Snowbird AG

Transcription

Snowbird AG

Prospectus
dated 4 September 2014
for the public offering in Germany and Luxembourg
of
10,000,000 newly issued ordinary bearer shares from a capital increase for a contribution in
cash to be resolved by an extraordinary general shareholders’ meeting of the Company
presumably on 24 September 2014
(the “New Shares”)
and of
1,500,000 existing ordinary bearer shares from the holdings of BIG BUSINESS GLOBAL
HOLDINGS LIMITED to cover a potential overallotment and for stabilization measures (the
“Overallotment Shares”)
and
for admission to trading on the regulated market segment (Regulierter Markt) of the
Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the
regulated market with additional post-admission obligations (Prime Standard)
of
30,000,000 existing ordinary bearer shares (the “Existing Shares”)
and of
up to 10,000,000 New Shares
and of
up to 1,500,000 newly issued ordinary bearer shares from a capital increase using
authorized capital (“Greenshoe Shares”)
- each such share with no par value and a notional value of Euro (“EUR”) 1.00 each and
full dividend rights for the financial year 2014 –
of
Snowbird AG
Cologne, Germany
International Securities Identification Number (ISIN): DE000A1PHEL8
German Securities Identification Number (WKN): A1PHEL
Ticker Symbol: 8S9
Global Coordinator
CM-Equity AG & Co. KG Financial Services
Lead Manager
CM-Equity AG & Co. KG Financial Services
Underwriter
ACON Actienbank AG
Joint Bookrunners
CM-Equity AG & Co. KG Financial Services and ACON Actienbank AG
This document constitutes a prospectus for the purposes of the public offerings in Germany and Luxembourg and listing
of the shares on the regulated market (Regulierter Markt) of the Frankfurt Stock Exchange (the “Prospectus”). This
Prospectus has been prepared in the English language with a German-language summary in accordance with the
Commission Regulation (EC) No 809/2004 of 29 April 2004 and conforms to the requirements of the German Securities
Prospectus Act (Wertpapierprospektgesetz). This Prospectus has been approved by the German Federal Financial
Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) after a review for completeness of the
Prospectus, including a review for coherence and comprehensibility of the presented information, according to section
13 subsection 1 of the German Securities Prospectus Act, and notified to the competent authority in Luxembourg in
accordance with section 18 subsection 1 of the German Securities Prospectus Act and the European passport
mechanism set out in the Prospectus Directive (No 2003/71/EC).
Page 1
TABLE OF CONTENTS
1.
SUMMARY .............................................................................................. 7
2.
GERMAN TRANSLATION OF THE SUMMARY
(ZUSAMMENFASSUNG) ...................................................................... 24
3.
RISK FACTORS .................................................................................... 43
4.
5.
6.
3.1
Risks related to SNOWBIRD’s Operations ........................................... 43
3.2
Risks related to Conducting Business in the PRC ................................ 56
3.3
Risks Related to the Offering ............................................................... 65
GENERAL INFORMATION ................................................................... 69
4.1
Responsibility Statement ...................................................................... 69
4.2
Subject Matter of this Prospectus ......................................................... 69
4.3
Statutory Auditors ................................................................................ 70
4.4
Documents Available for Inspection ..................................................... 70
4.5
Statements Relating to Future Events, Statistical Data, Market
Data and Estimates .............................................................................. 71
4.6
Note Regarding Financial Data and Currency ...................................... 72
4.7
Third Party Data ................................................................................... 73
THE OFFERING .................................................................................... 74
5.1
Subject Matter of the Offering .............................................................. 74
5.2
Price Range, Offering Period, Subscription, Offer Price and
Number of Allotted Shares ................................................................... 75
5.3
Rights Attached to the Offered Shares ................................................. 76
5.4
Projected Timetable for the Offering ..................................................... 77
5.5
Information Concerning the Shares in the Company ............................ 77
5.6
Allotment Criteria ................................................................................. 79
5.7
Stabilization Measures, Overallotment and Greenshoe Option............. 79
5.8
Stock Exchange Admission and Commencement of Trading ............... 80
5.9
Delivery and Settlement ....................................................................... 80
5.10
Designated Sponsor............................................................................. 80
5.11
Consent to the use of the Prospectus................................................... 80
5.12
Market Protection Agreements (Lock up) ............................................. 81
REASONS FOR THE OFFERING, USE OF ISSUE PROCEEDS,
ISSUE COSTS AND INTERESTED THIRD PARTIES .......................... 82
6.1
Issue Proceeds and Costs ................................................................... 82
6.2
Reasons for the Offering ...................................................................... 82
6.3
Use of the Issue Proceeds ................................................................... 82
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6.4
7.
8.
Interested Parties Involved in the Offering ............................................ 83
DIVIDEND POLICY; EARNINGS PER SHARE .................................... 84
7.1
Dividend Rights and Dividend Policy .................................................... 84
7.2
Dividends and Earnings per Share ....................................................... 84
GENERAL DESCRIPTION OF THE SHARES ...................................... 86
8.1
Class of Shares, Voting Rights ............................................................. 86
8.2
Certification of Shares .......................................................................... 86
8.3
Dividend Rights .................................................................................... 86
8.4
Takeover Offers, Exclusion of Minority Shareholders (SqueezeOut) and Shareholding Notification Requirements ................................ 87
8.5
Transferability of the Shares ................................................................ 90
8.6
Notices ................................................................................................. 90
8.7
Securities Identification Number, Stock Symbol, Ticker Symbol ........... 90
8.8
Paying Agent........................................................................................ 90
9.
DILUTION .............................................................................................. 91
10.
CAPITAL STRUCTURE AND NET FINANCIAL LIABILITIES ............. 92
10.1
Capitalization and Indebtedness .......................................................... 92
10.2
Contingent and Indirect Liabilities ......................................................... 93
10.3
Borrowing Requirements ...................................................................... 93
10.4
Working Capital Statement................................................................... 93
10.5
Significant Changes ............................................................................. 93
11.
SELECTED FINANCIAL INFORMATION ............................................. 94
12.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............. 97
13.
12.1
Overview of Business........................................................................... 97
12.2
Key Factors affecting Results of Operations......................................... 98
12.3
Results of Operations........................................................................... 99
12.4
Balance Sheet Data ........................................................................... 108
12.5
Liquidity and Capital Resources ......................................................... 113
12.6
Off-Balance Sheet and other Arrangements ....................................... 114
12.7
Basis of Preparation ........................................................................... 114
12.8
Critical Accounting Policies ................................................................ 114
12.9
Additional Information from the Financial Statements of the
Company ........................................................................................... 116
BUSINESS ACTIVITIES OF SNOWBIRD ........................................... 117
13.1
Overview ............................................................................................ 117
13.2
History of SNOWBIRD ....................................................................... 118
13.3
Competitive strength .......................................................................... 118
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13.4
Strategies........................................................................................... 119
13.5
Products............................................................................................. 120
13.6
Production .......................................................................................... 121
13.7
Quality Assurance .............................................................................. 126
13.8
Environmental Protection ................................................................... 127
13.9
Research and Development ............................................................... 127
13.10 Design................................................................................................ 127
13.11 Information Technology ...................................................................... 127
13.12 Sales .................................................................................................. 128
13.13 Major Customers ................................................................................ 129
13.14 Raw Materials and Suppliers .............................................................. 130
13.15 Inventory Management ...................................................................... 130
13.16 Credit Management............................................................................ 131
13.17 Awards and Recognitions................................................................... 131
13.18 Intellectual Property Rights ................................................................ 132
13.19 Employees ......................................................................................... 134
13.20 Business Locations, Property, Plant and Equipment .......................... 135
13.21 Insurances ......................................................................................... 136
13.22 Material Contracts .............................................................................. 137
13.23 Loan Agreements / Credit Line Agreements ....................................... 137
13.24 Mortgage/Guarantee Agreements ...................................................... 137
13.25 Legal Proceedings ............................................................................. 138
13.26 Investments........................................................................................ 138
14.
15.
MARKET ENVIRONMENT AND COMPETITIVE SITUATION ............ 140
14.1
Introduction ........................................................................................ 140
14.2
Economic Growth in the PRC ............................................................. 140
14.3
Urbanization in the PRC ..................................................................... 141
14.4
Disposable Income of urban and rural households in the PRC ........... 141
14.5
Retail sales of consumer goods in the PRC ....................................... 141
14.6
Industrial chain ................................................................................... 142
14.7
Position of PRC down industry in the global economy........................ 143
14.8
Size of the down industry of PRC ....................................................... 146
14.9
Competition Analysis.......................................................................... 151
REGULATORY ENVIRONMENT ........................................................ 158
15.1
PRC Legal System ............................................................................. 158
15.2
The General Principles of the Civil Law .............................................. 158
15.3
PRC Company Law............................................................................ 158
Page 4
15.4
M&A Provisions .................................................................................. 159
15.5
Foreign Investment Regulations ......................................................... 159
15.6
Foreign Exchange Regulation ............................................................ 160
15.7
Dividend Distribution by WFOE .......................................................... 161
15.8
Taxation of Dividends received from PRC in Hong Kong ................... 161
15.9
PRC Tax Laws ................................................................................... 162
15.10 Tort Liability Law ................................................................................ 163
15.11 Product Liability Law .......................................................................... 163
15.12 Protection of Intellectual Property Rights............................................ 164
15.13 Labor Law .......................................................................................... 165
15.14 The PRC Land System ...................................................................... 166
15.15 Environmental Laws ........................................................................... 167
15.16 Other National and Provincial Level Laws and Regulations................ 169
16.
GENERAL INFORMATION ON THE COMPANY AND
SNOWBIRD......................................................................................... 170
16.1
Incorporation, Entry in the Commercial Register, Company
Name and Registered Office .............................................................. 170
16.2
Financial Year, Auditor and Duration .................................................. 170
16.3
Current Structure of SNOWBIRD ....................................................... 171
16.4
Restructuring of SNOWBIRD and Corporate History .......................... 171
16.5
Capital Increase by Contribution in Kind (Sachkapitalerhöhung) ........ 175
16.6
Current Shareholder Structure of the Company ................................. 175
16.7
Notices ............................................................................................... 176
17.
SHAREHOLDER STRUCTURE OF THE COMPANY BEFORE
AND AFTER THE OFFERING ............................................................ 177
18.
INFORMATION ON THE SHARE CAPITAL OF THE COMPANY
AND GENERAL RULES ..................................................................... 178
19.
18.1
Issued and Authorized Share Capital ................................................. 178
18.2
Development of Share Capital ........................................................... 178
18.3
Authorized Share Capital ................................................................... 178
18.4
General Rules on the Increase of Share Capital ................................ 179
18.5
General Rules on Subscription Rights ................................................ 179
18.6
General Rules Relating to Use of Profits and Dividend
Payments ........................................................................................... 179
18.7
General Rules Relating to a Liquidation of the Company ................... 180
CORPORATE BODIES AND MANAGEMENT ................................... 181
19.1
Overview ............................................................................................ 181
19.2
Management Board (Vorstand) .......................................................... 182
19.3
Senior Management ........................................................................... 186
Page 5
20.
21.
22.
23.
19.4
Supervisory Board (Aufsichtsrat) ........................................................ 188
19.5
Specific Information on the Members of the Supervisory Board
(Aufsichtsrat), the Management Board (Vorstand) and the
Senior Management ........................................................................... 192
19.6
General Shareholders’ Meeting (Hauptversammlung) ........................ 193
19.7
Corporate Governance Code ............................................................. 194
TRANSACTIONS AND LEGAL RELATIONS WITH RELATED
PARTIES ............................................................................................. 197
20.1
Related Parties .................................................................................. 197
20.2
Related Party Transactions ................................................................ 197
TAXATION IN GERMANY .................................................................. 199
21.1
Taxation of the Company ................................................................... 199
21.2
Taxation of Shareholders ................................................................... 201
21.3
Taxation of Dividends ......................................................................... 201
21.4
Taxation of Capital Gains ................................................................... 204
21.5
Inheritance and Gift Tax ..................................................................... 206
21.6
Other Taxes ....................................................................................... 206
TAXATION IN LUXEMBOURG ........................................................... 207
22.1
Taxation of Income Derived from and Capital Gains Realized on
the Shares Held by Luxembourg Residents ....................................... 207
22.2
Other Taxes ....................................................................................... 210
UNDERWRITING ................................................................................ 211
23.1
Underwriting Agreement..................................................................... 211
23.2
Securities Loans and Greenshoe Option ............................................ 211
23.3
Commissions and Fees ...................................................................... 211
23.4
Conditions Precedent, Termination .................................................... 212
23.5
Indemnification ................................................................................... 212
23.6
Selling and Transfer Restrictions........................................................ 213
24.
RECENT DEVELOPMENTS AND OUTLOOK .................................... 214
25.
FINANCIAL INFORMATION ……..…………………………...……........ F-1
26.
GLOSSARY ……………………………………………………………….. G-1
27.
SIGNATURE ………………………………………………………………. S-1
Page 6
1.
SUMMARY
Summaries are made up of disclosure requirements known as “Elements”. These elements are
numbered in Sections A – E (A.1 – E.7). This summary contains all the Elements required to be
included in a summary for this type of securities and issuer. Because some Elements are not
required to be addressed, there may be gaps in the numbering sequence of the Elements. Even
though an Element may be required to be inserted in the summary because of the type of
securities and issuer, it is possible that no relevant information can be given regarding the
Element. In this case a short description of the Element is included in the summary with the
mention of “not applicable”.
Section A – Introduction and warnings
A.1
Warnings
This summary should be read as an introduction to the Prospectus.
Any decision to invest in the securities should be based on consideration of the
Prospectus as a whole by the investor.
In the event a claim relating to the information contained in this Prospectus is
brought before a court, the plaintiff investor may, under the respective national
legislation of the relevant member state of the European Economic Area (“EEA”),
be required to bear the costs of translating this Prospectus before legal
proceedings are commenced.
Snowbird AG, with its registered office in Cologne, Germany (the “Company”
and together with its direct and indirect subsidiaries “SNOWBIRD” or the
“Group”) as well as ACON Actienbank AG, Heimeranstraße 37, 80339 Munich,
Germany (“Underwriter” or “ACON”) assume responsibility for the contents of
this summary, including the German translation hereof, pursuant to section 5
subsection 2b no. 4 of the German Securities Prospectus Act
(Wertpapierprospektgesetz - WpPG). Those persons who are responsible for the
summary, including the translation thereof, or for the issuing thereof, can be held
liable, however, only if this summary is misleading, incorrect or contradictory
when read together with other parts of this Prospectus or it does not provide,
when read together with the other parts of the Prospectus, all necessary key
information.
A.2
Consent for
use of the
prospectus,
use of
prospectus
during offering
period,
conditions for
use and note
for the
investors
The consent of the Company regarding the use of the Prospectus in Germany
and Luxembourg for a sale and placement of securities has been granted to CMEquity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331 Munich,
Germany (to be merged onto CM-Equity AG, Kaufingerstraße 20, 80331 Munich,
Germany) (“Lead Manager”).
The consent to the use of the Prospectus by the Lead Manager is given for the
period which commences on 9 September 2014 and ends on 24 September
2014 (“Offering Period”).
Any new information with respect to the Lead Manager unknown at the date of
the Prospectus will be published at least on the Company’s website
(www.snowbird-ag.de).
In the event of an offer being made by the Lead Manager, the Lead Manager
will provide information to investors on the terms and conditions of the
offer at the time the offer is made.
Section B – Issuer
B.1
Legal and
commercial
name
The legal name of the Company is Snowbird AG. The Company acts under the
commercial name “SNOWBIRD AG”.
B.2
Domicile / legal
form /
legislation /
country of
incorporation
The registered office (Satzungssitz) of the Company is in Cologne, Germany and
the Company is registered with the commercial register of the local court
(Amtsgericht) of Cologne under the registration number HRB 76323. The
business address is c/o HRG Hansische Revisions-Gesellschaft mbH,
Wirtschaftsprüfungsgesellschaft, Ferdinandstraße 25, 20095 Hamburg,
Germany.
Page 7
The Company is a German stock corporation (Aktiengesellschaft).
The legislation under which the Company operates is German Law.
Country of incorporation is Germany.
B.3
The Issuer’s
current
operations and
its principal
activities,
including the
main
categories of
products sold
and/or services
performed and
identification of
the principal
markets in
which the
Issuer
competes
The Company
The current operations and principal activities of the Company are the
management of companies and the administration of interests in companies, in
particular companies active in the following business fields: Processing of down
for the production and sale of down products.
The operations of the Company include in particular the acquisition, holding and
administration as well as the sale of participations in companies, their
combination under common management and the provision of support and
advice to them, including the provision of services on behalf of such companies.
The Company may itself be directly active in the business fields specified above.
The Group
SNOWBIRD is mainly engaged in the processing of down and manufacture of
down products with its operating subsidiaries based in the People’s Republic of
China (“PRC”). Its current business can be divided into four segments: (i) down,
(ii) down clothing, (iii) down bedding and (iv) non-down Original Equipment
Manufacturers (“OEM”) clothing.
The down segment includes the processing of white and grey goose as well as
white and grey duck feathers and down (feathers and down together referred to
as “Down”) whereas white goose down represents approx. 50% of the total
processed down. SNOWBIRD washes, sterilizes and grades the raw feathers
and down to ensure a high grade of the washed Down. The processed Down will
then mainly be sold to domestic or foreign wholesalers and other down product
manufacturers while the other portion will be used by SNOWBIRD for its own
down products.
SNOWBIRD processes Down with a high ratio of down. SNOWBIRD regularly
processes Down with a down content of 80% or more which is well above
average in the down processing industry. Down which is exported by
SNOWBIRD to other countries even contain 90% down. SNOWBIRD can if
required even produce Down with a ratio of 100% down (Source: Test Report of
Hohenstein, June 2014).
The down end products produced by SNOWBIRD are down clothing and down
bedding products (the “Down Products”). Down clothing mainly includes the
production of jackets and coats whereas down bedding mainly includes the
production of duvets and pillows. The Down Products are sold under
SNOWBIRD’s own brands “Snow Bird” and “Xueniao”. In addition, SNOWBIRD
also manufactures down clothing for OEMs under their private labels.
SNOWBIRD’s own brand down clothing is sold to domestic and foreign trading
companies whereas the down bedding is currently only sold to domestic trading
companies. The trading companies resell the products using their own sales and
distribution networks.
Both, down clothing and down bedding products are currently aimed at middle
income end-consumers.
During the low season for its Down Products, SNOWBIRD also manufactures
non-down OEM clothing products, such as workers’ uniforms and jackets, in
order to keep capacities at a high level. The non-down products are made by
SNOWBIRD based on designs and samples provided by its customers.
SNOWBIRD mainly produces for the PRC market but also exports to customers
in Taiwan, Russia and Hong Kong.
Down is SNOWBIRD’s top selling product representing 51.9% of the total sales
in FY 2013 while down clothing, down bedding and non-down OEM clothing
represented 36.5%, 5.8% and 5.9% of the total sales in FY 2013 respectively.
SNOWBIRD’s operating facilities are located in Taiqian County, Puyang City,
Henan Province, PRC. SNOWBIRD’s production facilities have generated a total
output of approx. 1,186 tons of Down and approx. 1.75 million pieces of down
Page 8
clothing, down bedding and non-down OEM clothing in FY 2013.
As at 30 June 2014, SNOWBIRD employed 1,609 employees.
Strengths
SNOWBIRD considers itself a significant player in the Chinese down market and
believes it is well positioned to introduce innovative products to its existing client
base as well as potential new clients. Overall, SNOWBIRD believes that the
following strengths are the main drivers of its future growth:






Strategic location
Modern technology
Governmental support
Strong brand
Dedicated and experienced management
Innovative research department
Strategies
SNOWBIRD is pursuing the following strategic objectives:







B.4a Most
significant
recent trends
affecting the
issuer and the
industries in
which it
operates
Down Wholesale
Sharp increase in capacity
More domestic down clothing sales
More clothing exports under own brand
International sales of bedding products under own brand
Increase in OEM sales
Expansion of the distribution network
SNOWBIRD is targeting at both domestic and international market. The favorable
recent trends affecting SNOWBIRD’s business and the down industry in which it
operates include:
Rising industry
Down and down products industry in China has been on rising strong trend.
Market size for down, down garments and down bedding had been growing
tremendously at 22.0%, 16.0% and 21.0% respectively in 2013 as compared to
2012. (Source: National Bureau of Statistics, Respect Marketing Research Inc.,
2013).
Growth in international demand for Down
China is a large nation cultivating geese and ducks and outputs 200,000t Down
and feathers annually, taking up 80 percent of the world total. (Source: “Down
Industry in China”, by Respect Marketing Research Inc. in February 2014).
Export of Down and feathers had been growing at 30.8% in 2013 as compare to
2012. (Source: General Administration of Customs, 2013).
Growth in domestic demand for down garment
Rise in the living standard, especially of the small towns and rural residents, and
the relatively lower price and warmth-retention property of down garments have
great market appeal, which will expand the total demand and market size of
China down garments. In addition, China has 1.3 billion population, a majority of
whom live in areas where down garments are needed in winter. The Chinese
down garment market is far from saturation and has great development potential
(Source: Market Research Report, 2014).
Rise in popularity of down bedding in China
As learned from China Feather & Down Industrial Association, in developed
countries, almost every person has one duvet; the popularization rate of duvet in
Japan, US and Europe is 104%, 86.7% and 89.3% respectively while in China,
less than 1%. Rising popularity of down bedding has created huge opportunity
for SNOWBIRD`s down bedding products.
Page 9
B.5
Description of
the Issuer and
its position
within the
group
The Company is as the ultimate holding company of the Group the sole
shareholder of Snow Bird (Hong Kong) Holding Company Limited (“Snowbird
HK”) being a limited liability company incorporated under the laws of Hong Kong.
Snowbird HK is an intermediate holding company and is the sole direct
shareholder of Puyang Snowbird Trading Co., Ltd. (“Snowbird WFOE”) being
incorporated as a limited liability company under the laws of the PRC. Snowbird
WFOE is a further intermediate company with very few operative activity and the
sole direct shareholder of Henan Snowbird Enterprise Co., Ltd. (“Snowbird
Henan”) being incorporated as a limited liability company under the laws of the
PRC (Snowbird WFOE and Snowbird Henan collectively “Snowbird PRC”). The
operational business of SNOWBIRD is almost exclusively carried out by
Snowbird Henan with its business addresses located at Taiqian Industrial Park,
Puyang City, Henan Province, PRC. The current structure of SNOWBIRD is
shown in the chart below:
Snowbird AG
(Germany)
100%
Snow Bird (Hong Kong) Holding
Company Limited
(Hong Kong)
- Snowbird HK 100%
Puyang Snowbird Trading Co., Ltd
(PRC)
- Snowbird WFOE -
100%
Henan Snowbird Enterprise Co., Ltd.
(PRC)
- Snowbird Henan -
B.6
Persons who,
directly or
indirectly, have
an interest in
the issuer’s
capital or
voting rights
As of the date of this Prospectus, the Company’s share capital amounts to
EUR 30,000,000 divided into 30,000,000 no par value ordinary bearer shares
(Inhaber-Stückaktien) (“Existing Shares”) with a structure of the following
existing shareholders ( the “Existing Shareholders”) as follows:
Existing Shareholder
Number of Shares
%
BIG BUSINESS GLOBAL
HOLDINGS LIMITED(1)
10,950,000
36.5
Mr. YAN Changzai (2)
9,150,000
30.5
YIELD TRADE LIMITED (3)
1,470,000
4.9
Mystic Topaz S.à.r.l.(4)
1,350,000
4.5
Alrai S.à.r.l.(5)
1,350,000
4.5
Page 10
Alrakis S.à.r.l. (6)
1,350,000
4.5
Imperial Topaz S.à.r.l. (7)
1,350,000
4.5
ZHEN SHENG LIMITED (8)
1,320,000
4.4
United Talent Investments
Limited (9)
1,050,000
3.5
Midasi Investment Limited
660,000
2.2
30,000,000
100.00
(10)
Total
(1) BIG BUSINESS GLOBAL HOLDINGS LIMITED is a company incorporated under the laws of the
British Virgin Islands with the Company Number 1818048 and with its business address at: Flat B, 17/F,
Jade Terrace, 3 Link Road, Happy Valley, Hong Kong. Sole shareholder is Mr. CHOI Siu Hung.
(2) Mr. YAN Changzai is a Chinese resident with resident address at: No. 7-2-33, Wenquan Garden,
Shihua Street, Hualong District, Puyang City, Henan Province, PRC.
(3) YIELD TRADE LIMITED is a company incorporated under the laws of the British Virgin Islands with
the Company Number 1818818 and with its business address at: Room H, 9/F, Blk 6, Aldrich Gdn, No2
Oi Lai St, Shau Kei Wan, Hong Kong. Sole shareholder is Mr. XU Beifang.
(4) Mystic Topaz S.à.r.l. is a company incorporated under the laws of Luxembourg with its business
address at 7, rue Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mr. LIU Deling.
(5) Alrai S.à.r.l. is a company incorporated under the laws of Luxembourg with its business address at 7,
rue Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mr. YAN Zhaorui.
(6) Alrakis S.à.r.l. is a company incorporated under the laws of Luxembourg with its business address at
7, rue Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mr. CHEN Yijun.
(7) Imperial Topaz S.à.r.l. is a company incorporated under the laws of Luxembourg with its business
address at 7, rue Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mrs. WANG Qingmei.
(8) ZHEN SHENG LIMITED is a company incorporated under the laws of the British Virgin Islands with
the Company Number 1818372 and with its business address at: Room N, 5/F, Hung Fool Bldg, 42 Kam
Ping St, North Point, Hong Kong. Sole shareholder is Mr. LO Kin Nam.
(9) United Talent Investments Limited is a company incorporated under the laws of the British Virgin
Islands with the Company Number 1724928 and with its business address at: Room E, 36/F, Tower 1,
Sham Wan Towers, 3 Ap Lei Chau Drive, Ap Lei Chau, Hong Kong. Sole shareholder is Mr. CHEN Ling.
(10) Midasi Investment Limited is a company incorporated under the laws of the British Virgin Islands
with the Company Number 1713935 and with its business address at: PO Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Island. Sole shareholder is Mr. BEK Lian Ho.
Each bearer share representing EUR 1.00 of the share capital and each vested
with full dividend rights for the financial year 2014. Each share confers one vote
in the Company’s general shareholders’ meeting.
B.7
Different voting
rights of the
issuer’s major
shareholders
Not applicable. Mr. YAN Changzai as current direct and Mr. CHOI Siu Hung as
current indirect major shareholders of the Company do not have different voting
rights.
Whether the
issuer is
directly or
indirectly
owned or
controlled and
by whom and
description of
the nature of
control
Mr. YAN Changzai currently holds directly 30.5% and Mr. CHOI Siu Hung
currently holds indirectly 36.5% of the shares in the Company and the voting
rights in the Company and therefore with this majority, Mr. YAN Changzai and
Mr. CHOI Siu Hung control the Company and have substantial influence in the
general shareholders’ meeting and in the resolutions presented to the general
shareholders’ meeting.
Selected
historical
financial
The Company was founded as a shelf company (Vorratsgesellschaft) on 16 April
2012 and incorporated by registration in the commercial register
(Handelsregister) of the local court (Amtsgericht) of Frankfurt on 23 April 2012.
The Company disclosed the economic refoundation (wirtschaftliche
Page 11
information
Neugründung) to the commercial register (Handelsregister) of the local court
(Amtsgericht) of Cologne following the acquisition of all shares in the Company
by Mr. YAN Changzai. By way of further restructuring measures, the Group
structure as set out in Section B.5 above was established.
The operative business of SNOWBIRD is almost exclusively carried out by
Snowbird Henan, which is an indirect wholly owned subsidiary of the Company.
All shares in Snowbird Henan are directly held by Snowbird WFOE. Snowbird
WFOE has been incorporated on 12 August 2013 and has acquired all shares in
Snowbird Henan on 4 June 2014. Snowbird WFOE only after 30 June 2014
started generating revenues and thus becoming operational. All shares in
Snowbird WFOE are directly held by Snowbird HK. Snowbird HK has been
incorporated on 31 March 2009. The Company is the sole shareholder of
Snowbird HK.
Snowbird Henan was during the reporting period the only operating subsidiary of
SNOWBIRD. Hence in order to present the business, financial condition and
results of operations for the last three financial years in relation to the business of
SNOWBIRD, the Company has prepared single entity financial statements of
Snowbird Henan as at and for the financial years ended on 31 December 2011
(“FY 2011”), 31 December 2012 (“FY 2012”) and 31 December 2013 (“FY 2013”)
in accordance with International Financial Reporting Standards and International
Accounting Standards and Interpretations as endorsed for application in the EU
(“IFRS”) (the “Annual Financial Statements Snowbird Henan”).
The Annual Financial Statements Snowbird Henan were audited by Crowe
Kleeberg GmbH, Augustenstraße 10, 80333 Munich, Germany (“Kleeberg”).
In addition, condensed interim financial statements for the first six months period
ended on 30 June 2014 (“2014HY1”) in accordance with IFRS have been
prepared for Snowbird Henan with respective comparative information
(“2013HY1”). These condensed interim financial statements are unaudited, but
were reviewed by Kleeberg in accordance with the Auditing Standard 900 of the
Institute of Public Auditors in Germany (“IDW PS 900”).
Furthermore, the Company has prepared its single entity financial statements in
accordance with IFRS for the financial year ended on 31 December 2012 (short
fiscal year) and on 31 December 2013. For the financial year ended on 31
December 2013 the Company has also prepared its single entitiy financial
statement
in
accordance
with
the
German
Commercial
Code
(Handelsgesetzbuch). The single entity financial statements were audited by
Kleeberg.
The selected financial information, which is reflected in this section, was derived
from the aforementioned financial statements.
The aforementioned financial statements of SNOWBIRD are, apart from the
single entity financial statements of the Company for the financial year ended on
31 December 2013 in accordance with the German Commercial Code
(Handelsgesetzbuch), not the legally required financial statements of the
Company, but have been prepared on a voluntary basis for the purpose of this
Offering. The purpose of these financial statements is to put the investor in the
position to better compare the development of the business, financial condition
and the results of operations of SNOWBIRD over the last three years.
The following figures were subject to rounding adjustments that were carried out
according to established commercial standards. As a result, the figures stated in
a table may not exactly add up to the total values that may also be stated in the
table
Page 12
Selected Financial Statement Data
Snowbird Henan
All figures below are taken from the financial statements of Snowbird Henan.
2011
Selected Statement of Comprehensive Income (1)
Revenue
Cost of sales
Gross profit
Other income
Selling and distribution expenses
Administrative and other expenses
Finance costs
Profit before taxation
Income Tax Expense
Profit after taxation
49,166
-26,986
22,180
433
-4,489
-2,911
-526
14,687
-3,736
10,951
2012
(audited)
90,263
-48,886
41,377
561
-8,643
-4,026
-756
28,513
-7,279
21,234
2013
136,888
-83,913
52,975
1,260
-9,083
-6,108
-824
38,220
-9,941
28,279
2013HY1
2014HY1
(reviewed)
45,643
78,038
-28,371
-51,989
17,272
26,049
153
426
-1,115
-1,630
-2,715
-2,894
-383
-393
13,212
21,558
-3,408
-5,328
9,804
16,230
31 December
30 June
2011
2012
(audited)
2013
8,370
48,087
56,457
28,292
5,465
22,700
28,165
56,457
9,053
69,022
78,075
40,216
5,157
32,702
37,859
78,075
18,956
82,247
101,203
67,498
4,397
29,308
33,705
101,203
22,387
94,040
116,427
82,670
4,404
29,353
33,757
116,427
2011
2012
(audited)
2013
2013HY1
2014HY1
(reviewed)
Selected Statement of Cash Flow
14,687
28,513
38,220
13,212
21,558
Operating profit before working capital changes
15,737
29,870
40,104
14,000
22,599
Net cash from operating activities
Net cash for investing activities
Net cash for financing activities
3,931
-474
-2,622
14,459
-1,470
-4,156
5,886
-11,103
-7,562
1,063
-9,041
-5,500
-92
-1,838
-91
835
8,833
-12,779
-13,478
-2,021
22,410
30,414
16,695
18,288
13,590
Selected Statement of Financial Position
Non-current assets
Current assets
Total assets
Total equity
Non-current liabilities
Current liabilities
Total liabilities
Total Equity and liabilities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at end of the financial year/period
2011
Other selected Financial Data
EBIT(3)
EBIT margin(4)
Net profit margin(5)
Number of employees at end of the financial year/period
15,213
30.9%
22.3%
1,514
2012
(unaudited) (2)
29,269
32.4%
23.5%
1,566
2013
39,044
28.5%
20.7%
1,611
2014
(reviewed)
2013HY1
2014HY1
(unaudited) (2)
13,595
29.8%
21.5%
1,611
21,951
28.1%
20.8%
1,609
(1) all numbers in EUR'000 except as otherw ise stated.
(2) Unaudited information provided by the Company.
(3) EBIT = Profit before taxation plus finance cost.
(4) EBIT divided by revenue multiplied by 100.
(5) Profit after Tax (Net Profit) for the period divided by revenue multiplied by 100.
Page 13
Snowbird AG
All figures below are taken from the IFRS financial statements of Snowbird AG.
2012
2013
EUR'000
EUR'000
(audited)
Selected Statement of Comprehensive Income
Other operating expenses
Result before taxation
Loss/Total comprehensive income
-4
-4
-4
-10
-10
-10
2012
EUR'000
2013
EUR'000
50
50
46
55
55
36
4
0
0
50
14
0
5
55
2012
EUR'000
2013
EUR'000
Loss after income tax
-4
-10
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
0
0
0
5
0
0
Net variance in cash and cash equivalents
0
5
50
55
Current assets
Total assets
Total equity
Current liabilities
Provisions
Trade payables
Other Liabilities
Significant
changes to the
issuer's
financial
condition and
operating
results during
and
subsequent to
the period
covered by the
historical key
financial
information
Snowbird Henan has experienced a steady increase over FY 2011, FY 2012 FY
2013 and 2014H1 in regard to its operating results.
From FY 2011 to FY 2012 operating results increased by EUR 19.2 million from
EUR 22.2 million to EUR 41.4 million, therefore a rise of 86.49%. This increase
was mainly due to a rise in revenues by EUR 41.1 million or 83.54% from EUR
49.2 million to EUR 90.3 million. The higher growth rate of results compared to
revenues was mainly due to the management strategy to introduce new products
with higher margin.
From FY 2012 to FY 2013 the increase in operating results of EUR 11.6 million
or 28.02% from EUR 41.4 million to EUR 53.0 million was not as high compared
to the previous fiscal year. Nevertheless, this increase was also due to the
increase in revenue of EUR 46.6 million from EUR 90.3 million to EUR 136.9
million, a percentage increase of 51.61%, which is also roughly in line with the
increase of operating results. The lower growth rate of results compared to
revenues was due to a slightly higher proportionate increase in selling and
distribution expenses compared to average wholesale price.
From 2013H1 to 2014H1 operating results increased by EUR 8.7 million from
EUR 17.3 to EUR 26.0 million, therefore a rise of 50.29% as a result of a better
sales performance.
The Company was incorporated with a share capital of EUR 50,000 contributed
Page 14
in cash. No operational income of the Company was generated in the reporting
period up to 30 June 2014.
On 8 May 2014, the Company acquired 60% of the shares in Snowbird HK by
way of subscription of 3,062 new shares at par value resulting from a capital
increase in Snowbird HK against cash contribution. On 6 June 2014, inter alia,
the shareholders at that time entered into a contribution agreement
(Einbringungsvertrag) with the Company, whereby they undertook to transfer
40% of the shares in Snowbird HK, i.e. 2,041 shares of HKD 1.00 (approx. EUR
0.09) each, to the Company against the issue of 29,950,000 new no par value
ordinary bearer shares (Inhaber-Stückaktien) in the Company to the respective
shareholders in relation to their shareholding ratio. The contribution agreement
and the capital increase by way of contribution in kind (Sachkapitalerhöhung)
were approved by an extraordinary shareholders’ meeting of the Company on 13
June 2014 and have been registered with the commercial register
(Handelsregister) of the local court (Amtsgericht) of Cologne on 10 July 2014.
Apart from the abovementioned capital increase, no significant change has
occurred with respect to the financial condition or operating results of
SNOWBIRD since 30 June 2014 until the date of this Prospectus.
B.8
Pro forma
financial
information
Not applicable; no pro forma financial information are provided.
B.9
Profit forecast
or estimate
Not applicable; no profit forecasts or estimates are provided.
B.10 Qualifications
in the audit
reports
Not applicable; there are no qualifications in the audit reports.
B.11 Insufficiency of
the issuer’s
working capital
for its present
requirements
Not applicable; the Company believes that SNOWBIRD’s working capital is
sufficient for its present requirements, that means sufficient to cover those
payment obligations which will become at least due within the next twelve
months from the date of this Prospectus.
Section C – Securities
C.1
Type and class
of the
securities
being offered
and admitted to
trading,
including any
security
identification
number
The Offering consists of 11,500,000 no par value ordinary bearer shares
(lnhaber-Stückaktien) of the Company, each with a notional value of EUR 1.00
and carrying full dividend rights for the financial year 2014 (the "Offered
Shares"), thereof

10,000,000 newly issued no par value ordinary bearer shares from a
capital increase for a contribution in cash expected to be resolved by an
extraordinary general shareholders’ meeting of the Company on 24
September 2014 (“New Shares”). In order to be able to timely deliver
the shares to investors after the Offering Period, Mr. YAN Changzai and
Alrai S.à.r.l. will provide to the Underwriter a securities loan free of
charge for an equivalent number of shares. Upon registration of the
capital increase with the commercial register of the Company, the New
Shares will be transferred back to Mr. YAN Changzai and Alrai S.à.r.l.
by the Underwriter in order to fulfil its retransfer obligation under the
securities loan; and

1,500,000 existing no-par value ordinary bearer shares that originate
from a securities loan free of charge that is granted by BIG BUSINESS
GLOBAL HOLDINGS LIMITED with the sole shareholder Mr. CHOI
Siu Hung to ACON (together with CM-Equity AG & Co. KG Financial
Services, Kaufingerstraße 20, 80331 Munich, Germany, the “Joint
Stabilization Managers””) for a potential overallotment and for
stabilization measures (the “Overallotment Shares”); in order to fulfill
its retransfer obligation vis-à-vis BIG BUSINESS GLOBAL HOLDINGS
LIMITED from the securities loan, the Company will grant ACON the
option to subscribe up to 1,500,000 shares resulting from a capital
increase of the Company using authorized capital against payment of
Page 15
the respective Offer Price (less the agreed commission and other costs)
(“Greenshoe Option”).
For the purposes of admission to trading to the regulated market segment
(Regulierter Markt) of the Frankfurt Stock Exchange with simultaneous admission
to the sub-segment of the regulated market with additional post-admission
obligations (Prime Standard) (the “Listing”), this Prospectus covers a total of up
to 41,500,000 ordinary bearer shares of the Company, consisting of:

30,000,000 existing ordinary bearer shares (“Existing Shares”);

up to 10,000,000 newly issued ordinary bearer shares from a capital
increase for a contribution in cash to be resolved by an extraordinary
general shareholders’ meeting of the Company with a fixed amount
(“New Shares”); and

up to 1,500,000 newly issued ordinary bearer shares resulting from the
exercise of the Greenshoe Option (“Greenshoe Shares”)
each such share with no par value and a notional value of EUR 1.00 in the share
capital and carrying full dividend rights for the financial year 2014.
Ticker Symbol: 8S9
C.2
Currency of the
securities issue
EUR
C.3
Number of
shares issued
and fully paid
30,000,000 ordinary no-par value bearer shares (lnhaber-Stückaktien) of the
Company, each with a notional value of EUR 1.00, have been issued and fully
paid.
C.4
Rights attached
to the
securities
Dividend Rights
The shares in the Company carry full dividend rights for the financial year 2014.
Rights on Liquidation Proceeds
Should the Company be dissolved, any liquidation proceeds remaining after
discharging the Company’s liabilities will accrue to the shareholders pursuant to
the German Stock Corporation Act (Aktiengesetz) in proportion to the respective
shares they hold in the Company’s share capital.
Subscription Rights
Shareholders generally have the right to subscribe for new shares issued
pursuant to any future capital increases in a ratio proportionate to the respective
shares they hold in the Company’s share capital (subscription right) in connection
with share capital increases against cash contributions. Exemptions are made
with regard to conditional capital increases or the issuance of convertible bonds,
income bonds, profit participation rights or bonds with warrants as well as in
respect of the sale of treasury shares. Furthermore, the general shareholders’
meeting (Hauptversammlung) may partially or completely exclude the
subscription rights in specific cases.
Voting Rights
In accordance with the Company’s articles of association, each share carries one
vote at the general shareholders’ meeting (Hauptversammlung). All shares carry
the same voting rights. No restrictions on voting rights exist with the exception of
those stipulated by law in specific cases. Attendance of the general shareholders’
meeting (Hauptversammlung) and exercise of voting rights are governed by the
articles of association (Satzung) and general company law.
C.5
Restrictions on
the free
transferability
of the
securities
Not applicable. The Company’s shares are freely transferable in accordance with
the legal requirements for ordinary no par value bearer shares.
Page 16
C.6
C.7
Application for
admission to
trading for the
offered
securities
The Company intends to list its shares on the regulated market (Prime Standard)
of the Frankfurt Stock Exchange irrespective of the result of the Offering.
Dividend policy
Snowbird Henan has in the recent past paid dividends (with the exception of for
the FY 2013). The Company intends to distribute dividends in 2015 of approx.
20% of the consolidated net income of the FY 2014 to the extent legally possible,
in particular provided sufficient distributable annual profit is retained in the
Company, and to also pay dividends on a regular basis thereafter, whereas the
distribution of dividends of approx. 20% shall be the basis for the long-term
dividend policy of the Company, however depending on the results of operations
of the Company, its business strategy, its financial situation, its need for cash
and the legal, tax and regulatory environment as well as other factors.
An application for admission of all shares of the Company (including the New
Shares) to trading on the regulated market (Regulierter Markt) of the Frankfurt
Stock Exchange (Prime Standard) shall be filed on or around 10 September
2014. The Company expects that admission to trading on the regulated market
(Prime Standard) will be resolved by Frankfurt Stock Exchange on 26 September
2014 and that trading will commence on 29 September 2014.
Section D – Risks
Prior to making a decision on whether to purchase the Company’s shares, investors should, in
addition to the other information contained in this Prospectus, carefully consider certain risks. These
risks include the major risks cited below. The business, net assets, financial condition and results of
operations of SNOWBIRD may suffer substantial harm due to the materialization of any one or
several of these risks. The stock price of the Company’s shares may decline considerably if any one
of these risks occurs, and investors may lose all or part of their investment.
The risks described below may, in retrospect, turn out not to be complete and therefore may not be
the only risks to which SNOWBIRD is exposed. Additional risks and uncertainties of which the
Company is not currently aware of could have a material adverse effect on SNOWBIRD’s business,
net assets, financial condition and results of operations. Investors should pay particular attention to
the fact that all operating entities of SNOWBIRD are located in the PRC and governed by a legal and
regulatory environment, which in various respects differs from that of other countries.
The order in which the risk factors are presented below does not indicate the likelihood of their
occurrence or the magnitude or the significance of the individual risks. The risks specified below
could occur individually or cumulatively.
D.1
Risks related to
the Issuer or its
industry
Risks related to SNOWBIRD’s Operations

SNOWBIRD may not be able to continue competing successfully
against present and future competitors.

Fluctuations in consumer spending caused by changes in
macroeconomic conditions in the PRC and export countries may
significantly affect SNOWBIRD’s prospects.

Rapid changes in fashion trends, consumer preferences or spending
patterns may affect SNOWBIRD’s business

SNOWBIRD may be materially and adversely affected by seasonality
and climate changes.

SNOWBIRD’s business may be materially and adversely affected by the
export dependency.

SNOWBIRD may not be able to comply with customers’ specifications.

SNOWBIRD operates in an environmental hazardous industry and may
fail to comply with environmental protection laws and regulations in the
PRC.

The current PRC environmental protection laws and regulations may
change to the detriment of SNOWBIRD.

SNOWBIRD’s operation may cause damage to human health and the
insurance coverage may not be adequate for SNOWBIRD’s operations.

SNOWBIRD may be affected by complaints from its customers and
Page 17
negative publicity.

SNOWBIRD might fail to execute its expansion plans successfully and
manage its growth efficiently.

The implementation of SNOWBIRD’s growth strategy is capital intensive
and SNOWBIRD could be unable to secure additional financing.

SNOWBIRD cannot ensure long-term business relationships with its
existing customer base.

SNOWBIRD is exposed to the credit risks of its customers.

SNOWBIRD may be subject to fluctuations in the prices of raw materials
and is dependent on the continuous and timely supply of quality raw
materials.

SNOWBIRD’s business depends substantially on the continuing efforts
of its management and other key personnel.

Labor costs in the PRC have risen significantly in recent years and
could continue to rise significantly.

SNOWBIRD is exposed to fluctuation in foreign exchange rates against
the Renminbi (“RMB”).

SNOWBIRD may be materially and adversely affected if counterfeit
products are sold in the market.

SNOWBIRD may be materially and adversely affected if fake down

SNOWBIRD relies on the effective protection of its patents and
its confidential technical know-how.

SNOWBIRD may inadvertently infringe third-party intellectual property
rights.

SNOWBIRD’s operational, trading and financial planning, internal key
control and management reporting systems may be inadequate and its
management resources may be insufficient to successfully manage and
support its future growth and to ensure accurate financial management.

The Company’s management board (Vorstand) is not experienced in
complying with German legal requirements for listed companies and
SNOWBIRD currently does not have a comprehensive risk
management system in place.

The Company’s supervisory board (Aufsichtsrat) may have difficulties in
adequately supervising the management board (Vorstand) since the
management is located in the PRC and the chairlady of the supervisory
board (Aufsichtsratsvorsitzende) resides in Germany.

Mr. YAN Changzai and Mr. CHOI Siu Hung are major direct and indirect
shareholders of the Company, respectively, as well as hold
management positions in SNOWBIRD. These positions will enable them
to exercise significant control over the Company and the entities in the
PRC and could subject them to conflicts of interest.

SNOWBIRD does not have the insurance coverage that is customary in
more economically developed countries for a business of its type and
size and the insurance may not be adequate for SNOWBIRD’s
operations.

SNOWBIRD may not be able to maintain and/or obtain approvals and
licenses from PRC authorities necessary to carry out or expand its
business, to own real property or use land or to cope with future
regulatory requirements.

The Company is a holding company the liquidity of which depends upon
having access to the liquid funds of Snowbird Henan, which might not
be able to remit profits.

The tax burden of SNOWBIRD may increase as a result of tax audits.
Page 18

Financial subsidies granted by the local government authorities may be
ceased in the future.

SNOWBIRD may be materially and adversely affected by the bird flu or
other similar communicable diseases.

There can be no assurance that SNOWBIRD will not encounter
disruptions in the supply of electricity and water which could cause a
disruption to its production and affect its overall operation efficiencies.
Risks related to Conducting Business in the PRC
D.3
Risks related to
the Offering

SNOWBIRD’s business, financial condition, results of operations and
prospects could be materially and adversely affected by changes in the
economic, political and legal environment and developments in China.

Fluctuations in the global economy could materially and adversely affect
the economy of the PRC.

Changes in the PRC’s political and economic policies could have a
material and adverse effect on the business operations of SNOWBIRD.

PRC legislation on offshore special purpose vehicles (“SPV”) which are
formed by PRC legal entities and/or individuals for the purpose of
indirect listings and that control PRC companies directly or indirectly
may have a material and adverse affect on SNOWBIRD’s business.

Regulations by the State Administration of Foreign Exchange relating to
offshore investments by PRC residents or passport holders, may
materially and adversely affect SNOWBIRD’s business operations and
financing alternatives.

PRC regulations pertaining to loans and direct capital investments by
offshore parent companies to PRC entities may delay or prevent
SNOWBIRD from using the proceeds of this Offering.

The PRC legal
inconsistencies.

The tax status of SNOWBIRD or tax legislation or its interpretation might
change.

The Company and Snowbird HK may be treated as tax resident
enterprises for PRC tax purposes under the PRC enterprise income tax
laws and therefore be subject to PRC taxation.

Greater scrutiny over acquisition and disposition transactions by the
PRC tax authorities may have a negative impact on SNOWBIRD or the
investors’ disposition of the Company’s shares.

PRC accounting requirements may materially and adversely affect the
ability to pay dividends.

A destabilization of the political system could threaten China's economic
liberalization.

The PRC judiciary's lack of independence and limited experience and
the difficulty of enforcing court decisions and governmental discretion in
enforcing court orders could prevent SNOWBIRD from obtaining
effective remedies in a court proceeding.

Seeking recognition and enforcement in China of foreign judgments
against the Company, its assets, management personnel or directors
might be difficult or impossible for investors.

Certain facts, forecasts and other statistics with respect to China,
China’s economy and the textile industry in this Prospectus are derived
from official government publications and may not be reliable.

Restrictions might be imposed upon foreign control of PRC companies.

Public trading in the Company’s shares might not develop. There is no
prior market for its shares and this Offering may not result in an active
or liquid market for its shares.
system
contains
inherent
uncertainties
Page 19
and

A devaluation of the RMB could have an adverse currency translation
effect on the Company’s financial statements.

A volatile stock exchange price for the shares might develop and
investors could lose all or part of their investment.

Future sales or issuances of a substantial number of the Company’s
shares may depress the market price of the Company’s shares. Future
capitalization measures could lead to substantial dilution of existing
shareholders’ interests in the Company.

The Offering may not take place if the Underwriting Agreement is
terminated.

Forward-looking information contained in this Prospectus may prove
inaccurate.

Information in press articles or other media regarding SNOWBIRD or
the Offering could turn out to be incorrect and therefore it cannot be
excluded that investors base their investment decision on incorrect
information.

The market price of the Company’s shares could fall below the Offer
Price at a later stage.

The Offering may not be implemented in full which may negatively affect
the growth prospects of SNOWBIRD and/or the liquidity of the shares in
the market.

The Listing may not take place if the listing requirements are not
fulfilled.
Section E – Offer
E.1
Total net
proceeds / total
expenses
The Company believes that based on the price range of EUR 5.50 to EUR 6.00
and on the assumption that all Offered Shares will be placed, it is possible to
generate approximately EUR 59,050,000 to EUR 64,600,000 in net issue
proceeds, provided the Greenshoe Option is exercised. In case the Greenshoe
Option is not exercised, the Company believes that net proceeds of between
approximately EUR 51,200,000 to EUR 56,000,000 are attainable.
Based on the price range of EUR 5.50 to EUR 6.00 and on the assumption that
all Offered Shares will be placed, the Company estimates that it will incur costs of
the Offering (including fees of the Underwriter) totaling between approximately
EUR 4,200,000 and EUR 4,400,000, provided the Greenshoe Option is
exercised. In case the Greenshoe Option is not exercised, the Company
estimates that the costs of the Offering (including fees of the Underwriter) will be
between approximately EUR 3,800,000 and EUR 4,000,000.
E.2a Reasons for the
offering / use of
proceeds
The net issue proceeds accruing to the Company are intended to strengthen the
Company’s capitalization and financial position and support the intended
expansion of its activities and the implementation of its strategy. In particular, the
Company aims to finance its growth process. The Listing is also intended to
enable the Company to sharpen its public profile as well as its profile on the
international capital market.
The Company plans to use the net issue proceeds accruing to it (provided the
Greenshoe Option is exercised) as follows:
Purpose
EUR
Approx. %
Office building
2,922,975 to 3,197,700
4.95%
Sewing plant
4,446,465 to 4,864,380
7.53%
Furniture and fittings
Sewing machines
Working capital
773,555 to
846,260
1.31%
5,261,355 to 5,755,860
8.91%
45,645,650 to 49,935,800
77.30%
If the net issue proceeds envisaged are not raised, the Company plans to obtain
Page 20
additional bank loans to finance its further growth.
E.3
Terms and
conditions of
the offering
Subject Matter of the Offering
The Offering consists of a public offering in the Federal Republic of Germany and
Luxembourg as well as private placements in other jurisdictions outside
Germany, Luxembourg and the United States. The Offering consists of
11,500,000 no par value ordinary bearer shares (lnhaber-Stückaktien) of the
Company, each with a notional value of EUR 1.00 and carrying full dividend
rights for the financial year 2014 (the "Offered Shares"), thereof

10,000,000 newly issued no par value ordinary bearer shares originate
from a capital increase for a contribution in cash expected to be
approved by an extraordinary general shareholders’ meeting of the
Company on 24 September 2014 (“New Shares”). In order to be able to
timely deliver the shares to investors after the Offering Period, Mr. YAN
Changzai and Alrai S.à.r.l. will provide to the Underwriter a securities
loan free of charge for an equivalent number of shares. Upon
registration of the capital increase with the commercial register of the
Company, the New Shares will be transferred back to Mr. YAN
Changzai and Alrai S.à.r.l. by the Underwriter in order to fulfil its
retransfer obligation under the securities loan, and

1,500,000 existing no par value ordinary bearer shares that originate
from a securities loan free of charge that is granted by BIG BUSINESS
GLOBAL HOLDINGS LIMITED with the sole shareholder Mr. CHOI
Siu Hung to ACON for a potential overallotment and for stabilization
measures (the “Overallotment Shares”).
New Shares placed to investors will originate from a capital increase for a
contribution in cash expected to be approved by an extraordinary general
shareholders’ meeting of the Company on 24 September 2014. The then existing
shareholders will waive their subscription rights to the New Shares.
As regards overallotment and potential stabilization measures, in addition to the
maximum total of up to 10,000,000 New Shares of the Company being allocated,
investors may be allotted up to 1,500,000 additional Existing Shares of the
Company (“Overallotment”). Overallotment within this meaning is also possible
if the New Shares offered are not fully placed with investors. In order to cover this
Overallotment, BIG BUSINESS GLOBAL HOLDINGS LIMITED with the sole
shareholder Mr. CHOI Siu Hung will provide ACON, prior to the allotment of the
Offered Shares, with 1,500,000 Existing Shares by way of a securities loan
without charge.
In this context, the Company grants ACON the option to subscribe up to
1,500,000 shares in the Company resulting from a capital increase using
authorized capital against payment of the Offer Price less the agreed commission
and other costs (“Greenshoe Option”), in order to satisfy the retransfer
obligation under the securities loan. This Greenshoe Option expires 30 calendar
days after trading of the Existing Shares commences and may be exercised at
maximum to the extent that shares of the Company have been placed by way of
Overallotment.
Offering Period
The Offering is expected to commence on 9 September 2014 and to end on 24
September 2014 (“Offering Period”). Purchase orders are freely revocable until
the Offering Period expires. On the last day of the Offering Period, retail investors
and institutional investors will be able to submit offers to purchase shares until
10:00 a.m. (Central European Time).
Price Range
The price range within which purchase orders may be submitted is between EUR
5.50 and EUR 6.00 per Offered Share. Within this price range, the offers may be
furnished with a price limit.
Minimum Subscription
Only orders with a minimum subscription amount of one share will be accepted.
Page 21
Multiple Orders
Multiple orders of one subscriber will not be accepted.
Amendments to the Offer Terms
The Company, in agreement with ACON and CM-Equity AG & Co. KG Financial
Services, Kaufingerstraße 20, 80331 Munich, Germany (“also the “Joint
Bookrunners”), reserves the right to reduce the number of Offered Shares, to
lower or raise the upper limit and/or the lower limit of the price range and/or to
extend or shorten the Offering Period (collectively referred to as the “Offer
Terms”). In case of an amendment to the Offer Terms, a supplement to this
Prospectus will be filed with German Federal Financial Supervisory Authority
(Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) and published
following approval thereof on the Company’s website (www.snowbird-ag.de). To
the extent legally required, any changes will be published in an ad hoc
disclosure. Investors will not be notified individually.
Delivery of the Offered Shares
It is expected that delivery of the Offered Shares will take place presumably on
26 September 2014 against payment of the Offer Price.
Securities Loan
To facilitate a timely delivery of up to 10,000,000 New Shares of the Company to
the investors, Mr. YAN Changzai and Alrai S.à.r.l. will enter into a securities loan
agreement with the Underwriter to provide to the Underwriter a total number of
10,000,000 no-par value ordinary bearer shares (Inhaber-Stückaktien) by way of
securities loan free of charge.
General Allotment Criteria
The Company reserves the right to allot to investors less than the maximum
possible amount of New Shares that are being offered. The Company, Mr. YAN
Changzai and the Joint Bookrunners intend to comply with the “Principles for the
Allotment of Share Issues to Private Investors” ("Grundsätze für die Zuteilung
von Aktienemissionen an Privatanleger"), which were issued on 7 June 2000
by the Exchange Expert Commission (Börsensachverständigenkommission) of
the German Federal Ministry of Finance (Bundesministerium der Finanzen) (the
“Allocation Rules”).
Early Termination of the Offering
The underwriting agreement which will be concluded inter alia between the
Company, Mr. YAN Changzai, Alrai S.à.r.l., BIG BUSINESS GLOBAL
HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung and the
Underwriter shortly after the date of this Prospectus (“Underwriting
Agreement”) provides that the Underwriter may terminate the Underwriting
Agreement under certain circumstances up to the time of delivery of the Offered
Shares to the investors.
Furthermore, the Company reserves the right to withdraw the Offering at any
time during and after the Offer Period without giving any reasons.
If the Underwriting Agreement is terminated or the Company withdraws from the
Offering, the Offering will not take place. In such case, allocations of shares to
investors will become invalid, and investors will have no claim for delivery.
Claims relating to any subscription fees paid and costs incurred by any investor
in connection with the subscription are governed solely by the legal relationship
between the investor and the institution to which the investor submitted its
purchase order.
E.4
Interests and
conflicting
interests
In connection with the Offering and the Listing of the Company’s shares (the
“Transaction”), the Underwriter and the Lead Manager are in a contractual
relationship with the Company.
ACON is the Underwriter and its commission is inter alia dependent on the
amount of the offer proceeds in accordance with the Underwriting Agreement
expected to be executed shortly after the date of this Prospectus.
CM-Equity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331 Munich,
Germany (“CM-Equity”) advises as Global Coordinator and Lead Manager the
Company on the transaction and coordinates the structuring and execution
Page 22
thereof and will also sell the Offered Shares on behalf of the Underwriter. The
compensation of CM-Equity is, inter alia, incentive-based and depends, among
other factors, on the amount of the offer proceeds such that CM-Equity has an
interest in the successful implementation of the Offering.
The Underwriter and the Lead Manager or its affiliates may enter into business
relations with the Company or render services to the Company in the ordinary
course of business.
mwb fairtrade Wertpapierhandelsbank AG, Rottenbucher Straße 28 82166
Gräfelfing, Germany, also has an interest in the Offering on account of its
intended Designated Sponsor agreement.
E.5
E.6
E.7
Name of the
entity offering
to the security
The Offered Shares will be offered by ACON as the Underwriter.
Lock-up
agreement
The Company and certain existing shareholders concluded with CM-Equity a
lock-up agreement, whereby (i) the Company, BIG BUSINESS GLOBAL
HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung and Mr. YAN
Changzai agreed on a lock-up period of 36 months, and (ii), YIELD TRADE
LIMITED, ZHEN SHENG LIMITED, United Talent Investments Limited and
Midasi Investment Limited agreed on a lock-up period of 12 months respectively.
Amount and
percentage of
immediate
dilution
resulting from
the offer /
amount and
percentage of
immediate
dilution if the
existing equity
holders do not
subscribe to
the new offer
As of the date of this Prospectus, the Company’s share capital amounts to
EUR 30,000,000 divided into 30,000,000 no par value ordinary bearer shares
(Inhaber-Stückaktien).
Estimated
expenses
charged to the
investor by the
issuer or the
offeror
Not applicable. Neither the Company nor ACON will charge expenses to
investors. Investors will have to bear customary transaction and handling fees
charged by their safe-custody account-keeping financial institutions.
The net book value of the Company (total assets less non-current liabilities and
current liabilities) amounted to EUR 82.670 million as of 30 June 2014 based on
the condensed interim financial statements of Snowbird Henan for 2014H1
prepared in accordance with IFRS. This corresponds to approximately EUR 2.76
per share (calculated on the basis of 30,000,000 shares of the Company in issue
as of the date of this Prospectus).
Assuming that all 11,500,000 Offered Shares are placed and that the Offer Price
amounts to EUR 5.75 as the arithmetic mean of the price range between EUR
5.50 and EUR 6.00, the Company would obtain net proceeds of approximately
EUR 61,825,000 considering costs of the Offering and of the Listing (including
fees of the Underwriter) totaling approximately EUR 4,300,000. Assuming that
the Offering had been implemented on 30 June 2014, the net book value of the
Company at that time would have amounted to approximately EUR 144,495,000
(or approximately EUR 3.48 per share calculated on the basis of 41,500,000
shares of the Company in issue following full implementation of the capital
increase against cash contributions). This corresponds to an increase in the net
book value of the Company of approximately EUR 0.72 per share corresponding
to an increase of approx. 26.1% for the Existing Shareholders and a direct
dilution of about EUR 2.27 per share for the purchasers of the Offered Shares
based on the arithmetic mean of the price range and, thus, investors who acquire
shares at the arithmetic mean of the price range of EUR 5.75 per Offered Share
are diluted by about 65.2%.
Page 23
2.
GERMAN TRANSLATION OF THE SUMMARY (ZUSAMMENFASSUNG)
Zusammenfassungen bestehen aus geforderten Angaben, die als „Punkte“ bezeichnet sind.
Diese Punkte sind in den Abschnitten A – E (A.1 – E.7) fortlaufend nummeriert. Diese
Zusammenfassung enthält alle Punkte, die für die vorliegende Art von Wertpapieren und
Emittenten in eine Zusammenfassung aufzunehmen sind. Da einige Punkte nicht behandelt
werden müssen, können in der Nummerierungsreihenfolge Lücken auftreten. Selbst wenn ein
Punkt wegen der Art der Wertpapiere und des Emittenten in der Zusammenfassung
aufgenommen werden muss, ist es möglich, dass in Bezug auf diesen Punkt keine relevanten
Informationen gegeben werden können. In diesem Fall enthält die Zusammenfassung eine
kurze Beschreibung des Punkts mit dem Hinweis „Entfällt“.
Abschnitt A – Einleitung und Warnhinweise
A.1
Warnhinweise
Diese Zusammenfassung ist als Einführung zu diesem Prospekt zu verstehen.
Anleger sollten jede Entscheidung zur Anlage in Aktien der Gesellschaft auf die
Prüfung des gesamten Prospekts stützen.
Für den Fall, dass vor einem Gericht Ansprüche eines Anlegers aufgrund der in
diesem Prospekt enthaltenen Informationen geltend gemacht werden, könnte der
als
Kläger
auftretende
Anleger
in
Anwendung
einzelstaatlicher
Rechtsvorschriften von Staaten innerhalb des Europäischen Wirtschaftsraums
(„EWR“) die Kosten für die Übersetzung des Prospekts vor Prozessbeginn zu
tragen haben.
Die Snowbird AG, mit eingetragenem Sitz in Köln, Deutschland, (die
„Gesellschaft” und zusammen mit ihren direkten und indirekten
Tochtergesellschaften „SNOWBIRD” oder die „Gruppe”) und ACON Actienbank
AG, Heimeranstraße 37, 80339 München, Deutschland („Underwriter” oder
„ACON“) übernehmen im Sinne von § 5 Abs. 2b Nr. 4 Wertpapierprospektgesetz
(WpPG) die Verantwortung für den Inhalt dieser Zusammenfassung,
einschließlich der deutschen Übersetzung hiervon. Diejenigen Personen, die die
Verantwortung für die Zusammenfassung einschließlich der Übersetzung hiervon
übernommen haben oder von denen der Erlass ausgeht können haftbar gemacht
werden, jedoch nur für den Fall, dass die Zusammenfassung irreführend,
unrichtig oder widersprüchlich ist, wenn sie zusammen mit anderen Teilen dieses
Prospekts gelesen wird, oder sie, wenn sie zusammen mit den anderen Teilen
des Prospekts gelesen wird, nicht alle erforderlichen Schlüsselinformationen
vermittelt.
A.2
Zustimmung
zur
Verwendung
des Prospekts,
Verwendung
des Prospekts
währen der
Angebotsfrist,
Bedingungen
für die
Verwendung
sowie Hinweis
für die
Investoren
Die Zustimmung der Gesellschaft zur Verwendung des Prospekts in Deutschland
und Luxemburg für die Veräußerung oder Platzierung von Wertpapieren wurde
an die CM-Equity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331
München, Deutschland (wird auf die CM-Equity AG, Kaufingerstraße 20, 80331
München, Deutschland verschmolzen) („Lead Manager“) erteilt.
Die Zustimmung zur Verwendung des Prospekts durch den Lead Manager wurde
für die Frist erteilt, die am 9. September 2014 beginnt und am 24. September
2014 endet („Angebotsfrist“).
Etwaige neue Informationen zum Lead Manager, die zum Datum des Prospekts
unbekannt waren, werden zumindest auf der Webseite der Gesellschaft
veröffentlicht (www.snowbird-ag.de).
Für den Fall, dass der Lead Manager ein Angebot macht, wird der Lead
Manager die Anleger zum Zeitpunkt der Angebotsvorlage über die
Angebotsbedingungen unterrichten.
Abschnitt B – Emittent
B.1
Juristische
und
kommerzielle
Bezeichnung
Die juristische Bezeichnung der Gesellschaft ist Snowbird AG. Die Gesellschaft
handelt unter der kommerziellen Bezeichnung „SNOWBIRD AG“.
Page 24
B.2
Sitz /
Rechtsform /
Rechtsvorschriften /
Gründungsstaat
Der Sitz (Satzungssitz) der Gesellschaft befindet sich in Köln, Deutschland, und
die Gesellschaft ist im Handelsregister des Amtsgerichts Köln unter der
Registernummer HRB 76323 eingetragen. Die Geschäftsadresse lautet: c/o HRG
Hansische Revisions-Gesellschaft mbH, Wirtschaftsprüfungsgesellschaft,
Ferdinandstraße 25, 20095 Hamburg, Deutschland.
Die Gesellschaft ist eine deutsche Aktiengesellschaft.
Die Rechtsvorschriften, unter denen die Gesellschaft handelt, sind die des
deutschen Rechts.
Das Land der Gründung ist Deutschland.
B.3
Art der
derzeitigen
Geschäftstätig
keit des
Emittenten und
seine
Haupttätigkeite
n,
einschließlich
der
Hauptkategorie
n der
verkauften
Produkte
und/oder
erbrachten
Dienstleistung
en und
Identifizierung
der
Hauptmärkte,
auf denen der
Emittent
konkurriert
Die Gesellschaft
Unternehmensgegenstand und Geschäftstätigkeit der Gesellschaft sind das
Management anderer Unternehmen sowie die Verwaltung von Beteiligungen an
Unternehmen, insbesondere solcher Unternehmen, die in den folgenden
Bereichen tätig sind: Daunenverarbeitung für die Herstellung und den Verkauf
von Daunenprodukten.
Zu den Geschäftstätigkeiten der Gesellschaft zählen insbesondere der Erwerb,
das Halten und Verwalten sowie die Veräußerung von Beteiligungen an
Unternehmen, deren Zusammenfassung unter einheitlicher Leitung sowie deren
Unterstützung und Beratung, einschließlich der Erbringung von Dienstleistungen
für diese Unternehmen.
Die Gesellschaft darf selbst in den genannten Bereichen tätig werden.
Die Gruppe
SNOWBIRD ist insbesondere im Bereich der Daunenverarbeitung sowie der
Herstellung von Daunenprodukten durch ihre operativen Tochtergesellschaften in
der Volksrepublik China („VR China“) engagiert. Die laufenden Geschäfte
können in vier Segmente eingeteilt werden: (i) Daunen, (ii) Daunenbekleidung,
(iii) Daunenbettwaren und (iv) daunenfreie Original Equipment Manufacturers
(Originalhersteller) („OEM“)-Bekleidung.
Das Daunen-Segment umfasst die Verarbeitung von Federn und Daunenfaser
von Weiß- und Graugans sowie von Weiß- und Grauente (Federn und
Daunenfaser werden zusammen „Daunen“ genannt). Weiße Gänsedaunen
machen ca. 50 % der insgesamt verarbeiteten Daunen aus. SNOWBIRD wäscht,
sterilisiert und sortiert die ursprünglichen Federn und Daunenfaser, um eine hohe
Qualität der gewaschenen Daunen sicherzustellen. Die verarbeiteten Daunen
werden dann vor allem an in- oder ausländische Großhändler oder andere
Hersteller von Daunenprodukten verkauft, während ein Teil der Daunen von
SNOWBIRD für die Produktion der eigenen Waren eingesetzt wird.
SNOWBIRD verarbeitet Daunen mit einem hohen Anteil von Daunenfasern.
SNOWBIRD ist verarbeitet üblicherweise Daunen mit einem Daunenanteil von 80
% oder mehr, was weit über dem Durchschnitt in der Daunen verarbeitenden
Industrie liegt. Daunen, welche in andere Länder von SNOWBIRD exportiert
werden, weisen sogar einen Daunenanteil von bis zu 90 % Daunen auf.
SNOWBIRD kann sofern erforderlich sogar Daunen herstellen, die eine
Daunenanteil von 100 % haben (Quelle: Test Report von Hohenstein, Juni
2014).
Bei den Daunenendprodukten, welche von SNOWBIRD hergestellt werden,
handelt es sich um Daunenbekleidung und Daunenbettwaren (die
„Daunenprodukte“). Daunenbekleidung umfasst hauptsächlich die Herstellung
von Jacken und Mänteln, wohingegen Daunenbettwaren vor allem die
Produktion von Bettdecken und Kissen darstellt. Die Daunenprodukte werden
unter den eigenen SNOWBIRD-Marken „Snow Bird“ und „Xueniao“ verkauft.
Darüber hinaus stellt SNOWBIRD auch Daunenbekleidung für OEMs, unter
deren Handelsmarken her. Die unter SNOWBIRDs eigenen Marken vertriebene
Daunenbekleidung wird an in- und ausländische Handelsunternehmen verkauft,
während die Daunenbettwaren derzeit nur an inländische Handelsunternehmen
verkauft werden. Die Handelsunternehmen verkaufen die Produkte mit eigenen
Vertriebs- und Verteilungsnetzen weiter.
Sowohl Daunenbekleidung als auch Daunenbettwaren sind an Endverbraucher
Page 25
der mittleren Einkommensschicht gerichtet.
In der Nebensaison der Daunenverarbeitung produziert SNOWBIRD auch
daunenfreie OEM-Bekleidung wie zum Beispiel Arbeitskleidung und Jacken, um
die Produktionskapazität auszuschöpfen. Die nicht-Daunen Produkte werden von
SNOWBIRD nach Entwürfen und Beispielen der Kunden gefertigt.
SNOWBIRD produziert größtenteils für den Markt der VR China. Zudem wird
jedoch auch nach Taiwan, Russland und Hong Kong exportiert.
Daunen sind SNOWBIRD‘s meistverkauftes Produkt, welches 51,9% des
Gesamtumsatzes
im
GJ
2013
ausmachte,
während
hingegen
Daunenbekleidung, Daunenbettenwäsche und daunenfreie OEM Kleidung nur
36,5%, 5,8% und 5,9% des Gesamtumsatzes im GJ 2013 darstellten.
SNOWBIRDs Produktionsanlagen befinden sich in Taiqian County, Puyang
Stadt, Provinz Henan, VR China. SNOWBIRDs Produktionsstätten haben im GJ
2013 eine Gesamtleistung von ca. 1.186 Tonnen Daunen und ca. 1,75 Mio.
Stücken an Daunenbekleidung, Daunenbettwaren und daunenfreier OEMBekleidung im GJ 2013 erbracht.
Zum 30. Juni 2014 hatte SNOWBIRD 1.609 Arbeitnehmer angestellt.
Stärken
SNOWBIRD sieht sich als signifikanten Marktteilnehmer im chinesischen
Daunengeschäft und glaubt, dass es gut positioniert ist, um innovative Produkte
an einen bestehenden Kundenstamm ebenso wie an zukünftige neue Kunden zu
vertreiben. Insgesamt hält die Gesellschaft die folgenden Stärken für die Treiber
ihres zukünftigen Wachstums:






Strategische Lage
Moderne Technologie
Staatliche Unterstützung
Bekannte Marke
Engagiertes und erfahrenes Management
Innovative Forschungsabteilung
Strategien
SNOWBIRD strebt die folgende strategische Ausrichtung an:







B.4a
Wichtigste
jüngste
Trends, die
sich auf den
Emittenten und
die Branchen,
in denen er
tätig ist,
auswirken
Großhandel mit Daunen
Wesentliche Erhöhung der Kapazitäten
Verstärkter inländischer Verkauf von Daunenbekleidung
Ausbau des Exports von Daunenbekleidung unter Eigenmarke
Internationaler Verkauf von Bettwaren unter der eigenen Marke
Verstärkung des OEM-Vertriebs
Ausbau des Vertriebsnetzwerkes
SNOWBIRD zielt sowohl auf den inländischen als auch den internationalen Markt
ab. Wichtigste jüngste Trends, die das Geschäft von SNOWBIRD und die
Daunenbranche, in der SNOWBIRD agiert, beeinflussen sind:
Aufstrebende Branche
Die Daunen- und Daunenproduktbranche in China ist von starker aufstrebender
Tendenz geprägt. Im Jahr 2013 ist die Marktgröße von Daunen,
Daunenbekleidung und Daunenbettwaren im Vergleich zu 2012 um 22,0%bzw.
16,0% bzw. 21,0% enorm gewachsen (Quelle: National Bureau of Statistics,
Respect Marketing Research Inc., 2013).
Wachstum des internationalen Bedarfs nach Daunen
China ist ein großes Land, in dem Gänse und Enten gezüchtet werden. Es
exportiert jährlich 200.000 Tonnen Daunen und Federn, die 80% der weltweiten
Produktion ausmachen. (Quelle: “Down Industry in China”, von Respect
Marketing Research Inc. Februar 2014). Im Jahr 2013 ist der Export von Daunen
und Federn im Vergleich zu 2013 um 30,8% gestiegen. (Quelle: General
Administration of Customs, 2013).
Page 26
Wachstum des inländischen Bedarfs nach Daunenbekleidung
Eine Steigerung des Wohlstandsniveaus, insbesondere in kleineren Städten und
bei ländlicher Bevölkerung, sowie der relativ niedrige Preis und das
Warmhaltevermögen der Daunenbekleidung haben eine große Marktattraktivität
erreicht, die die gesamte Nachfrage und Marktgröße von Daunenbekleidung in
China erhöhen wird. China hat eine Bevölkerung von 1,3 Milliarden Menschen,
von denen ein großer Teil in Regionen lebt, in denen im Winter
Daunenbekleidung benötigt wird. Der chinesische Markt für Daunenbekleidung
ist also noch längst nicht gesättigt und hat großes Entwicklungspotential
(Quelle: Market Research Report, 2014).
Wachstum der Popularität von Daunenbettwaren in China
Laut Angaben der China Feather & Down Industrial Association, hat in den
entwickelten Industrieländern fast jede Person eine Daunendecke; die
Popularität der Daunendecke in Japan, USA und Europa liegt jeweils bei 104%,
86,7% und 89,3%, während in China diese Zahl unter 1% liegt. Wachsende
Popularität von Daunenbettwaren bietet ein enormes Potenzial für die
Daunenbettwaren von SNOWBIRD.
B.5
Beschreibung
des Emittenten
und seiner
Stellung
innerhalb der
Gruppe
Die Gesellschaft ist als oberste Holdinggesellschaft der Gruppe die
Alleingesellschafterin von Snow Bird (Hong Kong) Holding („Snowbird HK”),
welche als eine Gesellschaft mit beschränkter Haftung nach dem Recht Hong
Kong gegründet wurde. Snowbird HK ist eine Zwischenholdinggesellschaft und
die Alleingesellschafterin von Puyang Snowbird Trading Co., Ltd. („Snowbird
WFOE”), welche als eine Gesellschaft mit beschränkter Haftung nach dem Recht
der VR China gegründet wurde. Snowbird WFOE ist eine weitere
Zwischengesellschaft mit ganz geringem operativen Geschäft und die
Alleingesellschafterin von Henan Snowbird Enterprise Co., Ltd. („Snowbird
Henan”), welche als eine Gesellschaft mit beschränkter Haftung nach dem Recht
der VR China gegründet wurde (Snowbird WFOE und Snowbird Henan
zusammen „Snowbird PRC”). Das operative Geschäft von SNOWBIRD erfolgt
fast ausschließlich durch Snowbird Henan mit der Geschäftsadresse in Taiqian
Industriepark, Puyang Stadt, Provinz Henan, VR China. Die nachfolgende Grafik
verdeutlicht die derzeitige Konzernstruktur von SNOWBIRD:
Snowbird AG
(Deutschland)
100%
Company Limited
(Hong Kong)
- Snowbird HK 100%
(VR China)
- Snowbird WFOE -
100%
(VR China)
- Snowbird Henan -
Page 27
B.6
Personen, die
eine direkte
oder indirekte
Beteiligung am
Eigenkapital
des Emittenten
oder einen Teil
der Stimmrechte halten
Zum Datum dieses Prospektes beträgt das Grundkapital der Gesellschaft
EUR 30.000.000 eingeteilt in 30.000.000 neue, auf den Inhaber lautende
Stammaktien ohne Nennwert (Inhaber-Stückaktien) (die „Bestehenden Aktien“)
mit einer Aktionärsstruktur wie folgt:
Bestehender Aktionär
BIG BUSINESS GLOBAL
HOLDINGS LIMITED (1)
Anzahl der
Bestehenden Aktien
%
10.950.000
36,5
Herr YAN Changzai (2)
9.150.000
30,5
1.470.000
4,9
Mystic Topaz S.à.r.l. (4)
1.350.000
4,5
Alrai S.à.r.l. (5)
1.350.000
4,5
1.350.000
4,5
1,350,000
4.5
1.320.000
4,4
United Talent Investments
Limited (9)
1.050.000
3,5
Midasi Investment Limited
660.000
2,2
30.000.000
100,00
(10)
Total
(1) BIG BUSINESS GLOBAL HOLDINGS LIMITED ist eine Gesellschaft eingetragen nach dem Recht
der Britischen Jungferninseln unter der Registrierungsnummer 1818048 und mit der Geschäftsadresse:
Zimmer B, 17/F, Jade Terrace, 3 Link Road, Happy Valley, Hong Kong. Alleiniger Gesellschafter ist Herr
CHOI Siu Hung.
(2) Herr YAN Changzai ist Einwohner der VR China und wohnhaft in: Nr. 7-2-33, Wenquan Garten,
Shihua Straße, Hualong Distrikt, Puyang Stadt, Provinz Henan, VR China.
YIELD TRADE LIMITED ist eine Gesellschaft eingetragen nach dem Recht der Britischen
Jungferninseln unter der Registrierungsnummer 1818818 und mit der Geschäftsadresse: Zimmer H, 9/F,
Blk 6, Aldrich Gdn, No2 Oi Lai St, Shau Kei Wan, Hong Kong. Alleiniger Gesellschafter ist Herr XU
Beifang.
(3)
(4) Mystic Topaz S.à.r.l. ist eine Gesellschaft eingetragen nach dem Recht Luxemburgs mit der
Geschäftsadresse: 7, rue Robert Stümper, L-2557 Luxemburg. Alleiniger Gesellschafter is Herr LIU
Deling.
Alrai S.à.r.l. ist eine Gesellschaft eingetragen nach dem Recht Luxemburgs mit der
Geschäftsadresse: 7, rue Robert Stümper, L-2557 Luxemburg. Alleiniger Gesellschafter ist Herr YAN
Zhaorui.
(5)
Alrakis S.à.r.l. ist eine Gesellschaft eingetragen nach dem Recht Luxemburgs mit der
Geschäftsadresse: 7, rue Robert Stümper, L-2557 Luxemburg. Alleiniger Gesellschafter ist Herr CHEN
Yijun.
(6)
(7) Imperial Topaz S.à.r.l. ist eine Gesellschaft eingetragen nach dem Recht Luxemburgs mit der
Geschäftsadresse: 7, rue Robert Stümper, L-2557 Luxemburg. Alleinige Gesellschafterin ist Frau
WANG Qingmei.
(8) ZHEN SHENG LIMITED ist eine Gesellschaft eingetragen nach dem Recht der Britischen
Jungferninseln unter der Registrierungsnummer 1818372 und mit der Geschäftsadresse: Zimmer N, 5/F,
Hung Fool Bldg, 42 Kam Ping St, North Point, Hong Kong. Alleiniger Gesellschafter ist Herr LO Kin
Nam.
(9) United Talent Investments Limited ist eine Gesellschaft eingetragen nach dem Recht der Britischen
Jungferninseln unter der Registrierungsnummer 1724928 und mit der Geschäftsadresse: Zimmer E,
36/F, Tower 1, Sham Wan Towers, 3 Ap Lei Chau Drive, Ap Lei Chau, Hong Kong. Alleiniger
Gesellschafter ist Herr CHEN Ling.
Page 28
(10) Midasi Investment Limited ist eine Gesellschaft eingetragen nach dem Recht der Britischen
Jungferninseln unter der Registrierungsnummer 1713935 und mit der Geschäftsadresse: PO Box 957,
Offshore Incorporations Centre, Road Town, Tortola, Britische Jungferninseln. Alleiniger Gesellschafter
ist Herr BEK Lian Ho.
Jede Aktie repräsentiert EUR 1,00 am Grundkapital und verfügt über eine volle
Gewinnanteilsberechtigung für das Geschäftsjahr 2014. Jede Aktie gewährt ein
Stimmrecht in der Hauptversammlung der Gesellschaft.
B.7
Unterschiedliche
Stimmrechte
der Hauptanteilseigner
des Emittenten
Entfällt. Herr YAN Changzai als direkter und Herr CHOI Siu Hung als indirekter
Hauptaktionär der Gesellschaft haben keine unterschiedlichen Stimmrechte.
Ob an dem
Emittenten
unmittelbare
oder mittelbare
Beteiligungen
oder Beherrschungsverhältnisse
bestehen und
wer diese
Beteiligungen
hält bzw. diese
Beherrschung
ausübt und
welcher Art die
Beherrschung
ist
Herr YAN Changzai hält aktuell 30,5% der Aktien der Gesellschaft direkt und
Herr CHOI Siu Hung hält aktuell indirekt 36,5% der Aktien der Gesellschaft und
der Stimmrechte an der Gesellschaft. Mit dieser Mehrheit kontrollieren Herr YAN
Changzai und Herr CHOI Siu Hung die Gesellschaft und haben erheblichen
Einfluss in der Hauptversammlung und auf die dort vorgeschlagenen
Beschlüsse.
Ausgewählte
historische
Finanzinformationen
Die Gesellschaft wurde als Vorratsgesellschaft am 16. April 2012 errichtet und
durch die Eintragung ins Handelsregister des Amtsgerichts Frankfurt am 23. April
2012 gegründet. Die Gesellschaft veröffentlichte die wirtschaftliche Neugründung
gegenüber dem Handelsregister des Amtsgerichts Köln nach dem Erwerb aller
Aktien in der Gesellschaft durch Herrn YAN Changzai. Durch
Restrukturierungsmaßnahmen wurde die Beteiligungsstruktur, wie in Kapitel B.5
dargestellt, errichtet.
Das operative Geschäft von SNOWBIRD wird fast ausschließlich von Snowbird
Henan ausgeübt, die eine indirekte hundertprozentige Tochtergesellschaft der
Gesellschaft ist. Alle Anteile der Snowbird Henan werden direkt von der
Snowbird WFOE gehalten. Snowbird WFOE ist am 12. August 2013 gegründet
worden und hat alle Anteile an der Snowbird Henan am 4 Juni 2014 erworben.
Erst nach dem 30 Juni 2014 hat Snowbird WFOE begonnen, Umsätze zu
generieren und wurde dadurch operativ. Alle Anteile an der Snowbird WFOE
werden direkt von der Snowbird HK gehalten. Snowbird HK ist am 31. März 2009
gegründet worden. Die Gesellschaft ist der alleinige Gesellschafter der Snowbird
HK.
Snowbird Henan war während des Berichtszeitraums die einzige operative
Gesellschaft von SNOWBIRD. Um die Geschäfte, die Finanzlage und die
Geschäftsergebnisse für die letzten drei Geschäftsjahre im Hinblick auf das
operative Geschäft von SNOWBIRD darzustellen, hat die Gesellschaft daher
einzelne Jahresabschlüsse der Snowbird Henan für die am 31. Dezember 2011
(„GJ 2011”), 31. Dezember 2012 („GJ 2012”) und 31. Dezember 2013
(„GJ 2013”) endenden Geschäftsjahre nach den International Financial
Reporting Standards und International Accounting Standards and Interpretations,
soweit sie von der EU zugelassen sind („IFRS“), erstellt („Jahresabschlüsse
Snowbird Henan“).
Die Jahresabschlüsse Snowbird Henan wurden von Crowe Kleeberg GmbH,
Augustenstraße 10, 80333 München, Deutschland („Kleeberg”) geprüft.
Zudem wurden verkürzte Zwischenabschlüsse für die ersten sechs Monate zum
30. Juni 2014 ("2014H1") nach IFRS für Snowbird Henan mit entsprechenden
Vergleichsinformationen
("2013H1")
erstellt.
Diese
verkürzten
Page 29
Zwischenabschlüsse sind ungeprüft, wurden aber von Kleeberg nach dem
Prüfungsstandard 900 des Instituts der Wirtschaftsprüfers („IDW PS 900“)
durchgesehen.
Darüber hinaus hat die Gesellschaft einen Einzelabschluss für das am 31.
Dezember 2012 (Rumpfgeschäftsjahr) und das am 31. Dezember 2013 endende
Geschäftsjahr nach den Vorschriften des IFRS erstellt. Die Gesellschaft hat
zudem für das am 31. Dezember 2013 endende Geschäftsjahr den
Einzelabschluss
in
Übereinstimmung
mit
den
Vorschriften
des
Handelsgesetzbuches erstellt. Die Einzelabschlüsse wurden von Kleeberg
geprüft.
Die ausgewählten Finanzangaben, die in diesem Abschnitt enthalten sind,
wurden den vorgenannten Jahresabschlüssen entnommen.
Mit Ausnahme des Einzelabschlusses der Gesellschaft nach den Vorschriften
des Handelsgesetzbuches für das am 31. Dezember 2013 endende
Geschäftsjahr sind die vorgenannten Jahresabschlüsse von SNOWBIRD nicht
die gesetzlich vorgeschriebenen Abschlüsse der Gesellschaft, sondern wurden
auf freiwilliger Basis für den Zweck dieses Angebots erstellt. Der Zweck dieser
Abschlüsse liegt darin, Anlegern eine bessere Vergleichbarkeit der Entwicklung
der Geschäfte, der Finanzlage und der Geschäftsergebnisse von SNOWBIRD in
den letzten drei Jahren zu ermöglichen.
Die folgenden Zahlenangaben wurden nach anerkannten Grundsätzen gerundet.
Additionen der Zahlenangaben in einer Tabelle können daher zu anderen als
den ebenfalls in der Tabelle dargestellten Summen führen:
Page 30
Ausgewählte Finanzangaben
Snowbird Henan
Alle nachfolgenden Zahlen entstammen den Abschlüssen der Snowbird Henan.
Ausgewählte Angaben aus der Gesamtergebnisrechung (1)
Umsatzerlöse
Herstellungskosten
Bruttoergebnis
Sonstige Erträge
Aufwendungen für Vertrieb und Verkauf
Verwaltungs- und sonstige Kosten
Finanzaufwendungen
Ergebnis vor Steuern
Steueraufwand
Ergebnis nach Steuern
2011
EUR'000
2012
EUR'000
(geprüft)
2013
EUR'000
49.166
-26.986
22.180
433
-4.489
-2.911
-526
14.687
-3.736
10.951
90.263
-48.886
41.377
561
-8.643
-4.026
-756
28.513
-7.279
21.234
136.888
-83.913
52.975
1.260
-9.083
-6.108
-824
38.220
-9.941
28.279
2013HJ1
2014HJ1
EUR'000
EUR'000
(prüferisch durchgesehen)
45.643
-28.371
17.272
153
-1.115
-2.715
-383
13.212
-3.408
9.804
31 Dezember
2011
EUR'000
2012
EUR'000
30. Jun
2013
EUR'000
2014
EUR'000
(prüferisch
durchgesehen)
(geprüft)
Ausgewählte Angaben aus der Bilanz
Anlagevermögen
Umlaufvermögen
Summe Vermögenswerte
Eigenkapital
Verbindlichkeiten
Kurzfristige Verbindlichkeiten
Summe Verbindlichkeiten
Summe Verbindlichkeiten und Eigenkapital
Ausgewählte Angaben aus der Kapitallflussrechnung
Netto Cash Flow aus der Geschäftstätigkeit vor Änderung des
Betriebskapitals
Netto Cash Flow aus der operativen Tätigkeit
Netto Cash Flow für Investitionen
Netto Cash Flow für Finanzierungstätigkeiten
Netto(abnahme)/Zunahme von Zahlungsmitteln
Zahlungsmittel zum Periodenende
8.370
48.087
56.457
28.292
5.465
22.700
28.165
56.457
9.053
69.022
78.075
40.216
5.157
32.702
37.859
78.075
18.956
82.247
101.203
67.498
4.397
29.308
33.705
101.203
22.387
94.040
116.427
82.670
4.404
29.353
33.757
116.427
2011
EUR'000
2012
EUR'000
(geprüft)
2013
EUR'000
2013HJ1
2014HJ1
EUR'000
EUR'000
(prüferisch durchgesehen)
14.687
28.513
38.220
13.212
21.558
15.737
29.870
40.104
14.000
22.599
3.931
-474
-2.622
14.459
-1.470
-4.156
5.886
-11.103
-7.562
1.063
-9.041
-5.500
-92
-1.838
-91
835
8.833
-12.779
-13.478
-2.021
22.410
30.414
16.695
18.288
13.590
2011
Weitere ausgewählte Finanzinformationen
EBIT(3)
EBIT Marge(4)
Nettoergebnis-Marge(5)
Anzahl der Arbeitnehmer zum Periodenende
78.038
-51.989
26.049
426
-1.630
-2.894
-393
21.558
-5.328
16.230
15.213
30,9%
22,3%
1.514
2012
(ungeprüft) (2)
29.269
32,4%
23,5%
1.566
2013
39.044
28,5%
20,7%
1.611
2013H1
2014HJ1
(ungeprüft) (2)
13.595
29,8%
21,5%
1.611
21.951
28,1%
20,8%
1.609
(1) alle Zahlen in EUR'000 sofern nicht anders angegeben.
(2) Ungeprüfte Informationen durch die Gesellschaft vorbereitet.
(3) Ergebnis vor Steuern und Finanzaufw endungen.
(4) EBIT dividiert durch Umsatzerlös x 100.
(5) Ergebnis nach Steuern (Nettoertrag) für den entsprechenden Zeitraum, dividiert durch Umsatzerlös x 100.
Page 31
Snowbird AG
Alle nachfolgenden Zahlen entstammen den IFRS Abschlüssen der Snowbird AG:
2012
2013
EUR'000
EUR'000
(geprüft)
Ausgewählte Angaben aus der Gesamtergebnisrechnung
Sonstige operativen Aufwendungen
Verlust/Gesamtergebnis
-4
-4
-4
-10
-10
-10
2012
EUR'000
2013
EUR'000
50
50
46
55
55
36
4
0
0
50
14
0
5
55
2012
EUR'000
2013
EUR'000
-4
-10
Cash Flow aus operativer Tätigkeit
Cash Flow für Investitionen
Cash Flow für Finanzierungstätigkeit
0
0
0
5
0
0
Nettoabweichungen von Zahlungsmitteln und Barwert
0
5
Zahlungsmittel und Barwert zum Periodenende
50
55
Ausgewählte Angaben aus der Bilanz
Umlaufvermögen
Summe Vermögenswerte
Summe Eigenkapital
Kurzfristige Verbindlichkeiten
Rückstellungen
Verbindlichkeiten aus Lieferungen und Leistungen
Sonstige Verbindlichkeiten
Summe Verbindlickeiten und Eigenkapital
Ausgeählte Angaben aus der Kapitalflussrechnung
Verlust nach Ertragsteuern
Wesentliche
Änderungen
der Finanzlage
und des
Betriebsergebnisses
des Emittenten
in oder nach
dem von den
wesentlichen
historischen
Finanzinformationen
abgedeckten
Zeitraum
Das Ergebnis der operativen Geschäftstätigkeit von Snowbird Henan erfuhr ein
stetiges Wachstum im GJ 2011, GJ 2012, GJ 2013 und im 2014H1.
Das Ergebnis der operativen Geschäftstätigkeit stieg im GJ 2012 im Vergleich
zum GJ 2011 von EUR 22,2 Millionen um EUR 19,2 Millionen auf EUR 41,4
Millionen, was einer Steigerung um 86,49% entspricht. Diese Steigerung ist
vornehmlich auf eine Erhöhung der Umsatzerlöse um EUR 41,1 Millionen oder
83,54% von EUR 49,2 Millionen auf EUR 90,3 Millionen zurückzuführen. Die
höhere Wachstumsrate des Ergebnisses im Vergleich zum Umsatz ergibt sich
aufgrund der Managemententscheidung, neue Produkte mit einer höheren
Marge herzustellen.
Die Steigerung des Ergebnisses der operativen Geschäftstätigkeit im GJ 2013 im
Vergleich zum GJ 2012 von EUR 41,4 Millionen um EUR 11,6 Millionen oder
28,02% auf EUR 53,0 Millionen fiel im Vergleich zum vorherigen Geschäftsjahr
nicht so hoch aus. Trotzdem ist auch die erneute Steigerung auf eine Erhöhung
der Umsatzerlöse um EUR 46,6 Millionen von EUR 90,3 Millionen auf EUR 136,9
Millionen zurückzuführen, was einer prozentualen Steigerung von 51,61%
entspricht. Die niedrigere Wachstumsrate des Ergebnisses im Vergleich zum
Umsatz ergibt sich aufgrund einer geringfügigen anteiligen Erhöhung der
Ausgaben im Bereich der Vertriebskosten im Vergleich zum durchschnittlichen
Verkaufspreis.
Page 32
Das Ergebnis der operativen Geschäftstätigkeit stieg im 2014H1 im Vergleich
zum 2013H1 von EUR 17,3 Millionen um EUR 8,7 Millionen auf EUR 26,0
Millionen, was einer Steigerung um 50,29% entspricht. Dies ist das Ergebnis der
höheren Umsatzerlöse.
Die Gesellschaft wurde mit einem gezeichneten Kapital von EUR 50.000 durch
Bareinlage gegründet. Kein operativer Ertrag wurde in dem Berichtszeitraum bis
zum 30. Juni 2014 erwirtschaftet.
Am 8. Mai 2014 hat die Gesellschaft 60% der Anteile in Snowbird HK durch
Zeichnung von 3.062 neuen Anteilen im Rahmen einer Barkapitalerhöhung
erworben. Am 6. Juni 2014 haben die seinerzeitigen Aktionäre einen
Einbringungsvertrag mit der Gesellschaft abgeschlossen, nach dem sie sich
verpflichtet haben, 40% der Anteile an der Snowbird HK, d.h. 2.041 Anteile von
jeweils HKD 1,00 (ca. EUR 0,09) auf die Gesellschaft zu übertragen gegen
Ausgabe von 29.950.000 neuer, auf den Inhaber lautende Stammaktien ohne
Nennbetrag an die entsprechenden Aktionäre. Der Einbringungsvertrag und die
Sachkapitalerhöhung wurden in einer außerordentlichen Hauptversammlung am
13. Juni 2014 beschlossen und genehmigt und wurden am 10 Juli 2014 im
Handelsregister des Amtsgerichts Köln eingetragen.
Es haben sich mit Ausnahme der oben beschriebenen Kapitalerhöhung keine
erheblichen
Änderungen
hinsichtlich
der
Finanzlage
oder
des
Betriebsergebnisses von SNOWBIRD seit dem 30. Juni 2014 bis zum Datum des
Prospektes ergeben.
B.8
Pro-forma
Finanzinformationen
Entfällt. Es wurden keine Pro-forma Finanzinformationen erstellt.
B.9
Gewinnprognosen oder
Gewinnschätzungen
Entfällt. Es wurden keine Gewinnprognosen oder -schätzungen erstellt.
B.10 Beschränkungen im
Bestätigungsvermerk
Entfällt. Bestätigungsvermerke zu den in diesem Prospekt enthaltenen
historischen Finanzinformationen wurden ohne Einschränkungen erteilt.
B.11 Nichtausreichen
des Geschäftskapitals des
Emittenten zur
Erfüllung
bestehender
Anforderungen
Entfällt. Die Gesellschaft glaubt, dass SNOWBIRDs Geschäftskapital für seine
gegenwärtigen Bedürfnisse ausreichend ist, dies bedeutet, dass das
Geschäftskapital ausreicht, um die Zahlungsverpflichtungen, zumindest innerhalb
der nächsten zwölf Monate nach dem Datum dieses Prospektes, zu erfüllen.
Abschnitt C – Wertpapiere
C.1
Art und
Gattung der
angebotenen
und/oder zum
Handel
zuzulassenden
Wertpapiere /
Wertpapierkennung
Das Angebot besteht aus 11.500.000 auf den Inhaber lautende Stammaktien
ohne Nennbetrag (Inhaber-Stückaktien) mit einem anteiligen Betrag am
Grundkapital der Gesellschaft von je EUR 1,00 und mit voller
Gewinnanteilsberechtigung für das Geschäftsjahr 2014 (die „Angebotsaktien“),
davon

