advantages of
an independent insurance broker” in the section headed “Industry overview” and the paragraph headed
“Our competitive advantages” in the section headed “Business” in this prospectus.
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9. SUMMARY
Our products
ILAS or Investment-linked Assurance Scheme is the major contracts of insurance on which our
Group provides advisory services and from which over 99% of our Group’s revenue for the three years
ended 31 December 2007, 2008 and 2009 was generated. As a supplement, our Group also acts as an
independent broker for general and conventional insurance products and MPF schemes in the course of
providing advisory services to the customers.
The following table sets out a breakdown of our revenue for the Track Record Period:
Year ended 31 December
2007 2008 2009
HK$’000 % HK$’000 % HK$’000 %
ILAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633,873 99.66 552,943 99.76 451,637 99.14
Other insurance products . . . . . . . . . . . . . . . . . . . . . . . 1,743 0.27 410 0.07 3,391 0.74
MPF schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 0.07 930 0.17 559 0.12
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636,068 100.00 554,283 100.00 455,587 100.00
Our Directors believe that among all products and schemes we promote, ILAS is the most
popular choice as it is believed to be one of the most effective insurance products to achieve our
customers’ objectives. A brief study of the popularity of ILAS in Hong Kong is set out under the
paragraph headed “Development of ILAS in Hong Kong” in the section headed “Industry overview” in
this prospectus. Our Group is not involved in the underwriting of any product or scheme we promote.
Relationship with Consultants
The Consultants, except for licensed trainees, are not employed by CFS, but CFS has entered
into contracts for services on the basis that they are providing exclusive insurance and MPF schemes
brokerage services in Hong Kong to CFS. Unlike insurance agents engaged by authorised insurers in
Hong Kong, the Consultants have no contractual relationship with and are independent of the Product
Issuers. Both the Consultants and our Group are responsible for the advisory services provided to
customers and potential customers. The Consultants promote, arrange and negotiate contracts of
insurance and MPF schemes with the customers independently in accordance with all applicable
codes, rules, laws and regulations of the relevant regulatory bodies and Government authorities in
Hong Kong and are remunerated on a commission basis by CFS for the insurance products and MPF
schemes which they have successfully arranged.
All Consultants have contractually undertaken under their respective contracts for services
entered into with CFS that they will only carry on their activities on behalf of our Group for which they
are licensed. All Consultants are registered with PIBA as technical representatives of CFS. There were
1,023 Consultants and they represented the largest team licensed to market ILAS in Hong Kong as at
the Latest Practicable Date. There were 751 Consultants who were registered with both PIBA and
MPFA as representatives of CFS as at the Latest Practicable Date, representing approximately 73.4%
of the teams of Consultants.
In addition, although our Group may be subject to civil liabilities and/or disciplinary actions of
regulatory authorities (such as PIBA) if there is any misconduct by the Consultants in selling ILAS, the
Consultants will indemnify our Group from and against all actions, claims, proceedings, costs,
damages and expenses which may be levied, brought, incurred or made against our Group by any
customer and potential customer in respect of or arising out of the provision of the services by the
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10. SUMMARY
Consultants pursuant to contracts for services between the Consultants and CFS. Details of the
indemnity provided by the Consultants are set out under the paragraph headed “Our business model” in
the section headed “Business” in this prospectus.
Relationship with the Product Issuers
Our Group’s business relationships with various ILAS Issuers, who are independent of us, are
formed on the basis of the terms of business and/or conditions issued by the ILAS Issuers to our
Group. The broker agreements entered into between CFS and the ILAS Issuers have no expiry date and
can be terminated subject to one month’s advance notice and/or under certain circumstances. Through
provision of relevant advices, our Group is entitled to receive brokerage commission income from the
Product Issuers for business referrals and introductions as a result of arrangement of insurance products
and/or MPF schemes to customers. Our Directors believe that it is the industry norm that commission
is paid by the Product Issuers to the brokers. Although Product Issuers are not treated as customers by
our Group, we actually recorded accounts receivable and bear credit risk from the Product Issuers
rather than the policyholders. For details of the broker agreements, please refer to the paragraph headed
“Establishment of business relationships with Product Issuers” in the section headed “Business” in this
prospectus.
As at the Latest Practicable Date, our Group had built up a network with not less than 12 ILAS
Issuers and seven MPF Providers and certain other Product Issuers, and formed strategic partnerships
in promotion, marketing and sale of insurance products and MPF schemes.
The top five ILAS Issuers of our Group in terms of commission income, together accounted for
approximately 98.5%, 96.9% and 97.1% respectively of our Group’s revenue for the three years ended
31 December 2007, 2008 and 2009. Each of our top five Product Issuers issues ILAS themselves. Four
of the top five ILAS Issuers of our Group are Zurich International Life Limited, Friends Provident
International Limited, Standard Life (Asia) Limited and Generali International Limited. The largest
ILAS Issuer of our Group, in terms of commission income, accounted for approximately 50.9%, 48.2%
and 43.7% respectively of our Group’s revenue for the three years ended 31 December 2007, 2008 and
2009. For further details of our Group’s risk of concentration of ILAS Issuers for commission income,
please refer to the paragraph headed “We rely on our top five ILAS Issuers for a significant portion of
our revenue, and we anticipate such dependence to continue in the near future” in the section headed
“Risk factors” in this prospectus.
