CHINA OVERSEAS GRAND OCEANS GROUP LIMITED Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
(Incorporated in Hong Kong with limited liability)
(Stock Code : 688)(incorporated in Hong Kong with limited liability)
(Stock Code: 81) VOLUNTARY ANNOUNCEMENT COMPLETION OF THE TRANSFER ANNOUNCEMENT COMPLETION OF THE TRANSFER CONTINUING CONNECTED TRANSACTION PURSUANT TO RULE 14A.60 OF THE LISTING RULES AND FRAMEWORK AGREEMENT
Reference is made to the respective announcements issued by COLI and COGO both dated 18 May
2015 in relation to, among other things, the transfer of equity interests in COGOPM by the Seller to the Purchaser.
Completion of the Transfer took place on 28 May 2015.
EXISTING PROPERTY MANAGEMENT TRANSACTIONS AND THE FRAMEWORK AGREEMENT
Before COGOPM became a subsidiary of COLI, members of COGOPM Group were engaged to provide Property Management Services in respect of various property developments owned by COGO Group in the PRC. These Property Management Transactions have become continuing connected transactions of COGO following completion of the Transfer.
On 1 June 2015, COGO and COPH entered into the Framework Agreement with respect to the
Property Management Transactions to be conducted from time to time for the period from 1 June
2015 to 31 May 2018.
As COPH is a direct wholly-owned subsidiary of COLI which in turn is a substantial shareholder of COGO holding approximately 37.98% of the number of shares of COGO in issue as at the date of this announcement, COPH is a connected person of COGO under Chapter 14A of the Listing Rules. Accordingly, members of COPH Group are connected persons of COGO Group and the Property Management Transactions constitute continuing connected transactions for COGO.
Since the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Caps for the Property Management Transactions are greater than 0.1% but less than 5% for COGO, the Property Management Transactions are subject to reporting, announcement and annual review requirements but exempt from the independent shareholders' approval requirement.
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For the avoidance of doubt, the Property Management Transactions do not constitute continuing connected transactions under Chapter 14A of the Listing Rules for COLI nor notifiable transactions for the purpose of Chapter 14 of the Listing Rules for COLI and COGO.
Reference is made to the respective announcements issued by COLI and COGO both dated 18 May
2015 in relation to, among other things, the transfer of equity interests in COGOPM by the Seller to the Purchaser.
Completion of the Transfer took place on 28 May 2015. Upon completion of the Transfer, COGO will no longer have any interest in the property management business and does not intend to re- engage in such non-core business in the medium term. Against this background, the Seller and the Purchaser have agreed to complete the Transfer without the non-competition undertaking given by COGO to COPH and the parties have agreed to cancel it.
2. EXISTING PROPERTY MANAGEMENT TRANSACTIONS
Before COGOPM became a subsidiary of COLI, members of COGOPM Group were engaged to provide Property Management Services in respect of various property developments owned by COGO Group in the PRC. These Property Management Transactions have become continuing connected transactions of COGO following completion of the Transfer.
Pursuant to Rule 14A.60 of the Listing Rules, the principal terms of in aggregate 39 contracts regarding existing Property Management Transactions are set out as follows:
and
Members of COGO Group (as owner of relevant property developments)
(1) cleaning, repair and maintenance services of common areas and facilities;
(2) security services and fire safety services;
(3) traffic management services within the property developments; (4) car park and club house management services;
(5) pre-delivery inspection services and minor repair works for the property
developments developed by COGO Group and assisting the hand-over of properties to buyers;
(6) greening maintenance and management; and
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(7) other ancillary services such as the maintenance of records of residents and contractors of the property developments.
Depending on local regulations and practices of relevant local PRC authorities such as the Commodity Price Bureau and the Ministry of Land and Resources, the services fees payable by COGO Group for the Property Management Transactions are determined with reference to:
(1) square meter of gross floor area under management;
(2) estimated costs and expenses for rendering the services; and
(3) the pricing for comparable properties in terms of types and locations of the communities.
The service fees shall be paid monthly, quarterly or semi-annually depending on the specific terms of the underlying contracts entered between the parties to the relevant Property Management Transactions.
These existing Property Management Transactions have become continuing connected transactions of COGO following completion of the Transfer on 28 May 2015.
On 1 June 2015, COGO and COPH entered into the Framework Agreement with respect to the
Property Management Transactions to be conducted from time to time for the period from 1 June
2015 to 31 May 2018, the principal terms of which are set out below:
1 June 2015
Parties
(1) COGO; and (2) COPH. Term
The Framework Agreement shall take effect on 1 June 2015 for a term ending on 31 May 2018 (both days inclusive).