10.000.000 neue auf den Inhaber lautende Stammaktien ohne
Nennbetrag aus einer Barkapitalerhöhung gemäß einem Beschluss der
außerordentlichen Hauptversammlung, die voraussichtlich am 24.
September 2014 abgehalten wird (“Neuen Aktien”). Um die zeitnahe
Lieferung der Aktien vor Ablauf der Angebotsfrist sicherzustellen, wird
Herr YAN Changzai und die Alrai S.à.r.l. dem Underwriter ein
unentgeltliches Wertpapierdarlehen für die gleiche Anzahl an Aktien
gewähren. Nach Eintragung der Durchführung der Kapitalerhöhung in
das Handelsregister der Gesellschaft werden die Neuen Aktien durch
den Underwriter an Herrn YAN Changzai und die Alrai S.à.r.l.
Page 33
übertragen, um die Pflicht des Underwriters zur Rückführung der
Wertpapierleihe gegenüber Herrn YAN Changzai und der Alrai S.à.r.l.
zu erfüllen, und

1.500.000 bestehende auf den Inhaber lautende Stammaktien aus
einem unentgeltlichen Wertpapierdarlehen, welches die BIG BUSINESS
GLOBAL HOLDINGS LIMITED mit dem alleinigen Aktionär Herr CHOI
Siu Hung der ACON (zusammen mit CM-Equity AG & Co. KG Financial
Services, Kaufingerstraße 20, 80331 München, Deutschland die
„Gemeinsamen Stabilisierungsmanager“) im Hinblick auf eine
eventuelle Mehrzuteilung und für Stabilisierungsmaßnahmen gewähren
wird
(die
“Mehrzuteilungsaktien“);
um
ihre
Rückübertragungsverpflichtung aus dem Wertpapierdarlehen zu
erfüllen, räumt die Gesellschaft der ACON die Option ein, 1.500.000
Aktien aus einer Kapitalerhöhung der Gesellschaft aus genehmigtem
Kapital gegen Zahlung des Angebotspreises (abzüglich der
vereinbarten Provision und anderer Kosten) zu zeichnen („Greenshoe
Option“).
Für Zwecke der Zulassung zum Handel im regulierten Markt an der Frankfurter
Wertpapierbörse mit gleichzeitiger Zulassung zum Teilbereich des regulierten
Markts mit weiteren Zulassungspflichten (Prime Standard) an der Frankfurter
Wertpapierbörse („Listing“), bezieht sich dieser Prospekt auf bis zu 41.500.000
Aktien an der Gesellschaft, bestehend aus:

30.000.000 bestehende auf den Inhaber lautende Stammaktien
(“Bestehende Aktien”), und

bis zu 10.000.000 neue auf den Inhaber lautende Stammaktien aus
einer Barkapitalerhöhung in einer bestimmten Höhe gemäß einem
Beschluss der außerordentlichen Hauptversammlung (“Neuen Aktien”),
und

bis zu 1.500.000 neue auf den Inhaber lautende Stammaktien
resultierend aus der Ausübung der Greenshoe Option (“Greenshoe
Aktien”),
jeweils Aktien ohne Nennwert mit einem anteiligen Betrag am Grundkapital von
je EUR 1,00, die über volle Gewinnanteilsberechtigung für das Geschäftsjahr
2014 verfügen.
Internationale Wertpapier-Kenn-Nummer (ISIN): DE000A1PHEL8
Wertpapier-Kenn-Nummer (WKN): A1PHEL
Ticker Symbol: 8S9
C.2
Währung des
Wertpapier
EUR
C.3
Zahl der
ausgegebenen
und voll
eingezahlten
Aktien
30.000.000 nennwertlose, auf den Inhaber lautende Stammaktien (lnhaberStückaktien) der Gesellschaft, jede Aktie repräsentiert EUR 1,00 am
Grundkapital, wurden ausgegeben und voll eingezahlt.
C.4
Rechte welche
mit dem
Wertpapier
verbunden sind
Dividendenrechte
Die Aktien der Gesellschaft
gewinnbezugsberechtigt.
sind
für
das
Geschäftsjahr
2014
voll
Rechte am Liquidationserlös
Sollte die Gesellschaft aufgelöst werden, wird der gesamte Liquidationserlös,
nach Erfüllung der Verbindlichkeiten der Gesellschaft, den Aktionären nach dem
Aktiengesetz im Verhältnis zu den jeweils von ihnen gehaltenen Aktien der
Gesellschaft am Grundkapital ausgeschüttet.
Bezugsrechte
Aktionäre haben grundsätzlich das Recht, neue Aktien im Falle einer zukünftigen
Kapitalerhöhung in einem Verhältnis zu den bereits von ihnen gehaltenen Aktien
am Grundkapital der Gesellschaft (Bezugsrecht) gegen eine Bareinlage zu
Page 34
zeichnen. Ausnahmen sind in Bezug auf bedingte Kapitalerhöhungen oder die
Ausgabe von Wechselschuldverschreibungen, Gewinnschuldverschreibungen,
Genussrechte oder Optionsschuldverschreibungen sowie in Bezug auf den
Verkauf von eigenen Aktien zu machen. Darüber hinaus kann die
Hauptversammlung dieses Bezugsecht in bestimmten Fällen teilweise oder
komplett ausschließen.
Stimmrechte
In Übereinstimmung mit der Satzung der Gesellschaft gewährt jede Aktie eine
Stimme in der Hauptversammlung. Alle Aktien haben dasselbe Stimmrecht. Es
bestehen keine Beschränkungen der Stimmrechte mit Ausnahme der gesetzlich
geregelten Fälle. Die Teilnahme an der Hauptversammlung und die Ausübung
des Stimmrechts sind in der Satzung der Gesellschaft geregelt und richten sich
nach allgemeinem Gesellschaftsrecht.
C.5
Einschränkung
der
Übertragbarkeit
Entfällt. Die Aktien der Gesellschaft sind in Übereinstimmung mit den
gesetzlichen Bestimmungen für nennwertlose, auf den Inhaber lautende
Stammaktien frei übertragbar.
C.6
Zulassung zum
Handel an
einem
regulierten
Markt
Die Gesellschaft beabsichtigt ihre Aktien zum regulierten Markt (Prime Standard)
an der Frankfurter Wertpapierbörse ungeachtet des Ergebnisses des Angebots
zuzulassen.
Dividendenpolitik
Snowbird Henan hat in der jüngeren Vergangenheit Dividenden ausgeschüttet
(mit der Ausnahme für das GJ 2013). Die Gesellschaft beabsichtigt, soweit
rechtlich zulässig, insbesondere soweit ausreichend ausschüttungsfähiger
Gewinn in der Gesellschaft gegeben ist, Gewinnausschüttungen in 2015 von ca.
20% des Konzernjahresüberschusses aus dem Geschäftsjahr 2014
vorzunehmen und auch danach regelmäßig Gewinnausschüttungen zu tätigen,
wobei sich die Dividendenpolitik der Gesellschaft auch langfristig an dem
Grundsatz einer Gewinnausschüttung von ca. 20% orientieren soll, allerdings
abhängig von der Ertragslage der Gesellschaft, ihrer Geschäftsstrategie, ihrer
Vermögenslage, ihrem Bedarf an liquiden Mitteln und den rechtlichen,
steuerlichen und regulatorischen Rahmenbedingungen sowie anderen Faktoren.
C.7
Ein Antrag auf Zulassung sämtlicher Aktien der Gesellschaft (einschließlich der
Neuen Aktien) zum regulierten Markt an der Frankfurter Wertpapierbörse (Prime
Standard) soll am oder um den 10. September 2014 gestellt werden. Die
Entscheidung über die Zulassung der Aktien liegt im alleinigen Ermessen der
Frankfurter Wertpapierbörse. Die Handelszulassung durch die Frankfurter
Wertpapierbörse zum regulierten Markt (Prime Standard) wird am 26. September
2014 für die Aktien der Gesellschaft erwartet. Es wird erwartet, dass der Handel
mit den Aktien der Gesellschaft am 29. September 2014 aufgenommen wird.
Abschnitt D – Risiken
Bevor Anleger die Entscheidung zum Kauf von Aktien der Gesellschaft treffen, sollten sie neben den
übrigen in diesem Prospekt enthaltenen Informationen gewisse Risiken sorgfältig abwägen. Diese
Risiken schließen die unten angeführten wesentlichen Risiken ein. Das Eintreten von einem oder
mehreren der mit diesen Risiken verbundenen Ereignisse kann sich wesentlich nachteilig auf die
Geschäftstätigkeit von SNOWBIRD auswirken und die Vermögens-, Finanz- und Ertragslage von
SNOWBIRD erheblich beeinträchtigen. Es ist möglich, dass infolge eines mit dem Eintreten dieser
Risiken verbundenen Ereignisses der Börsenkurs der Aktien sinkt und Anleger ihr investiertes
Kapital ganz oder teilweise verlieren.
Es könnte sein, dass die nachstehend genannten Risiken sich im Nachhinein als nicht vollständig
herausstellen und daher möglicherweise nicht die einzigen Risiken darstellen, denen SNOWBIRD
ausgesetzt ist. Zusätzliche Risiken und Unsicherheiten, von denen die Gesellschaft derzeit keine
Kenntnis hat, könnten erhebliche nachteilige Auswirkungen auf die Geschäftstätigkeit, die
Vermögens-, Finanz- und Ertragslage von SNOWBIRD haben. Anleger sollten insbesondere den
Umstand beachten, dass alle operativen Gesellschaften von SNOWBIRD in der VR China ansässig
sind und sich damit in einem rechtlichen und regulatorischen Umfeld befinden, welches sich in
verschiedenen Aspekten von dem anderer Länder unterscheidet.
Die Reihenfolge der nachfolgend dargestellten Risikofaktoren gibt nicht Aufschluss über die
Wahrscheinlichkeit des Eintretens oder des Umfangs oder der Erheblichkeit des einzelnen Risikos.
Die unten genannten Risiken können einzeln oder kumulativ eintreten.
Page 35
D.1
Zentrale
Risiken des
Emittenten und
seiner Branche
Risiken bezüglich der Geschäftstätigkeit von SNOWBIRD
























SNOWBIRD könnte möglicherweise zukünftig nicht mehr in der Lage
sein, sich gegen Wettbewerber erfolgreich durchzusetzen.
Schwankungen bei den Konsumausgaben von Vebrauchern durch
Veränderungen der marktökonomischen Bedingungen in der VR China
könnten die Geschäftsaussichten von SNOWBIRD erheblich
beeinflussen.
Schnelle
Veränderungen
im
Bereich
der
Mode,
der
Verbraucherpräferenzen oder den Ausgabemustern könnte das
Geschäft von SNOWBIRD beeinflussen.
SNOWBIRD könnte wesentlich und nachteilig von Saisonänderungen
sowie Klimaänderungen betroffen sein.
SNOWBIRD’s Geschäft kann wesentlich und nachteilig von der
Exportabhängigkeit betroffen sein.
SNOWBIRD könnte möglicherweise die Kundenwünsche nicht
ausreichend erfüllen.
SNOWBIRD ist in einer umweltgefährdenden Industrie tätig und könnte
möglicherweise nicht in der Lage sein, die Gesetze und Vorschriften
zum Umweltschutz in der VR China zu erfüllen.
Die gegenwärtigen Umweltgesetze und -vorschriften könnten sich zum
Nachteil von SNOWBIRD ändern.
Die
Geschäftstätigkeit
von
SNOWBIRD
könnte
zu
Gesundheitsschädigungen führen und die Versicherungssumme könnte
für die Geschäftstätigkeit von SNOWBIRD nicht angemessen sein.
SNOWBIRD könnte von Kundenbeschwerden und negativen
Nachrichten betroffen sein.
SNOWBIRD könnte nicht in der Lage sein, ihre Expansionspläne
erfolgreich umzusetzen und ihr Wachstum effizient zu steuern.
Die Umsetzung der Wachstumsstrategie von SNOWBIRD ist
kapitalintensiv und eine zusätzliche Finanzierung könnte nicht
sichergestellt werden.
SNOWBIRD kann langfristige Geschäftsbeziehungen zu seiner
bestehenden Kundenbasis nicht sicherstellen.
SNOWBIRD ist Kreditrisiken von ihren Kunden ausgesetzt.
SNOWBIRD könnte Schwankungen von Rohmaterialpreisen ausgesetzt
sein und ist von einer durchgängigen und pünktlichen Lieferung von
Qualitätsrohmaterialien abhängig.
Das Geschäft von SNOWBIRD beruht weitestgehend auf der
kontinuierlichen Arbeit des Managements und weiterer wichtiger
Mitarbeiter.
Personalkosten sind in den letzten Jahren in der VR China signifikant
gestiegen und könnten weiterhin erheblich ansteigen.
SNOWBIRD ist Fluktuationen in Devisenumrechnungskursen und
Bewertungsschwankungen des Renminbi (“RMB”) ausgesetzt.
SNOWBIRD könnte wesentlich und nachteilig betroffen sein, falls
gefälschte Produkte auf dem Markt verkauft werden.
SNOWBIRD könnte wesentlich und nachteilig betroffen sein, sofern
Produkte mit falschen Daunenangaben auf dem Markt verkauft werden.
SNOWBIRD ist auf einen effektiven Schutz ihrer Patente und ihres
vertraulichen technischen Know-How angewiesen.
SNOWBIRD könnte unbeabsichtigt Rechte Dritter am geistigen
Eigentum verletzten.
Die betriebswirtschaftlichen, kaufmännischen und finanziellen
Planungssysteme, das Schlüsselsystem zur internen Kontrolle und die
Management Berichtssysteme könnten unzureichend sein und die
Kapazitäten des Managements von SNOWBIRD könnten nicht
ausreichen, um das zukünftige Wachstum erfolgreich zu steuern und zu
unterstützen
sowie
ein
zuverlässiges
Finanzmanagement
sicherzustellen.
Der Vorstand der Gesellschaft verfügt über keine Erfahrung im Hinblick
auf die gesetzlichen Anforderungen für börsennotierte Unternehmen in
Deutschland und SNOWBIRD verfügt derzeit über kein umfassendes
Risikomanagement.
Page 36









Die angemessene Überwachung des Vorstands durch den Aufsichtsrat
von SNOWBIRD könnte sich schwierig gestalten, da der Vorstand in der
VR China und die Aufsichtsratsvorsitzende in Deutschland ansässig ist.
Herr YAN Changzai und Herr CHOI Siu Hung sind direkter bzw.
indirekter Hauptaktionär der Gesellschaft und üben Funktionen im
Management von SNOWBIRD aus. Diese Positionen ermöglichen
ihnen, erhebliche Kontrolle über die Gesellschaft und die operativen
Gesellschaften in der VR China auszuüben, was zu Interessenkonflikten
führen könnte.
Der Versicherungsschutz von SNOWBIRD entspricht nicht dem
Umfang, wie er üblicherweise in wirtschaftlich weiter entwickelten
Ländern für Unternehmen von ihrer Art und Größe besteht, und die
Versicherung könnte für die Geschäftstätigkeiten von SNOWBIRD nicht
angemessen sein.
SNOWBIRD ist möglicherweise nicht in der Lage, Genehmigungen und
Lizenzen, die für die Ausübung oder die Erweiterung ihrer
Geschäftstätigkeit, zum Immobilienerwerb oder zur Landnutzung
notwendig sind, aufrecht zu erhalten und/oder zu erlangen oder
zukünftige behördliche Anforderungen zu erfüllen.
Die Gesellschaft ist eine Holdinggesellschaft, deren Liquidität vom
Zugang zu den liquiden Mitteln der Snowbird Henan abhängt. Diese
könnte möglicherweise nicht in der Lage sein, Gewinne auszuschütten.
Die steuerliche Belastung von SNOWBIRD kann durch das Ergebnis
der Steuerprüfung erhöht werden.
Finanzielle Zuschüsse von den lokalen staatlichen Behörden können in
der Zukunft entfallen.
SNOWBIRD kann wesentlich und nachteilig von der Vogelgrippe oder
ähnlich übertragbaren Krankheiten betroffen sein.
Es kann nicht ausgeschlossen werden, dass SNOWBIRD von
Unterbrechungen in der Strom- und Wasserversorgung betroffen wird,
was zu einer Unterbrechung der Produktion und zu einer
Beeinträchtigung der betrieblichen Abläufe führen könnte.
Risiken bezüglich der Geschäftstätigkeit in der VR China









Die
Geschäftstätigkeit,
Finanzund
Ertragslage
und
Geschäftsaussichten von SNOWBIRD könnten in einem erheblichen
Maße durch das wirtschaftliche, politische und rechtliche Umfeld sowie
durch zukünftige Entwicklungen in der VR China wesentlich und
nachteilig beeinflusst werden.
Fluktuationen in der globalen Wirtschaft könnten die Wirtschaft der VR
China erheblich und nachteilig beeinträchtigen.
Veränderungen der politischen und wirtschaftlichen Lage der VR China
könnten die Geschäftsaktivitäten von SNOWBIRD in einem erheblichen
Maße negativ beeinflussen.
Die Gesetzgebung in der VR China zu Zweckgesellschaften („SPV“) mit
Sitz im Ausland, die von chinesischen Gesellschaften und/oder
Einzelpersonen zum Zweck einer indirekten Börsennotierung gegründet
werden und Unternehmen in der VR China direkt oder indirekt
kontrollieren, kann sich in erheblichem Maße negativ auf die Geschäfte
von SNOWBIRD auswirken.
Die Rechtsvorschriften der State Administration of Foreign Exchange,
der staatlichen Devisenverwaltung in China, in Bezug auf OffshoreInvestitionen, die von in der VR China ansässigen Personen oder
Inhabern eines chinesischen Passes getätigt werden, können die
geschäftlichen
Aktivitäten
und
Finanzierungsalternativen
von
SNOWBIRD negativ beeinflussen.
Gesetzliche Vorgaben der VR China zu der Vergabe von Darlehen und
zu direkten Investitionen durch ausländische Muttergesellschaften an
chinesische Gesellschaften können dazu führen, dass SNOWBIRD die
Erlöse aus zukünftigen Kapitalmaßnahmen erst zu einem späteren
Zeitpunkt oder gar nicht nutzen kann.
Das Rechtssystem der VR China beinhaltet inhärente Unsicherheiten
und Inkonsistenzen.
Der
steuerrechtliche
Status
von
SNOWBIRD
oder
die
Steuergesetzgebung oder deren Auslegung könnten sich ändern.
Die Gesellschaft und Snowbird HK könnten als steuerlich ansässiges
Page 37







D.3

Risiken
bezüglich des
Angebotes









Unternehmen für steuerliche Zwecke in der VR China nach dem
chinesischen Körperschaftsteuergesetz angesehen werden und daher
der chinesischen Besteuerung unterliegen.
Eine größere Kontrolle von Übernahme- und Verkaufstransaktionen
durch die Steuerbehörden der VR China könnten einen negativen
Einfluss auf SNOWBIRD oder den Verkauf von Aktien der Gesellschaft
durch Investoren haben.
Rechnungslegungsstandards in der VR China könnten sich negativ auf
die Möglichkeit zur Ausschüttung von Dividenden auswirken.
Eine Destabilisierung des politischen Systems könnte die wirtschaftliche
Liberalisierung der VR China gefährden.
Die mangelnde Unabhängigkeit und geringe Erfahrung der Richter in
der VR China und die Schwierigkeiten bei der Vollstreckung von
richterlichen Entscheidungen sowie der Ermessensspielraum der
staatlichen
Behörden
bei
der
Durchsetzung
von
Gerichtsentscheidungen könnten SNOWBIRD daran hindern, effektiven
Rechtsschutz in einem Gerichtsverfahren zu erlangen.
Die Anerkennung und Vollstreckung von ausländischen Gerichtsurteilen
in der VR China gegen die Gesellschaft, ihr Management oder in die
Vermögenswerte der Gesellschaft könnte für Anleger schwierig oder
nicht möglich sein.
Bestimmte Fakten, Prognosen und andere Statistiken in Bezug auf die
VR China, die Wirtschaft der VR China und die Textilindustrie in diesem
Prospekt sind teilweise aus offiziellen Behördenpublikationen abgeleitet
und könnten nicht verlässlich sein.
Ausländischen Beteiligungen an chinesischen Unternehmen könnten
Beschränkungen auferlegt werden.
Ein öffentlicher Handel mit Aktien der Gesellschaft könnte sich
möglicherweise nicht entwickeln. Es gibt keinen aktuellen Markt für die
Aktien und das Angebot könnte keinen aktiven und liquiden Markt für
die Aktien finden.
Eine Abwertung des RMB könnte einen negativen Währungseffekt auf
den Jahresabschluss der Gesellschaft haben.
Der Aktienkurs der Aktien könnte sich volatil entwickeln und Anleger
einen Teil oder ihre gesamten Investitionen verlieren.
Zukünftige Verkäufe oder Ausgabe einer größeren Anzahl von Aktien
der Gesellschaft könnten den Börsenpreis der Aktien der Gesellschaft
negativ beeinflussen. Zukünftige Kapitalmaßnahmen könnten zu einer
erheblichen Verwässerung der Beteiligung der Investoren an der
Gesellschaft führen.
Das Angebot kann nicht stattfinden, wenn der Versicherungsvertrag
gekündigt wird.
In die Zukunft gerichtete Informationen in diesem Prospekt könnten sich
als unzutreffend erweisen.
Informationen aus Presseartikeln oder sonstigen Medien über
SNOWBIRD könnten sich als unzutreffend erweisen, so dass nicht
auszuschließen ist, dass Investoren ihre Investitionsentscheidung auf
Basis unzutreffender Information treffen.
Der Marktpreis der Aktien der Gesellschaft könnte zu einem späteren
Zeitpunkt unter den Angebotspreis fallen.
Das Angebot könnte möglicherweise nicht in vollem Umfang umgesetzt
werden, was sich negativ auf die Wachstumsaussichten von
SNOWBIRD und/oder der Liquidität der Aktien auf dem Markt auswirken
könnte.
Die Zulassung könnte entfallen, wenn die Voraussetzungen für die
Zulassung nicht erfüllt werden.
Abschnitt E – Angebot
E.1
Gesamtnettoerlöse /
Gesamtkosten
Auf Basis der festgesetzten Preisspanne von EUR 5,50 bis EUR 6,00 und unter
Annahme der vollständigen Platzierung aller Angebotsaktien geht die
Gesellschaft davon aus, dass ein Nettoemissionserlös zwischen EUR
59.050.000 und EUR 64.600.000 erreichbar ist, vorausgesetzt die Greenshoe
Option wird ausgeübt. Für den Fall, dass die Greenshoe Option nicht ausgeübt
wird, geht die Gesellschaft davon aus, dass ein Nettoemissionserlös zwischen
EUR 51.200.000 und EUR 56.000.000 erreichbar ist.
Page 38
Auf Basis der festgesetzten Preisspanne von EUR 5,50 bis EUR 6,00 und unter
Annahme der vollständigen Platzierung aller Angebotsaktien schätzt die
Gesellschaft die Gesamtkosten für das Angebot (einschließlich der Provision für
den Underwriter) auf einen Betrag zwischen ca. EUR 4.200.000 und EUR
4.400.000, vorausgesetzt die Greenshoe Option wird ausgeübt. Für den Fall,
dass die Greenshoe Option nicht ausgeübt wird, schätzt die Gesellschaft die
Gesamtkosten für das Angebot (einschließlich der Provision des Underwriters)
auf einen Betrag zwischen ca. EUR 3.800.000 und EUR 4.000.000.
E.2a Gründe für das
Angebot /
Zweckbestimmung
Die Gesellschaft beabsichtigt, den Nettoemissionserlös zur Stärkung der
Kapitalbasis und der Vermögenslage der Gesellschaft zu nutzen und um die
beabsichtigten Expansionspläne und die Umsetzung der strategischen Ziele zu
unterstützen. Insbesondere soll das Unternehmenswachstum finanziert werden.
Das Listing soll es der Gesellschaft auch ermöglichen, ihr öffentliches Profil als
auch ihr Profil auf dem Finanzmarkt zu schärfen.
Die Gesellschaft plant den Nettoerlös wie folgt zu verwenden:
Zweck
EUR
Ca. %
Verwaltungsgebäude
2.922.975 bis 3.197.700
4,95
Produktionsanlagen für Näharbeiten
4.446.465 bis 4.864.380
7,53
Betriebs- und Geschäftsausstattung
Maschinen für die Näharbeiten
Betriebsmittel
773.555 bis
846.260
1,31
5.261.355 bis 5.755.860
8,91
45.645.650 bis 49.935.800
77,30
Sollte der von der Gesellschaft geplante Nettoemissionserlös nicht erzielt
werden, plant die Gesellschaft weitere Bankdarlehen aufzunehmen, um das
weitere Wachstum voranzutreiben.
E.3
Angebotskonditionen
Angebotsgegenstand
Das Angebot besteht aus einem öffentlichen Angebot in der Bundesrepublik
Deutschland und Luxemburg sowie Privatplatzierungen außerhalb Deutschlands,
Luxemburgs und den Vereinigten Staaten von Amerika. Das Angebot besteht
aus 11.500.000 auf den Inhaber lautenden Stammaktien ohne Nennbetrag
(Inhaber-Stückaktien) mit einem anteiligen Betrag am Grundkapital der
Gesellschaft von je EUR 1,00 und mit voller Gewinnanteilsberechtigung für das
Geschäftsjahr 2014 (die „Angebotsaktien“), davon

10.000.000 neue auf den Inhaber lautende Stammaktien ohne
Nennbetrag aus einer Barkapitalerhöhung gemäß einem Beschluss der
außerordentlichen Hauptversammlung, die voraussichtlich am 24.
September 2014 abgehalten wird (“Neuen Aktien”). Um die zeitnahe
Lieferung der Aktien vor Ablauf der Angebotsfrist sicherzustellen, wird
Herr YAN Changzai und die Alrai S.à.r.l. dem Underwriter ein
unentgeltliches Wertpapierdarlehen für die gleiche Anzahl an Aktien
gewähren. Nach Eintragung der Durchführung der Kapitalerhöhung in
das Handelsregister der Gesellschaft werden die Neuen Aktien durch
den Underwriter an Herrn YAN Changzai und die Alrai S.à.r.l.
übertragen, um die Pflicht des Underwriters zur Rückführung der
Wertpapierleihe gegenüber Herrn YAN Changzai und der Alrai S.à.r.l.
zu erfüllen, und

1.500.000 bestehende auf den Inhaber lautende Stammaktien aus
einem unentgeltlichen Wertpapierdarlehen, welches BIG BUSINESS
GLOBAL HOLDINGS LIMITED mit dem alleinigen Aktionär Herr CHOI
Siu Hung der ACON im Hinblick auf eine eventuelle Mehrzuteilung und
für Stabilisierungsmaßnahmen gewährt (die “Mehrzuteilungsaktien“).
Die angebotenen Neuen Aktien stammen aus einer Barkapitalerhöhung gemäß
einem Beschluss der außerordentlichen Hauptversammlung, die voraussichtlich
am 24. September 2014 abgehalten wird. Die dann existierenden Aktionäre
verzichten auf ihr Bezugsrecht für die Neuen Aktien.
Im Hinblick auf Mehrzuteilungen und potenzielle Stabilisierungsmaßnahmen
Page 39
können neben den bis zu 10.000.000 Neuen Aktien weitere bis zu 1.500.000
Bestehende Aktien der Gesellschaft ausgegeben werden („Mehrzuteilung“).
Mehrzuteilung in diesem Sinne ist auch möglich, wenn die angebotenen Neuen
Aktien nicht vollständig bei den Investoren platziert wurden. BIG BUSINESS
GLOBAL HOLDINGS LIMITED mit dem alleinigen Aktionär Herr CHOI Siu Hung
wird der ACON vor der Zuteilung der Angebotsaktien 1.500.000 Bestehende
Aktien im Rahmen eines unentgeltlichen Wertpapierdarlehens für eine eventuelle
Mehrzuteilung zur Verfügung stellen.
In diesem Zusammenhang räumt die Gesellschaft der ACON die Option ein, bis
zu 1.500.000 Aktien aus einer entsprechenden Barkapitalerhöhung der
Gesellschaft aus genehmigtem Kapital zum Platzierungspreis abzüglich
vereinbarter Provisionen und anderen Kosten zu zeichnen („Greenshoe
Option“), um die Rückübertragungsverpflichtung aus dem Wertpapierdarlehen
zu erfüllen.
Angebotsfrist
Das Angebot beginnt voraussichtlich am 9. September 2014 und endet am 24.
September 2014 („Angebotsfrist“). Kaufangebote können bis zum Ablauf der
Angebotsfrist frei widerrufen werden. Am letzten Tag der Angebotsfrist können
Privatanleger und institutionelle Anleger bis um 10:00 Uhr (Mitteleuropäische
Zeit) ihre Kaufangebote abgeben.
Preisspanne
Die Preisspanne, innerhalb derer Kaufangebote abgegeben werden können, liegt
zwischen EUR 5,50 und EUR 6,00 je Angebotsaktie. Innerhalb dieser
Preisspanne können Kaufangebote mit einem Kaufpreislimit abgegeben werden.
Mindestvolumen einer Zeichnung
Es werden lediglich Kaufangebote über Zeichnungen mit einem Mindestvolumen
von einer Aktie akzeptiert.
Mehrfachzeichnungen
Mehrfache Kaufangebote eines Aktienzeichners werden nicht akzeptiert.
Änderung der Angebotsbedingungen
Die Gesellschaft behält sich das Recht vor, in Abstimmung mit der ACON und
CM-Equity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331
München, Deutschland („Gemeinsame Bookrunner“), die Anzahl der
Angebotsaktien zu verringern, die obere und/oder untere Begrenzung der
Preisspanne zu reduzieren oder zu erhöhen, und/oder die Angebotsfrist zu
verlängern oder zu verkürzen (zusammen als die „Angebotsbedingungen“
bezeichnet). Im Falle einer Änderung der Angebotsbedingungen wird ein
Nachtrag bei der Bundesanstalt für Finanzdienstleistungsaufsicht (“BaFin”)
eingereicht und nach der Billigung auf der Internetseite der Gesellschaft
(www.snowbird-ag.de) veröffentlicht. Soweit dies gesetzlich erforderlich ist, wird
jede Änderung als ad-hoc Mitteilung veröffentlicht. Eine individuelle Unterrichtung
der Anleger erfolgt nicht.
Lieferung der Angebotsaktien
Die Angebotsaktien werden vorrausichtlich am 26. September 2014 gegen
Zahlung des Angebotspreises geliefert.
Wertpapierdarlehen
Um die zeitnahe Lieferung von bis zu 10.000.000 Neuen Aktien der Gesellschaft
an die Anleger zu ermöglichen, wird Herr YAN Changzai und die Alrai S.à.r.l.
einen Wertpapierdarlehensvertrag mit dem Underwriter abschließen und dabei
dem Underwriter 10.000.000 auf den Inhaber lautende Stammaktien ohne
Nennbetrag (Inhaber-Stückaktien) als unentgeltliches Wertpapierdarlehen zur
Verfügung stellen.
Allgemeine Zuteilungskriterien
Die Gesellschaft behält sich das Recht vor, den Anlegern weniger als die
maximal mögliche Anzahl von angebotenen Neuen Aktien zuzuteilen. Die
Gesellschaft, Herr YAN Changzai und die Gemeinsamen Bookrunner
beabsichtigen, die „Grundsätze für die Zuteilung von Aktienemissionen an
Privatanleger“,
die
am
7.
Juni
2000
von
der
Page 40
Börsensachverständigenkommission des Bundesministeriums der Finanzen
herausgegeben wurden (die „Zuteilungsgrundsätze“), zu beachten.
Vorzeitige Beendigung des Angebots
Der Übernahmevertrag, der u.a. zwischen der Gesellschaft, Herr YAN Changzai,
der Alrai S.à.r.l., BIG BUSINESS GLOBAL HOLDINGS LIMITED mit dem
alleinigen Aktionär Herr CHOI Siu Hung und dem Underwriter kurz nach dem
Datum dieses Prospekts abgeschlossen wird (der „Übernahmevertrag“), sieht
vor, dass der Underwriter den Übernahmevertrag bei Vorliegen von bestimmten
Umständen bis zum Tag der Lieferung der Aktien kündigen kann.
Darüber hinaus behält sich die Gesellschaft vor, jederzeit während und nach
dem Angebot ohne weitere Angaben von Gründen vom Angebot zurückzutreten.
Im Falle einer Kündigung des Übernahmevertrags oder eines Rücktritts seitens
der Gesellschaft findet das Angebot nicht statt. In einem solchen Fall werden
Aktienzuteilungen an die Anleger für ungültig erklärt und die Anleger haben
keinen Lieferanspruch. Ansprüche aus gezahlten Zeichnungsgebühren und den
Anlegern im Zusammenhang mit der Zeichnung entstandene Kosten werden
ausschließlich nach Maßgabe der rechtlichen Verhältnisse zwischen dem
jeweiligen Anleger und der Institution, bei der dieser ein Kaufangebot abgegeben
hat, geregelt.
E.4
Interessen /
Interessenkonflikte
bezüglich der
Emission/ des
Angebots
Im Zusammenhang mit dem Angebot und dem Listing der Gesellschaftsaktien
(die „Transaktion“), stehen der Underwriter und der Lead Manager in einer
vertraglichen Beziehung mit der Gesellschaft.
ACON ist der Underwriter und seine Vergütung hängt unter anderem von der
Höhe des Angebots in Übereinstimmung mit dem Übernahmevertrag ab, der kurz
nach Veröffentlichung dieses Prospektes abgeschlossen werden soll.
CM-Equity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331
München, Deutschland („CM-Equity“) berät als Global Coordinator und Lead
Manager die Gesellschaft bei der Transaktion und koordiniert die Strukturierung
und Durchführung derselben. Darüber hinaus wird auch sie die Angebotsaktien
im Auftrag des Underwriter verkaufen. Die Vergütung von CM-Equity ist unter
anderem verkaufsabhängig und hängt unter anderem von der Höhe des
Angebots ab. Insoweit hat CM-Equity ein Interesse an der erfolgreichen
Umsetzung des Angebots.
Der Underwriter und der Lead Manager oder ihre Tochtergesellschaften könnten
in Geschäftsbeziehungen mit der Gesellschaft treten bzw. im Geschäftsalltag
Dienstleistungen an die Gesellschaft erbringen.
mwb fairtrade Wertpapierhandelsbank AG, Rottenbucher Straße 28 82166
Gräfelfing, Deutschland, hat darüber hinaus ein Interesse an dem Angebot auf
Grund der geplanten Designated-Sponsor-Vereinbarung.
E.5
E.6
Name des
Unternehmens,
das das
Wertpapier zum
Verkauf
anbietet
Die Angebotsaktien werden von der ACON als Underwriter angeboten.
Lock-Up
Vereinbarung
Die Gesellschaft und bestimmte Bestehende Aktionäre haben mit der CM-Equity
eine Lock-up Vereinbarung geschlossen, wobei (i) die Gesellschaft, BIG
BUSINESS GLOBAL HOLDINGS LIMITED mit dem alleinigen Aktionär Herr
CHOI Siu Hung und Herr YAN Changzai sich auf eine Lock-up-Frist von 36
Monaten, und (ii) YIELD TRADE LIMITED, ZHEN SHENG LIMITED, United
Talent Investments Limited und Midasi Investment Limited sich auf eine Lock-upFrist von 12 Monaten geeinigt haben.
Verwässerung
Zum Datum dieses Prospektes beträgt das Grundkapital der Gesellschaft EUR
30.000.000 eingeteilt in 30.000.000 auf den Inhaber lautende Stammaktien ohne
Nennbetrag (Inhaber-Stückaktien).
Der Nettobuchwert der Gesellschaft (Summe der Vermögenswerte abzüglich
Page 41
Verbindlichkeiten und kurzfristige Verbindlichkeiten), der sich aus den verkürzten
Zwischenabschlüssen der Snowbird Henan nach IFRS für 2014H1 ergibt, beträgt
zum 30. Juni 2014 EUR 82.670.000. Dies entspricht etwa EUR 2,76 pro Aktie
(kalkuliert auf der Basis von 30.000.000 Aktien der Gesellschaft zum Zeitpunkt
der Veröffentlichung dieses Prospektes).
Unter der Annahme, dass alle 11.500.000 Angebotsaktien platziert werden und
dass der Angebotspreis als arithmetisches Mittel der Preisspanne zwischen EUR
5,50 und EUR 6,00, EUR 5,75 beträgt, würde die Gesellschaft NettoEmissionserlöse von ca. EUR 61.825.000 erhalten, unter Berücksichtigung der
Gesamtkosten für das Angebot (einschließlich der Provision für den Underwriter)
mit ca. EUR 4.300.000. Unter der Annahme dass das Angebot am 30. Juni 2014
umgesetzt worden wäre, würde der Nettobuchwert der Gesellschaft zu diesem
Zeitpunkt ca. EUR 144.495.000 betragen (oder ca. EUR 3,48 pro Aktie auf der
Grundlage von 41.500.000 Aktien der Gesellschaft in der Ausgabe nach
vollständiger Durchführung der Kapitalerhöhung gegen Bareinlagen). Dies
entspricht einer Zunahme des Nettobuchwertes der Gesellschaft von ca. EUR
0,72 pro Aktie entsprechend einer Zunahme von ca. 26,1 % für die bestehenden
Aktionäre (Dies stellt eine direkte Verwässerung von ca. EUR 2,27 pro Aktie für
die Käufer der angebotenen Aktien dar, basierend auf dem arithmetischen Mittel
der Preisspanne. Investoren, welche Aktien mit einem arithmetischen Mittel von
einer Preisspanne von EUR 5,75 pro angebotene Aktie kauften, haben somit
eine Verwässerung von ca. 65,2 %.
E.7
Schätzung der
Ausgaben, die
dem Anleger
vom Emittenten
oder Anbieter
in Rechnung
gestellt werden
Entfällt. Weder die Gesellschaft noch ACON werden den Anlegern Gebühren in
Rechnung stellen. Die Investoren werden von ihren depotführenden
Finanzinstituten mit den üblichen Transaktions- und Bearbeitungsgebühren
belastet werden.
Page 42
3.
RISK FACTORS
In addition to the other information included in this Prospectus, potential investors should
peruse and carefully consider the specific risk factors described below before coming to a
decision about purchasing shares of Snowbird AG (the “Company”). The business
operations and net assets, financial condition and results of operations of the Company
and its direct and indirect subsidiaries (“SNOWBIRD”) could be materially and adversely
affected due to the materialization of any one or several of these risks. The risks
described below are not the only risks to which SNOWBIRD is exposed. Other
uncertainties and risks which are currently unknown to the Company may also impair the
operations of SNOWBIRD and materially and adversely affect its business and its net
assets, financial position and results of operations. Investors should pay particular
attention to the fact that the operating entities of SNOWBIRD are incorporated in China
and subject to a legal and regulatory environment which in various respects may differ
from that of other countries. The sequence in which the following risks are presented
does not contain any statement about the probability that they will occur or the extent of
the financial impact if the risks mentioned below materialize. The market price of the
Company’s shares might decline considerably and / or the Company may become
insolvent and wound-up if any one of these risks occurs and investors might lose all or
part of their investment.
3.1
Risks related to SNOWBIRD’s Operations
3.1.1
SNOWBIRD may not be able to continue competing successfully against
present and future competitors.
The Company believes that the textile and bedding industry is highly
competitive. Its major competitors include international and domestic textile
producers and/or processors. They compete with each other based on,
amongst other things, brand image, product variety, product design, product
quality and price. Competitors may have significantly greater financial, technical
and marketing resources, stronger brand name recognition and a larger existing
customer base than SNOWBIRD. In addition, competitors may have the ability
to respond more quickly to new or emerging technologies, may adapt more
quickly to changes in customer requirements and may devote greater resources
to the development, promotion and sales of their products than SNOWBIRD.
Competition in the People’s Republic of China (“PRC”) in the down product
industry is very intense and brand concentration is increasing. In recent years,
overseas clothing companies start to produce down clothing. These companies
have an edge over the local companies in term of their brand image and design
capability, thus cause great impacts to the down clothing companies. At the
same time, overseas well known down clothing brands are also start to enter
China market, thus increase the already intense competition.
There is no assurance that SNOWBIRD will be able to continue competing
successfully against present and future competitors. The Company believes
that important factors to achieving success in the textile industry include
maintaining customer loyalty by cultivating long-term customer relationships,
achieving consistent product renewal and maintaining the quality of products
and services. If SNOWBIRD is unable to attain these factors, it may lose its
customers to its competitors. Increased competition may also force SNOWBIRD
to lower its prices.
If SNOWBIRD is unable to compete effectively with existing or new competitors
in the future, in particular in light of the changing and competitive market
environment, SNOWBIRD’s business and its net assets, financial condition and
results of operations may be materially and adversely affected.
Page 43
3.1.2
Fluctuations in consumer spending caused by changes in
macroeconomic conditions in the PRC and export countries may
significantly affect SNOWBIRD’s prospects.
SNOWBIRD sells its products to domestic and foreign wholesalers who sell the
products within the PRC and the global market. Therefore the success of the
business of SNOWBIRD indirectly depends on the condition and growth of the
PRC and foreign consumer market, which, in turn, depends on worldwide
economic conditions and individual income levels and their impact on levels of
consumer spending. The slowdown of gross domestic product (“GDP”) growth
rates in the PRC in 2011, 2012 and 2013 which is, amongst others, due to the
development of the global economy, could lead to a toughened competition and
increased pressure on prices. There are many factors affecting the level of
consumer spending, including but not limited to interest rates, currency
exchange rates, recession, inflation, deflation, political uncertainty, taxation,
stock market performance, unemployment level and general consumer
confidence. There can be no assurance that historical growth rates of the PRC
economy will continue or that projected growth rates of the PRC economy and
the PRC consumer market will be realized. Any future slowdowns or declines in
the PRC economy or consumer spending may materially and adversely affect
SNOWBIRD’s business and its net assets, financial condition and results of
operations.
3.1.3
Rapid changes in fashion trends, consumer preferences or spending
patterns may affect SNOWBIRD’s business
SNOWBIRD believes that its success depends largely on its ability to originate
and define products and fashion trends as well as to anticipate, gauge and
respond to changing consumer demands in a timely manner. There can be no
assurance that SNOWBIRD will be able to continue to research, design and
develop products which appeal to consumers or successfully meet the
constantly changing consumer demands in the future. Its failure to anticipate,
identify and respond effectively to the changing consumer demands or fashion
trends could adversely affect the level of acceptance of SNOWBIRD’s products
by its customers and its end-consumers, which in turn could adversely affect
SNOWBIRD’s brand image and business and its net assets, financial condition
and results.
3.1.4
SNOWBIRD may be materially and adversely affected by seasonality and
climate changes.
SNOWBIRD has experienced seasonal fluctuations in its revenue as its
products and business are sensitive to changes in temperature and
unpredictable weather patterns in markets where SNOWBIRD sells its products.
Due to the strong seasonality of its business, SNOWBIRD’s sales are generally
highest in autumn and winter, which is considered to be SNOWBIRD’s peak
sales season. On the other hand, SNOWBIRD sales are generally lowest in
spring and summer when SNOWBIRD mainly conducts its non-down OEM
clothing business to keep its capacities at a relative stable level.
Furthermore, any changes in climate resulting in warmer winters (and in
particular during SNOWBIRD’s peak sales period) in the PRC and overseas
may adversely affect consumer demand for the down clothing and down
bedding products (“Down Products”), which in turn may affect SNOWBIRD’s
sales. SNOWBIRD cannot assure that adverse climate changes in markets
where it sells its products will not adversely affect SNOWBIRD’s business and
its net assets, financial condition and results.
3.1.5
SNOWBIRD’s business may be materially and adversely affected by the
export dependency.
SNOWBIRD’s export business was historically concentrated on just one agent
in Taiwan. This share fell in 2013 with the addition of a few more agents. A
Page 44
continued diversification of foreign customers is planned, but not already
implemented. The dependence of SNOWBIRD of these agents could adversely
affect SNOWBIRD’s business and its net assets, financial condition and results.
3.1.6
SNOWBIRD may not be able to comply with customers’ specifications.
SNOWBIRD produces for Original Equipment Manufacturers (“OEM”) products
based on designs and samples provided by its customers. SNOWBIRD might
not be able to produce the products according to its customers’ specifications. It
can also not be excluded that SNOWBIRD’s customers demand other design,
color or functionality of the Down Products which are produced according to
SNOWBIRD’s own design. In case SNOWBIRD is not able to comply with its
customers’ specifications, SNOWBIRD’s business, financial condition and
results of the operations may be adversely affected.
3.1.7
SNOWBIRD operates in an environmental hazardous industry and may fail
to comply with environmental protection laws and regulations in the PRC.
Businesses in China like SNOWBIRD that generate pollutants in the production
process, such as waste water, are subject to environmental laws and
regulations. These laws and regulations require enterprises engaged in the
manufacturing that may cause environmental pollution to adopt effective
measures to control and properly dispose of industrial waste.
Under PRC laws, any enterprise which discharges pollutants is required to
register with the relevant PRC governmental authorities and to obtain the
necessary approvals, such as pollutant discharge permit. Currently, the PRC is
exercising a discharge pollutants system. In the Water Pollution Prevention and
Control Law of the PRC it is specified that an enterprise that has no discharge
permit or has violated the discharge permit is not allowed to discharge waste
water.
Any enterprise which has obtained the pollutant discharge permit is also
required to have proper facilities to treat industrial pollutants such as waste
water, which are subject to periodical inspection from relevant government
authorities. In addition, fines may be imposed for pollution discharges, which fail
to meet the relevant environmental standards. Relevant governmental
authorities may refuse to issue or renew a pollutant discharge permit, if an
enterprise fails to pass environmental inspections, and are also empowered to
close down any enterprise in cases of severe violations of the relevant
environmental standards.
If SNOWBIRD should fail to comply with the applicable environmental protection
laws and regulations, this may result in penalties and other sanctions like a shut
down. As a result, SNOWBIRD’s business and its net assets, financial condition
and results of operation may be materially and adversely affected.
3.1.8
The current PRC environmental protection laws and regulations may
change to the detriment of SNOWBIRD.
There can be no assurance that the PRC government will not change the
existing environmental laws and regulations or impose additional or stricter laws
and regulations. Compliance with any of these additional or stricter laws or
regulations may cause SNOWBIRD to incur additional capital expenditure,
which SNOWBIRD may be unable to pass over to the customer through higher
prices for SNOWBIRD’s products. This could have a material adverse effect on
operations.
Furthermore, if SNOWBIRD should be unable to comply with more stringent
environmental protection standards, penalties may be imposed on it and/or its
operations and business may be shut down or adversely impaired, which would
also have a material adverse effect on SNOWBIRD’s net assets, financial
condition and results of operations.
Page 45
3.1.9
SNOWBIRD’s operation may cause damage to human health and the
insurance coverage may not be adequate for SNOWBIRD’s operations.
For the processing of feathers and down (“Down”) and the production of Down
Products and non-down OEM clothing, SNOWBIRD operates several machines
at its processing and production facilities. Furthermore, the employees can
suffer from inhaling dust in the down processing and filling process. Although
SNOWBIRD has implemented precautionary measures and safety procedures
in its operations, it cannot be assured that the process does not endanger the
human health of the employees involved. Any major industrial accident can
result in a permanent damage of the employees, whether due to SNOWBIRD’s
fault or not, and may give rise to potential claims against SNOWBIRD.
The social security covers health damage of the employees. However, it cannot
be assured that the social security is sufficient to cover all potential claims
against SNOWBIRD. In the event any claims are not covered by the social
security, SNOWBIRD may be liable to cover the amounts claimed, and its
business and profitability might be adversely affected.
3.1.10
SNOWBIRD may be affected by complaints from its customers and
negative publicity.
SNOWBIRD may be subject to complaints, whether valid or invalid, from its
customers with regard to the quality of its products. SNOWBIRD may also be
affected by factors such as negative publicity resulting from the publication of
industry findings and research reports concerning its products (regardless of
their accuracy or validity); this may also relate to any negative publicity due to
the slaughter of geese and ducks as part of the process of obtaining down as
raw material from SNOWBIRD’s suppliers. Such complaints and negative
publicity will affect SNOWBIRD’s brand image and the sale of its products. ln
such event, SNOWBIRD’s business and its net assets, financial condition and
3.1.11
SNOWBIRD might fail to execute its expansion plans successfully and
manage its growth efficiently.
SNOWBIRD has expanded its business significantly in recent years. For
FY 2011, FY 2012 and FY 2013, SNOWBIRD recorded total sales of EUR
49.17 million, EUR 90.26 million and EUR 136.89 million respectively.
SNOWBIRD intends to further advance such growth, in particular by increasing
its production capacities. There can be no assurance that SNOWBIRD may, in
part or at all, be successful in these activities. Many investments which are
planned by SNOWBIRD require high initial expenditures. Such investments can
only be operated profitably if their sufficient utilization is warranted by
corresponding demands.
SNOWBIRD’s anticipated future growth, combined with the requirements the
Company will face as a public listed company, will place a significant strain on
SNOWBIRD’s management, systems and resources. There is a risk that
SNOWBIRD will have difficulty or will fail to integrate satisfactorily new
personnel, operations, products and services into its operations.
To accommodate its growth, SNOWBIRD will need to implement new and
upgraded operational and financial systems, procedures and controls, including
the ongoing improvement of its accounting and other internal management
systems, all of which require substantial management efforts. SNOWBIRD will
also need to continue to expand, train, manage and motivate its workforce and
manage its customer relationships. Moreover, as SNOWBIRD introduces new
products or extends its presence to other PRC provinces as well as to overseas
markets, SNOWBIRD may face new operational risks and challenges, with
which SNOWBIRD is unfamiliar.
All of these endeavors will involve risks and require substantial management
effort and skill. SNOWBIRD may be unable to manage its growth effectively and
Page 46
any failure to do so may have a material and adverse effect on SNOWBIRD’s
business and its net assets, financial condition and results of operations.
3.1.12
The implementation of SNOWBIRD’s growth strategy is capital intensive
and SNOWBIRD could be unable to secure additional financing.
In order to finance its growth strategy, SNOWBIRD may have to raise additional
capital in the future through debt or equity offerings, if SNOWBIRD cannot
maintain sufficient working capital for its expansion plans. SNOWBIRD cannot
be certain that suitable financing will be available in the required amounts or on
acceptable terms.
If additional equity or equity-linked securities are issued, this may result in the
dilution of existing shareholders' holdings. If additional debt is incurred, this
would result in debt service obligations, which could have a negative impact on
profitability and could expose SNOWBIRD to general adverse economic
conditions. In addition, the terms of any financing agreement could limit
SNOWBIRD’s ability to pay dividends or restrict SNOWBIRD’s flexibility in
planning for, or reacting to, changes in its business or its industry. In particular,
the PRC economy is currently exposed to increasing inflation and increasing
interest rates. Therefore, any future debt financing by SNOWBIRD from PRC
lenders may incur significant interest payments, which would have an adverse
impact on its profitability and ability to pay dividends.
SNOWBIRD is also subject to foreign exchange registration and approval, if it
intends to borrow funds from entities outside of the PRC. In addition,
SNOWBIRD needs to obtain approval or registration from Chinese government
agencies, if it intends to secure financing through equity contributions from nonPRC residents. In the event that SNOWBIRD cannot obtain necessary financing
on reasonable terms, or at all, it may be forced to scale back its plans for future
business expansion.
The occurrence of any of the aforementioned risks, restrictions or exposure
could have material and adverse effects on SNOWBIRD’s business and its net
assets, financial condition and results of operations.
3.1.13
SNOWBIRD cannot ensure long-term business relationships with its
existing customer base.
SNOWBIRD sells its processed Down as well as its Down Products to approx.
50 customers who as wholesalers in turn sell through their own distribution
network and/or their retail shops. SNOWBIRD does not control nor participate in
the operations of their sales distribution network nor retails shops. Out of the 50
customers, in total about 26 customers are repeat customers, while the other
customers have been newly acquired by SNOWBIRD. Since SNOWBIRD does
not have long-term contracts with its customers of more than one year,
SNOWBIRD’s customers may, at any point in time, cease or alter to
SNOWBIRD’s disadvantage the present arrangements with SNOWBIRD, in
particular in case they start their own production in the PRC. This may have a
material and adverse effect on SNOWBIRD’s business and its net assets,
financial condition and results of operations.
3.1.14
SNOWBIRD is exposed to the credit risks of its customers.
SNOWBIRD’s business and SNOWBIRD’s financial results are dependent on
the credit worthiness of its major customers. SNOWBIRD’s contracts with its
customers generally provide specific payment terms, i.e. 60-90 days.
Any deterioration in the financial position of SNOWBIRD’s customers,
particularly its major customers, may affect SNOWBIRD’s profits and cash flow,
as these customers may default on their payments to SNOWBIRD. Although
SNOWBIRD reviews the credit risk of its customers on a yearly basis,
SNOWBIRD cannot assure that such defaults will not take place in the future or
that it will not experience cash flow problems as a result of such defaults.
Page 47
The occurrence of any default in payment may materially and adversely affect
operations.
3.1.15
SNOWBIRD may be subject to fluctuations in the prices of raw materials
and is dependent on the continuous and timely supply of quality raw
materials.
The costs of raw materials accounted for approximately 73.41%, 79.43% and
85.14% of SNOWBIRD’s total costs of goods sold for the Financial Year (“FY”)
2011, FY 2012 and FY 2013 respectively, which included in particular raw down
and feathers as well as clothing accoutrements or accessories. As SNOWBIRD
does not have long-term arrangements with its suppliers for such key raw
materials, in particular the annual supply contract does not contain any pricing
for the period due to the volatility of raw down and feather prices, there is no
assurance that SNOWBIRD will be able to obtain, or continue to obtain, quality
raw materials at competitive prices. Although SNOWBIRD’s raw materials
turnover days are maintained at 30 days, the continuous and timely supply of
quality raw materials is, however, the basis for quality products. Market prices of
such raw materials may fluctuate due to the outbreak of the bird flu or other
similar diseases or due to changes in the level of global demand and supply.
Any substantial increase in the prices of these raw materials is likely to have a
material adverse impact on SNOWBIRD’s production costs. In the event of any
significant increase in the costs of such materials and should SNOWBIRD be
unable to pass on such costs to SNOWBIRD’s customers or do so on a timely
basis, SNOWBIRD’s business and its net assets, financial condition and results
of operations may be materially and adversely affected.
3.1.16
SNOWBIRD’s business depends substantially on the continuing efforts of
its management and other key personnel.
SNOWBIRD’s future success substantially depends upon the continued
services of its management and other key employees. SNOWBIRD’s success to
date has been largely attributable to the efforts of its management team, in
particular Mr. YAN Changzai as chairman of the management board
(Vorstandsvorsitzender) of the Company, who has more than 20 years of
experience in the down industry.
Snowbird Henan is headed by the Company’s chairman Mr. YAN Changzai,
who is closely supported by Mr. QIU Duoxiang, also having more than 30 years
of experience in the down industry. Snowbird Henan’s deputy general
managers Mr. YAN Zhaorui and Mr. CHEN Yijun as well as the Company’s
CFO Mr. LAM Kok Weng also support Mr. YAN Changzai in SNOWBIRD’s
success.
If one or more of its management or key personnel are unable or unwilling to
continue in their present positions, in particular Mr. YAN Changzai, SNOWBIRD
might not be able to replace them easily or at all. Furthermore, if any of its
management or key personnel would join a competitor or form a competing
company, SNOWBIRD may lose customers, suppliers, expertise and key
professionals and staff members.
There can be no assurance that SNOWBIRD will be successful in retaining its
management or key employees or will be able to hire qualified management
personnel to replace them, should such a need arise. The demand for such
experienced personnel is intense and the search for personnel with the relevant
skills set can be time consuming.
In any of the abovementioned events, SNOWBIRD’s business may be severely
disrupted and its net assets, financial condition and results of operations may
be materially and adversely affected.
Page 48
3.1.17
Labor costs in the PRC have risen significantly in recent years and could
continue to rise significantly.
The workforce of SNOWBIRD is located in the PRC. As of 30 June 2014,
SNOWBIRD employed 1609 employees. Labor costs comprise wages, social
security contributions and other welfare benefits. The average annual wage per
capita of employees of private companies in the PRC increased in 2011 from
RMB 24,556 (approx. EUR 2,728) by 17.1% to RMB 28,752 (approx. EUR
3,542) in 2012 (Source: National Bureau of Statistics of China). The legal
minimum monthly salary in Taiqian County, Puyang City, Henan Province, PRC,
where SNOWBIRD’s facilities are located, amounts to RMB 960 (approx. EUR
116.69) since 2013 whereas the legal minimum hourly salary amounts to RMB
9.00 (approx. EUR 1.09).(Source: Circular on Adjusting the Standards of the
Minimum Wages of Puyang City Pu Ren She (2013) No. 252). The average
salary for workers of Snowbird Henan in Taiqian County, Puyang City, Henan
Province, PRC have the last time increased from RMB 2,537 (approx. EUR
281.81) per month in 2011 by 73.8% to RMB 4,409 (approx. EUR 535.92) per
month in 2013 for sewing workers and from RMB 2,999 (approx. EUR 333.13)
per month in 2011 by 20.2% to RMB 3,605 (approx. EUR 438,20) per month in
2013 for down processing workers.
Although the salary of SNOWBIRD’s employees complies with the minimum
salary requirements and is above average, it cannot be excluded that increases
in minimum wages affect the wages, which SNOWBIRD must pay in order to
remain an attractive employer. This may also result in increased prices for its
products and services, making SNOWBIRD potentially less competitive, even
though SNOWBIRD’s labor costs account only for approx. 9.77% of the total
costs of goods sold. In addition, new obligations imposed on employers and
enhanced employee protection measures, such as restrictions on the dismissal
of employees, and the requirement to pay a severance payment in case of prior
termination of an employment agreement may also lead to an increase in
SNOWBIRD’s labor costs.
In the future, labor costs could continue to increase significantly and additional
legislation could be enacted that further increases an employer’s obligation to
pay employee benefits.
In case any of the above mentioned risks materialize, this could have a material
and adverse effect on its business and its net assets, financial condition and
results of operations.
3.1.18
SNOWBIRD is exposed to fluctuation in foreign exchange rates against
the Renminbi (“RMB”).
Fluctuations in foreign exchange rates against the Renminbi (“RMB”), in
particular a strengthening RMB, may cause the price of goods produced in the
PRC to be relatively high as compared to products from other countries. Such
fluctuations might harm the competitiveness of Chinese exporters, which could
negatively affect the sale and export of goods and hence the growth of the PRC
companies. Since SNOWBIRD counts some of these Chinese exporters as its
distributors, fluctuations in the RMB exchange rate could also have a material
and adverse effect on SNOWBIRD’s business and its net assets, financial
3.1.19
SNOWBIRD may be materially and adversely affected if counterfeit
SNOWBIRD believes the recognition of its SNOWBIRD brand to be vital in the
sale of its products and an effective enforcement of intellectual property rights to
be important for the protection of its interests. Besides the products
manufactured by SNOWBIRD on the basis of OEM contracts, SNOWBIRD’s
Down Products are manufactured and marketed under its own brands “Snow
Bird” and “Xueniao”. SNOWBIRD’s brands have been registered as a trademark
in the PRC and in Hong Kong, Taiwan and the EU.
Page 49
SNOWBIRD cannot assure that there will not be any unauthorized usage or
misuse of the SNOWBIRD brand as it may be difficult and costly to monitor any
infringements in the PRC, although SNOWBIRD employed full time staff to
inspect its products in the market and pays the quality inspection authority an
annual fee of RMB 100,000 (approx. EUR 12,155) to assist SNOWBIRD to
detect fake products by performing random inspection. If SNOWBIRD cannot
adequately protect its brand, SNOWBIRD’s business and its net assets,
financial condition and results of operations and reputation could be adversely
affected.
In addition, SNOWBIRD believes the branding of its products and the brand
equity in SNOWBIRD’s brand is critical to SNOWBIRD’s expansion effort and
the continued success of its business. SNOWBIRD’s efforts to build its brand
may be undermined by the sale of counterfeit goods. In order to preserve and
enforce SNOWBIRD’s intellectual property rights, SNOWBIRD may have to
resort to litigation against the infringing or counterfeiting parties. Such litigation
could result in substantial costs and diversion of management resources which
may have a materially and adversely effect on SNOWBIRD’s business and its
net assets, financial condition and results of operations.
3.1.20
SNOWBIRD may be materially and adversely affected if fake down
Many companies in the down industry use only 70% down in textiles. Canada’s
Competition Bureau determines that products need to have at least 75% down
content to be labelled as “down”, whereas goose down products must contain at
least 90% goose down. (Source: The Down Association of Canada,
http://downmark.ca/consumer_information/fraud.htm).
Cheap copies with low-grade materials are therefore a major worldwide
challenge for the down industry. If fake down products are sold in the market,
SNOWBIRD would have to compete in price with fake products and lose market
share. In such case, SNOWBIRD’s business and its net assets, financial
condition and results of operations and reputation could be adversely affected.
3.1.21
SNOWBIRD relies on the effective protection of its patents and its
confidential technical know-how.
SNOWBIRD believes that the expertise and technical know-how in the
manufacturing of its products contributes to its business success. Besides
SNOWBIRD’s utility model patents, inter alia, the grading process is part of the
patents and SNOWBIRD’s technical know-how in the down processing.
Effective protection of this information in its production process is critical to
SNOWBIRD’s business. Certain patents are registered, which however may not
sufficient to protect the respective rights. Also, since other technical know-how
is not patented, SNOWBIRD relies on confidentiality restrictions to protect such
intellectual property rights. SNOWBIRD is thus exposed to unauthorized
disclosure of such proprietary information to its competitors. There is no
assurance that SNOWBIRD’s controls to maintain confidentiality will be
effectively implemented.
In the event that any of its technical know-how should be leaked to its
competitors, SNOWBIRD’s business and its net assets, financial condition and
3.1.22
SNOWBIRD may inadvertently infringe third-party intellectual property
rights.
SNOWBIRD is not aware of, nor has SNOWBIRD received any claims from
third parties for any violations or infringements of intellectual property rights of
third parties by SNOWBIRD as of the date of this Prospectus. Nevertheless,
there can be no assurance that new product designs developed by SNOWBIRD
(including those which are developed or reproduced in accordance with
SNOWBIRD’s customers' requirements and specifications) would not
Page 50
inadvertently infringe the intellectual property rights of others, or others would
not assert infringement claims against SNOWBIRD or claim that SNOWBIRD
has infringed their intellectual property rights. Such claims against SNOWBIRD,
even if untrue or baseless, could result in significant costs, legal or otherwise,
cause product shipment delays, require SNOWBIRD to develop non-infringing
products, enter into licensing agreements or seriously harm the reputation of
SNOWBIRD and its brand image. Licensing agreements, if required, may not be
available on terms acceptable to SNOWBIRD or at all. In the event of a
successful claim of intellectual property rights infringement against SNOWBIRD
and its failure or inability to develop non-infringing products or to license the
infringed intellectual property rights in a timely or cost-effective basis,
operations may be materially and adversely affected.
3.1.23
SNOWBIRD’s operational, trading and financial planning, internal key
control and management reporting systems may be inadequate and its
management resources may be insufficient to successfully manage and
support its future growth and to ensure accurate financial management.
SNOWBIRD’s operational, trading and financial planning, internal key control
and management reporting systems may not be fully adequate and thus not
provide SNOWBIRD’s management with as much or accurate information as
required, or not provide the required information in time. Also, the bookkeeping
and accounting department may not be able to fully comply with all accounting
or trading standards and procedures, such as proper documentation for all
transactions, as the basis for reporting and accounting, in particular the
bookkeeping and accounting department might fail to fully comply with IFRS
standards since these differ from those standards in the PRC. Moreover, the
shortage of qualified management and accounting personnel in the PRC in
general and in the Henan region in particular may hinder SNOWBIRD from
building sufficient personnel resources to ensure accurate financial
management.
Any inability to maintain operational, trading and financial planning and
management reporting systems, as well as any inability to hire further qualified
personnel, may hinder SNOWBIRD’s future successful growth. This may have a
material and adverse effect on SNOWBIRD’s business and net assets, financial
3.1.24
The Company’s management board (Vorstand) is not experienced in
complying with German legal requirements for listed companies and
SNOWBIRD currently does not have a comprehensive risk management
system in place.
SNOWBIRD has until recently operated as a private Chinese group and
maintains a small finance and accounting department. SNOWBIRD is therefore
not experienced in dealing with increased legal, accounting transparency, in
particular with respect to the International Financial Reporting Standards and
International Accounting Standards and Interpretations as endorsed for
application in the EU (“IFRS”), and administrative requirements imposed on a
publicly listed company in Germany. The obligation to comply with certain
reporting, notification, documentation and publication obligations resulting from
the admission of the Company’s shares to trading in the sub-segment of the
regulated market with additional post-admission requirements (Prime Standard)
of the Frankfurt Stock Exchange will put increased demand on its finance and
accounting departments. In addition, the preparation of quarterly financial
reports and annual consolidated financial statements in accordance with IFRS,
which the Company will be required to produce after the listing of its shares on
the Frankfurt Stock Exchange and the additional reporting requirements it will
face as a publicly listed company may pose problems for SNOWBIRD’s current
financial reporting system. SNOWBIRD may not have an adequate number of
management and accounting personnel sufficiently qualified to assist with the
Page 51
preparation of the IFRS financial statements, to install and operate adequate
management reporting systems and to meet reporting requirements as a
publicly listed company. If the Company should fail to timely issue complete and
correct financial statements and reports, it will potentially be exposed to fines
and penalties and a decrease in investor confidence thus resulting in a
decrease of its share price.
In addition, SNOWBIRD has not yet established a formalized risk reporting
system and risk management system as may be customary in European or US
listed companies, as such risk management systems are not standard in the
PRC. The lack of such formalized systems increases SNOWBIRD’s
susceptibility to the aforementioned risks. In addition, any gaps or shortcomings
of the existing compliance system or the Company’s policies and procedures
could lead to a restriction of SNOWBIRD’s ability to timely recognize and
respond to risks and future developments.
If SNOWBIRD fails to comply with its obligations as a publicly listed company or
if any risks materialize which could have been prevented by a formalized risk
management system, this could have a material adverse effect on
operations.
3.1.25
The Company’s supervisory board (Aufsichtsrat) may have difficulties in
adequately supervising the management board (Vorstand) since the
management is located in the PRC and the chairlady of the supervisory
board (Aufsichtsratsvorsitzender) resides in Germany.
SNOWBIRD’s business is located in the PRC and all of its senior management
members and directors reside there. The Company is currently a holding
company without any significant operational business of its own. The chairlady
of the supervisory board (Aufsichtsratsvorsitzender) resides in Germany and
she is, together with the other members of the supervisory board (Aufsichtsrat),
responsible for the supervision of the Company’s management board
(Vorstand).
However, it may be more difficult for her to fulfill her supervisory duties arising
from the German Stock Corporation Act (AktG) vis-à-vis the management
residing in the PRC, e.g. according to section 111 AktG, and/or to receive the
reports required from the management board (Vorstand), e.g. according to
section 90 AktG. It may in particular be difficult for the chairlady of the
supervisory board (Aufsichtsratsvorsitzende) to organize the supervision and to
communicate with the management board (Vorstand) and to receive at any time
all documents that are required to inspect and examine the books and the
records of the Company.
These circumstances could have a material and adverse effect on
operations.
3.1.26
Mr. YAN Changzai and Mr. CHOI Siu Hung are major direct and indirect
shareholders of the Company, respectively, as well as hold management
positions in SNOWBIRD. These positions will enable them to exercise
significant control over the Company and the entities in the PRC and
could subject them to conflicts of interest.
Immediately upon closing of the Offering, Mr. YAN Changzai and Mr. CHOI Siu
Hung will still have major shareholdings in the Company and each more than
30% of the voting rights. Through these shareholdings, they will be in a position,
irrespective of the voting behavior of other shareholders, to exercise
considerable influence over all major decisions and developments of the
Company. In particular, they will be able to exercise considerable influence at
general shareholders’ meetings (Hauptversammlungen), and consequently,
over decisions regarding measures which are presented for a vote at the
general shareholders’ meeting (Hauptversammlung) (including the election of
Page 52
the supervisory board (Aufsichtsrat) and the approval for important capital
measures). Mr. YAN Changzai is chairman of the management board
(Vorstand) of the Company and legal representative of Snowbird Henan. Mr.
CHOI Siu Hung is director of Snowbird HK and legal representative of Snowbird
WFOE. Their interests as major shareholders could conflict with their duties as
members of the management in SNOWBIRD to act in the best interests of
SNOWBIRD and/or the interests of other investors.
Also, as legal representatives of the respective entities in the PRC, Mr. YAN
Changzai and Mr. CHOI Siu Hung have full control over all business affairs of
Snowbird PRC. The position of legal representive is crucial for the ongoing
operations of Snowbird PRC. Under the laws of the PRC and given that Mr.
YAN Changzai and Mr. CHOI Siu Hung as major shareholders of the Company
have ultimate control over the business of SNOWBIRD, any changes in the
position of the legal representative potentially required due to any conflicts of
interests between Mr. YAN Changzi and Mr. CHOI Siu Hung personally and the
business operations of Snowbird PRC are very difficult to implement.
Any conflicts of interest described above could have a material and adverse
effect on SNOWBIRD’s business and its net assets, financial condition and
results of operations.
3.1.27
SNOWBIRD does not have the insurance coverage that is customary in
more economically developed countries for a business of its type and size
and the insurance may not be adequate for SNOWBIRD’s operations.
In the PRC, it is not customary to take out an extensive insurance protection for
businesses as in more developed economies. SNOWBIRD has taken out two
property insurances covering basic risks for its real estate, equipment, current
assets (inventory) and Down Products located at Industrial Park of Sunkou
Town, Taiqian County, Puyang City, Henan Province, PRC.
However, SNOWBIRD may become subject to liabilities for events that cannot
be insured against, e.g. natural disasters, riots, general strikes, acts of
terrorism, bird flu or against which it may elect not to be so insured because of
high premium costs or other reasons.
A lack of insurance coverage may expose SNOWBIRD to substantial financial
risks, for which it may not be adequately compensated. SNOWBIRD does not
maintain separate funds or otherwise set aside reserves for these types of
events. Any uninsured occurrence of loss or damage, litigation or business
disruption may result in SNOWBIRD incurring substantial costs and the
diversion of resources, which could have a material and adverse effect on
operations.
3.1.28
SNOWBIRD may not be able to maintain and/or obtain approvals and
licenses from PRC authorities necessary to carry out or expand its
business, to own real property or use land or to cope with future
regulatory requirements.
SNOWBIRD requires certain licenses (in particular business license and
environmental certificates) to conduct its business. The licenses are subject to
periodic renewal by the competent PRC authorities, and the standards of
compliance required may change. SNOWBIRD is subject to the supervision of
the authorities, each of which may be able to revoke or refuse to grant and/or to
extend the licenses. SNOWBIRD has obtained all required certificates.
However, there can be no assurance that SNOWBIRD will obtain all necessary
licenses or permits in the future, e.g. for the new sewing plant currently under
construction.
If any of the activities carried out by SNOWBIRD fails to meet the requirements
of current rules or regulations and SNOWBIRD is held liable or responsible, or if
SNOWBIRD fails to obtain the grant or renewal of the required licenses, such
Page 53
failure and any potential penalties could have a material and adverse effect on
operations.
3.1.29
The Company is a holding company the liquidity of which depends upon
having access to the liquid funds of Snowbird Henan, which might not be
able to remit profits.
The Company is a holding company without any operating business of its own.
SNOWBIRD’s assets and operations are located in the PRC. The Company’s
liquidity therefore depends upon having access to dividend distributions from its
indirect PRC subsidiaries through the Company’s direct subsidiaries, which are
holding companies based in Hong Kong. Current PRC regulations permit the
payment of dividends only out of accumulated profits determined in accordance
with PRC accounting standards and regulations. In addition, a PRC company is
required to set aside at least 10% of its after-tax profits each year to fund a
statutory capital reserve fund until such reserves in aggregate reach 50% of its
registered capital and may be required to further set aside a portion of its aftertax profits to fund the employee welfare fund. These reserves are not
distributable as cash dividends.
Due to the four tier holding structure (Germany, Hong Kong, PRC, PRC) and
regulatory and accounting constraints, it may take some time for the profits of
Snowbird Henan to be distributed to the Company. For example, distributable
profits generated by Snowbird Henan in 2014 may in principle only be
distributed to Snowbird WFOE in 2015 and passed on by Snowbird WFOE to
Snowbird HK in 2016 and passed on by Snowbird HK to the Company in 2017,
which means that it may happen that the shareholders of the Company receive
any distributable profits generated by Snowbird Henan in 2014, if distributed,
not until 2018.
Further, under PRC foreign exchange rules and regulations, payments of
recurring account items, including profit distributions and operating-related
expenditures, may generally be made in foreign currencies without prior
approval but are subject to procedural requirements. Strict foreign exchange
controls generally apply to certain capital account transactions. These
transactions must be approved by and/or registered with the State
Administration of Foreign Exchange (“SAFE”) or its local counterparts.
There can be no assurance that the entities of SNOWBIRD will be able to meet
all of their foreign currency obligations under PRC laws or to remit profits out of
PRC. Should Snowbird Henan be, or become, restricted and/or legally
prohibited from and/or unable to pay dividends or to make other distributions
outside the PRC, this could have a material and adverse effect on the net
assets, financial condition and results of operations of the Company.
3.1.30
The tax burden of SNOWBIRD may increase as a result of tax audits.
In the past, none of the entities of SNOWBIRD has undergone a special tax
investigation from the relevant tax authorities. A future tax investigation or tax
review may reveal that the tax authorities have views on tax regulations and
circumstances that are different from those of SNOWBIRD. In particular, the
possibility cannot be excluded that SNOWBIRD PRC will be required to make
additional tax payments.
Under China’s tax laws, any entity is subject to a late payment fee for any delay
in tax payment at 0.05% of the unpaid tax for each delayed day. Taxpayers with
underpaid tax may also be subject to penalties ranging from 50% to 500% of
the underpaid tax. Taxpayers who fail to withhold and pay tax may be subject to
penalties ranging from 50% to 300% of the tax not withheld.
Given the above, SNOWBIRD PRC is liable for any outstanding tax payments
and any late payment fees related thereto.
Page 54
In connection with the burden of any additional tax payments, there is also an
interest risk as, typically after a grace period, interest must be paid on additional
tax payments. Furthermore, there is a risk that tax penalties could be triggered.
In any of the abovementioned events, SNOWBIRD’s business and its net
assets, financial condition and results of operations could be materially and
adversely affected.
3.1.31
Financial subsidies granted by the local government authorities may be
ceased in the future.
SNOWBIRD currently enjoys financial subsidies from the local government
authorities from funds earmarked to support the development of enterprises
located within its geographical jurisdiction. For the FY 2011, FY 2012 and FY
2013, the total subsidies received by SNOWBIRD from the local government
authorities amounted to approximately RMB 3.15 million (approx. EUR
350,000), RMB 3.70 million (approx. EUR 456,000) and RMB 9.52 million
(approx. EUR 1,158,000), respectively. These financial grants were provided
without any conditions and the timing and amount of these financial grants were
subject to the full discretion of the relevant local government authorities. As
such, the discontinuation of any of these government grants could adversely
affect SNOWBIRD’s results of operations and financial condition.
3.1.32
SNOWBIRD may be materially and adversely affected by the bird flu or
other similar communicable diseases.
SNOWBIRD’s business and industry depends on the continued acceptance by
its consumers for down products and the continued availability of down at
commercially reasonable prices. As a result, an outbreak of the bird flu and
similar communicable diseases may result in a mass extermination of ducks
and geese which will lead to a decline in the availability of down. In addition,
there may be generally a decline in the supply of workers who are willing to
work with ducks and geese during the period of a bird flu outbreak, which could
also lead to a decline in down supply. Any significant decline in down supply in
the market will generally lead to increases in down prices. Furthermore,
SNOWBIRD’s sales may decline significantly if its consumers perceive down
products as unsafe. Thus, an outbreak of the bird flu or other similar
communicable diseases may adversely affect SNOWBIRD’s business and its
net assets, financial condition and results.
3.1.33
There can be no assurance that SNOWBIRD will not encounter disruptions
in the supply of electricity and water which could cause a disruption to its
production and affect its overall operation efficiencies.
SNOWBIRD’s production facilities consume substantial amount of electricity
and water. The water is supplied from Taiqian County and the electricity is also
supplied from a power plant in Taiqian County.
SNOWBIRD currently has one electricity supply line which ensures sufficient
uninterrupted electricity supply which is directly connected from the electricity
transmission network in China to its plant.
In addition to the electricity supply line, SNOWBIRD also has a water treatment
plant which has the capacity to treat maximum 5,000 cubic meters of waste
water and as such, the treated water can be channeled to its production plant
for re-use to reduce its fresh water consumption. This way, approximately 80%
of the waste water is reused for the production facilities which ensures a stable
supply of water for the production process in case of disruption. However, there
can be no assurance that SNOWBIRD will not encounter disruptions in the
supply of electricity and water caused by problems in the hydroelectricity power
plant itself, problems with electricity supply lines, contamination of its source of
water, natural calamities such as droughts or earthquakes, governmental acts
such as prohibition from or withdrawal of the approval on the use of the water
resources or any other factors which could cause a disruption to its production
Page 55
and affect its overall operation efficiencies. Force majeure events may also
materially and adversely affect the operations, performance of its suppliers,
distributors and/or the sales and demand of its products in the relevant markets.
In any of these events, SNOWBIRD may not be able to obtain alternative supply
in time or at all, the Group’s business and its net assets, financial condition and
results might be materially adversely affected.
3.2
Risks related to Conducting Business in the PRC
3.2.1
SNOWBIRD’s business, financial condition, results of operations and
prospects could be materially and adversely affected by changes in the
economic, political and legal environment and developments in China.
All of SNOWBIRD's business operations are conducted and all revenue is
generated by Snowbird Henan. Investors should thus be aware that
SNOWBIRD's operations are subject to greater risks than operations in more
developed markets, including significant legal, economic and political risks.
Moreover, emerging economies like China are subject to rapid change and the
information set out herein may therefore become outdated quickly. Investments
in emerging markets or in companies that operate in emerging markets are
generally exposed to additional risks and are generally only suitable for
sophisticated investors who fully appreciate the significance of the risks
involved. Investors are urged to consult with their own legal and financial
advisors before making an investment.
3.2.2
Fluctuations in the global economy could materially and adversely affect
the economy of the PRC.
The economy of the PRC is vulnerable to market downturns and to economic
slowdowns elsewhere in the world. As has happened in the past, financial
problems or an increase in the perceived risks associated with investing in the
PRC or in emerging economies in general could dampen foreign investment in
the PRC and businesses could face severe liquidity constraints, further
materially adversely affecting these economies. As a result, disruptions in the
development of the global economy could have material and adverse effects on
the business, financial condition and results of operations of SNOWBIRD.
3.2.3
Changes in the PRC’s political and economic policies could have a
material and adverse effect on the business operations of SNOWBIRD.
The PRC economy differs from the economies of most developed countries in
many respects, including structure, level of government involvement, level of
development, growth rate, control of foreign exchange and allocation of
resources.
The PRC economy has been transitioning from a planned economy to a more
market oriented economy. The PRC government has implemented economic
reform measures emphasizing utilization of market forces in the development of
the PRC economy for the past three decades, and is continuing to play a
significant role in regulating industries by imposing industrial policies.
While the Chinese economy has grown significantly in the past 30 years, the
growth has been uneven geographically among various sectors of the economy,
and during different periods. There can be no assurance that the Chinese
economy will continue to grow, or that if there is growth, such growth will be
steady and uniform, or that if there is a slowdown, such slowdown will not have
a negative effect on SNOWBIRD's business.
Taiwan is one of SNOWBIRD’s important markets. The economic relationship
between the PRC and Taiwan has been improved significantly in the past 10
years. There can be no assurance that the economic relationship will continue
to improve, or that if there is improvement, such improvement will be steady and
Page 56
uniform, or that if there is deterioration, such deterioration will not have a
negative effect on SNOWBIRD’s business.
Although the Company believes that the continuing economic reforms will have
a positive effect on the PRC’s overall and long-term development, the Company
cannot exclude any changes in the political, economic and social conditions in
the PRC which will have a material and adverse effect on its current or future
business, results of operations or financial condition.
3.2.4
PRC legislation on offshore special purpose vehicles (“SPV”) which are
formed by PRC legal entities and/or individuals for the purpose of indirect
listings and that control PRC companies directly or indirectly may have a
material and adverse effect on SNOWBIRD’s business.
On 8 August 2006, six PRC regulatory agencies, including the Ministry of
Commerce (“MOFCOM”) and the China Securities Regulatory Commission
(“CSRC”), promulgated the Provisions for the Mergers and Acquisitions of
Domestic Enterprises by Foreign Investors (“M&A Provisions”) which came
into effect on 8 September 2006 and were further amended by MOFCOM on 22
June 2009. The M&A Provisions provide, among others, that an offshore SPV
which is formed by PRC legal entities and/or individuals for listings and that
directly or indirectly controls PRC companies through merger and acquisition of
domestic companies must obtain the approval of CSRC prior to the listing and
trading of its shares on an overseas stock exchange. On 21 September 2006,
CSRC published on its official website a notice specifying the documents and
materials required to be submitted to it by SPVs seeking CSRC approval of an
overseas listing, the violation of which may lead to regulatory actions or other
sanctions from CSRC or other Chinese regulatory agencies. In addition to the
provisions relating to foreign indirect listings, the M&A Provisions also stipulate
that a domestic natural person or legal person must obtain approval from
MOFCOM before acquiring an affiliated domestic company via a foreign
company established or controlled by such domestic natural or legal person.
This requirement may not be circumvented by using a foreign-invested
enterprise as an acquisition vehicle or otherwise.
Various transactions were concluded during the corporate restructuring of
SNOWBIRD prior to listing of the Company. The structure adopted by
SNOWBIRD, is commonly used by some Chinese entities undergoing an
overseas listing and has not yet been challenged by the Chinese authorities.
The Company believes that the M&A Provisions do not apply to the
incorporation and restructuring procedures of the PRC entities and to the listing
of the shares of the Company because, among others, since its establishment
Puyang Snowbird Trading Co., Ltd. (“Snowbird WFOE”) had been held by a
Hong Kong corporate which is actually controlled and held by Mr. CHOI Siu
Hung, who is a Hong Kong citizen.
The Company believes further that the M&A Provisions do not apply to the
transfer of the shares of Snowbird HK to the Company, because the M&A
Provisions only apply to merger and acquisition of domestic companies
(meaning share swaps involving shares in PRC domestic entities and not
extending to share swaps involving foreign entities as in the case on hand, i.e.
shares in Snowbird HK being swapped against shares in the Company).
However, there has been no official interpretation or clarification of the M&A
Provisions since their adoption. There is uncertainty as to how these provisions
will be interpreted or implemented. There can be no assurance that CSRC
and/or MOFCOM will agree with these views, and recent corporate
restructuring, including but not limited to the transfer of the shares of Snowbird
HK to the Company, or in connection with the listing of the Company's shares.
If the M&A Provisions are applicable, it cannot be ruled out that CSRC and/or
MOFCOM will ultimately refuse to grant an approval. If an approval is required
and as long as such approval has not been granted, SNOWBIRD may face
Page 57
sanctions by the PRC regulatory agencies for failure to seek the approval for
this offering. These sanctions may include fines and penalties on SNOWBIRD’s
operations in the PRC, limitations on its operating privileges in the PRC, delays
or restrictions on the repatriation of the proceeds from this offering into the
PRC, restrictions on or prohibition of the payments or remittance of dividends by
Snowbird’s PRC subsidiaries, or other actions that could have a material
adverse effect on SNOWBIRD’s business, financial condition, results of
operations, reputation and prospects, as well as the trading price of the
Company’s shares.
The PRC regulatory agencies may also take actions requiring SNOWBIRD, or
making it advisable, to halt this offering before the settlement and delivery of the
shares that the Company is offering. Consequently, if investors engage in
market trading or other activities in anticipation of and prior to the settlement
and delivery of the shares the Company is offering, they would be doing so at
the risk that the settlement and delivery may not occur.
The application of the M&A Provisions could have a material and adverse effect
on SNOWBIRD’s business and its net assets, financial condition and results of
operations.
3.2.5
Regulations by the State Administration of Foreign Exchange relating to
offshore investments by PRC residents or passport holders, may
materially and adversely affect SNOWBIRD’s business operations and
financing alternatives.
SNOWBIRD is subject to the PRC rules and regulations on currency
conversion. In the PRC, the State Administration of Foreign Exchange (“SAFE”)
regulates the conversion of RMB into foreign currencies. Currently, foreign
invested enterprises (“FIE”) are required to apply to SAFE or its local
counterpart for “Foreign Exchange Registration Certificates for FIEs” and
SNOWBIRD has obtained such registration certificates. With such registration
certificates (which need to be examined annually), FIEs are allowed to open
foreign currency accounts including the “recurring items account” and “capital
items account”. Currently, conversion within the scope of the “recurring items
account” (e.g. remittance of foreign currencies for payment of dividends, etc.)
can be effected without requiring the approval of SAFE. However, conversion of
currency in the “capital items account” (e.g. for capital items such as direct
investments, loans, securities, etc.) still requires the approval of SAFE.
The applicable law in respect of conversion of RMB into other currencies is the
Regulation for Foreign Exchange Controls of the PRC (“Regulation”) which
came into effect on 1 April 1996 and was amended as of 14 January 1997 and
1 August 2008. Under the Regulation conversion of RMB into foreign currencies
for the use of recurring items, including the distribution of dividends and profits
to foreign investors of FIEs is permissible and the approval of SAFE is not
required, and FIEs are permitted to remit foreign currencies from their foreign
currency bank accounts in the PRC upon presentation of relevant resolutions to
the banks which authorize the distribution of profits or dividends and subject to
other requirements being satisfied. However, conversion of RMB into foreign
currencies for capital items, such as repatriation of capital, repayment of loans
and for securities investment, is still under control and needs the approval of
SAFE.
In addition, the Notice on Issues concerning Foreign Exchange Management in
Financing and investment by PRC Residents by Overseas Special Purpose
Vehicle (“SPV”) and Roundtrip Investments (“SAFE Notice 37”) promulgated by
SAFE which came into force on 4 July 2014 would also apply to the repatriation
of revenues by Snowbird Henan to the Company through Snowbird WFOE and
Snowbird HK in the form of dividend income or otherwise. Pursuant to SAFE
Notice 37, SPVs are foreign companies that are established by or controlled by
PRC residents for raising financing or investment outside of PRC. Such PRC
residents (“Relevant PRC Residents”) are required to file an “overseas
Page 58
investment foreign exchange registration” before making capital contribution to
such SPV and subsequently, to update such registration on the occurrence of
specified events such as (i) the change on the basic information such as
individual shareholders, name, business term, etc. of the PRC entity; (ii)
material event such as capital increase, capital decrease, share transfer or
swap, merger, division, etc.. Subject to completion of the aforesaid registration,
payment of dividends, profits and other payments to such SPV will be permitted.
SNOWBIRD has requested its current shareholders and beneficial owners to
disclose whether they or their shareholders or beneficial owners fall within the
scope of SAFE Notice 37 and its relevant guidance. Mr. YAN Changzai and any
other PRC passport holders as shareholders of the Company are deemed to be
Relevant PRC Residents under Notice 37. They are therefore required to obtain
the aforesaid registration with the local SAFE with regard to their ownership of
the Company, as well as changes in their ownership of the Company in
connection with the restructuring exercise for the Listing in compliance with the
requirements of Notice 37.
Mr. YAN Changzai has completed the relevant registration procedures required
under Notice 37 with the Henan Province Branch of SAFE. Mr. YAN Zhaorui
and Mr. LIU Deling are currently in the process of the relevant registration
procedures.
SNOWBIRD may not at all times be fully aware or informed of the identities of
all shareholders or beneficial owners who are PRC residents, and SNOWBIRD
may not always be able to compel shareholders or beneficial owners to comply
with SAFE Notice 37. Also, the relevant authorities may take a different view as
to whether or not the current shareholders or beneficial owners shall register
under SAFE Notice 37. As a result, SNOWBIRD cannot assure that all
shareholders or beneficial owners who are PRC residents will at all times
comply with Notice 37 and the related rules.
However, there can be no assurance that SAFE will not continue to issue new
rules and regulations and/or further interpretations of SAFE Notice 37 that will
further tighten the foreign exchange control. If new rules are promulgated, there
is no assurance that SNOWBIRD will be able to make or obtain any applicable
registrations or approvals required by such rules. As Snowbird Henan
generates almost all of SNOWBIRD’s sales and these sales are denominated
mainly in RMB, the ability of Snowbird Henan to pay dividends or make other
distributions to the Company may be restricted by PRC foreign exchange
control restrictions in the future. There can be no assurance that the relevant
regulations will not be amended to the detriment and that the ability of Snowbird
Henan to distribute dividends to shareholders will not be adversely affected.
3.2.6
PRC regulations pertaining to loans and direct capital investments by
offshore parent companies to PRC entities may delay or prevent
SNOWBIRD from using the proceeds of this Offering.
In utilizing the proceeds of this Offering to finance SNOWBIRD’s business, the
Company, as a holding company, may make loans or additional capital
contributions through Snowbird HK and Snowbird WFOE to Snowbird Henan.
Any loan by an offshore parent company to a PRC subsidiary is subject to
approval and/or registration requirements and must be within the margin
between each of their total investment amount and registered capital. Further,
loans to any of its PRC subsidiaries have to be registered with SAFE or its local
counterpart. In addition, if the Company finances Snowbird Henan through
additional capital contributions, the amount of these capital contributions must
first be approved by the competent government authority. There can be no
assurance that SNOWBIRD will be able to obtain these government
registrations or approvals on a timely basis, if at all, with respect to future loans
or capital contributions by the Company to Snowbird Henan. If SNOWBIRD fails
to obtain such registrations or approvals, the ability to use the proceeds of this
Offering and its ability to fund and expand the operational business in China
Page 59
could be adversely affected, which could have material adverse effects on the
business, financial condition and results of operations of SNOWBIRD.
On 29 August 2008, SAFE promulgated Circular 142, a notice regulating the
conversion by a foreign invested company of foreign currency into Renminbi by
restricting how the converted Renminbi may be used. Circular 142 prohibits the
use of Renminbi converted from foreign capital to purchase equity interests in
Chinese companies or to establish Chinese companies, unless the equity
investment is within the approved business scope of a foreign-invested
enterprise (“FIE”) and has been approved by SAFE, or has been otherwise
provided for.
In addition, SAFE increased its oversight of the flow and use of the registered
capital of a foreign-invested company settled in Renminbi converted from
foreign currencies. The use of such Renminbi capital may not be changed
without SAFE's approval, and may not in any case be used to repay Renminbi
loans if the proceeds of such loans have not been used for the approved
purpose. Violations of Circular 142 will result in severe penalties, such as
significant fines.
If SNOWBIRD fails to receive the necessary registrations or approvals, the
ability to use the proceeds of this Offering and its ability to fund and expand the
operating business in China could be adversely affected, which could have
material and adverse effects on SNOWBIRD’s business and its net assets,
3.2.7
The PRC legal
inconsistencies.
system
contains
inherent
uncertainties
and
The PRC’s legal system is based on written statutes. Prior legal decisions and
judgments have limited precedential value. The PRC is still in the process of
developing a comprehensive statutory framework and its legal system is still
considered to be underdeveloped in comparison with the legal systems in some
western countries. Since 1979, the PRC legislative bodies have promulgated
laws and regulations dealing with such economic matters as foreign investment,
corporate organization and governance, commerce, taxation and trade. Since
then, there has been a tendency in legislation towards giving increasing
protection to foreign investors and significant progress has been made in the
legal system of the PRC.
Despite significant improvement in its developing legal system, however, the
PRC does not have a comprehensive system of laws. The enforcement of
existing laws and regulations may be uncertain or inconsistent, and the
interpretation of these laws and regulations may change from time to time. Any
such change could have an adverse impact on SNOWBIRD’s business and its
net assets, financial condition and results of operations.
Furthermore, many laws, regulations and legal requirements have only recently
been adopted by the central or local governments, and their implementation,
interpretation and enforcement may involve uncertainty due to the lack of
established practice available for reference. Depending on the government
agency or how an application or a case is presented to such agency,
SNOWBIRD may receive less favorable interpretations of law than its
competitors. In addition, any litigation in the PRC may be protracted and result
in substantial legal costs and diversion of resources and management attention.
Similarly, legal uncertainty in the PRC may limit the legal protection available to
potential litigants. The occurrence of one or several of these risks could have
material and adverse effects on SNOWBIRD’s business and its net assets,
Page 60
3.2.8
The tax status of SNOWBIRD or tax legislation or its interpretation might
change.
The current tax rules and their interpretation relating to SNOWBIRD may be
subject to adverse changes in the future. The applicable tax rates may change
in the future. Any change in the SNOWBIRD’s tax status or in taxation
legislation or its interpretation could affect the value of the investments held by
the Company, its ability to provide returns to shareholders and/or alter the posttax returns to shareholders. Statements in this Prospectus concerning the
taxation of SNOWBIRD and the Company’s investors are based on current tax
laws and practices which are subject to change. In addition, the taxation regime
applicable in China may change again and could have an adverse impact on
the after-tax profits of SNOWBIRD.
As almost all operational profits are generated by Snowbird Henan, which is
subject to the tax legislation of the PRC, the materialization of the above risks
could have a material and adverse effect on SNOWBIRD’s business and its net
assets, financial condition and results of operations.
3.2.9
The Company and Snow Bird (Hong Kong) Holding Company Limited
(“SNOWBIRD HK”) may be treated as tax resident enterprises for PRC tax
purposes under the PRC enterprise income tax laws and therefore be
subject to PRC taxation.
The Enterprise Income (“EIT”) Law introduced the concept of tax resident
enterprise (“TRE”) defined as an enterprise which is established in the PRC
under the PRC laws and regulations, or which has its de facto management
body in the PRC. TREs are subject to the PRC enterprise income tax for their
worldwide income, including income received from their subsidiaries. According
to Article 4 of the Implementing Rules of the EIT Law (the “Implementing
Rules”), “de facto management body” refers to the management body that
exercises essential management and control over the enterprise. As a result, if
a holding company located outside the PRC is actually managed by a
management body in China, the overseas company may be regarded as a TRE
and subject to enterprise income tax for its worldwide income. According to the
interpretation of Article 4 of the Implementing Rules given by the Chinese State
Administration of Taxation (“SAT”) on its website, the location of the de facto
management body shall be determined by a substance-over-form method. In
particular, mere off-shore board meetings shall not be sufficient for the de facto
management body being located outside of China. Dividends received by one
TRE from another TRE (not listed in the Chinese stock market or in case of
being listed whose stocks are held for continuous 12 months by the former) are
exempted from enterprise income tax.
Most of SNOWBIRD’s management is currently located in China and
SNOWBIRD expects its management to continue to be located in China.
However, due to a lack of clear guidance on the criteria pursuant to which the
PRC tax authorities will determine SNOWBIRD’s tax residency under the EIT
Law, it remains unclear whether the PRC tax authorities will treat the Company
and Snowbird HK as PRC tax resident enterprises.
Currently, neither the Company nor Snowbird HK have been notified by the
PRC tax authorities that they are to be treated as a PRC tax resident enterprise.
However, if the Company and Snowbird HK are deemed to be PRC tax resident
enterprises, the following PRC tax implications will apply:

The Company and Snowbird HK might both be subject to an enterprise
income tax at the rate of 25 % on their worldwide income, which could
have an impact on SNOWBIRD’s effective tax rate and an adverse
effect on SNOWBIRD’s net income and result of operations. However,
the EIT Law provides that dividend income between qualified tax
resident enterprises is exempted income, which the Implementing
Rules have clarified to mean a dividend derived by a tax resident
enterprise on equity interest it directly owns in another resident
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enterprise. It is possible, therefore, that dividends the Company
receives through Snowbird HK and Snowbird WFOE from Snowbird
Henan would be exempted income under the EIT Law and its
Implementation Rules.

If the Company is deemed to be a PRC tax resident enterprise, the
Company would then be obliged under the EIT Law to withhold PRC
withholding tax on the gross amount of dividends the Company pays to
shareholders who are non-PRC tax residents. The withholding tax rate
is 10% for enterprise investors and 20% for individual investors, unless
otherwise provided under the applicable double taxation treaties
between China and other countries. Under the double taxation treaty
between China and Germany, the withholding tax rate of 10% for
enterprise investors and individual investors on dividends applies.
Under the EIT Law, such withholding tax on dividends is to be deducted
by the tax resident enterprise from the gross dividends and paid to the
competent PRC tax authorities on behalf of the non-PRC tax resident
shareholders. As the Company has issued bearer shares, and no
practical guidance has been issued by the SAT about the treatment of
dividends paid by foreign entities considered TREs, the Company may
not be able to ascertain whether or not its shareholders are non-PRC
tax residents, and may not be able to fully comply with the withholding
requirement in case it is considered a TRE, which subjects it to
additional uncertainty.

Further, if the Company is deemed to be a PRC tax resident enterprise,
any gains realized on the transfer of shares in the Company by nonPRC resident investors will also be subject to a 10% (if the investor is a
company) or 20% (if the investors is a natural person) PRC withholding
tax, under the EIT Law or PRC Individual Income Tax Law, if such
gains are then regarded as income derived from sources within China,
unless the applicable double taxation treaty provides otherwise. In case
the 10% or 20% PRC withholding tax respectively is payable for the
gains, under PRC tax law, the non-PRC resident investors are obliged
to declare such tax by themselves with the competent PRC tax
authorities.
If any of the aforementioned risks materializes, the value of an investment in the
shares of the Company may be materially adversely affected and the non-PRC
resident investors may be subject to tax compliance obligations, including tax
filings and charges, in the PRC.
3.2.10
Greater scrutiny over acquisition and disposition transactions by the PRC
tax authorities may have a negative impact on SNOWBIRD or the
investors’ disposition of the Company’s shares.
The operations and transactions of SNOWBIRD are subject to review by the
PRC tax authorities pursuant to relevant PRC laws, rules and regulations.
However, these laws, regulations and legal requirements change frequently,
and their interpretation and enforcement involve uncertainties. For example, on
10 December 2009, the SAT issued the Notice Concerning the Strengthening of
Enterprise Income Tax Administration with Respect to Equity Transfers by Nonresident Enterprises, or Circular No. 698, which became effective retroactively
as of 1 January 2008. Under Circular No. 698, where a non-PRC resident
enterprise transfers the equity interests of a PRC resident enterprise indirectly
by disposition of the equity interests of an overseas holding company (excluding
buying and selling shares of a PRC resident enterprise on a public stock
exchange), or Indirect Transfer, and such overseas holding company is located
in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does
not tax foreign income of its residents, the non-resident enterprise, being the
transferor, shall report this Indirect Transfer to the competent tax authorities for
the PRC resident enterprise. Using a “substance over form” principle, the PRC
tax regulatory authorities may disregard the existence of the overseas holding
Page 62
company if it lacks a reasonable commercial purpose and was established for
the purpose of reducing, avoiding or deferring any PRC tax. As a result, gains
derived from such Indirect Transfer may be subject to the PRC withholding tax
at a rate of up to 10%. In addition, Circular No. 698 provides that, where a nonPRC resident enterprise transfers its equity interests in a PRC resident
enterprise to its related parties at a price lower than the fair market value, the
relevant PRC tax authorities can, at their discretion, make a reasonable
adjustment to the taxable income of the transaction.
There is uncertainty as to the application of Circular No. 698. For example,
while the term “Indirect Transfer” is not clearly defined, it is understood that the
relevant PRC tax authorities have jurisdiction regarding requests for information
over a wide range of foreign entities having no direct contact with the PRC. It is
not clear to what extent the shareholders of the Company may be subject to
these requirements. Moreover, although several issues related to Circular 698
were clarified through the Notice Regarding Several Issues on the
Administration of Non-resident Enterprise Income Tax dated 28 March 2011 by
the SAT, or Circular 24, which became effective on 1 April 2011, there is little
guidance or precedent regarding the application of Circular 24, and the process
and format for reporting the Indirect Transfer to the competent PRC tax
authorities remain unclear. SNOWBIRD has conducted offshore acquisitions
and dispositions involving complex corporate structures, and it may not be able
to make timely filings with the PRC tax authorities as required. The PRC tax
authorities may, at their discretion, impose or adjust the capital gains of those
acquisitions and dispositions or request SNOWBIRD to submit additional
documentation for their review in connection with any relevant acquisition or
disposition, and thus cause SNOWBIRD to incur additional costs. Besides, the
investors that are non-PRC resident enterprises may be required by the PRC
tax authorities to make a filing upon the transfer of the shares of the Company,
and may be required to pay PRC tax on gains realized from such transfer at a
rate of 10% even if the Company is not treated as a PRC “resident enterprise”.
3.2.11
PRC accounting requirements may materially and adversely affect the
ability to pay dividends.
The ability of Snowbird PRC to make dividends and other payments to the
Company is restricted by PRC laws and regulations, which permit payment of
dividends only out of accumulated profits, after making up prior year losses and
allocations to various non-distributable reserve funds, as determined in
accordance with generally accepted accounting principles in the PRC (the
‘‘PRC GAAP’’) and applicable regulations, such as statutory capital reserve.
These regulations may restrict the amount of profit available for distribution from
Snowbird PRC, which could affect the Company’s liquidity and its ability to pay
dividends. Moreover, the determination of profit available for distribution under
PRC GAAP may differ from profit determined in accordance with IFRS. As a
result, it is possible that the Company might not receive distributions from
Snowbird PRC through Snowbird HK, even if its IFRS financial statements
indicate that its operations have been profitable.
3.2.12
A destabilization of the political system could threaten China's economic
liberalization.
While the PRC economy has changed fundamentally from a centrally planned
system to a more market-oriented economy over the last three decades, the
political system in China still operates under communist control. Although
political conditions in China seem to be generally stable, changes may occur in
its political system which might affect the ownership or operation of
SNOWBIRD's interests, including, among others, changes in government as
well as in legislative and regulatory regimes.
A material change in China's economic liberalization triggered by political
disruptions or by other means could impact the country's economic growth in
general and SNOWBIRD's business in particular. Social instability could
Page 63
increase public support for renewed centralized authority, and nationalism or
violence could lead to a tougher stance by the Chinese government on foreign
investors operating in China or on foreign investment in general. Any such
developments could have material and adverse effects on SNOWBIRD’s
business and its net assets, financial condition and results of operations.
3.2.13
The PRC judiciary's lack of independence and limited experience and the
difficulty of enforcing court decisions and governmental discretion in
enforcing court orders could prevent SNOWBIRD from obtaining effective
remedies in a court proceeding.
PRC's judicial system may not be as independent or immune to economic,
political and nationalistic influences as judicial systems in European
jurisdictions. The court system in China is largely understaffed and underfunded. Since courts in the PRC are financially dependent on the respective
local governments, judges tend to favor the economic interests of the
municipalities or provinces and the enterprises located there. The
independence of judges is further undermined by the fact that Chinese judges
are only appointed for a limited period of time and may be dismissed during
their term of office. Many older judges have not had any prior legal education.
Courts in China are often inexperienced in the area of business law. Not all
PRC legislation and court decisions are readily available to the public or
organized in a manner that facilitates understanding. Enforcement of court
orders can, in practice, be very difficult in the PRC. Additionally, court decisions
are often used in furtherance of political and commercial aims. SNOWBIRD
might be subjected to such claims by competitors or other parties and may not
be able to receive a fair hearing in the course of the respective trial or legal
procedure. Judicial decisions in China can also be unpredictable and may not
provide effective remedies. These uncertainties also extend to property rights.
Expropriation or nationalization of any of the Company's PRC subsidiaries, their
assets or portions thereof, potentially without adequate compensation, could
have material and adverse effects on Group’s business and its net assets,
3.2.14
Seeking recognition and enforcement in China of foreign judgments
against the Company, its assets, management personnel or directors
might be difficult or impossible for investors.
The main operational assets of the Group are with Snowbird Henan located in
China and most of its management personnel and directors reside there. The
Company is a holding company without any significant operational business of
its own. China has not entered into treaties or arrangements providing for the
recognition and enforcement of judgments made by the courts of Germany or
most other jurisdictions, including judgments obtained in relation to claims
investors may make with regard to this Offering. As a result, it will be difficult or
impossible for investors to affect service of process or enforce judgments from
courts of other jurisdictions against the Company or its assets, management
personnel or directors in China.
3.2.15
Certain facts, forecasts and other statistics with respect to China, China’s
economy and the textile industry in this Prospectus are derived from
official government publications and may not be reliable.
Certain facts, forecasts and other statistics in this Prospectus relating to the
PRC, PRC’s economy and the textile industry have been derived from official
government publications generally believed to be reliable. However, the quality
or reliability of such source materials is uncertain. They have not been prepared
or independently verified and, therefore, no representation as to the accuracy or
completeness of such facts, forecasts and statistics, which may not be
consistent with other information, compiled within or outside the PRC is made.
Due to possibly flawed or ineffective collection methods or discrepancies
between published information and market practice and other problems, such
Page 64
statistics may be inaccurate or may not be comparable to statistics produced for
other economies and should not be unduly relied upon. Further, there is no
assurance that they are stated or compiled on the same basis or with the same
degree of accuracy or completeness as may be the case elsewhere.
In all cases, investors should give consideration as to how much weight or
importance they should attach to or place on such facts, forecasts or statistics
derived from the official government publications and should not place undue
reliance on any of such information and statistics.
3.2.16
Restrictions might be imposed upon foreign control of PRC companies.
As part of PRC’s accession to the World Trade Organization (“WTO”) in 2001,
the PRC undertook to eliminate certain trade-related investment measures and
to open up specified industry sectors that had previously been closed to foreign
investment. Even though the PRC has lived up to most of its WTO
commitments, foreign investors still encounter barriers in practice as some of
the newly enacted or modified laws and regulations are enforced in an
inconsistent manner by different authorities. Additionally, there can be no
assurance that the PRC government will not toughen its stance on foreign
investors in other areas not covered by the WTO commitments. MOFCOM and
the National Development and Reform Commission (the “NDRC”) have issued
the Foreign Investment Industry Guidance Catalogue that divides certain
investment projects into three categories: encouraged, restricted and prohibited,
with industries and sectors that are not mentioned or listed deemed to be
permitted. The Foreign Investment Industry Guidance Catalogue is regularly
revised. It has last been amended in December 2011 and became effective on
30 January 2012. Should the textile industry in particular be subjected to
restrictions or prohibitions in the course of this revision or any further revision,
this could have material adverse effects on the business, financial condition and
results of operations of SNOWBIRD.
3.3
Risks Related to the Offering
3.3.1
Public trading in the Company’s shares might not develop. There is no
prior market for its shares and this Offering may not result in an active or
liquid market for its shares.
Prior to the Offering, there was no public trading in the Company’s shares. As a
result, no assurance can be given that liquid trading in the shares of the
Company will develop after the Offering and that the stock exchange price will
not fall below the final selling price for the Offered Shares (the “Offer Price”).
The Offer Price for the shares will be determined by way of a book-building
procedure and will not necessarily provide any indication of the stock exchange
price at which the shares will subsequently be traded at the Frankfurt Stock
Exchange. The Company cannot forecast to what extent investors’ interest in its
shares will foster trading, nor whether a liquid trading market will develop, in
particular if the number of shares allotted to investors in the course of the
Offering will be substantially less than envisaged. The stock exchange price of
the Company’s shares could become subject to greater volatility and
consequently buy and sell orders might be executed less efficiently. Under
certain circumstances, investors might not be able to sell their shares at the
purchase price fixed for the Offering or at a higher stock exchange price, or
might not be able to sell them at all.
3.3.2
A devaluation of the RMB could have an adverse currency translation
effect on the Company’s financial statements.
The financial statements contained in this Prospectus were prepared in EUR
and the Company’s future consolidated financial statements will be prepared in
EUR, while SNOWBIRD's operating currency is RMB, which is currently not a
freely convertible currency.
Page 65
The value of RMB is controlled by PRC authorities. During the years 2011, 2012
and 2013, the RMB fluctuated against the EUR. Devaluations of the RMB
against the EUR would have an adverse currency translation effect on the
Company's consolidated financial statements and the value of the potential
dividend payments by the Company to its shareholders.
Furthermore, SNOWBIRD's proceeds from this Offering may decrease in value
if the Company chooses not to or is unable to convert the proceeds into RMB
and the EUR devalues against the RMB during such period.
3.3.3
A volatile stock exchange price for the shares might develop and
investors could lose all or part of their investment.
After this Offering, the stock exchange price of the Company’s shares could
fluctuate considerably, especially because of fluctuating actual or forecasted
results, revised earnings outlooks, the failure to meet analysts’ expectations,
changed economic conditions in general, limited liquidity in the shares or other
factors. The general volatility of stock exchange prices could also exert
pressure on the stock exchange price of the Company’s shares without there
being any direct connection with SNOWBIRD’s business, financial condition,
results of operations or its business prospects. Because the shares are growth
stocks, the Company’s shares are particularly susceptible to fluctuations.
3.3.4
Future sales or issuances of a substantial number of the Company’s
shares may depress the market price of the Company’s shares. Future
capitalization measures could lead to substantial dilution of existing
shareholders’ interests in the Company.
Sales of substantial amounts of the Company’s shares in the public market
following this Offering or the perception that these sales could occur, could
cause the market value of its shares to decline. These sales could also make it
more difficult for the Company to sell equity or equity-related securities in the
future at a time and price that it considers appropriate. In addition, the
Company’s issuance of additional equity securities or securities with rights to
convert into equity could potentially reduce the market price of its shares and
would dilute the economic and voting rights of existing shareholders if made
without granting subscription rights to these shareholders.
As at the date of this Prospectus, Mr. YAN Changzai and Mr. CHOI Siu Hung
(through his investement vehicle BIG BUSINESS GLOBAL HOLDINGS
LIMITED) as the major shareholders hold 30.5% respectively 36.5% stake in
the Company. All of these shares are bound by lock-up agreements with the
Underwriter for a period of 36 months after admission of the Company’s shares
to trading in the regulated market segment of the Frankfurt Stock Exchange.
Also, YIELD TRADE LIMITED, ZHEN SHENG LIMITED, United Talent
Investments Limited and Midasi Investment Limited with their minority
shareholdings are bound by lock-up agreements of 12 months. However, the
shares of the other existing minority shareholders are not locked. Also, it cannot
be excluded that the existing shareholders with a contractual lock-up sell their
shares in the Company during the lock-up period despite the contractual
arrangements. Furthermore, it cannot be predicted whether substantial numbers
of the Company’s shares will be sold by the shareholders following the expiry of
the respective lock-up periods.
A sale of a substantial number of these shares or the perception that these
sales could occur could cause the market value of the Company’s shares to
decline.
3.3.5
The Offering may not take place if the Underwriting Agreement is
terminated.
The underwriting agreement, which will be concluded, inter alia, between the
Company, Mr. YAN Changzai, Alrai S.à.r.l., BIG BUSINESS GLOBAL
HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung and the
Page 66
Underwriter shortly after the date of this Prospectus (the “Underwriting
Agreement”), provides that the Underwriter may, under certain conditions,
terminate the Underwriting Agreement. If the Underwriting Agreement is
terminated, the Offering will not take place. Claims relating to any securities
commissions already paid and costs incurred by any investor in connection with
the subscription shall be controlled solely by the legal relationship between the
investor and the institution to which the investor submitted its order. Any
allotments already made to investors will be invalidated. In such cases,
investors will have no claim for delivery of shares in the Company. Any
investors who have engaged in so-called “short sales” will bear the risk of being
unable to cover such short sales through the delivery of shares.
3.3.6
Forward-looking information contained in this Prospectus may prove
inaccurate.
This Prospectus contains certain statements that are ‘‘forward-looking’’. These
statements include, among other things, future earnings, projections and
expectations as to the operations and management of SNOWBIRD, growth,
profits, economic and regulatory conditions and other factors to which
SNOWBIRD is exposed. Investors are cautioned that reliance on any forward
looking statement involves risk and uncertainties and that any or all of those
assumptions could prove to be inaccurate and as a result, the forward-looking
statements based on those assumptions could also be incorrect. The
uncertainties in this regard include those identified in the risk factors discussed
above. In the light of these and other uncertainties, the inclusion of forwardlooking statements in this Prospectus should not be regarded as
representations or warranties by the Company that its plans and objectives will
be achieved and these forward-looking statements should be considered in the
light of various important factors, including those set forth in this section. These
forward-looking statements will not be up-dated. Investors should not place
undue reliance on such forward looking information.
3.3.7
Information in press articles or other media regarding SNOWBIRD or the
Offering could turn out to be incorrect and therefore it cannot be excluded
that investors base their investment decision on incorrect information.
Prior to the date of this Prospectus, there might have been press and media
coverage regarding SNOWBIRD or the Offering which included certain
information about SNOWBIRD that does not appear in this Prospectus. The
Company has not authorized the disclosure of any such information in the press
or media and does not accept any responsibility for any such press or media
coverage or the accuracy or completeness of any such information. The
Company makes no representation as to the appropriateness, accuracy,
completeness or reliability of any such information or publication. The Company
disclaims all responsibilities and liabilities for any information appearing in
publications other than this Prospectus which is inconsistent or conflicts with the
information in this Prospectus. Investors should not rely on any such information
and should only rely on information included in this Prospectus in making any
decision as to whether to purchase the shares in the Company in the Offering.
The information in the press and media could be incorrect and therefore it
cannot be excluded that investors base their investment decision on incorrect
information.
3.3.8
The market price of the Company’s shares could fall below the Offer Price
at a later stage.
The Offer Price to be paid by an investor who purchased shares of the
Company in the Offering exceeds the pro rata book value of the equity capital
which is attributed to such share.
Therefore, the Offer Price implicates a high company value. There is no
guarantee that such a company value can be realized in future. Accordingly,
investors will purchase the Company's shares by way of this Offering pay an
Page 67
Offer Price which exceeds the value of the Company's tangible assets after
deduction of liabilities.
Should the investors' expectations concerning the company value not be
realizable, the investors could suffer losses due to a decrease in the share price
after the Offering.
3.3.9
The Offering may not be implemented in full which may negatively affect
the growth prospects of SNOWBIRD and/or the liquidity of the shares in
the market.
The Offering relates to 11,500,000 no par value ordinary bearer shares
consisting of 10,000,000 New Shares and 1,500,000 Overallotment Shares
(together „Offered Shares“). Thus, in case, all of the Offered Shares are
allotted to investors and the Greenshoe Option will be fully exercised, the
Company’s new free float will amount to approximately 27.71% of its total share
capital. However, the actual number of Offered Shares that will be allotted to
investors, i. e. the placement volume and in consequence the amount of the
capital increase to be resolved after the end of the Offering Period, will be jointly
determined by the Company and the Lead Manager based on the orders
received using the order book prepared during the bookbuilding process, and
will also depend on the Offer Price and certain allotment criteria. There is no
guarantee that all of the Offered Shares will eventually be placed with investors.
If the amount of Offered Shares placed with investors is significantly lower,
resulting in lower net proceeds than envisaged, the Company may not be able
to fund certain of the investments for which it intends to use the proceeds from
this Offering in full or at all which may affect the Company‘s growth strategy. In
addition, if the overall placement volume is significantly lower than the number
of Offered Shares which form the subject matter of the Offering, the free float
will be significantly lower than the percentage stated above, which may have a
material adverse effect on the tradability of the shares and on the shareholder
structure of the Company. The materialization of any of the above risks could
have a material adverse effect on the value of the shares of the Company.
3.3.10
The Listing may not take place if the listing requirements are not fulfilled.
The Company intends to list its shares on the Frankfurt Exchange. If the
Company fails to fulfill the respective listing requirements such as free float
requirements, a listing on the Frankfurt Stock Exchange will not take place. In
such case, investors who have purchased shares in the Company are not able
to trade these shares on the Frankfurt Stock Exchange.
Page 68
4.
GENERAL INFORMATION
4.1
Responsibility Statement
Snowbird
AG,
c/o
HRG
Hansische
Revisions-Gesellschaft
mbH,
Wirtschaftsprüfungsgesellschaft, Ferdinandstraße 25, 20095 Hamburg, Germany (the
“Company” and together with its direct and indirect subsidiaries “SNOWBIRD” or the
“Group”), as well as ACON Actienbank AG, Heimeranstraße 37, 80339 Munich, Germany
(the “Underwriter” or “ACON”) assume responsibility for the content of this securities
prospectus (the “Prospectus”) pursuant to section 5 subsection 4 of the German
Securities Prospectus Act (Wertpapierprospektgesetz - WpPG) and declare that to their
knowledge the information contained in this Prospectus is correct and that no material
facts are omitted.
Notwithstanding section 16 WpPG, neither the Company nor the Underwriter is required
by law to update this Prospectus.
If an investor files claims in court on the basis of the information contained in this
Prospectus, the plaintiff investor may be required by the laws of the individual member
state of the EEA to bear the costs of translating the Prospectus before the legal
proceedings may be commenced.
4.2
Subject Matter of this Prospectus
For the purposes of the public offering in Germany and Luxembourg and private
placement in certain other jurisdictions this Prospectus covers 11,500,000 ordinary bearer
shares, each such share with no par value and a notional value of EUR 1.00 each in the
share capital and full dividend rights for the financial year 2014 (the “Offering”),
consisting of

10,000,000 newly issued no par value ordinary bearer shares from a capital
increase against contribution in cash expected to be resolved by the
extraordinary general shareholders’ meeting of the Company with a fixed amount
depending on the placement volume on 24 September 2014 (the “New Shares”).
In order to be able to timely deliver the shares to investors after the Offering
Period, Mr. YAN Changzai and Alrai S.à.r.l. will provide to the Underwriter a
securities loan free of charge for an equivalent number of shares. Upon
registration of the capital increase with the commercial register of the Company,
the New Shares will be transferred back to Mr. YAN Changzai and Alrai S.à.r.l. by
the Underwriter in order to fulfil its retransfer obligation under the securities loan,
and

1,500,000 existing no par value ordinary bearer shares that originate from a
securities loan free of charge that is granted by BIG BUSINESS GLOBAL
HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung to ACON
(together with CM-Equity AG & Co. KG Financial Services, Kaufingerstraße 20,
80331 Munich, Germany, to be merged onto CM-Equity AG, Kaufingerstraße 20,
80331 Munich, Germany, the “Joint Stabilization Managers”) for a potential
overallotment and for stabilization measures (the “Overallotment Shares”,
together with the New Shares collectively referred to as the “Offered Shares”). In
order to fulfill its retransfer obligation vis-à-vis BIG BUSINESS GLOBAL
HOLDINGS LIMITED from the securities loan, the Company has granted ACON
the option to subscribe up to 1,500,000 shares resulting from a capital increase of
the Company using authorized capital against payment of the respective Offer
Price (less the agreed commission and other costs) (“Greenshoe Option”). The
capital increase using authorized capital is expected to be resolved by the
Management Board and approved by the Supervisory Board on 30 October 2014.
Upon registration of the capital increase (if any) with the commercial register of
the Company, the shares from the capital increase will be transferred to BIG
BUSINESS GLOBAL HOLDINGS LIMITED.
Page 69
For the purposes of admission to trading to the regulated market segment (Regulierter
Markt) of the Frankfurt Stock Exchange with simultaneous admission to the sub-segment
of the regulated market with additional post-admission obligations (Prime Standard) (the
“Listing”), this Prospectus covers a total of up to 41,500,000 ordinary bearer shares of
the Company, consisting of:

30,000,000 existing ordinary bearer shares (“Existing Shares”);

up to 10,000,000 New Shares; and

up to 1,500,000 newly issued ordinary bearer shares resulting from the
exercise of the Greenshoe Option (“Greenshoe Shares”),
each such share with no par value and a notional value of EUR 1.00 in the share capital
and carrying full dividend rights for the financial year 2014.
4.3
Statutory Auditors
The Company’s general shareholders’ meeting (Hauptversammlung) appointed Crowe
Kleeberg GmbH, Augustenstraße 10, 80333 Munich, Germany (“Kleeberg”) as statutory
auditor for the financial year ending on 31 December 2014. Kleeberg is a member of the
German Chamber of Public Accountants (Wirtschaftsprüferkammer).
The following financial statements contained in this Prospectus have been audited by
Kleeberg (Please also refer to Section 25 “Financial Information”) and each are
accompanied by an unqualified auditors’ report, copies of which are included in this
Prospectus:

the single entity financial statements in accordance with International
Financial Reporting Standards and International Accounting Standards
and Interpretations as endorsed for application in the EU (“IFRS”) of
Snowbird Henan as at and for the financial years ended on 31 December
2011, 31 December 2012 and 31 December 2013;

single entity financial statements in accordance with IFRS of the
Company for the financial years ended on 31 December 2012 (short
fiscal year) and 31 December 2013;

single entity financial statements in accordance with the German
Commercial Code (Handelsgesetzbuch) of the Company for the financial
year ended on 31 December 2013.
The following financial statements contained in this Prospectus are not audited, but were
subject to a review by Kleeberg (Please also refer to Section 25 “Financial Information”):

4.4
condensed interim financial statements in accordance with IFRS of
Snowbird Henan as at and for the six months period ended on 30 June
2014 (“2014H1”) with respective comparative information to 2013H1.
Documents Available for Inspection
For the duration of the validity of this Prospectus, hard copies of the following documents
may be inspected during regular business hours at the Company’s office at c/o HRG
Hansische
Revisions-Gesellschaft
mbH,
Wirtschaftsprüfungsgesellschaft,
Ferdinandstraße 25, 20095 Hamburg, Germany:

the Company’s articles of association (Satzung) and the rules of
procedure (Geschäftsordnung) for the management board and the
supervisory board;

an excerpt from the
(Handelsregisterauszug);

the audited single entity financial statements of Snowbird Henan in
accordance with IFRS as at and for the financial years ended on
31 December 2011, 31 December 2012 and 31 December 2013;
commercial
register
of
the
Company
Page 70

the audited single entity financial statements of the Company in
accordance with IFRS of the Company for the financial years ended on
31 December 2012 (short fiscal year) and on 31 December 2013;

the audited single entity financial statements of the Company in
accordance with the German Commercial Code (Handelsgesetzbuch) for
the financial year ended on 31 December 2013;

the reviewed condensed interim financial statements in accordance with
IFRS of Snowbird Henan as at and for the six months period ended
30 June 2014 with respective comparative information to HY1 2013;

Market research report “Down Industry in China”, dated February 2014,
prepared by Respect Marketing Research Inc., with its business address
at Rm. 316, Towercrest Plaza, No.3 Maizidian West Road, Chaoyang
District, Beijing, China, 100125 (“Market Research Report”).
All future annual and interim reports of the Company will be available at the Company’s
offices and on the Company’s website: www.snowbird-ag.de.
4.5
Statements Relating to Future Events, Statistical Data, Market Data and Estimates
This Prospectus contains certain forward-looking statements. A forward-looking
statement is any statement that does not relate to present or historical facts and events.
This applies in particular to statements in this Prospectus containing information on future
earning capacity, plans and expectations regarding SNOWBIRD’s business and
management, growth and profitability and general economic and regulatory conditions
and other factors to which SNOWBIRD is exposed.
Forward-looking statements in this Prospectus are based on estimates and assessments
made to the best of the Company’s present knowledge. These forward-looking
statements are subject to risks, uncertainties and other factors which could cause actual
results, including the financial condition and results of operations of SNOWBIRD, to differ
materially from and be worse than the results the Company has expressly or implicitly
assumed or described in these forward-looking statements. Statements made using
wording such as “expects”, “intends”, “plans” or “anticipates” are forward-looking
statements. The forward-looking statements are based on assumptions, uncertainties and
other factors, the occurrence or non-occurrence of which could cause SNOWBIRD’s
actual results, including the financial position and profitability of SNOWBIRD, to differ
materially from or fail to meet the expectations expressed or implied in the forwardlooking statements. In light of the uncertainties and assumptions, it is also possible that
the future events mentioned in this Prospectus might not occur. In addition, the forwardlooking estimates and forecasts included in this Prospectus from third-party reports could
prove to be inaccurate (also see Section 4.6 of this Prospectus ‘‘Note Regarding
Financial Data and Currency’’ and Section 4.7 of this Prospectus ‘‘Third Party Data’’
below). Actual results, performance or events may differ materially from those in such
statements.
SNOWBIRD’s business is also subject to a number of risks and uncertainties that could
cause a forward-looking statement, estimate or prediction in this Prospectus to become
inaccurate. Accordingly, investors are strongly advised to consider the Prospectus as a
whole and particularly ensure that they have read the following sections of this
Prospectus: ‘‘Risk Factors’’, ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’, “Business Activities of SNOWBIRD”, “Market
Environment and Competitive Situation”, “Regulatory Environment”, and “Recent
Developments and Outlook”. These sections contain a detailed description of the factors
having an impact on the development or the current situation of SNOWBIRDs business
and the market in which SNOWBIRD operates.
Neither the Company, its management board (Vorstand), its supervisory board
(Aufsichtsrat) nor the Underwriter can guarantee that expectations represented in this
Prospectus will prove accurate or that the developments predicted will actually occur. It
should also be noted that neither the Company nor the Underwriter assume any
obligation to update such statements relating to future events or to adapt them to future
Page 71
events or developments, except as required by law (esp. the duty to publish supplements
pursuant to section 16 subsection 1 WpPG).
4.6
Note Regarding Financial Data and Currency
Some figures cited in this Prospectus (including percentages) have been subjected to
commercial rounding. Such commercially rounded figures and the associated
percentages cited in the tables may not necessarily add up precisely to the totals given in
the tables. However, the percentages used in the text were computed based not on
commercially rounded values, but on actual values. Therefore, the percentages in the text
may differ in some cases from percentages calculated based on rounded values. All
currency data in this Prospectus refers to EUR. If numerical data in other currencies are
cited, this is expressly noted by specification of the appropriate currency or currency
symbol.
The functional currency of SNOWBIRD is Renminbi (“RMB”) whereas the financial
statements are made in the presentation currency EUR. The RMB financial data has
been translated to EUR using the following exchange rates:
Financial Year / Period
Ended
Period End Rates
RMB per EUR 1.00
Average Rates RMB
per EUR 1.00
31 December 2011
8.2339
9.0026
31 December 2012
8.3378
8.1171
31 December 2013
8.4146
8.2270
30 June 2013
8.0412
8.1995
30 June 2014
8.4024
8.4208
Snowbird HK has its legal and business seat in Hong Kong. The currency of Hong Kong
is Hong Kong Dollar (“HKD”). The HKD financial data has been translated to RMB prior to
its consolidation using the following exchange rates:
Financial Year / Period
Ended
Period End Rates HKD
per RMB 1.00
Average Rates HKD
per RMB 1.00
31 December 2011
1.2270
1.2044
31 December 2012
1.2321
1.2290
31 December 2013
1.2675
1.2522
30 June 2013
1.2550
1.2427
30 June 2014
1.2591
1.2628
The presentations of the financial statements in EUR for the periods under review are not
fully comparable to each other because different RMB/EUR and RMB/HKD exchange
rates were used for each period under review.
The exchange rates have been extracted from www.oanda.com for the relevant time
period. If not explicitly stated otherwise in this Prospectus, average rates for the year
2013 have been used for the conversion. Please refer to Section 25 “Financial
Information” whether period end rates or average rates have been used in the financial
statements.
Amounts used in industries reports may have been based on different exchange rates.
Page 72
4.7
Third Party Data
This Prospectus contains a number of references to third party data, statistical
information and studies, especially regarding the market environment and similar matters.
Information in this prospectus that is sourced from third parties has been accurately
reproduced and, as far as the Company is aware and is able to ascertain from information
published by that third party, no facts have been omitted which would render the
reproduced information inaccurate or misleading.
Market studies are often based on information and assumptions which may be neither
precise nor accurate, and their methodology is inherently predictive and speculative. This
Prospectus also contains estimates made by the Company relating to market data of third
parties that are based on published market data of figures from publicly available sources.
Neither the Company nor the Underwriter has independently verified the figures, market
data and other information used by third parties in their studies. Accordingly, the
Company and the Underwriter assume no responsibility and make no representation or
warranty as to the accuracy of any information derived from information and studies of
third parties included in this Prospectus.
In compiling this Prospectus, the Company relied on the sources mentioned below:

Market research report “Down Industry in China”, dated February 2014
(“Market Research Report”), prepared by Respect Marketing Research
Inc., with its business address at: Rm. 316, Towercrest Plaza, No.3
Maizidian West Road, Chaoyang District, Beijing, 100125, PRC;

IMF World Economic Outlook Database, April 2014;

PRC National Bureau of Statistics, 2014;

Circular on Adjusting the Standards of the Minimum Wages of Puyang
City (Pu Ren She (2013) No. 252;

The Down Association of Canada,
(http://downmark.ca/consumer_information/fraud.htm);

General Administration of Customs, 2013

Test Report of Hohenstein, dated June 2014, prepared by Hohenstein
Textile Testing Institute GmbH & Co. KG with its business address at:
Schloss Hohenstein, 74357 Boennigheim, Germany.
The Market Research Report has been prepared at the request of the Company. Respect
Marketing Research Inc. with its business address at Rm. 316, Towercrest Plaza, No.3
Maizidian West Road, Chaoyang District, Beijing, China, 100125 are business
consultants and do not have any material interest in the Company. Respect Marketing
Research Inc. has consented to the inclusion of the Market Research Report in the form
and context in which it is included into this Prospectus.
The Test Report of Hohenstein has been prepared at the request of the Company.
Hohenstein Textile Testing Institute GmbH & Co. KG with its business address at Schloss
Hohenstein, 74357 Boennigheim, Germany is a testing institute and do not have any
material interest in the Company. Hohenstein Textile Testing Institute GmbH & Co. KG
has consented to the inclusion of the Test Report of Hohenstein in the form and context
in which it is included into this Prospectus
Page 73
5.
THE OFFERING
5.1
Subject Matter of the Offering
The Offering will be made and trading in the Offered Shares will take place in Euro. The
Offered Shares are denominated in Euro.
The Offering consists of a public offering in Germany and Luxembourg as well as private
placements in other jurisdictions outside Germany, Luxembourg and the United States.
No fixed tranches have been reserved for any particular group of investors or for the
intended private placement.
The Offering comprises of 11,500,000 ordinary bearer shares of the Company with no par
value (Inhaber-Stückaktien), each such share with a notional value of EUR 1.00 and with
full dividend rights for the financial year 2014, thereof