Relationship with our customers
Our customers are policyholders whom the Consultants provide services to. Our Directors
believe that it is the industry norm that the independent insurance brokers treat the policyholders as
their customers. Our Group primarily provides advices to our customers through the Consultants as to
the selection of suitable insurance products and/or MPF schemes which are provided by the Product
Issuers to assist the customers to achieve their needs, who in turn enter into policy contracts with the
Product Issuers. The policy contracts are issued by the Product Issuers. As an insurance broker, our
Group is required under the ICO to act for the interest of policyholders and potential policyholders.
Through provision of relevant advices, our Group is entitled to receive brokerage commission income
from the Product Issuers for business referrals and introductions as a result of arrangement of insurance
products and/or MPF schemes to customers. From another point of view, the customers pay such
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11. SUMMARY
commission to our Group indirectly as all such costs would be eventually deducted from the
customers’ contribution.
Although brokerage commission income and recurring fees are paid to us by the Product
Issuers, our Directors consider that such arrangement (as described in the diagram above in this
section) will not lead to conflicts despite commission income is paid by the Product Issuers because
(i) our focus is to provide advices and information to our customers according to their objectives, needs
and concerns; and (ii) our Group is dedicated to provide a comprehensive and quality choice of various
products to the customers through maintaining business relationships with various Product Issuers and
performing due diligence on their products, to enable the customers to make informed decision as to
their choice of product(s). Our Directors believe that the aforementioned relationships among
customers, authorised insurers, insurance brokers and consultants are common across the insurance
brokerage industry in Hong Kong.
In the event that inappropriate products are recommended and purchased by the customers, our
Group will need to bear the liabilities, subject to the indemnity provided by the relevant Consultants
under the contracts for services. The Product Issuers will bear the liabilities when the products
themselves have defects or there are misrepresentations in the Product Issuers’ documentations for the
products. Please refer to the paragraph headed “Our customers” in the section headed “Business” in
this prospectus for further details.
Internal control of our Group
With the aim of developing and strengthening our compliance and internal control mechanisms,
our Group has established and implemented risk management and internal control systems, policies
and procedures, with reference to the requirements of the PIBA and the OCI. Our Group has engaged a
firm of certified public accountants to perform an internal control review on our Group’s internal
control system. Details of the above are disclosed under the paragraph headed “Long established and
comprehensive internal control system” in the section headed “Business” in this prospectus.
OUR REVENUE MODEL
Our Group is entitled to receive one-off brokerage commission income and recurring fee
income from various Product Issuers for brokering the sale of their products. The following table sets
out the amount of one-off brokerage commission income and recurring fee income for the Track
Record Period:
2007 2008 2009
Percentage Percentage Percentage
HK$’000 of total HK$’000 of total HK$’000 of total
One-off brokerage commission income . . . . . 625,615 98% 540,309 97% 439,582 96%
Recurring fee income . . . . . . . . . . . . . . . . . . . 10,453 2% 13,974 3% 16,005 4%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636,068 554,283 455,587
During the Track Record Period, most of our Group’s revenue was attributable to one-off
brokerage commission income derived from sale of (i) ILAS; (ii) general and conventional insurance
products; and (iii) MPF schemes. There was no significant fluctuation in the one-off brokerage
commission income and recurring fee income respectively as a percentage of total commission income
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12. SUMMARY
of our Group during the Track Record Period. The one-off brokerage commission income and
recurring fee income receivable in respect of ILAS and general and conventional insurance products
are normally settled within 45 days upon receiving the commission statements. The income derived
from the MPF schemes includes up-front commission and recurring management fee which are
receivable upon the execution of the MPF schemes and periodically as agreed with the MPF Providers
with reference to the underlying asset value of the MPF schemes.
Our Group records accounts receivable due from the Product Issuers and our profit margin
depends on, among others, the commission rates offered by the Product Issuers rather than the
policyholders. Commission income is payable by the Product Issuers to our Group who may default
their payment obligation to our Group even the customers paid the premiums to the Product Issuers.
Accordingly, our Group is subject to the credit risk and bankruptcy risk from the Product Issuers.
(i) ILAS business
For each of the three years ended 31 December 2007, 2008 and 2009, the revenue of our Group
attributable to the one-off brokerage commission income and recurring fee income derived from the
sale of ILAS amounted to approximately HK$633.9 million, HK$552.9 million and HK$451.6 million,
representing approximately 99.7%, 99.8% and 99.1% of our Group’s total revenue respectively. The
one-off brokerage commission income and recurring fee income of ILAS are calculated generally as a
percentage of the total premium of policy. The ILAS Issuers deliver their commission statements to our
Group on a regular basis, such as weekly and monthly. Upon receiving the commission statements by
our Group, the relevant ILAS Issuers would generally pay the one-off brokerage commission and
recurring fee income to our Group within 45 days. Our Group recognises the income on an accrual
basis upon receipt of the commission statements as confirmations from the ILAS Issuers.
