Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement. (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8272) DISCLOSEABLE TRANSACTION TERMINATION OF THE JOINT VENTURE AGREEMENT INVOLVING DISPOSAL OF 65% OF THE ENTIRE ISSUED SHARE CAPITAL OF THE JV COMPANY THE DISPOSAL Reference is made to the announcement of the Company dated 22 September 2014 in relation to, among other things, the entering into of the Joint Venture Agreement between Elite Trade, a wholly-owned subsidiary of the Galaxy Group, FLM Macau Ventures, a wholly-owned subsidiary of the SPV, and FLM Macau Holdings, being the JV Company. On 27 February 2017 (after trading hours), Elite Trade issued and FLM Macau Ventures signed the Buy-out Notice, pursuant to which FLM Macau Ventures and Elite Trade have agreed to terminate the Joint Venture Agreement by way of Elite Trade acquiring the Sale Shares, representing 65% of the entire issued share capital of the JV Company, and the Sale Loan at a consideration of HK$1, subject to adjustment. Pursuant to the Buy-out Notice, subject to adjustment after taking into account the finalised management accounts of the JV Company as of 28 February 2017, FLM Macau Ventures shall repay to Elite Trade and/or any other member companies within the Galaxy Group in the sum of HK$5,400,000, being its portion of the funding and operation of the joint venture business prior to completion, subject to any set-off arrangement in the Franchise Agreement (as defined below). It is expected that the FLM Indebtedness would not exceed HK$7,000,000. 1
As at the date of this announcement, the JV Company is owned as to 65% by FLM Macau Ventures and 35% by Elite Trade. As at the date of this announcement, the JV Company is booked as an investment in joint venture in the accounts of the Company. Upon completion, the Company will cease to hold any interest in the JV Company. GEM LISTING RULES IMPLICATIONS As certain percentage ratios calculated under Rule 19.07 of the GEM Listing Rules in respect of the Disposal are 5% or more but all are less than 25%, the Disposal constitutes a discloseable transaction of the Company under the GEM Listing Rules. THE DISPOSAL Reference is made to the announcement of the Company dated 22 September 2014 in relation to, among other things, the entering into of the Joint Venture Agreement between Elite Trade, a wholly-owned subsidiary of the Galaxy Group, FLM Macau Ventures, a wholly-owned subsidiary of the SPV and FLM Macau Holdings, being the JV Company. On 27 February 2017 (after trading hours), Elite Trade issued and FLM Macau Ventures signed the Buy-out Notice, pursuant to which FLM Macau Ventures and Elite Trade have agreed to terminate the Joint Venture Agreement by way of Elite Trade acquiring the Sale Shares, representing 65% of the entire issued share capital of the JV Company, and the Sale Loan at a consideration of HK$1, subject to adjustment. The Buy-out Notice Date: 27 February 2017 (after trading hours) Parties: (i) Elite Trade, as the Purchaser; (ii) FLM Macau Ventures, as the Vendor; (iii) FLM Restaurant; and (iv) FLM Macau Holdings. 2
Save for the Purchaser s 35% shareholding interests in the JV Company, to the best of the Directors knowledge, information and belief having made all reasonable enquiry, the Purchaser and its ultimate beneficial owner(s) are third parties independent of the Company and its connected persons. Assets to be disposed of Pursuant to the Buy-out Notice, (i) the Vendor has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from the Vendor, the Sale Shares, which represent 65% of the entire issued share capital of the JV Company; and (ii) the Vendor has agreed to assign to the Purchaser, and the Purchaser has agreed to receive the assignment of, the Sale Loan. As at 31 January 2017, the Sale Loan amounts to HK$13,000,000. As at the date of this announcement, the JV Company is owned as to 65% by FLM Macau Ventures and 35% by Elite Trade. Consideration The consideration payable by the Purchaser for the Sale Shares and the Sale Loan shall be HK$1, subject to adjustment. Pursuant to the Buy-out Notice, subject to adjustment after taking into account the finalised management accounts of the JV Company as of 28 February 2017, FLM Macau Ventures shall repay to Elite Trade and/or any other member companies within the Galaxy Group in the sum of HK$5,400,000 ( FLM Indebtedness ), being its portion of the funding and operation of the joint venture business prior to completion, subject to any set-off arrangement in the franchise agreement between FLM Macau Holdings as the franchisee and FLM Restaurant as the franchisor (the Franchise Agreement ) at completion. It is expected that the FLM Indebtedness would not exceed HK$7,000,000. FLM Restaurant is principally engaged in the operation of high-end Chinese restaurant