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Town Health and Ping An Insurance (Group) Company of China, Ltd. Join Forces to Develop and Manage Clinic Chain in Pearl River Delta Area
Date:4/9/2008

Town Health to Grant Call Option to Subscribe for 19.99% New Shares of Town

Health to Ping An Trust Co.

Making Strides Towards Establishing China Medical Services Business

HONG KONG, April 9, 2008 /Xinhua-PRNewswire/ -- Town Health International Holdings Co. Ltd, one of the largest medical service groups in Hong Kong, ("Town Health" or the "Group"; SEHK: 8138) announced that on 29 March 2008, (i) the Group, Guangdong Town Health Hospital Management Limited ("Guangdong Town Health") (as the agent of the Group) and Ping An Trust & Investment Co. Ltd. ("Ping An Trust Co."), a subsidiary of Ping An Insurance (Group) Company of China, Ltd. ("Ping An Group"; SEHK: 2318) entered into an exclusive cooperation agreement to develop and manage clinic chain in Guangdong(in particular the Pearl River Delta area); and (ii) the Group entered into a call option agreement with Ping An Trust Co to subscribe new shares of the Group. An application has been made to the Stock Exchange for the resumption of trading in the shares with effect from 9:30 a.m. on 7 April 2008.

Miss Crystal Choi, the Chairman of Town Health, said, "The development of this clinic chain project carries multiple implications for Town Health. Firstly, to operate and manage clinic chain is Town Health's utmost core business in Hong Kong. Leveraging the successful business model in Hong Kong, the business expansion to Mainland China, a market which is 185 times of Hong Kong, marks a new milestone and direction for Town Health business profile. If the clinic chain is launched successfully in the mainland China market, it will also generate new important revenue sources to the Group. Secondly, the join forces will bring synergistic effect for its existing operations and induce growth in all business segments of Town Health. Lastly, promoting high quality clinic chain to the mainland China will also be a contribution of Town Health to China's medical reform, improving and providing 1.3 billion of Chinese with quality healthcare and medical services under the successful business model of Hong Kong. We believe that the join forces will bring all parties to building the number one brand in clinic chains in China."

Dr. Cho Kwai Chee, Chief Executive Officer of Town Health continued, "We are pleased to enter into an exclusive framework agreement with Ping An Trust Co. to establish and manage clinic chain in the Guangdong provinces. A special trust with an initial fund of RMB 300 million will be established, which will be contributed equally for RMB150 million by each of Town Health and a qualified subsidiary of Ping An Group; total fund of Ping An Trust may be increased to RMB500 million if necessary. The fund will be used to implement the clinic chain project with providing medical services to residents in the Pearl River Delta area with high quality and standard services. Ping An Group has a popular reputation in the market, with the renowned brand name, versatile sales experience and massive clientele. Together with the successful management and business model of Town Health, the management is confidence with the combined forces to tap into the mainland China clinic chain industry. The granting of call option to Ping An Group is a vote of confidence in the performance and proven ability to manage clinic chain business by Town Health. We strongly believe the clinic chain project in the Pearl River Delta area will grow vigorously and generate positive results."

Exclusive Agreement to Develop and Manage Chain Clinics in Pearl River Delta Area with Ping An Trust Co.

Pursuant to the framework agreement, Guangdong Town Health (as the agent of the Group) and Ping An Trust Co. are entering into an exclusive agreement to develop and manage chain clinics in Guangdong, in particular the Pearl River Delta area.

The Group (through Guangdong Town Health) and a qualified Ping An subsidiary company shall participate and invest equally (50:50) to the Ping An trust scheme agreement, in its capacity as trustee for the implementation of the clinic project by acquiring of initially 80% equity interest in the Joint Venture Company ("Joint Venture Company"). Upon the indirect acquisition of 40% equity interest in the Joint Venture Company, it is the intention of the Group to treat such acquisition as an investment in an associated company.

The Joint Venture Company will participate in the operation of the clinic chain. It will principally be engaged in the operation and management of medical institutes, including but not limited to medical institutes, community clinics and chain clinics in Guangdong Province of the PRC.

Guangdong Town Health (being an agent of the Company) and Ping An Trust Co. will enter into the trust scheme agreement for a term of 10 years. Pursuant to the trust scheme agreement, Guangdong Town Health and a qualified Ping An subsidiary company shall establish a special trust with an initial fund of RMB 300 million (equivalent to approximately HK$330 million), which will be contributed by a qualified Ping An subsidiary company and Guangdong Town Health in cash in two tranches on 1:1 ratio (each party to duly make its contribution of RMB150 million). Depending on the funding requirements of the Joint Venture Company in future, the total fund of Ping An Trust may be increased to RMB500 million, subject to approval by the parties to the framework agreement and board of directors of the Joint Venture Company.