Commission clawback
Pursuant to the terms of the broker agreements entered into between our Group and the ILAS
Issuers, the commission paid by the ILAS Issuers in relation to Regular-savings ILAS to our Group is
subject to commission clawback, which applies solely to Regular-savings ILAS, by the ILAS Issuers
on a pro-rata basis over an indemnified period. The indemnified period for commission clawback is
generally from 6 months to 24 months. If a customer terminates his/her Regular-savings ILAS policy a
number of months after the date of execution of his/her insurance policy and such termination falls
within the indemnified period, our Group is entitled to retain the commission for a portion of such
number of months over the relevant indemnified period and shall refund any excess of the commission
already received to the Product Issuers. All commission clawback occurred in the same financial year
is immediately debited in our Group’s revenue. Pursuant to the contract for services entered into
between each of the Consultants and CFS, the Consultants are required to bear part of the commission
clawback based on a ratio of the Consultants’ commission entitlement to our Group’s brokerage
commission income derived from the sale of Regular-savings ILAS. Our Group therefore has made an
estimation of the expected cash outflows related to commission clawback for the business in the
indemnified period which is subject to commission clawback with reference to a model which is
established and developed by our Group (and which in our Directors’ opinion is objective and
consistent).
The amount of estimated commission clawback as at 31 December 2006, 2007 and 2008 were
approximately HK$4.1 million, HK$5.1 million and HK$8.0 million, representing approximately
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13. SUMMARY
1.1%, 0.8% and 1.4% of the revenue of our Group for each of the three years ended 31 December
2008. These estimated sums were set aside at the end of each financial year to prepare for actual
commission clawback which may occur subsequently within the indemnified period. The
corresponding actual clawback occurred and borne by our Group in 2007, 2008 and 2009 which relates
to revenue generated from the previous year, was approximately HK$3.3 million, HK$4.3 million and
HK$6.7 million respectively. For further details, please refer to the paragraph headed “Commission
clawback” in the section headed “ Financial information” in this prospectus.
As at 31 December 2009, our Group had estimated commission clawback of approximately
HK$5.9 million to account for the probable commission clawback in relation to the business
accomplished and indemnified by our Group in the years prior to 31 December 2009.
Our Directors believe that our Group has objectively estimated the extent and the possibility of
occurrence of commission clawback and the amount of estimated commission clawback has been
prudently, consistently and fairly reflected in the financial statements.
(ii) Conventional and general insurance business
For the three years ended 31 December 2007, 2008 and 2009, the revenue of our Group
attributable to one-off brokerage commission income and recurring fee income derived from the sale of
general and conventional insurance products amounted to approximately HK$1.7 million, HK$0.4
million and HK$3.4 million, representing approximately 0.27%, 0.07% and 0.74% of our Group’s total
revenue respectively. The one-off brokerage commission income and recurring fee income are
calculated as a percentage of the premium of each policy and are usually receivable from the Product
Issuers on a monthly basis.
(iii) MPF schemes business
For the three years ended 31 December 2007, 2008 and 2009, the revenue of our Group
attributable to brokerage commission income and recurring fee income derived from the sale of MPF
schemes amounted to HK$0.5 million, HK$0.9 million and HK$0.6 million, representing
approximately 0.07%, 0.17% and 0.12% of our Group’s total revenue respectively. The brokerage
commission income and recurring fee income are calculated as a percentage of the asset value of the
MPF schemes and are usually receivable from the MPF Providers on a monthly basis. Our Group
recognises the income upon the commencement of a MPF scheme.
OUR COMPETITIVE ADVANTAGES
We attribute our success to several principal competitive advantages which will enable us to
maintain our prominent position in the market and bolster our future prospects. These competitive
advantages include:
Š The largest number of consultants licensed to market ILAS in Hong Kong
Š Quality, competence and independence of the Consultants
Š The Development Model
Š Young and experienced management
Š Stable senior members of the Consultants
7
14. SUMMARY
Š Relationship with Product Issuers
Š Variety of ILAS, general and conventional insurance products and MPF schemes to satisfy
customers’ needs
Š Brand name recognition in insurance brokerage industry
Š Long established and comprehensive internal control system
For further details of our competitive advantages, please refer to the paragraph headed “Our
competitive advantages” in the section headed “Business” in this prospectus.
OUR BUSINESS STRATEGIES
The corporate mission of our Group is to establish the largest distribution network of insurance
products and MPF schemes with general recognition of being independent, professional and value
adding to the general public in Hong Kong.
Having considered the market potential of the insurance and MPF schemes brokerage industry
and evaluated our Group’s existing market position and strengths, our Group intends to achieve our
business objectives through implementing the following strategic plans:
Š Enhancement of quality of the Consultants
Š Expansion of the size of the teams of the Consultants
Š Expansion and promotion of ILAS, MPF schemes and other insurance business
Š Exploration of merger and acquisition opportunities and business collaboration with well-
established companies
Š Addition and extension of further services and distribution channels
For further details of our strategies, please refer to the paragraph headed “Our business
strategies” in the section headed “Business” in this prospectus.
8
15. SUMMARY
OUR TRADING RECORD
Summary of combined results of our Group
The following is a summary of our Group’s combined audited results for the Track Record
Period which has been extracted from the accountants’ report set out in Appendix I to this prospectus.
The combined audited results were prepared on the assumption that the current structure of our Group
had been in existence throughout the Track Record Period and in accordance with the basis set out in
the accountants’ report contained in Appendix I to this prospectus.