(1) COPH Group may provide the Property Management Services in respect of (i) property development projects developed by COGO Group prior to delivery thereof to buyers; (ii) the unsold portion of the property development projects developed by or property development projects held for investment by COGO Group; and (iii) pre-sale display units of the property development projects developed by COGO Group.
(2) A member of COPH Group may act as property management service provider to provide the Property Management Services for the relevant property developments of COGO Group in the PRC based on the terms of the specific tender or property management contract.
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(3) The annual consideration payable by COGO Group to COPH Group for the Property Management Transactions for the period from 1 June 2015 to 31 December 2015, each of the two years ending 31 December 2017 and the period from 1 January 2018 to 31 May 2018 shall not exceed the amounts set out below (the "Caps"):
RMB30 million (equivalent to approximately HK$37.8 million)
RMB50 million (equivalent to approximately HK$63 million)
RMB60 million (equivalent to approximately HK$75.6 million)
RMB35 million (equivalent to approximately HK$44.1 million)
(4) The management fees payable by COGO Group to COPH Group will be settled pursuant to the payment terms set out in the specific tender or property management contracts.
Pricing basis
As a general principle, the prices and terms of the property management services shall be determined in the ordinary course of business on normal commercial terms and negotiated on arm's length basis.
COGO Group will normally need to select the property management service provider through a standard and independent tender process of COGO Group in compliance with the applicable laws and regulations from time to time. In conducting COGO Group's invitations to tender, review of tenders and tender selection, the participation of the members of COPH Group in the tender process shall not in any way affect COGO Group's tender procedures, contract terms and selection principles. The members of COPH Group shall be treated in the same way as independent third parties.
The price and terms of the tenders awarded by COGO Group to COPH Group are subject to the standard and systematic tender procedure maintained by COGO Group, which applies to tenders submitted by both connected persons and independent third parties to ensure that the price and terms of the tender awarded by COGO Group to COPH Group is no more favourable than those awarded to independent third parties.
Furthermore, the engagement of an initial property management service provider in the PRC is mainly subject to a standard tender process regulated by applicable PRC laws and regulations. Set out below are the major requirements of such tender process:
Invitation to Tender
COGO Group is responsible for drawing up specification and requirements for a tender, based on a typical invitation to tender template and the specific requirements for a property development project.
In order to make an invitation to tender (the "Invitation To Tender"), all relevant documents
(including the Application Form for Making Invitation to Tender ( 《招標備案申請表》 ),
governmental approvals obtained for the property development, and documents comprising the
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Invitation to Tender) are required to be submitted and filed with the Relevant Local Authority in advance.
The Relevant Local Authority can, according to the size of the property development and the amount of expected contract amount involved, decide that the tender procedure set out below does not apply to a particular property management contract because it is insignificant. Different Relevant Local Authorities have adopted different criteria in deciding whether a contract is insignificant for the tender process.
In the case of an open tender, the Invitation to Tender is required to be published by way of a public notice in the press or media. In the case of a restricted tender, the Invitation to Tender is required to be sent to no less than three selected property management service providers. Whether an open tender or a restricted tender is required will depend on the respective requirements stipulated by the Relevant Local Authority.
Tender Evaluation and Grant of Awards
Bidders will be required to provide pre-qualification documents for vetting before the formal tender documents are submitted.
According to applicable PRC laws and regulations, the tender evaluation process and the composition of the tender evaluation committee must comply with the requirements set out in Temporary Measures on the Tendering and Bidding for Initial Property Management Services
(《前期物業管理招標投標管理暫行辦法》) (Jian Zhu Fang 2003 No. 130) promulgated by the
Ministry of Housing and Urban-Rural Development of the PRC (中華人民共和國住房和城鄉建
設部) on 26 June 2003. The tender evaluation committee shall comprise an odd number of five or
more members and at least two-thirds of the members must be property management experts
selected on a random basis from a list compiled by the Relevant Local Authority.
If there are less than three bidders, upon the approval of the Relevant Local Authority, COGO Group may engage a property management company directly through a contract.
The tender evaluation committee shall evaluate the tender based on the specification and requirement of the Invitation To Tender with the view to ranking the top three recommended bidders. COGO Group will confirm the winner and proceed to arrange for necessary notification.
Where selection of property management service provider through tender process is not required by the applicable laws and regulations from time to time, COGO Group will obtain at least three quotations from independent property management service provider and member of COPH Group. If the price and terms offered by the member of COPH Group are equal to or better than those offered by independent property management service provider on the condition that the property management service provider also satisfies all other essential requirements (including but not limited to relevant experience, quality of services and track records), such COGO Group may probably accept the quotation from such member of COPH Group.
