Town Health International Medical Gp : Announcements and Notices -

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Town Health International Medical Group Limited ੰ਄਷ყᔼᐕණྠϞࠢʮ̡

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 3886)

SHARE OF LOSS OF A JOINT VENTURE

AND

POSSIBLE IMPAIRMENT LOSSES ON RECEIVABLES

This announcement is made by Town Health International Medical Group Limited (the "Company", together with its subsidiaries, the "Group") pursuant to the provisions of inside information under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and Rule 13.09(2) of the Rules (the "Listing Rules") Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

The board (the "Board") of directors (the "Directors") of the Company would like to inform the shareholders and potential investors of the Company that, based on the information currently available to the Board, (i) the Group would record a share of loss of a joint venture in the amount of approximately HK$20 million for the year ended 31 December 2017; and (ii) it is possible that the Group would record impairment losses in respect of the Group's receivables in the aggregate maximum amount of approximately HK$236 million, further details of which are set out below.

SHARE OF LOSS OF A JOINT VENTURE

The Group would record a share of loss of a joint venture which is owned as to 51% by the Group, namely, Sky View Investment Limited ("Sky View"), in the amount of approximately HK$20 million for the year ended 31 December 2017 (share of loss of such joint venture of approximately HK$3.6 million was recorded for the year ended 31 December 2016).

Sky View holds 22% interest in Rolaner International Limited, which through an operating company in the People's Republic of China (the "PRC"), operates a mobile application "Mei Li Shen Qi€ߕᘆग़ኜ", one of the largest online communities and e-commerce platforms with millions of users for medical beauty industry in the PRC.

Such share of loss of a joint venture is expected to cause material adverse impact on the financial performance of the Group for the year ended 31 December 2017.

POSSIBLE IMPAIRMENT LOSSES ON RECEIVABLES

Reference is made to the announcement of the Company dated 4 November 2016 (the "Announcement") in relation to the disposal of the entire issued share capital of Wise Lead Holdings Limited ("Wise Lead"), which owns 49% interest in Huayao Medical Group Limited ("Huayao"), by the Group (the "Disposal").

It is possible that the Group would record impairment losses in respect of the Group's receivables, in particular, (i) impairment on the promissory note in the principal amount of approximately HK$203.7 million (the "Wise Lead Promissory Note") issued by the purchaser in the Disposal (the "Wise Lead Purchaser"), a third party individual, in favour of Town Health (BVI) Limited ("TH BVI"), being the vendor in the Disposal and a wholly-owned subsidiary of the Company, up to the maximum amount of approximately HK$203.7 million; and (ii) impairment on the promissory note in the principal amount of HK$30 million (the "New Ray Promissory Note") issued by a corporation which is a third party independent of the Company and its connected persons (as defined in the Listing Rules) (the "New Ray Purchaser") in favour of Town Health Pharmaceutical Limited, a wholly-owned subsidiary of the Company, together with the interest accrued and to be accrued thereon, up to the maximum amount of approximately HK$32.3 million (collectively as the "Possible

Impairments").

Wise Lead Promissory Note

As disclosed in the Announcement, a promissory note in the principal amount of HK$230 million was issued by the Wise Lead Purchaser on 4 November 2016 in favour of TH BVI in settlement of the consideration of the Disposal in the amount of HK$230 million. In December 2016, the Wise Lead Purchaser made partial early repayment of the Wise Lead Promissory Note to TH BVI, and the outstanding principal amount of the Wise Lead Promissory Note as at the date of this announcement is approximately HK$203.7 million. The maturity date of the Wise Lead Promissory Note is 4 November 2019.

The Wise Lead Promissory Note is secured by a share mortgage dated 4 November 2016 executed by the Wise Lead Purchaser in favour of TH BVI, pursuant to which the Wise Lead Purchaser has mortgaged the entire issued share capital of Wise Lead to TH BVI. Wise Lead owns 49% interest in Huayao, and the major assets of Huayao are a rehabilitation-oriented hospital situated in Hangzhou and certain outpatient medical clinics situated in Hangzhou. It has recently come to the attention of the management of the Company, upon preliminary inspection conducted by the staff members of the Company, that the operation of the hospital and the outpatient medical clinics in Hangzhou of Huayao have ceased. As a result, the Group has engaged an independent expert to conduct a credit assessment of the Wise Lead Purchaser, the results of which are currently expected to be delivered to the Group in late April 2018. Subject to the results of such credit assessment becoming available and subject to further discussion with the auditors of the Company, impairment loss up to the amount of approximately HK$203.7 million in respect of the Wise Lead Promissory Note may be recognised.

New Ray Promissory Note

The New Ray Promissory Note was issued by the New Ray Purchaser in favour of Town Health Pharmaceutical Limited, a wholly-owned subsidiary of the Company, on 29 June 2016 in partial settlement of the consideration of the sale and purchase of shares of New Ray Medicine International Holding Limited ("New Ray"), whose shares are listed on the Main Board of the Stock Exchange (Stock code: 6108). The maturity date of the New Ray

Promissory Note is 29 June 2018.

Subject to the results of the credit assessment of the sole shareholder of the New Ray Purchaser conducted by the Group becoming available and subject to further discussion with the auditors of the Company, impairment loss up to the amount of approximately HK$32.3 million in respect of the New Ray Promissory Note may be recognised.

The recognition of the Possible Impairments, if materialises, may cause material adverse impact on the financial performance of the Group for the year ended 31 December 2017, or may even result in a substantial loss attributable to owners of the Company being recorded by the Group for the year ended 31 December 2017, as compared to a profit attributable to owners of the Company of approximately HK$63.5 million for the year ended 31 December 2016.

The Company is still in the process of finalising the annual results of the Group for the year ended 31 December 2017. The information contained in this announcement is only a preliminary assessment by the management of the Company based on figures and information made available to the Board as at the date hereof and is not based on any figures or information which has been reviewed by the Company's auditors. Finalised annual results of the Group and other details will be disclosed in the 2017 annual results announcement to be published by the Company.

Shareholders and potential investors of the Company are advised to exercise caution when dealing in the shares of the Company.

By order of the Board

Town Health International Medical Group Limited

Lee Chik Yuet

Executive Director

Hong Kong, 16 April 2018

As at the date of this announcement, the executive Directors are Miss Choi Ka Yee, Crystal (Chairperson), Dr. Hui Ka Wah, Ronnie, JP (Chief Executive Officer), Mr. Lee Chik Yuet and Mr. Wong Seung Ming (Chief Financial Officer); the non-executive Directors are Dr. Choi Chee Ming, GBS, JP (Deputy Chairman), Ms. Fang Haiyan (Deputy Chairperson), Mr. Tsai Ming-hsing (Deputy Chairman), Mr. Chen Jinhao and Dr. Cho Kwai Chee; and the independent non-executive Directors are Mr. Ho Kwok Wah, George, MH, Mr. Wong Tat Tung, MH, JP, Mr. Yu Xuezhong, Ms. Li Mingqin and Mr. Wang John Hong-chiun.