CONTINUING CONNECTED TRANSACTIONS

Transcription

1 We have entered into certain transactions with our connected persons which will continue following the Listing and which will constitute continuing connected transactions within the meaning of the Listing Rules. CONNECTED PERSONS 1. Jin Jiang Limited Jin Jiang Limited is a company incorporated under the laws of Hong Kong with limited liability on 8 November It is principally engaged in investment holding. Jin Jiang Limited is a company directly wholly-owned by Mr. Shum and hence, is a connected person of our Company. 2. Zhejiang Jia Yuan Group Zhejiang Jia Yuan Group is a company established under the laws of the PRC with limited liability on 29 March It is principally engaged in property development and property investment. Zhejiang Jia Yuan Group is a company indirectly wholly-owned by Mr. Shum and hence, is a connected person of our Company. 3. Changzhou Tian Yu Changzhou Tian Yu is a company established under the laws of the PRC with limited liability on 3 March It is principally engaged in property development. Changzhou Tian Yu is a company owned as to 30% by Mr. Huang Fuqing ( ), an executive Director and hence, is a connected person of our Company. 4. Zhejiang Xigu Digital Technology Co., Ltd.* ( ) ( Zhejiang Xigu ) Zhejiang Xigu is a company established under the laws of the PRC with limited liability on 15 August It is principally engaged in the manufacture, installation and sale of software and system equipments. Zhejiang Xigu is a company directly owned as to 90% by Jiaxing Dongyuan Investment Co., Ltd.* ( ) (a company which is directly owned as to 75% by Ms. Wang Xinmei ( ), the spouse of Mr. Shum, and 25% by Mr. Shen Xiaodong ( ), the son of Mr. Shum), 9.6% by Ms. Wang Xinmei ( ) and 0.4% by Mr. Shen Jianxing ( ) (an Independent Third Party). Zhejiang Xigu is therefore a connected person of our Company. 5. Jiaxing City Deyu Electronics Technology Co., Ltd.* ( ) ( Jiaxing Deyu ) Jiaxing Deyu is a company established under the laws of the PRC with limited liability on 1 September It is principally engaged in the manufacture, installation and sale of software and system equipments. Jiaxing Deyu is a wholly-owned subsidiary of Zhejiang Xigu and hence, is a connected person of our Company. 234

2 6. Jiaxing City Boyuan Architecture Design Co., Ltd.* ( ) ( Jiaxing Boyuan ) Jiaxing Boyuan, formerly known as Zhejiang Jiayuan Architecture Design Co., Ltd.* ( ), is a company established under the laws of the PRC with limited liability on 29 January It is principally engaged in project design and decoration. Jiaxing Boyuan is a company indirectly wholly-owned by Mr. Shum and hence, is a connected person of our Company. 7. Jia Yuan Property Jia Yuan Property is a company established under the laws of the PRC with limited liability on 26 April It is principally engaged in property management. Jia Yuan Property is a company indirectly wholly-owned by Mr. Shum and hence, is a connected person of our Company. FULLY EXEMPT Upon Listing, the transactions set forth below will constitute fully exempt continuing connected transactions for our Company under the Listing Rules: Trademark License Agreement On 27 July 2015, our Company entered into a trademark license agreement (the Trademark License Agreement ) with Jin Jiang Limited and Zhejiang Jia Yuan Group (collectively, the Licensors ), pursuant to which the Licensors agreed to grant to us a non-exclusive license to use, and the rights to sub-license to our subsidiaries to use all of the trademarks (the Licensed Trademarks ) set forth in the section headed Statutory and general information Further information about the business of our Company 9. Intellectual property rights of our Group in Appendix VI to this document, on or in connection with the real estate business and any other agreed business segment in the PRC, Hong Kong and Macau, without royalty or cost. The Trademark License Agreement is for a term of 10 years commencing on 27 July We have been using the Licensed Trademarks in connection with our business conducted over the years. As such, in order to maintain the consistency of our market image, we will continue to use the Licensed Trademarks after Listing. Our Directors are of the view that (i) the Licensed Trademarks are essential to our business, which, to a significant extent is built on brand recognition, and a longer duration of the licence term will afford a greater degree of stability and continuity to our business; and (ii) it is normal business practice for license agreement of this type to be of a term of 10 years. The Sole Sponsor concurs with the view of our Directors. As there is no consideration payable by us in respect of the Trademark License Agreement, the transaction contemplated thereunder constitutes a de minimis continuing connected transaction exempt from reporting, announcement and independent shareholders approval requirement as set out in Chapter 14A of the Listing Rules. 235

