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UNIVERSAL TECHNOLOGIES HOLDINGS LIMITED
環 球 實 業 科 技 控 股 有 限 公 司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1026)
UPDATE ANNOUNCEMENT ON
STRUCTURED CONTRACTS RELATING TO THE BUSINESS OPERATIONS OF OPCO
Reference is made to the Annual Report of the Company for the year ended 31 December 2014 which was published by the Company on 29 April 2015. This announcement serves to provide additional information on the Structured Contracts between IPS-WFOE (an indirect 51%- owned subsidiary of the Company) and Opco (whose financial results are accounted for and consolidated in the Group's consolidated accounts through the Structured Contracts and the effective interest attributable to the Group is 51%).
BACKGROUND OF THE STRUCTURED CONTRACTS
Reference is made to the Reorganization Announcement dated 9 September 2005 in relation to the Reorganization whereby the Company (through IPS-WFOE) acquired an effective control over the entire interest in Opco through the Structured Contracts. As disclosed in the Reorganization Announcement, at the time of the entering into of the Structured Contracts, (i) operators of value-added telecommunication services in the PRC must obtain a valid Internet Content Provider (ICP) license issued by the Ministry of Information Industry in the PRC or its provincial-level bureau (MII); (ii) PRC laws and regulations limited foreign investment in and only allowed foreign investors to own up to 50% equity interest in businesses providing value-added telecommunication services in the PRC; and (iii) the Group's own PRC subsidiaries were not entitled to apply for such ICP license. Therefore, the Company underwent the Reorganization so as to acquire an effective control over the entire interest in Opco and entered into the Structured Contracts to recognize and receive all the economic benefits of the businesses and operations of Opco (including the revenues generated from the operation of its businesses and all dividends and distributions accrued thereon).
PARTICULARS AND BUSINESSES OF OPCO
Opco is a limited liability company established in the PRC and is principally engaged in the provision of online payment services, system integration, and software applications. Its scope of business includes internet information services, excluding information in relation to electronic public notices, press release, publication, education, medical information, medicines and medical equipment, and also involves in software and system integration and sale of the related products and online sales, provision of ecommerce information.
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As of the date of this announcement, the equity interest of Opco is 10.2% held by Mr. Liu,
9.8% by Madam Luan and 80% by Lanpu.
SUMMARY OF THE MAJOR TERMS OF THE STRUCTURED CONTRACTS (1) Exclusive Purchase Right Contract
Date: 9 September 2005
Parties: (i) Opco Shareholders and Opco (as grantors); and
(ii) IPS-WFOE (as grantee)
Major terms: Under the Exclusive Purchase Right Contract, (i) Opco Shareholders granted to IPS-WFOE the exclusive right to purchase all their equity interests in Opco for the consideration of RMB1.00 (HK$1.20); and (ii) Opco granted to IPS-WFOE the exclusive right to purchase all the assets of Opco for the consideration of RMB1.00 (HK$1.20). These exclusive purchase rights are exercisable by IPS-WFOE as soon as the purchases become permissible under the PRC laws.
(2) Pledge Contract
Date: 9 September 2005
Parties: (i) Opco Shareholders (as pledgors); and
(ii) IPS-WFOE (as pledgee)
Major terms: Under the Pledge Contract, Opco Shareholders granted to IPS-WFOE a continuing first priority security interest over their respective equity interests in Opco. The purpose of the Pledge Contract was to secure the due performance of the obligations of Opco Shareholders under the Exclusive Purchase Right Contract. Under the terms of the Pledge Contract, the pledge shall become enforceable upon the occurrence of the following events of default: (i) breaches by the Opco Shareholders or Opco of their material obligations under the Pledge Contract or the Exclusive Purchase Right Contract; (ii) Opco ceasing to conduct its operations or being dissolved, or being ordered to cease its operations, be dissolved or be wound up; (iii) any of the Opco Shareholders or Opco being involved in any material disputes or litigation which is likely to have a material adverse effect on their ability to perform their obligations under the Pledge Contract or the Exclusive Purchase Right Contract; and (iv) any other circumstance under which the disposal by way of enforcement of the pledged equity interests is permissible under the applicable PRC law.