10,000,000 New Shares and

1,500,000 Overallotment Shares (together with the New Shares the
“Offered Shares”).
To facilitate a timely delivery of up to 10,000,000 New Shares of the Company allocated
to the investors during the Offering, Mr. YAN Changzai and Alrai S.à.r.l. will enter into a
securities loan agreement with the Underwriter to provide to the Underwriter a total
number of 10,000,000 no-par value ordinary bearer shares by way of securities loan free
of charge (see section 23.1 of this Prospectus “Underwriting Agreement”). In order to fulfil
its retransfer obligation vis-à-vis Mr. YAN Changzai and Alrai S.à.r.l. from the securities
loan, the Underwriter will, after the end of the Offering Period, subscribe for an equivalent
number of New Shares from a capital increase for a contribution in cash to be approved
by an extraordinary general shareholders’ meeting of the Company as described below
and transfer these shares back to Mr. YAN Changzai and Alrai S.à.r.l..
Any New Shares placed to investors will originate from a capital increase against
contribution in cash expected to be resolved by an extraordinary general shareholders’
meeting of the Company on 24 September 2014 in accordance with Sections 182 eq.
German Stock Corporation Act (Aktiengesetz). The then existing shareholders will waive
their subscription rights to the New Shares. The application for registration of the
resolution on the capital increase is expected to be made with the commercial register of
the local court (Amtsgericht) of Cologne on or around 24 September 2014. It is expected
that registration and effectiveness of the capital increase will take place on or around 25
September 2014 and that the Company will issue a respective global share certificate that
will be lodged with Clearstream Banking AG, Mergenthalerallee 61, 65760 Eschborn, on
the same day. Assuming that the maximum number of New Shares is issued, the share
capital of the Company after the capital increase will amount to EUR 40,000,000.00
consisting of 40,000,000 no par value ordinary bearer shares with a notional value of
EUR 1.00 per share.
investors may be allotted up to 1,500,000 additional Existing Shares of the Company
(“Overallotment”). Overallotment within this meaning is also possible if the New Shares
offered are not fully placed with investors. In order to cover this Overallotment, BIG
BUSINESS GLOBAL HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung
will provide ACON, prior to the allotment of the Offered Shares, with 1,500,000 Existing
Shares by way of a securities loan without charge.
In this context, the Company grants ACON the option to subscribe up to 1,500,000
shares in the Company resulting from a capital increase using authorized capital against
payment of the Offer Price less the agreed commission and other costs (“Greenshoe
Option”), in order to satisfy the retransfer obligation under the securities loan. This
Greenshoe Option expires 30 calendar days after trading of the shares of the Company
commences and may be exercised at maximum to the extent that shares of the Company
have been placed by way of Overallotment.
Page 74
If the Greenshoe Option is exercised in full, after the respective capital increase using
authorized capital, the share capital of the Company will amount to EUR 41,500,000.00
consisting of 41,500,000 no par value ordinary bearer shares with a notional value of
EUR 1.00 per share.
Depending on the extent to which the Offered Shares are placed with investors and the
extent to which the Greenshoe Option is exercised, the Offered Shares will represent a
calculated total of up to EUR 11,500,000 of the Company’s share capital (after
registration of the respective capital increase in the commercial register). Thus, taking
into account the maximum placement volume of the Offered Shares and the exercise of
the Greenshoe Option, up to 27.71%% of the Company’s shares will be offered under the
Offering (calculated on the basis of 41,500,000 shares of the Company in issue following
full implementation of both capital increases against cash contributions). The Offered
Shares which constitute the subject-matter of the Offering carry the same rights as all
other shares of the Company and confer no additional rights or benefits.
The net proceeds from the sale of the New Shares under the Offering will accrue to the
Company.
The net proceeds from the sale of the Overallotment Shares, if any, will also accrue to the
Company, in case the Greenshoe Option is exercised.
Germany (“CM-Equity”) and ACON are acting as Joint Bookrunners of the Offering.
5.2
Price Range, Offering Period, Subscription, Offer Price and Number of Allotted
Shares
The price range within which purchase orders may be submitted is between EUR 5.50
and EUR 6.00 per Offered Share. Within this price range, the offers may be furnished
with a price limit. The Offering will be denominated in EUR.
The Offering Period, during which investors will be given the opportunity to submit orders
for the Offered Shares, is expected to begin on 9 September 2014 and is expected to end
on 24 September 2014. On the final day of the Offering Period, retail investors and
institutional investors will be able to submit offers to purchase shares until 10:00 a.m.
(Central European Time). Orders are freely revocable until the respective Offering Period
expires.
During the Offering Period, retail investors may submit orders for the public offering in the
Federal Republic of Germany via their (depository) bank or broker to the Joint
Bookrunners. Institutional investors may submit their orders directly to the Joint
Bookrunners only.
Orders must be submitted for a minimum of one share and may stipulate a price limit
within the price range, which is denominated in round Euro amounts or round Euro cent
figures of 25 cents. Multiple orders of one subscriber will not be accepted.
The Company, in agreement with the Joint Bookrunners, reserves the right to reduce the
number of Offered Shares, to lower or raise the upper limit and/or the lower limit of the
price range and/or to extend or shorten the Offering Period (collectively referred to as the
“Offer Terms”). In case of an amendment to the Offer Terms, a supplement to this
Prospectus will be filed with BaFin and published following approval thereof on the
Company’s website (www.snowbird-ag.de). To the extent legally required, any changes
will be published in an ad hoc disclosure. Printed copies of the supplement will also be
available free of charge during regular business hours at the Company’s offices at c/o
HRG Hansische Revisions-Gesellschaft mbH, Wirtschaftsprüfungsgesellschaft,
Ferdinandstraße 25, 20095 Hamburg, Germany and at the offices of the Joint
Bookrunners. Investors will not be notified individually.
Changes to the Offer Terms will not invalidate orders that have already been submitted.
Investors who have already submitted orders prior to the publication of any supplement
are entitled under the German Securities Prospectus Law to revoke their orders within
two business days of the publication of the supplement. The revocation must be declared
in text form to the party specified in the supplement as the recipient of such revocation;
revocations are to be deemed timely if dispatched before the notice period expires.
Page 75
Instead of revoking their orders, investors may within two days of the publication of the
supplement opt to modify orders submitted prior thereto or to submit new limit or market
orders. For information on cases involving a termination of the Offering in connection with
the termination of the Underwriting Agreement by the Underwriter, please refer to Section
23.4 of this Prospectus “Underwriting - Conditions Precedent, Termination”.
After the Offering Period expires, the Company and the Joint Bookrunners will use the
order book created in the bookbuilding process to jointly set the final selling price per
Offered Share (“Offer Price”) and to determine the number of shares to be allocated to
investors (“Placement Volume”). This determination is expected to be made on 24
September 2014. The Offer Price and the Placement Volume will be set based on the
orders submitted by investors during the Offering Period and collected in the order book.
These orders will be evaluated according to the price per share offered by the investor
and the expected investment horizon (i.e. the total period that an investor is expected to
hold the shares). Allotments will be based, among other factors, on the price offered by
investors and at the perceived quality and geographical spread of investors as well as on
a reasonable expectation that the share price will demonstrate relatively steady
performance in the aftermarket given the demand for the Company’s shares reflected in
the order book. Accordingly the final allocation of shares will be based not only on the
prices offered by investors and the number of investors wanting shares at a particular
price, but also on the composition of the group of shareholders in the Company (so-called
“investor mix”). For further information regarding allotment criteria see Section 5.6 of this
Prospectus ‘‘The Offering - Allotment Criteria”.
The Offer Price and the Placement Volume is expected to be published on 24 September
July 2014 in an ad hoc disclosure, by means of electronic media such as Reuters or
Bloomberg, on the websites of the Company (www.snowbird-ag.de).
Investors who have submitted their orders directly to the Joint Bookrunners should be
able to obtain the information from the Joint Bookrunners as to the Offer Price and the
number of shares they have been allotted starting, at the earliest, on the banking day
immediately following determination of the Offer Price, presumably on 25 September
2014. Trading in the Company’s shares may commence before investors are notified of
the number of shares they have been allotted.
The delivery of the allotted shares in book-entry form against payment of the Offer Price
is expected to take place presumably on 26 September 2014. Particularly in the event
that the Placement Volume proves insufficient to satisfy all the orders submitted at the
Offer Price, the Joint Bookrunners reserve the right not to accept orders or to accept only
parts thereof.
The Company reserves the right to withdraw the Offering at any time during the Offer
Period without giving any reasons and even thereafter until the final allotment of the
Offered Shares to the investors, even if the trading with the shares of the Company has
already commenced. In case of the withdrawal of the Offering, any subscription monies
already paid by the investors will be refunded in full. No interest is payable.
5.3
Rights Attached to the Offered Shares
The New Shares will rank pari passu with the Existing Shares (including the
Overallotment Shares) and thus have subscription rights to future capital increases on the
same terms and to the same extent as the Existing Shares. For information in relation to
the rights attached to the shares, see Section 5.5 of this Prospectus “The Offering Information Concerning the Shares in the Company” below and Section 18 of this
Prospectus “Information on the Share Capital of the Company and General Rules”.
Page 76
5.4
Projected Timetable for the Offering
The projected timetable for the Offering is as follows:
5 September 2014
Approval of the Prospectus by the German Financial
Supervisory
Authority
(Bundesanstalt
für
Finanzdienstleistungsaufsicht - “BaFin”)
Notification of approval of the Prospectus to the Luxembourg
Financial Supervisory Authority (Commission de Surveillance
du Secteur Financier)
Publication of the Prospectus on the website of the Company
(www.snowbird-ag.de)
9 September 2014
Commencement of the Offering Period, the period in which
investors can submit their buying orders
24 September 2014
End of the Offering Period at 10:00 a.m. (Central European
Time) for retail investors and institutional investors.
Determination of the Offer Price and of the Placement Volume
Allotment of the Offered Shares to investors
Publication of the Offer Price and Placement Volume as well
as the allotment criteria in an ad-hoc disclosure, on an
electronic information system and on the websites of the
Company (www.snowbird-ag.de)
25 September 2014
Registration of the implementation of the capital increase for
creating the New Shares with the commercial register
26 September 2014
Listing approval issued by the Frankfurt Stock Exchange
Book-entry delivery of the allotted Offered Shares to investors
against payment of the Offer Price (expected value date)
29 September 2014
Commencement of trading of the Company’s Shares on the
Frankfurt Stock Exchange
This Prospectus and any supplements thereto will be published on the Company’s
website (www.snowbird-ag.de). Print copies of the Prospectus and any supplements
thereto will also be available upon request and free of charge during regular business
hours at the Company’s offices at c/o HRG Hansische Revisions-Gesellschaft mbH,
Wirtschaftsprüfungsgesellschaft, Ferdinandstraße 25, 20095 Hamburg, Germany and at
the offices of the Joint Bookrunners from the day of publication.
5.5
Information Concerning the Shares in the Company
5.5.1
Rights on Liquidation Proceeds
Should the Company be dissolved, any liquidation proceeds remaining after
discharging the Company’s liabilities will accrue to the shareholders pursuant to
the German Stock Corporation Act in proportion to the respective shares they
hold in the Company’s share capital.
5.5.2
Subscription Rights
Shareholders generally have the right to subscribe for new shares issued
pursuant to any future capital increases in a ratio proportionate to the respective
shares they hold in the Company’s share capital (subscription right) in
connection with share capital increases against cash contributions. Exemptions
are made in regard to conditional capital increase or the issuance of convertible
Page 77
bonds, income bonds, profit participation rights or bonds with warrants as well
as in respect of the sale of treasury shares. Furthermore, the general
shareholders’ meeting may partially or completely exclude the subscription
rights in specific cases. Any exclusion of the subscription rights needs to be
permissible by law with regard to the German Stock Corporation Act (for further
details, see Section 18.5 of this Prospectus “Information on the Share Capital of
the Company and General Rules - General Rules on Subscription Rights”).
5.5.3
Voting Rights
In accordance with the Company’s articles of association, each share carries
one vote at the general shareholders’ meeting. All shares carry the same voting
rights. No restrictions on voting rights exist with the exception of those
stipulated by law in specific cases. Attendance of the general shareholders’
meeting and exercise of voting rights are governed by the articles of association
and general company law (for further details, see Section 19.6 of this
Prospectus “Corporate Bodies and Management - General Shareholders’
Meeting (Hauptversammlung)”).
5.5.4
Form and Representation of the Shares
All of the Company’s shares are or will be issued as no-par value ordinary
bearer shares (Inhaber-Stückaktien). The shares will be represented by several
global certificates without dividend coupons. The shares are deposited with
Clearstream Banking AG, Mergenthalerallee 61, 65760 Eschborn, as securities
clearing and depository bank. The same applies to the New Shares from the
capital increase, which will be represented by an additional global certificate
and also be deposited with Clearstream Banking AG, Mergenthalerallee 61,
65760 Eschborn. The articles of association of the Company exclude the
shareholders’ claim to be issued with share certificates, unless such certificates
are required under the regulations of a stock exchange on which the shares are
listed.
5.5.5
Dividend Rights
The Existing Shares of the Company as well as the New Shares from the
capital increase against cash contribution carry full dividend rights for the
financial year 2014.
Dividends are paid in Euro to each shareholder’s account through the systems
of the central depository (Clearstream Banking AG, Mergenthalerallee 61,
65760 Eschborn) to the custodian bank which will pay them to the shareholders
accounts. The distribution of dividends on the Company’s shares for the past
financial year is subject to the general shareholders’ meeting (for further details,
see Section 18.6 of this Prospectus “Information on the Share Capital of the
Company and General Rules - General Rules Relating to Use of Profits and
Dividend Payments”).
No restrictions on dividends or special procedures apply to holders of the
shares who are not residents of Germany. Reference is made to the Section 21
of this Prospectus “Taxation in Germany” and Section 22 of this Prospectus
“Taxation in Luxembourg” for a description of the tax treatment of dividends
under the laws of Germany and Luxembourg, respectively. Shareholders whose
shares are entered into custodial accounts via foreign institutions should inform
themselves about the procedure applicable at such institutions.
5.5.6
Transferability and Lock-Up
The shares are freely transferable. With the exception of the restrictions set out
in Section 5.12 of this Prospectus “Market Protection Agreements (Lock up)”,
there are no lock-up requirements or restrictions on the transferability of the
Company’s shares.
Page 78
5.5.7
WKN/ISIN/Ticker Symbol
The German Securities Identification Number (WKN) of the shares is A1PHEL,
the International Securities Identification Number (ISIN) is DE000A1PHEL8 and
the Ticker Symbol is 8S9.
5.6
Allotment Criteria
5.6.1
General Allotment
The Company reserves the right to allot to investors less than the maximum
possible amount of New Shares that are being offered. No agreements exist
between the Company, Mr. YAN Changzai and the Underwriter or the Joint
Bookrunners with respect to the allotment procedure prior to the
commencement of the Offering Period. The Company, Mr. YAN Changzai and
the Joint Bookrunners intend to comply with the “Principles for the Allotment of
Shares Issues to Private Investors” (“Grundsätze für die Zuteilung von
Aktienemissionen an Privatanleger”). These principles were issued on 7 June
2000
by
the
Exchange
Expert
Commission
(Börsensachverständigenkommission) of the German Federal Ministry of
Finance (Bundesministerium für Finanzen). “Qualified investors” under the
WpPG, as well as “professional clients” and “suitable counterparties” under the
German Securities Trading Act (Wertpapierhandelsgesetz - WpHG) are not
viewed as “private investors” within the meaning of the Allocation Rules. The
Company, Mr. YAN Changzai and the Joint Bookrunners will determine and
publish the specific details of the allotment procedure in accordance with the
“Principles for the Allotment of Shares Issues to Private Investors” once the
Offering Period has expired.
5.6.2
Minimum Allotment
Any minimum allotment will be determined once the order book has been
closed and will be published in accordance with the allotment principles. No
right to allotment exists.
5.7
Stabilization Measures, Overallotment and Greenshoe Option
In connection with the placement of the Placing Shares and to the extent permitted by
applicable law including the EU Commission Regulation 2273/2003 dated 22 December
2003 and in connection with the Offering, ACON and CM-Equity (the “Joint Stabilization
Managers”) may, in accordance with legal requirements, make overallotments and take
stabilization measures aimed at supporting the stock or market price of the Company’s
shares at a higher level than that which might otherwise prevail in the open market and
thereby counteract any selling pressure and demand for the shareholders. The Joint
Stabilization Managers are under no obligation to take stabilization measures. Therefore,
there is no guarantee that any stabilization measure will indeed be implemented. If
stabilization measures are taken, these may be terminated at any time without prior
notice. Such measures may be taken from the date of the commencement of trading of
the Existing Shares on the regulated market (Prime Standard) of Frankfurt Stock
Exchange in order to support the initial stock exchange price, if necessary, and must be
completed no later than 30 calendar days after such date (“Stabilization Period”).
Stabilization measures may lead to the stock exchange or market price of the Company’s
shares being higher than would have been the case without such measures. In addition,
such measures may temporarily result in a stock exchange or market price reaching a
level that is not sustainable in the long run.
investors may be allotted up to 1,500,000 additional Existing Shares of the Company
(“Overallotment”). Overallotment within this meaning is also possible if the New Shares
offered are not fully placed with investors. In order to cover this Overallotment, BIG
BUSINESS GLOBAL HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung
will provide ACON, prior to the allotment of the Offered Shares, with 1,500,000 Existing
Page 79
Shares by way of a securities loan without charge.
In this context, the Company will grant ACON the option to subscribe up to 1,500,000
shares in the Company resulting from a capital increase using authorized capital against
payment of the Offer Price less the agreed commission and other costs (“Greenshoe
Option”), in order to satisfy the retransfer obligation under the securities loan. This
Greenshoe Option expires 30 calendar days after trading of the shares of the Company
commences and may be exercised at maximum to the extent that shares of the Company
have been placed by way of Overallotment.
Within one week following the end of the Stabilization Period, an announcement will be
published in the Stock Exchange Gazette (Börsenzeitung) and on the Company’s website
(www.snowbird-ag.de) as to whether or not any stabilization measures were carried out,
the date on which these stabilization measures were commenced, the date on which the
last stabilization measure was taken, and the price range within which stabilization
measures were carried out (for each date on which a stabilization measure was carried
out). The implementation of any Overallotment and the exercise of the Greenshoe Option
and the date thereof, as well as the number and class of the relevant shares will also be
promptly published in the manner stated above.
5.8
Stock Exchange Admission and Commencement of Trading
The Company intends to list its shares at Frankfurt Stock Exchange irrespective of the
result of the Offering. An application for admission of all shares of the Company (including
the New Shares) to trading on the regulated market (Regulierter Markt) of the Frankfurt
Stock Exchange (Prime Standard) shall be filed on or around 10 September 2014. The
Company expects that admission to trading will be resolved by Frankfurt Stock Exchange
on 26 September 2014. It is expected that trading of the Company’s shares will
commence on 29 September 2014.
If and to the extent that ACON should exercise the Greenshoe Option and subscribe for
further shares in the capital of the Company, it is expected that the Listing of the
Greenshoe Shares will be one banking day following the registration of the respective
capital increase, i.e. on or around 6 November 2014 and the trading of these shares will
commence two banking days following the registration of the respective capital increase,
i.e. on or around 7 November 2014.
5.9
Delivery and Settlement
The allocated shares will be delivered through Clearstream Banking AG,
Mergenthalerallee 61, 65760 Eschborn, Germany, to the investors’ securities deposit
account maintained by a bank or broker through a depository chain with Clearstream
Banking AG, Mergenthalerallee 61, 65760 Eschborn.
Delivery of the allocated shares to investors against payment of the Offer Price is
expected to take place on 26 September 2014. Exceeding payments made by investors
will be refunded accordingly. The shares will be made available to shareholders as coownership interests in the respective global certificate.
5.10 Designated Sponsor
mwb fairtrade Wertpapierhandelsbank AG, Rottenbucher Straße 28 82166 Gräfelfing,
Germany (“mwb fairtrade”) will assume the function of a designated sponsor (the
“Designated Sponsor”) for the Company’s shares trading on the Frankfurt Stock
Exchange. According to the designated sponsor agreement which the Company will
execute with mwb fairtrade, mwb fairtrade will submit binding buying and selling orders
(limit orders) into the electronic trading system (Xetra) of the Frankfurt Stock Exchange
during regular trading hours. This is designed, in particular, to achieve higher liquidity in
the trading of the shares. The Designated Sponsor will receive an annual remuneration
for those services in accordance with market standards.
5.11 Consent to the use of the Prospectus
The consent of the Company regarding the use of the Prospectus in Germany and
Page 80
Luxembourg for a sale and placement of securities has been granted to CM-Equity AG &
Co. KG Financial Services, Kaufingerstraße 20, 80331 Munich, Germany (“Lead
Manager”). The consent to the use of the Prospectus by the Lead Manager is given for
the Offer Period. Any new information with respect to the Lead Manager unknown at the
date of the Prospectus will be published at least on the Company’s website
(www.snowbird-ag.de).
The Company accepts responsibility for the content of the Prospectus also with respect to
a subsequent resale or final placement of securities by the Lead Manager which was
given consent to use the Prospectus.
In the event of an offer being made by the Lead Manager, the Lead Manager will
provide information to investors on the terms and conditions of the offer at the
time the offer is made.
5.12 Market Protection Agreements (Lock up)
The Company undertakes vis-à-vis CM-Equity that for a period of 36 months following the
commencement of trading (Notierungsaufnahme) of the shares of the Company on the
regulated market (Prime Standard) of the Frankfurt Stock Exchange, that it will not,
without the prior written approval of CM-Equity, implement any capital increase from
authorized capital, propose any capital increase to the Company’s general shareholders’
meeting, announce, implement or propose to the Company’s general shareholders’
meeting any issue of any financial instruments carrying conversion or option rights with
respect to the shares in the Company or any transaction having an equivalent economic
effect, directly or indirectly sell, offer, market, distribute, transfer, encumber or in any
other way dispose of shares in the Company, and enter into transactions (including
derivative transactions) that result in the economic equivalent of any of the above (the
“Company’s Lock-Up”).
The Existing Shareholders, with the exception of Alrai S.à.r.l., Alrakis S.à.r.l, Mystic
Topaz S.à.r.l and Imperial Topaz S.à.r.l, undertake vis-à-vis CM-Equity for a certain
period following the commencement of trading (Notierungsaufnahme) of the shares of the
Company on the regulated market (Prime Standard) of the Frankfurt Stock Exchange as
stipulated below, that they will not, without the prior written consent of CM-Equity, initiate
or consent to any of the measures set out for the Company, directly or indirectly initiate or
consent that the shares in the Company or other financial instruments, which may be
converted into shares or which give a right to acquire shares in the Company, are issued,
sold, offered, marketed or otherwise disposed of or that an offer to any of such
transactions is announced, or directly or indirectly sell, offer, market distribute, transfer or
in any other way dispose of shares not being part of the Offering or other financial
instruments in the Company referring to a participation of 50% plus one share; the same
applies to any transactions constituting the economic equivalent of a sale, such as the
issue of option or conversion rights to shares of the Company and other comparable
transactions (including derivative transactions) (the “Lock-Up Existing Shareholders”).
Mr. YAN Changzai (the “Lock-Up YAN Changzai”) and BIG BUSINESS GLOBAL
HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung agreed with CMEquity on a lock-up period of 36 months respectively, and YIELD TRADE LIMITED, ZHEN
SHENG LIMITED, United Talent Investments Limited and Midasi Investment Limited
agreed with CM-Equity on a lock-up period of 12 months respectively. The Lock-Up YAN
Changzai does not apply to the Offered Shares to be offered to investors in connection
with the Offering, but to the New Shares which will be transferred back to Mr. YAN
Changzai by the Underwriter in order to fulfill its retransfer obligation under the securities
loan. The shares covered by the Lock-Up Existing Shareholders will be held for the
respective period following the commencement of trading (Notierungsaufnahme) of the
shares of the Company on the regulated market (Prime Standard) of the Frankfurt Stock
Exchange in a blocked deposit account at V-Bank, Arnulfstrasse 58, 80335 Munich.
Page 81
6.
REASONS FOR THE OFFERING, USE OF ISSUE PROCEEDS, ISSUE COSTS
AND INTERESTED THIRD PARTIES
6.1
Issue Proceeds and Costs
The gross issue proceeds from the sale of the New Shares and, if and to the extent the
Greenshoe Option is exercised, from the Overallotment Shares, less the issue costs to be
borne by the Company (the net issue proceeds) accrue to the Company under the
Offering. The amount of the gross issue proceeds depends on the number of the New
Shares and Overallotment Shares actually placed and the Offer Price.
Assuming that all of the New Shares are placed and the Greenshoe Option is fully
exercised, the gross issue proceeds from the Offering attainable by the Company will be
between EUR 63,250,000.00 and EUR 69,000,000.00. In case the Greenshoe Option is
not exercised, the gross issue proceeds from the Offering attainable by the Company will
be between EUR 55,000,000.00 and EUR 60,000,000.00.
Due to the fact that the costs are contingent on the total number of Offered Shares placed
and the Offer Price, which determine the amount of commissions, it is not possible at
present to reliably predict the amount of the costs. The commission to be paid to the
Underwriter is owed by the Company.
Based on the price range of EUR 5.50 to EUR 6.00 and on the assumption that all
Offered Shares will be placed, the Company estimates that it will incur costs of the
Offering (including fees of the Underwriter) totaling between approximately EUR
4,200,000 and EUR 4,400,000, provided the Greenshoe Option is exercised. In case the
Greenshoe Option is not exercised, the Company estimates that the costs of the Offering
and of the Listing (including fees of the Underwriter) will be between approximately EUR
3,800,000 and EUR 4,000,000.
The Company estimates, that the costs excluding the commission of the Underwriter will
amount to approximately EUR 1,300,000.
Subject to the aforementioned uncertainties, the Company believes that based on the
price range of EUR 5.50 to EUR 6.00 and on the assumption that all Offered Shares will
be placed, it is possible to generate approximately EUR 59,050,000 to EUR 64,600,000
in net issue proceeds, provided the Greenshoe Option is exercised. In case the
Greenshoe Option is not exercised, the Company believes that net proceeds of between
approximately EUR 51,200,000 to EUR 56,000,000 are attainable.
6.2
Reasons for the Offering
The net issue proceeds accruing to the Company are intended to strengthen
SNOWBIRD’s capitalization and financial position and support the intended expansion of
its activities and the implementation of its strategy. In particular, the Company aims to
finance its growth process. The Listing is also intended to enable the Company to
sharpen its public profile as well as its profile on the international capital market.
6.3
Use of the Issue Proceeds
The Company plans to use the net issue proceeds accruing to it from the sale of the New
Shares and, if and to the extent the Greenshoe Option is exercised, from the
Overallotment Shares to finance SNOWBIRD’s further growth and to implement and
finance its strategic objectives and for general business purposes as follows:
Purpose
EUR
Approx. %
Office building
2,922,975 to 3,197,700
4.95%
Sewing plant
4,446,465 to 4,864,380
7.53%
Furniture and fittings
Sewing machines
Working capital
773,555 to
846,260
1.31%
5,261,355 to 5,755,860
8.91%
45,645,650 to 49,935,800
77.30%
Page 82
If the net issue proceeds envisaged are not raised, the Company plans to obtain
additional bank loans to finance its further growth.
6.4
Interested Parties Involved in the Offering
In connection with the Offering and the Listing of the Company’s shares (the
“Transaction”), the Underwriter and the Lead Manager are in a contractual relationship
with the Company.
ACON is the Underwriter and its commission is inter alia dependent on the amount of the
offer proceeds in accordance with the Underwriting Agreement expected to be executed
shortly after the date of this Prospectus.
Germany (“CM-Equity”) advises as Global Coordinator and Lead Manager the Company
on the transaction and coordinates the structuring and execution thereof and will also sell
the Offered Shares on behalf of the Underwriter. The compensation of CM-Equity is, inter
alia, incentive-based and depends, among other factors, on the amount of the offer
proceeds such that CM-Equity has an interest in the successful implementation of the
Offering.
The Underwriter and the Lead Manager or its affiliates may enter into business relations
with the Company or render services to the Company in the ordinary course of business.
mwb fairtrade Wertpapierhandelsbank AG, Rottenbucher Straße 28 82166 Gräfelfing,
Germany, also has an interest in the Offering on account of its Designated Sponsor
agreement (see Section 5.10 of this Prospectus “The Offering - Designated Sponsor”).
Besides the ones mentioned above there are no other interested parties involved in the
Offering.
Page 83
7.
DIVIDEND POLICY; EARNINGS PER SHARE
7.1
Dividend Rights and Dividend Policy
The shares in the Company carry full dividend rights for the financial year 2014.
The shares of individual shareholders in the profit of the Company are determined in
accordance with the number of shares they hold in the registered capital (section 60
subsection 1 of the German Stock Corporation Act (“AktG”)).
The adoption of resolutions regarding the distribution of dividends on the Company’s
shares for a given financial year is the responsibility of the general shareholders’ meeting
(Hauptversammlung) held during the following financial year, which resolves on the
utilization of the Company’s distributable profits on the basis of the non-binding proposal
of the management board (Vorstand) and the supervisory board (Aufsichtsrat). If the
majority shareholder Mr. YAN Changzai holds an effective or, depending on its presence
at the general shareholders’ meeting (Hauptversammlung) of the Company, a factual
majority of the voting rights present or represented at the general shareholders’ meeting
(Hauptversammlung), it may exercise further influence on the utilization of the Company’s
profits and/or the dividend policy (see Section 3.1 of this Prospectus “Risk Factors –
Risks Related to SNOWBIRD’s Operations”). Under German law a resolution concerning
dividends and the utilization of distributable profits may be adopted only on the basis of a
balance sheet profit (Bilanzgewinn) shown in the Company’s adopted annual separate
financial statements (festgestellter Jahresabschluss) to be prepared in accordance with
generally accepted German accounting principles, i.e. the accounting provisions of the
German Commercial Code (Handelsgesetzbuch). In determining the balance sheet profit
available for distribution, the annual net income (Jahresüberschuss) or annual net loss
(Jahresfehlbetrag) of the respective year must be adjusted for profits and losses carried
forward from the previous year and for deposits into or withdrawals from reserves. Certain
reserves are to be created by law and must be deducted, where applicable, when
calculating the balance sheet profits available for distribution. In a resolution regarding
the utilization of balance sheet profits, the general shareholders’ meeting
(Hauptversammlung) can include further amounts in retained earnings or carry them
forward as profit. Dividends resolved by the general shareholders’ meeting
(Hauptversammlung) are paid annually, shortly after the general shareholders’ meeting
(Hauptversammlung), in compliance with the rules of the respective clearing system.
Dividend claims are subject to a three-year limitation period. Dividends which were not
exercised by shareholders within this period shall be retained by the Company.
The shares carry full dividend rights for the financial year 2014.
The Company intends to distribute dividends in 2015 of approx. 20% of the consolidated
net income of the FY 2014 to the extent legally possible, in particular provided sufficient
distributable annual profit is retained in the Company, and to also pay dividends on a
regular basis thereafter, whereas the distribution of dividends of approx. 20% shall be the
basis for the long-term dividend policy of the Company, however depending on the results
of operations of the Company, its business strategy, its financial situation, its need for
cash and the legal, tax and regulatory environment as well as other factors.
To report net profits available for distribution, the Company as a holding company
depends on profit distributions from its subsidiaries. The expenditures and costs of this
Offering will have a one-time impact that will adversely affect its results of operations in
2014.
Dividend income is subject to German dividend withholding tax (Abgeltungsteuer) (see
Section 21 of this Prospectus “Taxation in Germany”).
7.2
Dividends and Earnings per Share
The Company was incorporated in 2012 and did so far not generate any profits. No
dividends were therefore paid by the Company in the past.
Snowbird Henan as the operating company of SNOWBIRD did however generate profits
and has in the recent past paid dividends (with the exception for FY 2013).
Page 84
On the basis of the single entity financial statements of Snowbird Henan in accordance
with IFRS as at and for the years ended on 31 December 2011, 31 December 2012 and
31 December 2013, the following summary shows the profit for the respective financial
year of SNOWBIRD, and earnings per share (rounded to two decimal points), each in
accordance with IFRS and its distributed dividends as of and for the years ended on 31
December 2011, 31 December 2012 and 31 December 2013.
For comparability with the share capital structure of the Company, it has been assumed
that the number of shares used to calculate earnings per share and dividends per share
is the number of shares in the Company following the effectiveness of the capital increase
against contribution in kind of shares in Snowbird HK to the Company in the amount of
EUR 29,950,000.
FY 2011
FY 2012
FY 2013
unaudited (1)
unaudited (1)
unaudited (1)
Profit for the year (in EUR’000)
10,951
21,234
28,279
Dividends (in EUR’000)
6,072
8,396
none
Assumed number of shares
30,000,000
30,000,000
30,000,000
Earnings per share in EUR
0.36
0.70
0.94
Dividends per share in EUR
0.20
0.28
n/a
(1) Unaudited Information provided by the accounting department of the Company with the exception of “Profit
for the year” which were audited.
Page 85
8.
GENERAL DESCRIPTION OF THE SHARES
8.1
Class of Shares, Voting Rights
All shares in the Company are ordinary bearer shares (auf den Inhaber lautende
Stammaktien) with no par value (no-par value bearer shares) representing EUR 1.00 of
the share capital each. In accordance with the Company’s articles of association
(Satzung), each share carries one vote at the Company’s General Shareholder’s meeting
(Hauptversammlung). All shares carry the same voting right. No restrictions on voting
rights exist with the exception of those stipulated by law in specific cases. Attendance of
the general shareholder’s meeting and exercise of voting rights are governed by the
articles of association (Satzung) and general Company law (for further details, see
Section 19 of this Prospectus “Corporate Bodies and Management”).
8.2
Certification of Shares
The shares will be represented by one or more global share certificates without dividend
coupons which will be deposited with Clearstream Banking AG, Mergenthalerallee 61,
65760 Eschborn, Germany as securities clearing and depository bank.
The Company’s articles of association (Satzung) constitute that shareholders are not
entitled to be issued with share certificates, unless requested by the regulations of the
stock exchange on which the shares are listed.
The determination of the form and substance of the shares, e.g. the form of the global
certificate, as well as dividend and renewal coupons is carried out by the management
board (Vorstand) and is subject to approval of the supervisory board.
8.3
Dividend Rights
The shares carry full dividend rights for the financial year 2014.
The share of individual shareholders in the profit of the Company is determined in
accordance with the number of shares they hold in the registered capital (section 60
subsection 1 of the German Stock Corporation Act (AktG)).
Distributions of dividends on shares for a given financial year are generally determined by
a process in which the management board (Vorstand) and supervisory board
(Aufsichtsrat) submit a proposal to the annual general shareholders’ meeting
(Hauptversammlung) held in the subsequent financial year and such annual general
shareholders’ meeting (Hauptversammlung) adopts a resolution. German law provides
that a resolution concerning dividends and distribution thereof may be adopted only on
the basis of a balance sheet profit (Bilanzgewinn) shown in the Company’s adopted
annual single entity financial statements (festgestellter Jahresabschluss). In determining
the profit available for distribution, the result for the relevant year must be adjusted for
profits and losses brought forward from the previous year and for withdrawals from or
transfers to reserves. Certain reserves are required by law and must be deducted when
calculating the profit available for distribution.
Dividends on shares resolved by the general shareholders’ meeting (Hauptversammlung)
are paid annually, shortly after the annual shareholders’ meeting (Hauptversammlung), in
compliance with the rules of the respective clearing system. Dividend payment claims by
shareholders are subject to a three-year statute of limitations. Details concerning any
dividends resolved by the annual shareholders’ meeting (Hauptversammlung) and the
respective paying agents specified by the Company will be published in the electronic
version of the Federal Gazette (elektronischer Bundesanzeiger) and in at least one official
national publication for statutory stock market notices approved by the Frankfurt Stock
Exchange.
Dividend income is in general subject to withholding tax (Kapitalerstragssteuer) (see
Section 21 of this Prospectus “Taxation in Germany” and 22.1 of the Prospectus
“Taxation in Luxembourg”).
Page 86
8.4
Takeover Offers, Exclusion of Minority
Shareholding Notification Requirements
8.4.1
Shareholders
(Squeeze-Out)
and
Mandatory Takeover Offers
The Company as a stock corporation (Aktiengesellschaft) which will be listed on
a regulated market within the meaning of art. 4, para. 1 no. 14 of the EUDirective 2004/39/EC will – in accordance with the provisions of the German
Securities Acquisition and Takeover Act (Wertpapiererwerbs- und
Übernahmegesetz – WpÜG) – be considered as a so-called target company
(Zielgesellschaft) if a public offer is launched (öffentliches Erwerbs- oder
Übernahmeangebot) to acquire part or all of the Company’s shares. In such
cases the management board (Vorstand) has to work in cooperation with the
supervisory board (Aufsichtsrat) to prepare and announce a detailed statement
(Stellungnahme) concerning the public takeover bid.
Under the German Securities Acquisition and Takeover Act any party whose
voting rights reach or exceed the threshold of 30% of the voting rights of the
Company after admission to listing has to publish this fact, including the
percentage of the voting rights held, within seven calendar days via Internet and
over an electronic financial news service. Unless an exemption is granted, the
party subsequently has to submit a mandatory public tender offer to all
shareholders of the Company.
8.4.2
Squeeze-out of Minority Shareholders and Integrations
The general shareholders' meeting (Hauptversammlung) can, pursuant to the
provisions of German Stock Corporation Act, at the request of a shareholder
holding 95% of the share capital (“Principal Shareholder”), pass a resolution
concerning the transfer of the shares of the remaining minority shareholders to
the Principal Shareholder. The minority shareholders will in return receive a
payment of an appropriate cash settlement. Decisive for the actual amount
which is paid to the minority shareholders is “the Company's situation” at the
time the resolution was passed. The amount of the cash settlement must reflect
“the Company's situation” and is based on the full value of the Company, which
is determined using the capitalized earnings value calculation
(Ertragswertberechnung). The registration of the resolution of the general
shareholders' meeting (Hauptversammlung) on the squeeze out in the
commercial register automatically leads to the transfer of the minority's shares
to the Principal Shareholder.
Furthermore, a bidder that holds 95% of the voting share capital of a target
company within the meaning of the German Securities Acquisition and
Takeover Act (Wertpapiererwerbs- und Übernahmegesetz — WpÜG) after a
public takeover or mandatory bid may file an application with the regional court
in Frankfurt/Main to issue a court order that transfers the remaining voting
shares in return for an adequate compensation. This application has to be filed
within a period of three months following the expiration of the acceptance
period. A resolution by the general shareholders' meeting (Hauptversammlung)
is not a precondition for this. The compensation offered has to correspond to
the compensation offered in connection with the takeover or mandatory bid and
is deemed an appropriate settlement if the bidder has acquired shares from
90% of the share capital addressed by the bid. The provisions relating to the
stock corporation law squeeze-out do not apply during the takeover law
squeeze-out procedure which is initiated by the bidder. These rules may only
apply again after a binding court ruling with respect to the squeeze-out
proceedings has been issued.
The integration (Eingliederung) of a corporation is subject to a resolution of the
general shareholders' meeting (Hauptversammlung). Precondition to such
integration is that at least 95% of the shares of the Company to be integrated
are held by the future principal company. The former shareholders of the
integrated Company can claim a suitable settlement. This compensation must
Page 87
generally be granted in the form of shares of the principal company. The
amount of the settlement is calculated using a "merger value ratio"
(Verschmelzungswertrelation) between the two companies, i.e. the exchange
ratio that would be deemed to be appropriate in the event of a merger of the two
companies.
8.4.3
Disclosure of Shareholdings in Listed Companies, Reporting and
Notification Requirements in Relation to Share Ownerships
The German Securities Trading Act (Wertpapierhandelsgesetz - WpHG)
requires that anyone who acquires, sells or in some other way reaches,
exceeds or falls below 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% of the
voting rights in an issuer whose country of origin is Germany must immediately
but no later than within four trading days after the individual or company is
aware or should have been aware of the respective changes in voting rights
notify the issuer and at the same time the BaFin. The notice can be drafted in
either German or English and either sent in writing or via telefax. The notice
must include, among other things, the individual or entity's address, the share of
voting rights held and the date of reaching, exceeding or falling below the
respective threshold. As a domestic issuer, the Company must publish such
notices immediately but no later than within three trading days after receiving
them via media outlets, including those which one can assume will disseminate
the information throughout the EU and in the non-EU contracting parties to the
Agreement and the EEA. The Company must also transmit the notice to BaFin
and to the electronic Company Register (elektronisches Unternehmensregister)
for storage. There are exceptions to the notice requirement: trading activities of
investment services enterprises involving up to 5% of voting rights, shares held
solely for clearing and settlement purposes or held in safekeeping for short
periods of time and acquisitions and sales made for market making purposes.
In connection with the disclosure requirements, the German Securities Trading
Act (Wertpapierhandelsgesetz - WpHG) contains various provisions to ensure
that shareholdings are allocated to the person who actually controls the voting
rights attached to the shares. For example, shares belonging to a third party are
allocated to a party required to report if the reporting party controls the third
party. Similarly, shares held by a third party on behalf of a party required to
report, or held by an entity controlled by the party required to report, are
allocated to the party that is required to report. If a shareholder willfully fails to
file a notice or provides false information, the shareholder is excluded from
exercising the rights attached to its shares (including voting and dividend rights)
for the duration of the delay. If the failure relates specifically to the share of
voting rights held and the shareholder acted willfully or was grossly negligent,
the shareholder is generally not permitted to exercise the administrative (voting)
rights attaching to its shares for a period of six months after it files the
necessary notification. In addition, a fine may be imposed for failure to comply
with the notification obligation.
Moreover, under the German Securities Trading Act (Wertpapierhandelsgesetz
- WpHG), any person who directly or indirectly holds financial instruments that
grant the holder the unilateral right under a legally binding agreement to acquire
previously issued voting shares of an issuer whose country of origin is the
Federal Republic of Germany is subject to a notification obligation if the sum of
the shares they can so acquire, together with any voting right stakes they may
already hold in the issuer or which are attributable to them, reaches, exceeds or
falls below any of the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% or
75%.
Furthermore, the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) requires any shareholder whose holdings reach or exceed the 10%
threshold or a higher threshold to notify the issuer of the aims being pursued
with the acquisition of the voting rights and the origin of the funds used for the
acquisition within 20 trading days of the date on which the respective threshold
is met or exceeded. Once this information is received, and even if no
Page 88
information is received, the issuer has to publish it in the form discussed above,
or give notice that the disclosure requirement was not met, within no more than
three trading days. The issuer's articles of association (Satzung) may stipulate
that the shareholders are not subject to a notification obligation, but this is not
the case for the Company's articles of association (Satzung). In addition, under
the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und
Übernahmegesetz - WpÜG), anyone whose voting rights reach or exceed 30%
of the voting shares of the Company is obligated to disclose this fact and the
percentage of voting rights held within seven calendar days over the internet
and over an electronic financial news service and thereupon, unless granted an
exemption, to launch a public mandatory offer to all holders of shares in the
Company.
The German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und
Übernahmegesetz — WpÜG) contains a number of provisions intended to
ensure that share ownership is correctly attributed to the person who actually
controls the voting rights conferred by the shares. Shareholders who fail to
disclose that their holdings meet or exceed the 30% threshold or fail to make a
public mandatory offer are prohibited from exercising the rights conferred by
these shares (including voting rights and the right to receive dividends) until the
failure has been remedied. Breaches of the duty of disclosure are also
punishable by a fine.
8.4.4
Disclosure of Transactions by
Responsibilities at a Listed Company
Persons
Exercising
Executive
According to the provision of the German Securities Trading Act
(Wertpapierhandelsgesetz — WpHG) any person discharging managerial
responsibilities (“Executives”) within a company, whose shares are admitted to
trading or for whose shares admission to trading or a domestic organized
market has been requested, is obliged to disclose the purchase and sale of the
Company's shares and related financial instruments whenever the value of such
transactions amounts to EUR 5,000.00 or more within a calendar year.
Executives are, among others, members of the management board (Vorstand)
or of the supervisory board (Aufsichtsrat) or any other executives who are
authorized to make decisions on material corporate matters on behalf of the
company and who have regular access to insider information. The notification
obligation also applies to natural persons who are closely related to the
Executives of the Company such as spouses, registered civil partners, children
for whom the Executive is liable for maintenance, or relatives who, at the time of
the purchase or sale of the Company's shares, have shared the household for
at least a year. Furthermore, legal entities and other organizations are also
subject to the notification obligation regarding the purchase or sale of the
company’s shares (i) if the Executives or persons who are closely related to the
Executives discharge managerial responsibilities in such legal entities and
organizations, (ii) or the Executives or persons who are closely related to the
Executives directly or indirectly control the legal entity or the other
organizations, (iii) or if the legal entities or other organizations were set up for
the benefit of the Executives or persons who are closely related to the
Executives or the economic interests of the legal entity, (iv) or the other
organizations are substantially equivalent to those of the Executives or persons
who are closely related to the Executives.
Notification of the purchase or sale must be made within five business days of
the trade date to the Company and the German Federal Financial Supervisory
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - BaFin). This means
that the notification must be received by both, the Company and BaFin no later
than at the fifth business day following the trade date (excluding the trade date).
When the Company receives the notification, the Company is required to
publish the notification without undue delay and the proof of publication must be
forwarded to BaFin without undue delay. The Company also has to submit the
Page 89
notification to the business register without undue delay, following the
publication of the notification.
8.5
Transferability of the Shares
The shares are freely transferrable. With the exception of the restrictions set out in
Section 5.12 of this Prospectus “Market Protection Agreements (Lock up)”, there are no
lock-up requirements or restrictions on the transferability of the Company’s shares.
8.6
Notices
In accordance with its articles of association (Satzung), notices of the Company will be
made in the electronic version of the German Federal Gazette (elektronischer
Bundesanzeiger). Publications required by stock exchange laws will be made in a
national journal designated for such purposes by the Frankfurt Stock Exchange.
Notices in connection with the approval of the Prospectus and the approval of any
supplements to the Prospectus will be made in accordance with section 14 subsection 1
of the German Securities Prospectus Act (Wertpapierprospektgesetz) and will be
published in the form intended for prospectuses, i.e., on the internet website of the
Company with a printed version available at the office of the Company.
8.7
Securities Identification Number, Stock Symbol, Ticker Symbol
Ticker Symbol: 8S9
8.8
Paying Agent
The paying agent (Zahlstelle) for the shares in the Company is BNP Paribas
Niederlassung Frankfurt with business address at Europa-Allee 12, 60327 Frankfurt,
Germany.
Page 90
9.
DILUTION
The net book value of the Company (total assets less non-current liabilities and current
liabilities) amounted to EUR 82.670 million as of 30 June 2014 based on the condensed
interim financial statements of Snowbird Henan for 2014H1 prepared in accordance with
IFRS. This corresponds to approximately EUR 2.76 per share (calculated on the basis of
30,000,000 shares of the Company in issue as of the date of this Prospectus).
Assuming that all 11,500,000 Offered Shares are placed and that the Offer Price amounts
to EUR 5.75 as the arithmetic mean of the price range between EUR 5.50 and EUR 6.00,
the Company would obtain net proceeds of approximately EUR 61,825,000 considering
costs of the Offering (including fees of the Underwriter) totaling approximately EUR
4,300,000. Assuming that the Offering had been implemented on 30 June 2014, the net
book value of the Company at that time would have amounted to approximately EUR
144,495,000 (or approximately EUR 3.48 per share calculated on the basis of 41,500,000
shares of the Company in issue following full implementation of the capital increase
against cash contributions). This corresponds to an increase in the net book value of the
Company of approximately EUR 0.72 per share corresponding to an increase of approx.
26.1% for the Existing Shareholders and a direct dilution of about EUR 2.27 per share for
the purchasers of the Offered Shares based on the arithmetic mean of the price range
and, thus, investors who acquire shares at the arithmetic mean of the price range of EUR
5.75 per Offered Share are diluted by about 65.2 %.
The table below illustrates the amount by which the mid-point of the price range per share
would exceed the total share capital per share (immediate dilution per share):
Offer Price per share (arithmetic mean of the price range)
EUR 5.75
Net book value of the Company per share as of 30 June 2014
calculated on the basis of 30,000,000 Existing Shares
EUR 82,670,000
Amended net book value of the Company per share as of 30
June 2014, adjusted under the assumption of full implementation
of the capital increases
EUR
144,495,000
Percentage by which the amended net book value of the
Company per share for the Existing Shareholders exceeds the
net book value of the Company per share
approx. 26.1%
Amount by which the Offer Price per share exceeds the
amended net book value of the Company per share for the
investors
EUR 2.27
Percentage by which the Offer Price per share exceeds the
amended net book value of the Company per share for the
investors
65.2%
Page 91
10.
CAPITAL STRUCTURE AND NET FINANCIAL LIABILITIES
10.1 Capitalization and Indebtedness
The data presented in the following table provides an overview of the capital structure
and net financial liabilities of the Company as at 30 June 2014 on a consolidated basis as
if all shares in Snowbird HK already been held by the Company as at 30 June 2014. The
data is unaudited and has been prepared by the accounting department of SNOWBIRD in
accordance with IFRS. As a result of the net proceeds obtained in the Offering the
capitalization of SNOWBIRD will change following the Offering.
Capitalization
As at 30 June 2014
(EUR'000, unaudited)
Total Current Debt
Guaranteed (1)
Secured
Unguaranteed / Unsecured
Total Non Current Debt (excluding current portion of long-term debt)
Guaranteed
Secured (2)
Unguaranteed / Unsecured
29.796
8.093
21.703
4.404
4.404
-
Merger Reserve
82.385
50
6.386
9.869
Retained Earnings
64.788
Shareholder's Equity
Share Capital
Statutory Reserve
Foreign exchange fluctuation reserve
1.292
116.585
Total
Indebtedness
As at 30 June 2014
(EUR'000, unaudited)
A.
Cash
B.
Cash Equivalents (Detail)
C.
Trading Securities
D.
Liquidity (A + B + C)
13.632
13.632
E.
Current Financial Receivables
80.565
F
Current Bank Debt
G.
Current Portion of Non Current Debt
H.
Other Current Financial Debt
I.
Current Financial Debt (F + G + H)
8.093
21.703
29.796
J.
Net Current Financial Indebtedness (I - E - D)
-64.401
K.
Non Current Bank Loans
L.
Bonds Issued
M.
Other Non Current Loans
N.
Non Current Financial Indebtedness (K + L + M)
O.
Net Financial Indebtedness (J + N)
4.404
4.404
-59.998
(1) Interest bearing bank loans and borrow ings have been guaranteed by appointed third party financial
guarantors from a bank as w ell as personal guarantee by the chairman of the Company, Mr. YAN Changzai. All
short term bank borrow ings fall due w ithin tw elve months.
(2) Interest bearing bank loans and borrow ings have been secured by mortgages over certain property, plant and
equipment.
Page 92
10.2 Contingent and Indirect Liabilities
SNOWBIRD has no contingent and indirect liabilities.
10.3 Borrowing Requirements
In order to finance the intended growth of SNOWBIRD, inter alia, the expansion of the
sales network by promoting the brand and offering sales rebates on greater volumes (see
Section 13.4 of this Prospectus “Business Activities of SNOWBIRD - Strategies”), further
borrowing (in particular bank loans) will be necessary. The additional financing through
bank loans shall be obtained mainly from the banks by way of mortgaging SNOWBIRD’s
fixed assets or providing for guarantees. SNOWBIRD foresees, that the expanded
production capacity for both down processing (from 826 tons p.a. previously to 4131 tons
p.a. from September 2013 onwards) and sewing capacity (from 1.80 million pieces p.a. to
th
8.19 million pieces p.a. from 4 quarter of 2014) will require large working capital to
support the raw material procurement and production cost. The strategies to secure more
sales for down wholesale, domestic down clothing sales, export of clothing, international
sales of bedding products and increase in OEM sales will require large capital to support
the receivables.
10.4 Working Capital Statement
The Company believes that, based on SNOWBIRD’s current needs, SNOWBIRD’s
current working capital is sufficient for its present requirements, that means sufficient to
cover those payment obligations which will become at least due within the next twelve
months from the date of this Prospectus.
10.5 Significant Changes
On 6 June 2014 the shareholders at that time entered into a contribution agreement with
the Company whereby they undertook to transfer 40% of the shares in Snowbird HK, i.e.
2,041 shares, each of HKD 1.00 (approx. EUR 0.09), to the Company, which already was
holding 60% of the shares in Snowbird HK since 8 May 2014, against the issue of
29,950,000 new no par value ordinary bearer shares in the Company to the respective
shareholders according to their shareholder ratio (Einbringungsvertrag). The contribution
agreement and the capital increase by way of contribution in kind (Sachkapitalerhöhung)
were approved by an extraordinary shareholders’ meeting of the Company on 13 June
2014 and have been registered with the commercial register (Handelsregister) of the local
court (Amtsgericht) of Cologne on 10 July 2014.
Apart from the abovementioned capital increase, there have been no significant changes
in SNOWBIRD’s financial or trading position between 30 June 2014 and the date of this
Prospectus.
Page 93
11.
SELECTED FINANCIAL INFORMATION
The Company was founded as a shelf company (Vorratsgesellschaft) on 16 April 2012
and incorporated by registration in the commercial register (Handelsregister) of the local
court (Amtsgericht) of Frankfurt on 23 April 2012. The Company disclosed the economic
refoundation (wirtschaftliche Neugründung) to the commercial register (Handelsregister)
of the local court (Amtsgericht) of Cologne following the acquisition of all shares in the
Company by Mr. YAN Changzai.
The business of SNOWBIRD is mainly carried out by Snowbird Henan, which is an
indirect wholly owned subsidiary of the Company. All shares in Snowbird Henan are
directly held by Snowbird WFOE. Snowbird WFOE has been incorporated on 12 August
2013 and has acquired all shares in Snowbird Henan on 6 June 2014. Snowbird WFOE
became operational after 30 June 2014 and did not generate revenue and costs for
example before this time. All shares in Snowbird WFOE are directly held by Snowbird HK.
Snowbird HK has been incorporated on 31 March 2009. The Company is the sole
shareholder of Snowbird HK.
Snowbird Henan was during the reporting period the only operating subsidiary of
SNOWBIRD. Hence in order to present the business, financial condition and result of
operations for the last three financial years in relation to the business of SNOWBIRD, the
Company has prepared single entity financial statements of Snowbird Henan as at and
for the financial years ended on 31 December 2011 (“FY 2011”), 31 December 2012 (“FY
2012”) and 31 December 2013 (“FY 2013”) in accordance with International Financial
Reporting Standards and International Accounting Standards and Interpretations as
endorsed for application in the EU (“IFRS”) (the “Annual Financial Statements
Snowbird Henan”).
The Annual Financial Statements Snowbird Henan were audited by Crowe Kleeberg
GmbH, Augustenstraße 10, 80333 Munich, Germany (“Kleeberg”).
Furthermore, the Company has prepared its single entity financial statements in
accordance with IFRS for the financial years ended on 31 December 2012 (short fiscal
year) and 31 December 2013. For the financial year ended on 31 December 2013 the
Company has also prepared its single entity financial statement in accordance with the
German Commercial Code (Handelsgesetzbuch). These financial statements were
audited by Kleeberg.
In addition, condensed interim financial statements for the first six months period ended
on 30 June 2014 (“2014H1”) in accordance with IFRS have been prepared for Snowbird
Henan with respective comparative information (“2013H1”). These condensed interim
financial statements are unaudited, but were reviewed by Kleeberg in accordance with
the Auditing Standard 900 of the Institute of Public Auditors in Germany (“IDW PS 900”).
The selected financial information, which is reflected in this section, was derived from the
aforementioned financial statements for the FY 2011, FY 2012 and FY 2013 and 2014H1.
The aforementioned financial statements of SNOWBIRD are, apart from the separate
financial statement of the Company for the financial year ended on 31 December 2013 in
accordance with the German Commercial Code (Handelsgesetzbuch), not the legally
required financial statements of the Company, but have been prepared on a voluntary
basis for the purpose of this Offering. The purpose of these financial statements is to put
the investor in the position to better compare the development of the business, financial
condition and the results of operations of SNOWBIRD over the last three years.
The following figures were subject to rounding adjustments that were carried out
according to established commercial standards. As a result, the figures stated in a table
may not exactly add up to the total values that may also be stated in the table.
Page 94
Selected Financial Statement Data
Snowbird Henan
All figures below are taken from the financial statements of Snowbird Henan.
2011
Selected Statement of Comprehensive Income (1)
Revenue
Cost of sales
Gross profit
Other income
Administrative and other expenses
Finance costs
Income Tax Expense
49,166
-26,986
22,180
433
-4,489
-2,911
-526
14,687
-3,736
10,951
2012
(audited)
90,263
-48,886
41,377
561
-8,643
-4,026
-756
28,513
-7,279
21,234
2013
136,888
-83,913
52,975
1,260
-9,083
-6,108
-824
38,220
-9,941
28,279
2013HY1
2014HY1
(reviewed)
45,643
78,038
-28,371
-51,989
17,272
26,049
153
426
-1,115
-1,630
-2,715
-2,894
-383
-393
13,212
21,558
-3,408
-5,328
9,804
16,230
31 December
30 June
2011
2012
(audited)
2013
8,370
48,087
56,457
28,292
5,465
22,700
28,165
56,457
9,053
69,022
78,075
40,216
5,157
32,702
37,859
78,075
18,956
82,247
101,203
67,498
4,397
29,308
33,705
101,203
22,387
94,040
116,427
82,670
4,404
29,353
33,757
116,427
2011
2012
(audited)
2013
2013HY1
2014HY1
(reviewed)
14,687
28,513
38,220
13,212
21,558
15,737
29,870
40,104
14,000
22,599
Net cash from operating activities
Net cash for investing activities
Net cash for financing activities
3,931
-474
-2,622
14,459
-1,470
-4,156
5,886
-11,103
-7,562
1,063
-9,041
-5,500
-92
-1,838
-91
835
8,833
-12,779
-13,478
-2,021
22,410
30,414
16,695
18,288
13,590
Non-current assets
Current assets
Total assets
Total equity
Non-current liabilities
Current liabilities
Total liabilities
Net (decrease)/increase in cash and cash equivalents
2011
Other selected Financial Data
EBIT(3)
EBIT margin(4)
Net profit margin(5)
Number of employees at end of the financial year/period
15,213
30.9%
22.3%
1,514
2012
(unaudited) (2)
29,269
32.4%
23.5%
1,566
2013
39,044
28.5%
20.7%
1,611
2014
(reviewed)
2013HY1
2014HY1
(unaudited) (2)
13,595
29.8%
21.5%
1,611
(1) all numbers in EUR'000 except as otherw ise stated.
(2) Unaudited information provided by the Company.
(3) EBIT = Profit before taxation plus finance cost.
(4) EBIT divided by revenue multiplied by 100.
(5) Profit after Tax (Net Profit) for the period divided by revenue multiplied by 100.
Page 95
21,951
28.1%
20.8%
1,609
Snowbird AG
All figures below are taken from the IFRS financial statements of Snowbird AG.
2012
2013
EUR'000
EUR'000
(audited)
Selected Statement of Comprehensive Income
Loss/Total comprehensive income
-4
-4
-4
-10
-10
-10
2012
EUR'000
2013
EUR'000
50
50
46
55
55
36
4
0
0
50
14
0
5
55
2012
EUR'000
2013
EUR'000
-4
-10
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
0
0
0
5
0
0
0
5
50
55
Current assets
Total assets
Total equity
Current liabilities
Provisions
Trade payables
Other Liabilities
Page 96
12.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of the financial condition and results
of operations of SNOWBIRD should be read in conjunction with the other information in
this Prospectus, including the financial statements and the related notes which are
reproduced in this Prospectus starting on page F-1 and Section 11 „Selected Financial
Information“. The discussion and analysis regarding the key factors affecting results of
operations contains some forward-looking statements that are subject to known and
unknown risks and uncertainties. The actual results and the timing of events could differ
materially from those expressed or implied by such forward-looking statements as a result
of various factors, including those discussed below and elsewhere in this Prospectus,
particularly in Section 3 “Risk Factors”.
The financial and other data is presented in the text below primarily in millions of Euro
and in the tables below in thousands of Euro and is commercially rounded to one decimal
point. The percentages stated in the text and tables below have also been commercially
rounded to one decimal point. As a result, the figures shown in the text and tables below
may not add up exactly to the totals given, and the percentages may not add up to 100%.
12.1 Overview of Business
SNOWBIRD is mainly engaged in the processing of down and manufacture of down
products with its operating subsidiaries based in the PRC. Its current business can be
divided into four segments: (i) down, (ii) down clothing, (iii) down bedding and (iv) nondown OEM clothing.
The down segment includes the processing of white and grey goose as well as white and
grey duck feathers and down (feathers and down together referred to as “Down”)
whereas white goose down represents approx. 50% of the total processed down.
SNOWBIRD washes, sterilizes and grades the raw feathers and down to ensure a high
grade of the washed Down. The processed Down will then mainly be sold to domestic or
foreign wholesalers and other down product manufacturers while the other portion will be
used by SNOWBIRD for its own down products.
SNOWBIRD processes Down with a high ratio of down. SNOWBIRD regularly processes
Down with a down content of 80% or more which is well above average in the down
processing industry. Down which are exported by SNOWBIRD to other countries even
contain 90% down. SNOWBIRD can if required even produce Down with a ratio of 100%
down (Source: Test Report of Hohenstein, June 2014).
The down end products produced by SNOWBIRD are down clothing and down bedding
products (the “Down Products”). Down clothing mainly includes the production of jackets
and coats whereas down bedding mainly includes the production of duvets and pillows.
The Down Products are sold under SNOWBIRD’s own brands “Snow Bird” and “Xueniao”.
In addition, SNOWBIRD also produces manufactures down clothing for Original
Equipment Manufacturers (“OEMs”) under their private labels. SNOWBIRD’s own brand
down clothing is sold to domestic and foreign trading companies whereas the down
bedding is currently only sold to domestic trading companies. The trading companies
resell the products using their own sales and distribution networks or even might also
export the products.
Both, down clothing and down bedding products are currently aimed at middle income
end-consumers.
During the low season for its Down Products, SNOWBIRD also manufactures non-down
OEM clothing products, such as workers’ uniforms and jackets, in order to keep
capacities at a high level. The non-down products are made by SNOWBIRD based on
designs and samples provided by its customers.
The revenue generated from Down, Down Products and non-down OEM products
increased from EUR 49.17 million in FY 2011, to EUR 90.26 million in FY 2012 as well as
to EUR 136.89 million in FY 2013, respectively, representing a compounded annual
growth rate (“CAGR”) of 66.85%. SNOWBIRD’s profit after tax for FY 2011, FY 2012 and
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FY 2013 was EUR 10.95 million, EUR 21.23 million as well as EUR 28.28 million
respectively, representing a CAGR of 60.71%. Down is SNOWBIRD’s top selling product
representing 51.9% of the total sales in FY 2013 while down clothing, down bedding and
non-down OEM clothing represented 36.5%, 5.8% and 5.9% of the total sales in FY 2013
respectively.
SNOWBIRD’s operating facilities are located in Taiqian County, Puyang City, Henan
Province, PRC. SNOWBIRD’s production facilities have generated a total output of
approx. 1,186 tons of down and approx. 1.75 million pieces of down clothing, down
bedding and non-down OEM clothing in FY 2013.
As at 30 June 2014, SNOWBIRD employed 1609 employees.
Please refer to Section 13 of this Prospectus on “Business Activities of SNOWBIRD” for
further details.
12.2 Key Factors affecting Results of Operations
The Company believes that the following factors had and/or will continue to have a
material effect on its results of operation and financial condition:
12.2.1
Growth of the PRC economy
SNOWBIRD sells its products to domestic and foreign wholesalers who sell the
products within the PRC and the global market. Therefore the success of the
business of SNOWBIRD indirectly depends on the condition and growth of the
PRC and foreign consumer market, which, in turn, depends on worldwide
economic conditions and individual income levels and their impact on levels of
consumer spending. The slowdown of GDP growth rates in the PRC in FY
2011, FY 2012 and FY 2013 which is, amongst others, due to the development
of the global economy, could lead to a toughened competition and increased
pressure on prices. There are many factors affecting the level of consumer
spending, including but not limited to interest rates, currency exchange rates,
recession, inflation, deflation, political uncertainty, taxation, stock market
performance, unemployment level and general consumer confidence. There
can be no assurance that historical growth rates of the PRC economy will
continue or that projected growth rates of the PRC economy and the PRC
consumer market will be realized. Any future slowdowns or declines in the PRC
economy or consumer spending may materially and adversely affect
operations.
12.2.2
Competition in the PRC market
The Company believes that the textile and bedding industry is highly
competitive. Its major competitors include international and domestic textile
producers and/or processors. They compete with each other based on,
amongst other things, brand image, product variety, product design, product
quality and price. Competitors may have significantly greater financial, technical
and marketing resources, stronger brand name recognition and a larger existing
customer base than SNOWBIRD. In addition, competitors may have the ability
to respond more quickly to new or emerging technologies, may adapt more
quickly to changes in customer requirements and may devote greater resources
to the development, promotion and sales of their products than SNOWBIRD.
Competition in the PRC in the down product industry is very intense and brand
concentration is increasing. In recent years, overseas clothing companies start
to produce down clothing. These companies have an edge over the local
companies in term of their brand image and design capability, thus cause great
impacts to the down clothing companies. At the same time, overseas well
known down clothing brands are also starting to enter the Chinese market, thus
increasing the already intense competition.
There is no assurance that SNOWBIRD will be able to continue competing
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successfully against present and future competitors. The Company believes
that important factors to achieving success in the textile industry include
maintaining customer loyalty by cultivating long-term customer relationships,
achieving consistent product renewal and maintaining the quality of products
and services. If SNOWBIRD is unable to attain these factors, it may lose its
customers to its competitors. Increased competition may also force SNOWBIRD
to lower its prices.
If SNOWBIRD is unable to compete effectively with existing or new competitors
in the future, in particular in light of the changing and competitive market
environment, SNOWBIRD’s business and its net assets, financial condition and
12.2.3
Changes in raw material prices
The costs of raw materials accounted for approximately 73.41%, 79.43% and
85.14% of SNOWBIRD’s total costs of goods sold for FY 2011, FY 2012 and FY
2013 respectively, which included in particular raw down and feathers as well as
clothing accoutrements or accessories. As SNOWBIRD does not have longterm arrangements with its suppliers for such key raw materials, in particular the
annual supply contract does not contain any pricing for the period due to the
volatility of raw down and feather prices, there is no assurance that SNOWBIRD
will be able to obtain, or continue to obtain, quality raw materials at competitive
prices. Although SNOWBIRD’s raw materials turnover days are maintained at
30 days, the continuous and timely supply of quality raw materials is, however,
the basis for quality products. Market prices of such raw materials may fluctuate
due to the outbreak of the bird flu or other similar diseases or due to changes in
the level of global demand and supply. Any substantial increase in the prices of
these raw materials is likely to have a material adverse impact on SNOWBIRD’s
production costs. In the event of any significant increase in the costs of such
materials and should SNOWBIRD be unable to pass on such costs to
SNOWBIRD’s customers or do so on a timely basis, SNOWBIRD’s business
and its net assets, financial condition and results of operations may be
materially and adversely affected.
12.2.4
Effect of currency fluctuations
The Annual Financial Statements of Snowbird Henan for the period under audit
were prepared in EUR and the Company's future consolidated financial
statements will be prepared in EUR, while SNOWBIRD’s operating currency is
RMB, which is currently not a freely convertible currency. A devaluation of RMB
versus EUR would therefore have an adverse foreign currency translation effect
on SNOWBIRD’s consolidated financial statements. As the value of RMB is
controlled by PRC authorities, it is possible that foreign exchange policies of the
PRC government could have a significant impact on foreign currency exchange
rates. An increase in the value of RMB against EUR would therefore increase
SNOWBIRD’s profitability measured in EUR while alternatively a decrease in
the value of RMB against EUR would decrease SNOWBIRD’s profitability
measured in EUR.
12.2.5
Seasonality
SNOWBIRD’s down clothing and down bedding products are subject to
seasonal demands. SNOWBIRD experiences low demand for its down clothing
and down bedding products in the first half of the year due to the spring and
summer season. The demand will surge during the autumn and winter seasons.
12.3 Results of Operations
The following table presents the income statement data of Snowbird Henan for the years
ended 31 December 2011, 31 December 2012 and 31 December 2013, which was taken
from the audited Annual Financial Statements Snowbird Henan and the condensed
interim financial statements 2014H1.
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Statement of Comprehensive Income:
12.3.1
Revenues
SNOWBIRD’s core products can be classified into 4 categories namely down,
down clothing, down bedding and non-down OEM clothing.
Sales analysis by product
Comparison of FY 2011, FY 2012 and FY 2013
Sales increased by 83.59% and 51.65% in FY 2012 and FY 2013 respectively.
All of SNOWBIRD’s products have recorded significant increase in sales value
over the last three years.
Currently, down is SNOWBIRD’s top selling product, accounted for 18.17%,
39.67% and 51.90% of total sales in FY 2011, FY 2012 and FY 2013
respectively. Down is also SNOWBIRD’s highest growth product whereby it
recorded robust growth of 300.92% and 98.39% in 2012 and 2013 respectively.
Down clothing sales accounted for 64.54%, 44.73% and 36.47% of total sales in
FY 2011, FY 2012 and FY 2013 respectively. It registered double digit growth
rates over the last 3 years, increased by 27.25% and 23.64% in FY 2012 and
FY 2013 respectively.
Sales of down bedding accounted for 10.07%, 8.37% and 5.76% of total sales
in FY 2011, FY 2012 and FY 2013 respectively. It has recorded an increase of
52.69% in sales in FY 2012 and then further increased by 4.40% in FY 2013.
Sales of non-down OEM clothing accounted for 7.23%, 7.22% and 5.87% of
total sales in FY 2011, FY 2012 and FY 2013 respectively.
The main reason for the increase in sales over the last 3 years is a proven
business model, increased sales efforts and customers’ satisfaction on
SNOWBIRDS’s high quality products.
2013H1 compared to 2014H1
The momentum in the sales growth has continued in 2014 whereby sales had
increased by 70.97% in 2014H1 as compared to the 2013H1. Down recorded
robust growth of 89.21%, followed by 70.33% growth in down bedding, 42.17%
growth in down clothing and 39.43% growth in OEM clothing.
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Sales of down accounted for 67.55% and 61.05% of the total sales in 2014H1
and 2013H1 respectively. The increase in down sales is attributable to our new
down processing plant that had commence operations in the second half of
2013, thus enable us to satisfy our customers’ demand, both domestic and
overseas market. Domestic sales of down has been increased by 164.04%
while overseas sales of down has been increased by 41.29% in 2014H1 as
compared to 2013H1 as a result of strong demand from the existing customers.
Sales of down clothing accounted for 20.66% and 24.84% of the total sales in
2014H1 and 2013H1 respectively. The increase in sales of down clothing of
42.17% in 2014H1 as compared to 2013H1 is attributable mainly to the strong
demand from the existing customers in domestic market whereby we seen
growth of 47.75% in domestic sales while growth in export sales only 14.58%.
Sales of OEM clothing accounted for 10.24% and 12.56% of the total sales in
2014H1 and 2013H1 respectively. The increase in sales of OEM clothing of
39.43% in 2014H1 as compared to 2013H1 is attributable mainly to the higher
price of OEM clothing orders. Down clothing sales in the first half of the year are
highly affected by the seasonality factor due to spring and summer season
whereby there is very low demand for this warm weather period.
Sales of down bedding accounted for only 1.55% of total sales for both 2014H1
and 2013H1. Same as down clothing, sales of down bedding in the first half of
the year are also highly affected by the seasonality factor.
Sales analysis by geographical area
Domestic sales
Export sales
Comparison of FY 2011, FY2012 and FY 2013
Domestic sales accounted for 88.71%, 67.85% and 60.14% of total sales in FY
2011, FY 2012 and FY 2013 respectively. It registered strong growth rates over
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the last 3 years, increased by 40.42% and 34.40% in FY 2012 and FY 2013
respectively.
Export sales accounted for 11.29%, 32.15% and 39.86% of total sales in FY
2011, FY 2012 and FY 2013 respectively. It registered strong growth rates over
the last 3 years, increased by 422.95% and 88.07% in FY 2012 and FY 2013
respectively.
Domestic sales
At present, SNOWBIRD sells its products to the major distributors or
wholesalers across 12 provinces and federal territories in China who in turn sell
through their own distribution network and/or their retail shops. SNOWBIRD
does not control nor participate in the operations of their sales distribution
network nor retails shops.
SNOWBIRD’s top three provinces by sales value are Anhui, Jiangsu and Hebei.
When combined, they accounted for 44.89%, 44.41% and 49.90% of total
domestic sales in FY 2011, FY 2012 and FY 2013 respectively.
Export sales
SNOWBIRD sells mainly to its customers located at Taiwan, Russia and Hong
Kong. They will either re-export to other countries or sell to their local customers.
SNOWBIRD does not control nor participate in the operations of their sales
distribution network, SNOWBIRD is not aware of the countries or locations of
the end users market.
Taiwan is the top region by sales value. It accounted for 100.00% and 79.97%
of total export sales in FY 2012 and FY 2013 respectively.
The momentum in the sales growth has continued in 2014H1 whereby domestic
sales and export sales had increased by 93.85% and 38.59% respectively in
2014H1 as compared to the 2013H1.
Domestic
Down accounted for 55.39% and 40.66% of the total domestic sales in 2014H1
and 2013H1 respectively while down clothing accounted for 26.87% and 35.25%
of the total domestic sales in 2014H1 and 2013H1 respectively. The remaining
are OEM clothing accounted for 15.42% and 21.44% and down bedding for
2.33% and 2.65% of the total domestic sales in 2014H1 and 2013H1
respectively.
Due to the reason of seasonal demands, sales in the first half of each year for
down clothing and down bedding are normally low due to the spring and
summer seasons. As a result, sales to most of the provinces remain low while
SNOWBIRD accepts more sales orders for OEM clothing in order to better
utilize the sewing capacity. Therefore Nanjing city, main source of
SNOWBIRD’s OEM clothing orders, become the second top selling region
within China accounted for 14.57% and 21.44% of the total export sales in
2014H1 and 2013H1 respectively.
Export sales
Down accounted for 91.65% and 89.90% of the total export sales in 2014H1
and 2013H1 respectively while the remaining are down clothing.
Taiwan remains as SNOWBIRD’s main export market for our down and it
accounted for 75.61% and 72.12% of the total export sales in 2014H1 and
2013H1 respectively. It recorded an increase of 45.29% in 2014H1 as
compared to 2013H1.
Hong Kong accounted for 18.81% and 1.57% of total export sales in 2014H1
and 2013H1 respectively. The increase is attributable mainly to the down sales
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made to a new customer which represent 16.04% of total export sales in
2014H1.
Russia accounted for 5.58% and 26.30% of total export sales in 2014H1 and
2013H1 respectively. The reduction is due mainly to a customer, whose sales
represented 17.78% of the total export sales in 2013H1 and who did not place
any down sales order in 2014H1.
12.3.2
Cost of Sales
The main components of SNOWBIRD’s cost of sales are raw materials, direct
labor, manufacturing overhead and business and other taxes.
The costs of sales for the period under review are as follows:
Total cost of sales increased by 81.16% and 71.65% in FY 2012 and FY 2013
respectively which is in line with the increase in sales of 83.59% and 51.65% in
FY 2012 and FY 2013 respectively. Cost of sales has been increased in a much
higher percentage of 71.65% as compared to the increase in sales of 51.65%
due mainly to the product mix. Sales value of washed down, whereby its main
cost component is raw down, have increased its contribution from only 18.17%
of total sales in FY 2011 to 39.67% in FY 2012 and then further grew to 51.90%
of total sales in FY 2013.
Raw material cost, single largest cost component, accounted for 73.41%,
79.43%% and 85.14% of the total cost of goods sold in FY 2011, FY 2012 and
FY 2013 respectively. It has increased by 96.0% and 84.0% in FY 2012 and FY
2013 in line with the increase in sales.
Direct labor cost, second largest cost component, accounted for 20.68%, 15.01%
and 10.54% of the total cost of goods sold in FY 2011, FY 2012 and FY 2013
respectively. It has increased by 31.52% and 20.56% in FY 2012 and FY 2013
due to more human resources requirements to meet the production
requirements, which is in line with the increase in sales.
Total cost of sales increased by 83.25% in 2014H1 as compared to 2013H1
which is in line with the increase in sales of 70.97%. Cost of sales has been
increased in a much higher percentage than increase in sales due mainly to the
product mix. Sales of down, which has lower profit margin, accounted for 67.55%
of total sales in 2014H1 as compared to 61.05% in 2013H1.
Raw material purchases
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Purchase of raw down and features accounted for 49.19%, 61.24% and 73.72%
of the total raw material purchases in FY 2011, FY 2012 and FY 2013
respectively. Washed down can be used as raw materials to produce
SNOWBIRD’s down clothing and down bedding and can be sold directly to
SNOWBIRD’s customers.
Purchase of clothing accessories amounts to 27.36%, 19.38% and 15.04% of
the total raw material purchases in FY 2011, FY 2012 and FY 2013 respectively.
Clothing accessories such as mink collar, sewing thread, button etc are
required to produce SNOWBIRD’s clothing and bedding products.
Purchase of fabric amounts to 23.22%, 18.94% and 10.81% of the total raw
material purchases in FY 2011, FY 2012 and FY 2013 respectively. Fabrics are
required to produce SNOWBIRD’s clothing and bedding products.
Raw material purchases had increased by 63.97% in 2014H1 as compared to
2013H1. The increase is significantly lower than the increase in sales of 70.97%
due to the management effort to avoid excessive inventory holding as sales in
the first half of each year for down clothing and down bedding are normally low
due to the spring and summer seasons.
The components of various types of purchase had remained stable. For
instance, purchases of down and feathers remain at 77.88% of total purchases
in 2014H1 as compared to 75.10% in 2013H1.
12.3.3
Gross profit and gross profit margin
The following tables show a breakdown of gross profit and gross profit margin
generated from different business segments for the past three years ended 31
December 2011, 2012 and 2013.
Gross Profit
Gross profit has increased by 86.55% and 28.03% in FY 2012 and FY 2013
respectively in line with the increase in sales of 83.59% and 51.65% in FY 2012
and FY 2013 respectively. The gross profit has recorded a lower growth in FY
2013 as compared to FY 2012 due mainly to the different product mix. Sales of
down, whereby it has the lowest gross profit margin among all products, have
increased its contribution from only 18.17% of total sales in FY 2011 to 39.67%
in FY 2012 and then further grew to 51.90% of total sales in FY 2013.
Down product is the top contributor to SNOWBIRD’s gross profit. It accounted
for 11.90%, 34.19% and 44.41% in FY 2011, FY 2012 and FY 2013 respectively.
Its gross profit has increased by 436.03% and 66.32% in FY 2012 and FY 2013
in line with the increase in sales of down by 300.92% and 98.39% in FY 2012
and FY 2013 respectively.
Down clothing is the second top contributor to SNOWBIRD’s gross profit. It
accounted for 71.27%, 49.27% and 42.46% in FY 2011, FY 2012 and FY 2013
respectively. Its gross profit has increased by 28.98% and 10.31% in FY 2012
and FY 2013 in line with the increase in sales of down clothing by 27.25% and
23.64% in FY 2012 and FY 2013 respectively.
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Gross profit of down bedding has recorded an increase of 59.35% in FY 2012
which is in line with the increase of 52.69% in sales of down bedding in FY 2012.
Despite of an increase of 4.40% in sales of down bedding in FY 2013, gross
profit has been decreased by 7.67% as a result of lower gross profit margin.
Gross profit has increased significantly by 50.82% in 2014H1 as compared to
2013H1 as a result of better sales performance.
SNOWBIRD recorded an increase in gross profit across all products which is in
line with the increase in sales. However, gross profit growth for down at 54.07%
is much lower than sales growth at 89.21% due to the depressed gross profit
margin as a result of softer export prices for high grade goose down in 2014H1
as compared to 2013H1.
Gross Profit Margin:
SNOWBIRD has recorded gross profit margin of 45.11%, 45.84% and 38.70%
in FY 2011, FY 2012 and FY 2013 respectively. The decrease in gross profit
margin by 7.14% in FY 2013 as compared to FY 2012 is mainly due to the
different product mix and lower margin across all products. Sales of down,
whereby it has the lowest gross profit margin among all products, have
increased its contribution from only 18.17% of total sales in FY 2011 to 39.67%
in FY 2012 and then further grew to 51.90% of total sales in FY 2013.
Down prices, like other commodities, are subject to the volatility in the market
prices. Therefore gross profit margin for down is volatile. Gross profit margin for
down is 29.55% in FY 2011, it has increased by 9.96% to 39.51% in FY 2012,
after that decreased by 6.39% in FY 2013.
Down clothing and down bedding have a stable gross profit margin in FY 2011
and FY 2012. Gross profit margin for down clothing and down bedding in FY
2013 has been decreased by 5.44% and 7.05% as compared to FY 2012 due
the strategy to boost SNOWBIRD’s sales in preparation to the expansion plan in
FY 2014 whereby a new sewing plant is expected to be completed in second
quarter of FY 2014 and commence operations in fourth quarter of FY 2014.
Gross profit margin in has declined from 37.84% in 2014H1 to 33.38% in
2013H1 mainly due to the reduced gross profit margin of down which accounted
for 67.55% and 61.05% of total sales in 2014H1 and 2013H1 respectively..
Gross profit margin for down has declined from 35.47% to 28.88% due to the
softer export prices for high grade goose down in 2014H1 as compared to
2013H1
Gross profit margin for down clothing and down bedding does not differ
significantly from the corresponding periods.
Gross profit margin for OEM clothing declined slightly from 37.46% in 2013H1
to 31.66% in 2014H1 due to the increased raw material prices.
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12.3.4
Other income
Other income consists basically of government grants and subsidies, interest
income and sales of residuals.
12.3.5
Sales rebate accounted for 83.88%, 88.77% and 84.44% in FY 2011, FY 2012
and FY 2013 respectively. SNOWBIRD signs annual sales and sales rebate
agreement with its domestic customers. In order to encourage their loyalty and
inspire their sales, SNOWBIRD rewards them with sales rebate in according to
their annual sales value achievement (only for domestic sales of down clothing
and down bedding). The higher SNOWBIRD’s sales to them, the higher the
rebate % they will receive. SNOWBIRD incurred average sales rebate rates of
9.63%, 14.09% and 13.16% of total domestic sales of down clothing and down
bedding in FY 2011, FY 2012 and FY 2013 respectively.
Sales exhibition expenses accounted for 7.42%, 4.85% and 5.15% in FY 2011,
FY 2012 and FY 2013 respectively. In the second quarter of every year,
SNOWBIRD organizes a very large scale of the fashion show and invites its
existing and potential customers to attend. During the fashion show,
SNOWBIRD presents its latest designs of down clothing to them. Thereafter,
SNOWBIRD’s customers will place orders on their preferred selections. The
increase of 25.83% and 11.45% in FY 2012 and FY 2013 is in line with the
increase in sales.
Selling and distribution expenses remain low in both the first half due to low
sales activities as a result of low seasonal demand. The increase of 46.13% in
2014H1 as compared to 2013H1 is due mainly to the increase in sales rebates
incurred on domestic sales of down clothing and down bedding.
12.3.6
General and Administrative expenses
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General and administrative expense increased by 38.30% and 51.69% in FY
2012 and FY 2013 due to the expansion of SNOWBIRD and in line with the
increase in sales and purchases activities.
Salaries and related cost consist mainly of salaries, bonuses and social
insurances. It accounted for 62.28%, 63.41% and 58.02% of general and
administrative expenses in FY 2011, FY 2012 and FY 2013 respectively. It
increased by 40.81% and 38.80% in FY 2012 and FY 2013 respectively due to
expansion of businesses require more office supports and annual increment in
salaries.
Research and Development expenses were incurred in exploration of new
and/or improved products and new or improved production methods to enhance
SNOWBIRD’s product values. It accounted for 7.20%, 6.15% and 10.96% of
general and administrative expenses in FY 2011, FY 2012 and FY 2013
respectively. Throughout the years, SNOWBIRD has mastered the skills in
producing down and down related products. Through acquisition of modern
production facilities, SNOWBIRD is capable of producing top quality down such
as “sticky down” and “goose down mink”. SNOWBIRD will continue its R&D
efforts in order to further improve its product quality, to lower its production cost
and increase its competitiveness.
Exchange losses relate to the conversion of its export sales, which is
denominated in US dollar, into RMB upon receipts.
General and administrative expense increased by 6.58% in 2014H1 as
compared to 2013H1. The slight increase is in line with the business expansion.
12.3.7
Finance costs
Finance expense refers to the interest expenses incurred on bank borrowings.
The weighted average interest rates are 6.31%, 6.54%, 6.26% and 5.93% in FY
2011, FY 2012, FY 2013 and 2014H1 respectively.
12.3.8
Profit before taxation has been increased by 94.12% and 34.04% in FY 2012
and FY 2013 respectively in line with the increase in sales and gross profit.
Profit before taxation has been increased by 63.16% in 2014H1 as compared to
2013H1 which is in line with the increase in sales and gross profit.
12.3.9
Income tax and tax rates
SNOWBIRD’s profit before taxation was solely derived from China and subject
to a tax rate of 25% under the tax law of China. However, due to certain
calculations as required under the tax law, the actual income tax incurred may
be slightly different from the standard rate of 25%. The average tax rate is
25.40%, 25.50% and 26.00%, 25.8% and 24.7% in FY 2011, FY 2012, FY 2013,
2013H1 and 2014H1 respectively.
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12.4 Balance Sheet Data
12.4.1
Non-current assets
Non-current assets comprise of property, plant and equipment, intangible
assets and land use rights.
Property, plant and equipment
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At 31 December FY 2011, FY 2012 and FY 2013, net book value of property,
plant and equipment amounted to EUR 6.269 million, EUR 7.016 million and
16.982 million. At 31 December 2013, property, plant and equipment comprises
of buildings of EUR 7.538 million, plant and machinery of EUR 6.958 million,
building under construction of EUR 2.258 million, motor vehicle of EUR 0.204
million and office equipment of EUR 0.024 million.
The significant additions to the property, plant and equipment in FY 2011,
FY 2012, FY 2013 and 2014H1 are as below:
Item
Production
equipment
FY 2011
(EUR ‘000)
FY 2012
(EUR
‘000)
FY 2013
(EUR
‘000)
2014H1
(EUR ‘000)
23
12
4,715
29
Building and
building under
construction
306
1,412
6,317
1,785
Motor vehicles
135
38
50
16
2
1
8
8
469
1,463
11,102
1,838
Office equipment
Total
The additions in property, plant and equipment in FY 2011 amounted to EUR
0.460 million, mainly comprise of construction cost on a workers dormitory and
warehouse amounted to EUR 0.306 million.
1.463 million, mainly comprise of construction cost on a down processing plant
(under construction) amounted to EUR 1.412 million.
11.102 million, mainly comprise of construction cost on a down processing plant,
waste treatment plant, a sewing plant (under construction) and office building
(under construction) amounted to EUR 6.317 million and plant and machinery,
comprise mainly of down processing facilities and waste treatment facilities,
amounted to EUR 4.715 million.
The additions in property, plant and equipment in 2014H1 amounted to EUR
1.838 million, mainly comprise of construction cost on a sewing plant and the
office building.
Intangible assets
Intangible assets are those cost incurred on trademarks registration and
software.
Land use rights
Land use rights are two parcels of lands acquired in FY 2007 and one parcel of
land acquired in FY 2010. The decrease over the years is due to the
amortization charge.
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2014H1 compared to FY2013
As at 30 June 2014, net book value of property, plant and equipment amounted
to EUR 18.19 million. The increase during 2014H1 is due mainly to the building
under construction of EUR 1.79 million in respect of the sewing plant and office
building.
12.4.2
Current assets
Inventories
For FY 2011, FY 2012 and FY 2013, inventory turnover days are calculated
using the formula: (average inventories/cost of sales) × 365 days. For 2014H1,
inventory turnover days are calculated using the formula: (average
inventories/cost of sales) × 182 days.
(*)
Inventories amounted to EUR 3.309 million, EUR 3.787 million and EUR 10.778
million at end of FY 2011, FY 2012 and FY 2013 respectively. The increase
over the years is in line with the increase in cost of sales.
Inventories turnover days stood at 30.9 days, 26.5 days and 31.7 days in FY
2011, FY 2012 and FY 2013 respectively. The decrease of 4.4 days in FY 2012
as compared to FY 2011 is due to the lower finished goods on hand. The
increase of 5.2 days in FY 2013 as compared to FY 2012 is due to higher
inventories as a result of expanded down processing capacity which has
commenced operations in September 2013.
Inventory turnover days are relatively high in 2014H1 due to low sales amount
as a result of the seasonal demand. SNOWBIRD needs to stock up to meet the
production requirements to cater for the sales which will be picking during
2014H2.
Receivables and prepayments
For FY 2011, FY 2012 and FY 2013, trade receivables turnover days =
(average trade receivables/revenue) × 365 days. For 2014H1, trade receivables
turnover days = (average trade receivables/revenue) × 182 days.
(*)
Trade receivables amounted to EUR 22.054 million, EUR 31.229 million and
EUR 47.867 million at end of FY 2011, FY 2012 and FY 2013 respectively. The
increase over the years is in line with the increase in sales. Trade receivables
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turnover days stood at 123.3 days, 107.7 days and 105.5 days in FY 2011, FY
2012 and FY 2013 respectively. The decrease of 15.6 days in FY 2012 as
compared to FY 2011 is due to better credit management. The decrease of 2.2
days in FY 2013 as compared to FY 2012 is due to continuing effort in credit
management.
Other receivables at end of FY 2013 comprise of government grants receivable
amounted to EUR 1.032 million.
Prepayments amounted to EUR 0.314 million (comprise of lease prepayment
for land use rights for new factory location), EUR 3.592 million (comprise of
lease prepayment for land use rights for new factory location and advanced
payment to suppliers) and EUR 5.875 million (comprise of lease prepayment for
land use rights for new factory location, advanced payment to suppliers and
Prepaid professional fee) at end of FY 2011, FY 2012 and FY 2013
respectively.
Trade receivable turnover days appear to be relatively high in 2014H1 due to
the very low sales amount during the first quarter of 2014, which only accounted
for 31.58% of the total sales in 2014H1, as a result of the seasonal demand.
Cash and cash equivalents
Cash and cash equivalents, comprise of cash in bank and on hand, amounted
to EUR 22.410 million, EUR 30.414 million and EUR 16.695 million at end of FY
2011, FY 2012 and FY 2013 respectively. The increase in cash and cash
equivalents in FY 2012 is mainly attributable to the increased net profit during
the year. The decrease in cash and cash equivalents in FY 2013 is mainly
attributable to significant acquisition of property, plant and equipment amounted
to EUR 11.102 million and significant increase in inventories EUR 6.991 million.
SNOWBIRD does not have any deposit pledged with financial institutions.
Cash and cash equivalents, comprise of cash in bank and on hand, amounted
to EUR 13.59 million at end of 2014H1. The decrease in cash and cash
equivalents is mainly attributable to the capital expenditure of EUR1.84 million
during 2014H1.
12.4.3
Shareholders’ Equity
Shareholders’ equity accounted for EUR 28.292 million, EUR 40.216 million and
EUR 67.498 million and EUR 82.617 million at end of FY 2011, FY 2012, FY
2013 and 2014H1 respectively. The increase over the period under review is
attributable to the rising net profit of the Group.
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12.4.4
Current Liabilities
Payables and accruals
For FY 2011, FY2012 and FY2013, trade payables turnover days = (trade
payables/purchases of raw materials) × 365 days. For 2014H1, trade payables
turnover days = (trade payables/purchases of raw materials)× 182 days.
(*)
Trade payables amounted to EUR 4.632 million, EUR 5.717 million and EUR
5.145 million at end of FY 2011, FY 2012 and FY 2013 respectively. Trade
payables turnover days stood at 58.4 days, 48.6 days and 27.7 days in FY
2011, FY 2012 and FY 2013 respectively. The decrease of 9.8 days in 2012 as
compared to FY 2011 is due to faster payment to the suppliers. The decrease of
20.9 days in FY 2013 as compared to FY 2012 is due to continuing effort
improvement in payment to the suppliers.
Sales rebate payable amounted to EUR 4.117 million, EUR 7.469 million and
EUR 7.499 million at end of FY 2011, FY 2012 and FY 2013 respectively.
SNOWBIRD signs annual sales and sales rebate agreement with its domestic
customers. In order to encourage their loyalty and inspire their sales,
SNOWBIRD rewards them with sales rebate according to their annual sales
value achievement (only for domestic sales of down clothing and down
bedding). The higher SNOWBIRD’s sales to them, the higher the rebate % they
will receive. The Group incurred average sales rebate rates of 9.63%, 14.09%
and 13.16% of total domestic sales of down clothing and down bedding in FY
2011, FY 2012 and FY 2013 respectively.
Salary payable amounted to EUR 1.893 million, EUR 2.508 million and EUR
4.219 million at end of FY 2011, FY 2012 and FY 2013 respectively. The
increase is in line with the increase in employee related expenses.
VAT payable amounted to EUR 0.426 million, EUR 0.702 million and EUR
1.297 million at the end of FY 2011, FY 2012 and FY 2013 respectively. The
increase is in line with the increase in domestic sales.
The trade payables days at end of 2014H1 remain stable.
Dividend payables
Dividend payable amounted to EUR 6.072 million, EUR 8.396 million and Nil
and EUR 1.190 million at the end of FY 2011, FY 2012, FY 2013 and 2014H1
respectively.
The dividend declared for 2014H1 by Snowbird PRC is payable to Snowbird
WOFE as part of the restructuring exercise and has no financial impact at the
Snowbird Group level.
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Loans and borrowings
Loans and borrowings accounted for EUR 9.837 million, EUR 11.753 million
and EUR 12.587 million at end of FY 2011, FY 2012 and FY 2013 respectively.
These loans and borrowings bear weighted average interest rates of 6.31%,
6.54% and 6.26% in FY 2011, FY 2012 and FY 2013 respectively and are
secured by buildings and certain items of plant and machinery and a third party
financial guarantor. The current portion of loans and borrowings are also
secured by personal guarantee by Mr. YAN Changzai, the Company’s CEO.
Loans and borrowings accounted for EUR 12.496 million at end of 2014H1.
These loans and borrowings bear weighted average interest rates of 5.90%.
Income tax payable
Income tax payable accounted for EUR 1.071 million, EUR 0.917 million, EUR
2.090 million and EUR 3.922 million at end of FY 2011, FY 2012, FY 2013 and
2014H1 respectively.
12.5 Liquidity and Capital Resources
SNOWBIRD recorded positive net cash flow from operating activities for the period under
review at EUR 3.931 million, EUR 14.459 million and EUR 5.886 million in FY 2011, FY
2012 and FY 2013 respectively.
The Group recorded negative net cash flow for investing activities for the period under
2012 and FY 2013 respectively. Investing activities are mainly in acquisition of property,
plant and equipment in relation to the construction of a down processing plant and sewing
plant.
The Group recorded negative net cash flow for financing activities for the period under
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2012 and FY 2013 respectively. It comprises of (a) dividend paid amounted to EUR 3.200
million, EUR 6.072 million and EUR 8.396 million in FY 2011, FY 2012 and FY 2013
respectively, netted off by (b) net proceeds from bank borrowing of EUR 0.579 million,
EUR 1.916 million and EUR 0.834 million in FY 2011, FY 2012 and FY 2013 respectively.
2013H1 and 2014H1
SNOWBIRD recorded negative net cash flow from operating activities during 2014H1 at
EUR 0.09 million due mainly to the deposit of EUR1.79 million paid for the acquisition of
1,500 units of sewing machines for the new sewing plant which is expected to commence
operations in the fourth quarter of 2014.
SNOWBIRD recorded negative net cash flow for investing activities for the period under
review at EUR 9.04 million and EUR 1.84 million in 2013H1 and 2014H1 respectively.
Investing activities are mainly in acquisition of property, plant and equipment in relation to
the construction of a down processing plant during 2013H1 and construction of a office
building and sewing plant during 2014H1.
SNOWBIRD recorded positive net cash flow for financing activities in 2013H1 due to the
net proceeds from bank borrowings. The Group recorded negative net cash flow for
financing activities in 2014H1 due to the net payments for bank borrowings.
12.6 Off-Balance Sheet and other Arrangements
SNOWBIRD does not have any off-balance sheet obligations or transactions. There are
no other obligations or risks which were not reflected in the financial statements of
SNOWBIRD’s entities or disclosed in the notes of the financial statements.
12.7 Basis of Preparation
SNOWBIRD has prepared single entity financial statements of Snowbird Henan for the
years ended 31 December 2011, 31 December 2012 and 31 December 2013 and period
ended 30 June 2014, which were prepared in accordance with the provisions of the
International Financial Reporting Standards (IFRS) along with the interpretations of the
International Financial Reporting Interpretations Committee (IFRIC) as adopted in the EU.
SNOWBIRD has prepared single financial statements for the Company in accordance
with IFRS for years ended 31 December 2012 (short fiscal year) and 31 December 2013.
For the financial year ended on 31 December 2013 the Company has also prepared its
single entity financial statement in accordance with the German Commercial Code
(Handelsgesetzbuch).
12.8 Critical Accounting Policies
SNOWBIRD has identified the following critical accounting policies which require its
management to make assumptions about matters that were uncertain at the time those
policies were applied and with respect to which the management could reasonably have
made different assumptions in the relevant period or with respect to which changes in the
assumptions were reasonably likely to occur from period to period or would have a
material impact on the presentation of SNOWBIRD’s financial condition, changes in
financial conditions or results of operations.
For a detailed description of SNOWBIRD’s critical accounting policies, see note 4 to the
Audited Financial Statements Snowbird Henan for the financial year ended December 31,
2013, 2012 and 2011, included in the Section 25 “Financial Information”.
12.8.1
Critical accounting estimates and judgment
Estimates and judgments are continually evaluated and are based on historical
experiences and other factors, including expectations of future events that
SNOWBIRD believes might reasonably occur under specific circumstances.
SNOWBIRD makes estimates and assumptions concerning the future. The
resulting accounting estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
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12.8.2
Functional and Foreign Currencies
The financial statements of the Company are presented in the currency of the
primary economic environment in which the entity operates (the functional
currency).
The Company conducts its business predominately in the PRC and hence its
functional currency is in Renminbi (“RMB”).
12.8.3
Key sources of estimation uncertainty
Useful Lives and Residual Values of Depreciable Assets
Property, plant and equipment are depreciated on a straight-line basis over their
estimated useful lives after taking consideration of residual value, which
management assesses at 10% of the initial cost. Management estimates the
useful lives of property, plant and equipment to be within 5 to 20 years.
Changes in the expected level of usage and technological developments could
impact the economic useful lives and the residual value of these assets,
therefore future residual value and depreciation charges could be revised.
Lease Prepayment
Lease prepayments represent prepayments of land use rights paid to the
various PRC land bureaus. Lease prepayments are carried at cost less
amortization and accumulated impairment losses. Amortization is recognized in
profit or loss on a straight-line basis over the period of the land use rights, which
are 50 years from the respective dates that they are available for use.
Inventories
Inventories are measured at the lowest of cost and net realizable value. Cost is
determined by weighted average method. The cost of finished goods and workin- progress comprise of raw materials, labor and other overheads that incurred
in bringing the inventories to their present location and condition. Net realizable
value is the estimated cost of the selling price in the ordinary course of business,
less the estimated cost of completion and the estimated costs necessary to
make the sale.
Trade and other Receivables
Trade and other receivables are recognized initially at fair value and
subsequently at amortized cost using the effective interest method, less any
impairment losses. An allowance for impairment of receivables is established
when there is objective evidence that the Company will not be able to collect all
amounts due according to the original terms of the receivables.
Liabilities and Interest Bearing Liabilities
Trade and other payables and term loan are classified as financial liabilities
measured at amortized cost, and are recognized initially at fair value and
subsequently at amortized cost using the effective interest method. Interestbearing liabilities are recognized initially at costs less attributable transaction
costs. Subsequent to initial recognition, interest-bearing liabilities are stated at
amortized cost with any difference between cost and redemption value being
recognized in profit or loss over the period of the borrowings on effective
interest basis.
Financial Liabilities
Financial liabilities within the scope of IAS 39 are classified as either financial
liabilities measured at amortized costs such as interest-bearing liabilities and
trade and other payables, or financial liabilities designated at fair value through
profit or loss.
Financial liabilities are derecognized if the Company’s obligations specified in
the contract expire or are discharged or cancelled.
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Revenue Recognition
Provided it is probable that the economic benefits will flow to the Company and
the revenue and costs, if applicable, can be measured reliably, revenue is
recognized in the profit or loss as follows:
Sale of Goods
Revenue is recognized when goods are delivered to the customers’ premises or
collected by the customers at the Company’s premises which is taken to be the
point in time when the customer has accepted the goods and the related risks
and rewards of ownership.
Interest Income
Interest income is recognized on a time proportion basis using the effective
interest method.
Government grants
Grants that compensate the Company for expenses incurred are recognized in
profit or loss as other income on a systematic basis in the same periods in
which the expenses are recognized.
12.8.4
Critical judgment made in applying accounting policies
Allowance for Bad and Doubtful debts
Allowances for bad and doubtful debts are based on an assessment of the
recoverability of the trade and other receivables. Allowances are applied to
trade and other receivable where events or changes in circumstances indicate
that the balances may not be collectible. The identification of bad and doubtful
debts requires the use of judgment and estimation. Where the expected
outcome is different from the original estimate, such difference will impact the
carrying value of trade and other receivables and doubtful debt expenses for the
period in which such estimate has been changed.
Income Tax
SNOWBIRD has exposure to income tax arising from their operations in the
PRC. Significant judgment is required in determining the provision for income
taxes. There are also claims for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognizes
liabilities for expected tax issues based on estimates of whether additional
taxes will be due. When the final tax outcome of these matters is different from
the amounts that were initially recognized, such differences will impact the
income tax expense and deferred tax provisions in the period in which such
determination is made.
12.9 Additional Information from the Financial Statements of the Company
The single entity financial statement of the Company for the period ended on 31
December 2013 was prepared under the German Commercial Code (Handelsgesetzbuch
and) and under IFRS.
The single entity financial statement of the Company for the period ended on 31
December 2012 was prepared under IFRS.
The single entity financial statements of the Company abovementioned are reproduced in
Section 25 of this Prospectus “Financial Information”.
The Company incurred net loss of EUR 10,000 and EUR 4,000 respectively in FY 2013
and FY 2012 due to other operating expenses incurred. The Company has not
commenced any operations as of the end of 2014H1.
As at 31 December 2013 and 31 December 2012, total equity stood at EUR 36,000 and
EUR 46,000 respectively.
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13.
BUSINESS ACTIVITIES OF SNOWBIRD
13.1 Overview
The Company is the ultimate holding company of SNOWBIRD.
SNOWBIRD is mainly engaged in the processing of down and manufacture of down
products with its operating subsidiaries based in the PRC. Its current business can be
divided into four segments: (i) down, (ii) down clothing, (iii) down bedding and (iv) nondown OEM clothing.
The down segment includes the processing of white and grey goose as well as white and
grey duck feathers and down (feathers and down together referred to as “Down”)
whereas white goose down represents approx. 50% of the total processed down.
SNOWBIRD washes, sterilizes and grades the raw feathers and down to ensure a high
grade of the washed Down. The processed Down will then mainly be sold to domestic or
foreign wholesalers and other down product manufacturers while the other portion will be
used by SNOWBIRD for its own down products.
SNOWBIRD processes Down with a high ratio of down. SNOWBIRD regularly processes
Down with a down content of 80% or more which is well above average in the down
processing industry. Down which is exported by SNOWBIRD to other countries even
contain 90% down. SNOWBIRD can if required even produce Down with a ratio of 100%
down (Source: Test Report of Hohenstein, June 2014).
The down end products produced by SNOWBIRD are down clothing and down bedding
products (the “Down Products”). Down clothing mainly includes the production of jackets
and coats whereas down bedding mainly includes the production of duvets and pillows.
The Down Products are sold under SNOWBIRD’s own brands “Snow Bird” and “Xueniao”.
In addition, SNOWBIRD also manufactures down clothing for Original Equipment
Manufacturers (“OEMs”) under their private labels. SNOWBIRD’s own brand down
clothing is sold to domestic and foreign trading companies whereas the down bedding is
currently only sold to domestic trading companies. The trading companies resell the
products using their own sales and distribution networks.
Both, down clothing and down bedding products are currently aimed at middle income
end-consumers.
During the low season for its Down Products, SNOWBIRD also manufactures non-down
OEM clothing products, such as workers’ uniforms and jackets, in order to keep
capacities at a high level. The non-down products are made by SNOWBIRD based on
designs and samples provided by its customers.
The revenue generated from Down, Down Products and non-down OEM products
increased from EUR 49.16 million in FY 2011, to EUR 90.26 million in FY 2012 as well as
to EUR 136.88 million in FY 2013, respectively, representing a compounded annual
growth rate (“CAGR”) of 66.86%. SNOWBIRD’s profit after tax for FY 2011, FY 2012 and
FY 2013 was EUR 10.95 million, EUR 21.23 million as well as EUR 28.28 million
respectively, representing a CAGR of 60.70%. Down is SNOWBIRD’s top selling product
representing 51.9% of the total sales in FY 2013 while down clothing, down bedding and
non-down OEM clothing represented 36.5%, 5.8% and 5.9% of the total sales in FY 2013
respectively.
SNOWBIRD’s operating facilities are located in Taiqian County, Puyang City, Henan
Province, PRC. SNOWBIRD’s production facilities have generated a total output of
approx. 1,186 tons of Down and approx. 1.75 million pieces of down clothing, down
bedding and non-down OEM clothing in FY 2013.
As at 30 June 2014, SNOWBIRD employed 1,609 employees. Until the date of this
Prospectus, no material change in the number of employees has occurred.
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13.2 History of SNOWBIRD
The most important milestones in the history of SNOWBIRD are set out below:
2001

Snowbird Henan is incorporated.

Down clothing plant with a built-up area of 5,253 sqm commenced
operations. Annual clothing production capacity is 200,000 pieces.

Snowbird Henan has been awarded with the award “Henan top quality
product”.

New down processing plant and facilities with a built-up area of 3,627
sqm commenced operations. Annual production capacity amounts to 826
tons.

Snowbird Henan has been awarded with the award “China well-known
trademark”.

Snowbird Henan has been awarded with the award “Henan well-known
trademark”.

New down processing plant and facilities with a built-up area of 16,800
sqm commenced operations. Annual production capacity amounts to
3,305 tons.

New sewing plant for Down Products and non-down OEM products with a
built-up area of 11,071 sqm is currently being built. Annual clothing
production capacity of this new sewing plant is expected to be 6.3 million
pieces. In total, both sewing plants of SNOWBIRD will then have a
capacity of approx. 8.2 million pieces.
2008
2010
2012
2013
2014
13.3 Competitive strength
SNOWBIRD considers itself a significant player in the mature Chinese down market and
believes that it is well positioned to introduce innovative products to its existing client
base as well as potential new clients.
Overall, the Company believes that the following competitive strengths are the main
drivers of its future growth:

Strategic location
SNOWBIRD’s plants are strategically located at Taiqian County, Puyang City,
Henan Province, PRC. Taiqian County has been awarded “Home of Down” as a
result of its famous feather distribution center and production base of down. In
order to promote industrial development for down production, the Taiqian County
government has planned the development of an industrial park of down since 2000
and focus on improving infrastructure. At this juncture, Taiqian County’s industrial
park of down is one of the most structured industrial park for down and down
related products manufacturing in China. This area possesses more than 30 years
of expertise in producing down and down related products, can access to skilled
workers and cheap raw materials.
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
Modern technology
Throughout the years, SNOWBIIRD has mastered the skills in producing down and
down related products. Through establishment of modern production facilities,
SNOWBIRD is capable of producing expensive down such as “sticky down” and
“goose down mink”. In 2013, SNOWBIRD has registered a patent on “sticky down
screening box”, which proved its capability in producing high value and quality
down. SNOWBIRD can if required even produce Down with a ratio of 100% down
(Source: Test Report of Hohenstein, June 2014).

Governmental support
Down and down related products are the economic pillar of the Taiqian County.
Thus, SNOWBIRD has received support from the Taiqian County in many ways
including uninterrupted power supply and improved infrastructure. Besides, the
PRC government is very supportive regarding agricultural related industries,
including the down industry, and has been very encouraging exports. SNOWBIRD
has enjoyed various benefits such as exemption in raw material value-added tax
and export tax rebates.

Strong brand
SNOWBIRD has been awarded many brand related awards. SNOWBIRD is very
proud of its achievement in obtaining “China well-known brand” from Trademark
Office of the Chinese State Administration for Industry and Commerce. The highly
reputable brand of “Xueniao” (“Snow Bird”) witnessed SNOWBIRD’s products
popularity and the confidence among the consumers. This has boosted the
success rates of SNOWBIRD’s products.

Dedicated and experienced management
SNOWBIRD is led by the Company’s chairman, Mr. YAN Changzai, who has more
than 20 years of experience in the down industry. Mr. YAN Changzhai’s drive and
passion have been instrumental in SNOWBIRD’s success to-date. He has
conceptualized SNOWBIRD’s strategies in the past and successfully steered
SNOWBIRD. Mr. YAN Changzhai is closely supported by a team of executive
directors and executive officers with extensive experience in their respective fields.
Snowbird Henan is headed by the Company’s chairman Mr. YAN Changzai, who is
supported by Mr. QIU Duoxiang having more than 30 years of experience in the
down industry as well as by Snowbird Henan’s deputy general managers Mr. YAN
Zhaorui and Mr. CHEN Yijun.
These personnel support Mr. YAN Changzai in driving SNOWBIRD’s growth.

Innovative research department
SNOWBIRD is very innovative and believes to be one of the leaders in down
research. Its research department has in-house facilities with 12 employees.
Research is concentrated on manufacturing and processing. SNOWBIRD has 15
utility model patents, out of which 9 utility model patents are actually used in the
down processing and sewing process. The Company believes that SNOWBIRD is
a market leader in the most expensive type of “sticky down”. Future research is to
look into a number of products including colored down for transparent clothing.
13.4 Strategies
SNOWBIRD plans to become the Chinese market leader for down production. Given that
China produces around 80% of worldwide down (Source: Market Research Report),
becoming market leader in China would also suggest becoming the world market leader.
Thus, SNOWBIRD is pursuing the following strategic objectives:

Sharp increase in capacity
The second down processing plant, which was completed in second half of 2013
increases SNOWBIRD’s capacity more than four times and has leading
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technologies for processing Down with dedicated software. The site also has
extensive warehouse space for inventories of either unprocessed or processed
down. This should further facilitate a sharp increase in business. The plant has a
new waste water treatment facility which recycles all water used in cleaning.
Improved techniques should allow a significant improvement in general efficiencies
in the second down processing plant. Productivity of the second down processing
plan may be 30% higher than the first down processing plant.

Down Wholesale
SNOWBIRD plans to continue supplying cleaned and graded Down directly to local
Chinese textile manufacturers and indirectly to international customers.
SNOWBIRD also plans to expand its direct wholesale exports to other foreign
markets than Taiwan and Russia.

More domestic down clothing sales
SNOWBIRD also aims to enhance its brand for down clothing. These are well
known in China but little known outside. Currently SNOWBIRD sells into 12
provinces and direct-controlled cities in China. The Company intends to add a few
more, but SNOWBIRD already has extensive coverage of the colder areas where
warm winter textile products see greater demand.

More clothing exports under own brand
SNOWBIRD’s own designed down clothing are currently sold to 13 customers in
Russia. This number is to be increased. Also, SNOWBIRD intends to export own
brand products to other foreign markets such as elsewhere in Europe and the US.

International sales of bedding products under own brand
SNOWBIRD plans as a first step for a market entry in Europe to develop direct
sales of down bedding products to Europe. To create brand awareness among
consumers in Europe needs greater marketing expenses than in the past, which
SNOWBIRD is willing to invest.

Increase in OEM sales
SNOWBIRD’s international customers use their own design and brand. However,
as SNOWBIRD has supplied finished coats to Hawke, Fat Face, New Zealander
and others, quality is seen as very high. There is significant potential to expand
these private label sales now given the increased capacity through the second
sewing plant built in 2014.

Expansion of the distribution network
SNOWBIRD does not operate any retail shops. However, some local distributors
sell exclusively SNOWBIRD products although they may also occasionally sell a
few other companies’ goods. SNOWBIRD does not provide any in-store advertising
or external signs. All of these costs are directly payable by the effectively tied retail
outlets.
SNOWBIRD plans to expand the number of effectively tied retail outlets by way of
promoting the brand and offering sales rebates on greater volumes. No owned
flagship stores are planned.
13.5 Products
SNOWBIRD’s products can be broadly categorized into (i) Down, (ii) down clothing, (iii)
down bedding and (iv) non-down OEM clothing.
Down will be processed out of white and grey goose as well as white and grey duck
feathers and down. SNOWBIRD produces top quality Down such as “sticky down and
“goose down mink”.
Down clothing products mainly include jackets and coats for winter as well as thinner
jackets and coats for spring and autumn.
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Down bedding mainly includes duvets and pillows.
The non-down OEM clothing includes in particular workers’ uniforms and light jackets.
13.6 Production
SNOWBIRD processes Down and manufactures Down Products as well as the non-down
OEM clothing at its own facilities located in Taiqian County, Puyang City, Henan Province,
PRC. The rearing and slaughter of geese and ducks is not part of the production process
of Snowbird Henan.
13.6.1
Processing of down
SNOWBIRD uses white and grey goose as well as white and grey duck feathers
and down for the processing of Down. White goose down represents approx.
50% of the total processed down.
Down refers to the fluff at the belly and under the wings of the goose and duck.
Down is an animal fiber, its main ingredient is protein, thus its ability to keep
warm is better than some plant fiber like cotton, given that the down is pure
nature and close to the skin of the goose and the duck. Moreover, the down’s
spherical contains thousands of millions of tiny triangle pores that can change
with temperature contraction and expansion, can absorb the body heat while
isolate cold air intrusion from outside. Thus, down is widely used for clothing
and bedding.
SNOWBIRD produces the Down by washing, sterilizing and grading the Down.
The following chart illustrates the main phases of the processing of down:
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Raw Material and feathers
First wash of
down
Pre-separation in
single box facility
Wastages for
disposal
Pre-separation in
single box facility
Semi-finished
down (low
grade) (1)
Separation in
three boxes facility
Washing of down
Seperation in
three boxes facility
Separation in five
boxes facility
Separation in five boxes
facility
Thorough
wash
Mixing
Mixing
Finished goods
Finished
goods
Semi-finished
down (high
grade) (1)
Warehouse
(1) Semi-finished down can be further processed into finished down depending on
customers’ orders
Page 122
The processing of Down involves choosing excellent down material, advanced
washing and degreasing technology and sterilizing equipment. The process can
be summarized into pre-separation, dust removal, washing, drying, cooling,
grading into different quality type of Down and, as a last step, quality inspection.
All raw materials for the processing, including the down material, are acquired
from independent third party suppliers and undergo inspection to ensure that
the quality standards of SNOWBIRD are met before they are used in the further
process. Inspection is carried out by way of random sampling to choose
excellent down raw material. SNOWBIRD only utilizes down material that is soft,
natural lightweight and cold-resistant.
Raw down is washed with detergents for at least one and half hour and cleaned
with water for at least one hour. SNOWBIRD uses most advanced down
washing technology and washing equipment to wash the down material. After
washing, the down material is dehydrated for 15-30 minutes. It is then dried for
15-30 minutes in a drying machine at 100 degree Celsius. After cooling for six
minutes it is packed.
By way of sorting, washing, degreasing and sterilizing, the processed Down has
the characters of high filling power, high cleanliness, great warmth and is
hypoallergenic and no odor.
After packing, the grading process is conducted. During this time, the down
material is separated into three and five boxes facilities. The height of the box
depends on the quality of the down material. The best down material achieves
the highest box in the different box facility systems. The grading process of the
down material includes the classification in semi-finished Down (low/high grade)
and finished Down. Further use depends in particular on the respective product
to be manufactured.
13.6.2
Manufacture of Down Products
The following chart illustrates the phases of the manufacture of down products:
Page 123
Order
Sales Dept
Technical
Dept
Warehouse
Raw
materials
Technical
guide
Cutting
Colour card
Sewing
Sample
Sample
Technical
check
Passed
Production
Finished
goods
Quality
Control
Rejected
Passed
Packaging
Page 124
The production process can be summarized into raw material (fabrics,
accessories) selection and testing, cutting, sewing, ironing and finishing.
Throughout the process, there are three quality inspection points, i.e. semifinished part inspection, testing and ironing finished part inspection and after
finishing aspects of inspection to ensure stability of product quality.
The raw material undergoes random sampling, weighing and selection to
ensure that the quality, cleanliness and filing power meets SNOWBIRD’s
requirements.
After receiving the respective individual order, the process of cutting, sewing
and ironing begins, if SNOWBIRD’s technical department gives his approval.
The adjustment of the down material to the respective customer’s specification
by cutting requires the largest amount of SNOWBIRD’s work. The process of
cutting and sewing ends with an individual sample of the customer’s order.
This individual customer-based sample is comprehensively technically
examined. After the release, the start of mass production takes place.
The final quality control is conducted after the completion of the finished goods.
With the approval of the quality control department, the finished goods are
packed and stored in the warehouse for the customer. Otherwise the goods are
rejected to the process of cutting and sewing till the product meets the high
quality requirements of SNOWBIRD.
13.6.3
Processing Facilities
SNOWBIRD currently operates two down processing plants and one sewing
plant which are located in Taiqian County, Puyang City, Henan Province, PRC,
occupying in total an approximate land area of 109,067 sqm and built-up area of
39,883 sqm, being owned by SNOWBIRD. It is believed to be the world’s
largest down processing plant.
The two down processing plants occupy an approximate land area of 13,707
sqm and a built-up area of 20,427 sqm. Equipment for down processing
includes feather and down pre-sorting machines, down washing machines,
down centrifuges, different types of processing machines, analyzing equipment,
drying, sorting and bailing equipment.
The sewing plant occupies an approximate land area of 1,751 sqm and a builtup area of 5,253 sqm.
The average utilization rates of SNOWBIRD’s processing and production
facilities for Down and Down Products as well as non-down OEM products for
the past three financial years are shown as follows:
Processing of Down
Maximum
capacity
(tons) (1)
Actual
Output
(tons)
Utilization
Rate
FY 2011
826
300
36.3%
FY 2012
826
565
68.4%
FY 2013
1,928(2)
1,186
61.5%
Year
Production of Down Products and non-down OEM products
Year
Maximum
capacity
(Pieces)(3)
Actual
Output
(Pieces)
Utilization
Rate
FY 2011
1,890,000
1,244,427
65.8%
FY 2012
1,890,000
1,479,784
78.2%
FY 2013
1,890,000
1,726,015
91.3%
Page 125
(1) The maximum annual production capacity for the processing of Down is calculated based on
the annual production capacity of the machinery and equipment for the relevant periods,
operating 24 hours a day and 300 days a year (excluding the time spent in resetting the
process for the machinery and equipment for changes in product mix, and changes in
production shifts, maintenance.
(2) The maximum production capacity for the FY 2013 is based on the following calculation: In FY
2013, the new plant started in September 2013 and therefore only operated 4 months in FY
2013. 1,928 tons correspond to (i) a period of 4 months production in FY 2013 in the new
plant assuming a maximum production capacity of the new plant of 3,306 tons and (ii) 826
tons as maximum production capacity of the old plan.
(3) The maximum annual production capacity for the production of the Down Products is
calculated based on two sewing shifts with 8 hours each per day and 300 days a year.
In FY 2013, SNOWBIRD produced 1.16 million items of down clothing and
bedding and 0.56 million items of non-down OEM products.
Since the production capacity for down clothing, down bedding and non down
OEM products is currently close to full utilization and to further meet
SNOWBIRD’s customers’ demand, SNOWBIRD is building a second sewing
plant which is expected to be completed in the third quarter of 2014 and
commence operation in fourth quarter of 2014. SNOWBIRD will acquire modern
and computerized sewing machines in order to increase the production
efficiency and quality. Upon commencement of operations of the new sewing
plant, the annual production capacity of both sewing plants for the production of
down clothing, down bedding and non down OEM products will be increased
from 1.89 million pieces to in total approx. 8.2 million pieces.
13.7 Quality Assurance
SNOWBIRD believes that the quality of products is the key to its continued growth and
success. SNOWBIRD places great emphasis on quality assurance and on consistent
quality of its products and services at all stages of the production and business process.
As of 30 June 2014, SNOWBIRD’s quality assurance team comprised of 21 employees
for sewing and 3 employees for down processing. The quality team for sewing is headed
by Mr. YAN Zhaorui, while the quality team for down processing is led by Mr QIU
Duoxiang.
SNOWBIRD works closely with its customers as of the product development stage to
ensure that the customers’ requirements are met. SNOWBIRD also ensures the
consistency of the quality of its products by having its quality assurance staff undertake
inspections at various stages of the production process, i.e. semi-finished part inspection,
testing and ironing finished part inspection and after finishing inspection.
The key quality assurance certifications received by SNOWBIRD are as follows:
Certificate
Scope
Certifying Authority
Date of Expiry
Quality
Management
System (ISO
9001:2008)
Down processing,
Down Products design,
development and
production
Beijing Zhongdahuayuan
Certification Centre
26 August
2016
Environment
Management
Systems (ISO
14001:2004)
Environment
management activities
26 August
2016
Occupational
Health
and
Safety Zone
(OHSAS
18001:2007)
Occupational health
and safety zone
activities
26 August
2016
Page 126
In addition, SNOWBIRD has obtained Certificate Adopting International Standard Product
in respect of down clothing from Henan Bureau of Quality and Technical Supervision to
certify that SNOWBIRD has complied with the international standard “DIN/EN12935-2001”
in its down clothing products.
SNOWBIRD’s quality control program requires all its employees to undergo training
conducted internally in relation to its quality control policies, targets and procedures, as
well as production and processing techniques.
13.8 Environmental Protection
SNOWBIRD’s processing and production process results in the generation of waste water
which is treated and reused or discharged. As inadequately treated waste water could
affect the environment, SNOWBIRD places great importance in the proper treatment of
waste water generated from its operations. At the second down processing plant, which
started operations in 2013, SNOWBIRD has invested RMB 13 million (approx. EUR 1.58
million) in the waste water treatment and then invested another RMB 4.27 million (approx.
EUR 0.52 million) in modern waste water treatment facilities. The recycled water can be
reused for the down processing, thus is environmental friendly and can reduce water
expenses.
As a testimony to SNOWBIRD’s environmental management system, SNOWBIRD was
again after 2010 accredited with ISO14001:2004 by Beijing Zhongdahuayuan
Certification Centre in August 2013.
13.9 Research and Development
SNOWBIRD is very innovative and believed to be one of the leaders in down research. Its
research department has in-house facilities with 12 employees. Research is concentrated
on new technology for down processing, devices and product development. SNOWBIRD
has registered 15 utility model patents, out of which 9 utility model patents are actually
used in the down processing. SNOWBIRD is a market leader in the highest quality and
most expensive type of “sticky down”. This type of down costs approx. EUR 850,000 per
ton in Europe. Future research is to look into a number of products including colored
down for transparent clothing.
SNOWBIRD is to a certain extent dependent on its utility model patents. SNOWBIRD
relies on the utility model patents to ensure the highly efficient and cost effective
production processes and high quality of SNOWBIRD’s products.
The expenses for R&D in FY 2011, FY 2012 and FY 2013 were EUR 0.21 million, EUR
0.25 million and EUR 0.80 million respectively.
13.10 Design
The design team consists of 11 employees, which does extensive market research and
also gets their inspiration from the exchange with China’s leading textile university,
Donghua University. Some 300 textile designs are initially drawn and around 150 different
samples produced. These are presented in May each year at the fashion show of
SNOWBIRD to existing and potential customers in China.
13.11 Information Technology
SNOWBIRD uses, inter alia, Garment CAD System developed by Shenzhen Buyi
Technology, current version of 2012. The main feature of Garment CAD system is fashion
plate, nesting, design, drawing etc fashion design software.
The ERP system used is Kingdee. Kingdee is a very complete system, which assists the
management of SNOWBIRD in managing the resources effectively.
The IT available provides comprehensive information from sales, purchase, production
planning and execution to inventory management and enables the management to be
informed on the market and sales situation so as to enable purchasing department,
production department, warehouse and finance department to work closely and
effectively in order to maximise the utilisation of SNOWBIRD’s resources.
Page 127
13.12 Sales
SNOWBIRD’s Down and Down Products are sold to domestic and foreign wholesalers
servicing the respective market, while Down is in addition also supplied to domestic
manufacturers.
In FY 2013, SNOWBIRD’s sales comprised of 60.1% in domestic sales and 39.9% in
export sales. Down is SNOWBIRD’s top selling product representing 51.9% of the total
sales in FY 2013 while down clothing, down bedding and non-down OEM clothing
represented 36.5%, 5.8% and 5.9% of the total sales in FY 2013 respectively.
The following table shows the geographical split of SNOWBIRD’s total revenues in
FY 2011, FY 2012 and FY 2013:
Revenue
FY 2011
FY 2012
FY 2013
EUR’000
%
EUR’000
%
EUR’000
%
4,527
9.21%
6,791
7.52%
24,053
17.57%
- Down clothing
30,587
62.21%
40,378
44.73%
42,340
30.93%
- Down bedding
4,951
10.07%
7,558
8.37%
7,891
5.76%
- Non-down OEM clothing
3,553
7.23%
6,520
7.22%
8,034
5.87%
43,618
88.71%
61,247
67.85%
82,318
60.14%
- Down
4,404
8.96%
29,016
32.15%
46,987
34.32%
- Down clothing
1,144
2.33%
-
0.00%
7,583
5.54%
- Down bedding
-
0.00%
-
0.00%
-
0.00%
- Non-down OEM clothing
-
0.00%
-
0.00%
-
0.00%
5,548
11.29%
29,016
32.15%
54,570
39.86%
49,166
100.0%
90,263
100.0%
136,888
100.0%
PRC market
- Down
Oversea market
Total
SNOWBIRD’s sales and marketing department is spearheaded by a sales team
consisting of Mr. WANG Jiashou (Down), Ms. YAO Li (down clothing) and Mrs. WANG
Qingmei (down bedding).
SNOWBIRD had 50 customers in FY 2013. This is a significant increase compared to the
previous years in which SNOWBIRD had 27 customers in FY 2012 and 28 customers in
FY 2011. Most customers have long established relationships with SNOWBIRD.
Domestic Sale
At present, SNOWBIRD sells its products to wholesalers across twelve provinces and
direct-controlled cities in China who in turn sell through their own distribution network
and/or their retail shops. SNOWBIRD does not control nor participate in the operations of
their sales distribution network nor retail shops. Down as such is also partly supplied
directly to manufacturers of down products.
SNOWBIRD’s top three provinces by sales value are Anhui, Jiangsu and Hebei. When
combined, they accounted for 44.89%, 44.41% and 49.90% of total domestic sales in
FY 2011, FY 2012 and FY 2013 respectively.
Page 128
Foreign Sale
SNOWBIRD sells Down and down clothing in the foreign market mainly to its wholesalers
located in Taiwan, Russia and Hong Kong, which accounted for 79.97%, 10.80% and
9.23% in FY 2013 respectively with in total 21 customers. The wholesalers in the foreign
markets either re-export to other countries or sell to their local customers. SNOWBIRD is,
however, not aware of the countries or locations of the end users market.
Taiwan is the top region by sales value. It accounted for 100% and 79.97% of the total
export sales in FY 2012 and FY 2013 respectively.
SNOWBIRD’s down clothing sales to the foreign market are mainly produced to the
designs of its OEM customers. Lead times are typically two months. Currently,
SNOWBIRD has only in Russia customers that sell SNOWBIRD designed and branded
products. SNOWBIRD believes the potential to grow direct business in the Russian
market is very substantial. Hawke in the US, Fat Face in the UK and New Zealander in
Russia additionally sell SNOWBIRD products, but only under their own labels based on
customers’ requirements.
SNOWBIRD intends to further diversify its customer base in China and the foreign
markets. For that purpose, SNOWBIRD also attends regularly the respective conferences
and trade fairs of the down and feather trade associations in China and abroad.
13.13 Major Customers
In the FY 2013, SNOWBIRD sold its products to 50 customers, who are located in the
PRC and overseas. About 25 are repeat customers who have placed orders in each of
the past three years.
SNOWBIRD’s top five customers for its products in each of the previous three financial
years are set out below:
Customers (1)
Product
Percentage of Total Sales (%)
FY 2011
FY 2012
FY 2013
Universal Speed
Co., Ltd
Down
0
28.5
16.3
Hong Chin
Feather Works
Co., Ltd
Down
3.2
1.5
8.1
Luan Sea
Feathers Co.,
Ltd
Down
6.7
5.0
7.5
Mega Worldwide
Co., Ltd
Down
0
0
7.5
Jiang Su
Jinyang Leather
and Down
Products Co.,
Ltd
Down clothing
14.3
10.3
6.9
Hebei XueChi
Trading Holding
Co., Ltd
Down clothing
9.6
6.6
4.3
Shandong
Yanggu
Qinghua Down
Products Co.,
Ltd
Down clothing
6.8
4.9
3.3
(1) Since the top five customers have changed in FY 2011 to FY 2012 and FY 2013, the table shows seven
customers which at least in one of the previous financial years has been in the top five customers.
Page 129
13.14 Raw Materials and Suppliers
SNOWBIRD purchases a range of raw materials from suppliers, in particular raw down
and feathers, but also clothing accoutrements or accessories as well as fabrics, which are
the main raw materials required for the production and the processing of Down and Down
Products. In FY 2013, more than 70% of the raw materials were down and feathers.
The purchasing department of SNOWBIRD selects its suppliers carefully under
assessment criteria such as reputation and reliability, size, the quality of materials
supplied as well as their pricing. Moreover, the down and feathers as raw materials have
to comply with national industry standards specified by the competent governmental
agency.
SNOWBIRD has access to more than 35 raw material suppliers, most of which are
located in Anhui and Henan province as well as in Chongqing city, known for its high
quality of raw down and feathers. The down and feathers are mainly procured by
wholesalers, which partly sell the material as semi-finished product (washed) to
SNOWBIRD. To diversify its procurement channels, SNOWBIRD also directly sources
down and feathers from goose and duck abattoirs.
SNOWBIRD is not dependent on any one of its major suppliers as Snowbird PRC is able
to source the raw materials from alternative suppliers should the need arise.
SNOWBIRD has maintained good relationships with its suppliers and has not
encountered any significant production disruption due to shortage of supply of raw
materials from its suppliers to meet SNOWBIRD’s production requirements.
The following table provides an overview of SNOWBIRD’s top five suppliers in each of the
last three financial years:
Suppliers (1)
Product
Percentage of Total Purchases (%)
FY 2011
FY 2012
FY 2013
Supplier A
Down
23.8
22.5
19.2
Supplier B
Down
12.7
17.8
14.2
Supplier C
Down
10.4
9.7
10.4
Supplier D
Down
0
5.9
6.5
Supplier E
Down
2.3
5.4
6.2
Supplier F
Fabric and clothing accessories
9.8
6.6
4.0
Supplier G
Fabric and clothing accessories
6.5
6.3
3.0
(1) Since the top five suppliers have changed in FY 2011 to FY 2012 and FY 2013, the table shows seven
suppliers which at least in one of the previous financial years has been in the top five suppliers.
13.15 Inventory Management
SNOWBIRD’s inventory comprises its raw materials and work-in progress and finished
products.
SNOWBIRD’s purchase of raw materials generally depends on SNOWBIRD’s customers’
orders, but SNOWBIRD may also stock up on such materials when SNOWBIRD finds
that prices are relatively low.
Raw down and feathers inventories are typically maintained at at least one month’s
demand, so there is never a shortage of available material. Priority is given to filling
SNOWBIRD’s clothing orders. SNOWBIRD typically also holds one month’s inventories of
other raw materials and of finished goods as well as five days for clothing.
Page 130
SNOWBIRD’s inventory turnover (days) for each of FY 2011, FY 2012 and FY2013 were
as follows:
Inventory turnover (days) (1)
FY 2011
FY 2012
FY 2013
Snowbird PRC
30.9
26.5
31.7
(1) For FY 2011, FY 2012 and FY 2013, inventory turnover days are calculated using the formula: (average
inventories/cost of sales) × 365 days.
13.16 Credit Management
Payment terms to its customers
SNOWBIRD extends to its domestic customers payment terms of 60-90 days after
delivery. SNOWBIRD’s overseas customers typically pay after three months.
To ensure timely payment by its customers, SNOWBIRD has implemented standard
guidelines for its finance as well as sales and marketing departments in monitoring the
collection of payment. Should payment remain outstanding from a customer beyond the
credit term granted, reminders will be sent to the customers for payment. At the same
time, steps will be taken to discover the reason for the delay. There were no impairment
losses for trade receivables and SNOWBIRD had not written off any trade-related bad
debts for each of FY 2011, FY 2012 and FY 2013.
SNOWBIRD’s trade receivables turnover (days) for each of FY 2011, FY 2012 and FY
2013 were as follows:
Trade receivables turnover (days) (1)
FY 2011
FY 2012
FY 2013
Snowbird PRC
123.3
107.7
105.5
(1) For FY 2011, FY 2012 and FY 2013, trade receivables turnover days = (average trade receivables/revenue)
× 365 days.
Credit terms from its suppliers
SNOWBIRD’s suppliers typically extend payment periods of up to 30-60 days. The
abattoirs usually ask for an annual deposit to secure the supply of the down and feathers,
which is fixed in the supply agreement annually.
SNOWBIRD’s trade payables turnover in FY 2011, FY 2012 and FY2013 were as follows:
Trade payables turnover (days)
(1)
Snowbird PRC
FY 2011
FY 2012
FY 2013
58.4
48.6
27.7
(1) For FY 2011, FY2012 and FY2013, trade payables turnover days = (trade payables/purchases of raw
materials) × 365 days.
13.17 Awards and Recognitions
SNOWBIRD has received various business awards from PRC institutions, including the
following:
Date
Award/Certificate
Awarding Body
2012
China well-known trademark
Chinese Trademark Office
2012
Henan well-known trademark
certificate
Henan Administration for Industry
& Commerce
2012
Key provincial agricultural
industrialization leading
enterprise
Government of Henan Province
Page 131
2012
Top 30 enterprises in the textile
and garment industry
Department of Industry Information
Technology of Henan Province
2012
China Top 500 most competitive
enterprises in textile and
apparel industry in 2011-2012
China National Textile and Apparel
Council
2012
Agricultural industrialization
leading enterprise in Puyang
Chinese Communist Party of
Puyang and Government of
Puyang
2013
Top 10 down clothing in Henan
Henan Garment Industry
Association
2013
2010-2011 Reputable
Enterprise
State Administration for Industry &
Commerce of the People’s
Republic of China
13.18 Intellectual Property Rights
13.18.1 Trademarks
SNOWBIRD believes that the brand “Xueniao” and “Snow Bird” are one of the
key elements for the success of the business operations of SNOWBIRD in the
PRC and abroad, and SNOWBIRD depends in part on the further increase of
brand recognition. To protect the brand “Xueniao” and “Snow Bird”, SNOWBIRD
has registered 15 trademarks in the PRC and 3 trademarks in Hong Kong,
Taiwan and the EU. SNOWBIRD has also 22 pending applications for
registration of trademarks, also to protect the current used trademarks of
SNOWBIRD in China. The following two trademarks, which are owned by
SNOWBIRD, are the main trademarks currently used in its business operations:
Trademark
Reg. No.
Class
Goods
Term of
Protection
10137141
22
Packing rope, ropes for
hanging pictures,
packing rope, textile
package (bag), freight
bags, eiderdown (bird),
down feather, feather for
quilt, feather for filling
the cushion, feather for
filling the ornamental.
21 February
2013 to 20
February 2023
7552200
25
Down clothes, anorak,
imitation leather
processing clothes,
imitation leather clothes,
vest, underwear,
waterproof garment,
pajamas.
28 December
2010 to 27
December 2020
Page 132
13.18.2 Utility Model Patents
Snowbird PRC holds the following 15 utility model patents:
Description of Utility Model
Flocking machine for duck
Utility Model No.
ZL 2008 2 0069628.7
Territory
PRC
and goose down feather sheet
Duck and goose down feather
18 March 2008 to
17 March 2018
ZL 2008 2 0069794.7
PRC
and fur sheet
Sticky down screening box
Term of protection
28 March 2008 to
27 March 2018
ZL 2012 2 0517615.8
PRC
11 October 2012 to
10 October 2022
Forklift portal frame
ZL 2012 2 0517623.2
PRC
11 October 2012 to
10 October 2022
Deironing machine for down
ZL 2012 2 0517612.4
PRC
feather
11 October 2012 to
10 October 2022
Feather separating machine
ZL 2012 2 0517592.0
PRC
11 October 2012 to
10 October 2022
Needle rod
ZL 2012 2 0517625.1
PRC
11 October 2012 to
10 October 2022
Dust extraction equipment for
ZL 2012 2 0517622.8
PRC
down
11 October 2011 to
10 October 2021
Sewage disposal system for
ZL 2012 2 0548852.0
PRC
water washing down
Gluing machine
25 October 2012 to
24 October 2022
ZL 2012 2 0517621.3
PRC
11 October 2012 to
10 October 2022
Separating down equipment
ZL 2012 2 0517498.5
PRC
11 October 2012 to
10 October 2022
Separating feather equipment
ZL 2012 2 0623548.8
PRC
23 November 2012 to
22 November 2022
Down water washing machine
ZL 2012 2 0623550.5
PRC
23 November 2012 to
22 November 2022
Belt pulley for baling machine
ZL 2012 2 0623546.9
PRC
23 November 2012 to
22 November 2022
Diaphanometer
ZL 2012 2 0636746.8
PRC
28 November 2012 to
27 November 2022
Most of the utility models are currently in use by SNOWBIRD in the down
processing and sewing process.
13.18.3 Domains
SNOWBIRD has registered the following domain names:

www.xueniao.com

www.snowbird-ag.de
Page 133
13.19 Employees
13.19.1 Number of employees
The table below provides a breakdown of employees of SNOWBIRD by
category for the years/period ended on 31 December 2011, 31 December 2012,
31 December 2013 and 2014HY1:
(a)
FY 2011
FY 2012
FY 2013
2014HY1
3
4
5
5
36
36
41
41
8
9
11
10
Purchases Department
10
10
10
11
Sales Department
11
11
17
19
Quality Assurance
25
25
25
24
R & D Department
12
12
23
23
Logistics Department
21
21
23
22
Production Department
1388
1438
1456
1454
Total
1,514
1,566
1,611
1,609
Senior Management
Administration Department
Finance Department
No material change has occurred in the number of employees in the period
since 30 June 2014 until the date of this Prospectus.
SNOWBIRD does not employ temporary contract workers.
SNOWBIRD grants to its employees employment terms above statutory
minimum terms including a considerably higher remuneration than required by
law. In FY 2013, the average monthly salary of Snowbird Henan for sewing
workers amounted to RMB 4,409 (approx. EUR 535.92) while the average
monthly salary for down processing workers amounted to RMB 3,605 (approx.
EUR 438.19). The average monthly remuneration paid by SNOWBIRD is
approx. 275% higher than the minimum statutory salary in 2013 and the
Company believes also higher than the average in the relevant industry in
Henan and neighboring provinces. There has been no labor or industrial dispute
between the employees and management. The number of full-time employees
has not been subject to any significant fluctuations.
SNOWBIRD has not set aside nor accrued any additional amount of money to
provide for pension, retirement or similar benefits for the members of the
management board (Vorstand) or of the senior management of Snowbird
Henan.
13.19.2 Working conditions
SNOWBIRD has concluded written labor contracts with its employees by using
standard contracts containing the necessary clauses required by the applicable
PRC labor contract law.
SNOWBIRD provides extensive and continual training to its employees to
enhance their skills and increase their efficiency. Furthermore, its wages scale
that is calculated based on the production quantity has encouraged its
employees to produce more and thus directly boosted the production efficiency.
Page 134
SNOWBIRD places great emphasis in the staff welfare. SNOWBIRD provides
free food and accommodation to its staff and organizes various activities on
regular basis to boost the staff morale. On an annual basis, SNOWBIRD
organizes staff performance awards ceremony to recognize the contributions of
its staff by presenting various rewards to the best performing staff.
SNOWBIRD has been awarded many certifications as a result of its care to its
employees. In 2011, SNOWBIRD has been rewarded “employees caring and
loving role model enterprise in the garment industry of Henan Province” jointly
by Trade Union of Henan Textile and Tobacco and Henan Garment Industry
Association, while in 2012 SNOWBIRD received a reward of “employees caring
and loving role model enterprise” from Henan Garment Industry Association and
Henan International Chamber of Commerce and Apparel Association.
13.19.3 Trade Union Committee
On 23 March 2007, a trade union committee was established in Snowbird
Henan consisting of four members. The function of the trade union is to protect
the employees’ rights, to represent the employees’ interest vis-á-vis the
employer and to coordinate voluntary activities with the employees outside their
working time. Mr. SHI Enshen was the first chairman of the trade union
committee. The current chairman is YUE Xianguo.
13.19.4 Social Insurance and Housing Funds
SNOWBIRD is not required to pay housing funds contributions for its
employees. PRC companies are only required to pay housing funds
contributions for their employees in case they have been included into the local
selected enterprises. SNOWBIRD has not been included into the local selected
enterprises and is therefore not mandatorily required to pay housing funds
contributions for its employees.
However, SNOWBIRD is required to pay relevant social insurance contributions
and has in the past fully paid social insurance funds for all of its employees.
13.20 Business Locations, Property, Plant and Equipment
SNOWBIRD’s operation facilities are located in Taiqian County, Puyang City, Henan
Province, PRC. As at 30 June 2014, SNOWBIRD’s business premises covered a total
area of approx. 109,066.96 sqm with a built-up area of approx. 21,049.97 sqm.
13.20.1 Land Use Rights
SNOWBIRD holds four land use rights for the use of a total area of
109,066.96 sqm of land located at Taiqian County, Puyang City, Henan
Province, PRC for its business premises, which were acquired by way of
assignment from the state. The Certificate numbers and information of these
land use rights are as follows:
Certificate
No:
Area
Location
Expiry
Date
Issue Authority
Issue Date
Tai
Guo
Yong (2007)
No. 035
24,831.80
2
m
The south side
of
Fengtai
Avenue, Taiqian
County
26 July
2050
Land
and
Resources
Bureau
of
Taiqian County
17
April
2007
Tai
Guo
Yong (2007)
No. 036
4,428.40
2
m
Sunmatou
Village, Sunkou
Town, Taiqian
County
16
Novemb
er 2048
Land
and
Resources
Bureau
of
Taiqing County
18
April
2007
Page 135
Tai
Guo
Yong (2010)
No. 035
18,470
2
m
The south side
of
Fengtai
Avenue, Taiqian
County
26
October
2059
Land
and
Resources
Bureau
of
Taiqing County
31 March
2010
Tai
Guo
Yong (2014)
No. 040
61,336.76
2
m
The south side
of
Fengtai
Avenue and the
east side of
Xihuan
Road,
Industry Cluster
District, Taiqian
County
27
Septem
ber
2063
Land
and
Resources
Bureau
of
Taiqing County
25 June
2014
13.20.2 Buildings
SNOWBIRD owns several factory buildings, three warehouse as well as a few
office buildings and dormitories on the land used under the land use rights in
Sunkou Town, Taiqian County, Puyang City, Henan Province, PRC. The
buildings owned by SNOWBIRD cover a total built-up area of 21,049.97 sqm.
All buildings are legally owned by SNOWBIRD as evidenced by the respective
building property ownership certificates issued by the Building Property
Administration Bureau of Taiqian County.
Lease
On 20 May 2013, Snowbird HK as lessee and Zhong Xing Commercial Hotel as
lessor concluded one house lease contracts for one office located at the 2nd
and 3rd floor of Zhongxing Hotel, Taiqian Industrial Park, Puyang, Henan
Province, PRC. The term of lease is 20 years and the monthly lease amounts to
RMB 15,000 (approx. EUR 1,800). Although the lease contract is signed by
Snowbird HK, Snowbird WFOE actually uses the leased office.
13.20.3 Registered Offices in Hong Kong
Snowbird HK has its registered offices at Room 1003 10/F Olympia Plaza 255,
King’s RD, North Point, HK.
13.20.4 Equipment
SNOWBIRD owns various fixed assets such as production equipment, office
equipment, buildings and motor vehicles. As of 30 June 2014, the net book
value of these fixed assets and equipment was approx. RMB 118.83 million
(approx. EUR 14.14 million). None of these fixed assets or equipment items
have been leased to other parties or rented from other parties.
13.21 Insurances
SNOWBIRD has taken out two property insurances covering basic risks for its real estate,
equipment, current assets (inventory) and Down Products located at Industrial Park of
Sunkou Town, Taiqian County, Puyang City, Henan Province, PRC.
One insurance policy was issued on 9 December 2013 and has a duration term from 0:00
o’clock on 11 December 2013 to 24:00 o’clock on 10 December 2014. The insured
coverage amounts to RMB 150,444,806.68 (approx. EUR 17,957,126.00) and the
insurance premium amounts to RMB 225,666.75 (approx. EUR 26,936.00).
One insurance policy was issued on 27 November 2013 and has a duration term from
0:00 o’clock on 28 November 2013 to 24:00 o’clock on 27 November 2014. The insured
coverage amounts to RMB 63,528,960.00 (approx. EUR 7,582,831.00) and the insurance
premium amounts to RMB 95,293.25 (approx. EUR 11,374.00).
Page 136
However, SNOWBIRD currently does not have insurance coverage for business
interruption and product liability. The Company believes that the current insurances taken
out by SNOWBIRD are in line with general practice in the relevant industry in the PRC.
13.22 Material Contracts
No material contracts outside the ordinary course of business have been entered into in
the last two years prior to the date of this Prospectus by Snowbird Henan, Snowbird HK
or the Company except as the contracts described in the following.
On 30 August 2012, Snowbird Henan entered into a contract with Puyang Hongda Steel
Structure Co., Ltd. for the construction of the second down processing plant in the
amount of RMB 29,700,000 (approx. EUR 3,658,942). The costs were financed by long
term bank loan.
On 5 December 2012, Snowbird Henan entered into one contract with Liaocheng
Fangyuan Environmental Protection Engineering Co., Ltd. for the construction of the
water treatment plant and the water treatment facilities in the amount of RMB 13,000,000
(approx. EUR 1,601,557) and RMB 5,000,000 (approx. EUR 615,984) respectively. The
costs were financed by long term bank loan.
On 18 April 2013, Snowbird Henan completed a contract with Hangzhou Tianshen
Electric Environment Engineering Co., Ltd. for the purchase of machinery for down
processing in the amount of RMB 40,600,000 (approx. EUR 4,934,970). The costs were
financed internally.
On 18 July 2013, Snowbird Henan entered into a contract with Land and Resources
Bureau of Taiqian County for acquiring the land use right (Land parcel No. Tai Di 2013-C2
03, Area of land: 61,336.76 m , location: the south of Fengtai Avenue and the east of
Xihuan Road, Industry Cluster District, Taiqian County) in the amount of RMB:
11,788,500 (approx.: EUR 1,432,904).
On 2 August 2013, Snowbird Henan entered into a contract with Taiqian Hongxing
Construction And Installation Engineering Co., Ltd. for the construction of an office
building and a sewing plant in Taiqian in the amount of RMB 63,100,000 (approx. EUR
7,669,868). The costs were financed internally.
On 20 March 2014, Snowbird Henan entered into a contract with Zhengzhou Yuquan
Sewing Equipment Co. Ltd. for the purchase of 1,500 computerized sewing machines for
a total price of RMB 37,500,000 (approx. EUR 4,414,000). The first installment in the
amount of RMB 15,000,000 (approx. EUR 1,770,000) was due and payable upon signing
and has been paid. The second installment in the amount of RMB 15,000,000 (approx.
EUR 1,770,000) is due and payable upon delivery and the remaining amount upon proper
installation and commissioning of the sewing machines. The costs were financed
internally.
13.23 Loan Agreements / Credit Line Agreements
SNOWBIRD has taken out several short term bank loans and a long term loan from the
Agricultural Development Bank of China, Taiqian Sub-branch (“ADBC”) and several short
term loans from the Bank of China, Puyang Zhongyuan Youtian Sub-branch (“BoC”) to
finance its fixed assets and working capital. As at 30 June 2014, a total amount of RMB
105.00 million (approx. EUR 12.50 million) was outstanding under these loans. As at 30
June 2014, the loan for financing of fixed assets amounted to RMB 37.0 million (approx.
EUR 4.37 million) while loan for working capital amounted to RMB 68.00 million (approx.
EUR 8.09 million). The weighted average interest rates of the short term bank loans were
6.31% in FY 2011, 6.54% in FY 2012, 6.26% in FY 2013 and 5.09% in 2014HY1.
13.24 Mortgage/Guarantee Agreements
The short term bank loans mentioned in Section 13.23 above have been secured with
mortgages and guarantees by related third parties (please see Section 20.2.2 (“Bank
Guarantees”) of the Prospectus) as well as by unrelated third parties and Snowbird
Henan as follows:
Page 137
13.24.1 Mortgage
Snowbird Henan has granted a mortgage to Agricultural Development Bank of
China over its real estate, plant and machinery to secure its liabilities under the
bank loans, commencing on 29 October 2010 and ending on 28 October 2015
in the amount of RMB 45 million (approx. EUR 5.36 million).
13.24.2 Guarantees
Snowbird Henan has not provided any guarantees to third parties.
13.25 Legal Proceedings
During the previous twelve months immediately preceding the date of this Prospectus,
neither the Company nor any of the Company’s subsidiaries had been engaged in any
governmental, legal or arbitration proceedings (including any such proceedings which are
pending or threatened of which the Company is aware of) which may have, or have had
in the recent past significant effects on the Company’s and/or SNOWBIRD's financial
position or profitability.
13.26 Investments
SNOWBIRD has made the following major investments in FY 2011, FY 2012, FY 2013
and 2014HY1 respectively:
FY 2011
(EUR ‘000)
Item
FY 2012
(EUR ‘000)
2014HY1
(EUR ‘000)
4,715
29
Production equipment
23
Building and building under
construction
306
1,412
6,317
Motor vehicles
135
38
50
16
2
1
8
8
469
1,463
11,102
1,838
Office equipment
Total
12
FY 2013
(EUR ‘000)
1,785
The major investments in FY 2011 pertained to the building of the warehouse and the
workers’ dormitory as well as to the acquisition of a motor vehicle. These investments
were financed externally by long-term bank loan.
The major investments in FY 2012 pertained to the construction of the down processing
plant. These investments were financed externally by long-term bank loan.
The major investments in FY 2013 pertained to the construction of the down processing
plant, the water treatment plant, the sewing plant as well as to the acquisition of down
processing facilities and water treatment facilities. The down processing plant, the water
treatment plant and the water treatment facilities were financed externally by long term,
bank loan while the sewing plant and down processing facilities were financed internally.
The major investments in 2014HY1 pertained to the construction of the sewing plant and
the office building. These investments were financed internally.
Since 30 June 2014 until the date of this Prospectus, SNOWBIRD has not made any
major investments. However, SNOWBIRD has the following pending investments:

RMB 38 million (approx. EUR 4.6 million) devoted to the sewing plant
construction and RMB 25 million (approx. EUR 3.0 million) devoted to
construction of a new office building. A respective contract with
Page 138
Taiquian Hongxing Construction and Installation Engineering Co. Ltd.
has been entered into on 2 August 2013

RMB 37.5 million (approx. EUR 4.4 million) on 1,500 computerized
sewing machines. A respective purchase contract for the sewing
machines has been concluded on 20 March 2014 with Zhengzhou
Yuquan Sewing Equipment Co. Ltd, but the sewing machines have not
yet been delivered.

RMB 6.6 million (approx. EUR 0.8 million) on furniture and fittings for
the new sewing plant and new office building. No contract has yet been
entered into.
These pending investments shall be financed with the proceeds of the Offering (please
also refer to Section 6.3 of this Prospectus “Use of the Issue Proceeds). The investments
shall however be pre-financed with internal funds of SNOWBIRD. Apart from those
disclosed above, SNOWBIRD has no investment pending.
Besides the intended investments mentioned in Section 6.3 of this Prospectus “Use of the
Issue Proceeds”, SNOWBIRD has no further principal future investments on which its
management bodies have already made firm commitments.
Page 139
14.
MARKET ENVIRONMENT AND COMPETITIVE SITUATION
Market and industry information and statistics set out in this section have been extracted
from various external sources set out in Section 4.7 of this Prospectus under ”Third Party
Data“. These are in particular, but not solely, the publicly available IMF World Economic
Outlook Database as well as the “Down Industry in China”, published by Respect
Marketing Research Inc. in February 2014 (“Market Research Report”). Reasonable
care has been exercised in extracting and reproducing such information. However,
SNOWBIRD and the Underwriter make no representations as to the accuracy of such
information and statistics, which may be inaccurate, incomplete, out-of-date or
inconsistent with each other, or with any other information.
14.1 Introduction
SNOWBIRD operates its business in the PRC down industry market segment.
SNOWBIRD believes that the performance of the overall PRC down market is primarily
driven by the growth of the PRC economy, in particular, the increase in disposable
income of the PRC population, the urbanization trend as well as a shift in consumption
patterns of increasingly affluent urban consumers in the PRC. This development is
supported by China´s 12th Five-Year Plan, released in March 2011, which stipulates to
restructure the Chinese economy by encouraging domestic consumption, by developing
the service sector, and shifting to higher value added manufacturing, whilst improving on
energy efficiency and environmental protection.
14.2 Economic Growth in the PRC
The rise of China as a global economic heavy weight has been unprecedented in the
world’s recent history. Even the latest global financial and economic crisis has made
much less of an impact on China’s economic growth than to other countries worldwide, in
part thanks to the country’s effective economic stimulus measures. China has passed
Germany as the largest global exporter in 2009 and passed Japan, becoming the world’s
second largest economy behind the United States of America in 2010.
The table below shows the development of the real gross domestic product (“GDP”) in the
PRC, actual and projected, including its growth rates for the years 2007 to 2015:
2007
2008
2009
2010
2011
2012
2013e
2014e
2015e
GDP in trillion RMB
(current prices)
26.6
31.4
34.1
40.2
47.3
51.9
56.8
62.8
69.2
Real GDP in trillion RMB
(constant prices)
10.7
11.7
12.8
14.1
15.4
16.7
17.9
19.3
20.7
14.2%
9.6%
9.2%
10.4%
9.3%
7.8%
7.6%
7.5%
7.3%
Annual Real GDP growth rate
(based on constant prices)
(Source: IMF World Economic Outlook Database, April 2014.)
IMF predicts that China will show a 7.6% growth in 2013. Hence, China’s real gross
domestic product (“GDP”) is expected to grow from RMB 10.7 trillion (approx. EUR 1.3
trillion) in 2007 to estimated RMB 17.9 trillion (approx. EUR 2.2 trillion) in 2013 (Source:
IMF World Economic Outlook Database, April 2014). As a comparison, IMF expects a
global real GDP growth of 3.0% in 2013.
IMF expects further growth of China’s real GDP to RMB 19.3 trillion (approx. EUR 2.3
trillion) in 2014 (+ 7.5%) and to RMB 20.7 trillion (approx. EUR 2.5 trillion) in 2015 (+
7.3%) (Source: IMF World Economic Outlook Database, April 2014).
Page 140
14.3 Urbanization in the PRC
The table below shows the development of the total population and the urban population
in the PRC for the years 2008-2013, including the urbanization rate:
2008
2009
2010
2011
2012
2013
Population (in million)
1,328
1,334.7
1,339.7
1,347.4
1,354.0
1,360.7
Urban Population (in million)
606.7
621.9
665.6
690.8
711.8
731.1
45.7%
46.6%
49.7%
51.3%
52.6%
53.7
Urbanization Rate
(Source: PRC National Bureau of Statistics, Feb. 2014.)
The urbanization trend continued in China, through the migration of the rural population to
urban areas and the transformation of villages into cities. According to the National
Bureau of Statistics, the urban population in the PRC increased from 606.7 million in
2008, which accounted for approximately 45.7% of the total population, to 731.1 million in
2013, which accounted for approximately 53.7% of the total population. In 2011, for the
first time the urban population exceeded the rural population.
14.4 Disposable Income of urban and rural households in the PRC
The table below shows the development of the per capita annual disposable income of
urban and rural households in the PRC for the years 2008-2013, including its annual
growth rates:
2008
2009
2010
2011
2012
2013
15,781
17,175
19,109
21,810
24,565
26,955
Real Growth Rate of the Per
Capita Disposable Income of
Urban Citizens
8.4%
9.8%
7.8%
8.4%
9.6%
7.0%
Per Capita Disposable Income of
Rural Citizens in RMB
4,761
5,153
5,919
6,977
7,917
8,896
Real Growth Rate of the Per Capita
Disposable Income of Rural
Citizens
8.0%
8.5%
10.9%
11.4%
10.7%
9.3%
Per Capita Disposable Income of
Urban Citizens in RMB
China’s sustainable growth was accompanied by rising disposable income levels, in
particular of urban residents. According to the National Bureau of Statistics, the per capita
annual disposable income of Chinese urban residents increased from RMB 15,781
(approx. EUR 1,900) to RMB 26,955 (approx. EUR 3,300), during the period from 2008 to
2013. The per capita annual disposable income of Chinese rural residents increased from
RMB 4,761 (approx. EUR 580) in 2008 to RMB 8,896 (approx. EUR 1,100) in 2013,
leading to increased living standards. Continuing growth in disposable income is likely to
lead to increased middle-income consumer spending, especially in urban areas.
14.5 Retail sales of consumer goods in the PRC
The table below shows the development of retail sales of consumer goods in the PRC,
including its growth rates for the years 2008 to 2013:
Retail Sales of Consumer Goods in
trillion RMB
Growth Rate of Retail Sales of
Consumer Goods
2008
2009
2010
2011
2012
2013
11.5
13.3
15.7
18.4
21.0
23.7
22.7%
15.5%
18.3%
17.1%
14.3%
13.1%
Page 141
The rise of urban population and the increase of the per capita disposable income led to
a rapid growth of retail sales of consumer goods between 2008 and 2013. According to
the National Bureau of Statistics, retail sales of consumer goods in the PRC grew from
RMB 11.5 trillion (approx. EUR 1.4 trillion) to RMB 23.7 trillion (approx. EUR 2.9 trillion) in
2013. In comparison to 2012, the retail sales of consumer goods rose by 13.1%, if factors
such as price increase are deducted, the real growth rate amounts to 11.5% according to
the National Bureau of Statistics. Retail sales of consumer goods of urban households
reached RMB 20.6 trillion (approx. EUR 2,5 trillion), a rise of 12.9%, while rural
households spent RMB 3.2 trillion (approx. EUR 0.4 trillion) for consumer goods, a rise of
14.6% compared to 2012 according to the National Bureau of Statistics.
The growth of retail sales of consumer goods matches with the growth of the per capita
disposable income, representing strengthened consumer purchasing power.
14.6 Industrial chain
During its 140-year history, China down industry has developed from the scratch, grown
stronger and combined domestic and foreign trades. It maintained several firsts in the
world: the output of raw down ranks first, since China is a large nation cultivating geese
and ducks in the world and outputs 155,200t down and feathers annually, taking up 80
percent of the world total; the export volume of raw down ranks first, maintaining at
30,000-40,000t annually, taking up more than 75 percent of the world total. Currently,
there are more than 4,300 down production enterprises, forming the largest down
industrial cluster in the world and exporting products over the world.
Seeing from the industrial chain, China down industry mainly involves in down washing,
down processing, production of down products, and sales of down and down products.
Down washing: usually, feathers purchased contain impurities in different seasons and
from different birds, so they should undergo processes of pre-sorting, ash removing,
feather sorting, feather washing, dehydration, drying and cooling, to produce raw material
down with the down content of about 50%. In this section, there are many but small
enterprises, mostly domestic workshops.
Down processing: the down processing industry is labor-intensive and has developed
relatively mature. In this industry, there are many enterprises committing fierce
competitions. In this case, many down processing enterprises turn to fine processing and
are active in developing down products with high added value, like "goose down mink"
and "fur sheet material ". Besides, many larger enterprises start developing businesses in
the industrial chain downstream to gain competitive edges, to produce down clothing and
down bedding. Such enterprises have adopted the industrial-chain vertical integration
operation pattern.
Production of down products: down products mainly include down clothing and down
bedding (including duvet, down pillow and sleeping bags). To be specific, the down
clothing industry has a higher concentration degree and more fierce competition among
enterprises; it develops to the brand operation. By contrast, the down bedding industry
has a shorter history, so its popularization rate is lower and its products are mainly
exported.
Sales of down and down products: the down industry adopts the wholesale and retail
sales patterns. Main wholesale channels include: wholesale market, online wholesale
(B2B websites), associates and agents; main retail channels include: speciality stores,
shoppe in emporia, supermarkets, online retail (B2C websites). The industrial down from
the down processing industry is wholesaled to down products enterprises. Down products
are sold by means of wholesale and retail. Popular products are mainly wholesaled, while
medium-and-high-end products retailed.
Page 142
Down and Down Products Industrial Chain:
Down
processing
Down washing
Sales of down
and down
products
Down products
Source: Respect Marketing Research Inc., 2013
14.7 Position of PRC down industry in the global economy
14.7.1
Down processing
The year 2013 was a tough year for China down processing industry under the
internal and external pressure. Under the impact of bird flu, the price of down
from the end of April to the beginning of May doubled within one week. Even
worse, the Europe market's economy hadn't recovered yet, which increased
pressure to export enterprises. In 2013, export of feathers and down reached
USD 986 million, a rise of 30.8 percent year on year, yet lower against 2012.
Export of Down (Feather) in China (USD 100 million, 10,000t): 2009-2013:
2009
Export amount (USD 100 million)
Growth rate of export amount
Export volume (10,000t)
Growth rate of export volume
2010
2011
2012
2013
2.48
3.67
5.52
7.54
9.86
-16.2%
48.0%
50.4%
36.6%
30.8%
2.70
3.21
3.28
3.58
3.81
-9.4%
18.9%
2.2%
9.1%
6.4%
Source: General Administration of Customs, 2013
The US is the most important importer of China down processing industry and
consumed 30.03 percent of China's down exported in 2013. Among the top 10
importers of China down, EU countries totally consumed 22.46 percent of
China's export.
Importers of China Down Industry 2013:
Italy
2.40%
Other
16.43%
US
30.03%
Burma
2.64%
Czech
3.36%
Japan
3.84%
Taiwan
13.76%
Korea
4.98%
Vietnam
5.86%
UK Germany
6.88% 9.82%
Page 143
14.7.2
Down clothing
The down clothing industry is the terminal section of the down industry chain
and the final product of the industry. Its products are sold both in China and in
other countries. After the high-speed growth during 2009-2011, export of down
clothing in China in 2012 slowed down. In 2013, China exported 67.3284 million
pieces of down clothing, a fall of 3.52 percent against 2012; the export amount
reached USD 2.009 billion, a fall of 4.72 percent. In 2013, import of down
clothing in China maintained high-speed growth, reaching 5.6473 million pieces,
a rise of 53.35 percent against 2012; the import amount reached USD 210
million, a rise of 51.81 percent against 2012.
Export and Import of Down Clothing in China (USD 100 million, 10,000 pieces):
2009-2013:
2009
2010
2011
2012
104,023.56
135,802.51
205,022.98
210,856.34
200,909.04
Export volume
(10,000 pieces)
4,299.86
5,291.14
6,776.23
6,978.52
6,732.84
Import amount
(USD 10,000)
1,773.57
5,674.53
12,566.09
13,819.25
20,979.28
85.14
223.90
353.68
368.27
564.73
Export amount
(USD 10,000)
Import volume
(10,000 pieces)
2013
China down clothing are mainly exported to EU, Japan and Russia. EU is the
largest importer of Chinese down clothing and takes up 26.21 percent of
China's total export, followed by Japan with a ratio of 24.98 percent; Russia
takes up 10.37 percent.
Importers of Chinese Down clothing 2013:
Holland Canada
3.44% 2.14%
Other
15.75%
France
3.57%
Hong Kong
4.02%
Italy
11.53%
Russia
10.37%
Korea
7.21%
Germany
7.66%
Japan
24.98%
US
9.33%
14.7.3
Down bedding
The down bedding is the terminal of the down industry and the final finished
product. In foreign countries, down bedding industry is more mature and has
higher market popularization rate. By contrast, the down bedding industry in
China has a shorter history and lower market popularization rate. Down bedding
is mainly exported. Down bedding is relatively mature in the foreign market, so
the export volume of down bedding from China has little fluctuation. China
exported 55,021.97 ton of down bedding in 2013, generating income of USD
Page 144
444.3537 million. Since 2010, growth of export amount of down bedding has
been faster than the export volume, indicating that the export price is on the
rise.
Import and Export of Down Sleeping Bags of China (USD 100 million, 10,000):
2009-2013
2009
Export amount (USD
10,000)
2010
2011
2012
2013
1,806.45
2,179.33
3,157.12
3,457.34
3,263.77
47.98
59.84
72.45
64.97
60.93
Import amount (USD
10,000)
6.39
5.41
7.13
13.51
12.95
Import volume (10,000)
0.11
0.10
0.07
0.11
0.12
Export volume (10,000)
Import and Export of Other Down Bedding of China (USD 100 million, ton):
2009-2013
2009
2010
2011
2012
2013
Export amount
(USD 10,000)
42,703.38
47,900.10
55,230.64
50,569.84
44,435.37
Export volume
(ton)
70,643.99
70,584.53
65,196.62
59,032.69
55,021.97
Import amount
(USD 10,000)
174.38
204.05
398.15
434.50
422.15
Import volume
(ton)
137.12
87.05
94.83
119.43
61.50
China mainly exports its down bedding to the US, Japan and the UK. US makes
the largest importer, consuming 25.92 percent of Chinese exports, followed by
Japan and the UK, consuming 24.98 percent and 7.80 percent, respectively.
Importers of China’s Down Bedding 2013:
Norway Belgium
2.52% 2.51%
Other
25.25%
Spain
2.55%
Canada
2.69%
Sweden
Germany
2.79%Australia
6.58%
4.83%
US
25.92%
Japan
16.55%
UK
7.80%
Page 145
14.8 Size of the down industry of PRC
14.8.1
Down processing
China down industry is a rising and sustainably-developing industry. Since
1980s, it has witnessed leap development and grown into an emerging industry
vital for and an important constituent of economy. China is rich in feather
resources and produces about 80 percent of the world down used for feather
products. It implements the "Goose and Duck Project", which enriches the down
resources and provides abundant resources for development of the down
industry.
By 2013, China produced 155,200t down, growing by 6.78 percent annually on
average during 2009-2013. The down clothing industry, as the downstream
industry, had steadily-growing demand on down. Plus, the down bedding was
still popularizing and saw fast-rising production and sales volume. Under the
rising demand from the downstream, it is predicted that China down will grow by
5.28 percent annually on average during 2014-2018 and is expected to exceed
200,000t in 2018.
Down Output and Forecast in China (10,000t): 2009-2018
10,000t
25.0
Annual mean compound
growth 5.28%
Annual mean
compound growth
6.78%
20.0
15.0
10.0
5.0
11.94
14.02
15.52
16.59
13.66
15.19
17.42
2010
2011
2012
2013
2014E
2015E
18.40
19.30
20.38
2016E
2017E
2018E
0.0
2009
Source: National Bureau of Statistics, Respect Marketing Research Inc., 2013
Since 2009, the down processing industry has been developing fast. Its market
size reached RMB 48.3 billion (approx. EUR 5.87 billion) in 2013, a rise of 21.95
percent against 2012. Impacted by the bird flu and hot summer, the output of
down in China in 2013 saw obvious decline, resulting in a shrunk market size.
The market size of the down processing industry during 2009-2013 enjoyed
annual growth of 30.83 percent.
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Market Size and Forecast of Down Processing Industry in China (RMB 100
million): 2009-2018:
RMB 100 million
growth 12.17%
1,000
900
800
700
Annual mean
compound growth
30.83%
600
500
400
300
200
100
396
165
223
483
555
635
716
797
878
293
0
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
Increased income and upgraded consumption demand from citizens will drive
the consumption of down bedding to grow by 18.51 percent and of the down
clothing by 17.88 percent, indicating huge market demand. The enormous
market demand will push the down processing industry to develop fast. Taking
no account of great fluctuation in the down price, the market size of the down
processing industry during 2014-2018 is expected to grow by 8.78 percent.
The down processing market in China is mainly the duck down. However, ducks
are mixed feeding animals and their down is easy to have odor. Also, duck
down has longer processing process than the goose down and its value is lower
than the goose down. Consumer demand is upgraded, so goose down is more
and more popular with consumers. In this case, enterprises specialized in
goose down will benefit from the upgrade.
14.8.2
Down clothing
The down clothing industry, on the whole, is still labor-intensive. The production
and sales of products are closely related to weather. Seasonable change and
temperature fluctuation directly influence sales of down clothing and bedding.
Weather change has significant influence on sales performance of the
enterprise. Besides climate, production of down clothing is related to the
upstream down supply and price, and the downstream consumer demand.
China outputs the most down clothing in the world, taking up more than 80
percent of the global market. In the first half year of 2013, outbreak of the bird
flu resulted in undersupply of down, forcing down clothing enterprises to reduce
their production. In 2013, China output 299 million pieces of down clothing, a
rise of 0.67 percent against 2012. Down clothing are highly ratified in the coldprotection market, so they enjoy steady market demand. Taking no account of
climate change, China is expected to output 450 million pieces of down clothing
in 2018, with the annual average compound growth rate of 8.48 percent during
2013-2018.
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2018E
Output and Forecast of Down Clothing in China (100 million pieces): 2008-2018
100 million pieces
growth 8.48%
5.0
4.5
Annual mean
compound growth
5.32%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
2.43
2.79
2.64
2010
2011
2.99
3.25
3.50
2.97
2012
2013
2014E
2015E
3.80
4.10
4.50
0.5
0.0
2009
2016E
2017E
2018E
Output of down clothing in 2013 was similar to that in 2012. Yet, owing to
inventory of the down clothing industry and slim space for price rise, the growth
rate of the down clothing market size had little change. In 2013, the market size
of the down clothing industry reached RMB 90.5 billion (approx. EUR 11 billion).
The annual average compound growth rate of the market size of China down
clothing industry during 2009-2013 was 15.50 percent.
Market Size and Forecast of China Down clothing (RMB 100 million): 20092018
RMB 100 million
2,500
growth 17.88%
2,000
Annual mean
compound growth
15.50%
1,500
1,000
1,994
1,033
780
509
734
905
602
2009
2010
2011
2012
2013
2014E
500
1,225
1,430
1,679
0
2015E
2016E
2017E
In company with continuous growth of GDP, fast and steady growth of
consumption level, consumers' concepts are changed continuously. Consumers
of the medium-and-high-end products are gradually expanded. Besides, rise in
the living standard, especially of the small towns and rural residents, and the
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2018E
relatively lower price and warmth-retention property of down clothing have great
market appeal, which will expand the total demand and market size of China
down clothing. In addition, seeing from the development range and depth,
China has 1.3 billion people, a majority of whom live in areas where down
clothing are needed in winter. The Chinese down clothing market is far from
saturation and has great development potential. The down clothing industry is
expected to grow by 17.88 percent during 2014-2018 and reach RMB 200
billion (approx. EUR 24.31 billion) in 2018.
14.8.3
Down bedding
Down bedding includes duvet, down cushion and sleeping bags. It has met
people's demand on green, health and environmental protection, so it is very
popular in Japan, Europe and US. Down bedding has a longer service life than
ordinary bedding. Statistics indicate that the service life of one duvet is 12-15
years, while the common cotton bedding is only 5-8 years. In this sense, the
duvet might be more expensive, but it has a higher performance-price-ratio.
2010 Shanghai Expo initiated the low-carbon economic concept, which aroused
hot discussion in the world. Different industries had made reflections and
reforms to adapt the new way of living. In particular, for the home textile industry
always advocating environmental protection, low carbon will become the main
concern of people. Some home furnishing using natural materials and having no
processing has become the new consumption hotspot under the new concept of
"low carbon" and "zero carbon".
Down bedding, as a member of the home textiles, demonstrates its low-carbon
concept in "down product credit warranty mark", ISO 14001, PAS 2060Declaration of Commitment to Carbon Neutrality. The "down product credit
warranty mark" proves the product has qualified raw material quality and
processing quality as specified in the national and industry standards. ISO
14001 environmental management system certification proves that the
enterprise that has passed the certification has international-level environmental management and is capable of controlling product processes, products
and pollutants to meet relevant requirements. PAS 2060-Declaration of
Commitment to Carbon Neutrality was prepared by BSI on May 19, 2010 and
issued in the UK. PAS 2060, based on the current ISO 14000 and PAS 2050
standards, has specified provisions to be observed by enterprises that carry out
carbon neutralization through quantizing, reducing and compensating
greenhouse gases. Enterprises that have met requirements of this standard are
regarded to have met environmental requirements.
Benefited from low-carbon economy and rise in income and upgraded
consumption demand of Chinese citizens, China down bedding is being popular
and gradually replaces the conventional home textile products. Since 2009, the
down bedding industry has been enjoying continuous growth, growing up to
RMB 37.5 billion (approx. EUR 4.56 billion) in 2013 from RMB 12.8 billion
(approx. EUR 1.56 billion) in 2009, with the annual average compound growth
rate reaching 30.97 percent.
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Down Bedding Market Size and Forecast in China (RMB 100 million): 20092018
RMB 100 million
growth 18.51%
1,000
900
800
700
Annual mean
compound growth
30.97%
600
500
931
400
798
678
300
200
100
128
168
2009
2010
238
310
375
472
569
0
2011
2012
2013
2014E
2015E
2016E
2017E
Factors influencing development of down bedding market
Great development potential of the home textile industry
In developed countries, clothing, home textiles, and industrial textiles each shall
take up 1/3 of the total market consumption. Yet in China, consumption of
clothing takes up 65 percent and consumption of home textiles only 23 percent.
Plus, the per capita consumption of home textiles only takes up less than 1
percent of the consumption expenses. Seeing from the gap between China and
foreign countries in consumption of home textile necessities and the
development trend, China home textile industry will have huge space. Down
bedding, as an important branch of home textiles, has a great market potential.
Rise in popularity of down bedding per capita
As learned from China Feather & Down Industrial Association, in developed
countries, almost every person has one duvet; in Japan, the popularization rate
of duvet is 104 percent, and in the US and Europe, the figure is 86.7 percent
and 89.3 percent, respectively, but in China, less than 1 percent. China has 1.3
billion people, but the down popularization rate is less than 1 percent. If this rate
is elevated to 10 percent, then the demand will become 130 million duvets. If
one duvet is sold at RMB 2,000 (approx. EUR 243.10), then the sales amount
will be RMB 260 billion (approx. EUR 31.60 billion).
Popularity of down bedding in star hotels
Today, many cities are building star hotels, from tier-one/two to tier-three/four
cities. Along with swift growth in economy and increase in foreign trades,
upgrade of bedding products has become an important indicator for Chinese
hotels to meet the international standard. Whether to use down bedding is
directly related to the star assessment of hotels. Down bedding will be widely
used in Chinese hotels.
By 2013, China had 12,151 star hotels, holding 2.9529 million beds. Among
them, four-star and five-star hotels were 2,346 and 717, respectively, holding
908,600 and 437,200 beds, respectively. If at least two suits of bedding are
needed for each bed, then, the four- and five-star hotels will need 2.7 million
suits. If each suit is at least RMB 2,000 (approx. EUR 243.10), then the market
size for these hotels will exceed RMB 5 billion (approx. EUR 600 million).
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2018E
Currently, down bedding is used in almost 80 percent of Japanese and US
hotels, while in China, this figure is less than 15 percent. It can be seen that the
Chinese market has great potential.
14.9 Competition Analysis
14.9.1
Down processing
Competition Pattern
Initially, feather processing enterprises are mainly domestic workshops, so they
lack modern enterprise management concepts or brand awareness and thus
were vulnerable in face of market risks. In recent years, the down clothing and
down bedding industries are developing vigorously. The feather processing
industry accordingly is upgraded. Enterprises have improved their operation and
management experience, enlarged size and some start producing feather
products besides down processing. Yet, most enterprises of the industry are
small and thus the industrial concentration degree is extremely low.
The low concentration degree of this industry will expose SNOWBIRD a good
chance to expand its market size and enhance market share. Especially,
compared with the lower production level of the industry, SNOWBIRD has its
technical capability as a competitive edge. SNOWBIRD has produced "sticky
down", which features high quality and has been ratified by Chinese and foreign
organizations of the industry. It has also independently developed "goose down
mink", which has adopted special technologies to plant the large goose down on
the high-count and high-density cotton cloth, the first of its kind in the world. Its
high-tech product "goose fur sheet material" has applied for national patent.
Enterprises in the Chinese down processing industry develop unevenly, so they
need to improve their production and development level so as to make profit in
competitions. Sophisticated process equipment and professional technologies
are required to develop new products, which is a capital-consuming and laborconsuming process. This is beyond the capacity of new entrants in a short term.
The disorderly market competition will bring about deficiency of raw materials.
As a result, this will cause a raw material barrier for new entrants.
Main down-producing regions
China down industry has formed industrial clusters, such has Xiaoshan
(Zhejiang Province), Wuchuan (Guangdong Province), Guigang (Guangxi
Zhuang Autonomous Region), Anxin County (Hebei Province), Changshu
(Jiangsu Province), Guangshan (Henan Province) and Puyang (Henan
Province).
Zhejiang Province makes the largest industrial cluster in China, featuring rapid
development, one-stop industry and diversified development. Xintang is praised
to be "City of Down in China" and is a famous down processing base. Its down
and down products exports take up more than 90% of total exports of Xiaoshan,
56 percent of the national total, and more than 25 percent of the world market.
In company with shift of traditional industries like the textile industry in the
coastal area and rise in labor cost and influenced by the warm winter and
financial crisis, Xintang has lost its superior competitive edges in the down
industry. Down enterprises in Xintang are changing their operation concept,
innovating products and marketing methods, developing core technologies and
injecting more funds and resources into development, design, brand marketing
and channel building.
Anhui is rich in down resources, especially white goose down, but is lagged
behind in its down processing and down products production. Anhui is a large
agricultural province and has abundant down raw material resources. Anqing
and Liuan here rank the top three in China down raw material list. Especially,
Liuan has become the largest down distributing center in China and its down
processing industry has reached a large scale.
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Taiqian County of Henan Province is a famous down distributing center and
renowned down processing and producing base in China. Its mainstay industry
is the down industry. To develop its down industry, Taiqian County built a down
industrial park in 2000 and consummated infrastructures in the park. This park
has attracted 26 large down enterprises. For the moment, Taiqian down
industrial park is the most standardized industrial park giving priority to down
processing and production in China. Snowbird Down Industrial Co., Ltd. is a
leading enterprise of Taiqian County and earns strong support from the local
government. Besides, it can get enough raw materials for its innovative and
high-added-value down products from the washing and preliminary processing
enterprises in the park.
Wuchuan, Guangdong Province, is also an important down production base and
is equally famous as Xiaoshan. It is also regarded to be the City of Down in
China. Its mainstay industry is the down processing industry, from feather
purchasing to preliminary processing, washing, up to the processing and
production of down products. Currently, it has grown into the down technical
development center and information center of Guangdong Province, the largest
white geese and down distributing center in China, and the down feather
industrial base of Guangdong Province.
Lishui is a major down clothing production base in China. Its down and clothing
industry has developed fast in recent years. Currently, it has arranged its
industry with Liandu District as the center. Its leading enterprises are also
influential in both Chinese and foreign down and clothing markets. Yet, its down
and clothing industry has lower concentration degree, small size, weak ability to
provide auxiliary services, and lack of skilled persons.
Table 1 Main Clusters of Down Industry (RMB 100 million)
Area
Xiaoshan
Xintang
Main Businesses
---
Enterprises
Mainly
down
products,
supplemented
by
down
processing,
well-developed
down bedding
Liuan
Down
purchasing,
processing
Taiqian County
Output Value
from
Down
Processing in
2012
down
Hangzhou Xintang Down Co., Ltd.
Hangzhou Liuqiao Feathers Co., Ltd.
Hongrun Down Co., Ltd.
9
Mainly down processing,
supplemented by feather
products
6
Wuchuan
County
Down
purchasing,
processing
down
Wuchuan Hongyi Down Products
Co., Ltd.
2.0
Lishui --- Liandu
Down
processing,
clothing
down
ERAL Down Products Co., Ltd.
0.5
14.9.2
35
Down clothing
Competition Pattern
The down clothing industry is a labor-intensive industry with lower added value.
China down clothing industry has fierce brand competition. Its brand
concentration degree becomes higher. Bosideng takes up 15.46 percent of the
China down clothing market. In recent years, many clothing brands both at
home and abroad start producing down clothing. Their brand awareness and
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design capacity are apparently higher than the down clothing enterprises and
exert great influence on down clothing enterprises. Besides, foreign well-known
down clothing brands start entering the Chinese market, to heat up
competitions.
Main competitive enterprises of the down clothing industry include:
internationally-famous down clothing brands, featuring high selling price and
mainly sold in the high-end market; enterprises that are not specialized in down
clothing but in fashionable clothing, they are not focused on selling down
clothing, so they are not strong competitors of the down clothing enterprises;
Chinese down clothing brands, taking a greater market share and featuring
medium-and-high-grade and moderate product price.
Figure 18 Competition Pattern of Main Down clothing Enterprises
High
Foreign
brands:
S pec i a l iz a t io n
de gr e e
Operation
brand:
Bosideng,
ERAL etc.
Columbia,
Moncler
Production
brand:
Snowbird etc.
Non-downclothing
enterprise: Zara,
Only
Low
Low
Product price
High
In the down clothing brand market in China, there are mainly two kinds of
enterprises: one is the operation-oriented down clothing enterprises
represented by Bosideng and ERAL; the other is the production-oriented down
clothing enterprises represented by SNOWBIRD. Enterprises of this kind mostly
adopt the industrial-chain vertical integration operation pattern.
The operation-oriented enterprises have higher brand awareness and widelyexpanded territory, but they have poor control ability towards the upstream raw
materials. In this case, they will face with difficulty once the raw material price
rises or the raw materials are insufficiently supplied.
Most production-oriented down clothing enterprises are originally down
processing enterprises, so their brand awareness is low and targets their
markets in the tier-three/four cities. They have self-sufficient raw materials, so
they can reduce the transaction cost, weaken bargaining power of raw material
suppliers and thus increase profitability. The down clothing industry is troubled
with low-level duplicate construction and deficient down raw materials.
Therefore, along with market development and enhanced brand awareness of
the production-oriented enterprises, the production-oriented down clothing
enterprises will strengthen their competitive edges in future market.
Competition enterprises
SNOWBIRD is a representative of production-oriented down clothing
enterprises. In contrast with Bosideng International Holdings Limited, the leader
of China down clothing industry, SNOWBIRD's income in 2012 was less than
1/10 of Bosideng, but the growth rate of the annual income was 6.4 times
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Bosideng. It can be seen that SNOWBIRD is enjoying instant development. Its
annual average growth of sales income during 2011-2013 hit 59.51 percent.
Seeing from profit, SNOWBIRD has far higher net income ratio and return on
sales than Bosideng. It has adopted the industrial-chain vertical integration
operation pattern. Its down processing can furnish sufficient raw materials to
production of down clothing, which can reduce transaction cost and also
efficiently evade risks from rise in raw material price. It is a production-oriented
enterprise, so it has less expense in market network and brand promotion in
contrast with operation-oriented enterprises. In the meantime, the company
performs production based on orders, which can avoid excessive inventory
caused by the slump market.
Seeing from owner's equity, return on owners’ equity of SNOWBIRD is 3.56
times Bosideng in 2012, indicating that under the enlarged size and increased
net assets, SNOWBIRD's new products and new markets can guarantee net
profit and net assets to grow together. Also, the company managers can make
proper forecast on the industrial development, have proper judgment on new
profit growth point and improve their management capabilities. SNOWBIRD has
adopted the integration operation strategy, which can raise profitability and at
the same time, acquire steady cash flow and enough development capital.
Table 8 SNOWBIRD versus Bosideng International Holdings Limited
2012
2013
Growth Rate
of
Sales
Income
Net
Income
Ratio
Return on
Owners’
Equity
Growth Rate
of
Sales
Income
Net
Income
Ratio
Return on
Owners’
Equity
Snowbird Down
Industrial Co., Ltd.
65.53%
23.52%
51.40%
53.71%
20.66%
40.96%
Bosideng
International
Holdings Limited
10.25%
11.60%
14.45%
-8.80%
11.45%
4.48%
Remarks: the finance year of Bosideng ends on March 31 and no quarterly data are available.
Therefore, the data for the year 2012 covers the period from March 31, 2012 to March 31, 2013;
data for the year 2013 covers the period from April 1, 2013 to September 30, 2013.
Source: Annual Report of Bosideng, Data from Snowbird, 2013
Along with rise in income, consumers have demanding requirements on
individualization and brand. Also, their purchasing power is stronger and thus
brings great consumption potential to the down clothing industry. Accordingly,
down clothing enterprises shall change their operation strategies, enhance
brand awareness, and improve product design abilities, to gain more benefits
from market and take the initiative in market competitions.
Future competition direction
The Chinese down clothing industry has a relatively higher concentration
degree of brands. Bosideng, Yalu and Yaya are enjoying higher brand
awareness and market share, but other brands are not. Down clothing are more
fashionable, casual and individualized. Also, product update is accelerated. In
this case, to adapt to the changed market competition pattern, down clothing
enterprises need to adjust their operation strategies in cost, marketing and
design to make profit.
Production-oriented enterprises shall, besides maintaining their strength in cost,
highlight building of the terminal market and make improvement in development
and design. Compared with celebrity endorsement and advertising, market
terminal can better improve brand image. They shall adopt down-to-earth
promotion strategies, to inject funds into improving product quality, design and
development, and building of sales terminals. Besides, they shall normalize
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specific management and organizational flow, to form an organic whole and
ensure orderly, permanent, healthy and high-speed development. Furthermore,
production-oriented enterprises are weaker in product design. Yet brand design
and innovation are critical for sustainable development of enterprise. Only
improving and innovating products can an enterprise meet individualized
demand from consumers. SNOWBIRD has been aware of significance of brand
operation and product design. It will exert more energy into brand operation,
strengthen brand promotion force, expand marketing channels and continuously
improve product design capabilities.
For instance, SNOWBIRD down clothing is mainly sold in tier-two/three cities,
where consumers are many but their consumption power is weaker. Also,
consumers cannot accept the price of large brands. In this case, SNOWBIRD
shifts from the tier-two/three markets to the tier-one market to improve its
popularity and expand market share. In addition, SNOWBIRD expands its
business to the upstream, to develop down production and breed goose and
commercial products, so as to provide sufficient raw materials for down clothing
production, save raw material cost and evade risks from price fluctuation of raw
materials.
The operation-oriented enterprises shall focus on the high-end market. Some
internationally famous brands have entered the down clothing market and
transfer their brand influence to their down clothing products. They have
attracted a host of medium-and-high-end consumers. Down clothing of high
price have appeared, which has aroused attention in the industry. Thus, some
large down clothing enterprises in China shall also march to the high-end
market. Moreover, they shall increase development force, elevate the added
value of products, raise product selling price, and avoid reduced income and
profit rate due to low-price competition, to adapt to market change.
14.9.3
Down bedding
Competition pattern
The down bedding industry is lagging behind the down clothing industry. Its high
profitability has attracted many new entrants, but its competition is not as fierce
as the down clothing industry. The down bedding industry is weaker in aspects
of brand strength and retail management than the down clothing industry.
Currently, it is in the extensional expansion stage.
For the moment, there are several bedding product brands in China and formed
the brand layout of the home textile industry. Besides, these brands have
covered the low, medium and high consumer markets. The down bedding
enterprises, as an important branch of the home textile industry, are still weaker
than the home textile enterprises. The down bedding industry has an extremely
low concentration degree and hasn't formed a brand with absolute strength.
Its lower market concentration degree determines that it is not ready for
integration. Integration takes place only when the leading enterprise in the
industry has obtained scale strength and the SMEs have far lower profit margin
compared with the leading enterprises. This is a golden chance for brand down
bedding enterprises to expand their brand influence and improve market share.
In the down bedding market, competition enterprises mainly include: down
enterprises and home textile enterprises. Down enterprises mostly develop from
the down processing enterprises and are more specialized in producing down
bedding. Yet for home textile enterprises, down bedding is a supplement to their
product range, so they are not specialized. Compared with the home textile
enterprises, down enterprises have lower brand awareness. However, in
company with popularization of down bedding in China market, the industry will
become more mature and consumers will more ratify duvet and down pillows.
Then, the down enterprises will have the chance to exert their specialized
strength and get the upper hand in market competition.
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Table 11 Main Competitors in Down Bedding Market
Down Enterprise
Home textile Enterprise
Main business
Main down products, starting down
bedding business
Down bedding is supplement to the
product range.
Operation pattern
Integration operation, lower production
cost
Outsourcing pattern, entrusting the quilt
filling and pillow filling to down
enterprises
Sales pattern
Mainly bulk purchase from distributors,
weaker brand chain operation
Mainly brand chain operation
Marketing
channel
Supermarket,
shopping
wholesale market, fewer
stores
Brand specialty stores
Product
Highlights technical content of products,
more practical appearance
place,
specialty
Highlighting diversified appearance
Competitive enterprises
Compared with Luolai Home Textile Co., Ltd., a leading enterprise of the home
textile industry, SNOWBIRD has the income growth rate 6.39 times Luolai in
2012, so it has great development potential. Besides, SNOWBIRD’s profit
margins are higher than Luolai.
SNOWBIRD has adopted the integration operation pattern, which gives it
strength in raw material cost, so its net income ratio and return on sales are far
higher than Luolai. Integration operation can strengthen SNOWBIRD 's
profitability and also enable it to gain steady cash flow and enough development
fund, so that the return on owners’ equity of SNOWBIRD is 3.57 times Luolai in
2012, which means more interests to investors and even higher investment
worth.
Table 12 SNOWBIRD versus Home Textile Enterprises
2012
Growth
Rate of
Sales
Income
2013
Net Income
Ratio
Return on
Owners’
Equity
Growth
Rate of
Sales
Income
Net Income
Ratio
Return on
Owners’
Equity
Snowbird
Down
Industrial Co.,
Ltd.
65.53%
23.52%
51.40%
53.71%
20.66%
40.96%
Luolai Home
Textile Co.,
Ltd.
10.25%
14.02%
14.38%
-20.54%
14.55%
4.62%
Remarks: Luolai hasn’t issued its annual report for the year 2013. Therefore, data for the year 2013
covers the period from January 1 to September 30, 2013.
Source: Annual Report of Luolai Home Textile Co., Ltd., Snowbird's data, 2013
Currently, the down bedding industry is giving priority to production and rapidly
occupying the market, so it hasn't paid enough attention to the brand concept
and operation concept. Brand means market positioning and the value of
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product quality, performance, technology, equipment and services. It can help
an enterprise build a good corporate image and strengthen the company's
competitive power. In the down bedding industry, enterprises have weak brand
awareness. If they can realize significance of brand operation and embark on
improving brand awareness when the brand operation cost is lower, they will
gain more strength in market competition. In the industry, the competition
means are extensive. Once several brands gain the leading position with
sophisticated marketing means, they will keep such strength for a long time.
Enterprises may select TV programs and promotion channels that match the
brand particularity, to promote brand and elevate brand reputation and
popularity. Also, they may perform integration marketing pattern and elevate the
terminal brand promotion force. Enterprises shall highlight online media like TV
and network to promote their brands, but shall by no means neglect the terminal
brand promotion, to continuously elevate the brand reputation and gain
customer's loyalty to the brand, which will be key to down bedding enterprises
to get the upper hand in market competition.
Page 157
15.
REGULATORY ENVIRONMENT
Set forth below are summaries of certain PRC laws and regulations applicable to
SNOWBIRD’s operations and business.
15.1 PRC Legal System
The PRC is a unitary state and all power theoretically flows from the central congress and
government in Beijing which in turn grants certain powers, subject to a number of
limitations, to the provincial and local authorities. Formal legislative power is centered in
the National People’s Congress (“NPC”). The State Council under the Premier carries out
the daily work of government including enacting administrative regulations. The Supreme
People’s Court issues judicial interpretations which are equivalent to laws and applied by
all other local courts throughout the PRC. Below the Supreme People’s Court are the
Higher Level People’s Courts at the provincial level, the Intermediate Level and then the
Basic Level People’s Courts at the local level. A majority of lawsuits relating to foreign
affairs are heard in the Intermediate Level People’s Courts where its judges are more
familiar with disputes involving foreign investors.
The introduction of new commercial legislation can often be tied to the shift from public to
private ownership that has taken place in the PRC over the last 15 years. PRC citizens
have become shareholders and accumulated their own private wealth; they are enjoying
previously unimagined levels of autonomy and strong laws such as the Property Law that
was passed in early 2007 for the purpose of protecting property freedom.
15.2 The General Principles of the Civil Law
The General Principles of the Civil Law (the Principles of Civil Law) were adopted by the
NPC on 12 April 1986 and came into force on 1 January 1987. The Principles of Civil Law
is formulated for the purpose of protecting the lawful civil rights and interests of citizens
and legal persons as well as correctly adjusting civil relations. According to the Principles
of Civil Law, all parties in a civil law relationship shall enjoy equal legal positions and all
civil law activities shall abide by the principle of voluntariness, all persons shall act in
good faith without causing harm to others. In the following chapters, the Principles set out
general rules on the obligations of contractual and non-contractual parties and the
concept of damages.
15.3 PRC Company Law
The establishment and operation of corporate entities in China is governed by the
Company Law, which was promulgated by the Standing Committee of the NPC on 29
December 1993 and became effective on 1 July 1994. It was subsequently amended on
25 December 1999, 28 August 2004, 27 October 2005 and 28 December 2013,
respectively. The amendments to the Company Law published on 28 December 2013
and adopted on 1 March 2014 seek to lower the requirements for registered capital and
simplify the establishment of company.
The Company Law applies to all companies registered in the PRC, including foreigninvested companies to the extent not provided in FIE Regulations and generally governs
two types of companies. Companies under the Company Law have the status of legal
persons, and the liability of a company to its creditors is limited to the value of assets
owned by the company. Liabilities of shareholders of a limited liability company are
generally limited to the amount of registered capital they have subscribed to. All directors
and supervisors must act in a loyal and diligent way towards the company. A liability
arises for damages in case a director, supervisor or senior manager violates the laws, the
administrative regulations or the articles of association (Satzung) whilst performing
his/her duties. A shareholder may institute legal proceedings against the unlawful acts of
a director, supervisor, manager or third party that have harmed the interests of the
company or the shareholder.
The management structure of a limited liability company shall be constituted by the
shareholders, board of directors, board of supervisors and other members of the
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management such as senior managers and the general manager. The board of directors
(for companies with a smaller scope, only one executive director may be appointed) is the
indispensable organ of the limited liability company. It shall be responsible for exercising
the management functions and powers such as executing resolutions made at
shareholders' meetings, determining the company's operational plans and investment
plans, formulating the company's annual budgets and final account plans, formulating the
company's profit distribution plans and loss recovery plans, etc. Primary responsibilities of
the board of supervisors (for companies with a smaller scope, only one supervisor may
be appointed) include inspecting the financial affairs of the company, supervising
performance of the directors and senior managers, requiring any director or senior
manager to take corrective action where his/her actions damage the interests of the
company, etc. A limited liability company may have a manager appointed by the board of
directors, or the post of manager may be directly held by executive director. The manager
shall be responsible to report to the board of directors and shall assume the responsibility
covering a range of executing the daily operation of production and business, executing
the plan made by the board of directors, formulating the inner management of the
company, etc. Besides the aforesaid management structure of limited liability company,
the legal representative holds a very important function for the operation of the company.
The position of the legal representative shall be taken by the chairman of board of
directors, executive director or manager and registered with the administrative authority of
industry and commerce (“AIC”). The legal representative has full powers by law to
represent the company.
15.4 M&A Provisions
The Provisions on the Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors (the “M&A Provisions”) were promulgated by MOFCOM, CSRC, the Stateowned Assets Supervision and Administration Commission of the State Council, the State
Administration of Taxation, the State Administration for Industry and Commerce (SAIC)
and SAFE on 8 August 2006. The M&A Provisions became effective on 8 September
2006 and amended in 2009. The M&A Provisions provide rules which foreign investors
must comply with when purchasing a stake in a domestic non-foreign-funded enterprise
or subscribing to the increased capital of a domestic company, thus changing the
domestic company into a foreign-funded enterprise. The M&A Provisions are also
applicable if a foreign investor establishes a foreign-funded enterprise, through which it
purchases the assets of a domestic enterprise and operates its assets, or, if a foreign
investor purchases the assets of a domestic enterprise, and then invests such assets to
establish a foreign-funded enterprise and operates the assets.
The M&A Provisions among other things, require that an offshore special purpose vehicle
(“SPV”) formed for listing purpose controlled directly or indirectly by PRC enterprises or
individuals and has acquired domestic entities obtain CSRC approval before it lists
overseas. On 21 September 2006, CSRC published on its official website procedures
specifying documents and materials required to be submitted to it by SPVs seeking
CSRC approval of their overseas listings. However, significant uncertainty remains with
regard to the extent and applicability of the M&A Provisions to overseas listing of offshore
SPVs.
15.5 Foreign Investment Regulations
Investment activities in the PRC by foreign investors are mainly governed by the
Guidance Catalogue of Industries for Foreign Investment (“Catalogue”), which will be
promulgated and amended from time to time jointly by MOFCOM and the National
Development and Reform Commission (“NDRC”). The latest version of the Catalogue, as
amended, became effective on 30 January 2012 and divides, like the former versions,
industries into three categories for foreign investment: encouraged, restricted and
prohibited. Industries that are not covered by the Catalogue are permitted for foreign
investment.
Foreign-invested enterprises are subject to approval of the MOFCOM or its local
counterpart depending on the total amount of investment for the establishment in the
PRC. Following the establishment of such a foreign-invested enterprise, any material
corporate changes, including capital increase or reduction, change in business scope,
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transfer of shares, also require approval by MOFCOM or its local counterpart. For specific
industries, the approval of the ministry with responsibility for such industry is needed in
order to apply for the approval by MOFCOM or its local counterpart. The establishments
of foreign-invested enterprises as well as major corporate changes must be registered
with the responsible registration authority, i.e. the State Administration for Industry and
Commerce (“SAIC”) or its local counterpart.
15.6 Foreign Exchange Regulation
SNOWBIRD’s subsidiaries in the PRC are subject to PRC laws and regulations on
currency conversion. One of the key authorities with respect to foreign exchange is SAFE
which supervises and controls the foreign exchange market.
15.6.1
The Regulation on Foreign Exchange Administration
SAFE controls, inter alia, specific transactions involving the flow or conversion
of foreign exchange in the PRC. Transaction items are treated differently,
subject to whether they qualify as current account or capital account items.
Recurring account items refer to ordinary transactions including receipts and
payments. In contrast, capital account items refer to items of increase or
decrease in debt and equity due to inflow or outflow of capital. The State
Council adopted the Regulation on Foreign Exchange Administration which
came into force on 1 April 1996, and most recently amended on 1 August 2008.
According to this regulation, the RMB is convertible for recurring account items
including the trade and service-related foreign exchange transactions and other
current exchange transactions, but not for capital account items, such as direct
investments, loans, repatriation of investments in equity interests, which are still
subject to the approval of SAFE or its local counterparts.
15.6.2
The Regulations on the Sale and Purchase of and Payment in Foreign
Exchange
Pursuant to the Regulations on the Sale and Purchase of and Payment in
Foreign Exchange which became effective on 1 July 1996, domestic institutions
in China may only buy, sell and/or remit foreign currencies at those banks
authorized to conduct foreign exchange business after providing valid
commercial documents and, in the case of capital account item transactions,
obtaining approval from SAFE or its local counterparts. Capital investments
outside the PRC by domestic institutions in the PRC are also subject to
limitations, which include approvals by or registration with SAFE and other
relevant government authorities.
15.6.3
SAFE Notice No.142
The Notice on the Relevant Operating Issues concerning the Improvement of
the Administration of Payment and Settlement of Foreign Currency Capital of
Foreign-funded Enterprises (“SAFE Notice No.142”) was issued on 29 August
2008. SAFE Notice No. 142 is one of a number of measures recently
implemented in order to restrict the use of the registered capital of foreigninvested enterprises settled in RMB and converted from foreign currencies. Due
to its potential impact on acquisitions and investments in China carried out via
foreign-invested enterprises it may have significant consequences for foreign
investors.
A significant number of foreign-invested enterprises in the PRC denominate
their registered capital in a foreign currency and then convert their registered
capital into RMB. This converted capital is then used to develop their enterprise
in the PRC. SAFE Notice No.142 provides that the RMB funds from the
settlement of foreign currency capital of a foreign-funded enterprise shall only
be used within the business scope as approved by the examination and
approval department of the government, and shall not be used for domestic
equity investment unless it is otherwise provided for. Furthermore, with the
exception of foreign-funded real estate enterprises, no foreign-funded enterprise
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shall use RMB funds from the settlement of foreign currency capital to purchase
domestic real estate for any purpose other than its own use. A foreign-funded
enterprise shall follow the relevant provisions of the state, when using the RMB
funds from the settlement of foreign currency capital for any securities
investment. Where a foreign-funded investment enterprise formed with the
approval of the commerce administrative department is engaged in domestic
equity investment, its transfer of capital within the PRC may be handled only
after being examined and approved by SAFE. In M&A transactions, the
settlement of the purchase consideration denominated in foreign currency must
be effected via an exclusive foreign currency account approved by the local
branch of SAFE. In addition, the use of such registered capital settled in RMB
may not be changed without SAFE's approval, and may not in any case be used
to repay RMB loans if the revenues of such loans have not been used for
approved purpose.
15.6.4
SAFE Notice 37
On 4 July 2014, SAFE issued the Notice on Issues concerning Foreign
Exchange Management in Financing and investment by PRC Residents by
Overseas Special Purpose Vehicle and Roundtrip Investments (“SAFE Notice
37”), which became effective on 4 July 2014. Pursuant to SAFE Notice 37,
SPVs are foreign companies that are established by or controlled by PRC
residents for raising financing or investment outside of PRC. Such PRC
residents are required to file an “overseas investment foreign exchange
registration” before making capital contribution to such SPV and subsequently,
to update such registration on the occurrence of specified events such as (i) the
change on the basic information such as individual shareholders, name,
business term, etc. of the PRC entity; (ii) material event such as capital increase,
capital decrease, share transfer or swap, merger, division, etc.. Subject to
completion of the aforesaid registration, payment of dividends, profits and other
payments to such SPV will be permitted.
Under SAFE Notice 37, where a PRC resident or passport holder violates the
provisions in this Notice and constitutes evasion of foreign exchange or violation
of any other rule on foreign exchange administration, the foreign exchange
office shall give penalties in accordance with the Regulation of the PRC on
Foreign Exchange Administration and other relevant provisions. In addition,
non-compliance with the provisions of SAFE Notice 37 may result in restrictions
concerning the foreign exchange activities of the relevant onshore company,
including the payment of dividends and other distributions to its offshore parent
or affiliate and the capital inflow from the offshore entity.
15.7 Dividend Distribution by WFOE
The principle rules governing distribution of dividends by a wholly foreign-owned
enterprise (“WFOE”) are set out in the PRC Company Law (1993), as amended in 2005,
the Wholly Foreign-Owned Enterprise Law (1986), as amended in 2000 and the Wholly
Foreign Owned Enterprise Law Implementation Rules (1990) as amended in 2001.
According to these rules, a WFOE may pay dividends only out of their accumulated
profits, if any, determined in accordance with PRC accounting standards and regulations.
Before any profits can be distributed, the WFOE must first set aside 10% of the profits
after tax as reported in its PRC statutory financial statements to its statutory common
reserve fund in each year, up until the aggregate balance of its statutory common reserve
fund has reached 50% of the company’s registered capital. In addition, a WFOE may set
aside certain amounts out of its accumulated profits each year for bonus and welfare
funds. The amounts set aside in these funds are not distributable as cash dividends to
the shareholders of the WFOE.
15.8 Taxation of Dividends received from PRC in Hong Kong
In Hong Kong no tax is imposed on dividends under the Inland Revenue Ordinance (Cap
112). Therefore, no tax is payable in Hong Kong in respect of the dividends paid to a
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Hong Kong corporation, whether the dividends have a source in Hong Kong or outside of
Hong Kong. Dividends distributed to the shareholders of a Hong Kong corporation are not
subject to Hong Kong withholding tax.
15.9 PRC Tax Laws
15.9.1
The EIT Law
The new EIT Law was adopted by the NPC on 16 March 2007 and came into
force on 1 January 2008. Under the previous tax regulations, the general
enterprise income tax rate for foreign-invested enterprises (“FIE”) was 33%
which comprised of 30% national and 3% local income tax. In some special
zones, regions and industries, according to the previous income tax regime, the
applicable tax rate may be as low as 15% or 24%. Under the previous tax law,
manufacturing FIEs with a term of operation exceeding ten years were usually
entitled to a tax holiday of two years full exemption followed by a three years
term of 50% tax exemption beginning the first profitable year after previous
losses have been made up. The new EIT Law sets forth a unified tax rate for
both foreign-invested and domestically owned companies. The new EIT Law
provides that the 15% tax rates in the special zones and regions will gradually
be increased to 25% in the next five years. According to the new EIT Law, tax
holidays for FIEs will be phased out. However, the new EIT Law provides a
grandfathering period for FIEs which was approved prior to the promulgation of
the EIT Law. If the tax holidays have not started due to losses, they shall be
deemed to commence from the beginning of 2008, i.e. tax holidays can only be
utilized until 2012.
The concept of tax resident enterprise (“TRE”), however, which was introduced
by the EIT Law, states that any (offshore) enterprise whose de facto
management body is located in the PRC will be subject to income tax at a rate
of 25% on its worldwide income under the EIT Law. According to the
Implementing Rules of the EIT Law, the term “de facto management body” shall
refer to the body that is in charge of the management and exercises essential
control over the enterprise with respect to its operation, personnel, accounts
and assets. In case either Snowbird HK or the Company is considered a TRE, it
would be subject to enterprise income tax in China on their worldwide income,
including dividends received at a rate of 25%.
15.9.2
Withholding Tax on Dividends and Capital Gains
Prior to 1 January 2008, dividends derived by foreign enterprises from business
operations in the PRC were not subject to the PRC enterprise income tax.
However, such tax exemption ceased when the EIT law became effective on 1
January 2008 and a withholding tax rate of 10% now applies to such dividends,
subject to reductions by the relevant tax treaties, if applicable.
The EIT Implementing Rules provide that, (i) if the enterprise that distributes
dividends is domiciled in the PRC; or (ii) if gains are realized from transferring
equity interests of enterprises domiciled in the PRC, then such dividends or
capital gains are treated as China-sourced income and subject to PRC
withholding tax.
Pursuant to a special tax arrangement between Hong Kong and the PRC, the
tax rate of 10% may be lowered to 5% if, among other things, the PRC
enterprise is at least 25% held by a Hong Kong enterprise and subject to the
approval of the competent PRC tax authorities.
15.9.3
The Interim Regulation on Value Added Tax (VAT)
The Interim Regulation on VAT was amended and adopted by the State Council
on 5 November 2008 and came into force on 1 January 2009. Pursuant to The
Interim Regulation on VAT, enterprises and individuals engaged in the sale of
goods, supply of processing, repair and replacement services, and import of
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goods within the territory of the PRC are taxpayers of VAT and shall pay VAT.
VAT taxpayers are divided into general taxpayers and small-scale taxpayers. A
small-scale VAT taxpayer is a manufacturer who has annual taxable sales of
less than RMB 500,000 (approx. EU 60,000) or a distributor or retailer who has
annual taxable sales of less than RMB 800,000 (approx. EUR 95,000).
Different tax rates and calculation of tax amounts will be applied respectively.
The VAT payable by a general taxpayer equals the balance between the output
tax amount and the input tax amount incurred. The VAT rate is normally 17%
and a lower rate of 13% is applied to certain categories of goods. Goods and
services of a small-scale taxpayer are subject to lower VAT rate at 3%.
However, a small-scale taxpayer cannot deduct the paid input VAT charged on
imported or domestically purchased materials from the payable amount of
output VAT.
15.10 Tort Liability Law
The Tort Liability Law of the PRC was adopted by the NPC’s Standing Committee on 26
December 2009 and has come into force on 1 July 2010. The Tort Liability Law is
formulated for the purpose of protecting the legal rights and interests of civil subjects,
defining tort liability, preventing and sanctioning acts of tort. The “civil rights” are personal
and property rights including the right to life, right to health, right of name, right of
reputation, right of honor, portrait right, right to privacy, autonomy in marriage,
guardianship, ownership, usufruct, real rights granted by way of security, copyright,
patent, rights to exclusive use of trademarks, right of discovery, equity interest and right
of inheritance. According to the Tort Liability Law, the infringee is entitled to seek tort
liability on the part of the tortfeasor and in the event that the property of the tortfeasor is
insufficient to pay for his or her tort liability and administrative or criminal liability for the
same act, he or she shall first and foremost assume his or her tort liability.
According to the Tort Liability Law, the liability is mainly assumed through the cessation of
the infringing act, the removal of obstacle, the elimination of danger, the restitution of
property, the restitution of original state, the compensation for loss, formal apology and
the elimination of adverse effect and restoration of reputation. Under the Tort Liability Law,
employer shall be liable for the damages caused by its employees to others in the course
of performing work duties. A manufacturer shall be liable for any damages caused due to
its defective products. With regard to the environmental issues, the Tort Liability Law
highlighted the principle that polluters should assume liabilities for harm caused by
environmental pollution, unless the polluter can prove that there is no causation of liability.
The Tort Liability Law also establishes a separate chapter regarding product liability.
Compared to other laws and regulations in relation to product liability, the Tort Liability
Law expressly provides that, in the event a defective product causes death or serious
personal injury and the entity that manufactures and distributes such defective products
has knowledge of the existence of such defects, such entity may be sued for punitive
damage.
15.11 Product Liability Law
The principal law governing product liability is the Product Quality Law, which was
promulgated on 22 February 1993 and amended in 2000 and 2009 respectively.
The Product Quality Law is applicable to all activities of production and sale of any
product which within the PRC, and the producers and sellers shall be liable for product
quality in accordance with its provisions.
According to the Product Quality Law, products must satisfy the following requirements:

being free from unreasonable dangers to the personal or property safety,
and confirming to the national or industrial standards for safeguarding the
health and personal or property safety;