business and is owned as to 50% by the Group as at the date of this announcement. Pursuant to the Franchise Agreement, FLM Restaurant irrevocably and unconditionally authorises FLM Macau Holdings to have a right of set-off, by deducting any amounts of debts, outstanding claims or demands, which are due and owing by FLM Restaurant and/or any others members of FLM Group and/or FLM Macau Ventures (and their successors and assigns) to FLM Macau Holdings and/or any members of Galaxy Group, from the franchise fee and the royalty fee and any other fees, charges and amounts of similar nature (or any portion thereof) (the Franchise Fees ) that FLM Macau Holdings should pay to FLM Restaurant from time to time during the term of the Franchise Agreement. 3
The Buy-out Notice provides that the FLM Indebtedness shall be repaid, subject to the aforementioned set-off arrangement, within 10 days after the termination of the Franchise Agreement. The Company intends to fully settle the FLM Indebtedness through setting off it with the Franchise Fees to be received from FLM Macau Holdings. Pursuant to the Buy-out Notice, FLM Restaurant unconditionally and irrevocably undertakes to Elite Trade for the benefits of Elite Trade and other member companies within the Galaxy Group that FLM Restaurant shall, jointly and severally with FLM Macau Ventures, repay the FLM Indebtedness to Elite Trade and/or any other member companies within the Galaxy Group and such undertaking shall notwithstanding completion remain in full force and effect until the FLM Indebtedness has been repaid in full within the time specified in the above paragraph. The amount receivable and payable by the Group under the Disposal were determined after arm s length negotiations among parties to the Buy-out Notice taking into account, among other things, (i) the net liabilities position of the JV Company; (ii) the amount of the FLM Indebtedness; and (iii) the amount of the Sale Loan. In light of the above, the Directors consider that the Disposal is on normal commercial terms, which are fair and reasonable and in the interests of the Company and Shareholders as a whole. Conditions Precedent No conditions precedent for completion have been set out in the Buy-out Notice. Termination of the Joint Venture Agreement Pursuant to the Buy-out Notice, the Joint Venture Agreement shall be terminated with effect from 1 March 2017. INFORMATION ON THE JV COMPANY The JV Company is incorporated in the British Virgin Islands with limited liability and its purpose is for the operation of a high-end luxurious Chinese restaurant under the trading name of Fook Lam Moon located at Galaxy Macau TM in Macau. 4
Set out below are financial information of the JV Company extracted from the unaudited financial statements of the JV Company for the period from 23 February 2015 (being the date on which the JV Company was established) to 31 December 2015 and the financial year ended 31 December 2016. Year ended 31 December 2016 (Unaudited) MOP approximately Period from 23 February 2015 to 31 December 2015 (Unaudited) MOP approximately Revenue 16,943,447 8,420,109 Loss before taxation (23,225,889) (12,254,345) Loss after taxation (23,225,889) (12,254,345) Net liabilities (35,472,233) (12,229,345) REASONS FOR AND BENEFITS OF TERMINATION OF THE JOINT VENTURE AGREEMENT The Company is an investment holding company. The Group is principally engaged in catering business, food manufacturing business and securities trading. The JV Company recorded an unaudited loss of approximately MOP12,254,345 (equivalent to approximately HK$11,897,422) for the period from 23 February 2015 to 31 December 2015. The Board believes that there are still uncertainties in the catering business in Macau which may lead to volatile financial results of the JV Company. In view of the above, the Board considers that the Disposal and the entering into of the Franchise Agreement are an appropriate strategy for the Group to reduce the Group s business risk and commit the financial resources of the Group to its existing and prospective businesses. In view of the above, the Directors consider that the Buy-out Notice is on normal commercial terms, and is fair and reasonable and in the interests of the Company and the Shareholders as a whole. 5