(3) Operative Contracts
Date: 9 September 2005
Parties: (i) The Company;
(ii) IPS-WFOE; and
(iii) Opco
Major terms: IPS-WFOE entered into six Operative Contracts with Opco and the Company entered into one Operative Contract with Opco, whereby the Company and IPS-WFOE provided various licenses, lease and consultancy services to Opco which were
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critical to the value-added telecommunication operations of Opco. In return for such licenses, lease and consultancy services, IPS-WFOE shall be entitled to receive all the cash received by Opco through its operations, which is surplus to Opco's basic requirements.
The seven Operative Contracts are: (i) Cooperative Framework Contract - serving as the master agreement setting out the context of the seven Operative Contracts and entitling IPS-WFOE to all the surplus cash of Opco; (ii) Company Trademark License Contract - whereby the Company granted a non-exclusive license to Opco for the use of certain trademarks owned by the Company; (iii) IPS-WFOE Trademark License Contract - whereby IPS-WFOE granted a non-exclusive license to Opco for the use of certain trademarks owned by IPS-WFOE; (iv) Software License Contract - whereby IPS-WFOE granted a non-exclusive license to Opco for the use of certain software owned by IPS- WFOE; (v) Domain Name License Contract - whereby IPS-WFOE granted a non- exclusive license to Opco for the use of certain domain names owned by IPS-WFOE; (vi) Assets Leasing Contract - whereby IPS-WFOE leased certain assets to Opco; and (vii) Technical Consultancy Services Contract - whereby IPS-WFOE agreed to provide technical consulting, maintenance and other related consultancy services to Opco.
SIGNIFICANCE OF BUSINESSES OF OPCO GROUP TO THE GROUP
As a result of the Structured Contracts, the financial statements of the Opco Group were consolidated to the Group's financial statements. For the two financial years ended 31
December 2014, the financial results of the Opco Group (which are subject to the Structured
Contracts) contributed to a significant proportion of the Group's financial results:
2014 2 013
Opco
Group Group
Opco
Group Group
HK$'000 HK$'000 % HK$'000 HK$'000 %
Revenue 278,565 317,148 87.83 148,243 189,847 78.09
Net profits/(losses) 29,898 32,694 91.45 21,645 (34,085) (63.50) Total assets 863,419 1,310,148 65.90 668,957 1,166,235 57.36
REASONS FOR USING THE STRUCTURED CONTRACTS
The principal businesses of the Opco Group are classified as value-added telecommunication services which are categorized as a type of business which is subject to foreign investment restriction in the PRC. By virtue of the Administrative Provisions on Foreign-invested
Telecommunication Enterprises (外商投資電信企業管理規定), foreign investors shall not hold
more than 50% equity interest of a PRC enterprise providing value-added telecommunication services.
To the best understanding of the Company, apart from the foreign investment restrictions as mentioned above, the entering into of the Structured Contracts do not relate to any other legal or regulatory requirements.
As the Group, being a foreign investor, is subject to the aforesaid restriction in equity interest of Opco, the Structured Contracts serve as an effective means through which the Group may fully and effectively control the Opco Group and enjoy the economic benefit of the businesses
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of the Opco Group. The Structured Contracts (in particular, the Exclusive Purchase Right Contract) also enable the Company (or its nominee) to acquire the entire equity interest in Opco as and when the foreign investment restriction is lifted.
RISKS ASSOCIATED WITH THE STRUCTURED CONTRACTS
(A) Regulatory and policy change on Variable Interest Entity (VIE) structure
The Company was advised by its PRC legal adviser that (i) the Structured Contracts do not violate any mandatory laws and regulations in the PRC and are valid, binding and enforceable on the relevant parties; and (ii) in their opinion, the Structured Contracts should not be considered to be in violation of Article 52 of the PRC Contract Law, which renders void any contracts which are regarded to be ''concealing illegal intentions with a lawful form''. However, there can be no assurance that the Structured Contracts will be accepted by the PRC government and authorities as in compliance in all respects with the PRC laws and regulations, and there can be no assurance that the validity and enforceability of the Structured Contracts will not be affected by any future regulatory or policy change in the PRC in respect of VIE structure. If that happens, the businesses and operations of the Group may be adversely affected.