Year ended 31 December
2007 2008 2009
HK$’000 HK$’000 HK$’000
REVENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636,068 554,283 455,587
Other income and gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,734 207 208
Commission expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (362,850) (322,915) (253,538)
Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,517) (63,569) (44,909)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,733) (16,484) (16,735)
Commission clawback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,217) (7,286) (4,651)
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81,056) (106,638) (88,882)
PROFIT BEFORE TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,429 37,598 47,080
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,035) (6,088) (8,966)
PROFIT FOR THE YEAR AND TOTAL COMPREHENSIVE INCOME
FOR THE YEAR ATTRIBUTABLE TO THE OWNER OF OUR
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,394 31,510 38,114
DIVIDEND PAID BY A SUBSIDIARY OF OUR COMPANY . . . . . . . . . . . 100,000 7,500 72,000
RISK FACTORS
Our Directors consider that the business and operations of our Group and the Share Offer are
subject to a number of risk factors, which can be categorised into (i) risks relating to our Group;
(ii) risks relating to our industry; (iii) risks relating to the global economic downturn; (iv) risks relating
to the Share Offer; and (v) risks relating to statements made in this prospectus. These risks are set out
in the section headed “Risk factors” in this prospectus, the headings of which are as follows:
(i) Risks relating to our business
Š We recorded a decreasing revenue during the Track Record Period and decreases in
net profit and net profit margin in 2008 and 2009 as compared to 2007
Š We are highly concentrating on limited types of insurance products
Š A large portion of our revenue is originated from one-off commission income and the
recurrence of sale from our existing customers is not guaranteed
Š The investment-linked business, which our Group’s business belongs to, is volatile
Š Our operating results may fluctuate due to market acceptance for our Group’s
services
Š We rely on business relationships with ILAS Issuers
Š We rely on our top five ILAS Issuers for a significant portion of our revenue, and we
anticipate such dependence to continue in the near future
9
16. SUMMARY
Š We rely on our management team and teams of Consultants and their team leaders for
carrying on our operations
Š The Consultants may not have sufficient financial resources to provide indemnity to
our Group against actions which may be brought against our Group by any customer
and potential customer in respect of services provided by the Consultants
Š We may be exposed to risks on potential computer system failure and disruptions
Š We may be exposed to risks on probable commission clawback
Š We may be exposed to risks in relation to compliance standards
Š Failure to obtain registrations and/or licences from the relevant authorities could
adversely affect our operations
Š Misconduct of the Consultants is difficult to detect and deter
Š Possible mis-selling by the Consultants
Š We may not be able to implement our future plans successfully
Š Our historical dividends may not be indicative of our future dividends
(ii) Risks relating to our industry
Š Our business depends on the macro-economic situation of Hong Kong
Š We operate in a highly competitive industry
(iii) Risks relating to the global economic downturn
(iv) Risks relating to the Share Offer
Š There has been no prior public market for our Shares, and the liquidity, market price
and trading volume of our Shares may be volatile
Š The market price of our Shares may be volatile
Š Purchasers of our Shares will experience immediate dilution and may experience
further dilution if we issue additional Shares in the future
Š Future sales by our existing Shareholders of a substantial number of our Shares in the
public market could materially and adversely affect the prevailing market price of our
Shares
Š Impact of granting options under the Share Option Scheme
(v) Risks relating to statements made in this prospectus
Š Certain facts and other statistics in this prospectus are derived from various official
government sources and may not be reliable
10
17. SUMMARY
STATISTICS OF THE SHARE OFFER
Based on an Offer Based on an Offer
Price of HK$1.00 Price of HK$1.20
per Share per Share
Market capitalisation of the Shares(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$400 million HK$480 million
Price/earnings multiple(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5 times 12.6 times
Unaudited pro forma adjusted combined net tangible asset value per
Share(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK32.7 cents HK37.7 cents
Notes:
(1) The market capitalisation is calculated on the basis of Offer Price and 400,000,000 Shares in issue and to be issued immediately
following the completion of the Share Offer, but takes no account of any Share which may be issued pursuant to the exercise of any
option which may be granted under the Share Option Scheme, or any Shares which may fall to be allotted and issued or repurchased by
our Company pursuant to the general mandates for the allotment and issue or repurchase of Shares referred to under the paragraph
headed “Written resolutions of the sole shareholder of our Company passed on 23 June 2010” in Appendix V to this prospectus.
(2) The calculation of the price/earnings multiple on a pro forma fully diluted basis is based on the earnings per Share for the year ended
31 December 2009 at the respective Offer Prices of HK$1.00 per Share and HK$1.20 per Share and on the assumption that the Share
Offer has taken place since 1 January 2009 with a total number of 400,000,000 Shares in issue since 1 January 2009.
(3) The unaudited pro forma adjusted combined net tangible asset value per Share is arrived at after making the adjustments referred to
under the paragraph headed “Unaudited pro forma adjusted combined net tangible assets” in the section headed “Financial information”
in this prospectus and the 400,000,000 Shares as referred in Note 1 above.
OUR DIVIDEND POLICY
Dividends may be paid out of our distributable profits as permitted under the relevant laws. Our
ability to pay dividends will therefore depend on our ability to generate sufficient distributable profits.
During the three years ended 31 December 2007, 2008 and 2009, CFS declared a dividend of a
total sum of approximately HK$100.0 million, HK$7.5 million and HK$72.0 million, respectively, to
its then sole shareholder, namely, CFG. There can be no assurance that in the future we will pay
dividends at a similar level to the past or at all, and potential investors should be aware that the amount
of dividends we paid in the past should not be used as a reference or basis which future dividends are
determined. The payment and the amount of dividends in the future will depend on various factors,
including but not limited to, the results of operations, cash flows, financial position, statutory and
regulatory restrictions on the payment of dividends by us and future prospects.