possessing the functions for the use that the product ought to possess;
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
confirming to the product standards marked on the product or on the
package thereof, and to the quality conditions indicated by way of product
directions and product sample.
Violations of the Product Quality Law may result in the imposition of administrative fines.
In addition, the business operator will be ordered to suspend its operations and its
business license may be revoked. Criminal liability may be incurred in serious cases.
According to the Product Quality Law, if damages are done to a person or the properties
of others due to the defective products, the victims may claim compensation either from
the producers or sellers. If the responsibility rests with the producers and the
compensation is paid by the sellers, the sellers have the right to recover their losses from
the producers. If the responsibility rests with the sellers and the compensation is paid by
the producers, the producers have the right to recover their losses.
15.12 Protection of Intellectual Property Rights
15.12.1 Trademark Law
The PRC Trademark Law was promulgated on 23 August 1982, and was
amended for the first time on 22 February 1993, for the second time on 27
October 2001 and for the third time on 30 August 2013 by the NPC Standing
Committee, followed by the Regulation for the Implementation of the PRC
Trademark Law in 2002. The PRC is a signatory to the Madrid Agreement and
the Madrid Protocol by which an international registration has the same effect
as an application for registration of the mark made in each of the countries
designated by the applicant.
The PRC Trademark Office is competent for the registration and administration
of trademarks for the whole of the PRC.
According to the PRC Trademark Law, the duration of trademark rights shall be
ten years, counted from the date of registration, and it is renewable. The
protection of the trademark rights starts from the registration date and is limited
to the registered trademark and the designated goods/services thereof.
In the event of any acts which infringe the right to the exclusive use of a
registered trademark, the registrant of that trademark or persons who have a
legal right which may be harmed by another person's act can choose to seeking
redress in a court of law or request the administrative department of industry
and commerce to launch an investigation
According to this law, a trademark registrant may, by concluding a trademark
licensing contract, authorize another person to use its registered trademark.
The licensor shall supervise the quality of the commodities on which the
licensee uses the licensor’s registered trademark, and the licensee shall
guarantee the quality of the commodities on which the registered trademark is
to be used. The licensee must indicate the name of the licensee and the origin
of the commodities on the commodities on which that registered trademark is
used. The trademark licensing contract shall be submitted to the Trademark
Office for the purpose of archive.
15.12.2 Patents
The PRC Patent Law was promulgated on March 12, 1984, and was latest
amended for the third time on 27 December 2008 by the Standing Committee of
NPC, followed by the amendment to the Regulation for the Implementation of
the PRC Patent Law in 2010.
According to the PRC Patent Law, there are three types of patent, namely
invention, utility model and design patent. An invention patent is valid for 20
years, whereas a utility model and a design patent is valid for 10 years, all from
the initial date on which the patent application was filed. The validity period is
not renewable. Patent applications must be filed with the State Intellectual
Property Office (“SIPO”) in Beijing.
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A patent holder who believes the patent is being infringed may either file a civil
legal suit or file an administrative complaint with a competent local office of
SIPO. A PRC court may issue a preliminary injunction upon the patent holder’s
or an interested party’s request before instituting any legal proceedings.
Damages for infringement are calculated as either the loss suffered by the
patent holder arising from the infringement or the benefit gained by the
infringing party from the infringement. If it is difficult to ascertain damages in this
manner, damages may be determined on the basis of the license fee under a
contractual license. If damages cannot be determined, statutory damages
ranging from RMB 10,000 (approx. EUR 1,215) to 1,000,000 (approx.
EUR121,550) may be requested.
Under the PRC Patent Law, where a person possesses the means to utilize a
patented technology, but such person cannot obtain a license from the patent
holder on reasonable terms and within a reasonable period of time, the SIPO is
authorized to grant a compulsory license. A compulsory license can also be
granted where a national emergency or any extraordinary state of affairs occurs
or where the public interest so requires.
Patents issued in the PRC are not enforceable in Hong Kong, Taiwan or Macau,
which each have independent patent systems. Although patent rights are
national rights, there is also a large degree of international co-operation under
the Patent Cooperation Treaty, or the “PCT”, to which China is a signatory.
Under the PCT, applicants in one country can seek patent protection for an
invention simultaneously in a number of other member countries by filing a
single international patent application. The fact that a patent application is
pending is no guarantee that a patent will be granted, and even if granted, the
scope of a patent may not be as same as the subject of the initial application.
15.12.3 Internet Domain Name
Internet domain names in the PRC are regulated by the Administrative
Measures on the PRC Internet Domain Name, which were promulgated by the
Ministry of Industry and Information Technology and came into effect on 20
December 2004, and the Implementation Rules of Registration of Domain
Name, which was promulgated by PRC’s domain name registrar, CNNIC, and
came into effect on 1 December 2002. Registration of domain names with
CNNIC follows the “first to file” principle and applicants are required to register
through domain name registration service organizations. Domain name service
organizations accept applications for network domain names and domain name
registration applicants become holders of the registered domain name after
registration. A holder needs to pay operation fees on time to keep its registered
domain name or otherwise the domain name registrar may revoke the domain
name. in case there is any change to the registration information of a domain
name, the holder shall file the changes with the domain name registrar within 30
days after such changes. The CNNIC is responsible for the administration of
“.cn” domain names and Chinese domain names. Disputes in respect of domain
names are regulated by the Measures on Resolution of Disputes regarding
Domain Names which was issued by CNNIC and revised on 14 February 2006
and its implementing rules, according to which disputes shall be settled by
organizations approved by CNNIC.
15.13 Labor Law
Labor relations in the PRC are governed by various laws, regulations and local
government policies. The most important ones are the 1994 Labor Law of the PRC and
the new Labor Contract Law that came into effect on 1 January 2008. Both laws are
supplemented by local and subsidiary rules. An employee is regarded as an individual
who performs physical or mental work in enterprises, institutions and government
authorities and earns his living primarily from wages or salaries.
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15.13.1 The Labor Contract Law
The Labor Contract Law was adopted by the Standing Committee of the NPC
on 29 June 2007 and came into force on 1 January 2008 with further
amendments made on 28 December 2012. The Labor Contract Law has a
significant impact on all existing and future employment relationships under
PRC law. Pursuant to the Labor Contract Law, labor contracts shall be entered
into if employment relationships are to be established between employer and
the employee. There is no national standard employment contract but some
local labor authorities have prepared their own standard contract.
The Labor Contract Law has strengthened an employee’s position by stipulating
written contracts and minimum contents including the term of the contract, the
place of work and the working hours, the remuneration to be paid to the
employee and the work conditions. The Labor Contract Law imposes severe
consequences and sanctions on employers for non-compliance with the
conclusion of employment contracts in written form. Consequences can include
the doubling of the employee’s salary for the relevant period of time, should an
employer fail to conclude a written employment contract for a period of one
month to one year after the actual commencement of work. If no written contract
has been concluded after more than one year, an unfixed-term of contract is
deemed to have been concluded.
The PRC Labor Contract Law also provides that an employer who terminates
an employment contract in violation of laws shall continue to perform the
employment contract if the employee demands it. If the employee does not want
to continue the employment or if the performance of the employment contract
has become impossible, the employer shall pay the employee damages in the
amount of twice the severance payment.
An employer cannot require an employee to work in excess of statutory time
limits and shall pay wages which are no lower than the applicable local
standards on minimum wages. The employer shall establish a sound system for
employment protection, strictly abide by the rules and standards on work safety
and hygiene and educate employees in work safety and hygiene. The employer
shall provide employees with work safety and hygiene conditions meeting State
stipulations and all applicable provisions of employment protection.
The State Council issued the Implementing Rules on 18 September 2008 and
made further explanations on several important issues of the PRC Labor
Contract Law. The Implementing Rules state, for instance, that employer and
employee shall not agree on any additional termination reasons in the
employment contract apart from the circumstances as stipulated in the PRC
Labor Contract Law, that is automatic termination due to the expiration to the
employment term, reaching of the statutory retirement age or retirement using
the pension to which an entitlement under the law accrued. Further, the
Implementing Rules designate the calculation method of the monthly salary of
an employee for the calculation of statutory severance payments.
15.13.2 The Social Insurance Law
The Social Insurance Law of the PRC was adopted on 28 October 2010 and
came into force on 1 July 2011. The Social Insurance Law aims to prevent the
improper use of social security funds and also promises a new endowment
insurance system for rural residents. The new law specifies a common right for
all citizens to access and enjoy five forms of insurance: pension insurance,
medical insurance, employment injury insurance, unemployment insurance and
maternity insurance. It also allows employees to transfer their basic endowment
insurance accounts from one residence to another and promises a new
endowment insurance system for rural residents.
15.14 The PRC Land System
Under the national constitution of the PRC, all land in the PRC is either state-owned or
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collectively owned, depending on the location of the land. All land in urban areas of a city
or town is state-owned, and all land in rural and suburban areas, except stipulated by law
as being owned by the State, is collectively owned by rural residents.
According to the PRC Property Law and Land Administration Law, private individuals as
well as businesses and other organizations are permitted to acquire long-term (for
instance, up to 70 years for residential purpose or up to 50 years for industrial use) land
use rights either through transfer against payment of a grant premium or through
allocation from the local governments at or above county level. Renewal is possible upon
expiration.
A land grantee of the use right of land for construction purpose may, in compliance with
the provisions of the land grant contract regarding the period and conditions of
investment, development and use of the land, transfer, mortgage or lease its land use
rights to a third party for the remainder of the term of grant. For any change of land use
rights, an application for alteration registration shall be filed with the registration
authorities.
The state may reclaim granted land use rights prior to expiration of the term of grant due
to public interests. In that case, compensations shall be given to the houses and other
real properties on the land.
15.15 Environmental Laws
15.15.1 The Environmental Protection Law
The Environmental Protection Law adopted on 26 December 1989 by the
Standing Committee of NPC provides the legal framework on environmental
protection. Units that cause environmental pollution and other public hazards
shall incorporate steps and measures of environmental protection into their
plans and establish a responsibility system for environmental protection. These
units shall adopt effective measures to prevent and control the pollution and
harms caused to the environment by waste gas, waste water, waste residues,
dust, malodorous gases, radioactive substance, noise, vibration and
electromagnetic radiation generated in the course of production, construction or
other activities. Installations for the prevention and control of pollution at a
construction project shall be designed, built and commissioned together with the
principal part of the project. No permission shall be given for a construction
project to be commissioned or used, until its installations for the prevention and
control of pollution have been examined and considered compliant with the
standard by the competent department of the environmental protection
administration having examined and approved the environmental impact
statement. The administration department of environmental protection of the
State Council implements unified supervision and management of the national
environmental protection work, and establishes the national standards for
pollutant discharge, while the environmental protection bureaus at or above the
county level are responsible for the environmental protection work within their
respective jurisdictions.
15.15.2 The Law on the Prevention and Control of Water Pollution
The Law on the Prevention and Control of Water Pollution was adopted on 11
May 1984 and most recently amended on 28 February 2008 and became
effective on 1 June 2008.
According to this law, the environmental protection department of the State
Council is in charge of the national waste discharge standards. The local
provincial governments can work out and implement local waste discharge
standards where relevant national standards are absent or promulgate even
stricter local waste discharge standards. The discharge of waste under the
governance of certain local standards must comply with the local waste
discharge standards. Enterprises which directly discharge waste into water
must pay pollutant discharge fees. Payment of pollutant discharge fee will be
exempted if the waste is discharged into facilities for concentrated treatment of
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urban water pollutant and the pollutant treatment fee has been paid. If the
pollutant discharged exceeds the national or local waste discharge standards,
the environmental protection department is entitled to order the relevant
enterprises to remedy their actions within a certain time limit and impose a fine
of no less than twice of the amount of pollutant discharge fees applicable, such
amount is, however, capped at five times of such fees that may become
applicable. During the stipulated time limit, the environmental protection
department may order the discharging enterprise to restrict its production or
discharge or stop production.
15.15.3 The Law on the Prevention and Control of Atmospheric Pollution
The Law on the Prevention and Control of Atmospheric Pollution, adopted on 29
April 2000 by the NPC’ Standing Committee, is effective as of 1 September
2000. Pursuant to this law, the environmental protection authorities above
county level can regulate the prevention of air pollution. The environmental
protection department of the State Council formulates the national air
environmental quality standards and the local provincial governments formulate
the local standards if there are no applicable national air environmental quality
standards. The local provincial governments can also delineate more specific
local standards. Enterprises which emit smoke into the air must comply with the
national and relevant local air environmental quality standards. If the smoke
emitted exceeds these quality standards, the relevant enterprises must rectify
their actions within a limited timeframe, and the environmental protection
authority at county level can impose a penalty.
15.15.4 The Law on the Prevention and Control of Pollution from Environmental
Noise
The Law on the Prevention and Control of Environmental Pollution by Noise,
adopted on 29 October 1996, came into effective on 1 March 1997. Pursuant to
this law, any new construction project, expansion, or reconstruction project that
discharges pollutants into the air shall be subject to the regulations of State on
environmental protection of construction projects. Industrial enterprises that
produce environmental noise pollution due to the use of permanent equipment
in the course of industrial production shall report to the competent
administrative department for environmental protection of the local government
at or above the county level the types and quantity of its equipment that
produces environmental noise pollution, the noise level produced under normal
operation and the facilities installed for prevention and control of such pollution,
and provide technical information relating to the prevention and control of noise
pollution. Any industrial enterprise that intends to make a substantial change in
the types or quantity of the equipment that produces environmental noise
pollution, in the noise level of facilities for prevention and control of such
pollution shall submit a report without delay and take prevention and control
measures as it should. Units that produce environmental noise pollution shall
take measures to control it and pay fees for excessive emission of such
pollution according to the regulations of the State.
15.15.5 The Law on the Prevention and Control of Environmental Pollution by
Solid Waste
According to the Law on the Prevention and Control of Environmental Pollution
by Solid Waste amended and effective as of 1 April 2005, producers,
distributors, importers and users of a product shall be responsible for the
prevention and control of the solid wastes it generates or discharges.
15.15.6 Law on Appraising of Environmental Impact
On 28 October 2002, the Standing Committee of NPC promulgated the Law of
the People’s Republic of China on Appraising of Environmental Impacts, which
became effective on 1 September 2003. According to this law and its
implementation rules, the PRC government has set up a system to appraise the
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environmental impact by construction works, and to classify and manage the
environmental impact appraisals in accordance with the degree of the
environmental impact. For any project the construction of which may result in a
material impact on the environment, an environmental impact report which
thoroughly appraises the environmental impact is required; for any project which
may result in a slight impact on the environment, an environmental impact
record analyzing or appraising the specific environmental impact is required;
and for any project which may result in slight impact on the environment, an
environmental impact appraisal is not required but the owner or constructor of
construction project is required to file an environmental impact form. Such
appraisal reports must be submitted to the relevant administrative departments
of environmental protection for examination and approval. For any enterprise
which fails to submit the aforesaid environmental impact appraisal documents
according to PRC laws and regulations or if the documents are not approved
after examination by the relevant administrative departments, the departments
responsible for approving the relevant project shall not approve such project
and the enterprise shall not commence the construction of the project. Besides,
an examination and approval by the department responsible for environmental
protection after completion of the construction is prescribed. In case of failure of
passing such examination and approval, the project owner or operator must
undertake remedy measures and may not launch the operation unless the final
approval is granted.
15.16 Other National and Provincial Level Laws and Regulations
SNOWBIRD is subject to changing regulations under many other laws and regulations
administered by government authorities at national, provincial and municipal levels, some
of which are or may become applicable to its business. SNOWBIRD is also subject to
numerous additional state and local laws relating to matters such as manufacturing
practices and fire hazard control.
Page 169
16.
GENERAL INFORMATION ON THE COMPANY AND SNOWBIRD
16.1 Incorporation, Entry in the Commercial Register, Company Name and Registered
Office
The Company was incorporated by means of a notarial deed of incorporation
(Gründungsurkunde) dated 16 April 2012 (Roll of Deeds No. 6070/2012 of the notary
public Dr. Peter Kolb, Bonn, Germany) as a so called shelf-company (Vorratsgesellschaft)
with a registered share capital of EUR 50,000. The founder of the company is FORATIS
Gründungs GmbH with its business address at Kurt-Schumacher-Straße 18-20, 53113
Bonn, Germany. The formation of the Company became legally effective by registration in
the commercial register (Handelsregister) with the local court (Amtsgericht) of Frankfurt
on 23 April 2012. The Company was registered under the registration number HRB
93597 and is organized in the legal form of a German stock corporation
(Aktiengesellschaft).
Under purchase agreement dated 26 June 2012, Mr. YAN Changzai acquired all shares
in the Company. On 28 June 2012 a meeting of the supervisory board of the Company
took place to change the members of the management board. Immediately thereafter, a
general shareholders’ meeting of the Company was held to change the members of the
supervisory board. On 11 July 2012 a further general meeting of the Company was held
during which inter alia the change of the Company’s name, its seat and the adoption of
new articles of association were resolved.
The application for registration of the change of the members in the management board
and the amendment of the Company's articles of association was signed on 17 July 2012
and then filed with the commercial register (Handelsregister) with the local court
(Amtsgericht) of Cologne together with the disclosure of the economic refoundation
(wirtschaftliche Neugründung) of the Company. The disclosure of the economic
refoundation to the commercial register is required, where a shelf company is acquired for
operational use and thereby looses its status as a shelf company. The changes applied
for registration were registered with the commercial register (Handelsregister) with the
local court (Amtsgericht) of Cologne on 29 August 2012 under the new registration
number HRB 76323.
The business name of the Company is Snowbird AG. The Company acts under the
commercial name “SNOWBIRD AG”. The registered office of the Company is in Cologne.
The Company is registered with the commercial register of the local court of Cologne
under HRB 76323. The Company’s business address is c/o HRG Hansische RevisionsGesellschaft mbH, Wirtschaftsprüfungsgesellschaft, Ferdinandstraße 25, 20095 Hamburg,
Germany, phone +49 40 689999-0, fax +49 40 689999-10, email: ir@snowbird-ag.com.
The last amendment to the Company’s articles of association (Satzung) was resolved by
the general shareholders’ meeting on 13 June 2014.
16.2 Financial Year, Auditor and Duration
The Company’s financial year (Geschäftsjahr) is the calendar year (i.e. 1 January through
31 December); the first financial year of the Company is a short financial year
(Rumpfgeschäftsjahr).
The Company’s auditors are Crowe Kleeberg GmbH, Augustenstraße 10, 80333 Munich,
Germany (“Kleeberg”).
The duration of the Company (Dauer der Gesellschaft) is unlimited.
The Company’s business object (Unternehmensgegenstand) as set forth in section 2 of
the Company’s articles of association (Satzung) is as follows:
The object of the Company is the management of companies and the administration of
interests in companies, in particular companies active in the following business fields:
Processing of down for the production and sale of down products.
The object of the Company shall include in particular the acquisition, holding and
administration as well as the sale of participations in companies, their combination under
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common management and the provision of support and advice to them, including the
provision of services on behalf of such companies.
The activities of the companies shall not include business transactions and services
requiring approval.
The Company may itself as well be directly active in the business fields specified above.
The Company may engage in all kinds of business and take all measures that are related
to the business purpose or that it deems directly or indirectly useful for achieving that
purpose. In doing so, it may also establish branches, domestically and abroad, establish,
purchase or participate in other companies.
16.3 Current Structure of SNOWBIRD
The Company is as the ultimate holding company of the Group the sole shareholder of
Snow Bird (Hong Kong) Holding Company Limited (“Snowbird HK”) being a limited
liability company incorporated under the laws of Hong Kong. Snowbird HK is an
intermediate holding company and is the sole direct shareholder of Puyang Snowbird
Trading Co., Ltd (“Snowbird WFOE”) being incorporated as a limited liability company
under the laws of the PRC. Snowbird WFOE is a further intermediate company with very
few operative activity and the sole direct shareholder of Henan Snowbird Enterprise Co.,
Ltd. (“Snowbird Henan”) being incorporated as a limited liability company under the laws
of the PRC (Snowbird WFOE and Snowbird Henan collectively “Snowbird PRC”). The
operational business of SNOWBIRD is almost exclusively carried out by Snowbird Henan
with its business address at Taiqian Industrial Park, Puyang City, Henan Province, PRC.
The current structure of SNOWBIRD is shown in the chart below:
Snowbird AG
(Germany)
100%
Company Limited
(Hong Kong)
- Snowbird HK 100%
(PRC)
- Snowbird WFOE -
100%
(PRC)
- Snowbird Henan -
16.4 Restructuring of SNOWBIRD and Corporate History
The Group has recently been formed leading to the structure as presented under Section
16.3 above. The corporate history of the SNOWBIRD companies (other than the
Company) and the steps of the restructuring are set out below.
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16.4.1
Snowbird HK
Snowbird HK is a limited liability company incorporated on 31 March 2009
under the name of Hong Kong Hang Tai Living Things Technology Shares
Company Limited under the laws of Hong Kong and registered with the
Companies Registry in Hong Kong under the company registration number
1330535. On 27 January 2010, it changed its name to Hang Tai (Hong Kong)
Recycled Resources Holding Company Limited. On 19 November 2012, it
changed to its current name as Snow Bird (Hong Kong) Holding Company
Limited.The registered office of Snowbird HK is Room 1003, 10/F, Olympia
Plaza, 255 King’s Road, North Point, Hong Kong.
The authorized share capital of Snowbird HK upon incorporation amounted to
HKD 10,000.00 (approx. EUR 937) comprising 10,000 ordinary shares in the
nominal value of HKD 1.00 (approx. EUR 0.09) each, out of which 100 shares
were allotted to LAM Mat Chuen at par value on the date of the incorporation.
On 29 January 2010, LAM Mat Chuen transferred the 100 shares of Snowbird
HK to TSAI Hung Chingat par value. On 3 January 2013, TSAI Hung Ching
transferred the 100 shares of Snowbird HK to XU Beifang at par value. On 21
February 2013, Snowbird HK allotted 400 shares to CHOI Siu Hung at par
value. On 19 May 2014, XU Beifang transferred 100 shares of Snowbird HK at
par value to Yield Trade Limited (a company incorporated under the laws of the
British Virgin Inslands with its seat at P.O. Box 957, Offshore Incorporations
Centre, Road Town, Tortola, British Virgin Inslands) and CHOI Siu Hung
transferred 400 shares of Snowbird HK at par value to Big Business Global
Holdings Limited (a company incorporated under the laws of the British Virgin
Inslands with its seat at P.O. Box 957, Offshore Incorporations Centre, Road
Town, Tortola, British Virgin Islands).
On 8 May 2014, Snowbird HK allotted a total of 1,541 shares at par value,
respectively as to 345 shares to Big Business Global Holdings Limited, as to 90
shares to Zhen Shen Limited, as to 71 shares to United Talent Investments
Limited, as to 45 shares to Midasi Investment Limited, as to 714 shares to YAN
Changzai, as to 92 shares to QIU Duoxiang, as to 92 shares to CHEN Yijun,
and as to 92 shares to WANG Qing Mei. After the transfer and allotment of
shares as aforesaid, Yield Trade Limited, Big Business Global Holdings Limited,
Zhen Shen Limited, United Talent Investments Limited, Midasi Investment
Limited, Yan Changzai, Qiu Duoxiang, Chen Yijun, Wang Qing Mei and the
Company became the shareholders of Snowbird HK. On 8 May 2014, Snowbird
HK also allotted a total of 3,062 shares at par value to the Company
corresponding to 60% of the shares in Snowbird HK.
Pursuant to a contribution agreement dated 6 June 2014, Big Business Global
Holding Limited transferred 745 shares of Snowbird HK to the Company in
consideration of 10,931,750 shares of the Company, Yield Trade Limited 100
shares to the Company in consideration of 1,467,550 shares of the Company,
Zhen Sheng Limited 90 shares to the Company in consideration of 1,317,800
shares of the Company, United Talent Investments Limited 71 shares to the
Company in consideration of 1,048,250 shares of the Company, Midasi
Investment Limited 45 shares to the Company in consideration of 658,900
shares of the Company, YAN Changzai 714 shares to the Company in
consideration of 10,482,500 shares of the Company, QIU Duoxiang 92 shares
to the Company in consideration of 1,347,750 shares of the Company, CHEN
Yijun 92 shares to the Company in consideration of 1,347,750 shares of the
Company and WANG Qingmei 92 shares to the Company in consideration of
1,347,750 shares of the Company. As a result thereof, the Company has
become the sole shareholder of 5,103 shares in Snowbird HK.
There is no further allotment of shares by Snowbird HK.The present directors of
Snowbird HK are Mr. XU Beifang, Mr. CHOI Siu Hung and Mr. YAN Changzai,
appointed on 3 January 2013, 21 February 2013 and 21 May 2013 respectively.
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16.4.2
Snowbird WFOE
Snowbird WFOE is a limited liability company incorporated under PRC laws and
is registered with the Puyang Administration of Industry and Commerce with
business license number 410900400001017. Its registered address is
Zhongxing Hotel, Taiqian Industrial Park, Puyang, Henan Province, PRC. The
business scope of Snowbird WFOE is “sales of feather, down, peach skin, down
product (whereas the sales of the quota products involve the state or area
where the products are not deemed as quota, and whereas involves the export
license, the enterprise shall not operate the export business without permit; the
business shall not be operated before obtaining special trade license, if the
special trade license is required), operation of import and export business
(excluding the distribution of the imported products)”. Snowbird WFOE started
very recently to buy to a very minor extent selected goose down from Snowbird
Henan for sale to third parties. Snowbird WFOE’s operation term will expire on
11 August 2033.
Snowbird WFOE was established as a wholly foreign owned enterprise by
Snowbird HK on 12 August 2013 with a total registered share capital of USD
82,000 (approx. EUR 59,451). Snowbird HK holds 100% of the shares in
Snowbird WFOE.
The legal representative of Snowbird WFOE is Mr. CHOI Siu Hung. Snowbird
WFOE has no board of directors, but one executive director, who is also Mr.
CHOI Siu Hung. Mr. XU Beifang has been appointed as the supervisor.
16.4.3
Snowbird Henan
Snowbird Henan is a limited liability company incorporated under PRC laws and
is registered with the Taiqian Administration of Industry and Commerce with
business license number 410927100009786. Its registered address is at
Taiqian Industrial Park, Puyang City, Henan Province, PRC. The business
scope of Snowbird Henan is “hatch, cultivation, slaughter and sales of duck and
goose; processing and sales of feather, down, clothing, labor protection
clothing, bedclothes, sleeping bag, and pillow core; purchase and sales of
knitted goods and grain; processing on giving materials; import and export of
goods and technology (except the goods and technology of which the operation
shall be approved or the import and export is forbidden according to laws and
regulations)”. Snowbird Henan’s operation term will expire on 17 January 2028.
Snwobird Henan was established as a a limited liability company by YAN
Changzai, YAN Changxing, MIAO Yuezhi, LIU Yueyun and Puyang Snowbird
Down & Feather Products Factory (“Snowbird Factory”), incorporated in
Sunkou Industry and Trade Zone, Taiqian County, Puyang City, Henan
Province, PRC on 19 March 2001 with a total registered capital of
RMB 12,000,000 (approx. EUR 1,223,000). YAN Changzai, YAN Changxing,
MIAO Yuezhi, LIU Yueyun and Snowbird Factory respectively held 5.83%,
4.17%, 3.33%, 3.33% and 83.33% of the share capital of Snowbird Henan. The
registered capital of RMB 12,000,000 (approx. EUR 1,223,000) had been fully
paid in on 6 March 2001.
On 27 February 2004, Snowbird Henan passed a shareholders’ resolution on
increasing the registered capital from RMB 12,000,000 (approx. EUR
1,223,000) by RMB 20,000,000 (approx. EUR 2,039,000) to RMB 32,000,000
(approx. EUR 3,262,000). The capital increase was approved by the competent
authority on 2 March 2004. The increase of the registered capital was only
contributed by YAN Changzai, YAN Changxing, MIAO Yuezhi and LIU Yueyun.
Thus, since then, YAN Changzai, YAN Changxing, MIAO Yuezhi, LIU Yueyun
and Snowbird Factory respectively held 53.3%, 4.7%, 4.4%, 4.4% and 31.2% of
the share capital of Snowbird Henan. The registered capital of RMB 32,000,000
(approx. EUR 3,262,000) had been fully paid in on 27 February 2004.
On 10 August 2005, Snowbird Factory transferred its entire shares in Snowbird
Henan to Mr. YAN Changzai for a price of RMB 10,000,000 (approx.
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EUR 1,019,000). Afterwards on the same day, Snowbird Henan passed a
shareholders’ resolution to increase the registered capital from RMB 32,000,000
(approx. EUR 3,262,000) by RMB 10,000,000 (approx. EUR 1,019,000) to RMB
42,000,000 (approx. EUR 4,281,000). The increase in the registered capital was
carried out through undistributed profits. The share transfer and the capital
increase were approved by the competent authority on 11 August 2005. Since
then, YAN Changzai, YAN Changxing, MIAO Yuezhi and LIU Yueyun
respectively held 75.48%, 8.33%, 8.10% and 8.10% of the share capital in
Snowbird Henan.
On 25 May 2006, Snowbird Henan’s initial name “Puyang Snowbird Down &
Feather Products Co., Ltd.” was changed to its current name “Henan Snowbird
Enterprise Co., Ltd.”.
On 24 December 2007, YAN Changxing, MIAO Yuezhi and LIU Yueyun
transferred their entire shares in Snowbird Henan to YAN Changzai for a
purchase price of RMB 3,500,000 (approx. EUR 356,750), RMB 3,400,000
(approx. EUR 346,557) and RMB 3,400,000 (approx. EUR 346,557)
respectively. Afterwards on the same day, Snowbird Henan passed a
shareholders’ resolution to increase the registered capital from RMB 42,000,000
(approx. EUR 4,281,000) by RMB 36,090,000 (approx. EUR 3,679,000) to RMB
78,090,000 (approx. EUR 7,960,000). The increase in the registered capital was
contributed by Mr. YAN Changzai and Henan Agricultural Comprehensive
Development Co., Ltd. (“Henan ACD”). The share transfers and the capital
increase were approved by the competent authority on 18 January 2008. Since
then, Mr. YAN Changzai and Henan ACD respectively held 80.79% and 19.21%
of the share capital in Snowbird Henan.
On 30 April 2010, Snowbird Henan passed a shareholders’ resolution to
increase the registered capital from RMB 78,090,000 (approx. EUR 7,960,000)
by RMB 30,400,000 (approx. EUR 3,099,000) to RMB 108,490,000 (approx.
EUR 11,059,000). The increase of the registered capital was contributed by
YAN Changzai. The capital increase was approved by the competent authority
on 10 May 2010. Since then, YAN Changzai and Henan ACD respectively held
86.17% and 13.83% of the share capital in Snowbird Henan.
On 13 August 2013, Henan ACD transferred its entire shares in Snowbird
Henan to Mr. YAN Changzai for a purchase price of RMB 15,520,000 (approx.
EUR 1,900,000). The share transfer was approved by the competent
authorities. Since then, YAN Changzai held 100% of the share capital in
Snowbird Henan.
On 3 June 2013, Snowbird Henan passed a shareholders’ resolution to change
the business scope to “hatch, cultivation, slaughter and sales of duck and
goose; processing and sales of feather, down, clothing, labor protection
clothing, bedclothes, sleeping bag, and pillow core; purchase and sales of
knitted goods and grain; processing on giving materials; import and export of
goods and technology” and to change its registered address to Taiqian
Industrial Park, Puyang City, Henan Province, PRC. The change of business
scope and the registered address was registered at the competent authority on
23 June 2013.
On 8 April 2014, YAN Changzai transferred his 2% shares in Snowbird Henan
to YAN Zhaorui for a purchase price of RMB 2,169,800 (approx. EUR 260,000).
On the same day, Snowbird Henan passed a shareholders’ resolution to
approve the share transfer between YAN Changzai and YAN Zhaorui. The
share transfer was registered at the competent authority on 8 April 2014. Since
then, YAN Changzai and YAN Zhaorui held 98% and 2% of the share capital in
Snowbird Henan respectively.
On 4 June 2014, YAN Changzai and Yan Zhaorui transferred their entire shares
in Snowbird Henan to Snowbird Trading for a purchase price of RMB 9,800,000
(approx. EUR 1,200,000) and RMB 200,000 (approx. EUR 24,000) respectively.
On the same day, Snowbird Henan passed a shareholders’ resolution to
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approve the share transfer between YAN Changzai, YAN Zhaorui and Snowbrid
Trading. The share transfer was registered at the competent authority on 5 June
2014. Since then, Snowbird Trading held the entire share capital in Snowbird
Henan.
The legal representative of Snowbird Henan is Mr. YAN Changzai. Snowbird
Henan has no board of directors, but one executive director, who is Mr. YAN
Changzai (Chairman and CEO). Supervisor of Snowbird Henan is Mr. YAN
Zhaorui.
16.5 Capital Increase by Contribution in Kind (Sachkapitalerhöhung)
On 6 June 2014, the shareholders at that time entered into a contribution agreement with
2,041 shares, each of HKD 1.00 (approx. EUR 0.09), to the Company against the issue of
29,950,000 new no par value ordinary bearer shares in the Company to the respective
shareholders in relation to their shareholding ratio (Einbringungsvertrag). The Company
prior to the contribution agreement already held 60% of the shares in Snowbird HK since
8 May 2014.
The contribution agreement and the capital increase by way of contribution in kind
(Sachkapitalerhöhung) were approved by an extraordinary shareholders’ meeting of the
Company on 13 June 2014 and has been registered with the commercial register
(Handelsregister) of the local court (Amtsgericht) of Cologne on 10 July 2014. The new
no par value ordinary bearer shares in the Company were issued to the Existing
Shareholder with a notional value of EUR 1.00 each. The total notional value of the newly
issued shares in the amount of EUR 29,950,000 is to be booked as registered share
capital of the Company.
16.6 Current Shareholder Structure of the Company
At the date of this Prospectus, the Company’s share capital amounts to EUR 30,000,000
divided into 30,000,000 no par value ordinary bearer shares (Inhaber-Stückaktien). Each
bearer share representing EUR 1.00 of the share capital and each vested with full
dividend rights for the financial year 2014. Each share confers one vote in the Company’s
general shareholders’ meeting (Hauptversammlung). The major shareholders of the
Company do not have different voting rights.
Mr. YAN Changzai currently holds directly 30.5 % and Mr. CHOI Siu Hung currently holds
indirectly 36.0% of the shares and the voting rights in the Company and therefore with
these majorities control the Company and have substantial influence in the general
meeting and in the resolutions presented to the general meeting.
As of the date of this Prospectus, the shareholder structure of the Company is as follows:
BIG
BUSINESS
HOLDINGS LIMITED (1)
Number of Shares
GLOBAL
Percentage of Share Capital (%)
10,950,000
36.5
Mr. YAN Changzai (2)
9,150,000
30.5
1,470,000
4.9
1,350,000
4.5
Alrai S.à.r.l. (5)
1,350,000
4.5
1,350,000
4.5
1,350,000
4.5
1,320,000
4.4
United Talent Investments Limited (9)
1,050,000
3.5
660,000
2.2
30,000,000
100
Midasi Investment Limited (10)
Total
Page 175
(1) BIG BUSINESS GLOBAL HOLDINGS LIMITED is a company incorporated under the laws of the British
Virgin Islands with the Company Number 1818048 and with its business address at: Flat B, 17/F, Jade Terrace,
3 Link Road, Happy Valley, Hong Kong. Sole shareholder is Mr. CHOI Siu Hung.
(2) Mr. YAN Changzai is a Chinese resident with resident address at: No. 7-2-33, Wenquan Garden, Shihua
Street, Hualong District, Puyang City, Henan Province, PRC.
(3) YIELD TRADE LIMITED is a company incorporated under the laws of the British Virgin Islands with the
Company Number 1818818 and with its business address at: Room H, 9/F, Blk 6, Aldrich Gdn, No2 Oi Lai St,
Shau Kei Wan, Hong Kong. Sole shareholder is Mr. XU Beifang.
(4) Mystic Topaz S.à.r.l. is a company incorporated under the laws of Luxembourg with its business address at
7, rue Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mr. LIU Deling.
(5) Alrai S.à.r.l. is a company incorporated under the laws of Luxembourg with its business address at 7, rue
Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mr. YAN Zhaorui.
(6) Alrakis S.à.r.l. is a company incorporated under the laws of Luxembourg with its business address at 7, rue
Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mr. CHEN Yijun.
(7) Imperial Topaz S.à.r.l. is a company incorporated under the laws of Luxembourg with its business address at
7, rue Robert Stümper, L-2557 Luxembourg. Sole shareholder is Mrs. WANG Qingmei.
(8) ZHEN SHENG LIMITED is a company incorporated under the laws of the British Virgin Islands with the
Company Number 1818372 and with its business address at:Room N, 5/F, Hung Fool Bldg, 42 Kam Ping St,
North Point, Hong Kong. Sole shareholder is Mr. LO Kin Nam.
(9) United Talent Investment Limited is a company incorporated under the laws of the British Virgin Islands with
the Company Number 1724928 and with its business address at: Room E, 36/F, Tower 1, Sham Wan Towers, 3
Ap Lei Chau Drive, Ap Lei Chau, Hong Kong. Sole shareholder is Mr. CHEN Ling.
(10) Midasi Investment Limited is a company incorporated under the laws of the British Virgin Islands with the
Company Number 1713935 with its business address at: PO Box 957, Offshore Incorporations Centre, Road
Town, Tortola, British Virgin Islands. Sole shareholder is Mr. BEK Lian Ho.
16.7 Notices
Pursuant to section 3 of the Company’s articles of association (Satzung), notices of the
Company will be made in the electronic version of the German Federal Gazette
(elektronischer Bundesanzeiger). Notices in connection with the approval of the
Prospectus or regarding amendments to the Prospectus will be made in accordance with
the provisions of the German Securities Prospectus Act (WpPG) and will be published in
the form intended for prospectuses, i.e., on the Internet website of the Company with a
printed version available at the offices of the Company and the Lead Manager.
Page 176
17.
SHAREHOLDER STRUCTURE OF THE COMPANY BEFORE AND AFTER
THE OFFERING
The table below sets out the shareholder structure of the Company prior to the Offering
and upon completion of the Offering, based on different scenarios (full placement of New
Shares, including and excluding placement of all Overallotment Shares).
Shareholdings
Immediately
prior to the Offering
Shareholder
Shares
After completion of the Offering
(assuming full placement of the
Offered Shares with full exercise of
the Greenshoe Option
in % Shares
After completion of the Offering
(assuming full placement of the
Offered Shares without exercise
of the Greenshoe Option
in % Shares
in %
BIG BUSINESS GLOBAL
HOLDINGS LIMITED
10,950,000
36.5
10,950,000
26.39
10,950,000
27.38
Mr. YAN Changzai
9,150,000
30.5
9,150,000
22.05
9,150,000
22.88
YIELD TRADE LIMITED
1,470,000
4.9
1,470,000
3.54
1,470,000
3.68
1,350,000
4.5
1,350,000
3.25
1,350,000
3.38
Alrai S.à.r.l. (1)
1,350,000
4.5
1,350,000
3.25
1,350,000
3.38
1,350,000
4.5
1,350,000
3.25
1,350,000
3.38
1,350,000
4.5
1,350,000
3.25
1,350,000
3.38
ZHEN SHENG LIMITED
1,320,000
4.4
1,320,000
3.18
1,320,000
3.30
1,050,000
3.5
1,050,000
2.53
1,050,000
2.63
660,000
2.2
660,000
1.59
660,000
1.65
0
0.00
11,500,000
27.71
10,000,000
25.00
100.00
41,500,000
100.00(2)
40,000,000
100.00(2)
(1)
(1)
United
Talent
Investments Limited (1)
Midasi
Limited (1)
Investment
Other Free Float
Total
30,000,000
(1) Counts as Free Float since below 5 % of the total share capital of the Company.
(2) Due to rounding adjustments of the percentages, the respective percentages in total may not add up
precisely to the total value mentioned.
Page 177
18.
INFORMATION ON THE SHARE CAPITAL OF THE COMPANY AND
GENERAL RULES
18.1 Issued and Authorized Share Capital
As at the date of this Prospectus, the Company’s registered share capital (gezeichnetes
Grundkapital) amounts to EUR 30,000,000.00. It is divided into 30,000,000 no par value
ordinary bearer shares (Inhaber-Stückaktien) each with a notional amount of EUR 1.00.
All shares have been fully paid in. Each share grants the holder one vote at the general
shareholders’ meeting (Hauptversammlung).
18.2 Development of Share Capital
The Company was established with a registered share capital of EUR 50,000 divided into
50,000 no par value ordinary bearer shares (Inhaber-Stückaktien).
On 13 June 2014 the share capital was increased by shareholders’ resolution through
contribution in kind (Sacheinlage) where the existing shareholders at that time contributed
40% of the shares in Snowbird HK, i.e. 2,041shares, each of HKD 1.00 (approx. EUR
0.09), against the issuance of 29,950,000 no par value ordinary bearer shares (InhaberStückaktien) each with a notional amount of EUR 1.00. The Company prior to the capital
increase against contribution in kind already held 60% of the shares in Snowbird HK
since 8 May 2014.
The Company’s current share capital, amounting to EUR 30,000,000.00 and divided
into 30,000,000 no par value ordinary bearer shares (Inhaber-Stückaktien) with a notional
amount of EUR 1.00 each, is fully paid in.
18.3 Authorized Share Capital
According to section 5 subsection 1 of the Company’s articles of association (Satzung),
the management board (Vorstand) is authorized to increase the share capital of the
Company with the approval of the supervisory board (Aufsichtsrat) until 12 June 2019
once or several times by up to EUR 15,000,000 through the issuance of up to 15,000,000
new no par value ordinary bearer shares in cash or in contributions in kind (Authorized
Capital 2014). In each case ordinary shares and/or preference shares may be issued.
The management board (Vorstand) is further authorized, with the consent of the
supervisory board (Aufsichtsrat), to exclude the statutory subscription rights (gesetzliches
Bezugsrecht) of the shareholders of the Company in the following cases:

for fractional amounts;

if the new shares are issued against contribution in kind to acquire
enterprises, shares in enterprises or parts of an enterprise;

if the new shares are issued against cash provided that the shares are
issued at a price which is not substantially below the stock exchange
price and the exclusion of the subscription rights is only applied to new
shares that represent not more than 10% of the share capital, for the
calculation of the 10% threshold any other exclusion of the subscription
rights according to section 186 subsection 3 sentence 4 of the Stock
Cooperation Act (AktG) has to be taken into account;

for granting shares to employees and members of the management of
the Company or of an affiliated entity in relation to employee participation
programs, however the capital increase may not exceed 10% of the
share capital existing at the time of the capital increase out of the
authorized capital;

if a third party, which is not a financial institution pursuant to section 186
subsection 5 of the Stock Cooperation Act (AktG), subscribes for the new
shares and ensures that the shareholders are granted an indirect
subscription right (mittelbares Bezugsrecht).
Page 178
18.4 General Rules on the Increase of Share Capital
In accordance with the German Stock Corporation Act (Aktiengesetz - AktG), the share
capital of a German stock corporation (Aktiengesellschaft) may be increased by
shareholders’ resolution adopted by a majority of at least three-quarters of the share
capital represented in the vote. Moreover, the management board (Vorstand) may be
authorized by a shareholders’ resolution to increase the share capital of the Company in
a determined total amount within five years with the approval of the supervisory board
(Aufsichtsrat) by issuing shares (Genehmigtes Kapital). Eventually, shareholders may
resolve to create conditional capital, however, only to grant creditors of convertible bonds
conversion and subscription rights in order to prepare a merger with another company or
to grant employees and members of the management of the Company or of an affiliated
company subscription rights by way of an approving or authorizing resolution (Bedingtes
Kapital). The aforementioned shareholders’ resolutions concerning the creation of
authorized or conditional capital require a majority of three quarters of the share capital
represented during the vote. The nominal amount of the authorized capital created by the
shareholders may not exceed half of the share capital existing in the commercial register
on the date the authorized capital is entered. The total nominal amount of the conditional
capital created by the shareholders may not exceed half of the share capital existing on
the date the resolution concerning the conditional capital increase is adopted. The total
nominal amount of the conditional capital issued to grant subscription rights to employees
and management members of the Company or of affiliated companies may not exceed
10% of the share capital existing on the date of the resolution concerning the conditional
capital increase. If the share capital of the Company is increased by the Company’s own
assets, the conditional capital increases by operation of law in the same proportion as the
share capital.
18.5 General Rules on Subscription Rights
The German Stock Corporation Act (Aktiengesetz - AktG) provides that, in the case of a
capital increase - with the exception of a conditional capital increase - shareholders are,
in principle, entitled by law to subscription rights regarding new shares to be issued in the
course of a capital increase in accordance with their current equity quota (gesetzliches
Bezugsrecht). The same applies to the issue of convertible bonds, income bonds, profit
participation rights or bonds with warrants as well as in respect of the sale of treasury
shares. Subscription rights are freely transferable and the Company may determine that
the subscription rights may be traded on a German stock exchange during a fixed period
prior to the expiry of the subscription period.
The general shareholders’ meeting (Hauptversammlung) may partially or completely
exclude the subscription rights by means of a resolution passed with a majority of at least
three-quarters of the share capital represented at the time the resolution is adopted. The
management board (Vorstand) must present a written report to the shareholders’ meeting
justifying the exclusion of the subscription rights. An exclusion of subscription rights is
permissible if the Company’s interest in excluding the subscription rights outweighs the
shareholders’ interest in the conferral of the subscription rights. In the absence of such
justification, subscription rights may only be excluded in the case of a capital increase if
such capital increase has been effected in return for cash contributions, if the amount of
the capital increase does not exceed 10% of the existing share capital, and if the issue
price of the new shares is not substantially below the stock exchange price of the shares
already trading on the stock exchange.
18.6 General Rules Relating to Use of Profits and Dividend Payments
Under German law, the participation of the Company’s shareholders in profits is
determined on the basis of their respective interests in the share capital, unless the
Company’s articles of association (Satzung) provide for another profit allocation.
Distributions of dividends on shares for a given financial year are generally determined by
a process in which the management board (Vorstand) and supervisory board
(Aufsichtsrat) submit a proposal to the annual general shareholders’ meeting
(Hauptversammlung) held in the subsequent financial year and such annual shareholders’
meeting adopts a resolution. German Law provides that a resolution concerning dividends
Page 179
and distribution thereof may be adopted only on the basis of a balance sheet profit
(Bilanzgewinn) shown in the Company’s adopted annual individual financial statement
(festgestellter Jahresabschluss). In determining the profit available for distribution, the
result for the relevant year must be adjusted for profits and losses brought forward from
the previous year and for withdrawals from or transfers to reserves. Certain reserves are
required by law and must be deducted when calculating the profit available for distribution.
In a resolution regarding the utilization of balance sheet profits (Bilanzgewinn), the
general shareholders’ meeting (Hauptversammlung) can include further amounts in
retained earnings or carry them forward as profits. Future dividend distribution will depend
upon the results of operation of the Company, its financial condition, its need for cash and
the legal, tax and regulatory environment, as well as other factors.
Dividends on shares resolved by the general shareholders’ meeting (Hauptversammlung)
are paid annually, shortly after the annual shareholders’ meeting (Hauptversammlung), in
compliance with the rules of the respective clearing system. In accordance with the
general provisions of sections 195 and 199 subsection 1 of the German Civil Code
(Bürgerliches Gesetzbuch, BGB) dividend claims become time-barred three years after
the end of the year in which the general shareholders’ meeting (Hauptversammlung) has
taken
the
respective
resolution
on
the
distribution
of
profits
(Gewinnverwendungsbeschluss). After expiry of this period, the Company may refuse
payment of the respective dividend to a shareholder. In such case, the respective
dividend amount remains with the Company, which therefore benefits hereof. Details
concerning any dividends resolved by the annual shareholders’ meeting
(Hauptversammlung) and the respective paying agents specified by the Company will be
published in the electronic version of the Federal Gazette (elektronischer Bundesanzeiger)
and in at least one official national publication for statutory stock market notices approved
by the Frankfurt Stock Exchange.
18.7 General Rules Relating to a Liquidation of the Company
Apart from liquidation as a result of insolvency proceedings and other reasons as set forth
in the German Stock Corporation Act (Aktiengesetz - AktG), the Company may be
liquidated only upon resolution of the general shareholders’ meeting (Hauptversammlung)
to be adopted with a majority of at least 75% of the share capital represented at the
general shareholders’ meeting (Hauptversammlung) at which such resolution is adopted.
In such a case, the assets remaining following fulfillment of all of the Company’s liabilities
will be distributed among the shareholders according to their respective shares in the
share capital and in accordance with the German Stock Corporation Act (Aktiengesetz AktG).
Page 180
19.
CORPORATE BODIES AND MANAGEMENT
19.1 Overview
The governing bodies of the Company are the management board (Vorstand), the
supervisory board (Aufsichtsrat) and the general shareholders’ meeting
(Hauptversammlung). The powers of these governing bodies are set forth in the German
Stock Corporation Act (Aktiengesetz - AktG), the Company’s articles of association
(Satzung), and the respective rules of procedure of the management board (Vorstand)
and the supervisory board (Geschäftsordnungen für den Vorstand und den Aufsichtsrat).
The management board (Vorstand) is responsible for managing and representing the
Company, whilst the supervisory board (Aufsichtsrat) appoints and dismisses the
members of the management board (Vorstand) and supervises them. The management
board (Vorstand) and supervisory board (Aufsichtsrat) work independently from each
other. Membership in both bodies at the same time is not permitted, i.e. members of the
management board (Vorstand) may not at the same time be members of the supervisory
board (Aufsichtsrat) and vice versa. In addition, a member of the supervisory board
(Aufsichtsrat) must not be in an executive position of any of the Company’s subsidiaries
(also outside Germany).
The Company’s shareholders are represented in the general shareholders’ meeting
(Hauptversammlung). The shareholders are, with certain exceptions, not involved in the
day-to-day management of the Company.
The management board (Vorstand) and the supervisory board (Aufsichtsrat) shall
cooperate trustfully for the interests of the Company. To enable the supervisory board
(Aufsichtsrat) to carry out its monitoring functions, the management board (Vorstand) has
to report on a regular basis to the supervisory board (Aufsichtsrat). These management
reports form the basis of the monitoring activities of the supervisory board (Aufsichtsrat).
The management board (Vorstand) is obliged to report to the supervisory board
(Aufsichtsrat) about intended business policy and other fundamental matters of company
planning (particularly finance, investment and personnel planning), whereby deviations
from the actual development of targets reported at an earlier date and the reasons for
these deviations are to be reported. If the Company is also a parent company, then the
report also has to cover the Company’s subsidiaries and joint ventures. Furthermore, the
profitability of the Company, particularly the return on equity, must be reported to the
supervisory board (Aufsichtsrat). The management board (Vorstand) also regularly
reports on the course of business, particularly revenues and the condition of the company
as well as transactions of considerable importance. The supervisory board (Aufsichtsrat)
or individual supervisory board (Aufsichtsrat) members can also request separate reports
on matters which are of particular significance for the Company.
Both the members of the management board (Vorstand) and of the supervisory board
(Aufsichtsrat) must apply the due care of a prudent and conscientious manager in
performing their duties. Both the management board (Vorstand) and supervisory board
(Aufsichtsrat) have to take into account a number of interests, particularly those of the
Company, its shareholders, employees and creditors. The management board (Vorstand)
and supervisory board (Aufsichtsrat) members are moreover obligated to exercise good
faith vis-à-vis the Company and its shareholders and to maintain secrecy concerning
confidential information and secrets of the Company. The management board (Vorstand)
must also consider the concept of equal treatment of shareholders.
They must observe the Company’s interests at all times. If the members of the
management board (Vorstand) or of the supervisory board (Aufsichtsrat) breach their
duties, they are jointly and severally liable for any damages sustained by the Company. In
specific cases, the management board (Vorstand) can also be held personally liable by
third parties, e.g. non-payment of social security charges, damages resulting from tort,
incorrect statements in connection with corporate transactions.
The German Stock Corporation Act (Aktiengesetz - AktG) stipulates that the Company
cannot in advance limit or fully release the personal liability of the members of the
management board (Vorstand) for breaches of duty in the performance of their official
Page 181
tasks. The Company can waive its claim for damages for a breach of duty, or it can
propose an agreement on such claims only if more than three years have passed since
the date on which the claim arose. This is subject to the approval of the general
shareholders’ meeting (Hauptversammlung) and a minority of at least 10% of the
shareholders can block such a resolution.
The German Stock Corporation Act (AktG) further contains an exemplary list of acts
which directly trigger the management board’s (Vorstand) liability, e.g. in case of the
repayment of contributions to the shareholders or the unlawful distribution of the
Company’s assets.
Individual shareholders may in principle not sue members of the management board
(Vorstand) or supervisory board (Aufsichtsrat) for damage compensation (to themselves
or to the Company) in the event of a breach of duties vis-à-vis the Company. Rather,
damage compensation claims of the Company against management board (Vorstand) or
supervisory board (Aufsichtsrat) members may usually only be enforced by the Company
itself. In this event, the Company is represented by the supervisory board (Aufsichtsrat) in
the case of claims against management board (Vorstand) members and by the
management board (Vorstand) in the case of claims against supervisory board
(Aufsichtsrat) members. If the board entitled to represent the Company decides against
pursuing the claim, compensation claims of the Company against management board
(Vorstand) or supervisory board (Aufsichtsrat) members must nonetheless be asserted if
the shareholders so resolve in general meeting by simple majority. Shareholders with a
total share of at least 1% of the share capital or a notional value of the share capital of at
least EUR 100,000 may request in their own name that a law suit be admitted before the
regional court (Landgericht) at the Company’s registered address for enforcement of
claims for compensation brought by the Company. Among other things, a prerequisite for
admission of the action is that the shareholders of the Company have unsuccessfully
requested the competent board to bring an action, after setting an appropriate deadline,
and facts exist that justify the urgent suspicion that the Company has suffered damages
due to impropriety, dishonesty or gross violation of the law or the Company’s articles of
association (Satzung) and no overriding reasons of the Company will rule out asserting
the compensation claim. The Company is entitled at any time to enforce its claim for
compensatory damages itself. The bringing of an action by the Company makes a
pending approval procedure or action by the shareholders inadmissible.
The Company has entered into directors’ and officers’ insurance in its name, covering the
members of the management board (Vorstand) and supervisory board (Aufsichtsrat),
based on prevailing market conditions.
19.2 Management Board (Vorstand)
19.2.1
General Rules
The management board (Vorstand) legally represents the Company in court
and in dealings with third parties and bears the sole responsibility for managing
the day-to-day business of the Company.
The supervisory board (Aufsichtsrat) determines the size of the management
board (Vorstand) and appoints its members. According to the Company’s
articles of association (Satzung) the management board (Vorstand) must
consist of one or more members. The supervisory board (Aufsichtsrat) may
appoint one management board (Vorstand) member as chairman of the
management board (Vorstandsvorsitzender) and another member as deputy
chairman of the management board (Stellvertretender Vorstandsvorsitzender).
Furthermore, the supervisory board (Aufsichtsrat) may appoint further members
of the management board (Vorstand). The members of the management board
(Vorstand) are appointed for a maximum term of five years and this term can be
renewed for consecutive further periods of up to five years each. Prior to the
expiry of it term, the appointment can only be revoked for good cause by a
resolution of the supervisory board (Aufsichtsrat) such as gross breach of
fiduciary duties or if the general shareholders’ meeting (Hauptversammlung)
Page 182
adopts a no-confidence resolution in relation to the member of the management
board (Vorstand) in question.
The rights and obligations of the management board (Vorstand) of the
Company are specified in the German Stock Corporation Act (Aktiengesetz AktG), in the Company’s articles of association (Satzung), the rules of
procedure of the management board (Vorstand) (if any) and the service
contracts of the members of the management board (Vorstand). Further, the
management board (Vorstand) has to consider the German Corporate
Governance Code.
Neither the shareholders nor the supervisory board (Aufsichtsrat) members may
issue binding directions to the management board (Vorstand) regarding the
management of the Company. Thus, the management board (Vorstand) has a
strong independent position within the Company.
However, the powers of the members of the management board (Vorstand)
may be limited by e.g. the Company’s articles of association (Satzung) or by
rules of procedure of the management board by stipulating that certain matters
require the consent of the supervisory board (Aufsichtsrat) or the shareholders
in general shareholders’ meeting (Hauptversammlung). Such limitations do not,
however, affect the validity of the actions of the management board (Vorstand)
vis-à-vis third parties but the members of the management board (Vorstand)
might be liable internally in relation to the Company if they are in breach of such
stipulations.
According to the Company’s articles of association (Satzung), the Company is
legally represented by the members of the management board (Vorstand). In
case only one member exists, the Company is legally represented by the sole
member. In case the management board (Vorstand) is composed of two or
more members, the Company is legally represented by two members jointly or
by one member together with an authorized officer (Prokurist). The supervisory
board (Aufsichtsrat) can grant sole power of representation to any of the
members of the management board (Vorstand) and exempt any of the
members from the restrictions under section 181, second alternative of the
German Civil Code (Bürgerliches Gesetzbuch – BGB). Section 112 of the
German Stock Corporation Act (Aktiengesetz – AktG) remains unaffected. The
supervisory board (Aufsichtsrat) has granted sole power of representation to Mr.
YAN Changzai and has exempted him from the restrictions under section 181
second alternative of the German Civil Code (Bürgerliches Gesetzbuch – BGB)
by resolution dated 28 June 2012.
The resolutions of the management board (Vorstand) are in principle passed by
simple majority of the votes cast, unless the applicable law or the Company’s
rules of procedure for the management board (Geschäftsordnung für den
Vorstand) provide otherwise.
19.2.2
Rules of Procedure for the Management Board
Under the Company’s articles of association (Satzung), the supervisory board
(Aufsichtsrat) may issue rules of procedure for the management board
(Geschäftsordnung für den Vorstand). By way of a written resolution of the
supervisory board (Aufsichtsrat) dated 3 September 2014, such rules of
procedure for the management board (Geschäftsordnung für den Vorstand)
were adopted. The Company’s rules of procedure for the management board
(Geschäftsordnung für den Vorstand) contain a list of transactions by the
management board (Vorstand), which require the consent of the supervisory
board (Aufsichtsrat), e.g. investments as well as sale of assets exceeding a
certain monetary threshold. The Company’s rules of procedure for the
management board (Geschäftsordnung für den Vorstand) also determine the
schedule of responsibilities of the members of the Company’s management
board (Vorstand) as amended from time to time.
Page 183
19.2.3
Members of the Management Board (Vorstand)
The management board (Vorstand) of the Company currently consists of three
members.
The members of the management board, their terms of appointment and their
current areas of responsibility are as follows:
Name
Age
Initially
appointed
on
Term
expires on
Responsibility
Mr. YAN
Changzai
59
29 June
2012
28 June
2017
Chairman of the
management
board and Chief
Executive Officer
(CEO)
Mr. QIU
Duoxiang
59
16 August
2014
15 August
2019
Chief Operations
Officer (COO)
Mr. LAM
Kok Weng
44
16 August
2014
15 August
2019
Chief Financial
Officer (CFO)
The members of the management board (Vorstand) can be reached at the
company’s address of Snowbird Henan. Its registered address is at Taiqian
Industrial Park, Puyang City, Henan Province, PRC.
19.2.4
Mr. YAN Changzai
Mr. YAN Changzai is the chairman of the management board
(Vorstandsvorsitzender) of the Company. He is the chief executive officer
(“CEO”) and in charge of the overall management, setting strategy and
directions to SNOWBIRD and provides leadership to the whole management
team.
Mr. YAN Changzai possesses 20 years experience in down and down products
industry. Prior to setting his own down business, he worked in various positions
for a few transportation and logistic companies in Taiqian County, Puyang City,
Henan Province, PRC. In 1996, he set up his own down business and
incorporated Snowbird Henan in 2001.
In 2013, Mr. YAN Changzai has successfully obtained the certificate of
qualification from the International Profession Certification Association in the US
(www.ipasu.org) and being awarded the accreditation grade “Senior”.
Mr. YAN Changzai has not been over the last five years and is currently not
partner in any partnership or member of any administrative, management or
supervisory body outside SNOWBIRD.
19.2.5
Mr. QIU Duoxiang
Mr. QIU Duoxiang is the chief operations officer (“COO”). He is responsible for
the management of Down Products covering research and development,
purchases of raw materials, production and sales.
Mr. QIU Duoxiang has more than 30 years experience in down industry. He
graduated from law faculty of Anhui University in Anhui Province, PRC. From
1976 to 1996, he worked in Anhui Animal Products Import Export Company as
deputy assistant manager responsible for the sales of down and feather
products. Mr. QIU Duoxiang joined Mr. YAN Changzai’s down business in 1998
and then joined SNOWBIRD upon its incorporation in 2001.
Page 184
Mr. QIU Duoxiang has not been over the last five years and is currently not
supervisory board outside SNOWBIRD.
19.2.6
Mr. LAM Kok Weng
Mr. LAM Kok Weng is the Company’s chief financial officer (“CFO”) and is
responsible for the overall financial management for SNOWBIRD.
He graduated as Bachelor of Accounting (Honours) from University of Malaya in
Malaysia in 1995.
Mr. Lam Kok Weng has more than 18 years experience in the accounting and
financial management field. From 1995 to 2000, he worked as an audit
assistant manager in Deloitte Touche Tohmatsu Malaysia. From 2000 to 2002,
he joined Ernst & Young Singapore as an audit supervisor. Thereafter from
2002 to 2010, he joined RCL Feeder Pte. Ltd., a multinational container
shipping company based in Singapore, as general manager for management
accounting responsilble for the group management reporting. From 2010 to
2012, he joined China Foodzart International Pte. Ltd. as chief financial officer
and was responsible to assist the said company for the IPO listing exercise in
Singapore Stock Exchange. From 2012 to 2013, he joined Falcon Capital
Management International Pte. Ltd., an agricultural company with focus on palm
oil and forestry products, as financial controller responsible for the financial
management. In November 2013, he joined Snowbird HK as chief financial
officer.
Mr. LAM Kok Weng has not been over the last five years and is currently not
supervisory board outside the Group.
19.2.7
Remuneration of Management Board (Vorstand)
The services of Mr. YAN Changzai, Mr. QIU Duoxiang and Mr. LAM Kok Weng
with SNOWBIRD will be based on service agreements to be concluded with the
Company represented by Ms. Viona Brandt as chairlady of the supervisory
board (Aufsichtsrat).
Under the respective service agreements with the Company, Mr. YAN
Changzai, Mr. QIU Duoxiang and Mr. LAM Kok Weng will not be entitled to
remuneration for their service as members of the management board
(Vorstand) of the Company.
However, the members of the management board receive remuneration from
Snowbird HK or Snowbird Henan for their services provided to Snowbird HK or
Snowbird Henan respectively (cf. section 19.2.6 “Remunerations for members
of the Management Board (Vorstand) and senior managers”).
19.2.8
Shareholdings and Options of the Members of the Management Board
(Vorstand)
As of the date of this Prospectus, the shareholding interests of the members of
the management board (Vorstand) are as follows:
Percentage of
Shareholder
Mr. YAN Changzai
Number of Shares
9,150,000
Share Capital (%)
30.5%
The Company itself has not granted any options to acquire or subscribe for
shares in the Company to any of its members of the management board
(Vorstand) or employees.
Page 185
19.2.9
Conflict of Interests
Potential conflicts may arise from Mr. YAN Changzai’s shareholding in the
Company since he has personal interests in the development of the value of
their shares in the Company.
Apart from the one mentioned above, there exist no potential conflicts of interest
between any duties of the members of the management board to the Company
and their private interests and other duties.
19.3 Senior Management
The following provides for an overview on the senior management of Snowbird Henan as
the main operating entity of SNOWBIRD:
Name
Position /
Personal
Relationship
Years of
Experience
Background
Mr. YAN
Zhaorui
Deputy general
manager of
Snowbird Henan /
Son of Mr. YAN
Changzai
13 years
Mr. YAN Zhaorui is responsible
for the management of down
clothing, down bedding and
OEM clothing products covering
purchases of raw materials,
production and sales.
Mr. YAN Zhaorui graduated in
economic management from
Henan Finance and Economic
School in 2000. He was elected
as a Representative of Puyang
City People’s Congress. Since
2001, Mr. YAN Zhaorui is
working for Snowbird Henan.
Mr. CHEN
Yijun
Deputy general
manager of
Snowbird Henan /
No personal
relationship
30 years
Mr. CHEN Yijun is responsible
for
the
office
support,
administration
and
human
resources. He graduated as
Bachelor of Economics majored
in Finance in 2000 from Open
University of China. In 2013, Mr.
CHEN Yijun has successfully
obtained the certification of
qualification from International
Professional
Certification
Association.
Mr. CHEN Yijun possesses
more than 30 years experience
in corporate management and
financing
experience.
From
1980 to 1992, he worked as an
assistant manager of Henan
Taiqian Administration of Grain.
From 1992 to 1994, he joined
Xin Tai Textile Co., Ltd as
operation manager. From 1994
to 2012, he joined Agricultural
Bank of China as deputy branch
manager of Taiqian county. In
February 2013, Mr. CHEN
joined Snowbird Henan.
Ms. CHEN
Yang
Assistant CEO
cum Investor
Relations Director
/ No personal
23 years
Ms. CHEN Yang has graduated
from
Shanghai
Normal
University with the Bachelor
degree of Literature in 1991 and
Page 186
relationship
completed her Master degree in
Monetary
Banking
from
Shanghai University of Finance
& Economics in 1998. She
achieved
the
Qualification
Certificate of Speciality and
Technology
for
Financial
Economy which was approved
and issued by Ministry of
Personnel of PRC in 1995.
Ms. CHEN Yang has more than
20
years
experience
in
investment,
finance
and
accounting field. She worked for
Shanghai
Investment
Consulting Institution from 1991
to 1994 where she was
responsible for analyze and
research
of
Shanghai
investment environment and
policy consulting. From 1994 to
2001, Ms. CHEN Yang worked
for Shanghai International Trust
& Investment CO., LTD as an
investment manager, where she
was responsible for managing
and coordinating investment
project. From 2001 to 2010, Ms.
CHEN Yang studied and
worked in Australia. She has
graduated from the University of
New South Walee with the
Master of Commerce in Finance
and also obtained the Graduate
Diploma
in
Information
Technology
of
Northern
Territory University. She worked
for Australian John & Partners
Accounting Firm from 2005 to
2009 as public accountant, tax
agent and auditor. Then she
joined in Australian Resources
listed company as financial
director from 2009 till the end of
2010. Since 2011, Ms. CHEN
Yang has become a partner of
Yongkai Holding (H.K) Limited.
The business address of the officers and senior managers is Taiqian Industrial Park,
Puyang City, Henan Province, PRC.
Over the last five years, none of the senior managers has been a partner in a partnership
or a member of administrative, management or supervisory bodies outside SNOWBIRD.
Except for Mr. YAN Zhaorui and Mr. CHEN Yijun, none of the members of the senior
management, directly or indirectly, holds any shares in the Company as of the date of this
Prospectus. The Company has not granted any options to acquire or subscribe for shares
in the Company to any of the members of the senior management.
Potential conflicts may arise from Mr. YAN Zhaorui and Mr. CHEN Yijun shareholdings in
the Company since they have personal interests in the development of the value of his
shares in the Company.
Page 187
Apart from the ones mentioned above, there exist no potential conflicts of interest
between any duties of the senior management to Snowbird Henan and their private
interests and other duties.
19.4 Supervisory Board (Aufsichtsrat)
19.4.1
General Rules
Pursuant to section 11 of the Company’s articles of association (Satzung) and
in accordance with sections 95 and 96 of the German Stock Corporation Act
(AktG), the supervisory board (Aufsichtsrat) consists of three members
appointed by the general shareholders’ meeting (Hauptversammlung). Unless
otherwise determined by shareholders’ resolution, the term of each supervisory
board (Aufsichtsrat) member expires at the end of the annual general
shareholders’ meeting (Hauptversammlung) that formally approves the actions
of the supervisory board (Aufsichtsrat) members for the fourth financial year
following commencement of the member’s term of office. The financial year in
which the term commences is not included. Each member of the supervisory
board (Aufsichtsrat) can be re-elected. The general shareholders’ meeting
(Hauptversammlung) can provide for a shorter term of office. A successor to
any member of the supervisory board (Aufsichtsrat) retiring prior to the
expiration of his or her term is appointed for the remainder of the term of the
resigning the members of the supervisory board (Aufsichtsrat).
The general shareholders’ meeting (Hauptversammlung) not only appoints
members to the supervisory board (Aufsichtsrat) but can also remove them with
simple majority of the votes cast. Pursuant to section 10 of the Company’s
articles of association (Satzung), any supervisory board (Aufsichtsrat) member
may resign with at least one month’s prior written notice. The notice period can
be waived by mutual agreement. If the resignation is for good cause, it may take
immediate effect.
The
supervisory
board
(Aufsichtsrat)
appoints
a
chairman
(Aufsichtsratsvorsitzender) and a deputy chairman (Stellvertretender
Aufsichtsratsvorsitzender) from among its members. The chairman
(Aufsichtsratsvorsitzender) or, if unable to attend, the deputy chairman
(Stellvertretender Aufsichtsratsvorsitzender), is obligated to convene and
conduct the meetings of the supervisory board (Aufsichtsrat).
The supervisory board (Aufsichtsrat) is not entrusted with the day-to-day
business and therefore cannot set binding directives for the management board
(Vorstand). However, according to the rules of procedure for the management
board (Geschäftsordnung für den Vorstand), certain transactions are subject to
the supervisory board’s (Aufsichtsrat) consent.
The supervisory board (Aufsichtsrat) is responsible for appointment of the
members of the management board (Vorstand) and can revoke their
appointment for good cause such as gross breach of fiduciary duties or if the
general shareholders’ meeting (Hauptversammlung) adopts a no-confidence
resolution in relation to the member of the management board (Vorstand) in
question.
The most important tasks of the supervisory board (Aufsichtsrat) is the advice,
control and supervision of the business operated by the management board
(Vorstand). This advisory and supervisory role covers all the activities of the
management board (Vorstand). In assessing the management board’s
(Vorstand) activities, the supervisory board (Aufsichtsrat) is not limited to the
assessment of the legitimacy of the activities but its supervision also includes
the appropriateness and economic consequences of the activities.
In order to enable the supervisory board (Aufsichtsrat) to fulfill its tasks, the
management board (Vorstand) is obliged to report to the supervisory board
(Aufsichtsrat) on a regular basis. The supervisory board (Aufsichtsrat) (and
each of its members) can request a report from the management board
Page 188
(Vorstand) to the supervisory board (Aufsichtsrat) on the transactions of the
Company, on legal and business relations with affiliated companies and on the
course of business of these companies, in so far as they are of economic
importance to the Company. Every member of the supervisory board
(Aufsichtsrat) is entitled to review these reports.
The supervisory board (Aufsichtsrat) can also arrange for special audits and
investigations of the work of the management board (Vorstand), in particular the
examination of certain transactions and the books of the Company.
The supervisory board (Aufsichtsrat) has a limited right of representation. It
represents the Company in legal transactions and in the event of legal disputes
with members of the management board (Vorstand). Furthermore, the
supervisory board (Aufsichtsrat) represents the Company together with the
management board (Vorstand) in the event of an action to challenge a general
shareholders’ meeting (Hauptversammlung) resolution brought by a
shareholder.
The members of the supervisory board (Aufsichtsrat) are jointly responsible for
performing their duties. The tasks and duties of the members of the supervisory
board (Aufsichtsrat) can be further defined in rules of procedure for the
supervisory board (Geschäftsordnung für den Aufsichtsrat) and certain tasks
can be assigned to a committee or to individual members of the supervisory
board (Aufsichtsrat). The supervisory board (Aufsichtsrat) has to consider the
German Corporate Governance Code, which is mandatory for companies listed
in the Prime Standard segment of Frankfurt Stock Exchange.
The members of the supervisory board (Aufsichtsrat) are guided by the interests
of the Company. They represent neither solely the shareholders nor the
employees and must therefore consider the interests of the Company in their
decisions and actions. The interests of the Company include the interests of the
shareholders and the workforce and, to a certain extent, the interests of the
public. The members of the supervisory board (Aufsichtsrat) act entirely
independently and on their own account.
The supervisory board (Aufsichtsrat) must hold a meeting twice in each half of
the calendar year. Resolutions of the supervisory board (Aufsichtsrat) are
generally passed in meetings. According to the German Stock Corporation Act
the supervisory board (Aufsichtsrat) has a quorum if at least three members of
the supervisory board (Aufsichtsrat) participate in a vote on a resolution.
Resolutions of the supervisory board require simple majority of the votes cast,
unless the applicable laws does not provide otherwise. However, resolutions
may also be passed outside of meetings, e.g. in writing, by telephone, in text
form, in electronic or other another comparable form, especially by
videoconference or in a combination of all above mentioned procedures, if this
is determined by the chairman of the supervisory board (Aufsichtsrat).
19.4.2
Rules and Procedures for the Supervisory Board
On 16 August 2014, the supervisory board (Aufsichtsrat) adopted rules of
procedure for the supervisory board (Geschäftsordnung für den Aufsichtsrat).
19.4.3
Members of the Supervisory Board
By means of resolution dated 8 May 2014, the general shareholders’ meeting
(Hauptversammlung) of the Company has appointed Ms. Viona Brandt, Ms.
YAO Xiaomen and Ms. CHEN Yang as members of the supervisory board
(Aufsichtsrat) for a period until the expiration of the general shareholders’
meeting (Hauptversammlung) exonerating the management board (Vorstand)
and the supervisory board (Aufsichtsrat) for the financial year 2014. The
supervisory board has elected Ms. Viona Brandt as its chairlady
(Aufsichtsratsvorsitzende) and Ms YAO Xiaoman as its deputy chairlady
(Stellvertretende Aufsichtsratsvorsitzende) by resolution dated 5 June 2014.
Thomas Weidlich, Dr. Gregor Wecker and Philipp Dietz resigned from their
Page 189
office on 8 May 2014. Ms. CHEN Yang has resigned on 8 August 2014. Mr.
Thomas Andreas Bieri was elected as new member of the supervisory board on
9 August 2014.
The members of the supervisory board (Aufsichtsrat) can be contacted at the
Company’s address.
The table below shows the current members of the supervisory board of the
Company and their respective terms of office:
Name and Position
Age
Ms. Viona Brandt
Chairlady of the supervisory board
(Aufsichtsratsvorsitzende)
Ms. YAO Xiaoman
Deputy chairlady of the
supervisory board
(Stellv. Aufsichtsratsvorsitzende)
Mr. Thomas Andreas Bieri
Member of the supervisory board
Initially appointed
on
Term expires
in*
44
9 May 2014
2018
59
9 May 2014
2018
44
9 August 2014
2018
(*) Term of office expires after the general shareholders meeting (Hauptversammlung) that formally
approves (entlastet) the actions of the members of the supervisory board of the financial year 2017.
19.4.4
Ms. Viona Brandt
Ms. Viona Brandt is
(Aufsichtsratsvorsitzende).
the
chairlady
of
the
supervisory
board
Ms. Viona Brandt has graduated from the University of Frankfurt/Main with a
degree in business management in 1998. During her studies, she already
worked for the Investmentbank J.P. Morgan Holding GmbH in Frankfurt/Main
from 1991 to 1998. During this time, she worked in the investment banking,
global markets and client administration. In 1999, she changed to the Allianz
Asset Management GmbH in Munich. There she worked for five months in client
relations. From 1999 till 2001, Ms. Viona Brandt worked for EM.TV &
Merchandising AG in Munich as a director for investor relations. In 2001 she
changed to the fashion company Escada AG in Munich where she took over the
position as head of investor relations from 2001 till 2008. From 2008 till 2009,
Ms. Viona Brandt worked for the fashion company Willy Bogner GmbH & Co.
KGaA in Munich as head of investor relations and communications. Since 2009,
Ms. Viona Brandt is owner of the individual enterprise “Viona Brandt
Communications” in Munich. In 2009, she was in addition managing partner of
Viona Brandt Financial Communications GmbH for a period of nine months.
Over the last five years, Ms. Viona Brandt has been a partner in the following
partnerships or a member of administrative, management or supervisory bodies
of the following companies outside the Company:
Current
 Member of supervisory board (Aufsichtsrat) of CFO AG
 Member of supervisory board (Aufsichtsrat) of Clavis Beteiligungen AG
 Owner of the individual enterprise “Viona Brandt Communications”
Past (last five years)
 Managing Partner of Viona Brandt Financial Communications GmbH
19.4.5
Ms. YAO Xiaoman
Ms. YAO Xiaoman is the deputy chairlady of the supervisory board
(stellvertretender Aufsichtsratsvorsitzende).
Page 190
Ms. YAO Xiaoman was graduated in Northeast Forestry University with degree
in forestry in 1982. She worked in Light Industry Department of China from 1982
to 1994. She was the vice chairlady cum secretary general of China Feather &
Down Industrial Association (CFDIA) from 1994 to 2012 and then became its
chairlady in 2012 until now.
Over the last five years, Ms. YAO Xiaoman has not been a partner in a
partnership or a member of administrative, management or supervisory bodies
outside the Company.
19.4.6
Mr. Thomas Andreas Bieri
Mr. Thomas Andreas Bieri was graduated from University of Berne, Switzerland
with a bachelor degree in Economics and Business Administration in 1994. He
obtained his Maste in Economics and Business Administration (“MBA”) from
London Business School in 1995. From 1995 to 1997, he worked in Union Bank
of Switzerland where he was responsible for finance related research and
analysis. From 1998 to 2007, he worked with UBS Investment Bank in
Switzerland where he advised national and international clients on IPO , preIPO transactions, other equity capital market transactions and merger and
acquisitions. From 2007 to 2009, he head the Equity Capital Marketd Group for
UBS Investment Bank in Switzerland where he responsible for primary and
secondary equity and equity linked transactions. From 2010 to 2013, Thomas
was a co-head of IBD Switzerland of Nomura, responsible to build up
investment banking franchise of Nomura in Switzerland. In 2013 till present, he
is the Managing Partner of Acxit Capital Management AG.
Over the last five years, Mr. Bieri has been a partner in the following
partnerships or a member of administrative, management or supervisory bodies
of the following companies outside the Company:
Current
 Managing Partner of Acxit Capital Management AG, Switzerland
Past (last five years)
 Managing Director of IBD Switzerland of Nomura
 Executive Director of UBS Investment Bank, Switzerland
19.4.7
Remuneration of the Supervisory Board Members
Ms.
Viona
Brandt
as
chairlady
of
the
supervisory
board
(Aufsichtsratsvorsitzende) receives a gross remuneration of EUR 50,000 per
year while Ms. YAO Xiaoman as deputy chairlady (Stellvertretende
Aufsichtsratsvorsitzende) receives a gross remuneration of EUR 12,000. Mr.
Thomas Andreas Bieri receives a gross remuneration of EUR 40,000 per year.
In addition, the members receive attendance fees between EUR 1,000 and
EUR 2,000 per physical meeting.
If a person is a member of the supervisory board only for part of a financial
year, remuneration is determined for a proportionate period of time (pro rata
termporis). In addition, every member of the supervisory board (Aufsichtsrat) is
entitled to reimbursement for expenses incurred in performing the duties of its
office.
19.4.8
D&O Insurance
The Company has entered into directors’ and officers’ insurance in its name,
covering the members of the supervisory board and management board, based
on prevailing market conditions.
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19.4.9
Shareholding and Options
None of the members of the supervisory board directly or indirectly holds any
shares in the Company.
The Company has not granted any options to acquire or subscribe for shares in
the Company to any of the members of the supervisory board.
19.4.10 Conflict of Interests
There exist no potential conflicts of interest between any duties of the members
of the supervisory board (Aufsichtsrat) to the Company and their private
interests and other duties.
19.4.11 Committees
As at the date of this Prospectus, the supervisory board (Aufsichtsrat) of the
Company has not established an audit committee or remuneration committee.
19.5 Specific Information on the Members of the Supervisory Board (Aufsichtsrat), the
Management Board (Vorstand) and the Senior Management
For the previous five years no member of the management board (Vorstand), supervisory
board (Aufsichtsrat) or the senior management has been convicted in relation to a
fraudulent offence. Neither have any official accusations and/or sanctions been made in
relation to members of the management board (Vorstand), supervisory board
(Aufsichtsrat) or senior management by law enforcement agencies or regulatory
authorities. For the previous five years no member of the Company’s administrative,
management or supervisory bodies, in particular no member of the management board
(Vorstand), senior management and supervisory board (Aufsichtsrat) was associated with
any bankruptcies, receiverships or liquidations.
Furthermore, at no times for the previous five years there was any official public
incrimination and/or sanction of a member of the Company’s administrative, management
or supervisory body or senior management by statutory or regulatory authorities
(including designated professional bodies) and no such person has ever been disqualified
by a court from acting as a member of the administrative, management or supervisory
bodies (Aufsichtsräte) of an issuer or from acting in the management or conduct of the
affairs of an issuer for the previous five years.
The Company and SNOWBIRD have not granted the members of the management
boards (Vorstände) and supervisory boards (Aufsichtsräte) any loans. The members of
the two boards have not concluded any transactions with the Company or SNOWBIRD
outside SNOWBIRD’s course of ordinary business.
No member of the management board (Vorstand) or supervisory board (Aufsichtsrat) or
senior management has entered into a service agreement with any company of
SNOWBIRD providing for any special compensation upon the termination of the service
relation. In particular, no pension or retirement benefits will be provided. Besides the
family relationship between Mr. YAN Changzai and Mr. YAN Zhaorui, the son of Mr. YAN
Changzai, there exists no other family relationship, neither among the members of the
management board (Vorstand) or the supervisory board (Aufsichtsrat) or senior
management, nor between any members of the management board (Vorstand), any
members the supervisory board (Aufsichtsrat) and any members of the senior
management. Furthermore, there are no agreements or arrangements with majority
shareholders, customers, suppliers or other persons based on which any management
board (Vorstand) or supervisory board (Aufsichtsrat) or senior management member has
been appointed.
Mr. YAN Changzai, the chairman of the management board (Vorstandsvorsitzender),
currently holds 30.50% of the shares in the Company (see Section 19.2.8 above
‘‘Directors’ Shareholdings and Options of the Member of the Management Board
(Vorstand)’’).
Page 192
19.6 General Shareholders’ Meeting (Hauptversammlung)
The general shareholder’s meeting (Hauptversammlung) is held at the Company’s
registered office, in a German city which has a stock exchange or in a German city with
more than 250,000 inhabitants. According to German Stock Corporation Law, the meeting
must be convened thirty days before the meeting itself. The invitation to the General
Shareholder’s Meeting (Hauptversammlung) has to be published in the electronic version
of the German Federal Gazette at least thirty days before the day of the meeting or at
least thirty days before notice of attendance has to be given, excluding the day of the
invitation and the day of the meeting or the day notice of attendance has to be given.
Shortly after the convocation of the general shareholders' meeting (Hauptversammlung)
the Company must publish certain information on their website such as the content of the
invitation, an illustration if no resolution is concluded in regard to a certain point of the
agenda, the documents available in the meeting, the total amount of shares and of the
voting rights, including separate information on the different total amounts concerning the
varying classes of shares and - if necessary the formulas needed to vote by proxy or to
issue a postal vote.
The Company's articles of association (Satzung) regulate that shareholders who want to
attend the meeting and exercise their voting rights within the meeting must register six
days prior to the general shareholders’ meeting (Hauptversammlung), not counting the
day of the meeting and the day the registration is received. The registration must be
made to the Company under the address announced in the convocation. The registration
has to be issued in text form (section 126b German Civil Code), either in German or
English. Shareholders must provide proof regarding their eligibility to participate in the
general shareholders' meeting (Hauptversammlung). In this regard, a special confirmation
of shareholding by the custodian bank is required and sufficient. With regard to such
shares which are not deposited with a custodian bank, this special confirmation of
shareholding may also be provided by a German notary or credit institution. The special
confirmation of shareholding has to be submitted in text form (section 126b BGB), either
in German or English. This document must refer to the 21st day prior to the meeting and
must be submitted to the Company via the address stated in the convocation at least six
days prior to the meeting. The day of the general shareholders' meeting
(Hauptversammlung) and the day on which the registration is received is not to be
counted. Details on the proof of eligibility, the issue of admission tickets and registration
have to be announced in the convocation. The voting rights may be exercised by proxy.
The German Stock Corporation Act (AktG) and the Company's articles of association
(Satzung) state that if the shareholder empowers more than one person, the Company
may reject one or more of the so-empowered persons. Each no-par value share carries
one vote at the general shareholders' meeting (Hauptversammlung) of the Company.
Neither German law nor the Company’s articles of association (Satzung) restrict the rights
of foreign shareholders or shareholders who are not domiciled in Germany to hold shares
or to exercise the voting rights attached to them.
The general shareholders' meeting (Hauptversammlung) adopts resolutions regarding, in
particular:

The appointment of members of the supervisory board (Aufsichtsrat);

The appropriation of the retained earnings (Bilanzgewinn);

The formal approval of acts of the members of the management board
(Vorstand) and supervisory board;

The appointment of the auditor;

Amendments to the articles of association (Satzung);

Capital procurement and capital reduction measures;

The appointment of auditors to control the formation and management of
the Company; and
Page 193

The liquidation of the Company.
Measures of the management board (Vorstand) can only be subject to a decision of the
general shareholders' meeting (Hauptversammlung) if the management board (Vorstand)
requests such decision.
Unless otherwise stipulated by mandatory statutory provisions or provisions of the
Company’s articles of association (Satzung), resolutions of the general shareholders'
meeting may be adopted by a simple majority of the votes cast. If statutory provisions in
non-mandatory form require a majority of the capital represented, a simple majority of the
capital represented at the adoption of the resolution is sufficient. Principally, this also
applies to resolutions amending the Company's articles of association (Satzung) and to
capital increases and capital reductions, unless a different majority is required by law.
Stock corporation law constitutes that resolutions of fundamental importance must be
passed by a majority of at least three-quarters of the registered share capital represented
at the meeting. In such cases, the stipulated majority exceeds the majority prescribed by
the Company's articles of association (Satzung).
Resolutions of fundamental importance include the following:

Amendments to the Company's articles of association (Satzung);

Capital increases excluding shareholders' subscription rights; capital
reductions

The creation of authorized or conditional capital

The transfer of the Company’s entire assets (Übertragung des gesamten
Gesellschaftsvermögens) and reorganizations as laid down in the
German Transformation Act (Umwandlungsgesetz) such as mergers
(Verschmelzungen), spin-offs (Spaltungen) or transfers of the Company`s
assets and transformations of the Company’s corporate legal form
(Formwechsel);

The conclusion of inter-Company agreements (in particular control
agreements and profit pooling agreement); and

The dissolution of the Company.
The general shareholder’s meeting (Hauptversammlung) may be called by the
management board (Vorstand), the supervisory board (Aufsichtsrat) or by the
shareholders holding an aggregate of 5% of the registered share capital. The supervisory
board (Aufsichtsrat) must call a general shareholder`s meeting (Hauptversammlung) if the
best interests of the Company require so. The general shareholder`s meeting
(Hauptversammlung) must be held within the first eight months of each fiscal year.
19.7 Corporate Governance Code
The German Corporate Governance Code (the “Code”) contains provisions concerning
shareholders and the general shareholders' meeting (Hauptversammlung) of German
companies listed on a stock exchange. The regulations of the Code also relate to the
management board (Vorstand), the supervisory board (Aufsichtsrat) and to transparency,
accounting policies and auditing.
Although there is no obligation under German law to comply with the recommendations
and suggestions of the Code, section 161 of the German Stock Corporation Act requires
the management board (Vorstand) and the supervisory board (Aufsichtsrat) of a listed
company to make an annual declaration that it follows and will follow the
recommendations of the Code or which of the recommendations were or will not to be
followed. In the last case the declaration must include the reasons for not following the
Code. The declaration has to be published on the company's website.
The Company has not intentionally complied with the recommendations and suggestions
contained in the Code yet because it has so far not been listed on any stock exchange
and therefore the Code did not apply to the Company. Once the Company is granted
Page 194
admission to trade on the regulated market of the Frankfurt Stock Exchange, the
Company will annually issue and publish a declaration in compliance with section 161 of
the German Stock Corporation Act (AktG) and will make it continuously available on its
website.
The management board (Vorstand) and the supervisory board (Aufsichtsrat) of the
Company identify with the goals of the Code to foster responsible and transparent
corporate management and control, oriented to a sustained increase in Company value.
The members of the governing bodies declare that after the Listing they will largely follow
the recommendations and suggestions of the Code presumably except for the following:
Section 3.8, Sentence 5
Section 3.8, Sentence 5 of the Code recommends agreeing on a specified deductible in
any D&O (directors’ and officers’ liability insurance) policy to be taken out for members of
the supervisory board (Aufsichtsrat). In the Company’s opinion, the attitude of the
supervisory board members in responsible acting and complying with German law will not
be supported by such specified deductible. Also, a deductible would reduce the
attractiveness of supervisory board activities, and thus also the Company’s chances in
the competition to attract qualified candidates.
Section 4.1.5
Section 4.1.5 of the Code recommends taking diversity into consideration when filling
management positions, and, in particular, to aim for an appropriate consideration of
women. SNOWBIRD is considering diversity. However, the focus here is on the
professional qualification of the candidates (men and women).
Section 4.2.3
According to Section 4.2.3 of the Code, the monetary compensation elements for the
management board shall comprise fixed and variable elements, related to demanding,
relevant comparison parameters. The supervisory board (Aufsichtsrat) must ensure that
the variable compensation elements are, in general, based on a multi-year assessment.
Both positive and negative developments shall be taken into account when determining
variable compensation components. All compensation components must be appropriate,
both individually and in total, and in particular must not encourage taking unreasonable
risks. The amount of compensation shall be agreed, both overall and for individual
compensation components. The variable compensation components shall be related to
demanding, relevant comparison parameters. Changing such performance targets or the
comparison parameters retroactively shall be excluded. In 2013, SNOWBIRD deviated
from these provisions of the Code as the management board was not entitled to
remuneration for their service as member of the management board of the Company. The
members of the management board only received remuneration for their services as
directors and/or officers of the Company’s subsidiaries.
Section 5.1.2
The Company deviates from the recommendations set forth in Paragraph 5.1.2 of the
Code. Decisions on suitable candidates for appointment as members of the management
board are taken on a purely objective basis and focus on the professional qualification of
the candidates in accordance with the German legislative on diversity. The supervisory
board (Aufsichtsrat) sees no reason for rigid age limits and will take all personnel
decisions individually and based on appropriate considerations.
Section 5.3
As a legal requirement for the formation of a committee that takes decisions, the
committee must consist of at least three members. Since the supervisory board
(Aufsichtsrat) of the Company only consists of three members due to the size of the
Company, the formation of a committee is not necessary. Thus, the Company deviates
from the recommendation of Section 5.3 of the Code.
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Section 5.4.1
Pursuant to Section 5.4.1 para. 2 of the Code, the supervisory board (Aufsichtsrat) shall
set specific objectives with regard to its composition that take into account the companyspecific situation, the international scope of the company’s business, potential conflicts of
interest, the number of independent members of the supervisory board (Aufsichtsrat)
pursuant to Section 5.4.2 of the Code, a set age limit for members of the supervisory
board as well as diversity. Those specific objectives shall in particular provide for an
appropriate representation of women. Pursuant to Section 5.4.1 para. 3 of the Code,
proposals issued by the members of the supervisory board to the responsible corporate
electoral bodies shall take those objectives into account and the objective target shall be
reported on in the Corporate Governance Report. In the interest of the company, the
supervisory board (Aufsichtsrat) will in each individual case solely base its nomination
proposals to the shareholders’ meeting on the skills, abilities and professional expertise
but not on gender or rigid age limits. Therefore, fixed targets to be attained at a fixed
point in time are not provided for. In this regard, the Company deviates from Section 5.4.1
para. 2 and 3 of the Code.
Section 5.4.5
Pursuant to Section 5.4.5 of the Code, members of the supervisory board (Aufsichtsrat)
shall autonomously undertake training and educational measures required for their
individual tasks and shall in this regard be appropriately supported by the company. Due
to the fact that the requirements of the term “angemessen” (appropriate) are not clear, the
Company declares its deviation from this recommendation for reasons of caution.
Section 7.1.2
The consolidated financial statements will probably not be made available publicly within
90 days from the end of the financial year and the interim reports will probably not be
available within 45 days from the end of the reporting period as recommended in Section
7.1.2 of the Code. The Company cannot guarantee that it can meet the deadlines
recommended by the Code in view of the need to include foreign companies in the
consolidated financial statements and interim reports. The consolidated financial
statements will, however, be available within four months from the end of the financial
year, while interim reports will be published within the statutory deadlines
Since all members of the management board (Vorstand) of the Company are mainly
located outside of Germany it will be difficult for them to act in compliance with the
German standards for corporate governance.
The management board (Vorstand) of the Company will receive training and constant
legal advice on its duties arising from the Code and of its duties vis-a-vis the supervisory
board (Aufsichtsrat) arising from the German Stock Corporation Act (AktG).
The supervisory board (Aufsichtsrat) is aware that - because of the linguistic differences
and the geographical distance it may be more difficult to fulfill its supervisory duties
arising from the German Stock Corporation Act (AktG), for example with regard to the
duties stated in section 111 of the German Stock Corporation Act (AktG).
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20.
TRANSACTIONS AND LEGAL RELATIONS WITH RELATED PARTIES
20.1 Related Parties
This section describes the transactions between entities of SNOWBIRD and related
parties concluded in the period between 1 January 2011 and the date of this Prospectus.
An entity or individual is considered a related party of the Company if: (i) it possesses the
ability, directly or indirectly, to control or exercise significant influence over the operating
and financial decision of the Company or vice versa; or (ii) it is subject to common control
or common significant influence.
Further, related parties of the Company include members of the management board
(Vorstand) and the supervisory board (Aufsichtsrat), including their close family members
and companies over which members of the management board (Vorstand) or supervisory
board (Aufsichtsrat) of the Company or their family members could exercise considerable
influence or hold a substantial amount of the voting rights.
The following related parties have concluded transactions with (other) entities of
SNOWBIRD within the period between 1 January 2011 and the date of this Prospectus:
Related Party
Relationship / Type
of Business
Relation to SNOWBIRD
Mr. CHOI Siu Hung
n/a
Major indirect shareholder of
the Company and chairman of
the management board of
Snowbird HK.
BIG
GLOBAL
LIMITED
Investment company
Major direct shareholder of the
Company and solely held by
Mr. CHOI Siu Hung.
Mr. YAN Changzai
n/a
Major shareholder of the
Company,
CEO
of
the
Company as well as executive
director of Snowbird Henan.
Mr. YAN Zhaorui
Son of Mr. YAN
Changzai
Director and deputy general
manager of Snowbird Henan.
Mr. QIU Duoxiang
n/a
Chief operating officer of the
Company and of Snowbird
Henan.
Mr. CHEN Yijun
n/a
Indirect shareholder of the
Company and deputy general
manager of Snowbird Henan.
Mr. LAM Kok Weng
n/a
Chief financial officer of the
Company.
BUSINESS
HOLDINGS
20.2 Related Party Transactions
To allow the investor to examine transactions between entities of SNOWBIRD and their
related parties in the past, this section includes a summary of such transactions between
1 January 2011 and the date of this Prospectus.
20.2.1
Restructuring Agreement
On 6 June 2014, inter alia Mr. YAN Changzai and BIG BUSINESS GLOBAL
HOLDINGS LIMITED entered into a contribution agreement with the Company
whereby they undertook to transfer 14.6% and 14.0% of the shares in Snowbird
HK respectively to the Company against the issue of 10,482,500 and
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10,931,750 new no par value ordinary bearer shares in the capital of the
Company respectively (Einbringungsvertrag).
20.2.2
Bank Guarantees
The short term bank loans of Snowbird Henan are, inter alia, collateralized with
personal guarantees granted by Mr. YAN Changzai.
Mr. YAN Changzai has granted personal guarantees in the following amounts:

In 2012, the personal guarantees amounted in total RMB 39.0 million
(approx. EUR 4.80 million);

In 2013, the personal guarantees amounted in total RMB 40.0 million
(approx. EUR 4.86 million).