Town Health to Enter into the Management Consultancy Agreement with the Joint Venture Company

After the Joint Venture Company has been established, the Group or its nominee shall enter into a management consultancy agreement with the Joint Venture Company for a term of 5 years. According to the management consultancy agreement, the Group or its nominee shall provide consultancy and management services to all the chain clinics operated by the Joint Venture Company, including clinic operation and management, medical equipment maintenance, recruitment, staff training, clinic chain information technology system and drugs and medicine supply system. The aggregate management fee to be received by the Group from the Joint Venture Company in five fiscal years during the term of the consultancy agreement is to be based on the net profit of the Joint Venture Company, shall be capped at RMB22.5 million (equivalent to approximately HK$24.75 million).

Ping An Group may become the Group's second major shareholder

The Group conditionally agreed to grant the call option to Ping An Trust Co. pursuant to which it shall have the right to subscribe for up to 3,393,583,143 new shares, representing approximately 19.99% of the existing issued share capital of the Group in a twenty months call option period. The option shares will be issued at the exercise price which is HK$0.12 per option share or the average closing price of the five consecutive trading days immediately preceding the exercising of the call option, whichever is the lower. The fixed exercise price of HK$0.12 per option share represents:

(i) a discount of 20% to the closing price of HK$0.15 per share as quoted

on the Stock Exchange on 28 March 2008, being the last trading day

prior to the date of the call option agreement; and

(ii) a discount of approximately 16.67% to the average closing price of

HK$0.144 per share as quoted on the Stock Exchange over the last

five consecutive trading days up to and including 28 March 2008.

The 3,393,583,143 option shares represent approximately 19.99% of the existing issued share capital of the Group and approximately 16.67% of the issued share capital of the Group as enlarged by the issue and allotment of the option shares.

Adjustments and anti-dilution mechanism

During the call option period, the Group shall entitle the shareholder, Ping An Trust, to convert into new shares with the dilution events. With the anti-dilution mechanism, the Group shall grant further options to Ping An Trust at new subscription price to subscribe for additional shares equal to 20% of the new shares issued or issuable under the dilution events, minus one share at an exercise price equal to the relevant issue price/conversion price under the dilution events.

If Ping An Group exercises all call options, Ping An Group may become the second largest shareholder of Town Heath.

About Town Health International Holdings Co. Ltd (SEHK: 8138)

Town Health provides a wide spectrum of one-stop healthcare services as well as other healthcare services and products. In Hong Kong, the Group boasts a network of approximately 100 "Town Health Centres", providing a full range of medical services including outpatient services, dental services, specialist clinical services and paramedical services. In Mainland China, Town Health offers services ranging from dental and medical hospital to the distribution of cardiac-related surgical equipment. Around the world, Town Health is also committed to managing and operating cosmetic dermatology clinic chains, and men's healthcare clinics. Town Health is one of the largest medical services groups and the first listed healthcare company by itself through IPO (Initial Public Offering) in Hong Kong. The Group completed a successful listing on the GEM Board of the Stock Exchange of Hong Kong Limited in 2000. Town Health has been added to Morgan Stanley Capital International (MSCI) Hong Kong Small Cap Index Series in 2007.

The Group also actively invests in healthcare-related business. Hong Kong Health Check and Laboratory Holdings Company Limited (SEHK: 397) is the only listed healthcare company in Hong Kong that specializes in health check and medical diagnostic services. In February 2008, the Company announced its establishment of its wholly owned subsidiary in Guangdong to enter into the health check and medical diagnostic services industry in mainland China, which is also the first wholly-foreign enterprise with approved business scope to accept management and consultancy jobs for medical institutes in Guangdong Province. Core Healthcare Investment Holdings Ltd. (SEHK: 8250) participates in the pharmaceutical business and distribution network in China.

Attachment: Changes on Shareholdings Structure of the Company

The shareholding structure of the Company as at the date of this announcement and immediately upon the full exercise of the Call Option is set out as follows:

Shareholding structure

Existing immediately upon full

shareholding structure exercise of the Call Option

Number of % of total Number of % of total

Shares held issued Shares Shares held issued Shares

Broad Idea

International

Limited

(note 1) 7,890,742,353 46.50% 7,890,742,353 38.75%

Ping An Group

(note 2) -- -- 3,393,583,143 16.67%

Public 9,077,173,371 53.50% 9,077,173,371 44.58%

Total 16,967,915,724 100.00% 20,361,498,867 100.00%

Notes:

(1) 50.1% of the issued share capital of Broad Idea International Limited

is owned by Dr. Cho Kwai Chee, an executive Director, whilst 49.9% of

the issued share capital of Broad Idea International Limited is owned

by Dr. Francis Choi Chee Ming, JP, a non-executive Director.

(2) Pursuant to the Call Option Agreement, Ping An Trust Co. shall not be

interested in 20% or more of the issued Shares from time to time.

For further information, please contact:

PR ASIA Consultants Limited

Ms. Alice Li / Ms. Maggie Zha

Tel: +852-3183-0232 / +852-3183-0250

Fax: +852-2155-9165


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SOURCE Town Health International Holdings Co. Ltd.
Copyright©2008 PR Newswire.
All rights reserved

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