In addition, to the extent profits are distributed as dividends, such portion of profits will not be
available to be reinvested in our operations and may therefore limit our future development. Therefore,
there can be no assurance that we will declare dividends at all in the future. Future dividends, if any,
will be at the discretion of our Board and will depend upon our future results of operations, capital
requirements, general financial position, legal and contractual restrictions and other factors our Board
may deem relevant.
11
18. SUMMARY
USE OF NET PROCEEDS FROM THE SHARE OFFER
Our Directors intend to apply the net proceeds from the Share Offer to finance our capital
expenditure and business expansion, strengthen our capital base and improve our overall financial
position. Based on the Offer Price of HK$1.10 per Offer Share (being the mid-point of the indicative
Offer Price range between HK$1.00 and HK$1.20 per Offer Share), the net proceeds from the Share
Offer, after deducting underwriting commission and estimated expenses payable by us in connection
thereto, are estimated to be approximately HK$94 million. We presently intend to apply such net
proceeds from the Share Offer as follows:
Š as to approximately HK$25 million or approximately 26.6% of the net proceeds from the
Share Offer, will be used for enhancement of the quality of the Consultants through
offering of (i) various external and internal continuous professional training programs; (ii)
subsidies on recognised professional qualification courses; and (iii) incentives in
recruitment of Consultants from other professions and countries, and expansion of the
teams of Consultants through (a) offering of incentives in speeding up the organic growth
under the Development Model; and (b) organising recruitment functions targeting
individuals from different market sectors and other countries;
Š as to approximately HK$25 million or approximately 26.6% of the net proceeds from the
Share Offer, will be used for expansion and promotion of ILAS, MPF schemes and other
insurance businesses by (i) increasing promotional and marketing spending in our ILAS,
MPF schemes and other insurance businesses to the general public; and (ii) offering sales
incentive and promotional events to the Consultants;
Š as to approximately HK$25 million or approximately 26.6% of the net proceeds from the
Share Offer, will be used for exploration of merger and acquisition opportunities and
business collaboration with well-established companies, where no target or potential
business collaboration with well-established companies had been identified as at the Latest
Practicable Date;
Š as to approximately HK$15 million or approximately 16.0% of the net proceeds from the
Share Offer, will be used for addition and extension of further services and distribution
channels by developing an on-line application system and a comprehensive information
management system and expanding our distribution network to e-marketing and direct-
marketing channels; and
Š as to approximately HK$4 million or approximately 4.2% of the net proceeds from the
Share Offer, will be used for working capital and other general corporate purposes.
If the Offer Price is finally determined at the highest end of the indicative Offer Price range
between HK$1.00 and HK$1.20 per Offer Share, the net proceeds from the Share Offer will increase
by approximately HK$10 million to approximately HK$104 million. In such event, our Directors
intend to apply such additional net proceeds for the above usages on a pro-rata basis.
If the Offer Price is finally determined at the lowest end of the indicative Offer Price range
between HK$1.00 and HK$1.20 per Offer Share, the net proceeds from the Share Offer will reduce by
approximately HK$10 million to approximately HK$84 million. In such event, our Directors intend to
reduce the intended use of proceeds for the above stated purposes on a pro-rata basis and we will
finance such shortfall by internal cash resources and/or additional bank borrowings, as and when
appropriate.
12
19. SUMMARY
To the extent that the net proceeds from the Share Offer are not immediately required for the
above purposes or if we are unable to effect any part of our future development plans as intended, we
may hold such funds in short-term deposits with licensed banks and/or authorised financial institutions
in Hong Kong for so long as it is in our best interest. We will also disclose the same in the relevant
annual report.