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The Caps are determined with reference to, among others, the following factors:
(1) the historical figures on amounts paid by COGO Group to COGOPM and its subsidiaries in respect of the Property Management Services as follows:
for the year ended 31 December 2013: RMB5,677,000 (equivalent to approximately
HK$7,153,000);
for the year ended 31 December 2014: RMB5,042,000 (equivalent to approximately
HK$6,353,000); and
for the period from 1 January 2015 to 31 March 2015: RMB14,208,000 (equivalent to approximately HK$17,902,000).
(2) the estimated demand of COGO Group for Property Management Services for the period from
1 June 2015 to 31 May 2018, estimated with reference to Property Management Transactions to be conducted under existing contracts and future property development plans of the COGO Group; and
(3) other factors such as, COGO's business plans and inflation.
The shareholders of COGO should note that the Caps represent the best estimate by COGO Directors of the amount of the relevant transactions based on the information currently available. The Caps bear no direct relationship to, nor should be taken to have any direct bearing to, COGO Group's financial or potential financial performance.
COGOPM was the property management service provider of COGO Group's various property developments in the PRC before the Transfer. To avoid disruptions to the property management arrangements of COGO Group's property developments, COGO intends to continue its existing engagement of COGOPM as the property management service provider for COGO Group's property developments in the PRC following completion of the Transfer, whereby COGOPM will become an indirect wholly-owned subsidiary of COPH, which in turn is a direct wholly-owned subsidiary of COLI.
COLI is a well-known property developer in the PRC and is a sought after famous brand in the PRC property market. COGO Board believes that it is in the best interests of COGO to enter into the Framework Agreement because the engagement of COPH Group as the property management service provider for COGO Group's property developments in the PRC can re-inforce its marketing and sales strategies by using COPH Group's property management experience and its
famous brand name "China Overseas Property Management" (中海物業). This will promote sales
volume and command more competitive pricing so as to enhance the value of its real estate developments.
COGO Directors (including the independent non-executive COGO Directors) are of the view that the Property Management Transactions are and will continue to be conducted in the ordinary course of business of COGO Group, the terms of the Framework Agreement (together with Caps) are negotiated on arm's length basis and are on normal commercial terms, and the terms of the Framework Agreement (together with the Caps) are fair and reasonable and in the best interests of COGO and its shareholders as a whole.
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As COPH is a direct wholly-owned subsidiary of COLI which in turn is a substantial shareholder of COGO holding approximately 37.98% of the number of shares of COGO in issue as at the date of this announcement, COPH is a connected person of COGO under Chapter 14A of the Listing Rules. Accordingly, members of COPH Group are connected persons of COGO Group and the Property Management Transactions constitute continuing connected transactions for COGO.
Since the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules in respect of the Caps for the Property Management Transactions are greater than 0.1% but less than 5% for COGO, the Property Management Transactions are subject to reporting, announcement and annual review requirements but exempt from the independent shareholders' approval requirement.
For the avoidance of doubt, the Property Management Transactions do not constitute continuing connected transactions under Chapter 14A of the Listing Rules for COLI nor notifiable transactions for the purpose of Chapter 14 of the Listing Rules for COLI and COGO.
None of the COGO Directors has a material interest in the Framework Agreement. However, Mr. Hao Jian Min, being the directors of both COGO, COLI and China Overseas Holdings Limited ("COHL"), the controlling shareholder of COLI, and Mr. Yang Hai Song, a COGO Director and acting as a director of COHL, have voluntarily abstained from voting on the relevant COGO Board resolutions.
COGO is incorporated in Hong Kong with limited liability and the shares of which are listed on the Main Board of the Stock Exchange. As at the date of this announcement, COGO Group is principally engaged in real estate development and investment in the PRC.
8. INFORMATION OF COPH, COPH GROUP, COLI AND COGOPMCOPH is a limited liability company incorporated in the Cayman Islands and is a direct wholly- owned subsidiary of COLI as at the date of this announcement. The principal activity of COPH Group is property management business in the PRC, Hong Kong and Macau. COLI is incorporated in Hong Kong and the shares of COLI are listed on the Main Board of the Stock Exchange. As at the date of this announcement, COLI and its subsidiaries is principally engaged in the property development and investment, property management, treasury and other operations. COGOPM is a limited company established in the PRC and its principal business is property management in the PRC.
9. DEFINITIONS
In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:
"associate(s)", "connected person(s)", "controlling shareholder", "percentage ratios", "subsidiary(ies)"
each has the meaning ascribed to it in the Listing Rules;
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"Caps" has the meaning given to it under the section headed "3.