3 Tenancy Agreement Since 2014, Changzhou Jinyuan has been leasing 15/F, Zhongchuang Building, Times Square, Xinbei District, Changzhou, PRC* ( 15 ) in the PRC (the Changzhou Property ) with a GFA of approximately 291 sq.m. for office use. The reason for entering into the Tenancy Agreement was that we have been using the Changzhou Property for years and any relocation will cause unnecessary disruption. On 31 December 2015, Changzhou Tian Yu, as lessor, and Changzhou Jinyuan, as lessee, entered into a tenancy agreement (the Tenancy Agreement ), pursuant to which Changzhou Tian Yu agreed to lease the Changzhou Property to Changzhou Jinyuan as office for a term of one year from 1 January 2016 to 31 December 2016 at the rent of RMB100,000 per annum exclusive of utilities charges and other outgoings which are payable by Changzhou Jinyuan. Pursuant to the Tenancy Agreement, Changzhou Tian Yu shall grant Changzhou Jinyuan a right of first refusal in the event that Changzhou Tian Yu wishes to transfer the Changzhou Property. Our Directors consider that the rental in respect of the Changzhou Property is comparable to the market level of similar properties in the locality and is fair and reasonable with reference to the market data on rentals of similar properties in the locality. Our Directors have confirmed that the transaction under the Tenancy Agreement is in the ordinary and usual course of business of our Group, on normal commercial terms or better, fair and reasonable and in the interests of our Company and Shareholders as a whole. As all of the applicable percentage ratios (except profits ratio) in respect of the annual rent of the Tenancy Agreement are less than 0.1%, the transaction contemplated thereunder constitutes a de minimis continuing connected transaction exempt from reporting, announcement and independent shareholders approval requirement as set out in Chapter 14A of the Listing Rules. NON-EXEMPT Upon Listing, the transactions set forth below will constitute non-exempt continuing connected transactions for our Company under the Listing Rules: Intelligent System Equipment Procurement Framework Agreement Background During the Track Record Period, we entered into intelligent system equipment procurement agreements and purchased a variety of intelligent system equipments including security monitoring equipment, video intercom system, access control equipment and alarm system for some of our property development projects (the Intelligent System Equipment ) from Zhejiang Xigu and Jiaxing Deyu (collectively, the ISE Suppliers ). As of the Latest Practicable Date, certain intelligent system equipment procurement agreements for our property projects under development had not been completed and would continue after Listing. The ISE Suppliers also provide services to other third party customers other than our Group. Material terms On 12 February 2016, our Company entered into an intelligent system equipment procurement framework agreement with Zhejiang Xigu and Jiaxing Deyu to govern the procurement of the Intelligent System Equipment by our Group for its property development projects in the PRC from the ISE Suppliers (the Intelligent System Equipment Procurement Framework Agreement ). 236