13
20. DEFINITIONS
In this prospectus, unless the context otherwise requires, the following expressions have the
following meanings:
“Application Form(s)” white application form(s) and yellow application form(s),
or where the context so requires, any one or both of them,
relating to the Share Offer
“Application Lists” the application lists for the Public Offer
“Articles of Association” the articles of association of our Company adopted on
23 June 2010 and as amended from time to time, a
summary of which is set out in Appendix IV to this
prospectus
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Board” or “Board of Directors” the board of Directors as at the date of this prospectus
“Business Day” a day on which banks in Hong Kong are generally open for
business to the public and which is not a Saturday, Sunday
or public holiday in Hong Kong
“BVI” the British Virgin Islands
“Call Option Deed” a call option deed dated 3 November 2008 whereby CFS
was granted call options to purchase shares of two
insurance intermediary companies
“CAM” Convoy Asset Management Limited ( ),
a company incorporated in Hong Kong with limited
liability on 24 November 1999, which is wholly-owned by
CFG and is licensed by SFC to carry out type 1 (dealing in
securities), type 4 (advising on securities) and type 9 (asset
management) regulated activities under the SFO
“CCASS” the Central Clearing and Settlement System established and
operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct
clearing participant or general clearing participant
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals or
a corporation
“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian
Participant or a CCASS Investor Participant
“CFG” Convoy Financial Group Limited ( )
(formally known as Advance All Enterprises Limited), a
14
21. DEFINITIONS
company incorporated in the BVI with limited liability on
2 September 2002 and owned as to approximately 56.2%
by Perfect Team and 43.8% by Convoy Inc
“CFG Group” CFG and its subsidiaries, save for our Group
“CFS” Convoy Financial Services Limited ( )
(formerly known as Wardley Shipping Limited
( ), Equitable Insurance Management
Limited ( ), Convoy Insurance Brokers
Limited ( ) and Convoy NPL
Financial Services Limited ( )), a
company incorporated in Hong Kong with limited liability
on 12 March 1992, an indirect wholly-owned subsidiary of
our Company and a registered member of PIBA and
corporate intermediary of MPFA
“CIS” Convoy Investment Services Limited (
), a company incorporated in Hong Kong with
limited liability on 23 February 2007 and is wholly-owned
by CFG, and is licensed by the SFC to carry out type 1
(dealing in securities), type 2 (dealing in futures contracts)
and type 4 (advising on securities) regulated activities
under the SFO, and one of the Joint Lead Managers
“Companies Law” the Companies Law, Chapter 22 (Law 3 of 1961, as
consolidated and revised) of the Cayman Islands
“Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong
Kong)
“Company” or “our Company” Convoy Financial Services Holdings Limited
( ), an exempted company incorporated
in the Cayman Islands on 12 March 2010 with limited
liability
“connected person(s)” has the meaning ascribed thereto under the Listing Rules
“Consultant(s)” individual(s) registered with PIBA as technical
representative(s) and accredited to CFS, and engaged by
CFS to provide services to customers and potential
customers in negotiating contracts of insurance and, in
some cases, MPF schemes
“Controlling Shareholder(s)” any person who is or a group of persons who are together
entitled to exercise or control the exercise of 30% (or such
other amount as may from time to time be specified in the
Takeovers Code as being the level for triggering a
mandatory general offer) or more of the power at general
meetings of our Company or who is or are in a position to
15
22. DEFINITIONS
control the composition of a majority of the Board, and, for
the purpose of this prospectus, refers to Convoy Inc,
Perfect Team, CFG, and the respective individual
shareholders of Convoy Inc, and Mr. Sin Kin Chung (the
cousin of Mr. Shin Kin Man who is a shareholder of
Convoy Inc)
“Convoy Inc” Convoy Inc., a company incorporated in the BVI with
limited liability on 29 January 2001, which is owned by
Mr. Lee Kwok Yin, Denthur, Mr. Chan Chi Keung,
Ms. Fong, Mr. Wong, Mr. Mak, Mr. Ng Ka Wai, Eric,
Mr. Chan Tsz Kin, Ernest and Mr. Shin Kin Man as to
approximately 20.1%, 19.7%, 19.7%, 19.7%, 5.4%, 5.4%,
5.1% and 4.9% respectively, and one of the Controlling
Shareholders
“CTL” Convoy (Trademarks) Limited ( ), a
company incorporated in the BVI with limited liability on
30 October 2009 and a wholly-owned subsidiary of CFG
“Convoy”, “ ” and “ ” brand names adopted by our Group in engaging in our
business
“Development Model” a development model for the Consultants, in which the
Consultants and trainees are specially trained, monitored
and educated in accordance with our Group’s defined
policies, details of which are described under the paragraph
headed “The Development Model” in the section headed
“Business” in this prospectus
“Director(s)” the director(s) of our Company
“Group”, “we” or “us” our Company and our subsidiaries or any of them or, where
the context so requires, in respect of the period before our
Company became the holding company of our present
subsidiaries, such subsidiaries as if they were the
subsidiaries of our Company at the time
“HK$” or “HK dollars” Hong Kong dollars, the lawful currency of Hong Kong
“HK cents” Hong Kong cents, the lawful currency of Hong Kong
“HKCIB” The Hong Kong Confederation of Insurance Brokers, a
body of insurance brokers which is approved by the IA
under the Insurance Companies Ordinance
“HKFRSs” Hong Kong Financial Reporting Standards
“HKSCC” Hong Kong Securities Clearing Company Limited
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
16
23. DEFINITIONS
“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC
“IA” the public officer appointed as the Insurance Authority
pursuant to the Insurance Companies Ordinance
“IFPHK” Institute of Financial Planners of Hong Kong, a non-profit,
self-regulatory organisation representing over 10,000
financial services practitioner from the financial planning
and wealth management industry in Hong Kong
“ILAS Issuer(s)” authorised insurer(s) that provide(s) Investment-linked
Assurance Scheme, an insurance policy of the “linked long-
term” class as defined in the First Schedule, Part 2 of the
ICO, to our Group
“Independent Third Party(ies)” independent third party or parties who is/are not connected
with any members of our Group, our Directors, the chief
executives and the substantial shareholders of our
Company and our subsidiaries and/or any of their
respective associates
“Insurance Companies Ordinance” or the Insurance Companies Ordinance (Chapter 41 of the