Framework Agreement - Subject Matters" of this announcement;
"COGO" China Overseas Grand Oceans Group Ltd., a company incorporated in Hong Kong with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 81);
"COGO Board" the board of directors of COGO; "COGO Directors" the directors of COGO;
"COGO Group" COGO and its subsidiaries from time to time;
"COGOPM" 中海宏洋物業管 理有限公司 (China Overseas Grand Oceans Property Management Limited*), a limited liability company established in the PRC and an indirect wholly-owned subsidiary of COPH following completion of the Transfer;
"COLI" China Overseas Land & Investment Limited, a company incorporated in Hong Kong with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 688), being a controlling shareholder of COGO;
"COPH" China Overseas Property Holdings Limited (中海物業集團有限 公司) (formerly known as China Overseas Management Services (International) Limited (中國海外管理服務(國際)有限公司)), a
company incorporated in the Cayman Islands and a direct wholly- owned subsidiary of COLI as at the date of this announcement;
"COPH Group" COPH and its subsidiaries from time to time;
"Framework Agreement" the framework agreement dated 1 June 2015 entered into between COGO and COPH in respect of the Property Management Transactions;
"Hong Kong" the Hong Kong Special Administrative Region of the PRC; "HK$" Hong Kong dollars, the lawful currency of Hong Kong;
"Listing Rules" The Rules Governing the Listing of Securities on the Stock
Exchange;
"PRC" the People's Republic of China, which for the purpose of this announcement excludes Hong Kong, Macau and Taiwan;
"Property Management
Services"
property management services including (1) cleaning, repair and maintenance services of common areas and facilities; (2) security services and fire safety services; (3) traffic management services within the property developments; (4) car park and club house management services; (5) pre-delivery inspection services and
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minor repair works for the property developments developed by COGO Group and assisting the hand-over of properties to buyers; (6) greening maintenance and management; and (7) other ancillary services such as the maintenance of records of residents and contractors of the property developments;
"Property Management
Transactions"
the provision of Property Management Services by members of COPH Group to members of COGO Group (including the existing Property Management Transactions set out under the section headed "2. Existing Property Management Transactions");
"Purchaser" 中海物業管理有限公司(China Overseas Property Management
Co., Ltd.*), a limited liability company established in the PRC
and an indirect wholly-owned subsidiary of COLI;
"Relevant Local Authority(ies)" the competent real estate administration department of the PRC
government;
"RMB" Renminbi, the lawful currency of the PRC;
"Seller" 中海宏洋地產集團有限公司 (China Overseas Grand Oceans Property Group Company Limited*), a limited liability company established in the PRC and an indirect wholly-owned subsidiary of COGO;
"Stock Exchange" The Stock Exchange of Hong Kong Limited;
"Transfer" the transfer of 100% equity interest in COGOPM by the Seller to the Purchaser, details of which are set out in the announcement of COGO dated 18 May 2015; and
"%" per cent.
This announcement contains translation between Renminbi and Hong Kong dollars at RMB1 to HK$1.26. The translation shall not be taken as representation that the Renminbi could actually be converted into Hong Kong dollars at that rate, or at all.
* English or Chinese translation, as the case may be, is for identification only.
By order of the Board
CHINA OVERSEAS LAND & INVESTMENT LIMITED Hao Jian MinChairman & Chief Executive Officer
Hong Kong, 1 June 2015
By order of the Board
CHINA OVERSEAS GRAND OCEANS GROUP LIMITED Hao Jian MinChairman and Non-Executive Director
As at the date of this announcement, Messrs. Hao Jian Min (Chairman and Chief Executive Officer), Xiao Xiao (Vice Chairman), Chen Yi, Luo Liang, Nip Yun Wing, Guo Yong and Kan Hongbo are the executive directors; Mr. Zheng Xuexuan is the non-executive director; and Messrs. Lam Kwong Siu, Wong Ying Ho, Kennedy, Li Man Bun, Brian David and Madam Fan Hsu Lai Tai, Rita are the independent non-executive directors of COLI.
As at the date of this announcement, COGO Board comprises nine directors, of which four are executive directors, namely, Mr. Zhang Guiqing, Mr. Xiang Hong, Mr. Paul Wang Man Kwan and Mr. Yang Hai Song; two non-executive directors, namely Mr. Hao Jian Min and Mr. Billy Yung Kwok Kee, and three independent non-executive directors, namely Dr. Timpson Chung Shui Ming, Mr. Jeffrey Lam Kin Fung and Mr. Dantes Lo Yiu Ching.
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