(B) Potential conflict of interests between the Opco Shareholders and the Group
The Group's control over the Opco Group is based on the contractual arrangements under the Structured Contracts with Opco and the Opco Shareholders. As the Opco Shareholders are employees of the Group, the Company expects them to follow instructions of the Company. However, there is no absolute certainty that the Opco Shareholders will act in favour of the Group at all times. In addition, if any conflict of interests arises between the Group and the Opco Shareholders, the interest of the Group may be adversely affected.
UNWINDING OF THE STRUCTURED CONTRACTS
No Structured Contract has been unwound as at the date of this announcement. The Company does not intend to unwind any Structured Contract unless and until the foreign investment restriction relating to ownership of the equity interest in Opco is lifted. When the foreign investment restriction is lifted, the Company intends to exercise its exclusive purchase right under the Exclusive Purchase Right Agreement to acquire the entire equity interest in Opco, so that the Company can control the Opco Group through direct shareholding relationship rather than Structured Contracts.
LISTING RULES COMPLIANCE
As of the date of this announcement, (a) the equity interest of Opco is 10.2% held by Mr. Liu,
9.8% by Madam Luan and 80% by Lanpu; and (b) the equity interest of Lanpu is 51% held by Mr. Liu and 49% held by Madam Luan. On a look-through basis, Mr. Liu and Madam Luan respectively own 51% and 49% effective interest in Opco.
Mr. Liu was a former Director who resigned with effect from 8 June 2012. As of the date of this announcement, Mr. Liu is a director of certain subsidiaries of the Company, and is therefore regarded as a connected person at the subsidiary level under the definitions of the Listing Rules.
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Madam Luan was a former Director who resigned with effect from 10 September 2012. As of the date of this announcement, Madam Luan is a director of certain subsidiaries of the Company, and is therefore regarded as a connected person at the subsidiary level under the definitions of the Listing Rules.
Lanpu is a limited liability company established in the PRC. To the best knowledge, information and belief of the Directors, Lanpu has not conducted any active business activities since its date of incorporation, and was established by Mr. Liu and Madam Luan as an investment holding company and special purpose vehicle through which they hold the registered capital of Opco. Lanpu is controlled by Mr. Liu and Madam Luan and is therefore regarded as a connected person at the subsidiary level under the definitions of the Listing Rules.
As disclosed in the Reorganization Announcement, the Structured Contracts were regarded as connected transactions when they were entered into on 9 September 2005 under the then- prevailing Listing Rules. The Structured Contracts have already been approved by the Independent Shareholders (as defined in the Reorganization Announcement) at the Company's extraordinary general meeting held on 18 October 2005.
The Structured Contracts have not been materially supplemented or modified since their date of execution up to the date of this announcement. If there is any material change to the terms of the Structured Contracts which is required to be disclosed under the Listing Rules, the Company will make further announcement(s) as and when appropriate.