“ICO” Laws of Hong Kong), as amended and supplemented from
time to time
“Joint Lead Managers” Quam Securities and CIS
“Latest Practicable Date” 22 June 2010, being the latest practicable date prior to the
printing of this prospectus for ascertaining certain
information referred to in this prospectus
“Listing” the listing of our Shares on the Main Board
“Listing Date” the date on which dealings in our Shares first commence on
the Main Board, which is expected to be on or around
Tuesday, 13 July 2010
“Listing Rules” the Rules Governing the Listing of Securities on the Stock
Exchange, as amended from time to time
“Main Board” the main board of the Stock Exchange
“Memorandum of Association” the memorandum of association of our Company
“MPF” Mandatory Provident Fund
“MPF Provider(s)” company(ies) that provide(s) MPF schemes to our Group
“MPFA” Mandatory Provident Fund Schemes Authority
17
24. DEFINITIONS
“Ms. Fong” Fong Sut Sam, an executive Director and one of the
Controlling Shareholders
“Mr. Mak” Mak Kwong Yiu, an executive Director and one of the
Controlling Shareholders
“Mr. Wong” Wong Lee Man, an executive Director and one of the
Controlling Shareholders
“OCI” the Office of the Commissioner of Insurance of the
Government of Hong Kong, which is the office for the IA
“Offer Price” the final HK dollars offer price per Offer Share (excluding
brokerage fee of 1%, SFC transaction levy of 0.004% and
Stock Exchange trading fee of 0.005%) at which the Offer
Shares are to be subscribed, such price is expected to be not
more than HK$1.20 and not less than HK$1.00 and to be
determined on or before Tuesday, 6 July 2010, or such later
date as may be agreed between our Company and the Joint
Lead Managers (for themselves and on behalf of the
Underwriters)
“Offer Share(s)” the Placing Share(s) and the Public Offer Share(s)
“Perfect Team” Perfect Team Group Limited, a company incorporated in
the BVI with limited liability on 2 September 2002 and one
of the Controlling Shareholders
“PIBA” Professional Insurance Brokers Association, a body of
insurance brokers which is approved by the IA under the
Insurance Companies Ordinance
“Placing” the conditional placing of initially 90,000,000 Placing
Shares at the Offer Price on and subject to the terms and
conditions described in this prospectus as further described
in the section headed “Structure and conditions of the Share
Offer” in this prospectus
“Placing Shares” the 90,000,000 new Shares being offered for subscription
under the Placing
“Placing Underwriters” the underwriters in respect of the Placing named under the
paragraph headed “Placing Underwriters” in the section
headed “Underwriting” in this prospectus
“PRC” the People’s Republic of China which, for the purposes of
this prospectus, excludes Hong Kong, the Macau Special
Administrative Region of the People’s Republic of China
and Taiwan
“Price Determination Date” the date on which the final Offer Price is determined by our
Company and the Joint Lead Managers (for themselves and
on behalf of the Underwriters), which is expected to be on
18
25. DEFINITIONS
or before Tuesday, 6 July 2010, or such later date as may
be agreed between our Company and the Joint Lead
Managers (for themselves and on behalf of the
Underwriters)
“Product Issuer(s)” company(ies) that provide(s) insurance products (including
ILAS) and/or MPF schemes to our Group
“Public Offer” the offer to the public in Hong Kong for subscription of the
Public Offer Shares at the Offer Price, on and subject to the
terms and conditions stated in this prospectus and in the
Application Forms
“Public Offer Shares” the 10,000,000 new Shares initially being offered by our
Company for subscription at the Offer Price under the
Public Offer
“Public Offer Underwriters” the underwriters in respect of the Public Offer named under
the paragraph headed “Public Offer Underwriters” in the
section headed “Underwriting” in this prospectus
“Quam Capital” or “Sponsor” Quam Capital Limited, a corporation licensed by the SFC
to carry out type 6 (advising on corporate finance)
regulated activity under the SFO
“Quam Securities” Quam Securities Company Limited, a corporation licensed
by the SFC to carry out type 1 (dealing in securities), type 2
(dealing in futures contracts), type 4 (advising on
securities) and type 9 (asset management) regulated
activities under the SFO, one of the Joint Lead Managers
“Reorganisation” the reorganisation of group of companies now comprising
our Group in preparation for the Listing completed on
21 June 2010, details of which are set forth under the
paragraph headed “History and development” in the section
headed “Corporate history, development and
Reorganisation” and under the paragraph headed
“Corporate Reorganisation” in Appendix V to this
prospectus
“Securities Ordinance (repealed)” the Securities Ordinance (Chapter 333 of the Laws of Hong
Kong), which was repealed with effect from 1 April 2003
“SFC” the Securities and Futures Commission of Hong Kong
“SFC Circular” the circular entitled “Circular Clarifying the Licensing
Requirements arising out of the Promotion Offering or Sale
of Investment-linked Assurance Schemes to the Public”
dated 13 August 2009 published by the SFC
“SFO” the Securities and Futures Ordinance (Chapter 571 of the
laws of Hong Kong), as amended and supplemented from
time to time
19
26. DEFINITIONS
“Share(s)” ordinary share(s) with a nominal value of HK$0.10 each in
the share capital of our Company
“Share Offer” the Placing and the Public Offer
“Share Option Scheme” the share option scheme conditionally adopted by our
Company on 23 June 2010, the principal terms of which
have been summarised under the paragraph headed “Share
Option Scheme” in Appendix V to this prospectus
“Shareholder(s)” holder(s) of the Share(s)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Substantial Shareholder(s)” has the meaning ascribed to it under the Listing Rules
“Takeovers Code” The Hong Kong Code on Takeovers and Mergers
“Track Record Period” the period comprising the three years ended 31 December
2007, 2008 and 2009
“Trademarks” , , , and , being trademarks
owned by CTL
“Trademarks Agreement” a trademarks agreement entered into between CTL and our
Company on 21 June 2010, details of which are disclosed
under the paragraph headed “Connected transactions” in
the section headed “Relationship with the Controlling
Shareholders and connected transactions” in this
prospectus;
“Underwriters” the Placing Underwriters and the Public Offer Underwriters
“Underwriting Agreement” the underwriting agreement dated 28 June 2010 entered
into between, among others, our Company, the Controlling
Shareholders, the Sponsor, the Joint Lead Managers and
the Underwriters relating to the Share Offer, details of
which are set out in the section headed “Underwriting” in
this prospectus.