In 2014 so far, the personal guarantees amounted in total RMB 10.0
milion (approx. EUR 1.22 million).
The guarantees were provided for no consideration.
20.2.3
Personal Undertakings
Mr. YAN Changzai has given several personal undertakings pursuant to which
he, inter alia, undertook to reimburse each of Snowbird PRC (i) for any
outstanding payments requested by the competent authorities in connection
with a failure to pay taxes and fees, social insurance and housing funds
contributions; (ii) undertook to reimburse Snowbird Henan for any shareholders’
contribution defect during the establishment of Snowbird Henan.
20.2.4
Remunerations for members of the Management Board (Vorstand) and
Senior Managers
The aggregate remuneration for the members of the management board
(Vorstand) in FY 2013 amounted to EUR 371,066:
Mr. YAN Changzai
EUR 214,141
paid by Snowbird
Henan
Mr. QIU Duoxiang
EUR 145,731
paid by Snowbird
Henan
Mr. LAM Kok Weng
EUR 11,194
paid by Snowbird
HK
Total
EUR 371,066
The aggregate remuneration for the senior managers in FY 2013 amounted to
EUR 292,602:
Mr. YAN Zhaorui
EUR 146,175
paid by Snowbird
Henan.
Mr. CHEN Yijun
EUR 146,427
paid by Snowbird
Henan.
Total
292,602
Not all of the related party transactions described in this Section 20.2 have been entered
into at current market conditions and have been concluded as arm’s length transactions
pursuant to the procedure of Article 3 of Regulation (EC) No. 1606/2002.
None of the related party transaction set out above were trade related.
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21.
TAXATION IN GERMANY
This section, ‘‘Taxation in Germany’’, contains a brief summary of some major principles
of German taxation which are or may become significant in connection with the
acquisition, holding or transfer of shares or subscription rights. It is not meant to be a
comprehensive and complete description of all tax-related circumstances which may be
of relevance for shareholders. This summary is based on the provisions of German tax
law in force at the date of this Prospectus and the double taxation treaties currently
concluded between the Federal Republic of Germany and other states. In both areas, the
relevant provisions may change, and under certain circumstances, even retroactively.
Potential investors in the shares are therefore advised to consult their tax advisors with
respect to the tax consequences of buying, holding or transferring shares or subscription
rights and with respect to the procedure which must be followed in case regarding a
possible refund of German dividend withholding tax (Abgeltungssteuer). Only such tax
advisors are in a position to adequately consider the specific tax situation of the individual
investor.
The tax year is the calendar year (sec. 7 para. 3 Corporate Income Tax Act (”CITA”). The
tax is levied on the taxable income deriving from the corporate taxpayer’s financial year.
Usually, the financial year corresponds to the calendar year. The taxpayer can choose a
financial year deviating from the calendar year. Nevertheless, after having chosen initially
a financial year corresponding to the calendar year, the taxpayer needs the prior consent
of the tax office before changing his financial year end to deviate from the calendar year
(sec. 7 para. 4 sentence 3 CITA). If a company adopts an accounting period that deviates
from the calendar year, tax is assessed for the taxable income in the financial year in the
calendar year the financial years end.
When a new corporation is founded, the corporation has to be registered for tax purposes
and will receive a tax identification number (sec. 138 and 139a General Fiscal CodeGFC).
Annual tax returns must be filed on 31 May of the year following the calendar year in
which the financial year ended (sec. 149 para. 2 GFC). However, an extension of the
term may be granted upon application. If a licensed tax consultant prepares the tax
return, the filing date is automatically prolonged to 31 December.
After the local tax office has reviewed the tax return a formal assessment notice is issued
and sent to the taxpayer. Most of the time tax assessments are preliminary and subject to
later review by the tax authorities due to regular tax audits.
21.1 Taxation of the Company
The taxable income of corporations domiciled in Germany is in principle subject to
corporation tax (Körperschaftsteuer), solidarity surcharge (Solidaritätszuschlag) and trade
tax (Gewerbesteuer).
The Company’s taxable income is subject to German corporation tax (Körperschaftsteuer)
at a rate of 15% plus solidarity surcharge (Solidaritätszuschlag) of 5.5% assessed
thereon, totaling 15.825%. When determining the Company’s taxable income, basically all
of its earnings have to be included. German corporation tax, solidarity surcharge and
trade tax are not tax deductible. This basic principle, though, is subject to certain
modifications:
Dividends received by the Company from another corporation are exempt from German
corporation tax (Körperschaftsteuer) and solidarity surcharge (Solidaritätszuschlag) only if
the company has been holding at least 10% of the distributing company’s share capital
uninterruptedly since the beginning of the relevant assessment period. If the Company
only holds less than 10% of the distributing company’s share capital the free floats
dividends received are taxable in full (Streubesitzdividenden).. In the case of tax exempt
dividends, 5% of the tax-exempt amounts are treated as non-deductible business
expenses, thereby economically leading to a minimum taxation of such 5% at the
corporation
tax
(Körperschaftsteuer)
rate
(including
solidarity
surcharge
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(Solidaritätszuschlag) of 15.825%. Expenses actually incurred which have an economic
connection with the dividends may be fully deducted. Write-offs on shares are not tax
deductible. The de facto 95% tax exemption for dividends received by corporations does
not apply to credit institutions and insurance companies as well as other entities which
may be considered financial institutions within the meaning of the German Banking Act
(see 21.4.4 below) if special requirements are met.
Further, the dividends received by the Company from another corporation will underly the
participation exemption only if the dividend payment was not treated as a tax-deductible
expense at the level of the distributing company.
In addition, German corporations are subject to trade tax (Gewerbesteuer) for the trade
income earned in their German permanent establishments. For the purposes of trade tax
(Gewerbesteuer), dividends and other profit shares received from domestic and foreign
corporations and profits from the sale of shares in other corporations are generally
treated in the same manner as for corporate tax (Körperschaftsteuer) purposes. However,
dividends and profit shares are, in general, 95% tax-exempt only if the company has been
holding at least 15% of the distributing company’s share capital uninterruptedly since the
beginning of the relevant assessment period (Erhebungszeitraum). Otherwise also the
remaining 95% of the dividends are subject to German trade tax (Gewerbesteuer) due to
the so-called trade tax add-back. Trade income is determined by the taxable income for
income tax or corporate income tax purposes modified by certain additions and
deductions. The additions include one-fourth of the sum of the following items, which
must be added back when computing income for trade tax purposes, for example: loan
remuneration (e.g. interest), 20% of rental and leasing payments for movable fixed assets,
50% of rental and leasing payments for immovable fixed assets. The add-backs apply
only to the extent payments exceed an exemption amount of EUR 100,000. Deductions
include for example 1.2% of 140% of the assessed value (Einheitswert) of real property
as well as the distributive share of profits from an interest in a domestic or foreign trading
partnership. Additional restrictions apply to dividends and other profit shares originating
from foreign corporations. The trade tax (Gewerbesteuer) amount owed is calculated by
the trade earnings (Gewerbeertrag), multiplied by the trade tax assessment rate
(Gewerbesteuermesszahl) and the local multiplier (Hebesatz) applied by the municipality
or municipalities in which the Company maintains a permanent establishment
(Betriebsstätte). The trade tax (Gewerbesteuer) assessment rate for corporations is
currently 3.5%. The relevant multiplier for each local municipality ranges with some
exceptions currently between 200% and 490%. For example the multiplier 490%, or factor
of 4.9, yields a tax rate of 17.15%. Trade tax is not tax-deductible. German partnerships
and sole proprietorships have a tax relief of EUR 24,500 in the trade tax base. If
partnership shares/sole proprietorships are hold as a private asset the sale of these is
trade tax exempted.
Negative earnings incurred by the company in one year may be carried back to the
immediately preceding assessment period up to an amount of EUR 1,000,000 for
corporate income tax purposes.
Tax losses carried forward can only be used subject to the minimum taxation policy
(Grundsatz der Mindestbesteuerung). According to this policy, corporation tax
(Körperschaftsteuer) and trade tax (Gewerbesteuer) losses carried forward may only be
fully offset against profits earned by the Company in any financial year up to a maximum
amount of EUR 1 million. If the taxable income (Gesamtbetrag der Einkünfte) of the
Company exceeds this maximum amount, only 60% of the exceeding amount may be
offset against tax losses carried forward. The remaining 40% of profits are subject to tax.
Exceeding tax losses must be carried forward. Tax losses carried forward which are not
utilized can in principle be carried forward indefinitely for corporation tax or trade tax
purposes and be offset with future taxable income, in each year again subject to the
minimum taxation policy.
Changes in the ownership of corporations can, however, cause forfeiture of losses for tax
purposes – so-called change-in-ownership rules. The restriction applies on two levels.
Acquisitions of more than 25% and no more than 50% of a corporation’s shares or voting
rights within a five year period by one person or parties related thereto trigger pro rata
forfeiture of losses. The forfeiture of losses is total where more than 50% of the shares or
Page 200
voting rights are transferred.
Interest expense is only deductible subject to the application of the so-called interest
barrier (Zinsschranke). The interest barrier restricts the deductibility of interest expense to
the amount of interest income plus 30% of the earnings before interest, taxes,
depreciation and amortization (EBITDA) determined for tax purposes for corporate
income tax and trade tax purposes. The non-deductible part of the interest expense can
be carried forward to future financial years and might reduce the taxable profit of the
company in the future if the interest expense in such period is deductible under the
interest barrier rule. There is a risk that the non-deductible part of interest expense might
be forfeited, for example in case of restructurings or in case of the termination of the
business. The interest barrier will not apply if the interest expense in one year is less than
EUR 3 million or in the event the company complies to the so-called “escape clause”,
provided there is no harmful shareholder debt financing. The escape clause stipulates the
complete deductibility of interest expense in the event that the company’s equity ratio is
not lower than on a consolidated group basis. However, exceptions to this escape clause
have to be considered. For the purpose of the equity ratios the financial statements as
per the end of the preceding business year end are relevant. Relevant financial
statements are, as a rule, those set up under IFRS; financial statements set up pursuant
to local (e.g. German) GAAP are acceptable under specific conditions only. Only in case
that there is no harmful shareholder debt financing, the escape clause will be applicable.
A harmful shareholder debt financing is existing if the shareholder (holding directly or
indirectly more than 25% of the shares) which is not a member of a consolidated group or
any related party hereto or any third party who has a right of recourse against the
shareholder or a related party hereto receives interest exceeding 10% of the negative
interest balance (difference between interest income and interest expenses) from the
respective corporation or from another affiliated company.
Remunerations accrued by the Company on services rendered by related parties are
subject to the general arm’s length principle. This covers for instance services rendered
by entities of Snowbird HK, Snowbird WFOE or Snowbird Henan to the Company.
Remunerations exceeding the level that would be accepted by the Company in relation to
an unrelated third party may be excluded from tax deductibility. This may also apply to
remunerations accrued without a sufficient written agreement entered into in advance.
The Company must hold available sufficient transfer pricing documentation pursuant to
detailed specific German tax rules covering inter alia the content and deadlines if certain
thresholds are exceeded.
21.2 Taxation of Shareholders
Shareholders are subject to tax in particular in connection with the holding of shares
(taxation of dividends), the disposal of shares (taxation of capital gains) and the
gratuitous or partially gratuitous transfer of shares (inheritance and gift tax).
21.3 Taxation of Dividends
21.3.1
Withholding Tax (Abgeltungssteuer)
Generally, dividends distributed to its shareholders are subject to a withholding
tax at a 25% flat tax rate plus a 5.5% solidarity surcharge (Solidaritätszuschlag)
on this flat tax amount, adding up to a total of 26.375%.
In case the shares are held in collective deposit at a central securities
depository (Wertpapiersammelbank) within Germany, in individual safe custody
or where dividends are paid or credited upon presentation of a dividend coupon,
the tax will be withheld by the German branch of the domestic or foreign bank or
financial institution or domestic securities trading institute or bank holding the
shares in trust or administering them or paying the dividends to the bearer of
the coupon or to a foreign institution. The Company does not assume any
responsibility for the withholding of the withholding tax at the source.
Such withholding tax is levied and is to be withheld irrespective of whether and
to what extent the dividend distribution is taxable at the level of the shareholder
Page 201
residing inside or outside Germany. Certain exceptions may apply if the
dividend is paid to corporations in another EU Member State to which the EU
Parent/Subsidiary Directive applies. Due to the EU Parent/Subsidiary Directive,
there is an exception for dividends by a German subsidiary to an EU parent. In
such a case, withholding tax is not levied upon application (sec. 43b para. 1
Income Tax Act (“ITA”) if (i) the parent is a corporation resident in the EU and
(ii) the parent holds a direct participation of at least 10% in its German
subsidiary and (iii) the participation is held for a 12-months period without
interruption. A partial exemption may also be available under a respective
double taxation treaty. In these cases the restrictive preconditions according to
sec. 50d para.3 German Income Tax Act have to be fulfilled. According to sec.
50d para. 3 ITA a foreign company must have sufficient substance to be
recognized as a tax resident from a German perspective. Generally, in case of a
mere holding company without any active trade or business activities, among
others the formal requirements for substance (e.g. separate accounting, own
business space, employees) need to be fulfilled. Application forms may be
obtained from the German Federal Central Tax Office (Bundeszentralamt für
Steuern), An der Kuppe 1, 53225 Bonn, Germany (www.bzst.bund.de).
For shareholders resident in Germany (that means, shareholders whose
residence, habitual abode, management, or domicile is located in Germany)
holding their shares as business assets as well as for shareholders residing
outside Germany (foreign shareholders) holding their shares in a permanent
establishment or a fixed base in Germany, or as assets for which a permanent
representative has been appointed in Germany, the tax withheld is credited
against the shareholders’ personal income tax or corporate income tax liability.
Any tax withheld in excess of the shareholder’s personal tax liability is refunded.
The same principles apply to the solidarity surcharge.
21.3.2
Taxation of Dividend Income of Investors Resident in Germany Holding
their Shares as Private Assets
For individual shareholders resident in Germany holding their shares as private
assets dividends are subject to the flat tax regime (Abgeltungsteuer). Under this
regime dividend income of private investors will be taxed at the withholding tax
of 25% plus a 5.5% solidarity surcharge thereon (aggregate tax burden:
26.375%) and church tax if applicable. Except for an annual lump sum
allowance (Sparerpauschbetrag) of EUR 801 (EUR 1,602 for married couples
filing jointly), private investors will not be entitled to deduct expenses incurred in
connection with the capital investments from their dividend income. If the tax
rate results in a higher tax burden as opposed to the private investor’s individual
tax rate the investor may opt for taxation at the individual tax rate. The
withholding tax will be credited against the income tax. Private investors are in
the case of a lower individual tax rate under the current rules not entitled to
deduct expenses incurred in connection with the capital investments from their
income except of the annual lump sum allowance even if they opt for taxation at
an individual tax rate. However, this rule has recently been filed for revision with
the German Federal Court. This option may be exercised only for all capital
income and married couples may only jointly exercise the option.
If the shareholder holds at least 25% of the shares in the Company, or holds at
least 1% and carries out an occupational activity for the Company, the
shareholder can opt for taxation of 60% of the dividend income at his individual
income tax rate (part-income system). In such event 60% of his expenses
related to the dividend income can be tax deducted.
21.3.3
Taxation of Dividend Income of Investors Resident in Germany Holding
their Shares as Business Assets
If shares are held as business assets of a shareholder, the taxation depends on
whether the shareholder is a corporation, a sole proprietor, or a partnership
(Mitunternehmerschaft):
Page 202
Corporations
Dividend distributions to corporate shareholders are exempt from corporate
income tax only if the company has been holding at least 10% of the distributing
company’s share capital uninterruptedly since the beginning of the relevant
assessment period. However, 5% of the tax-exempt dividend income is deemed
to be non-deductible business expense for tax purposes and is therefore
subject to corporate income tax (plus solidarity surcharge) and trade tax.
Business expenses actually incurred in connection with the shares are entirely
tax deductible. 95% of dividend income must be added back when determining
the trade taxable income and is therefore subject to trade tax unless the
investor holds at least 15% of the share capital of the company at the beginning
of the relevant assessment period.
Sole Proprietors
For sole proprietors holding their shares as business assets, generally 60% of
the dividend distributions are taxable. Correspondingly, only 60% of the
business expenses related to the dividend income are deductible for tax
purposes (subject to any other restrictions on deductibility). In addition,
dividends are entirely subject to trade tax if the shares are held as a business
asset of a permanent establishment in Germany and if the shareholder does not
hold at least 15% of the share capital of the company at the beginning of the
relevant assessment period. The trade tax levied – depending on the municipal
trade tax rate and the individual tax situation – is partly or entirely credited
against the shareholder’s personal income tax liability in a lump sum procedure.
Partnerships
If shares are held by a partnership, personal income tax or corporate income
tax is levied only on the level of the partners. If a partner is subject to corporate
income tax, dividends are tax-exempt to 95% only if the company has been
holding at least 10% of the distributing company’s share capital uninterruptedly
since the beginning of the relevant assessment period. If the partner is subject
to personal income tax, 60% of the dividends are taxable and only 60% of the
business expenses related to dividend income are deductible. At the level of a
partnership which is liable to trade tax, the entire dividends are subject to trade
tax if the partnership does not hold at least 15% of the share capital of the
company at the beginning of the relevant assessment period. However,
depending on the applicable municipal trade tax rate and individual
circumstances, the trade tax paid at the level of a partnership may partly or
entirely be credited against the personal income tax liability of the partners in a
lump sum procedure if the partners are natural persons.
Additional preconditions for the trade tax exemption of 95 %, have to be fulfilled
when a corporation, a sole proprietor or a partnership receives dividends from a
corporation which is seated outside of Germany
21.3.4
Taxation of Dividend Income of Investors not Resident in Germany
Individual shareholders, who have neither a domicile nor a habitual place of
abode in Germany, and corporate shareholders, who have neither their legal
seat nor a place of general management in Germany (“German non-resident”),
are subject to limited tax liability for German income tax (Einkommenssteuer or
Körperschaftsteuer, as the case may be) purposes. Accordingly, such
shareholders are taxed only on their 'domestic income' as defined and
catalogued by the German Income Tax Act (Einkommensteuergesetz - EStG).
For foreign shareholders who do not hold their shares in a permanent
establishment or a fixed base in Germany, or as an asset for which a
permanent representative has been appointed in Germany, the German tax
liability is, in principle, satisfied upon deduction of withholding tax (possibly
reduced by way of a refund under a double taxation treaty or the EU
Parent/Subsidiary Directive and subject to the restrictive preconditions of
section 50 d (3) German Income Tax Act).
Page 203
However, shareholders who hold their shares in a permanent establishment or
a fixed base in Germany, or as business assets for which a permanent
representative has been appointed in Germany, are subject to the same rules
described above for shareholders resident in Germany.
21.4 Taxation of Capital Gains
21.4.1
Taxation of Capital Gains of Investors Resident in Germany Holding their
Shares as Private Assets
Any gain from the sale or redemption of the shares will be subject to a
withholding tax (Abgeltungsteuer) of 25% plus a solidarity surcharge of 5.5%
thereon resulting in an aggregated tax burden of 26.375%. Except for an annual
lump sum allowance (Sparerpauschbetrag) of EUR 801 (EUR 1,602 for married
couples filing jointly) private investors will not be entitled to deduct expenses
incurred in connection with the capital investment from their capital gain. If the
flat tax results in a higher tax burden as opposed to the private investor’s
individual tax rate the investor may opt for taxation at his individual tax rate.
Private investors are not entitled to deduct expenses incurred in connection with
the capital investments from their income except for the annual lump sum
allowance even if they opt for taxation at an individual tax rate. The option may
only be exercised for all capital gains and income from capital investments and
married couples may only exercise the option jointly.
Losses from the disposition of the shares may only be offset against other
capital gains resulting from the disposition of shares. Offsetting of overall losses
with other income (for example business or rental income) and other capital
income is not possible. Such losses may be carried forward and offset against
positive capital gains deriving from the sale of shares in future years.
The general flat tax will not apply if the seller of the shares or, in case of
gratuitous transfer, its legal predecessor has held, directly or indirectly, at least
1% of the share capital of the company at any time during the five years prior to
the disposal. 60% of the capital gains are taxed at the individual tax rate upon
this disposal.
Capital gains are principally subject to withholding tax of 25% plus 5.5%
solidarity surcharge thereon (in total 26.375%) in the event a German credit or
financial institution (including a German branch of a foreign credit or financial
institution or German securities trading company or securities trading bank)
stores or administrates or carries out the sale of the shares and pays or credits
the capital income. If the shares have not been acquired through such German
credit or financial institution and administered thereafter, for example in case of
a change of administration (Depotwechsel), withholding tax may be levied on
30% of the sale proceeds if the actual acquisition costs of the shares cannot be
proved. However in general banks are obliged to inform the transferee bank
about the acquisition costs of the transferred shares.
21.4.2
Taxation of Capital Gains of Investors Resident in Germany Holding their
Shares as Business Assets
If shares are held as business assets of a shareholder, the taxation of capital
gains realized upon disposal depends on whether the shareholder is a
corporation, a sole proprietor, or a partnership:
Corporations
Capital gains realized by a corporate shareholder upon disposal of shares are
exempt from corporate income tax and trade tax. Capital gains for this purpose
is the amount by which the selling price or the equivalent value after deduction
of selling costs exceeds the tax value at the time of disposal. However, 5% of
the capital gain is deemed to be a non-deductible business expense and is
therefore subject to corporate and trade tax. Losses incurred upon the disposal
of shares or other impairments of the shares’ value or reduction of profit are not
Page 204
tax deductible. A reduction of profit is also defined as any losses incurred in
connection with a loan or security in the event the loan or the security is granted
by the shareholder or by a related person hereto or by a third person with the
right of recourse against the before mentioned persons and the shareholder
holds directly or indirectly 25% or more of the capital of the company.
Sole Proprietors
If the shares are held by sole proprietors, 60% of the capital gains realized upon
disposal are taxed. Correspondingly, 60% of the business expenses related to
such capital gains and only 60% of any losses incurred upon disposal of shares
are tax deductible. In addition, 60% of the capital gains are subject to trade tax
if the sole proprietor is subject to trade tax. However, trade tax is partly or
entirely credited against the shareholder’s personal income tax liability
depending on the applicable municipal trade tax rate and individual
circumstances.
Partnerships
If the shareholder is a partnership, taxation on the level of the partners depends
on whether the partners are subject to personal income tax or corporate income
tax: If the partners are subject to corporate income tax, any capital gains are tax
exempt in amount of 95%. If the partners are subject to personal income tax,
60% of the capital gains are taxable. In addition, 60% of the capital gains are
subject to trade tax at the level of a partnership if the partnership is liable to
trade tax and the partners are individuals and 5% of the capital gains are
subject to trade tax if the partners are corporations. However, the trade tax paid
at the level of a partnership may partly or entirely be credited in a lump sum
procedure – depending on the applicable municipal trade tax rate and individual
circumstances – against the personal income tax liability of the partners who
are individuals.
21.4.3
Taxation of Capital Gains of Shareholders Outside Germany
Capital gains realized upon disposal of shares by a shareholder resident
outside Germany are only subject to German income tax (plus solidarity
surcharge) in the event (i) the shares are held in a permanent establishment or
through a fixed base in Germany, or held as assets for which a permanent
representative has been appointed in Germany or (ii) the selling shareholders
or, in case of a gratuitous transfer, its legal predecessor has held, directly or
indirectly, at least 1% of the share capital of the company at any time during the
five year period prior to the disposal.
In this case:

5% of the capital gain is subject to corporate income tax and solidarity
surcharge, if the shareholder is a corporation; and

60% of the capital gain is taxed in all other cases.
However, some of the German double taxation treaties provide for a complete
exemption from German taxation (except in case (i)) in such cases and assign
the right to tax to the shareholder’s state of residence). An exemption from
withholding tax or a refund may be subject to the proof of foreign residency.
Capital gains realized upon disposal of shares held in a permanent
establishment or through a fixed base in Germany, or held as assets for which a
permanent representative has been appointed in Germany, are subject to the
same rules as described above for shareholders resident in Germany.
21.4.4
Special Rules for Banks, Financial Services Institutions, Financial
Institutions, Life and Health Insurance Companies, and Pension Funds
To the extent banks and financial services institutions hold shares that are
attributable to their trading book pursuant to § 1a of the German Banking Act
(Kreditwesengesetz) the standard tax exemption for corporations does not
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apply to dividend income received or to capital gains or losses realized upon the
disposal of shares, that means dividend income and capital gains are fully
subject to corporate income tax and, if applicable, to trade tax. The same
applies to shares that were acquired by financial institutions within the meaning
of the German Banking Act in order to realize short-term proprietary trading
gains. Furthermore, this applies to banks, financial services institutions and
financial institutions domiciled in another member state of the European
Community or another contracting party to the EEA Agreement. The standard
tax exemption for corporations neither applies to dividends received nor to
capital gains or losses if the shares are attributable to the capital investments
(Kapitalanlagen) of life and health insurance companies or pension funds.
Certain exceptions may apply to corporations if the EU Parent/Subsidiary
Directive (90/435/ EEC of 23 July 1990, as amended) applies.
According to a recent decision from the Federal Fiscal Court (dated 14 January
2009) holding companies also qualify as financial institutions (falling under the
German Banking Act), if they acquire shares with intent to make short term
profits. Capital gains arising from the sale of these shares are also 100%
taxable for corporate income tax and trade tax purposes. The intention to make
short term profits is typically given if shares are bought with the intent to sell
them in a short term and to realize a gain. Private Equity companies and
Venture Capital companies usually do not fall under sec. 8b para. 7 CITA
because they aim at investing in the medium-term rather than realizing short
term capital gains. A definition of “aiming at making short term profits” is not
provided by law. Some experts argue that only financial instruments (e.g.
shares) allocable to the current assets qualify for generating profits in the short
run, others suggest that financial instruments being held for less than 12
months not to qualify for the sec. 8b CITA exemption.
21.5 Inheritance and Gift Tax
The transfer of shares by way of gift or succession is subject to German inheritance and
gift tax only if one of the following criteria is met:
(i)
The testator, donor, heir, donee, or any other beneficiary has his or her
residence or habitual abode, registered domicile or place of management
in Germany at the time of the transfer or is a German citizen who has not
stayed abroad for more than five years without having a residence in
Germany (in case of a move to the US the relevant period is 10 years
according to the double taxation treaty between Germany and the US);
(ii)
Irrespective of these personal circumstances, the shares are held as
business assets for which a permanent establishment is maintained or a
permanent representative is appointed in Germany; or
(iii)
At the time of succession or donation, the testator or donor held, either
alone or with other closely related persons, directly or indirectly, at least
10 % of the registered share capital of the Company.
The few double taxation treaties on inheritance and gift tax which Germany has entered
into generally provide that German inheritance or gift tax is levied only in case (i) and,
with certain restrictions, in case (ii). Special provisions apply to certain German
expatriates and former German citizens.
21.6 Other Taxes
No German capital transfer tax, VAT, stamp duty, or similar tax is levied on the
acquisition, sale, or other forms of transferring shares. However, an entrepreneur may opt
for value-added tax being levied on a transaction that is normally tax-exempt if the
transaction is executed for the enterprise of another entrepreneur. Net wealth tax
(Vermögenssteuer) is currently not levied in Germany.
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22.
TAXATION IN LUXEMBOURG
The information given in this Prospectus concerning taxation in the Grand Duchy of
Luxembourg is solely of a general nature. The laws in force in Luxembourg as of the date
of this Prospectus form the basis for the presented information. The summary is subject
to any change in law that may take effect after such date. The information does not
represent a comprehensive description of all of the tax considerations that might be
relevant to an investment decision. To give preliminary information is its only purpose. In
neither case should the information be intended to be, nor should it be construed to be,
legal or tax advice. It is a description of the essential material Luxembourg tax
consequences with respect to the shares in the Company (hereafter referred to in this
section as “the shares”) and may not include tax considerations that arise from rules of
general application or that are generally assumed to be known to shareholders. It is
recommended that prospective investors in the shares should consult their professional
advisors with respect to particular circumstances, the effects of state, local or foreign laws
to which they may be subject and as to their tax position.
The residence concept used under the respective headings applies for Luxembourg
income tax assessment purposes only. The present section refers to Luxembourg tax law
and/or concepts only. Thus any references in the following passage to a tax, duty, levy
impost or other charge or withholding of a similar nature relate solely to Luxembourg tax
law and/or concepts. It should be kept in mind that a reference to Luxembourg income tax
encompasses corporate income tax (impôt sur le revenu des collectivités), municipal
business tax (impôt commercial communal), a solidarity surcharge (contribution au fonds
pour l’emploi), as well as personal income tax (impôt sur le revenu) generally. Corporate
shareholders may further be subject to net wealth tax (impôt sur la fortune) as well as
other duties, levies or taxes. Corporate income taxes, municipal business tax, net wealth
tax as well as the solidarity surcharge invariably apply to most corporate taxpayer’s
resident of Luxembourg for tax purposes. For the year 2014, the corporate income tax
rate is 22.47% (including the 7% solidarity surcharge). The municipal business tax rate for
2014 is 6.75% (for a company having its statutory seat in Luxembourg City). As a result,
for the year 2014, a Luxembourg fully-taxable resident company is subject to corporate
income tax and municipal business tax at the current aggregate rate of 29.22% (if the
statutory seat is in Luxembourg City). On the other side individual tax payers are
generally subject to personal income tax (with a top marginal rate of 40%) and the
solidarity surcharge (7 % for the taxable income up to EUR 150,000, 9% for the taxable
income in excess of EUR 150,000 (or EUR 300,000 in case of collective taxation)) (the
top effective marginal rate would thus be 43.6% for the year 2014). Should an individual
taxpayer act in the course of the management of a professional or business undertaking,
municipal business tax may apply under certain circumstances as well
22.1 Taxation of Income Derived from and Capital Gains Realized on the Shares Held by
Luxembourg Residents
22.1.1
Withholding Tax
Dividend payments made to shareholders of the Company are in principle
subject to 15% withholding tax in Luxembourg.
However, based on the article 147 LTL, a tax exemption applies if the following
conditions are met:

The dividends are paid by a Luxembourg company fully subject to tax in
Luxembourg and;

The dividend are paid to
–
a Luxembourg capital company fully subject to tax in Luxembourg,
–
an entity listed in Annex II to EC Parent Subsidiary Directive, or
–
a company resident in a treaty country, subject to a comparable tax
to Corporate Income Tax in Luxembourg and;
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
The parent company owns (or commits to own) a shareholding of at
least 10%, or having an acquisition cost price of at least
EUR 1,200,000, for a period of at least 12 months.
There is no withholding tax in Luxembourg on liquidation proceeds, interest
(save the European Savings Directive Interest) and capital gains.
The Company is responsible for any tax to be withheld at source in Luxembourg
upon payment of dividends to the shareholders under the Shares, having to
withhold it, declare and pay it to the Luxembourg tax authorities.
22.1.2
Individual Holders of Shares
Resident individuals shareholders who receive dividends and other payments
derived from the shares and act in the course of the management of either their
private wealth or their professional / business activity, are subject to income tax
at the progressive ordinary rate (with a top effective marginal rate of currently
43.6% for the year 2014). A tax credit is granted for foreign withholding taxes.
Precondition is that the tax credit does not exceed the corresponding
Luxembourg tax. Under current Luxembourg tax laws, 50% of the gross amount
of dividends received from EU resident companies covered by art. 2 of the
Parent-Subsidiary Directive 90/435/EEC or from non-resident capital companies
resident in a state having concluded a double tax treaty with Luxembourg and
fully liable to a tax which corresponds to Luxembourg’s corporate income tax by
resident individuals is exempt from income tax.
Resident individual shareholders who receive capital gains realized on the
disposal of the shares and who act in the course of the management of their
private wealth are not subject to income tax, unless said capital gains qualify
either as speculative gains or as gains on a substantial participation
(allowances of EUR 50,000 or EUR 100,000, in case of collective taxation,
apply over a period of 10 years). Capital gains are deemed to be speculative
gains and are subject to income tax at ordinary rates (with a top effective
marginal rate of 43.6% for the year 2014) if the shares are disposed of within 6
months after their acquisition or if their disposal precedes their acquisition. A
participation is deemed to be substantial where a resident individual
shareholder holds, either alone or together with his spouse and/or minor
children, directly or indirectly at any time within the 5 years preceding the
disposal, more than 10% of the share capital of the Company. Capital gains
realized on a substantial participation more than 6 months after the acquisition
thereof are subject to income tax according to the half-global rate method, (i.e.
the average rate applicable to the total income is calculated according to
progressive income tax rates and half of the average rate is applied to the
capital gains realized on the substantial participation). The top effective
marginal rate is currently 21.8% for the year 2014. A disposal may include a
sale, an exchange, a contribution or any other kind of alienation of the shares.
Capital gains realized on the disposal of the shares by resident individual
shareholders, who act in the course of their professional / business activity, are
subject to income tax at ordinary rates. Taxable gains are determined as being
the difference between the price for which the shares have been disposed of
and the lower of their cost or book value.
22.1.3
Luxembourg Resident Corporate Holders
A Luxembourg fully-taxable resident company which receives dividends and
other payments derived from the shares has to pay an income tax, unless the
conditions of the participation exemption regime, as described below, are
satisfied. Luxembourg tax laws provide that 50% of the gross amount of
dividends received by a Luxembourg fully-taxable resident company is exempt
from income tax.
The 50% dividend exemption generally applies when the minimum holding
condition of the participation exemption regime is not met.
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Precondition is that the dividends are received from EU resident companies
covered by art. 2 of the Parent-Subsidiary Directive 90/435/EEC or from nonresident capital companies resident in a state having concluded a double tax
treaty with Luxembourg and fully liable to tax which corresponds to
Luxembourg’s corporate income tax. A tax credit is further granted for foreign
withholding taxes, provided it does not exceed the corresponding Luxembourg
tax.
Under the participation exemption regime, dividends derived from the shares by
a Luxembourg fully-taxable resident company may be exempt from income tax
if cumulatively (i) it has held or commits itself to hold the shares for an
uninterrupted period of at least 12 months, (ii) during this uninterrupted period
the shares represent a participation of at least 10% in the share capital of the
Company or a participation of an acquisition price of at least EUR 1,200,000.00
and (iii) the dividend is put at its disposal within such period. Liquidation
proceeds are assimilated to a received dividend and may be exempt under the
same conditions. Any expenses in direct economic relationship with the
dividends received and any value reduction of the shares following the dividend
distribution will not be deductible up to the amount of the dividends exempt.
Shares held through a fiscally transparent entity are considered as being a
direct participation proportionally to the percentage held in the net assets of the
transparent entity.
Capital gains realized by a Luxembourg fully-taxable resident company on the
shares are subject to income tax at ordinary rates, unless the conditions of the
participation exemption regime, as described below, are satisfied. Taxable
gains are determined as being the difference between the price for which the
shares have been disposed of and the lower of their cost or book value.
Under the participation exemption regime, capital gains realized on the shares
by a Luxembourg fully-taxable resident company may be exempt from income
tax if cumulatively (i) it has held or commits itself to hold the shares for an
uninterrupted period of 12 months and (ii) during this uninterrupted period of 12
months the shares represent a participation of at least 10% in the share capital
of the Company or a participation of an acquisition price of at least
EUR 6,000,000.00. Capital gains realized on the shares will remain taxable up
to the aggregate amount of expenses in direct economic relationship with the
shares including any value reduction of the shares that have reduced the
taxable basis of the company prior to the disposal of the shares. Shares held
through a fiscally transparent entity are considered as being a direct
participation proportionally to the percentage held in the net assets of the
transparent entity.
Expenses in direct economic relationship with the participations are tax
deductible.
However, a recapture system exists. Indeed, all the charges (previously)
deducted and related to the exempt income (i.e. dividend or capital gain), if any,
would be recaptured up to the tax exempt income. This results normally in a tax
neutral operation (offset of corresponding carry forward tax losses against the
recaptured income).
In the year 2014,a minimal of EUR 3.210 (including 7% solidarity surcharge) flat
income tax would be levied on all unregulated collective undertakings for which
the sum of financial assets, securities and cash at bank represent more than
90% of total assets.
22.1.4
Tax Exempt Holders of Shares
Holders of Shares who are private asset holding companies governed by the
law of 11 May 2007, undertakings for collective investment subject to the law of
30 March 1988 and/or the law of 20 December 2002 or specialized investment
funds governed by the law of 13 February 2007 are exempt from income tax in
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Luxembourg. Dividends derived from and capital gains realized on the shares
are thus not subject to income tax in their hands.
22.1.5
Taxation of Income Derived from and Capital Gains Realized on the
Shares by Luxembourg Non-residents
Individual shareholders, who are non-residents of Luxembourg and who have
neither a permanent establishment nor a permanent representative in
Luxembourg to which or whom the shares are attributable are not subject to
Luxembourg income tax.
Corporate shareholders which are non-resident but have a permanent
establishment or a permanent representative in Luxembourg, to which the
shares are attributable, have to include any income received on the shares,
including any capital gain realized on the sale, disposal or redemption of
shares, in their taxable income for Luxembourg tax assessment purposes. The
same regulations apply to individuals, acting in the course of the management
of a professional or business undertaking, who have a permanent establishment
or a permanent representative in Luxembourg, to which the shares are
attributable. The difference between the sale, repurchase or redemption price
and the lower of the cost or book value of the shares sold or redeemed forms
the taxable gains.
22.2 Other Taxes
22.2.1
Net Wealth Tax
Luxembourg net wealth tax of 0.5% per year (not applicable for individual
Luxembourg residents) will not be levied on the shares unless (i) the
shareholder is a corporate entity resident in Luxembourg other than an
undertaking for collective investment governed by the amended law of
20 December 2002, a securitization company or fund governed by the law of
22 March 2004, a company subject to the law of 15 June 2004 on venture
capital vehicles, a specialized investment fund governed by the law of
13 February 2007, or a family wealth management company governed by the
law of 11 May 2007, or (ii) the shares are attributable to an enterprise or part
thereof which is carried on through a permanent establishment or a permanent
representative in Luxembourg of a corporate entity. Furthermore, in case of a
Luxembourg fully taxable resident company or a permanent establishment of a
company covered by art. 2 of the amended EU Parent/Subsidiary Directive, or
of a company resident in a state having a tax treaty with Luxembourg, or of a
company resident in the European Economic Area other than an EU Member
State, the shares may be exempt from net wealth tax for a given year, if the
shares represent at the fixing date a participation of at least 10% in the share
capital of the company or a participation of an acquisition price of at least
EUR 1.2 million.
22.2.2
Registration Taxes and Stamp Duties
The issuance of the shares and the disposal of the shares are both not
regulated by a to a Luxembourg registration tax or stamp duty.
22.2.3
Inheritance Tax and Gift Tax
Should an individual holder of shares who is a resident of Luxembourg for tax
purposes die, the shares are included in his or her taxable basis for the price at
the date of inheritance for inheritance tax purposes.
A gift or donation of the shares can be subject to a gift tax; if the gift is recorded
in a Luxembourg notarial deed.
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23.
UNDERWRITING
23.1 Underwriting Agreement
Shortly after the date of this Prospectus inter alia the Company, Mr. YAN Changzai, Alrai
S.à.r.l., BIG BUSINESS GLOBAL HOLDINGS LIMITED with the sole shareholder Mr.
CHOI Siu Hung and ACON Actienbank AG, Heimeranstraße 37, 80339 Munich, Germany
(the “Underwriter”) will enter into an underwriting agreement (the “Underwriting
Agreement”) regarding the offer and the sale of the Offered Shares in the course of the
Offering.
Subject to the fulfillment of certain terms and conditions set out in the Underwriting
Agreement, the Company will agree to offer for subscription 10,000,000 New Shares from
a capital increase of the Company with a notional value of EUR 1.00 per share to the
Underwriter. The Underwriter will agree to subscribe for up to 10,000,000 New Shares at
the issue price (Ausgabebetrag) of EUR 1.00 per share (the “Issue Price”) as follows: the
number of New Shares to be subscribed for by the Underwriter will correspond to the
number of New Shares for which the Underwriter has received valid subscriptions from
investors in the Offering.
To ensure a timely delivery of the shares to the investors, Mr. YAN Changzai and Alrai
S.à.r.l. will provide the Underwriter with 10,000,000 no-par value ordinary bearer shares
each with a notional value of EUR 1.00 and with full dividend rights for the short financial
year 2014 by way of a securities loan free of charge. Against payment of the Offer Price
the investors will receive the number of shares allocated to them by way of book-entry. It
is expected that the Underwriter will subscribe for an equivalent number of New Shares at
the Issue Price on 25 September 2014 to be issued from a capital increase for a
contribution in cash expected to be resolved by an extraordinary general shareholders’
meeting of the Company on 25 September 2014.
After the capital increase has been registered with the commercial register of the
Company and after the allocated shares have been delivered to the investors against
payment of the Offer Price, the Underwriter will pay the difference between the Offer
Price received from the investors and the Issue Price (less agreed commissions and
expenses) to the Company on or around 1 October 2014.
23.2 Securities Loans and Greenshoe Option
With regard to a potential Overallotment and for stabilization measures, 1,500,000
existing no par value ordinary bearer shares from the holdings of BIG BUSINESS
GLOBAL HOLDINGS LIMITED with the sole shareholder Mr. CHOI Siu Hung will be
granted to the Underwriter by way of a securities loan free of charge (the “Overallotment
Shares”).
If and to the extent that Overallotment Shares have been delivered to the investors
against payment of the Offer Price, the Underwriter may use these funds (i) to purchase
shares of the Company on the stock market during the stabilization period or (ii) to
subscribe for new shares of the Company at the Offer Price (less agreed commission) to
be issued from the authorized capital against cash consideration in order to satisfy
retransfer obligations of the Underwriter under the securities loan agreement.
If and to the extent the Greenshoe Option is exercised, the Underwriter will pay the Offer
Price (less agreed commissions and expenses) to the Company.
23.3 Commissions and Fees
For the placement of Offered Shares the Underwriter receives a placement commission
of 4.5% of the generated volume (number of shares time price of shares) from the sale of
the Offered Shares to investors at the Offer Price. The compensation to be paid to ACON
has to be paid plus value-added tax, if and to the extent applicable. The placement
commission is owed by the Company.
No underwriting commission is due since placement by the Underwriter is done on a best
effort basis.
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23.4 Conditions Precedent, Termination
The obligations of the Underwriter under the Underwriting Agreement, in particular in
respect of the subscription and offering of the Offered Shares, will be subject to certain
conditions precedents, in particular that no material adverse change occurred.
The following events constitute such a material adverse change:

since the due dates, which are definitive for the information contained in
the Prospectus, a significant impairment or foreseeable significant
impairment, or a material adverse change in the prospects, consolidated
financial position, or results of operations of the Company or its affiliates
have arisen, which is not mentioned in the Prospectus

a significant change in the management structure of the Company;

the entire or partial suspension of trading on the Frankfurt, London or
New York Stock Ex-change or a promulgation of a general moratorium on
commercial banking activities in Frankfurt, London or New York or not
insignificant disruptions in securities settlement, paying or depository
services in Europe; and

a detrimental change in the financial, political, industrial, economic or
general legal conditions or capital market conditions or currency
exchange rates for the Euro, US-Dollar and/or British Pound, or
significant outbreaks or an escalation of militant or terrorist activities, in
each case in Germany, the United Kingdom or the United States
provided that such circumstances are, in the opinion of the Underwriter, so far-reaching
and serious as to cause the Underwriter to consider it inadvisable or unreasonable or
impracticable to implement or to continue the Offering in view of these circumstances.
The Underwriting Agreement will provide that the Underwriter may terminate the
Underwriting Agreement up to the time of the delivery of the Offered Shares to the
investors, if any of the conditions precedent as defined in the Underwriting Agreement
have not been met at the relevant time, or ceased to apply following its occurrence; such
termination shall be without liability of the Underwriter.
If the Underwriting Agreement is terminated, the obligations of the Underwriter will no
longer apply and the Offering will not take place. In such case, any allotments to investors
will become invalid and investors will have no claim for delivery. Claims relating to any
subscription fees paid and costs incurred by any investor in connection with the
subscription are governed solely by the legal relationship between the investor and the
institution to which the investor submitted its purchase order. Investors who have
engaged in short sales of shares will bear the risk of not being able to fulfil their delivery
obligations in connection with such sale.
23.5 Indemnification
The Company will agree in the Underwriting Agreement to indemnify on first demand the
Underwriter, its affiliated companies and its directors, staff, representatives and
contractors and each company (supposed to) control the Underwriter (in each case,
“Indemnified Person”) from any losses, damages and any claims filed against them,
which the respective Indemnified Person, even by third parties, is exposed to in relation to:

actual or alleged inaccuracies in respect of the guarantees contained in
this Agreement, or