FINANCIAL IMPACT OF TERMINATION OF THE JOINT VENTURE AGREEMENT As at the date of this announcement, the JV Company is owned as to 65% by FLM Macau Ventures and 35% by Elite Trade. As at the date of this announcement, the JV Company is booked as an investment in joint venture in the accounts of the Company. Upon completion, the Company will cease to hold any interest in the JV Company. Subject to audit, it is expected that the Company would record a gain of approximately HK$172,000 as calculated by the share of loss of the JV Company of approximately HK$23,203,000 as at 31 January 2017 less the amount of the Sale Loan and other accounts receivables settled in the Disposal in the aggregate amount of approximately HK$17,631,000 and less the FLM Indebtedness in the amount of HK$5,400,000 to be paid by the Vendor to the Purchaser. Based on the above, it is expected that the Disposal would not have material impact on the consolidated statement of the financial position of the Company. GEM LISTING RULES IMPLICATIONS As certain percentage ratios calculated under Rule 19.07 of the GEM Listing Rules in respect of the Disposal are 5% or more but all are less than 25%, the Disposal constitutes a discloseable transaction of the Company under the GEM Listing Rules. DEFINITIONS In this announcement, unless the context otherwise requires, capitalised terms used herein shall have the following meanings: Board Buy-out Notice Company Directors the board of Directors a buy out notice in respect of the termination of the Joint Venture Agreement, issued by Elite Trade on FLM Macau Ventures pursuant to the Joint Venture Agreement Chinese Food and Beverage Group Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on GEM the director(s) of the Company 6
Disposal Elite Trade or Purchaser FLM Group FLM Macau Holdings or JV Company FLM Macau Ventures or Vendor FLM Restaurant Galaxy Group GEM GEM Listing Rules Hong Kong the disposal by FLM Macau Ventures through the sale of Sale Shares and Sale Loan Elite Trade Global Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of Galaxy Entertainment Group Limited ( ) SPV, FLM Restaurant and their respective subsidiaries and affiliates Fook Lam Moon Macau Holdings Limited ( ), a company incorporated in the British Virgin Islands with limited liability, which, prior to completion, is owned as to 65% by FLM Macau Ventures and 35% by Galaxy Group and, upon completion, will be wholly-owned by the Galaxy Group FLM Macau Ventures Limited, a company incorporated in the British Virgin Islands with limited liability, which is whollyowned by SPV Fook Lam Moon Restaurant Limited ( ), a company incorporated in Hong Kong with limited liability on 25 November 1975, which is owned as to 89.26% by SPV Galaxy Entertainment Group Limited ( ), a company whose issued shares are listed on Main Board of the Stock Exchange (stock code: 27) and all of its subsidiaries and affiliates but excluding FLM Macau Holdings the Growth Enterprise Market of the Stock Exchange the Rules Governing the Listing of Securities on the GEM the Hong Kong Special Administrative Region of the People s Republic of China 7
Joint Venture Agreement Macau Sale Loan Sale Shares Share(s) SPV Stock Exchange HK$ MOP the joint venture agreement dated 17 September 2014 entered into between Elite Trade, FLM Macau Ventures and FLM Macau Holdings in relation to the formation of a joint venture through FLM Macau Holdings in connection with the operation of a high-end luxurious Chinese restaurant under the trading name of Fook Lam Moon located at Galaxy Macau TM in Macau the Macau Special Administrative Region of the People s Republic of China the shareholder s loans of HK$13,000,000 of the JV company beneficially owned by FLM Macau Ventures 65% of the entire issued share capital of the JV Company ordinary share(s) of HK$0.02 each in the share capital of the Company as at the date of this announcement Professional Guide Enterprise Limited, a company incorporated in the British Virgin Islands with limited liability, which is indirectly owned as to 50% by the Company The Stock Exchange of Hong Kong Limited Hong Kong dollar(s), the lawful currency of Hong Kong Macau Pataca, the lawful currency of Macau % per cent. By Order of the Board CHINESE FOOD AND BEVERAGE GROUP LIMITED Yu Sau Lai Executive Director Hong Kong, 27 February 2017 8
For the purpose of this announcement, unless otherwise indicated, conversions of MOP into HK$ is calculated at the approximate exchange rate of HK$1.00 to MOP1.03. This exchange rate is adopted for illustration purpose only and does not constitute a representation that any amounts have been, could have been, or may be, exchanged at this rate or any other rates at all. As at the date of this announcement, Ms. Yu Sau Lai, Mr. Lam Raymond Shiu Cheung, Mr. Chow Cheuk Hang and Mr. Yuen Koon Tung are executive Directors; Mr. Yeung Wai Hung, Peter, Mr. Kam Tik Lun, Mr. Ho Siu King Stanley and Mr. Ma Stephen Tsz On are independent non-executive Directors. This announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement 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 announcement misleading. This announcement will remain on the Latest Company Announcements page of the GEM website at www.hkgem.com for at least 7 days from the date of its publication and on the Company s website at www.cfbgroup.com.hk. 9