“United States” or “US” or “USA” the United States of America, its territories, its possessions
and all areas subject to its jurisdiction
“US$” or “US dollar(s)” United States dollar(s), the lawful currency of the United
States
“%” per cent.
Certain amounts and percentage figures included in this prospectus have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic
aggregation of the figures preceding them.
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27. GLOSSARY OF TECHNICAL TERMS
This glossary contains explanations and definitions of certain technical terms used in this
prospectus in connection with our Group and our business. The terms and their meanings may not
correspond to standard industry meanings or usage of these terms.
“authorised insurer(s)” company(ies) that provides insurance products including
long term insurance and general insurance products
schemes in Hong Kong
“CAGR” the acronym for compound annual growth rate, being the
annual growth rate computed on a compound basis
“CFP” the acronym for CERTIFIED FINANCIAL PLANNERCM,
a designation awarded by Certified Financial Planner Board
of Standards Inc., which is a professional regulatory
organisation to foster professional standards in personal
financial planning so that the public values, has access to
and benefits from competent and ethical financial planning
“CPD” the acronym for Continuing Professional Development
“endowment” a policy that the payment of the face amount at the end of a
specific term or upon earlier death and if the insured
survive the term, the policy is said to mature
“GDP” the acronym for gross domestic product
“general insurance” insurance other than long term insurance
“IIQAS” the acronym for Insurance Intermediaries Quality
Assurance Scheme
“ILAS” the acronym for Investment-linked Assurance Scheme, an
insurance policy of the “linked long term” class as defined
in First Schedule, Part 2 of the ICO
“increasing death benefit” the death benefit which will be the value of the units
accumulated in the policyholder’s account, at the date of
death, plus the chosen death cover
“level death benefit” the death benefit which will be the higher of the value of
units accumulated in the policyholder’s account, at the date
of death or chosen death cover
“linked long term” an insurance policy that effecting and carrying out
contracts of insurance on human life or contracts to pay
annuities on human life where the benefit are wholly or
partly to be determined by reference to the value of, or the
income from, property of any description (whether or not
specified in the contracts) or by reference to fluctuations in,
in an index of, the value of property of any description
(whether or not so specified)
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28. GLOSSARY OF TECHNICAL TERMS
“long term insurance” one of the two major classes of insurance business as per
the ICO, and the dominant categories within this class
concern life insurance contracts which are normally not
annual contracts, but last for a number of years
“Lump-sum ILAS” one type of ILAS, of which the premium is contributed by
one lump sum at the beginning of the term of ILAS
“m2” square meters
“office premiums” in relation to a financial year of an insurer, means:
(i) for policies with single mode of payment, the
premiums paid by the policyholders during the
financial year; or
(ii) for policies with regular mode of payment, the
annualised premiums of the policies at the valuation
date or the flexible premium paid by the policyholders
during the financial year.
“Regular-savings ILAS” one type of ILAS, of which the premium is contributed on a
regular basis during the terms of ILAS
“sq.ft.” square feet
“whole-life” a policy designed to last the whole of one’s life and the
face amount is paid on death (and not before), whenever
that occurs
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29. FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on various assumptions
regarding our present and future business strategy and the environment in which we will operate in the
future. These forward-looking statements reflecting our current views with respect to future events are
not a guarantee of future performance and are, by their nature, subject to significant risks and
uncertainties. These forward-looking statements include, without limitation, statements relating to:
Š our business strategies and plans of operation;
Š our capital expenditure plans;
Š the amount and nature of, and potential for, future development of our business;
Š our operations and business prospects;
Š our dividend policy;
Š projects under planning;
Š the regulatory environment of our industry in general; and
Š future development in our industry.
The words “anticipate”, “believe”, “could”, “expect”, “going forward”, “intend”, “may”,
“plan”, “seek”, “will”, “would” and similar expressions, as they relate to us, are intended to identify a
number of these forward-looking statements. These forward-looking statements reflecting our current
views with respect to future events are not a guarantee of future performance and are subject to certain
risks, uncertainties and assumptions, including the risk factors described in this prospectus. One or
more of these risks or uncertainties may materialise, or underlying assumptions may prove incorrect.
Subject to the requirements of the Listing Rules, our Company does not intend to publicly
update or otherwise revise the forward-looking statements in this prospectus, whether as a result of
new information, future events or otherwise. As a result of these and other risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed in this prospectus might not
occur in the way our Company expects, or at all. Accordingly, you should not place undue reliance on
any forward-looking information. All forward-looking statements in this prospectus are qualified by
reference to this cautionary statement.
In this prospectus, unless otherwise stated, statements of or references to our intentions or those
of any of our Directors are made as at the date of this prospectus. Any such intentions may change in
light of future developments.
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