4 Under the Intelligent System Equipment Procurement Framework Agreement, the ISE Suppliers (i) have confirmed that they would continue to supply Intelligent System Equipment and to provide us with the installation and debugging services under the existing procurement agreements; and (ii) have agreed that they would supply such products and services to the members of our Group from time to time for our new property development projects or new phases of the existing projects. The parties will enter into specific implementation agreements in connection with procurement of Intelligent System Equipment in accordance with the Intelligent System Equipment Procurement Framework Agreement after arm s length negotiations, which will set out specific terms, such as the product price, quantity, standard, specifications and delivery time of the Intelligent System Equipment, provided that, the aggregate purchase amounts of the Intelligent System Equipment for each year shall not exceed the corresponding annual cap as set out in the paragraph headed Annual caps and basis of caps in this section below. The Intelligent System Equipment Procurement Framework Agreement will be effective from the Listing Date until 31 December Pricing Policy The purchase amounts will be determined by reference to the prevailing market prices of similar Intelligent System Equipment taking into consideration of the expected quality and services rendered by the ISE Suppliers, and on similar terms of payment and delivery offered to our Group. To ascertain the prevailing market price and ensure that the terms of purchase offered by the ISE Suppliers are no less favourable to our Group than those available from independent third parties, our Group will obtain quotations for comparable products from other independent suppliers shortlisted and approved by us, in order to determine whether viable alternatives of comparable quality can be obtained in a timely manner. Historical transaction amounts The aggregate purchase amounts paid by us to the ISE Suppliers for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 were approximately RMB19.2 million, RMB24.9 million, RMB8.6 million and RMB8.3 million, respectively. Annual caps and basis of caps We expect the aggregate annual purchase amounts to be paid by us for each of the three years ending 31 December 2016, 2017 and 2018 will be approximately RMB26.3 million, RMB26.2 million and RMB13.3 million, respectively. The above annual caps are arrived by reference to (i) the outstanding contract fees for the unrendered services under the existing procurement agreements which is estimated to be approximately RMB4.0 million for the year ending 31 December 2016; (ii) our estimation on the demand for the uncontracted Intelligent System Equipment, projected with reference to the aggregate GFA under development and planned GFA for future development of approximately 1.65 million sq.m. for our 9 new phases of existing property development projects, which we may procure the Intelligent System Equipment from the ISE Suppliers during 2016 to 2018 according to our development schedule; and the estimated average unit procurement fee of approximately RMB41.5 per sq.m. spread out over the 3-year period by reference to the historical unit procurement fees for completed phases of corresponding property development projects; (iii) the historical purchase amounts paid to the ISE Suppliers by our Group for the completed phases during the Track Record Period, with unit procurement fees ranging from approximately RMB22 to RMB61 per sq.m. depending on the types of property and the Intelligent System Equipment required in the particular project; and (iv) a reasonable increment of the purchase price payable to the ISE Suppliers taking into account the expected inflation rate and increases in costs for the three years ending 31 December The proposed annual caps for the years ending 31 December 2016 and 2017 are larger than the historical transaction amounts as we expect these years to be the peak completion period whereby substantial amount of our new phases of property development project will be completed. 237

5 Architecture Design Service Framework Agreement Background During the Track Record Period, we engaged Jiaxing Boyuan for providing us with architecture design service for some of our property development projects including (i) formulating the proposal, the preliminary design plan and the construction plan; and (ii) supervising the implementation of relevant design plan and construction plan for projects under construction (the Architecture Design Service ). As of the Latest Practicable Date, certain architecture design service agreements for our property projects under development had not been completed and would continue after Listing. Jiaxing Boyuan also provides services to other third party customers other than our Group. Material terms On 12 February 2016, our Company entered into an architecture design service framework agreement with Jiaxing Boyuan to govern the provision of the Architecture Design Service by Jiaxing Boyuan to our Group for its property development projects (the Architecture Design Service Framework Agreement ). Under the Architecture Design Service Framework Agreement, Jiaxing Boyuan (i) has confirmed that it would continue to provide us with the Architecture Design Service under the existing service agreements; and (ii) has agreed that it would provide such services to members of our Group from time to time for our new property development projects or new phases of the existing projects. The parties will enter into specific implementation agreements in connection with the provision of the Architecture Design Service in accordance with the Architecture Design Service Framework Agreement after arm s length negotiations, which will set out specific terms, such as the unit service fee, the size of the project, the design requirement, standard and specification, provided that, the service fees for the provision of the Architecture Design Service for each year shall not exceed the corresponding annual cap as set out in the paragraph headed Annual caps and basis of caps in this section. The Architecture Design Service Framework Agreement will be effective from the Listing Date until 31 December Pricing Policy The service fees will be determined by reference to the prevailing market prices of similar Architecture Design Service taking into consideration of the qualification, experience, expected quality and services rendered by Jiaxing Boyuan. To ascertain the prevailing market price and ensure that the terms of service offered by Jiaxing Boyuan are no less favourable to our Group than those available from independent third parties, our Group will obtain quotations for comparable services from other independent service providers shortlisted and approved by us, in order to determine whether viable alternatives of comparable quality can be obtained in a timely manner. Historical transaction amounts The aggregate service fees paid by us to Jiaxing Boyuan for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 were approximately RMB4.3 million, RMB53.0 million, RMB8.7 million and RMB32.0 million, respectively. Annual caps and basis of caps We expect the aggregate annual service fees to be paid by us for each of the three years ending 31 December 2016, 2017 and 2018 will be approximately RMB59.1 million, RMB39.7 million and RMB31.4 million, respectively. 238