DEFINITIONS
In this announcement, the following expressions shall, unless the context requires otherwise, have the following meanings:
''Board'' board of directors of the Company
''Company'' Universal Technologies Holdings Limited, a company incorporated with limited liability in the Cayman Islands, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 1026)
''connected person(s)'' having the meaning ascribed thereto under the Listing Rules
''Director(s)'' director(s) of the Company
''Exclusive Purchase
Right Contract''
the ''Exclusive Purchase Right Contract'' entered into between (i) Opco Shareholders and Opco (as grantors) and (ii) IPS-WFOE (as grantee) dated 9 September 2005, which is described in more details under paragraph (1) of the section headed ''Summary of the Major Terms of the Structured Contracts'' in this announcement
''Group'' the Company and its subsidiaries
''HK$'' Hong Kong dollars, the lawful currency of Hong Kong
''Hong Kong'' Hong Kong Special Administrative Region of China
''ICP'' Internet Content Provider
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''IPS-WFOE'' *International Payment Solutions (China) Limited (易之付（上海）電 子科技有限公司) (formerly known as *Universal Media (Shanghai) Limited (環影多媒體技術（上海）有限公司)), a wholly foreign owned
enterprise established under the laws of the PRC and an indirect 51%- owned subsidiary of the Company
''Lanpu'' *Shanghai Lanpu Information Technology Co., Ltd. (上海藍普信息科
技有限公司), a limited liability company established under the laws of
the PRC whose equity interest is held as to 51% by Mr. Liu and 49%
by Madam Luan
''Listing Rules'' the Rules Governing the Listing of Securities on the Stock Exchange
''Madam Luan'' Madam Luan Yumin, the registered holder of 49% equity interest in
Opco
''MII'' the Ministry of Information Industry of the PRC, or its provincial- level bureau
''Mr. Liu'' Mr. Liu Ruisheng, the registered holder of 51% equity interest in
Opco
''Opco'' *Universal eCommerce China Limited (上海環迅電子商務有限公司) (formerly known as *International Payment Solutions (Shanghai)
Limited (上海環迅電子商務有限公司)), a limited liability company
established under the laws of the PRC whose financial results are accounted for and consolidated in the Group's consolidated accounts through the Structured Contracts and the effective interest attributable to the Group is 51%
''Opco Group'' Opco and its subsidiaries
''Opco Shareholders'' collectively, Mr. Liu and Madam Luan
''Operative
Contracts''
the six operative contracts (namely the Cooperative Framework Contract, the IPS-WFOE Trademark License Contract, the Software License Contract, the Domain Name License Contract, the Assets Leasing Contract and the Technical Consultancy Services Contract) entered into between IPS-WFOE and Opco, and the Company Trademark License Contract entered into between the Company and Opco, in each case dated 9 September 2005, which are described in more details under paragraph (3) of the section headed ''Summary of the Major Terms of the Structured Contracts'' in this announcement
''Pledge Contract'' the ''Pledge Contract'' entered into between (i) Opco Shareholders (as pledgors) and (ii) IPS-WFOE (as pledgee) dated 9 September 2005, which is described in more details under paragraph (2) of the section headed ''Summary of the Major Terms of the Structured Contracts'' in this announcement
''PRC'' the People's Republic of China
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''Reorganization'' the corporate reorganization undertook by the members of the Group in or around 9 September 2005 involving a series of acquisition, transfer, disposal, intra-group disposals, assets transfer and the Structured Contracts, as described in the Reorganization Announcement
''Reorganization
Announcement''
the Company's announcement dated 9 September 2005 in relation to the Reorganization
''RMB'' Renminbi, the lawful currency of the PRC
''Stock Exchange'' The Stock Exchange of Hong Kong Limited
''Structured
Contracts''
collectively, the Exclusive Purchase Right Contract, the Pledge
Contract and the Operative Contracts
''VIE'' Variable Interest Entity
For the purpose of this announcement, RMB denominated amounts were converted into HK$
using the exchange rate of RMB 1.00 = HK$1.20 by way of illustration.
* for identification purposes only and should not be regarded as an official name
By Order of the Board
UNIVERSAL TECHNOLOGIES HOLDINGS LIMITED Chen Jinyang
Chairman
Hong Kong, 18 August 2015
As at the date of this announcement, the Board comprises:
Executive Directors:
Mr. Chen Jinyang (Chairman)
Mr. Chau Cheuk Wah (Chief Executive Officer)
Mr. Chen Runqiang
Mr. Chow Cheuk Lap
Mr. Zhou Jianhui
Non-executive Director:
Ms. Fan Man Yee Alice
Independent Non-executive Directors:
Dr. Cheung Wai Bun, Charles, J.P.
Mr. David Tsoi
Mr. Chan Chun Kau
Mr. Chao Pao Shu George
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