the Prospectus or other documents needed for the performance of the
Underwriting Agreement containing actual or allegedly incorrect,
incomplete or otherwise misleading details within the meaning of sec. 5, 7
and 21 WpPG; or
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
breaches by the Company or any persons acting on their behalf of (i)
obligations under the Underwriting Agreement or (ii) statutory or other
legal provisions in connection with the Underwriting Agreement.
23.6 Selling and Transfer Restrictions
The offering consists of public offerings in Germany and Luxembourg and private
placements outside Germany, Luxembourg and the United States. The shares have not
been and will not be registered under the U.S. Securities Act of 1933, as amended, and
are only being offered outside the United States in reliance on Regulation S under the
Securities Act.
This Prospectus does not constitute an offer, solicitation or invitation to subscribe for
shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not
authorized or to any person to whom it is unlawful to make such offer, solicitation or
invitation. No action has been or will be taken under the requirements of the legislation or
regulations of, or of the legal or regulatory authorities of, any jurisdiction, except for the
filing and/or registration of this Prospectus in Germany and Luxembourg in order to permit
a public offering of the shares and the public distribution of this Prospectus in Germany
and Luxembourg. The distribution of this Prospectus and the Offering of the shares in
certain jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons
who may come into possession of this Prospectus are required by the Company to inform
themselves about, and to observe and comply with, any such restrictions at their own
expense and without any liability of the Company. Persons to whom a copy of this
Prospectus has been issued shall not circulate the same to any other person or
reproduce or otherwise distribute this Prospectus or any information herein for any
purpose whatsoever nor permit or cause the same to occur.
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24.
RECENT DEVELOPMENTS AND OUTLOOK
On 6 June 2014, the shareholders at that time entered into a contribution agreement with
2,041 shares, each of HKD 1.00 (approximately EUR 0.09), to the Company against the
issue of 29,950,000 new no par value ordinary bearer shares in the Company to the
respective shareholders (Einbringungsvertrag). Prior to the contribution agreement, the
Company already held 60% of the shares in Snowbird HK since 8 May 2014. The
contribution agreement and the capital increase by way of contribution in kind
(Sachkapitalerhöhung) was approved by an extraordinary shareholders’ meeting of the
Company on 13 June 2014 and has been registered with the commercial register
(Handelsregister) of the local court (Amtsgericht) of Cologne on 10 July 2014.
Apart from the abovementioned capital increases in kind, from 30 June 2014 until the
date of this Prospectus no significant changes in the financial or trading position of
SNOWBIRD have occurred.
SNOWBIRD’s products are targeted at China's domestic market and the global market.
Therefore, the economic development of the Chinese mainland and other countries
where SNOWBIRD’s products are sold is the central influence on the markets in which
SNOWBIRD operates.
China GDP grew steadily during 2008-2012. In the year 2013, it reached RMB 56.88
trillion, a rise of 7.7%. The disposable income per capita of urban citizens in China
mounted up to RMB 26,955 (EUR 3,203) in 2013 from RMB 15,781 (EUR 1,875) in 2008,
an annual average compound growth rate of 11.30 percent. The rise in disposable
income per capita will influence consumer spending behavior significantly.
SNOWBIRD operates under favorable economic and industry conditions. Down and down
products industry in China has been on strong rising trend. Market size for down, down
garments and down bedding had been growing tremendously at 22.0%, 16.0% and 21.0%
respectively in 2013 as compared to 2012. (Source: National Bureau of Statistics,
Respect Marketing Research Inc., 2013).
SNOWBIRD has been benefited directly from the strong growth at both national level and
industry level. All of SNOWBIRD’s products have recorded significant increase in sales
value over the last three years. Sales increased by 83.59% and 51.65% in FY 2012 and
FY 2013 respectively. The momentum in the sales growth has continued in 2014HY1
whereby sales had increased by 70.97%% in 2014HY1 as compared to the 2013HY1.
The strong sales records have translate into rising net profit as well. Net profit increased
by 93.9% and 33.2% in FY2012 and FY2013 respectively. Net profit in 2014HY1 has
increased by 65.5% as compared to 2013HY1.
The management is optimistic on the economic, industry and business outlook. As
predicted in the Global Economic Prospects of 2014 issued by the World Bank, China
GDP would grow by 7.7% in 2014. As indicated by the National Bureau of Statistic, it is
predicted that the disposable income of urban citizens will exceed RMB 35,000 (EUR
4,159) by 2018. This will create a pleasant business environment for our business.
The new down processing plant which has commenced its operations in September 2013
has boosted the production capacity from 826 tons annually to 4,131 tons annually. This
additional capacity will enable SNOWBIRD to further expand its Down business.
The new sewing plant is expected to commence its operations in the last quarter of 2014.
Upon its completion, it is expected that sewing capacity will be increased from existing
1.89 million pieces annually to 8.19 million pieces annually. This additional capacity will
enable SNOWBIRD to further expand its down jacket, down bedding and non down OEM
business.
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25. FINANCIAL INFORMATION
Table of Contents
Henan Snowbird Enterprise Co., Ltd., People Republic of China (“Snowbird Henan”)
Single Entity Financial Statements for the years ended 31 December 2011, 31 December 2012 and
31 December 2013
A.
STATEMENT OF FINANCIAL POSITION
F-4
B.
STATEMENT OF COMPREHENSIVE INCOME
F-5
C.
STATEMENT OF CHANGES IN EQUITY
F-6
D.
STATEMENT OF CASH FLOWS
F-7
E.
NOTES TO THE FINANCIAL STATEMENTS
F-8
F.
AUDITORS´ REPORT
F-39
Henan Snowbird Enterprise Co., Ltd., People Republic of China (“Snowbird Henan”)
Review Report and Condensed Interim Financial Statements for the first six months period ended
on 30 June 2014 (“H1 2014”)
A.
REVIEW REPORT
F-41
B.
CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION
F-42
C.
CONDENSED INTERIM STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
F-43
D.
CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
F-44
E.
CONDENSED INTERIM STATEMENT OF CASH FLOWS
F-45
F.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
F-46
Snowbird AG, Cologne
Financial Statements for the short fiscal year
ended on 31 December 2012
(International Financial Reporting Standards and International Accounting Standards and
Interpretations as endorsed for application in the EU) - (“IFRS”)
A.
F-66
B.
F-67
C.
F-68
D.
STATEMENT OF CASH FLOWS
F-69
E.
F-70
F.
AUDITORS’ REPORT
F-76
F-1
Single Entity Financial Statements for the financial year
(German Commercial Code) - (Translation of the German version)
A.
BALANCE SHEET (GERMAN COMMERCIAL CODE)
F-78
B.
PROFIT AND LOSS ACCOUNT (GERMAN COMMERCIAL CODE)
F-79
C.
NOTES (GERMAN COMMERCIAL CODE)
F-80
D.
AUDITORS’ OPINION
F-82
Single Entity Financial Statements for the financial year
(International Financial Reporting Standards and International Accounting Standards and
Interpretations as endorsed for application in the EU) - (“IFRS”)
A.
F-84
B.
F-85
C.
F-86
D.
STATEMENTS OF CASH FLOWS
F-87
E.
F-88
F.
AUDITORS’ REPORT
F-94
F-2
HENAN SNOWBIRD ENTERPRISE CO., LTD.
(Incorporated in The People’s Republic of China)
Company No: 410927100009786
SINGLE ENTITY FINANCIAL STATEMENTS
For The Financial Years Ended
31 December 2013, 2012 and 2011
F-3
Company No: 410927100009786
A. STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2013, 2012 AND 2011
2013
EUR’000
2012
EUR’000
2011
EUR’000
5
6
16,982
11
7,016
11
6,269
5
7
1,963
2,026
2,096
18,956
9,053
8,370
10,778
54,774
16,695
3,787
34,821
30,414
3,309
22,368
22,410
82,247
69,022
48,087
101,203
78,075
56,457
11
12
11,059
6,386
11,059
4,361
11,059
2,224
13
14
2,347
47,706
3,344
21,452
4,258
10,751
67,498
40,216
28,292
4,397
5,157
5,465
4,397
5,157
5,465
19,028
8,190
2,090
16,793
8,396
6,596
917
11,185
6,072
4,372
1,071
29,308
32,702
22,700
33,705
37,859
28,165
101,203
78,075
56,457
NOTE
ASSETS
NON-CURRENT ASSETS
Intangible assets
Lease prepayment – land use
rights
CURRENT ASSETS
Inventories
8
9
10
TOTAL ASSETS
EQUITY AND LIABILITIES
EQUITY
Share capital
Statutory reserve
Foreign currency translation
reserve
Retained earnings
TOTAL EQUITY
NON-CURRENT LIABILITY
CURRENT LIABILITIES
Dividend payables
Income tax payable
TOTAL LIABILITIES
TOTAL EQUITY AND
LIABILITIES
15
16
22
15
The annexed notes form an integral part of these financial statements.
F-4
Company No: 410927100009786
B. STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2013, 2012 AND 2011
NOTE
2013
EUR’000
2012
EUR’000
2011
EUR’000
REVENUE
17
136,888
90,263
49,166
COST OF SALES
18
(83,913))
(48,886) )
(26,986)
52,975
41,377
22,180
561
433
GROSS PROFIT
OTHER INCOME
17
1,260
SELLING AND DISTRIBUTION
EXPENSES
19
(9,083))
(8,643) )
(4,489)
ADMINISTRATIVE AND OTHER
EXPENSES
20
(6,108))
(4,026) )
(2,911) )
(824)
(756)
(526)
FINANCE COSTS
PROFIT BEFORE TAXATION
INCOME TAX EXPENSE
PROFIT AFTER TAXATION
38,220
21
(9,941))
28,279
OTHER COMPREHENSIVE INCOME
- Foreign currency translation differences
(997)
28,513
(7,279)
21,234
(914)
14,687
(3,736) )
10,951
2,340
TOTAL COMPREHENSIVE INCOME
27,282
20,320
13,291
ATTRIBUTABLE TO:
OWNERS OF THE COMPANY
27,282
20,320
13,291
Earnings per share (“EPS”)
N/A
N/A
N/A
* - EPS are not applicable, in accordance with relevant PRC regulations, there is no number of shares being accounted for
the paid-in capital.
F-5
Company No: 410927100009786
C. STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2013, 2012 AND 2011
FOREIGN
CURRENCY
NOTE
Balance at 31.12.2010/1.1.2011
SHARE
CAPITAL
EUR’000
STATUTORY
RESERVE
EUR’000
11,059
1,128
TRANSLATION
RESERVE
EUR’000
RETAINED
EARNINGS
EUR’000
TOTAL
EQUITY
EUR’000
1,918
6,967
21,072
Profit for the financial year
Foreign currency translation difference
-
-
2,340
10,951
-
10,951
2,340
Total comprehensive income for the financial year
-
-
2,340
10,951
13,291
-
-
-
(6,071)
-
1,096
-
(1,096)
2,224
4,258
10,751
28,292
Dividend paid
22
Transfer to statutory reserve
Balance as at 31.12.2011/1.1.2012
11,059
(6,071)
-
-
-
(914)
21,234
-
21,234
(914)
-
-
(914)
21,234
20,320
-
-
-
(8,396)
-
2,137
-
(2,137)
4,361
3,344
21,452
40,216
-
(997)
28,279
-
28,279
(997)
27,282
Dividend paid
Balance at 31.12.2012/1.1.2013
22
11,059
-
-
-
(997)
28,279
-
2,025
-
(2,025)
6,386
2,347
47,706
Balance at 31.12.2013
11,059
(8,396)
-
67,498
F-6
Company No: 410927100009786
D. STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2013, 2012 AND 2011
NOTE
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments for:Depreciation of property, plant and equipment
Plant and machinery written off
Amortisation of land use rights
Amortisation of intangible assets
Interest expense
Interest income
2013
EUR’000
2012
EUR’000
2011
EUR’000
38,220
28,513
14,687
1,095
1
46
1
824
(83)
45
1
756
(101)
564
41
526
(81)
40,104
(6,991)
(19,953)
2,235
29,870
(478)
(12,453)
5,608
15,737
(2,050)
(11,216)
4,888
15,395
83
(824)
(8,768)
22,547
101
(756)
(7,433)
7,359
81
(526)
(2,983)
NET CASH FROM OPERATING ACTIVITIES
5,886
14,459
3,931
CASH FLOWS FOR INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Acquisition of intangible assets
Lease prepayment for land use rights
(11,102)
(1)
-
(1,463)
(7)
-
(469)
(5)
-
NET CASH FOR INVESTING ACTIVITIES
(11,103)
(1,470)
(474)
Increase in inventories
Increase in receivables and prepayments
Increase in payables and accruals
CASH FROM OPERATIONS
Interest received
Interest paid
Income tax paid
CASH FLOWS FOR FINANCING ACTIVITIES
Proceeds from issuance of shares
Net proceeds from bank borrowings
Dividends paid
22
NET CASH FOR FINANCING ACTIVITIES
834
(8,396)
656
-
1,916
(6,072)
578
(3,200)
(7,562)
(4,156)
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS
(12,779)
8,833
835
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE FINANCIAL YEAR
30,414
22,410
19,680
Effects of currency translation differences
(940)
(829)
1,895
16,695
30,414
22,410
CASH AND CASH EQUIVALENTS AT END OF THE
FINANCIAL YEAR
10
(2,622)
F-7
Company No: 410927100009786
E. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL
YEARS ENDED 31 DECEMBER 2013, 2012 AND 2011
1.
GENERAL INFORMATION
Henan Snowbird Enterprise Co., Ltd (“Snowbird Henan”) is a limited liability company and is
incorporated under the laws of The People’s Republic of China (the “PRC”). The domicile of
Snowbird Henan is the PRC. The registered office, which is also the principal place of business is
at Taiqian Industrial Park, Puyang City, Henan Province, China.
The financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the EU, so as to give a true and fair view of the financial position
as of 31 December 2013, 2012 and 2011 and of their financial performance and cash flows for the
financial years then ended.
The financial statements of Snowbird Henan were prepared as a single entity and no consolidated
financial result was presented.
The figures presented in the financial statements have been rounded to the nearest EURO
(“EUR”) thousand.
The financial statements were authorised for issue by the Board of Directors in accordance with a
resolution of the directors dated 3 March 2014.
2.
PRINCIPAL ACTIVITIES
Snowbird Henan is principally engaged in manufacturing of down, down clothing, down bedding
and non-down OEM clothing. There have been no significant changes in the nature of these
activities during the financial years ended 31 December 2013, 2012 and 2011 (“Relevant Financial
Years”).
3.
BASIS OF PREPARATION
The financial statements are the first financial statements in which Snowbird Henan adopts
International Financial Reporting Standards (“IFRS”). Snowbird Henan has adopted all EU IFRS
that were effective before 1 January 2014.
The financial statements of Snowbird Henan are prepared under the historical cost convention and
modified to include other bases of valuation as disclosed in other sections under significant
accounting policies, and in compliance with IFRS.
(a) During the current financial year, Snowbird Henan has adopted the following new accounting
standards and interpretations (including the consequential amendments, if any):IFRSs and IC Interpretations (Including The Consequential Amendments)
IFRS 13 Fair Value Measurements
IAS 19 (2011) Employee Benefits
IAS 27 (2011) Separate Financial Statements
Amendments to IFRS 7: Disclosures – Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 1 Presentation of Financial Statements – Presentation of Items of Other
Comprehensive Income
Annual Improvements to IFRSs 2009 – 2011 Cycle
F-8
The adoption of the above accounting standards and interpretations (including the
consequential amendments) did not have any material impact on Snowbird Henan’s financial
statements.
(b) Snowbird Henan has not applied in advance the following accounting standards and
interpretations (including the consequential amendments, if any) that have been issued by the
International Accounting Standards Board (IASB) but are not yet mandatory for the current
financial year:IFRSs and IC Interpretations (Including The
Consequential Amendments)
Effective Date
IFRS 9 (2009) Financial Instruments
1 January 2015
No
IFRS 9 (2010) Financial Instruments
1 January 2015
No
IFRS 14 Regulatory Deferred Accounts
1 January 2016
No
1 January 2015
No
1 January 2014
Yes
1 July 2014
Yes
1 January 2014
Yes
1 January 2014
Yes
1 January 2014
Yes
1 January 2014
No
Amendments to IFRS 9 and IFRS 7: Mandatory
Effective Date of IFRS 9 and Transition
Disclosures
Amendments to IFRS 10, IFRS 12 and IAS 27:
Investment Entities
Amendments to IAS 19: Defined Benefit Plans –
Employee Contributions
Amendments to IAS 32 Financial Instruments:
Presentation – Offsetting Financial Assets and
Amendments to IAS 36 Impairment of Assets –
Recoverable Amount Disclosures for NonFinancial Assets
Amendments to IAS 39: Novation of Derivatives
and Continuation of Hedge Accounting
IFRIC 21 Levies
Endorsed by EU until
31 December 2014
The directors anticipate that the adoption of the above IFRSs and interpretations do not have a
material financial impact on the financial statements. It will only impact the content of disclosures
presented in the financial statements.
4.
SIGNIFICANT ACCOUNTING POLICIES
(a)
Critical Accounting Estimates And Judgements
Estimates and judgements are continually evaluated by the directors and management and
are based on historical experience and other factors including expectations of future events
that are believed to be reasonable under the circumstances. Apart from information disclosed
elsewhere in these financial statements, the following summarises estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year and significant judgements
made in the process of applying Snowbird Henan’s accounting policies:(i)
Impairment of Receivables
Snowbird Henan makes allowance for impairment based on an assessment of the
recoverability of trade and other receivables. Allowance is applied to trade and other
receivables where events or changes in circumstances indicate that the balances
may not be collectible. The identification of doubtful receivables requires the use of
judgement and estimates. Where the expectation is different from the original
estimate, such difference will impact the carrying amount of trade and other
F-9
receivables and the allowance for impairment in the financial year in which such
estimate has been changed.
(ii)
Depreciation of Property, Plant and Equipment
The costs of equipment are depreciated on a straight-line basis over their economic
useful lives estimated to be within 5-20 years, net of residual value. The carrying
amounts of these assets of Snowbird Henan were EUR16,981,638, EUR7,015,848
and EUR6,268,713 as at 31 December 2013, 2012 and 2011 respectively. Changes
in the expected level of usage and technological developments could impact the
economic useful lives and the residual values of these assets, therefore future
depreciation could be revised.
(iii)
Net Realisable Value of Inventories
Net realisable value of inventories is the estimated selling price in the ordinary course
of business, less estimated costs of completion and selling expenses. These
estimates are based on the current market condition and the historical experience of
selling products of similar nature. It could change significantly as a result of
competitor actions in response to severe industry cycles. Management reassess the
estimations at the end of the reporting period.
(iv)
Income Taxes
Snowbird Henan is subject to income taxes in the PRC. There are many transactions
and calculations for which the ultimate tax determination is uncertain during the
ordinary course of business. Snowbird Henan recognises liabilities for anticipated tax
issues based on estimation of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the income tax and deferred income tax
provisions in the year in which such determination is made.
(v)
Impairment of Intangible Assets
Snowbird Henan determines whether intangible asset is impaired at least on an
annual basis. This requires an estimation of the value-in-use of the cash generating
units (“CGU”) to which intangible assets are allocated. Estimating a value-in-use
amount requires management to make an estimate of the expected future cash flows
from the CGU and also to choose a suitable discount rate in order to calculate the
present value of those cash flows. The carrying amount of intangible assets as at 31
December 2013, 2012 and 2011 were EUR10,755, EUR10,814 and EUR4,743
respectively. Further details are disclosed in Note 6.
(b)
Functional And Foreign Currencies
(i)
Functional and Presentation Currency
The financial statements of Snowbird Henan are presented in the currency of the
primary economic environment in which the entity operates (the functional
currency).
Snowbird Henan conducts its business predominately in the PRC and hence its
functional currency is in Renminbi (“RMB”).
F-10
The financial statements of Snowbird Henan are presented in EUR for purpose of
the intended IPO numbers are converted to EUR, and therefore the financial
statements has been translated from RMB to EUR at the following rate:
31 December 2013
31 December 2012
31 December 2011
Period end rates
EUR 1.00 = RMB 8.4146
EUR 1.00 = RMB 8.3378
EUR 1.00 = RMB 8.2339
Average rates
EUR 1.00 = RMB 8.2270
EUR 1.00 = RMB 8.1171
EUR 1.00 = RMB 9.0026
The results and financial positions in functional currency are translated into the
presentation currency for purpose of presentation in the listing prospectus of its
intended ultimate legal parent as follows:
(a) Assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet;
(b) Income and expenses for each income statement are translated at average
exchange rate (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transaction); and
(c) All resulting exchange differences are recognized in translation reserve, a
separate component of equity.
(ii)
Foreign Currency Transactions
Transactions in foreign currencies are translated at foreign exchange rates ruling
at the dates of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the end of the reporting period are translated into RMB at
foreign exchange rates ruling at those dates. Non-monetary assets and liabilities
measured at cost in a foreign currency are translated using exchange rates that
existed when the values were determined. Foreign exchange differences arising
from translation are recognised in profit or loss.
(c)
Property, Plant and Equipment
(i)
Recognition and measurement
Items of equipment are stated at cost less accumulated depreciation and any
accumulated impairment losses. The cost of an asset comprises its purchase price
and any directly attributable costs of bringing the asset to the location and condition
for its intended use.
(ii)
Depreciation
Depreciation is provided on the straight-line basis so as to write off the cost of
property, plant and equipment net of the estimated residual values over their
estimated useful lives as follows:
Building
Plant and machinery
Office equipment
Motor vehicles
Estimated
Useful Lives
Estimated Residual Value
as a Percentage of Cost
20 years
10 years
5 years
5 years
10%
10%
10%
10%
Depreciation methods, useful lives and residual values are reviewed, and adjusted as
appropriate, at each reporting date.
F-11
(iii)
Subsequent Cost
Cost includes expenditure that is directly attributable to the acquisition of the asset.
The cost of replacing part of an item of equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within
the part will flow to Snowbird Henan and its cost can be measured reliably. The costs
of the day-to-day servicing of the equipment are recognised in profit or loss when
incurred.
Subsequent costs are included in the asset’s carrying amount or recognised as a
separate asset, as appropriate, only when the cost is incurred and it is probable that
the future economic benefits associated with the asset will flow to Snowbird Henan
and the cost of the asset can be measured reliably. The carrying amount of parts that
are replaced is derecognised. The costs of the day-to-day servicing of equipment are
recognised in profit or loss as incurred. Cost also comprises the initial estimate of
dismantling and removing the asset and restoring the site on which it is located for
which Snowbird Henan is obligated to incur when the asset is acquired, if applicable.
Fully depreciated assets are retained in the financial statements until they are no
longer in use. The gain or loss on disposal or retirement of an item of property, plant
equipment recognised in profit or loss is the difference between the net sale proceeds
and the carrying amount of the relevant asset.
(d)
Lease Prepayment
Lease prepayments represent prepayments of land use rights paid to the various PRC
land bureaus. Lease prepayments are carried at cost less amortisation and accumulated
impairment losses (see note 4(s)(b)). Amortisation is recognised in profit or loss on a
straight-line basis over the period of the land use rights, which are 50 years from the
respective dates that they are available for use.
(e)
Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined on the
weighted average method and comprises all cost of purchases, costs of conversion and other
costs incurred in bringing the inventories to their present location and condition. In the case
of manufactured inventories and work in progress, cost includes direct labor and an
appropriate share of production overheads based on normal operating capacity. Net
realisable value is the estimated selling price in the ordinary course of business less the
estimated cost of completion and the estimated cost necessary to make the sale.
When inventories are sold, the carrying amount of those inventories is recognised as an
expense in the period in which the related revenue is recognised. The amount of any writedown of inventories to net realisable value and all losses of inventories are recognised as an
expense in the period the write-down or loss occurs. The amount of any reversal of any writedown of inventories, arising from an increase in net realisable value, is recognised in profit or
loss in the period in which the reversal occurs.
(f)
Intangible Assets (other than goodwill)
Intangible assets acquired separately are measured on initial recognition at cost. The
useful lives of intangible assets are assessed to be either finite or indefinite. Intangible
assets with finite lives are subsequently amortised over the economic useful life and
assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation period and the amortisation method for an intangible asset with
a finite useful life are reviewed at the end of each reporting and adjusted, if appropriate.
Intangible assets with indefinite useful lives are not amortised but are tested for
impairment annually and whenever there is an indication that they may be impaired.
F-12
(g)
Trade and Other Receivables
Trade and other receivables are recognised initially at fair value and subsequently at
amortised cost using the effective interest method, less any impairment losses. An allowance
for impairment of receivables is established when there is objective evidence that
Snowbird Henan will not be able to collect all amounts due according to the original terms
of the receivables.
(h)
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, bank balances, deposits pledged with
financial institutions, bank overdrafts and short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
(i)
Equity Instruments
Paid-in capital is classified as equity. Incremental costs directly attributable to the additional
paid-in capital or options are shown in equity as a deduction, net of tax, from proceeds.
Dividends on shares are recognised as liabilities when approved for appropriation.
(j)
Statutory Reserve
In accordance with relevant PRC regulations, Snowbird Henan is required to maintain certain
statutory reserve by appropriating from the profit after taxation in accordance with the relevant
laws and regulations in the PRC and Articles of Association of Snowbird Henan before
declaration or payment of dividends. The reserves form part of the equity of Snowbird Henan.
The statutory reserve fund can be used to increase the registered capital and eliminate future
losses of Snowbird Henan, but it cannot be distributed to shareholders except in the event of
a solvent liquidation of Snowbird Henan.
The appropriation to the statutory common surplus reserve represents 10% of the profit after
taxation of Snowbird Henan. In accordance with the laws and regulations in the PRC, the
appropriations to statutory common reserve cease when the balances of the reserve reach
50% of the registered capital of Snowbird Henan. The statutory reserve is not distributable by
way of dividends.
The statutory reserve can only be used to set off against losses or to increase the capital of
Snowbird Henan. However such balance of statutory reserve must be maintained at a
minimum of 25% of the share capital of Snowbird Henan after such usages.
(k)
Liabilities and Interest-Bearing Liabilities
Trade and other payables and term loan are classified as financial liabilities measured at
amortised cost, and are recognised initially at fair value and subsequently at amortised cost
using the effective interest method. Interest-bearing liabilities are recognised initially at costs
less attributable transaction costs. Subsequent to initial recognition, interest-bearing liabilities
are stated at amortised cost with any difference between cost and redemption value being
recognised in profit or loss over the period of the borrowings on effective interest basis.
(l)
Financial Instruments
Financial Assets
Financial assets within the scope of IAS 39 Financial Instruments: Recognition and
Measurement are classified as either financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments, or available-for-sale financial assets, as
F-13
appropriate. Financial assets are recognised in the statements of financial position when, and
only when, Snowbird Henan becomes a party to the contractual provisions of the financial
instrument.
All regular way purchases and sales of financial assets are recognised on the trade date i.e.
the date that Snowbird Henan commits to purchase the asset or sell the asset. Regular way
purchases or sales are purchases or sales of financial assets that require delivery of assets
within the period generally established by regulation or convention in the marketplace
concerned.
(i)
Loans and Receivables
Non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market are classified as loans and receivables. Such assets are
carried at amortised cost using the effective interest method. Gains and losses are
recognised in profit or loss when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
(ii)
Available-For-Sale Financial Assets
Available-for-sale financial assets are those non-derivative financial assets that are
designated as available-for-sale or are not classified in any of the three preceding
categories. After initial recognition, available-for-sale financial assets are measured
at fair value with gains or losses being recognised in the fair value adjustment
reserve in equity until the investment is derecognised or until the investment is
determined to be impaired at which time the cumulative gain or loss previously
reported in equity is included in the profit or loss. The fair value of investments that
are actively traded in organised financial markets is determined by reference to the
relevant Exchange’s quoted market bid prices at the close of business in the end of
the reporting period. For investments where there is no active market, fair value is
determined using valuation techniques. Such techniques include using recent arm’s
length market transactions by reference to the current market value of another
instrument, discounted cash flow analysis and option pricing models.
Financial liabilities within the scope of IAS 39 are classified as either financial liabilities
measured at amortised costs such as interest-bearing liabilities and trade and other payables,
or financial liabilities designated at fair value through profit or loss.
Financial liabilities are derecognised if Snowbird Henan’s obligations specified in the contract
expire or are discharged or cancelled.
(m)
Effective Interest Method
The effective interest method is a method of calculating the amortised cost of a financial
instrument and of allocating interest income or expense over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash receipts and
payments (including all fees on points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial instruments or where appropriate, a shorter period. Income or
expense is recognised on an effective interest basis for debt instruments.
F-14
(n)
Related Parties
A party is related to Snowbird Henan if:
(i) directly, or indirectly through one or more intermediaries, the party controls, is controlled
by, or is under common control with, Snowbird Henan; or has an interest in Snowbird
Henan that gives it significant influence over Snowbird Henan or has joint control over
Snowbird Henan;
(ii) the party is an associate of Snowbird Henan;
(iii) the party is a joint venture in which Snowbird Henan is a venturer;
(iv) the party is a member of the key management personnel of Snowbird Henan;
(v) the party is a close member of the family of any individual referred to in (i) or (iv);
(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or
for which significant voting power in such entity resides with, directly or indirectly, any
individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan for the benefit of employees of Snowbird
Henan, or of any entity that is a related party of Snowbird Henan.
Amounts owing by/(to) related parties are classified as loans and receivables, and financial
liabilities respectively at amortised cost.
Key Management Personnel
Key management personnel are those persons having the authority and responsibility for
planning, directing and controlling the activities of Snowbird Henan.
(o)
Derecognition of Financial Assets and Liabilities
(i)
Financial Assets
Financial assets are derecognised from the end of the reporting period when
Snowbird Henan has transferred substantially all risks and rewards of ownership.
(ii)
A financial liability is derecognised from the end of the reporting period when the
obligation under the liability is discharged, cancelled or expired.
(p)
Revenue Recognition
Provided it is probable that the economic benefits will flow to Snowbird Henan and the
revenue and costs, if applicable, can be measured reliably, revenue is recognised in the profit
or loss as follows:
(i)
Sale of Goods
Revenue is recognised when goods are delivered to the customers’ premises or
collected by the customers at Snowbird Henan’s premises which is taken to be the
point in time when the customer has accepted the goods and the related risks and
rewards of ownership.
F-15
(ii)
Interest Income
Interest income is recognised on a time proportion basis using the effective interest
method.
(iii)
Government grants
Grants that compensate Snowbird Henan for expenses incurred are recognised in
profit or loss as other income on a systematic basis in the same periods in which the
expenses are recognised.
(q)
Employee Benefits
Snowbird Henan participates in the national pension schemes as defined by the laws of the
countries in which it has operations. Contributions to national pension schemes are
recognised as an expense in the period in which the related service is performed. Companies
incorporated in the PRC are required to provide certain staff pension benefits for their
employees under existing PRC legislation. Pension contributions are provided at rates
stipulated by the PRC legislation and are contributed to a pension fund managed by
government agencies, which are responsible for paying pensions to the retired employees.
These benefits are accounted for on an accrual basis and charged to the profit or loss when
incurred.
These national pension schemes are dealt with as payments to defined contribution plans
where Snowbird Henan’s obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan.
(r)
Provisions
Provisions are recognised when Snowbird Henan has a present obligation as a result of a
past event where it is probable that it will result in an outflow of economic benefits that can be
reasonably estimated.
(s)
Impairment
Impairment of Financial Assets
A financial asset is considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that asset.
(i)
Assets Carried at Amortised Cost
An impairment loss in respect of a financial asset measured at amortised cost is
calculated as the difference between its carrying amount, and the present value of
the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual
basis. The remaining financial assets are assessed collectively in Snowbird Henan
that share similar credit risk characteristics. All impairment losses are recognised in
the profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event
occurring after the impairment loss was recognised. For financial assets measured at
amortised cost, the reversal is recognised in the profit or loss.
(ii)
Available-For-Sale Financial Assets
If an available-for-sale financial asset is impaired, an amount comprising the
difference between its cost (net of any principal payment and amortisation) and its
F-16
current fair value, less any impairment loss previously recognised in the profit or loss,
is transferred from equity to the profit or loss. Reversals in respect of equity
instruments classified as available-for-sale are not recognised in the profit or loss.
Reversals of impairment losses on debt instruments are reversed through the profit
or loss, if the increase in fair value of the instruments can be objectively related to an
event occurring after impairment loss was recognised in the profit or loss.
Impairment of Non-Financial Assets
The carrying amounts of Snowbird Henan’s non-financial assets are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such
indication exists, the assets’ recoverable amounts are estimated. An impairment loss is
recognised if the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. A cash-generating unit is the smallest identifiable asset Snowbird Henan
that generates cash flows that largely are independent from other assets and Snowbird
Henan.
Impairment losses are recognised in the profit or loss. Impairment losses recognised in
respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to the units and then to reduce the carrying amount of the other assets in
the unit on a pro rata basis. The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset or cash-generating unit.
Impairment losses recognised in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if
there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of accumulated
depreciation or amortisation, if no impairment loss had been recognised.
(t)
Finance Costs
Interest expense and similar charges are expensed to the profit or loss in the period in which
they are incurred.
The interest component of the interest-bearing liabilities is recognised in the profit or loss
using the effective interest method.
(u)
Income Tax
Income tax on the results for the year comprises current tax. Income tax is recognised in the
profit or loss except to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the end of the reporting period, and any adjustment to tax
payable in respect of previous financial years.
(v)
Value Added Tax (“VAT”)
Snowbird Henan’s sale of goods in the PRC is subject to VAT at the applicable tax rate of
17% for the PRC domestic sales. Input VAT on purchases can be deducted from output VAT.
The net amount of VAT recoverable from, or payable to, the tax authority is included as part
of “other receivables” or “other payables” in the statements of financial position.
F-17
Revenue, expenses and assets are recognised net of the amount of VAT except:
(w)
(i)
where the VAT incurred on a purchase of assets or services is not recoverable from
the tax authority, in which case the VAT is recognised as part of the cost of
acquisition of the asset or as part of the expense item as applicable; and
(ii)
receivables and payables that are stated with the amount of VAT included.
Research And Development (“R&D”) Costs
Research and development costs are expensed in the period in which it is incurred.
Snowbird Henan does not have any R&D expenses to be capitalised.
(x)
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision-maker. The chief operating decision-makers are
responsible for allocating resources and assessing performance of the operating
segments. The Chief operative decision maker is the Chief Executive Officer of Snowbird
Henan.
The management information of Snowbird Henan bases its decisions on the internal
reporting on down, down clothing, down bedding and non-down OEM clothing, which are
Snowbird Henan’s four business segments.
Segment information is presented in respect of Snowbird Henan’s business segment. The
primary format, business segment, is based on Snowbird Henan’s management and
internal reporting structure. In presenting information on the basis of the business segment,
segment revenue and segment assets are based on the nature of the products provided
by Snowbird Henan.
Segment information is presented in a manner consistent with the internal reporting
provided to the management of Snowbird Henan.
The accounting policies Snowbird Henan uses for segment reporting under IFRS 8 are the
same as those used in its financial statements.
F-18
5.
PROPERTY, PLANT AND EQUIPMENT
Building
EUR’000
Building under
construction
EUR’000
2,963
3
436
122
306
(436)
4,341
23
-
130
135
-
92
2
-
7,648
469
-
185
8
271
8
6
478
At 31
December
2011
Additions
Exchange
differences
3,587
-
1,412
4,635
12
273
38
100
1
8,595
1,463
(1)
(106)
At 31
December
2012
Additions
Transferred
Written off
Exchange
differences
3,543
12
5,458
-
100
8
-
9,952
11,102
(1)
Cost
At 31
December
2010
Additions
Transferred
Exchange
differences
At 31
December
2013
Accumulated
Depreciation
At 31
December
2010
Depreciation
Exchange
differences
At 31
December
2011/
1 January 2012
Depreciation
Exchange
differences
At 31
December
2012/
1 January 2013
Depreciation
Exchange
differences
At 31
December
2013
(44)
-
1,412
6,317
(5,458)
-
(32)
(13)
Plant and
Motor
Office
machinery
vehicle equipment
Total
EUR’000 EUR’000 EUR’000
EUR’000
(58)
4,589
4,715
(1)
(42)
(3)
308
50
(3)
(1)
(91)
8,981
2,258
9,261
355
107
787
143
-
769
380
21
25
32
16
1,609
564
62
-
84
3
4
153
1,233
424
49
50
52
18
2,326
656
(2)
(1)
97
56
69
15
(2)
(1)
992
164
-
(16)
-
1,140
321
(18)
1,443
-
-
(27)
1,630
703
(30)
2,303
151
83
20,962
(46)
2,936
1,095
(51)
3,980
F-19
Building
EUR’000
Building
under
construction
EUR’000
Net Book Value
At 31 December 2011
2,595
-
3,402
224
48
6,269
At 31 December 2012
2,403
1,412
2,959
211
31
7,016
At 31 December 2013
7,538
2,258
6,958
204
24
16,982
Plant and
Motor
Office
machinery
vehicle equipment
Total
EUR’000 EUR’000 EUR’000
EUR’000
All property, plant and equipment held by Snowbird Henan are located in the PRC. They are
recorded at cost less accumulated depreciation.
The buildings and certain items of plant and equipment of Snowbird Henan with a total carrying
amount of EUR 3,765,235, EUR 4,264,478 and EUR 4,788,773 for the financial years ended
31 December 2013, 2012 and 2011 respectively, have been pledged to bank as security for term
loan facilities granted to Snowbird Henan (Note 15).
6.
INTANGIBLE ASSETS
Accounting
software
EUR’000
Trademark
EUR’000
Total
EUR’000
Cost
At 31 December 2011
Additions
7
5
-
5
7
At 31 December 2012
Additions
7
1
5
-
12
1
At 31 December 2013
8
5
13
Accumulated amortisation
At 31 December 2011
Amortisation
1
-
1
At 31 December 2012
Amortisation
1
1
-
1
1
At 31 December 2013
2
-
2
Net Book Value
At 31 December 2011
-
5
5
At 31 December 2012
6
5
11
At 31 December 2013
6
5
11
Snowbird Henan registered its trademark “Xueniao” under Community Trade Marks on
15 February 2012 with a 10 year licence period.
F-20
Snowbird Henan acquired the rights for using the Kingdee accounting software during 2012 with a
licence period of 10 years.
7.
LEASE PREPAYMENT - LAND USE RIGHTS
2013
EUR’000
2012
EUR’000
2011
EUR’000
Cost
At 1 January
Additions
Exchange differences
2,229
(20)
2,257
(28)
2,124
13
At 31 December
2,209
2,229
2,257
At 1 January
Amortisation
Exchange differences
203
46
(3)
161
45
(3)
109
41
11
At 31 December
246
203
161
2,026
2,096
Net Book Value
At 31 December
1,963
Lease prepayment – land use rights represent cost of land use rights in respect of land located in
the PRC with a lease period of 50 years when granted.
8.
INVENTORIES
Raw materials
Work-in-progress
Finished goods
2013
EUR’000
2012
EUR’000
2011
EUR’000
5,837
112
4,829
10,778
2,748
82
957
3,787
1,073
82
2,154
3,309
None of the inventories were stated at net realisable value.
F-21
9.
RECEIVABLES AND PREPAYMENTS
Trade receivables
Other receivables
Prepayments
2013
EUR’000
2012
EUR’000
2011
EUR’000
47,867
1,032
5,875
31,229
3,592
22,054
314
54,774
34,821
22,368
(a) Snowbird Henan’s normal trade credit terms range from 30 to 90 days.
(b) As at 31 December, prepayments comprised:
(i)
(ii)
(iii)
Lease prepayment for acquiring land use rights for new factory location amounting to
EUR 2,245,000, EUR 593,000 and EUR 314,000 for the financial years 2013, 2012 and
2011 respectively; and
Amount of EUR 3,512,000 and EUR 2,998,000 as advance payment to suppliers for
purchase of stock for financial years 2013 and 2012 (2011: nil); and
Professional fee prepaid to lawyer and auditor relates to IPO exercise amounting
EUR 119,000.
(c) As at 31 December 2013, other receivables comprise subsidy granted from government authority.
10.
CASH AND CASH EQUIVALENTS
Cash at bank
Cash on hand
2013
EUR’000
2012
EUR’000
2011
EUR’000
16,688
7
16,695
30,393
21
30,414
22,374
36
22,410
Cash and bank balances are denominated in the following currencies:
Chinese Renminbi
US Dollar *
2013
EUR’000
2012
EUR’000
2011
EUR’000
16,391
304
16,695
30,414
30,414
22,410
22,410
*Snowbird Henan maintains US Dollar account with balances amounting to RMB 0.32 and RMB 0.31 as at 31
December 2012 and 2011 respectively.
The Chinese Renminbi is not freely convertible into foreign currencies. Under the PRC Foreign
Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign
Exchange Regulations Snowbird Henan is permitted to exchange Chinese Renminbi for foreign
currencies through banks that are authorised to conduct foreign exchange business.
F-22
11.
PAID-IN CAPITAL
Snowbird Henan was incorporated in 4th March 2001 with registered and paid-in share capital of
EUR 1,223,000. The movements in the paid-in capital are as follows:-
At date of incorporation
th
Issuance of new ordinary shares on 27 February 2004
th
Issuance of new ordinary shares on 10 August 2005
th
Issuance of new ordinary shares on 18 January 2008
th
Issuance of new ordinary shares on 4 May 2010
EUR’000
1,223
2,039
1,019
3,679
3,099
11,059
As at 31 December 2013, 2012 and 2011, the shareholders of Snowbird Henan are:-
Yan Changzai
Henan Agricultural Comprehensive Development Co., Ltd.
12.
EUR’000
9,530
1,529
11,059
STATUTORY RESERVE
The statutory reserve of Snowbird Henan amounted to EUR 6,386,081 as at 31 December 2013
(2012: EUR 4,361,512, 2011: EUR 2,223,756).
13.
FOREIGN CURRENCY TRANSLATION RESERVE (OTHER COMPREHENSIVE INCOME)
Foreign currency translation reserve represents the foreign currency translation difference arising
from the translation of the financial statements of Snowbird Henan from its functional currency to
the presentation currency and is the component of other comprehensive income.
14.
RETAINED EARNINGS
The retained earnings reserve comprises the cumulative net gains and losses recognized in
Snowbird Henan’s profit or loss.
F-23
15.
LOANS AND BORROWINGS
Current portion:
- Not later than one
year
Non-current portion:
- Later than one year
and not later than
two years
- Later than two years
but not later than five
years
- Later than five years
2013
EUR’000
2012
EUR’000
2011
EUR’000
8,190
6,596
4,372
-
-
-
4,397
-
-
-
5,157
5,465
4,397
5,157
5,465
12,587
11,753
9,837
(a) Snowbird Henan’s interest-bearing bank loans are secured by buildings and certain items of plant
and machinery (Note 5) and appointed a third party financial guarantor from the Bank and bear
effective interest rates of 6.45%, 6.72% and 5.96% per annum for the financial years ended 31
December 2013, 2012 and 2011 respectively. Finance costs relating to these loans amounted to
EUR 824,000, EUR 756,000 and EUR 526,000 for the financial years ended 31 December 2013,
2012 and 2011 respectively.
(b) As at 31 December 2013, secured short-term loans and borrowings of EUR 8,190,000 (2012:
EUR 4,677,000, 2011: Nil) are guaranteed by Mr. YAN Changzai, the director of Henan Snowbird
Enterprise Co., Ltd. and a major shareholder.
(c) As at 31 December 2013, current portion of loans and borrowings consist of Export Commercial
Invoice Discounting (ECID) amounting to EUR 1,179,000 (2012: nil, 2011: nil).
(d) The repayment terms of the term loans are as follows:Term loan 1 at floating rate
(2011- 6.31%; 2010- 5.61%)
EUR 2,286,000 is repayable upon maturity on 13 October 2011.
Term loan 2 at floating rate
(2011- 6.31%; 2010- 5.61%)
(2012- 6.54%; 2011- 6.31%)
(2012- 6.54%; 2011- 6.31%)
(2012- 6.54%)
EUR 1,079,000 is repayable upon maturity on 21 March 2013.
(2012- 6.54%)
EUR 1,919,000 is repayable upon maturity on 23 August 2013.
(2012- 6.54%)
(2012- 6.54%)
F-24
16.
(2013- 6.26%; 2012- 6.54%;
2011- 6.31%; 2010- 5.61%; )
(2013- 6.26%)
EUR 2,258,000 is repayable upon maturity on 23 May 2014.
(2013- 6.26%)
(2013- 6.26%)
EUR 2,377,000 is repayable upon maturity on 25 September
2014.
ECID 1 at fixed rate
(2013- 7.80%)
EUR 119,000 is repayable upon maturity on 28 March 2014.
(2013- 3.28%)
EUR 1,060,000 is repayable upon maturity on 17 March 2014.
PAYABLES AND ACCRUALS
2013
EUR’000
2012
EUR’000
2011
EUR’000
5,145
7,499
4,219
1,297
868
5,717
7,469
2,508
702
397
4,632
4,117
1,893
426
117
19,028
16,793
11,185
Trade payables
Sales rebate payables
Salary payable
VAT payable
Other payables and accruals
The normal trade credit term granted to Snowbird Henan is 30 to 60 days.
The trade and other payables balances are denominated in Chinese Renminbi.
17.
REVENUE AND OTHER INCOME
Snowbird Henan’s revenue is as follows:
Revenue:
Sale of goods
Other income:
Interest income
Government subsidy
Other income
2013
EUR’000
2012
EUR’000
2011
EUR’000
136,888
90,263
49,166
83
1,158
19
101
456
4
81
350
2
1,260
561
433
F-25
18.
COST OF SALES
Cost of sales comprise purchasing materials, labor costs for personnel employed in production,
depreciation of non-current assets used for production purposes, factory utilities, maintenance
charges and other production overheads.
The following table shows a breakdown of costs of sales for the period under review for each
category:
2013
2012
2011
EUR’000
EUR’000
EUR’000
71,447
38,829
19,811
Material costs
8,847
7,338
5,580
Wages and related costs
Production overheads
809
674
561
- Salaries and related costs
- Depreciation of property, plant and
878
422
362
equipment
360
262
147
- Others
1,015
603
80
Export levy
19.
Total self-production cost
Sales supplement taxes
83,356
557
48,128
758
26,541
445
Cost of goods sold
83,913
48,886
26,986
2013
EUR’000
2012
EUR’000
2011
EUR’000
7,670
560
853
7,672
349
622
3,765
235
489
9,083
8,643
4,489
SELLING AND DISTRIBUTION EXPENSES
Sales rebate
Salaries and related costs
Others
20.
ADMINISTRATIVE AND OTHER EXPENSES
Depreciation of property, plant and
equipment
R&D expenses
Exchange loss
Others
2013
EUR’000
2012
EUR’000
2011
EUR’000
3,544
2,553
1,813
218
670
1
46
597
1,032
233
247
1
45
166
781
202
210
41
33
612
6,108
4,026
2,911
F-26
21.
INCOME TAX EXPENSE
Current tax:
- for the financial year
- underprovision in prior period
2013
EUR’000
2012
EUR’000
2011
EUR’000
9,765
176
7,143
136
3,652
84
9,941
7,279
3,736
The reconciliation between tax expense and accounting profit at applicable tax rates is as follows:
2013
EUR’000
2012
EUR’000
2011
EUR’000
38,220
28,513
14,687
Tax at applicable tax rate of 25%
Tax effect of non-deductible
expenses
Deferred tax unrecognised for the
year
Others
Underprovision in prior period
9,555
7,128
3,672
119
-
-
91
176
36
(21)
136
Income tax
9,941
7,279
(20)
84
3,736
The provision for PRC income tax is calculated based on statutory income tax at a rate of 25% for
years ended 31 December 2013, 2012 and 2011 in accordance with the relevant PRC income tax
rules and regulations for the relevant periods. Taxes are not related to other comprehensive
income.
22.
DIVIDENDS
Dividends disclosed represent dividends on ordinary shares declared by Snowbird Henan to its
equity holders.
2013
2012
2011
EUR’000
EUR’000
EUR’000
Dividend declared
23.
-
8,396
6,071
SEGMENT INFORMATION
BUSINESS SEGMENT
Snowbird Henan’s primary format for reporting segment information is business segments, with
each segment representing a product category. Snowbird Henan’s business segments are
organized into four operating segments:
(a)
Design, manufacture and sale of down clothing
(b)
Produce and sale of down
(c)
Design, manufacture and sale of down bedding
(d)
Non-down OEM clothing
F-27
Down
clothing
EUR’000
Down
EUR’000
Down
bedding
EUR’000
Non-down
OEM
clothing
EUR’000
Total
EUR’000
71,040
7,891
8,034
136,888
23,529
4,250
2,705
52,975
2013
Revenue
External revenue
Results
Segment results
49,923
22,491
Other income
Selling and distribution
expenses
Administrative expenses
Finance costs
Income tax expense
(9,083) )
(6,108) )
(824) )
(9,941) )
28,279
Assets
Segment assets
1,260
32,080
38,698
4,272
4,099
Unallocated assets:
Prepayment to acquire
land use rights
Lease prepayment –
Land use right
Government subsidy
receivables
Professional fee prepaid
Cash and bank balances
2,245
1,963
1,032
119
16,695
Total assets
Liabilities
Segment liabilities
79,149
101,203
10,573
5,983
1,795
677
Unallocated liabilities:
Income tax payable
19,028
12,587
2,090
33,705
Other segment items
Additions to non-current
assets other than financial
instruments:
- Property, plant and
equipment
4,049
5,761
640
652
11,102
F-28
Non-down
OEM
clothing
EUR’000
Down
clothing
EUR’000
Down
EUR’000
Down
bedding
EUR’000
Revenue
External revenue
40,378
35,807
7,558
6,520
90,263
Results
Segment results
20,389
14,146
4,604
2,238
41,377
Total
EUR’000
2012
Other income
expenses
Finance costs
Income tax expense
561
(8,643))
(4,026)
(756))
(7,279)
Assets
Segment assets
21,234
21,108
18,539
4,248
1,147
45,042
Unallocated assets:
land use rights
Land use right
2,026
30,414
Total assets
78,075
Liabilities
Segment liabilities
593
10,560
3,699
1,861
673
16,793
Dividend payable
Income tax payable
8,396
11,753
917
Total liabilities
37,859
Other segment items
instruments:
equipment
654
580
123
106
1,463
F-29
Down
EUR’000
Down
bedding
EUR’000
Non-down
OEM
clothing
EUR’000
Total
EUR’000
31,732
8,931
4,950
3,553
49,166
15,807
2,639
2,889
845
22,180
Down
clothing
EUR’000
Revenue
External revenue
Results
Segment results
2011
Other income
expenses
Finance costs
Income tax expense
(4,489)
(2,911)
(526)
(3,736)
10,951
Assets
Segment assets
433
19,897
7,366
3,400
974
31,637
Unallocated assets:
land use rights
Land use right
2,096
22,410
Total assets
56,457
Liabilities
Segment liabilities
314
8,150
1,284
1,239
511
Dividend payable
Income tax payable
6,072
9,837
1,071
Total liabilities
Other segment items
instruments:
equipment
11,185
28,165
303
85
47
34
469
F-30
GEOGRAPHICAL INFORMATION
PRC
Taiwan
Hong Kong
Russia
REVENUE
2012
2011
EUR’000
EUR’000
61,247
43,617
29,016
5,549
90,263
49,166
2013
EUR’000
82,318
43,638
5,037
5,895
136,888
M AJOR CUSTOMERS
Revenue from major customers, with revenue equal to or more than 10% of total revenue,
amounted to EUR 22,362,148, EUR 35,095,531 and EUR 11,760,069 for the financial years ended
31 December 2013, 2012 and 2011, arising from sales of the down garments and high rated down
segments.
24.
SIGNIFICANT RELATED PARTY TRANSACTIONS
Snowbird Henan has related party relationships with its directors, key management, entities of
which the directors and/or by management have significant financial interest.
(a) Key Management Personnel Compensation
Directors’ remuneration:- salaries and bonuses
- social security insurance
Other key management
personnel:- salaries and bonuses
2013
EUR’000
2012
EUR’000
2011
EUR’000
213
1
177
1
137
1
214
178
138
436
2
229
2
147
1
438
231
148
652
409
286
(b) Key management/ director of Snowbird Henan
Related party
Mr. Yan Changzai
Mr. QIU Duoxiang
Mr. CHEN Yijun
Mr. YAN Zhaorui
Mr. LAM Kok Weng
Relationship with Snowbird Henan
Snowbird Henan’s chairman
Chief Operating officer
Deputy General Manager
Deputy General Manager
Chief Financial officer
F-31
25.
CAPITAL COMMITMENT
2013
EUR’000
2012
EUR’000
2011
EUR’000
5,241
4,311
-
Approved and contracted for:Purchase of property, plant and
equipment
26.
FINANCIAL INSTRUMENTS
Snowbird Henan’s activities are exposed to a variety of market risks (including foreign currency
risk, interest rate risk and price risk), credit risk, liquidity and cash flow risks, and capital risk
management. Snowbird Henan’s overall financial risk management policy focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on Snowbird
Henan’s financial performance.
(a)
Financial Risk Management Policies
Snowbird Henan’s financial risk management policy seeks to ensure that adequate
financial resources are available for the development of Snowbird Henan’s businesses
whilst managing its market, credit, liquidity and cash flow risks. Snowbird Henan’s policies
in respect of the major areas of treasury activity are as follows:(i)
Market Risk
(aa) Foreign Currency Risk
Snowbird Henan is exposed to foreign currency risk on transactions and
balances that are denominated in currencies other than Chinese
Renminbi. The currency giving rise to this risk is primarily United States
Dollar. Foreign currency risk is monitored closely on an ongoing basis to
ensure that the net exposure is at an acceptable level.
Foreign currency exposure
United States
Dollar
EUR’000
2013
Financial assets
Trade receivables
2012
Financial assets
Trade receivables
12,704
6,183
2011
Financial assets
Trade receivables
1,150
F-32
Foreign currency risk sensitivity analysis
The following table details the sensitivity analysis to a reasonably possible
change in the foreign currencies at the end of the reporting period, with all
other variables held constant:A 100 basis points (“bp”) strengthening of the Chinese Renminbi against
the United States Dollar at the end of the reporting period would have
increased/(decreased) profit after taxation by approximately EUR95,277,
EUR46,376 and EUR8,629 for the financial years ended 31 December
2013, 2012 and 2011 respectively. A 100 bp weakening in the foreign
currencies would have had an equal but opposite effect on the profit after
taxation. This assumes that all other variables remain constant.
(bb) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. Snowbird Henan’s exposure to interest rate risk arises mainly from
interest-bearing financial assets and liabilities. Snowbird Henan’s policy is
to obtain the most favourable interest rates available. Any surplus funds of
Snowbird Henan will be placed with licensed financial institutions to
generate interest income.
Information relating to Snowbird Henan’s exposure to the interest rate risk
of the financial liabilities is disclosed in Note 15 to the financial statements.
Interest rate risk sensitivity analysis
change in the interest rates at the end of the reporting period, with all
other variables held constant:2013
Increase/
(Decrease)
EUR’000
2012
Increase/
(Decrease)
EUR’000
2011
Increase/
(Decrease)
EUR’000
31
(31)
140
(140)
94
(94)
31
(31)
140
(140)
94
(94)
Effect on profit
after taxation
Increase of 100 bp
Decrease of 100 bp
Effect on equity
Increase of 100 bp
Decrease of 100 bp
(cc) Market Price Risk
Market price risk is the risk that the value of a financial instrument will
fluctuate due to changes in market prices whether those changes are
caused by factors specific to the individual security or its issuer of factors
affecting all securities traded in the market.
F-33
Snowbird Henan does not hold any quoted or marketable financial
instrument, hence is not exposed to any movement in market prices.
(ii)
Credit Risk
Credit risk is the risk of financial loss to Snowbird Henan if counterparty fails to
meet its contractual obligations. Credit risk of Snowbird Henan arises primarily
from Snowbird Henan’s trade receivables.
Snowbird Henan trades only with recognised, creditworthy third parties. It is
Snowbird Henan’s policy that all customers who wish to trade on credit terms are
subject to credit verification procedures. In addition, receivable balances are
monitored on an ongoing basis with the result that Snowbird Henan’s exposure to
bad debt is not significant. As Snowbird Henan does not hold any collateral, the
maximum exposure to credit risk is represented by the total carrying amounts of
these financial assets at the end of the reporting period reduced by the effects of
any netting arrangements with counterparties.
Snowbird Henan’s exposure to credit risk is influenced mainly by the individual
characteristics of each customer. Snowbird Henan typically gives the existing
customers credit terms ranging from 30 to 60 days. In deciding whether credit
shall be extended, Snowbird Henan will take into consideration factors such as the
relationship with the customer, its payment history and credit worthiness. In
relation to new customers, the sales and marketing department will prepare credit
proposals for approval by the general manager.
(aa)
Credit risk concentration profile
Snowbird Henan’s concentration of credit risk relates to the following
major customers:-
Number of receivables
As a % of total trade
receivables
2013
2012
2011
2
4
3
34%
51%
36%
There is no impairment loss recognised in the profit or loss for the
reporting periods as all the receivables were subsequently settled or
within credit term.
(bb)
Exposure to credit risk
As Snowbird Henan does not hold any collateral, the maximum exposure
to credit risk is represented by the carrying amount of the financial assets
at the end of the reporting period.
The exposure of credit risk for trade receivables by geographical region is
as follows:2013
2012
2011
EUR’000
EUR’000
EUR’000
PRC
Taiwan
Hong Kong
35,163
11,129
1,575
25,046
6,183
47,867
31,229
20,904
1,150
-
22,054
F-34
(cc)
Ageing analysis
Snowbird Henan establishes an allowance for impairment that represents
its estimate of incurred losses in respect of the trade receivables as
appropriate. The main components of this allowance are a specific loss
component that relates to individually significant exposures, and a
collective loss component established for Snowbird Henan of similar
assets in respect of losses that have been incurred but not yet identified.
The collective loss allowance is determined based on historical data of
payment statistics for similar financial assets. No allowance for specific or
collective impairment was made based on past experience.
The ageing analysis of these trade receivables is as follows:2013
EUR’000
Not past due and
not impaired
Past due but not
impaired:
- less than 3 months
- between 3 to 6
months
- more than 6 months
2012
EUR’000
2011
EUR’000
46,856
30,511
22,054
1,011
718
47,867
31,229
22,054
At the end of the reporting period, trade receivables that are individually
impaired were those in significant financial difficulties and have defaulted on
payments. These receivables are not secured by any collateral or credit
enhancement.
The collective impairment allowance is determined based on estimated
irrecoverable amounts from the sale of goods, determined by reference to
past default experience.
Trade receivables that are past due but not impaired
Snowbird Henan believes that no impairment allowance is necessary in
respect of these trade receivables. They are substantially companies with
good collection track record and no recent history of default.
Trade receivables that are neither past due nor impaired
All of the trade receivables are neither past due nor impaired. These are
regular customers that have been transacting with Snowbird Henan.
Snowbird Henan uses ageing analysis to monitor the credit quality of the
trade receivables. Any receivables having significant balances past due or
more than 90 days, which are deemed to have higher credit risk, are
monitored individually.
(iii)
Liquidity Risk
Liquidity risk arises mainly from general funding and business activities. Snowbird
Henan practises prudent risk management by regularly monitoring their current
F-35
and expected liquidity requirements and maintaining sufficient cash balances and
the availability of funding through certain committed credit facilities
The following table sets out the maturity profile of the financial liabilities at the end
of the reporting period based on contractual undiscounted cash flows (including
interest payments computed using contractual rates or, if floating, based on the
rates at the end of the reporting period):Weighted
average
effective
rate
%
2013
Loans and
borrowings
Trade and
other
payables
2012
Loans and
borrowings
Trade and
other
payables
2011
Loans and
borrowings
Trade and
other
payables
(b)
Carrying
amounts
EUR’000
Contractual
cash flows
EUR’000
Within 1
year
EUR’000
1–5
years
EUR’000
6.26
12,587
13,370
8,746
4,624
-
19,028
31,615
19,028
32,398
19,028
27,774
4,624
6.54
11,753
12,995
7,222
5,773
-
16,793
16,793
16,793
28,546
29,788
24,015
5,773
9,837
11,380
4,941
6,439
11,185
11,185
11,185
21,022
22,565
16,116
6.31
-
-
6,439
Capital Risk Management
Snowbird Henan manages its capital to ensure that Snowbird Henan will be able to
continue as a going concern whilst maximising the return to shareholders through an
optimum of the debt and equity structure.
The capital structure of Snowbird Henan consists of net debts, which include borrowings,
cash and cash equivalents and equity attributable to equity holders of Snowbird Henan,
comprising issued capital, reserves and retained earnings.
Snowbird Henan manages its capital based on debt-to-equity ratio. Snowbird Henan’s
strategies were unchanged from the previous financial year. The debt-to-equity ratio is
calculated as net debt divided by total equity. Net debt is calculated as borrowings plus
trade and other payables less cash and cash equivalents.
F-36
The debt-to-equity ratios of Snowbird Henan at the end of the reporting periods were as
follows:2013
EUR’000
2012
EUR’000
2011
EUR’000
12,587
11,753
9,837
8,396
6,072
19,028
16,793
11,185
31,615
36,942
27,094
(16,695)
(30,414)
(22,410)
14,920
6,258
4,684
Total equity
67,498
40,216
28,292
Net debt to
0.221
0.162
0.166
Total
borrowings
Dividend
payable
Trade and
other
payables
Less: Cash
and bank
balances
Net debt
-
equity ratio
(c)
Classification of Financial Instruments
2013
EUR’000
2012
EUR’000
2011
EUR’000
47,867
16,695
31,229
30,414
22,054
22,410
64,562
61,643
44,464
5,145
5,717
4,632
13,883
12,587
11,076
8,396
11,753
6,553
6,072
9,837
31,615
36,942
27,094
Financial Assets
Loan and
Receivables
Trade receivables
Other Financial
Liabilities
Trade payables
Other payables and
accruals
Dividend payable
Term loan
(d)
Fair Value Estimation
All financial instruments are carried at amounts not materially different from their fair
values as at the end of the reporting period.
F-37
Fair value estimates are made at a specific point in time and based on relevant market
information and information about the financial instruments. These estimates are
subjective in nature, involve uncertainties and matters of significant judgement and
therefore cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.
(e)
Fair Value Hierarchy
As at 31 December 2013, 2012 and 2011 there were no financial instruments carried at fair
values.
27.
AVERAGE HEADCOUNTS & EMPLOYEES BENEFITS
Office of General Manager
Sales/Marketing Department
Administrative Department
Production Department
YEAR ENDED 31 DECEMBER
2013
2012
4
4
17
11
133
113
1,457
1,438
2011
3
11
112
1,388
Total
1,611
1,514
Social security insurance
YEAR ENDED 31 DECEMBER
2013
2012
EUR’000
EUR’000
12,517
9,933
1,243
981
13,760
28.
1,566
10,914
2011
EUR’000
7,410
780
8,190
SUBSEQUENT EVENTS
There are no significant non-adjusting events or any significant events to report between the
reporting date and the date of preparation of these financial statements.
China, 3 March 2014
Director:
Signature
_________________
Mr. YAN Changzai
F-38
Company No: 410927100009786
F. AUDITORS’ REPORT
YEARS ENDED 31 DECEMBER 2013, 2012 AND 2011
AUDITORS’ REPORT (Translation of the German version)
To Henan Snowbird Enterprise CO., Ltd, Henan:
We have audited the annual financial statements – comprising the balance sheet, statement of profit and
loss, statement of comprehensive income, statement of changes in equity, cash flow statement and notes
– together with the bookkeeping system of Henan Snowbird Enterprise CO., Ltd, for the business year
from 01. January to the 31. December 2011, 2012 and 2013. The maintenance of the books and records
and the preparation of the annual financial statements in accordance with IFRS as adopted by the EU are
the responsibility of Snowbird Henan’s management. Our responsibility is to express an opinion on the
annual financial statements, together with the bookkeeping system, based on our audit.
We conducted our audit of the annual financial statements in accordance with German generally accepted
standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of
Public Auditors in Germany – IDW). Those standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net assets, financial position and results of
operations in the annual financial statements in accordance with the applicable financial reporting
framework are detected with reasonable assurance. Knowledge of the business activities and the
economic and legal environment of Snowbird Henan and expectations as to possible misstatements are
taken into account in the determination of audit procedures. The effectiveness of the accounting-related
internal control system and the evidence supporting the disclosures in the books and records and the
annual financial statements are examined primarily on a test basis within the framework of the audit. The
audit includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the annual financial statements. We believe that our audit
provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the annual financial statements comply with IFRS as
adopted by the EU and give a true and fair view of the net assets, financial position and results of
operations of Snowbird Henan in accordance with these requirements.
Munich, 13. May 2014
Crowe Kleeberg GmbH
WIRTSCHAFTSPRÜFUNGSGESELLSCHAFT
Prechtl
Wirtschaftsprüfer
(German Public Auditor)
Schmidt
Wirtschaftsprüfer
F-39
Company No: 410927100009786
REVIEW REPORT AND
CONDENSED INTERIM FINANCIAL STATEMENTS
For The Financial Period From 1 January 2014 To 30 June 2014
F-40
Company No: 410927100009786
A. REVIEW REPORT
FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2014
REVIEW REPORT
To Henan Snowbird Enterprise Co., Limited, Henan, China:
We have reviewed the condensed interim financial statements, comprising the statement of financial
position, the statement of comprehensive income, the statement of changes in equity, the statement of
cash flows and notes to the condensed interim financial statements, of Henan Snowbird Enterprise Co.,
Limited, for the period from 1 January 2014 to 30 June 2014. The preparation of the condensed interim
financial statements in accordance with those IFRS applicable to interim financial reporting, as adopted by
the EU, is the responsibility of the company's management. Our responsibility is to issue a report on the
condensed interim financial statements based on our review.
We conducted our review of the condensed interim financial statements in accordance with the German
generally accepted standards for the review of financial statements promulgated by the Institut der
Wirtschaftsprüfer (Institute of Public Auditors in Germany – IDW). Those standards require that we plan and
perform the review such that we can preclude through critical evaluation, with a certain level of assurance,
that the condensed interim financial statements have not been prepared, in material respects, in
accordance with the IFRS applicable to interim financial reporting as adopted by the EU. A review is limited
primarily to inquirier of company employees and analytical assessments and therefore does not provide the
assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not
performed a financial statement audit, we cannot issue an auditor's report.
Based on our review no matters have come to our attention that cause us to believe that the condensed
interim financial statements have not been prepared, in material respects, in accordance with those IFRS
applicable to interim financial reporting as adopted by the EU.
Munich, 1 August 2014
Crowe Kleeberg GmbH
Wirtschaftsprüfungsgesellschaft
Prechtl
Wirtschaftsprüfer
Schmidt
Wirtschaftsprüfer
F-41
Company No: 410927100009786
B. CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION AT
30 JUNE 2014
NOTE
30.6.2014
EUR’000
AUDITED
31.12.2013
EUR’000
18,189
10
4,188
16,982
11
1,963
22,387
18,956
19,850
60,600
13,590
10,778
54,774
16,695
94,040
82,247
116,427
101,203
11,059
6,386
1,289
63,936
11,059
6,386
2,347
47,706
82,670
67,498
4,404
4,397
4,404
4,397
16,148
1,190
8,093
3,922
19,028
8,190
2,090
29,353
29,308
33,757
33,705
116.427
101,203
ASSETS
NON-CURRENT ASSETS
Intangible assets
Lease prepayment – land use rights
CURRENT ASSETS
Inventories
6
7
8
9
10
11
TOTAL ASSETS
EQUITY AND LIABILITIES
EQUITY
Share capital
Statutory reserve
Foreign currency translation reserve
Retained earnings
12
13
14
TOTAL EQUITY
NON-CURRENT LIABILITY
CURRENT LIABILITIES
Dividend payable
Income tax payable
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
15
16
15
F-42
Company No: 410927100009786
C. CONDENSED INTERIM STATEMENTS OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL PERIODS
ENDED 30 JUNE 2014 AND 2013
NOTE
30.6.2014
EUR’000
30.6.2013
EUR’000
REVENUE
17
78,038
45,643
COST OF SALES
18
(51,989)
(28,371)
26,049
17,272
426
153
GROSS PROFIT
OTHER INCOME
17
19
(1,630)
(1,115)
20
(2,894)
(2,715)
(393)
(383)
FINANCE COSTS
PROFIT BEFORE TAXATION
INCOME TAX EXPENSE
21,558
21
13,212
(5,328)
(3,408)
PROFIT AFTER TAXATION
16,230
9,804
OTHER COMPREHENSIVE INCOME
(1,058)
1,676
15,172
11,480
PROFIT AFTER TAXATION/
ATTRIBUTABLE TO:
OWNERS OF THE COMPANY
15,172
11,480
F-43
Company No: 410927100009786
D. CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY
NOTE
Balance at
31.12.2012/1.1.2013
Profit after
taxation/Total
comprehensive
income for the
financial period
Profit after
taxation/Total
comprehensive
income for the
financial period
Transfer to statutory
reserve
Profit after
taxation/Total
comprehensive
income for the
financial period
SHARE
CAPITAL
STATUTORY
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
EUR’000
FOREIGN
CURRENCY
RESERVE
EUR’000
EUR’000
EUR’000
EUR’000
11,059
4,361
3,344
21,452
40,216
-
-
1,676
9,804
11,480
5,020
31,256
51,696
(2,673)
18,475
15,802
-
11,059
4,361
-
-
-
2,025
-
(2,025)
11,059
6,386
2,347
47,706
67,498
(1,058)
16,230
15,172
1,289
63,936
82,670
-
-
11,059
6,386
F-44
Company No: 410927100009786
E. CONDENSED INTERIM STATEMENT OF CASH FLOWS
FOR THE FINANCIAL PERIODS ENDED 30 JUNE 2014 AND 2013
1.1.2014
NOTE
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments for:Depreciation of property, plant and equipment
Interest expense
Interest income
1.1.2013
TO
TO
30.6.2014
EUR’000
30.6.2013
EUR’000
21,558
13,212
655
26
1
393
(34)
430
23
1
383
(49)
Increase in inventories
Decrease in receivables and prepayments
Increase/(decrease) in payables and accruals
22,599
(9,072)
(8,074)
(1,690)
14,000
(11,633)
7,014
(5,990)
CASH FROM OPERATIONS
Interest received
Interest paid
Income tax paid
3,763
34
(393)
(3,496)
3,391
49
(383)
(1,994)
NET CASH FROM OPERATING ACTIVITIES
(92)
1,063
CASH FLOWS FOR INVESTING ACTIVITY
Acquisition of property, plant and equipment
(1,838)
(9,041)
NET CASH FOR INVESTING ACTIVITY
(1,838)
(9,041)
CASH FLOWS (FOR)/FROM FINANCING ACTIVITY
Net proceeds from bank borrowings
Dividend paid
(91)
-
2,896
(8,396)
NET CASH (FOR)/FROM FINANCING ACTIVITY
(91)
(5,500)
NET INCREASE IN CASH AND CASH EQUIVALENTS
(2,021)
(13,478)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE
FINANCIAL PERIODS
16,695
30,414
(1,084)
1,352
13,590
18,288
Effects of currency translation differences
CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL
PERIODS
11
F-45
Company No: 410927100009786
F. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
1.
GENERAL INFORMATION
Henan Snowbird Enterprise Co., Ltd. (“Snowbird Henan”) is a limited liability company and is
incorporated under the laws of The People’s Republic of China (the “PRC”). The domicile of
Snowbird Henan is the PRC. The registered office, which is also the principal place of business is
at Taiqian Industrial Park, Puyang City, Henan Province, China.
The financial statements are expressed in Euro ("EUR").
The financial statements were authorised for issue by the Board of Directors in accordance with a
resolution of the directors dated 1 August 2014
2.
PRINCIPAL ACTIVITIES
Snowbird Henan is principally engaged in the manufacturing of down, down clothing, down
bedding and non-down OEM clothing. There have been no significant changes in the nature of
these activities during the financial period ended 30 June 2014.
3.
FINANCIAL INSTRUMENTS
Snowbird Henan’s activities are exposed to a variety of market risks (including foreign currency
risk, interest rate risk and price risk), credit risk, liquidity and cash flow risks, and capital risk
management. Snowbird Henan’s overall financial risk management policy focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on Snowbird
Henan’s financial performance.
(a)
Financial Risk Management Policies
Snowbird Henan’s financial risk management policy seeks to ensure that adequate
financial resources are available for the development of Snowbird Henan’s businesses
whilst managing its market, credit, liquidity and cash flow risks. Snowbird Henan’s policies
in respect of the major areas of treasury activity are as follows:
(i)
Market Risk
(aa)
Foreign Currency Risk
Snowbird Henan is exposed to foreign currency risk on transactions and
balances that are denominated in currencies other than Chinese
Renminbi. The currency giving rise to this risk is primarily United States
Dollar. Foreign currency risk is monitored closely on an ongoing basis to
ensure that the net exposure is at an acceptable level.
F-46
Foreign currency exposure
United States
Dollar
EUR’000
30.6.2014
Financial assets
Trade receivables
9,560
31.12.2013
Financial assets
Trade receivables
12,704
Foreign currency risk sensitivity analysis
change in the foreign currencies at the end of the reporting period, with all
other variables held constant:
A 1% strengthening of the United States Dollar against the Euro at the
end of the reporting period would have increased/(decreased) profit after
taxation by approximately EUR71,542 and EUR96,637 for the financial
periods ended 30 June 2014 and 31 December 2013 respectively. A 1%
weakening in the foreign currencies would have had an equal but opposite
effect on the profit after taxation. This assumes that all other variables
remain constant.
(bb)
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. Snowbird Henan’s exposure to interest rate risk arises mainly from
interest-bearing financial assets and liabilities. Snowbird Henan’s policy is
to obtain the most favourable interest rates available. Any surplus funds of
Snowbird Henan will be placed with licensed financial institutions to
generate interest income.
Information relating to Snowbird Henan’s exposure to the interest rate risk
of the financial liabilities is disclosed in Note 3(a)(iii) to the financial
statements.
F-47
Interest rate risk sensitivity analysis
change in the interest rates at the end of the reporting period, with all
other variables held constant:
30.6.2014
Increase/
(Decrease)
EUR’000
31.12.2013
Increase/
(Decrease)
EUR’000
8
(8)
31
(31)
8
(8)
31
(31)
Effect on profit after taxation
Increase of 100 bp
Decrease of 100 bp
Effect on equity
Increase of 100 bp
Decrease of 100 bp
(cc)
Market Price Risk
Market price risk is the risk that the value of a financial instrument will
fluctuate due to changes in market prices whether those changes are
caused by factors specific to the individual security or its issuer of factors
affecting all securities traded in the market.
Snowbird Henan does not hold any quoted or marketable financial
instrument, hence is not exposed to any movement in market prices.
(ii)
Credit Risk
Credit risk is the risk of financial loss to Snowbird Henan if counterparty fails to
meet its contractual obligations. Credit risk of Snowbird Henan arises primarily
from Snowbird Henan’s trade receivables.
Snowbird Henan trades only with recognised, creditworthy third parties. It is
Snowbird Henan’s policy that all customers who wish to trade on credit terms are
subject to credit verification procedures. In addition, receivable balances are
monitored on an ongoing basis with the result that Snowbird Henan’s exposure to
bad debt is not significant. As Snowbird Henan does not hold any collateral, the
maximum exposure to credit risk is represented by the total carrying amounts of
these financial assets at the end of the reporting period reduced by the effects of
any netting arrangements with counterparties.
Snowbird Henan’s exposure to credit risk is influenced mainly by the individual
characteristics of each customer. Snowbird Henan typically gives the existing
customers credit terms ranging from 30 to 90 days. In deciding whether credit
shall be extended, Snowbird Henan will take into consideration factors such as the
relationship with the customer, its payment history and credit worthiness. In
relation to new customers, the sales and marketing department will prepare credit
proposals for approval by the general manager.
F-48
(aa)
Credit risk concentration profile
Snowbird Henan’s concentration of credit risk relates to the following
major customers:
30.6.2014
31.12.2013
Number of receivables
As a % of total trade
receivables
3
2
49%
34%
There is no impairment loss recognised in the profit or loss for the
reporting periods as all the receivables were subsequently settled or
within credit term.
(bb)
Exposure to credit risk
As Snowbird Henan does not hold any collateral, the maximum exposure
to credit risk is represented by the carrying amount of the financial assets
at the end of the reporting period.
The exposure of credit risk for trade receivables by geographical region is
as follows:
30.6.2014
31.12.2013
EUR’000
EUR’000
PRC
Taiwan
Hong Kong
(cc)
43,599
9,441
119
35,163
11,129
1,575
53,159
47,867
Ageing analysis
Snowbird Henan establishes an allowance for impairment that represents
its estimate of incurred losses in respect of the trade receivables as
appropriate. The main components of this allowance are a specific loss
component that relates to individually significant exposures, and a
collective loss component established for Company of similar assets in
respect of losses that have been incurred but not yet identified. The
collective loss allowance is determined based on historical data of
payment statistics for similar financial assets. No allowance for specific or
collective impairment was made based on past experience.
The ageing analysis of these trade receivables is as follows:
Not past due and not impaired
Past due but not impaired:
- less than 3 months
- between 3 to 6 months
- more than 6 months
30.6.2014
EUR’000
52,918
31.12.2013
EUR’000
46,856
241
53,159
1,011
47,867
F-49
At the end of the reporting period, trade receivables that are individually
impaired were those in significant financial difficulties and have defaulted on
payments. These receivables are not secured by any collateral or credit
enhancement.
The collective impairment allowance is determined based on estimated
irrecoverable amounts from the sale of goods, determined by reference to
past default experience.
Trade receivables that are past due but not impaired
Snowbird Henan believes that no impairment allowance is necessary in
respect of these trade receivables. They are substantially companies with
good collection track record and no recent history of default.
Trade receivables that are neither past due nor impaired
All of the trade receivables are neither past due nor impaired. These are
regular customers that have been transacting with Snowbird Henan.
Snowbird Henan uses ageing analysis to monitor the credit quality of the
trade receivables. Any receivables having significant balances past due or
more than 90 days, which are deemed to have higher credit risk, are
monitored individually.
(iii)
Liquidity Risk
Liquidity risk arises mainly from general funding and business activities. Snowbird
Henan practises prudent risk management by regularly monitoring their current
and expected liquidity requirements and maintaining sufficient cash balances and
the availability of funding through certain committed credit facilities
The following table sets out the maturity profile of the financial liabilities at the end
of the reporting period based on contractual undiscounted cash flows (including
interest payments computed using contractual rates or, if floating, based on the
rates at the end of the reporting period):
Weighted
average
effective
rate
%
30.6.2014
Loans and
borrowings
Trade and
other
payables
31.12.2013
Loans and
borrowings
Trade and
other
payables
5.90
Carrying
amounts
EUR’000
Contractual
cash flows
EUR’000
Within 1
year
EUR’000
1–5
years
EUR’000
12,497
13,067
8,383
4,684
16,148
16,148
16,148
28,645
29,215
24,531
4,684
12,587
13,370
8,746
4,624
19,028
19,028
19,028
31,615
32,398
27,774
-
6.26
-
4,624
F-50
(b)
Capital Risk Management
Snowbird Henan manages its capital to ensure that Snowbird Henan will be able to
continue as a going concern whilst maximising the return to shareholders through an
optimum of the debt and equity structure.
The capital structure of Snowbird Henan consists of net debts, which include borrowings,
cash and cash equivalents and equity attributable to equity holders of Snowbird Henan,
comprising issued capital, reserves and retained earnings.
Snowbird Henan manages its capital based on debt-to-equity ratio. Snowbird Henan’s
strategies were unchanged from the previous financial year. The debt-to-equity ratio is
calculated as net debt divided by total equity. Net debt is calculated as borrowings plus
trade and other payables less cash and cash equivalents.
The debt-to-equity ratios of Snowbird Henan at the end of the reporting periods were as
follows:
30.6.2014
EUR’000
31.12.2013
EUR’000
12,497
16,148
1,190
12,587
19,028
-
29,835
31,615
Less: Cash and bank balances
Net debt
(13,590)
16,245
(16,695)
14,920
Total equity
82,670
67,498
0.196
0.221
Total borrowings
Trade and other payables
Dividend payable
Net debt to equity ratio
(c)
Classification of Financial Instruments
30.6.2014
EUR’000
31.12.2013
EUR’000
53,159
1,785
13,590
47,867
1,032
16,695
68,534
65,594
10,020
6,128
1,190
12,497
5,145
13,883
12,587
29,835
31,615
Financial Assets
Loan and Receivables
Trade receivables
Other receivables and deposit
Other Financial Liabilities
Trade payables
Dividend payable
Term loan
F-51
(d)
Fair Value Estimation
All financial instruments are carried at amounts not materially different from their fair
values as at the end of the reporting period.
Fair value estimates are made at a specific point in time and based on relevant market
information and information about the financial instruments. These estimates are
subjective in nature, involve uncertainties and matters of significant judgement and
therefore cannot be determined with precision. Changes in assumptions could significantly
affect the estimates.
(e)
Fair Value Hierarchy
As at 30 June 2014 and 31 December 2013 there were no financial instruments carried at fair
values.
4.
BASIS OF PREPARATION
This condensed interim financial report has been prepared in accordance with IAS34 interim
financial reporting. Selected explanatory notes are included to explain events and transactions that
are significant to an understanding of the changes in financial position and performance of
Snowbird Henan since the last annual financial statements as at and for the year ended 31
December 2013. This condensed interim financial report does not include all the information
required for full annual financial statements prepared in accordance with International Financial
Reporting Standards.
5.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by Snowbird Henan in this condensed interim financial report are
the same as applied by Snowbird Henan in its financial statements as at and for the year ended
31 December 2013.
F-52
6.
PROPERTY, PLANT AND EQUIPMENT
Building
EUR’000
Cost
At 31 December
2012/ 1 January
2013
Additions
Transferred
Written off
Exchange
difference
3,543
12
5,458
-
Building under
construction
EUR’000
Plant and
machinery
EUR’000
Motor
vehicle
EUR’000
Office
equipment
EUR’000
Total
EUR’000
1,412
6,317
(5,458)
4,589
4,715
(2)
308
50
-
100
8
-
9,952
11,102
(2)
(42)
(3)
(1)
(91)
-
(32)
(13)
At 31 December
2013
Additions
Exchange
difference
8,981
2,258
9.260
355
107
20,961
-
1,785
29
16
8
1,838
3
14
1
0
31
At 30 June 2014
8,994
4,046
9,303
372
115
22,830
97
69
2,936
Accumulated
Depreciation
At 31 December
2012/ 1 January
2013
Depreciation
Written off
Exchange
difference
At 31 December
2013
Depreciation
Exchange
difference
At 30 June 2014
13
1,140
-
1,630
321
-
-
703
(1)
56
-
15
-
1,095
(1)
(18)
-
(30)
(2)
(1)
(51)
1,443
-
2,302
151
83
3,979
202
-
417
32
4
655
3
4
-
1,648
2,723
183
87
4,641
7
Net Book Value
At 31 December 2013
7,538
2,258
6,958
204
24
16,982
At 30 June 2014
7,346
4,046
6,580
189
28
18,189
All property, plant and equipment held by Snowbird Henan are located in the PRC. They are
recorded at cost less accumulated depreciation.
The buildings and certain items of plant and equipment of Snowbird Henan with a total carrying
amount of EUR 3,540,248 and EUR 3,765,235 for the financial periods ended 30 June 2014 and
31 December 2013 respectively, have been pledged to bank as security for term loan facilities
granted to Snowbird Henan (Note 15).
F-53
7.
INTANGIBLE ASSETS
Accounting
software
EUR’000
Cost
At 31 December 2012/ 1 January 2013
Additions
At 31 December 2013
Additions
7
1
Trademark
EUR’000
5
12
1
-
8
-
Total
EUR’000
5
-
13
-
At 30 June 2014
8
5
13
At 31 December 2012/ 1 January 2013
Amortisation
1
1
-
1
1
At 31 December 2013
Amortisation
2
-
1
2
1
At 30 June 2014
2
1
3
Net Book Value
At 31 December 2013
6
5
11
At 30 June 2014
6
4
10
Snowbird Henan registered its trademark “Xueniao” under Community Trade Marks on
15 February 2012 with a 10 year licence period.
Snowbird Henan acquired the rights for using the Kingdee accounting software during 2012 with a
licence period of 10 years.
8.
LEASE PREPAYMENT – LAND USE RIGHTS
30.6.2014
EUR’000
31.12.2013
EUR’000
Cost
At beginning of the period
Additions
Exchange difference
2,209
2,248
3
2,229
(20)
At closing of the period
4,460
2,209
At beginning of the period
Amortisation
Exchange difference
246
26
-
203
46
(3)
272
246
4,188
1,963
Net Book Value
Lease prepayment – land use rights represent cost of land use rights in respect of land located in
the PRC with a lease period of 50 years when granted.
F-54
9.
INVENTORIES
At cost,
Raw materials
Work-in-progress
Finished goods
30.6.2014
EUR’000
31.12.2013
EUR’000
14,580
212
5,058
19,850
5,837
112
4,829
10,778
None of the inventories were stated at net realisable value.
10.
RECEIVABLES AND PREPAYMENTS
Trade receivables
Other receivables
Deposit
Prepayments
30.6.2014
EUR’000
31.12.2013
EUR’000
53,159
1,785
5,656
47,867
1,032
5,875
60,600
54,774
(a) Snowbird Henan’s normal trade credit terms range from 30 to 90 days.
(b) As at 30 June 2014, prepayments mainly comprised of:
(i)
(ii)
11.
Amount of EUR 5,445,000 and EUR 3,512,000 as advance payment to suppliers for
purchase of stock for financial periods ended 30 June 2014 and 31 December 2013
respectively; and
Deposit paid to acquire 1,500 sewing machines amounting EUR 1,785,000 (2013: Nil).
CASH AND CASH EQUIVALENTS
Cash at bank
Cash on hand
30.6.2014
EUR’000
31.12.2013
EUR’000
13,590
-
16,688
7
13,590
16,695
30.6.2014
EUR’000
31.12.2013
EUR’000
13,588
2
16,391
304
13,590
16,695
Cash and bank balances are denominated in the following currencies:
Chinese Renminbi
US Dollar *
*Snowbird Henan maintains US Dollar account with balances amounting to RMB48 as at 30 June 2014.
F-55
The Chinese Renminbi is not freely convertible into foreign currencies. Under the PRC Foreign
Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign
Exchange Regulations Snowbird Henan is permitted to exchange Chinese Renminbi for foreign
currencies through banks that are authorised to conduct foreign exchange business.
12.
PAID-IN CAPITAL
th
Snowbird Henan was incorporated in 4 March 2001 with registered and paid-in share capital of
EUR1,223,000. The movements in the paid-in capital are as follows:
EUR’000
At date of incorporation
th
Issuance of new ordinary shares on 27 February 2004
th
Issuance of new ordinary shares on 10 August 2005
th
Issuance of new ordinary shares on 18 January 2008
th
Issuance of new ordinary shares on 4 May 2010
1,223
2,039
1,019
3,679
3,099
11,059
30.6.2014
EUR’000
Yan Changzai
Puyang Snowbird Trading Co., Ltd.
-
31.12.2013
EUR’000
11,059
9,530
1,529
-
11,059
11,059
On 4 June 2014, Puyang Snowbird Trading Co., Ltd. acquired the entire equity share of Snowbird
Henan and become the sole shareholder of Snowbird Henan.
13.
STATUTORY RESERVE
The statutory reserve of Snowbird Henan amounted to EUR 6,386,081 as at 30 June 2014 (2013:
EUR 6,386,081).
14.
RETAINED EARNINGS
The retained earnings reserve comprises the cumulative net gains and losses recognised in
Snowbird Henan’s profit or loss.
F-56
15.
LOANS AND BORROWINGS
30.6.2014
EUR’000
31.12.2013
EUR’000
Current portion:
- Not later than one year
8,093
8,190
Non-current portion:
- Later than one year and not later than two years
- Later than two years but not later than five years
- Later than five years
4,404
-
4,397
-
4,404
4,397
12,497
12,587
(a) Snowbird Henan’s interest-bearing bank loans are secured by buildings and certain items of plant
and machinery (Note 6) and appointed a third party financial guarantor from the Bank and bear
effective interest rates of 6.45% per annum for the financial periods ended 30 June 2014 and 31
December 2013. Finance costs relating to these loans amounted to EUR 393,000 and EUR
383,000 for the financial periods ended 30 June 2014 and 2013 respectively.
(b) As at 30 June 2014, secured short-term loans and borrowings of EUR 8,093,000 (2013:
EUR 8,190,000) are guaranteed by Mr. YAN Changzai, the director of Henan Snowbird
Enterprise Co., Ltd. and a major shareholder.
(c) As at 30 June 2014, current portion of loans and borrowings consist of Export Commercial Invoice
Discounting (ECID) amounting to EUR 1,071,000 (2013: EUR 1,179,000).
(d) The repayment terms of the term loans are as follows:
(2013- 6.26%; 2012- 6.54%;
2011- 6.31%; 2010- 5.61%; )
EUR 5,355,000 is repayable upon maturity on 28 October
2015.
(2014- 5.93%; 2013- 6.26%)
(2014- 5.93%; 2013- 6.26%)
2014.
(2014- 5.93%)
EUR 2,262,000 is repayable upon maturity on 27 May 2014.
5.93%)
2014.
(2014-
F-57
16.
PAYABLES AND ACCRUALS
30.6.2014
EUR’000
31.12.2013
EUR’000
10,020
590
2,454
1,866
1,218
5,145
7,499
4,219
1,297
868
16,148
19,028
Trade payables
Sales rebate payables
Salary payable
VAT payables
The normal trade credit term granted to Snowbird Henan is 30 to 60 days.
The trade and other payables balances are denominated in Chinese Renminbi.
17.
REVENUE AND OTHER INCOME
Snowbird Henan’s revenue is as follows:
Revenue:
Sale of goods
Other income:
Interest income
Government subsidy
Other income
Exchange gain
18.
30.6.2014
EUR’000
30.6.2013
EUR’000
78,038
45,643
34
139
2
251
49
103
1
-
426
153
COST OF SALES
Cost of sales comprise purchasing materials, labour costs for personnel employed in production,
depreciation of non-current assets used for production purposes, factory utilities, maintenance
charges and other production overheads.
The following table shows a breakdown of costs of sales for the period under review for each
category:
30.6.2014
30.6.2013
EUR’000
EUR’000
45,761
23,259
Material costs
3,950
3,677
Wages and related costs
Production overheads
415
378
- Salaries and related costs
546
322
- Depreciation of property, plant and
equipment
325
322
- Others
502
358
Export levy
51,499
28,316
Total self-production cost
490
55
Sales supplement taxes
Cost of goods sold
51,989
28,371
F-58
19.
30.6.2014
EUR’000
Sales rebates
Others
20.
291
588
751
270
192
653
1,630
1,115
Depreciation of property, plant and
equipment
Research and development
Exchange loss
Others
21.
30.6.2013
EUR’000
30.6.2014
EUR’000
30.6.2013
EUR’000
1,912
109
1,706
109
1
26
246
600
1
23
262
216
398
2,894
2,715
30.6.2014
EUR’000
30.6.2013
EUR’000
5,327
1
3,231
177
5,328
3,408
-
INCOME TAX EXPENSE
Current tax:
- for the financial year
- underprovision in prior period
The reconciliation between tax expense and accounting profit at applicable tax rates is as follows:
30.6.2014
EUR’000
30.6.2013
EUR’000
21,558
13,212
Tax at applicable tax rate of 25%
Effect of utilisation of deferred tax asset previously
not recognised
Underprovision of previous financial period
Others
5,390
-
3,303
494
Income tax
5,328
1
(63)
177
(566)
3,408
The provision for PRC income tax is calculated based on statutory income tax at a rate of 25% for
periods ended 30 June 2014 and 2013 in accordance with the relevant PRC income tax rules and
regulations for the relevant periods. Taxes are not related to other comprehensive income.
F-59
22.
SEGMENT INFORMATION
BUSINESS SEGMENT
Snowbird Henan’s primary format for reporting segment information is business segments, with
each segment representing a product category. Snowbird Henan’s business segments are
organized into four operating segments:
(a)
Design, manufacture and sale of down clothing
(b)
Produce and sale of down
(c)
Design, manufacture and sale of down bedding
(d)
Non-down OEM clothing
F-60
Down
clothing
EUR’000
Down
EUR’000
Down
bedding
EUR’000
Non-down
OEM
clothing
EUR’000
Total
EUR’000
1.1.2014 to 30.6.2014
Revenue
External revenue
16,120
52,718
1,206
7,994
78,038
Results
Segment results
7,619
15,227
672
2,531
26,049
Other income
expenses
Finance costs
Income tax expense
426
(1,630)
(2,894)
(393)
(5,328)
16,230
30.6.2014
Assets
Segment assets
21,315
67,853
1,698
5,787
Unallocated assets:
Land use right
Deposit to acquire
sewing machine
Professional fee
prepaid
Cash and bank
balances
96,653
4,188
1,785
211
13,590
Total assets
116,427
30.6.2014
Liabilities
Segment liabilities
Dividend payable
Income tax payable
3,803
10,511
240
1,594
16,148
12,497
1,190
3,922
33,757
Other segment items
instruments:
equipment
380
1,242
28
188
1,838
F-61
Down
EUR’000
Down
bedding
EUR’000
Non-down
OEM
clothing
EUR’000
Total
EUR’000
11,338
27,863
708
5,734
45,643
4,874
9,883
367
2,148
17,272
Down
clothing
EUR’000
Revenue
External revenue
Results
Segment results
1.1.2013 to 30.6.2013
Other income
expenses
Finance costs
Income tax expense
153
(1,115)
(2,715)
(383)
(3,408)
9,804
31.12.2013
Assets
Segment assets
32,080
38,698
4,272
4,099
Unallocated assets:
land use rights
Land use right
Government subsidy
receivables
Professional fee prepaid
79,149
2,245
1,963
1,032
119
16,695
Total assets
101,203
31.12.2013
Liabilities
Segment liabilities
10,573
5,983
1,795
677
19,028
Income tax payable
12,587
2,090
Total liabilities
33,705
Other segment items
instruments:
equipment
4,049
5,761
640
652
11,102
F-62
GEOGRAPHICAL INFORMATION
REVENUE
PRC
Taiwan
Hong Kong
Russia
30.6.2014
EUR’000
30.6.2013
EUR’000
51,851
19,800
4,927
1,460
78,038
26,748
13,628
297
4,970
45,643
MAJOR CUSTOMERS
Revenue from major customers, with revenue equal to or more than 10% of total revenue,
amounted to EUR 34,538,000 and EUR 24,685,000 for the periods ended 30 June 2014 and 2013
respectively, arising from sales of the down garments and high rated down segments.
23.
SIGNIFICANT RELATED PARTY TRANSACTIONS
Snowbird Henan has related party relationships with its directors, key management, entities of
which the directors and/or by management have significant financial interest.
Key Management Personnel Compensation
Directors’ remuneration:
- salaries and bonuses
30.6.2014
EUR’000
30.6.2013
EUR’000
17
1
15
-
18
15
38
1
34
1
39
35
57
50
Other key management personnel:
- salaries and bonuses
24.
CAPITAL COMMITMENT
Approved and contracted for:
Purchase of property, plant and
equipment
30.6.2014
EUR’000
31.12.2013
EUR’000
6,141
5,241
F-63
Statement By Director
I, Mr. YAN Changzai, being the director of Henan Snowbird Enterprise Co., Ltd., state that, in my opinion,
the condensed interim financial statements for the first six months period ended on 30 June 2014 set out
on pages before are drawn up in accordance with International Financial Reporting Standards, IAS34 so
as to give a true and fair view of the condensed interim financial position of Snowbird Henan as of 30 June
2014, and of their financial performance and cash flows for the financial period then ended.
Mr. YAN Changzai
China, 1 August 2014
F-64
(formerly SKYLINEHÖHE 72. V V AG)
Financial Statements for the Period from 23 April until 31 December 2012 (“IFRS”)
F-65
SNOWBIRD AG, Cologne
A. STATEMENT OF COMPREHENSIVE INCOME (“IFRS”)
SHORT FINANCIAL YEAR 24 APRIL TO 31 DECEMBER 2012
Notes
4
Loss / Total comprehensive income
Earnings per share (EUR/share)
23 April to
31 December 2012
EUR’000
(4)
(4)
(4)
11
(0,08)
Due to the fact that the company only came into existence on 23 April 2012, as described in note
1 below, only the period 23 April to 31 December 2012 is shown and there are no comparative
figures for 2011.
F-66
B. STATEMENT OF FINANCIAL POSITION (“IFRS”)
AS OF 31 DECEMBER 2012
Notes
31 December 2012
23 April 2012
EUR’000
EUR’000
0
50
50
37
12
50
50
50
6
6
50
(4)
46
50
0
50
7
4
4
0
0
50
50
ASSETS
Current
Trade and other receivables
5
Total assets
Equity and Liabilities
Equity
Share capital
Retained earnings
Total equity
Liabilities
Current
Provisions
Total equity and liabilities
F-67
C. STATEMENT OF CHANGES IN EQUITY (“IFRS”)
Share
capital
EUR’000
.
Balance at
23 April 2012
Comprehensive income for the
period ended December 31,
2012
Balance at
31 December 2012
Retained
earnings
EUR’000
Total equity
EUR’000
50
0
50
-
(4)
(4)
50
(4)
46
Due to the fact that the company only came into existence on 23 April 2012, as described in note 1 below,
only the period 23 April to 31 December 2012 is shown and there are no comparative figures for 2011.
F-68
D. STATEMENT OF CASH FLOWS (“IFRS”)
24 SEPTEMBER TO 31 DECEMBER 2012
Notes
Increase of provisions
Increase in trade and other payables
24 September to
31 December 2012
EUR’000
(4)
4
0
Cash Flows from Operating Activities
0
Cash Flows from Investing Activities
0
Cash Flows from Financing Activities
0
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the period
0
50
5
50
Due to the fact that the company only came into existence on 23 April 2012, as described in note 1 below,
only the period 23 April to 31 December 2012 is shown and there are no comparative figures for 2011.
F-69
E. NOTES TO THE FINANCIAL STATEMENTS (“IFRS”)
1.
COMPANY INFORMATION
Snowbird AG (formerly SKYLINEHÖHE 72. V V AG) (“Company”) was founded and entered
in the commercial register responsible for the Company at Cologne District Court on on April
23, 2012 under the number HRB 76323.
Snowbird AG (formerly SKYLINEHÖHE 72. V V AG) is an incorporated Company, which is
domiciled in Cologne / Germany. The address of the Company’s registered office is c/o
Luther Rechtsanwaltgesellschaft mbH, Anna-Schneider-Steig 22, 50678 Cologne, Germany.
According to §2 of the Articles of Association the object of the Company is the management
of companies and the administration of interests in companies, in particular companies active
in the following business: Processing of down for the production and sale of down products.
The object of the Company include in particular the acquisition, holding and administration as
well as the sale of participations in companies, their combination under common
management and the provision of support and advice to them, including the provision of
services on the behalf of such companies.
2.
Basis of the Reporting
The financial year of the Company is a calendar year; however this first reporting period of
the Company represents a short financial year, which begins with recording in the commercial
register (April 23, 2012) and runs until December 31, 2012.
The Financial Statements for the short reporting period 23 April to 31 December 2012 have
been prepared in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board (IASB), London, United Kingdom and the
interpretations of the IFRS Interpretations Committee (IFRS IC), in so far as these have been
endorsed by the European Union (EU) (“IFRS”).
These Financial Statements are the first set of year end financial statements prepared in
accordance with IFRS by the Company.
The significant accounting policies that have been applied in the preparation of these
Financial Statements are summarised below. The Financial Statements are presented in
accordance with IAS 1 Presentation of Financial Statements (Revised 2007).
IFRS 1, First-time Adoption of Financial Reporting Standards, has been applied in preparing
these Financial Statements. The Company maintains its accounting records in Euro and
prepares its statutory financial statements in accordance with German generally accepted
accounting practice. The financial information in these financial statements is based on the
statutory records without any differences between Germany accounting records and IFRS.
The Financial Statements of the Company are drawn up in Euros. Amounts are stated in
thousands of Euros (EUR thousand or EUR’000) except where otherwise indicated.
F-70
3.
3.1
Significant accounting policies
General
3.1.1 Overall consideration
The significant accounting policies and measurement bases that have been used in the
preparation of these Financial Statements are summarized below. The Company has elected
to adopt IAS 1 Presentation of Financial Statements (Revised 2007) by presenting the
“Statement of Comprehensive Income” in one statement.
3.1.2. Published but not yet applied standards, interpretations and amendments
At the time of preparation of the financial statements, the following standards and
interpretations of the IASB as well as their changes and revisions had either not been
endorsed by the European Union or were not compulsorily applicable in the 2012 financial
year, and were therefore not applied by the Company:

















IFRS 9 – Financial Instruments and subsequent amendments
IFRS 1 (Amendments) – Government Loans
IFRS 1 – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
Improvements to IFRSs 2009-2011
Transition Guidance – Amendments to IFRS 10, IFRS 11 and IFRS 12
Investment Entities – Amendments to IFRS 10, IFRS 12 and IAS 27
IFRS 7 (Amendments) – Disclosures – Offsetting Financial Assets and Financial Liabilities
IAS 32 (Amendments) – Disclosures – Offsetting Financial Assets and Financial Liabilities
IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements
IFRS 12 – Disclosures of Interests in Other Entities
IFRS 13 – Fair Value Measurement
IAS 1 – Presentation of Items of Other Comprehensive Income
IAS 27 – Separate Financial Statements (issued 12 May 2011)
IAS 28 – Investments in Associates and Joint Ventures (issued 12 May 2011)
IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine
IAS 19 (Amendments) – Employee Benefits
The aforementioned IFRS are to be applied in the Financial Statements of the Company from
the 2013 financial year or later. Management does not expect the standards to have a
material effect on the statement of financial position, statement of cash flows or statement of
comprehensive income as a result of the first-time application of these standards,
interpretations or changes to them.
3.2
Summary of accounting policies
3.2.1 Other operating expenses
Operating expenses are recognized in profit or loss upon utilization of the service or at the
date of their origin.
3.2.2 Provisions and contingent liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive)
where, as a result of a past event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be made
of the amount of the obligation. Provisions are not recognized for future operating losses.
Where the Company expects some or all of a provision to be reimbursed, the reimbursement
is recognized as a separate asset but only when the reimbursement is virtually certain.
However, this asset may not exceed the amount of the related provision. The expense
relating to any provision is presented in the statement of comprehensive income net of any
reimbursement. Provisions are measured at the estimated expenditure required to settle the
F-71
present obligation, based on the most reliable evidence available at the reporting date,
including the risks and uncertainties associated with the present obligation. Where there are a
number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. Provisions are discounted to
their present values, where the time value of money is material.
In those cases where the probability of an outflow as a result of present obligations is
considered improbable or remote, no liability is recognized but a contingency is disclosed. All
provisions and contingent liabilities are reviewed at each reporting date and adjusted to
reflect the current best estimate.
3.2.3 Income taxes
Current income tax for current and prior periods is recognized at the amount expected to be
paid to or recovered from the tax authorities, using the tax rates and tax laws that have been
enacted or substantively enacted by the end of the reporting period.
Deferred income tax is recognized for all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial information except when
the deferred income tax arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and affects neither accounting or taxable profit
or loss at the time of the transaction.
Deferred tax is recognized on temporary differences arising on investments in subsidiaries,
except where the Company is able to control the timing of the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable
future. A deferred income tax asset is recognized to the extent that it is probable that future
taxable profit will be available against which the deductible temporary differences and tax
losses can be utilized. Deferred income tax is measured:
- at the tax rates that are expected to apply when the related deferred income tax asset is
realized or the deferred income tax liability is settled, based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the reporting period; and
- based on the tax consequence that will follow from the manner in which the Company
expects, at the end of the reporting period, to recover or settle the carrying amounts of its
assets and liabilities.
Current and deferred income taxes are recognized as income or expense in the statements of
comprehensive income, except to the extent that the tax arises from a business combination
or a transaction which is recognized either in other comprehensive income or directly in equity.
Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Deferred tax assets and liabilities are offset when there is legal enforceable right to offset
current income tax assets against current income tax liabilities and when deferred income
taxes relate to the same fiscal authority.
3.2.4 Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits with financial institutions
which are readily convertible to cash and which are subject to an insignificant risk of change
in value and include cash on hand and bank deposits net of bank overdrafts and pledged
deposits.
3.2.5 Equity Capital
Share capital represents the nominal value of shares that have been issued by Snowbird AG
(formerly SKYLINEHÖHE 72. V V AG).
Retained earnings include all retained profits.
F-72
4.
23 April to
31 December 2012
EUR’000
5.
Legal and professional fee
4
Total
4
The cash and bank balances comprise balances with banks and have a residual term of not
more than three months.
6.
Equity capital
Share Capital – Snowbird AG (formerly SKYLINEHÖHE 72. V V AG International AG)
The share capital of Snowbird AG (formerly SKYLINEHÖHE 72. V V AG) consists only of fully
paid ordinary shares without nominal value (nil-par shares), having a proportional amount of
the subscribed capital of EUR 1.00 each. All shares are equally eligible to receive dividends
and repayments of capital and represent one vote at the Shareholder’s Meeting of Snowbird
AG (formerly SKYLINEHÖHE 72. V V AG).
Number of
ordinary
shares
2012
Authorised share capital
23 April
and 31 December 2012
Total shares issued
23 April–
31 December 2012
EUR’000
50.000
50
50.000
50
Retained earnings
the Statement of Comprehensive Income.
7.
Provisions
The provisions relate to financial statement for the financial statements as of 31 December
2012.
8.
The Trade and other payables show trade accounts payable. The payables were unsecured,
and interest-free. The carrying value approximates to their fair values.
F-73
9.
Related party information
An entity or individual is considered a related party of the Company for the purposes of the
financial statements if: (i) it possesses the ability, directly or indirectly, to control or exercise
significant influence over the operating and financial decision of the Company or vice versa;
or (ii) it is subject to common control or common significant influence.
Related party
Relationship to the Company
Mr. YAN Changzai
Director of Snowbird AG (formerly SKYLINEHÖHE
72. V V AG)
There are no significant related party transactions entered into between the Company and
their related parties.
Key management positions are held by Management Board and Supervisory Board
Members as follows:
Management Board Members
Mr. YAN Changzai, Puyang, Henan Province/PR China, CEO (since 28 June 2012)
Frau Angelika Hundt, Wesseling, Germany, CEO (until 28 June 2012)
Supervisory Board Members
Mr. Thomas Weidlich LL.M., Bensberg, attorney-at-law (since 29 June 2012);
Mr. Philipp Dietz LL.M., Cologne, attorney-at-law (since 29 June 2012);
Mr. Dr. Gregor Wecker, Cologne, attorney-at-law (since 29 June 2012);
Ms. Steffi Brettschneider, Bonn, management expert (until 28 June 2012);
Ms. Conny Leuschner, Cologne, attorney-at-law (until 28 June 2012);
Mr. Simon Fritzsche, Bonn, office executive (until 28 June 2012)
In the fiscal year 2012 the members of the management board and the supervisory board did
not receive remuneration.
10.
Taxation
As the Company did not have taxable profits during the short reporting period ended 31
December 2012, no German corporate income taxes have been provided for.
Deferred income taxes have not been recognized due to uncertainity of their recoverability.
11.
Earnings per Share
The basic earnings per share have been calculated using the profit attributable to
shareholders of the Company (the legal parent) as the numerator and correspond directly to
the profit or loss attributable to the parent entity for the period without reconciliation.
The weighted average number of outstanding shares used for basic earnings per share for
the time period 23 April to 31 December 2012 amounted to 50,000 shares based on the
share capital of Snowbird AG (formerly SKYLINEHÖHE 72. V V AG). There are no dilutive or
F-74
potentially dilutive effects, and so diluted earnings per share and undiluted earnings per share
are equivalent.
12.
Events after the reporting period
There are no significant non-adjusting events or any significant adjusting events to report
between the reporting date and the date of preparation of these financial statements.
Cologne, 12 May 2014
Snowbird AG (formerly SKYLINEHÖHE 72. V V AG)
The Board of Management
Mr. YAN Changzai
F-75
F. AUDITORS’ REPORT (“IFRS”)
To Snowbird AG (formerly Skylinehöhe 72. V V AG), Köln:
We have audited the annual financial statements – comprising the balance sheet, statement of profit
and loss, statement of comprehensive income, statement of changes in equity, cash flow statement
and notes – together with the bookkeeping system of Snowbird AG (formerly Skylinehöhe 72. V V
AG), Köln, for the short business year from 23. April 2012 to 31. December 2012. The maintenance of
the books and records and the preparation of the annual financial statements in accordance with
IFRS as adopted by the EU are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the annual financial statements, together with the bookkeeping system,
based on our audit.
We conducted our audit of the annual financial statements in accordance with German generally
accepted standards for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer (Institute of Public Auditors in Germany – IDW). Those standards require that we
plan and perform the audit such that misstatements materially affecting the presentation of the net
assets, financial position and results of operations in the annual financial statements in accordance
with the applicable financial reporting framework are detected with reasonable assurance. Knowledge
of the business activities and the economic and legal environment of the Company and expectations
as to possible misstatements are taken into account in the determination of audit procedures. The
effectiveness of the accounting-related internal control system and the evidence supporting the
disclosures in the books and records and the annual financial statements are examined primarily on a
test basis within the framework of the audit. The audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation
of the annual financial statements. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, based on the findings of our audit, the annual financial statements comply with IFRS
as adopted by the EU and give a true and fair view of the net assets, financial position and results of
operations of the Company in accordance with these requirements.
Crowe Kleeberg GmbH
Prechtl
Wirtschaftsprüfer
Schmidt
Wirtschaftsprüfer
F-76
Single Entity Financial Statements for the financial year ended 31 December
2013
(German Commercial Code) - (Translation of the German version)
F-77
SNOWBIRD AG, COLOGNE
A. BALANCE SHEET (German Commercial Code)
(Translation of the German version)
ASSETS
31.12.2013
EUR
31.12.2012
EUR
A. Current assets
Cash and central bank balances, bank balances and checks
55,276.31
50,000.00
55,276.31
50,000.00
SHAREHOLDER’S EQUITY AND OTHER PROVISIONS
31.12.2013
EUR
A. Equity capital
I. Subscribed capital
II. Accumulated loss
31.12.2012
EUR
50,000.00
-14,253.68
35,746.32
50,000.00
-4,000.00
46,000.00
B. Provisions
Other provisions
14,000.00
4,000.00
C. Liabilities
1. Trade payables
2. Other liabilities
206.58
5,323.41
0.00
0.00
55,276.31
50,000.00
F-78
B. PROFIT AND LOSS ACCOUNT (German Commercial Code)
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013
2013
EUR
1.
2.
3.
4.
5.
Result from ordinary activities
Net loss
Losses carried forward from the previous year
Accumulated loss
-10,253.68
-10,253.68
-10,253.68
-4,000.00
-14,253.68
Short fiscal year
2012
EUR
-4,000.00
-4,000.00
-4,000.00
0.00
-4,000.00
F-79
C. NOTES (German Commercial Code)
1.
GENERAL INFORMATION ON THE FINANCIAL STATEMENTS
The Company has on the balance sheet date the size characteristics of a small corporation
pursuant to § 267a section 1 HGB.
The structure and classification of items in the balance sheet comply with the requirements for
large corporations (§ 266 HGB).
The financial statements present a fair and true view of the net assets, financial position and
results of operations of the Company (§ 264 section 2 HGB).
For the profit and loss account, the total cost method is applied according to § 275 section 2
HGB.
2.
INFORMATION ABOUT ACCOUNTING AND VALUATION METHODS
The evaluation will be based on the continuation of business activity (going concern). The
assets and liabilities are measured at the balance sheet date individually.
Other assets as well as cash assets are measured at initial cost.
The liabilities were recorded at their settlement amount.
In the formation of other provisions, any identifiable risks and contingent liabilities at the
balance sheet date have been adequately taken into account. The assessment of the
settlement amount was carried out at a level that is dictated by prudent business judgment.
3.
INFORMATION ON THE BALANCE SHEET
The subscribed capital (share capital) corresponding to the authorized capital amounts to
EUR 50,000.00. The share capital is divided into 50,000.00 par value bearer shares.
Other provisions include provisions for outstanding invoices.
All liabilities have a residual maturity of up to one year.
F-80
4.
OTHER DISCLOSURES
Members of the corporate bodies
The Company does not employ any staff.
Management Director is Mr. Yan Changzai, Puyang, Henan Province/PR China, CEO. He is
authorized with sole power of representation and without the restrictions of § 181 BGB.
Composition of the Supervisory Board:

Mr. Thomas Weidlich LL.M., Bensberg, attorney-at-law;

Mr. Philipp Dietz LL.M., Cologne, attorney-at-law;

Mr. Dr. Gregor Wecker, Cologne, attorney-at-law.
The director and the members of the supervisory board did not receive compensation in the
financial year.
Appropriation of profits
The management board proposes to carry forward the net loss to new account.
Management Director
____________________________
Yan Changzai
F-81
D. AUDITORS’ OPINION (German Commercial Code)
AUDITORS' OPINION
To Snowbird AG (formerly Skylinehöhe 72 V V AG), Köln:
We have audited the annual financial statements - comprising balance sheet, profit and loss
account and notes - together with the bookkeeping System of Snowbird AG (formerly
Skylinehöhe 72 V V AG), Köln, for the business year from 1 January 2013 to 31 December
2013. The maintenance of the books and records and the preparation of the annual financial
statements in accordance with German commercial law are the responsibility of the
company's management. Our responsibility is to express an opinion on the annual financial
statements, together with the bookkeeping system, based on our audit.
We conducted our audit of the annual financial statements in accordance with section 317
HGB (German Commercial Code) and German generally accepted standards for the audit of
financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public
Auditors in Germany – IDW). Those standards require that we plan and perform the audit
such that misstatements, whether due to error or fraud, materially affecting the presentation
of the net assets, financial position and results of operations in the annual financial
statements in accordance with German principles of proper accounting are detected with
reasonable assurance. Knowledge of the business activities and the economic and legal
environment of the company and expectations as to possible misstatements are taken into
account in the determination of audit procedures. The effectiveness of the accounting-related
internal control system and the evidence supporting the disclosures in the books and records
and the annual financial statements are examined primarily on a test basis within the
framework of the audit. The audit includes an assessment of the accounting principles used
and significant estimates made by management, as well as an evaluation of the overall
presentation of the annual financial statements. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on the findings of our audit, the annual financial statements of
Snowbird AG (formerly Skylinehöhe 72 V V AG), Köln, for the business year from 1 January
2013 to 31 December 2013 comply with legal requirements and give a true and fair view of
the net assets, financial position and results of operations of the company in accordance with
German principles of proper accounting.
Crowe Kleeberg GmbH
Wirtschaftsprüfungsgesellschaft
Prechtl
Wirtschaftsprüfer
Schmidt
Wirtschaftsprüfer
F-82
Single Entiry Financial Statements for financial year ended on 31 December
2013 (“IFRS”)
F-83
A. STATEMENT OF COMPREHENSIVE INCOME (“IFRS”)
Notes
4
Loss / Total comprehensive income
Earnings per share (EUR/share)
11
EUR’000
23 April to
31 December
2012
EUR’000
(10)
(10)
(4)
(4)
(10)
(4)
(0.20)
(0.08)
2013
F-84
B. STATEMENT OF FINANCIAL POSITION (“IFRS”)
Notes
31 December
2013
31 December
2012
EUR’000
EUR’000
55
55
50
50
55
50
ASSETS
Current
5
Total assets
Equity and Liabilities
Equity
Share capital
Retained earnings
Total equity
6
6
50
(14)
36
50
(4)
46
Liabilities
Current
Provisions
Trade payables
Other Liabilities
7
14
0
5
4
0
0
55
50
Total equity and liabilities
8
F-85
C. STATEMENT OF CHANGES IN EQUITY (“IFRS”)
Share
capital
EUR’000
.
Balance at
23 April 2012
2012
31 December 2012 /
1 January 2013
2013
Balance at
31 December 2013
Retained
earnings
EUR’000
Total equity
EUR’000
50
0
50
-
(4)
(4)
50
(4)
46
-
(10)
(0)
50
(14)
36
F-86
D. STATEMENT OF CASH FLOWS (“IFRS”)
31 December 2013
EUR’000
23 April to
31 December 2012
EUR’000
(10)
10
5
(4)
4
0
Cash Flows from Operating Activities
5
0
Cash Flows from Investing Activities
0
0
Cash Flows from Financing Activities
0
0
Cash and cash equivalents at beginning of
year
5
0
5
50
50
5
55
50
Notes
Increase of provisions
Increase in trade and other payables
Cash and cash equivalents at end of the
period
7
8
F-87
E. NOTES TO THE FINANCIAL STATEMENTS (“IFRS”)
1.
COMPANY INFORMATION
Snowbird AG (“Company”) was founded and entered in the commercial register responsible
for the Company at Cologne District Court on April 23, 2012 under the number HRB 76323.
Snowbird AG is an incorporated Company, which is domiciled in Cologne / Germany. The
address of the Company’s registered office is c/o Luther Rechtsanwaltgesellschaft mbH,
Anna-Schneider-Steig 22, 50678 Cologne, Germany.
According to §2 of the Articles of Association the object of the Company is the management
of companies and the administration of interests in companies, in particular companies active
in the following business: Processing of down for the production and sale of down products.
The object of the Company include in particular the acquisition, holding and administration as
well as the sale of participations in companies, their combination under common
management and the provision of support and advice to them, including the provision of
services on the behalf of such companies.
2.
Basis of the Reporting
The financial year of the Company is a calendar year. The previous year of the Company
represented a short financial year, which begins with recording in the commercial register
(April 23, 2012) and runs until December 31, 2012.
The Financial Statements for the reporting period ended 31 December 2013 have been
prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB), London, United Kingdom and the
interpretations of the IFRS Interpretations Committee (IFRS IC), in so far as these have been
endorsed by the European Union (EU) (“IFRS”).
The significant accounting policies that have been applied in the preparation of these
Financial Statements are summarized below. The Financial Statements are presented in
accordance with IAS 1 Presentation of Financial Statements (Revised 2007).
The Company maintains its accounting records in Euro and prepares its statutory financial
statements in accordance with German generally accepted accounting practice. The financial
information in these financial statements is based on the statutory records without any
differences between Germany accounting records and IFRS.
The Financial Statements of the Company are drawn up in Euros. Amounts are stated in
thousands of Euros (EUR thousand or EUR’000) except where otherwise indicated.
3.
Significant accounting policies
3.1
General
3.1.1 Overall consideration
The significant accounting policies and measurement bases that have been used in the
preparation of these Financial Statements are summarized below. The Company has elected
to adopt IAS 1 Presentation of Financial Statements by presenting the “Statement of
Comprehensive Income” in one statement.
F-88
3.1.2. Standards, interpretations and amendments
At the time of preparation of the financial statements, the following standards and
interpretations of the IASB as well as their changes and revisions had either not been
adopted by the Company.
The following new or revised IFRSs are promulgated by the European Union and became
effective in the financial year 2013. Therefore the following regulations were applied by the
Company:








IFRS 1 (Amendments) – Government Loans
IFRS 1 – (Amendments) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
IFRS 13 – Fair Value Measurement
IAS 1 – Presentation of Items of Other Comprehensive Income
IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine
IFRS 7 (Amendments) – Disclosures – Offsetting Financial Assets and Financial Liabilities
IAS 19 (Amendments) – Employee Benefits
The adoption of the IFRS above did not result in substantial changes to the Company's
accounting policies or have not any significant impact on the financial statements.
The following new or revised IFRSs are promulgated by the European Union but were not
effective in the financial year 2013 and were therefore not applied by the Company:





IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements
IFRS 12 – Disclosures of Interests in Other Entities
IAS 27 – Separate Financial Statements (issued 12 May 2011)
IAS 28 – Investments in Associates and Joint Ventures (issued 12 May 2011)
There are no other IFRSs or IFRIC interpretations promulgated by the European Union but
were not effective in the financial year 2013 that would have expected to have a material
impact on the Company.
The following IFRSs are not promulgated by the European Union and were therefore not
applied by the Company:






IFRS 9 – Financial Instruments and subsequent amendments
IAS 19 (Amendments) - Employee Benefits - Employee Contributions
IFRS 7 and IFRS 9 (Amendments) - "Financial instruments" and "Financial Instruments Disclosures": Initial Application and Transitional Regulations
IFRIC 21 - Levies
There are no other IFRSs or IFRIC interpretations that are not effective in the financial year
2013 and were therefore not applied by the Company.
The aforementioned IFRS are to be applied in the Financial Statements of the Company from
the 2014 financial year or later. Management does not expect the standards to have a
material effect on the statement of financial position, statement of cash flows or statement of
comprehensive income as a result of the first-time application of these standards,
interpretations or changes to them.
3.2
Summary of accounting policies
3.2.1 Other operating expenses
Operating expenses are recognized in profit or loss upon utilization of the service or at the
date of their origin.
F-89
3.2.2 Provisions and contingent liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive)
where, as a result of a past event, it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate can be made
of the amount of the obligation. Provisions are not recognized for future operating losses.
Where the Company expects some or all of a provision to be reimbursed, the reimbursement
is recognized as a separate asset but only when the reimbursement is virtually certain.
However, this asset may not exceed the amount of the related provision. The expense
relating to any provision is presented in the statement of comprehensive income net of any
reimbursement. Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the reporting date,
including the risks and uncertainties associated with the present obligation. Where there are a
number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. Provisions are discounted to
their present values, where the time value of money is material.
In those cases where the probability of an outflow as a result of present obligations is
considered improbable or remote, no liability is recognized but a contingency is disclosed. All
provisions and contingent liabilities are reviewed at each reporting date and adjusted to
reflect the current best estimate.
3.2.3 Income taxes
Current income tax for current and prior periods is recognized at the amount expected to be
paid to or recovered from the tax authorities, using the tax rates and tax laws that have been
enacted or substantively enacted by the end of the reporting period.
Deferred income tax is recognized for all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial information except when
the deferred income tax arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and affects neither accounting or taxable profit
or loss at the time of the transaction.
Deferred tax is recognized on temporary differences arising on investments in subsidiaries,
except where the Company is able to control the timing of the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable
future. A deferred income tax asset is recognized to the extent that it is probable that future
taxable profit will be available against which the deductible temporary differences and tax
losses can be utilized. Deferred income tax is measured:
- at the tax rates that are expected to apply when the related deferred income tax asset is
realized or the deferred income tax liability is settled, based on tax rates and tax laws that
have been enacted or substantively enacted by the end of the reporting period; and
- based on the tax consequence that will follow from the manner in which the Company
expects, at the end of the reporting period, to recover or settle the carrying amounts of its
assets and liabilities.
Current and deferred income taxes are recognized as income or expense in the statements of
comprehensive income, except to the extent that the tax arises from a business combination
or a transaction which is recognized either in other comprehensive income or directly in equity.
Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Deferred tax assets and liabilities are offset when there is legal enforceable right to offset
current income tax assets against current income tax liabilities and when deferred income
taxes relate to the same fiscal authority.
F-90
3.2.4 Cash and cash equivalents
Cash and cash equivalents include cash on hand and deposits with financial institutions
which are readily convertible to cash and which are subject to an insignificant risk of change
in value and include cash on hand and bank deposits net of bank overdrafts and pledged
deposits.
3.2.5 Equity Capital
Share capital represents the nominal value of shares that have been issued by Snowbird AG.
Retained earnings include all retained profits.
4.
5.
31 December 2013
23 April to
31 December 2012
EUR’000
Legal and professional fee
10
4
Total
10
4
The cash and bank balances comprise balances with banks and have a residual term of not
more than three months.
6.
Equity capital
Share Capital – Snowbird AG
The share capital of Snowbird AG consists only of fully paid ordinary shares without nominal
value (nil-par shares), having a proportional amount of the subscribed capital of EUR 1.00
each. All shares are equally eligible to receive dividends and repayments of capital and
represent one vote at the Shareholder’s Meeting of Snowbird AG.
Number of
ordinary
shares
2013
31 December 2013
EUR’000
Authorized share capital
31 December 2013
50.000
50
Total shares issued
50.000
50
Retained earnings
the Statement of Comprehensive Income.
F-91
7.
Provisions
The provisions relate to financial statement for the financial statements as of December 31,
2012 and December 31, 2013.
8.
The Trade and other payables show trade accounts payable. The payables were unsecured,
and interest-free. The carrying value approximates to their fair values.
The other payables show payables against the shareholder Mr. YAN Changzai. The payables
were unsecured and interest-free.
9.
Related party information
An entity or individual is considered a related party of the Company for the purposes of the
financial statements if: (i) it possesses the ability, directly or indirectly, to control or exercise
significant influence over the operating and financial decision of the Company or vice versa;
or (ii) it is subject to common control or common significant influence.
Related party
Relationship to the Company
Mr. YAN Changzai
Director of Snowbird AG
There are no significant related party transactions entered into between the Company and
their related parties.
Key management positions are held by Management Board and Supervisory Board
Members as follows:
Management Board Members
Mr. Yan Changzai, Puyang, Henan Province/PR China, CEO
Supervisory Board Members
Mr. Thomas Weidlich LL.M., Bensberg, attorney-at-law;
Mr. Philipp Dietz LL.M., Cologne, attorney-at-law;
Mr. Dr. Gregor Wecker, Cologne, attorney-at-law.
In the fiscal year 2013 the members of the management board and the supervisory board did
not receive remuneration.
10.
Taxation
As the Company did not have taxable profits during the reporting period ended 31 December
2013, no German corporate income taxes have been provided for.
Deferred income taxes have not been recognized due to uncertainty of their recoverability.
F-92
11.
Earnings per Share
The basic earnings per share have been calculated using the profit attributable to
shareholders of the Company (the legal parent) as the numerator and correspond directly to
the profit or loss attributable to the parent entity for the period without reconciliation.
The weighted average number of outstanding shares used for basic earnings per share for
the period ended 31 December 2013 amounted to 50,000 shares based on the share capital
of Snowbird AG. There are no dilutive or potentially dilutive effects, and so diluted earnings
per share and undiluted earnings per share are equivalent.
12.
Events after the reporting period
There are no significant non-adjusting events or any significant adjusting events to report
between the reporting date and the date of preparation of these financial statements.
Snowbird AG
The Board of Management
Mr. YAN Changzai
F-93
F. AUDITORS’ (“IFRS”)
To Snowbird AG (formerly Skylinehöhe 72. V V AG), Köln:
We have audited the annual financial statements – comprising the balance sheet, statement of profit
and loss, statement of comprehensive income, statement of changes in equity, cash flow statement
and notes – together with the bookkeeping system of Snowbird AG (formerly Skylinehöhe 72. V V
AG), Köln, for the business year from 1 January 2013 to 31 December 2013. The maintenance of the
books and records and the preparation of the annual financial statements in accordance with IFRS as
adopted by the EU are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the annual financial statements, together with the bookkeeping system, based
on our audit.
We conducted our audit of the annual financial statements in accordance with German generally
accepted standards for the audit of financial statements promulgated by the Institut der
Wirtschaftsprüfer (Institute of Public Auditors in Germany – IDW). Those standards require that we
plan and perform the audit such that misstatements materially affecting the presentation of the net
assets, financial position and results of operations in the annual financial statements in accordance
with the applicable financial reporting framework are detected with reasonable assurance. Knowledge
of the business activities and the economic and legal environment of the Company and expectations
as to possible misstatements are taken into account in the determination of audit procedures. The
effectiveness of the accounting-related internal control system and the evidence supporting the
disclosures in the books and records and the annual financial statements are examined primarily on a
test basis within the framework of the audit. The audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation
of the annual financial statements. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, based on the findings of our audit, the annual financial statements comply with IFRS
as adopted by the EU and give a true and fair view of the net assets, financial position and results of
operations of the Company in accordance with these requirements.
Crowe Kleeberg GmbH
Prechtl
Wirtschaftsprüfer
Schmidt
Wirtschaftsprüfer
F-94
26.
GLOSSARY
ADBC
Agricultural Development Bank of China, Taiqian Sub-branch
AIC
Administrative authority of industry and commerce
AktG
German Stock Corporation Act (Aktiengesetz)
Allocation Rules
“Principles for the Allotment of Share Issues to Private Investors” which were issued on 7 June 2000 by the Exchange Expert Commission (Börsensachverständigenkommission) of the
German Federal Ministry of Finance (Bundesministerium der
Finanzen)
Annual Financial Statements
Financial statements of Snowbird Henan, as at and for the financial years ended on 31 December 2011, 31 December 2012
and 31 December 2013 under IFRS as endorsed by the EU.
BaFin
German Federal Financial Supervisory Authority (Bundesanstalt
für Finanzdienstleistungsaufsicht)
BGB
German Civil Code (Bürgerliches Gesetzbuch)
CAGR
Compounded Annual Growth Rate
Catalogue
Guidance Catalogue of Industries for Foreign Investment
CEO
Chief Executive Officer
CFO
Chief Financial Officer
China / PRC
People’s Republic of China, which for the purposes of this Prospectus excludes Hong Kong and Macau
CITA
Corporate Income Tax Act
CM Equity
CM Equity AG & Co. KG Financial Services, Kaufingerstraße
20, 80331 Munich, Germany
G-1
Code
German Corporate Governance Code
Company
Snowbird AG
Company's Lock-Up
Restrictions under the market protection agreements
COO
Chief Operations Officer
CSRC
China Securities and Regulatory Commissions
CSSF
Commission de Surveillance du Secteur Financier
Designated Sponsor
mwb fairtrade Wertpapierhandelsbank AG, Rottenbucher Straße 28, 82166 Gräfelfing, Germany
Down
Feathers and down
Down products
The down products produced by SNOWBIRD.
EBITDA
Earnings before interest, taxes, depreciation and amortization
EEA
European Economic Area
EIT
Enterprise Income Tax
EIT Law
The PRC law on Enterprise Income Tax
EStG
German Income Tax Law (Einkommenssteuergesetz)
EUR
Euro, the official currency of the Eurozone and the EU institutions
Executives
Any person entrusted with managerial responsibilities
BIG BUSINESS GLOBAL HOLDINGS LIMITED, Mr. YAN
Changzai, YIELD TRADE LIMITED, Alrai S.à.r.l., Alrakis S.à.r.l
Mystic Topaz S.à.r.l and Imperial Topaz S.à.r.l, ZHEN SHENG
LIMITED, United Talent Investments Limited and Midasi Investment Limited
G-2
Existing Shares
30,000,000 existing ordinary bearer shares (InhaberStückaktien) in the Company issued and existing as at the date
of this Prospectus
FIE
Foreign-invested enterprises
FY
Financial Year
GDP
Gross Domestic Product
Global Coordinator
CM-Equity AG & Co. KG Financial Services, Kaufingerstraße
Greenshoe Options
1,500,000 shares resulting from a capital increase of the Company using authorized capital against payment of the respective
Offer Price (less the agreed commission and other costs)
Greenshoe Shares
1,500,000 newly issued ordinary bearer shares from a capital
increase using authorized capital
Group
The Company together with its direct and indirect subsidiaries
Henan ACD
HKD
Hong Kong Dollar, the currency of Hong Kong
IFRIC
International Financial Reporting Interpretations Committee
IFRS
International Financial Reporting Standards and International
Accounting Standards and Interpretations as endorsed for application in the EU
IMF
International Monetary Fund
Implementing Rules
Implementing Rules of the EIT Law
ISIN
International Securities Identification Number
Issue Price
New Shares at the issue price of EUR 1.00 per share
G-3
ITA
Income Tax Act
Joint Stabilization Managers
ACON Actienbank AG, Heimeranstraße 37, 80339 Munich,
Germany together with CM Equity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331 Munich, Germany
Joint Bookrunners
Germany together with CM Equity AG & Co. KG Financial Services, Kaufingerstraße 20, 80331 Munich, Germany
Kleeberg
Crowe Kleeberg GmbH, Augustenstraße 10, 80333 Munich,
Germany
Lead Manager
CM-Equity AG & Co. KG Financial Services, Kaufingerstraße
Listing
Admission to trading to the regulated market segment (Regulierter Markt) of the Frankfurt Stock Exchange with simultaneous admission to the sub-segment of the regulated market with
additional post-admission obligations (Prime Standard)
Lock-Up
M&A Provisions
Provisions on the Acquisition of Domestic Enterprises by Foreign Investors
Market Research Report
Market research report “Down Industry in China”, dated February 2014, prepared by Respect Marketing Research Inc., with
its business address at Rm. 316, Towercrest Plaza, No.3
Maizidian West Road, Chaoyang District, Beijing, China,
100125
MiFID
Markets in Financial Instruments Directive 2004/39/EC
MOFCOM
Ministry of Commerce
N/A
Not applicable
New Shares
10 million newly issued no par value ordinary bearer shares
from a capital increase for a contribution in cash expected to be
resolved by an extraordinary general shareholders’ meeting of
the Company on 24 September 2014
G-4
NDRC
National Development and Reform Commission
NPC
National People´s Congress
OEM
Original Equipment Manufacturer
Offer Price
The final selling price for the Offered Shares
Offer Terms
the right to reduce the number of Offered Shares, to lower or
raise the upper limit and/or the lower limit of the price range
and/or to extend or shorten the Offering Period
Offered Shares
The Offering consists of 11.5 million no par value ordinary
bearer shares (lnhaber-Stückaktien) of the Company, each with
a notional value of EUR 1.00 and carrying full dividend rights for
the financial year 2014
Offering Period
The Offering is expected to commence on 9 September 2014
and to end on 24 September 2014
Overallotment
As regards overallotment and potential stabilization measures,
in addition to the maximum total of up to 10,000,000 New
Shares of the Company being allocated, investors may be allotted up to 1,500,000 additional Existing Shares of the Company
Overallotment Shares
1,500,000 existing ordinary bearer shares from the holdings of
BIG BUSINESS GLOBAL HOLDINGS LIMITED to cover a potential overallotment and for stabilization measures
PCT
Patent Cooperation Treaty
Placement Volume
The number of shares to be allocated to the investors
PRC
People’s Republic of China
PRC GAAP
Generally accepted accounting principles in the PRC
Principal Shareholder
A shareholder holding 95% of the share capital
Prospectus
This prospectus
G-5
Regulation
Regulation for Foreign Exchange Controls of the PRC
Relevant PRC Residents
Such PRC residents are required to file an “overseas investment foreign exchange registration” before the establishment of
such SPV and subsequently, to update such registration on the
occurrence of specified events
Shareholder’s Lock-Up
RMB
Renminbi, the currency of the PRC
SAFE
The PRC State Administration of Foreign Exchange
SAFE Notice No.75
Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Financing and
in Return Investment via Overseas Special Purpose Companies
SAFE Notice No.142
Notice on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of
Foreign Currency Capital of Foreign-funded Enterprises
SAIC
State Administration for Industry and Commerce
SAT
Chinese State Administration of Taxation
SIPO
The PRC State Intellectual Property Office
SNOWBIRD
The Group
Snowbird Factory
Puyang Snowbird Down & Feather Products Factory
Snowbird Henan
Snowbird HK
Snow Bird (Hong Kong) Holding Company Limited
Snowbird PRC
Snowbird WFOE and Snowbird Henan collectively
Snowbird WFOE
Puyang Snowbird Trading Co., Ltd.
G-6
Specified Events
Events such as (i) the injection of assets or shares of a PRC
domestic company into the SPV; (ii) subsequent equity financing by such SPV outside of the PRC; (iii) capital reduction; and
(iv) share transfers or share swaps.
SPV
Special Purpose Vehicle
Sqm
Square meters
Stabilization Period
30 calendar days after the date of the commencement of trading
Test Report
Test report, dated June 2014, prepared by Hohenstein Textile
Testing Institute GmbH & Co. KG with its business address at:
Schloss Hohenstein, 74357 Boennigheim, Germany
Transaction
The Offering and the Listing of the Company’s shares
TRE
Tax Resident Enterprise
Underwriter
Germany
Underwriting Agreement
Agreement between, inter alia,the Company, Mr. YAN Changzai, Alrai S.à.r.l, BIG BUSINESS GLOBAL HOLDINGS LIMITED
with the sole shareholder Mr. CHOI Siu Hung and the Underwriter which will be concluded shortly after the date of this Prospectus
United States / US
United States of America
VAT
Value Added Tax
WFOE
Wholly foreign-owned enterprise established under the PRC
laws.
WKN
German Securities Identification Number
WpHG
German Securities Trading Act (Wertpapierhandelsgesetz)
WpPG
German Securities Prospectus Act (Wertpapierprospektgesetz)
G-7
WpÜG
German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Uebernahmegesetz)
WTO
World Trade Organization
2014H1 or 2014HY1
Six month period as at and ended 30 June 2014
2013H1 or 2013HY1
Six month period as at and ended 30 June 2013
G-8
27. SIGNATURES
_______________________________________________
Snowbird AG
signed by
YAN Changzai
QIU Duoxiang
Management Board (Vorstand)
S-1
27. SIGNATURES
_______________________________________________
ACON Actienbank AG
signed by
Dr. Michael Hasenstab
[Vorstand]
Beate Harr
[Prokuristin]
S-2

Snowbird AG

Transcription

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