6 The above annual caps are arrived by reference to: (i) the outstanding contract fees for the unrendered services under the existing service agreements, which is estimated to be approximately RMB32.4 million, RMB13.0 million and RMB8.1 million for the years ending 31 December 2016, 2017 and 2018, respectively; (ii) our estimation on the demand for the uncontracted Architecture Design Service, projected with reference to the aggregate planned GFA for future development of approximately 1.6 million sq.m. for our new phases of existing property development projects, which we may engage Jiaxing Boyuan to provide us with the Architecture Design Service during 2016 to 2018 according to our development schedules; and the average unit service fee for completed phases of corresponding property development projects; (iii) the historical service fees paid to Jiaxing Boyuan by our Group for the completed projects during the Track Record Period, with unit service fees ranging from approximately RMB42 to RMB123 per sq.m. depending on the types of property and the Architecture Design Service required in the particular project; and (iv) a reasonable increment of the service fees payable to Jiaxing Boyuan taking into account the expected inflation rate and increases in costs for the three years ending 31 December Property Management Service Framework Agreement Background During the Track Record Period, we engaged Jia Yuan Property for providing us with pre-delivery property management service including property maintenance, site security, gardening, cleaning and other ancillary services (the Property Management Service ) for all of our property development projects prior to the establishment of an owners committee of the relevant building developed by us. As of the Latest Practicable Date, certain property management service agreements for our property projects had not been completed and would continue after Listing. Jia Yuan Property also provides services to other third party customers other than our Group. Material terms On 12 February 2016, our Company entered into a property management service framework agreement with Jia Yuan Property to govern the provision of the Property Management Service by Jia Yuan Property to our Group for its property development projects (the Property Management Service Framework Agreement ). Under the Property Management Service Framework Agreement, Jia Yuan Property (i) has confirmed that it would continue to provide the Property Management Service under the existing service agreements; and (ii) has agreed that it would provide such services to members of our Group from time to time for our new property development projects or new phases of the existing projects. The parties will enter into specific implementation agreements in connection with the provision of the Property Management Service in accordance with the Property Management Service Framework Agreement, which will set out specific terms, such as the unit management fees, GFA of the relevant properties and the scope of service, provided that, the aggregate management fees for the provision of Property Management Service for each year shall not exceed the corresponding annual cap as set out in the paragraph headed Annual caps and basis of caps in this section. The Property Management Service Framework Agreement will be effective from the Listing Date until 31 December

7 Pricing and tendering policy The management fee is determined with reference to the guidance rate set by the relevant government authorities and the GFA of the relevant property development projects. In accordance with the relevant PRC property management laws and regulations, our Group conducts a tender process to select and appoint professional property management companies to provide us with the Property Management Services. We maintain a standard and systematic tender submission procedures which applies to both connected persons and Independent Third Parties. Under such tender procedures, a bid evaluation committee consisting of our representative(s) and independent property management experts will assess and evaluate each submitted bid under a set of criteria, including the submitted tender price, the reputation and the management policies and procedures of such property management companies, and our Group will select and appoint the candidate adhering the recommendation from the bid evaluation committee. Historical transaction amounts For each of the three financial years ended 31 December 2014, we were not required by Jia Yuan Property to pay, and did not pay any management fees to Jia Yuan Property in respect of the Property Management Service provided to us. Since 2015, we commenced to pay Jia Yuan Property for the Property Management Service rendered. For the eight months ended 31 August 2015, the management fees paid by us to Jia Yuan Property were approximately RMB2.0 million. Annual caps and basis of caps We expect the aggregate annual management fees to be paid by us for each of the three years ending 31 December 2016, 2017 and 2018 will be approximately RMB17.0 million, RMB18.3 million and RMB20.7 million, respectively. The above annual caps are derived based on (i) the management fees payable for the contracted Property Management Service under the signed management agreements, which amounts to approximately RMB17.0 million, RMB14.6 million and 19.7 million for the years ending 31 December 2016, 2017 and 2018 respectively; (ii) our estimation on the demand for the uncontracted Property Management Service, projected with reference to the aggregate GFA under development and planned GFA for future development of approximately 0.4 million sq.m. for our new phases of existing property development projects, which we expect to complete the development and may engage Jia Yuan Property to provide us with the Property Management Service during 2017 to 2018; (iii) the average unit management fee of RMB2 per sq.m. under the signed management agreements; and (iv) a reasonable increment of the guidance rate taking into account the historical increment. Implication under Listing Rules Intelligent System Equipment Procurement Framework Agreement: as all of the applicable percentage ratios (except profits ratio) in respect of the annual caps of this non-exempt continuing connected transaction are less than 5% on an annual basis, the transactions contemplated under the Intelligent System Equipment Procurement Framework Agreement will be subject to the reporting, announcement and annual review requirements, but are exempt from the independent shareholders approval requirement, as set out in Chapter 14A of the Listing Rules. 240

8 Architecture Design Service Framework Agreement: as all of the applicable percentage ratios (except profits ratio) in respect of the annual caps of this non-exempt continuing connected transaction are less than 5% on an annual basis, the transactions contemplated under the Architecture Design Service Framework Agreement will be subject to the reporting, announcement and annual review requirements, but are exempt from the independent shareholders approval requirement as set out in Chapter 14A of the Listing Rules. Property Management Service Framework Agreement: as all of the applicable percentage ratios (except profits ratio) in respect of the annual caps of this non-exempt continuing connected transaction are less than 5% on an annual basis, the transactions contemplated under the Property Management Service Framework Agreement will be subject to the reporting, announcement and annual review requirements, but are exempt from the independent shareholders approval requirement as set out in Chapter 14A of the Listing Rules. Application for waivers As the continuing connected transactions contemplated under each of the Intelligent System Equipment Procurement Framework Agreement, the Architecture Design Service Framework Agreement and the Property Management Service Framework Agreement will continue after the Listing on a recurring basis, our Directors consider that strict compliance with the announcement requirement under the Listing Rules would be unduly burdensome and would incur unnecessary administrative costs to our Company each time when such transactions arise. With respect to the above continuing connected transactions, we have, pursuant to Rule 14A.105 of the Listing Rules, applied for [and the Stock Exchange has agreed to grant] a waiver from strict compliance with the relevant requirements under Chapter 14A of the Listing Rules. We have compiled and will comply with the written agreement requirement under Rule 14A.34 of the Listing Rules, the annual reporting requirement under Rule 14A.49 of the Listing Rules and other requirements applicable under Chapter 14A of the Listing Rules. Confirmation from our Directors Our Directors (including our independent non-executive Directors) confirm that the above continuing connected transactions have been entered into in the ordinary and usual course of business of our Group and are based on normal commercial terms that are fair and reasonable and in the interest of our Company and our Shareholders as a whole, and that the terms of each of the Intelligent System Equipment Procurement Framework Agreement, the Architecture Design Service Framework Agreement and the Property Management Service Framework Agreement and their respective annual caps are fair and reasonable and in the interests of our Company and our Shareholders as a whole. Confirmation from the Sole Sponsor The Sole Sponsor considers that the above continuing connected transactions have been entered into in the ordinary and usual course of business of our Group and are based on normal commercial terms that are fair and reasonable and in the interest of our Company and our Shareholders as a whole, and that the terms of each of the Intelligent System Equipment Procurement Framework Agreement, the Architecture Design Service Framework Agreement and the Property Management Service Framework Agreement and their respective annual caps are fair and reasonable and in the interests of our Company and our Shareholders as a whole. 241

9 RELATED PARTY TRANSACTIONS Our Group entered into certain related party transactions with its related parties during the Track Record Period (the Related Party Transactions ). Details of the Related Party Transactions are set out in note 39 in the accountants report set out in Appendix I to this document. Save and except for the continuing connected transactions which are expected to continue after the Listing, all other Related Party Transactions have either been discontinued or settled or are expected to be discontinued or settled upon or prior to the Listing. 242