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[HK] Times China Holdings: Continuing Connected Transactions General Equipment Sales, Installation and Maintenance Services

Time: January 9, 2020 23:02:17 China Finance
Original Title: Times China Holdings: Continuing Connected Transactions for Total Equipment Sales, Installation and Maintenance Services


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 statement as to its accuracy or completeness, and expressly disclaim any liability whatsoever for the contents of this announcement in whole or in part Assumes no responsibility for any loss arising from or in reliance on such content.




TIMES CHINA HOLDINGS LIMITED

Times China Holdings Limited

(A company incorporated in the Cayman Islands with limited liability)

(Stock Code: 1233)

Continuing connected transactions Total equipment sales, installation and maintenance services

Reference is made to the date of the Company on September 9, 2019, November 15, 2019, November 28, 2019, December 2019 6th, 9th December 2019,
Announcements on December 18, 2019 and December 19, 2019 related to the spin-off and independent listing of Times Neighborhood.


General agreement for equipment sales, installation and maintenance services

On December 3, 2019, the Company entered into a general agreement with Times Neighbors, pursuant to which Times Neighbourhood Group agreed to (a) sell elevators to the Group and provide supporting installation, maintenance and repair services for these elevators ;and
(b) Provide intelligent engineering services, including but not limited to the installation and maintenance of access control systems, intercom systems, monitoring systems and broadband network facilities of properties developed by the Group before delivery to the owners and related to such installations and maintenance Consulting services (collectively referred to as "equipment sales, installation and maintenance services") with a term from the listing date to December 31, 2021.


Implications of the Listing Rules

As at the date of this announcement, the Company is owned by Fengya Enterprises
61.54% equity. Under Listing Rule 14
Chapter A, Fengya Enterprise is a connected person of the Company. After the completion of the spin-off and as of the date of this announcement, Times Neighbourhood ceased to be a subsidiary of the Company, and Fengya Enterprise was owned by the issued share capital of Times Neighbourhood


50.58% equity. Therefore, Times Neighborhood is an associate of a connected person of the Company and is therefore a connected person under Chapter 14A of the Listing Rules. Therefore, under Chapter 14 of the Listing Rules
Chapter A, the transactions contemplated under the Master Agreement constitute continuing connected transactions of the Company.

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As certain applicable percentage ratios of the highest annual caps for transactions contemplated under the Master Agreement under the Listing Rules exceed 0.1%, all applicable percentage ratios are below
5%, the transactions contemplated under the Master Agreement are subject to the reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules, but are exempt from the independent shareholder approval requirements.


Reference is made to the date of the Company on September 9, 2019, November 15, 2019, November 28, 2019, December 2019 Announcements on the 6th, December 9, 2019, December 18, 2019, and December 19, 2019 related to the spin-off and independent listing of Times Neighborhood.


General agreement for equipment sales, installation and maintenance services

Date: December 3, 2019 Parties:
(1) Times Neighborhood; and
(2) The company.

Term: From the date of listing to 31 December 2021.

Subject matter: Times Neighborhood Group provides equipment sales, installation and maintenance services to the Group.

Price: The charges for providing equipment sales, installation and maintenance services will be determined after arm's length negotiations with reference to current market prices (taking into account the location and conditions of the property, the purchase cost of the elevator, and expected operating costs (including labor costs and material costs)).

Payment: The company and its associates have a credit term of 30 days for service fees payable for equipment sales, installation and maintenance services, which is consistent with the credit term provided to independent third parties.


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Historical transaction value

For the years ended 31 December 2016, 2017 and 2018 and for the six months ended 30 June 2019, provision of equipment sales, installation and The historical transaction amount of the maintenance service is RMB 1.4 million and RMB
4.7 million yuan, RMB
16.2 million yuan and RMB 2.6
million dollar. The following table details the relevant historical amounts:

For the six months ended June 30, the year ended December 31, 2016 2017 2018 2019

(RMB thousand)
(Note
1)

Lift installation and maintenance – 233 9,681 1,529
Internet Service Installment – 789 177
Intelligent Engineering Services
1,435 4,505 5,694 899

total
1,435 4,738 16,164 2,605

Notes:


1.
The Company expects that the actual transaction amount for the year ended December 31, 2019 will not exceed the approved annual cap of approximately RMB30.7 million.

Annual cap

For each of the three years ending December 31, 2021, the annual caps that the Group will have to pay to the Times Neighborhood Group for the provision of equipment sales, installation and maintenance services will not exceed RMB


30.7 million yuan, RMB
66.2 million and RMB 95.7 million. The following table sets forth the details of the relevant annual cap estimates:
For the year ended 31 December 2019 2020 2021

(RMB thousand)

Elevator sales, installation and maintenance
22,315 31,053 43,690
Internet Service Installment
4,869 10,045 14,863
Intelligent Engineering Services
3,470 25,049 37,064

total
30,654 66,147 95,617

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The above recommended annual caps for each of the three years ending December 31, 2021 are determined after taking into account the following factors:


(i)
Including historical transactions for the three years ended 31 December 2016, 2017 and 2018 and the six-month period ended 30 June 2019 Amount
(ii)
Estimated revenue to be recognized based on existing signed contracts;
(iii)
Elevator sales revenue (since September 2019) and the estimated acceptance / acceptance rate of Times Neighborhood (calculated based on the ratio for the year ended 31 December 2018);
(iv)
The estimated number of elevators the Group will purchase (calculated based on its land bank and projects under development as of June 30, 2019);
(v)
The estimated selling price, estimated installation cost and estimated renovation cost of each elevator (assuming the same prices as for the two years ended 31 December 2018);
(vi)
Estimated growth in demand for equipment sales, installation, and maintenance services of the Group's properties under development (based on publicly available information and based on information included as of December 31, 2016, 2017 and 2018 The estimated acceptance / acceptance rate of the Times Neighbourhood for the three years and the six-month period ended June 30, 2019); and
(vii)
The estimated contract price (per unit) for the instalment payment of Internet services and intelligent engineering services, which is calculated based on the prices for the year ended 31 December 2018.

Pricing policy

During the term of the Master Agreement, members of the Group may, from time to time, enter into individual agreements with members of the Times Neighborhood Group in providing equipment sales, installation and maintenance services in accordance with the main terms of the Master Agreement. For the Master Agreement, the Group adopts the following pricing policies:


(a)
Individual agreements will be negotiated on an arm's length basis to ensure that relevant pricing terms are fair and reasonable and on normal commercial terms;
(b)
The transaction price shall be determined in accordance with the prevailing market price reached after the two parties of the respective agreements have reached after arm's length negotiations on the terms and conditions of the respective agreements to ensure that Times Neighbourhood Group provides the Group with prices no less favourable than those provided by other independent third parties;
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(c)
The Group shall refer to other quotations provided by independent third parties for similar products and services through tendering and regularly review whether the prices provided by Times Neighbor Group are significantly different from those provided by independent third parties to ensure that the prices provided by Times Neighbour Group are fair and reasonable. And no less favourable than those provided by other independent third parties;
(d)
The transaction price shall be negotiated with Times Neighborhood Group after referring to the location and conditions of the property, the purchase cost of the elevator and the expected operating costs (including labor costs and material costs); and
(e)
If there is any material difference between the prices charged by Times Neighbourhood and those provided by independent third parties, the prices charged by Times Neighbourhood Group shall be adjusted accordingly.

Internal monitoring

The Group will adopt the following internal control measures related to the Master Agreement:


(a)
The Purchasing Department will regularly check relevant pricing terms by collecting relevant market information, reviewing and comparing quotes obtained from other independent third parties that provide similar products and services, to ensure that Times Neighbourhood Group will provide terms no less favourable than those provided by independent third parties price;
(b)
The Finance Department will properly record the actual transaction amount between the Group and the Times Neighborhood Group, and will review the total transaction amount on a monthly basis. To ensure that the annual cap is not exceeded, the Finance Department will continue to remind management and the procurement team about the total transaction amount;
(c)
The Group will conduct internal checks by randomly checking the pricing terms, payment arrangements and actual transaction amounts to ensure that the connected transaction process will be in compliance with the Group's internal control system, the annual cap will be complied with and the pricing will comply with the main terms and conditions of the Master Agreement;
(d)
The company's external auditors will conduct annual reviews of pricing and transaction volumes and annual caps under the Master Agreement;
(e)
The Company's audit committee will review the transactions under the Master Agreement and advise on proposals to improve internal control measures; and
(f)
The independent non-executive directors will review the implementation and implementation of the provisions and internal control measures under the master agreement every year.

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Reasons for and benefits of trading

Times Neighborhood Group is one of the leading and fast-growing integrated property management service providers in China. Its main services currently include:
(i) property management services, which mainly include security, cleaning, horticultural and repair and maintenance services;
(ii) non-owner value-added services, including construction site services, co-sale services and land reclamation cleaning services;


(iii) community value-added services, including public space rental and parking space management, and living services; and
(iv) Other professional services, mainly including elevator services, intelligent engineering services and municipal sanitation services. The directors consider that
The Times Neighborhood Group has established a long-term business relationship with the Group and has extensive expertise and experience in providing equipment sales, installation and maintenance services, so it will be able to provide quality services to the Group.

In addition, given its huge market share and promising business model, it will be able to provide the Group with competitive prices on terms that are more favorable to the Group than those provided by independent third parties. Therefore, the directors believe that the Group will be able to benefit from entering into a general agreement with the Times Neighborhood.

The directors (including independent non-executive directors) believe that the general agreement is concluded on normal commercial terms in the general and daily business processes of the Group, and its terms are fair and reasonable and in the interests of shareholders as a whole.


Implications of the Listing Rules

As at the date of this announcement, the Company is owned by Fengya Enterprises
61.54% equity. Under Listing Rule 14
A
Chapter, Fengya Enterprise is a connected person of the Company. After the completion of the spin-off and as of the date of this announcement, Times Neighbourhood ceased to be a subsidiary of the Company, and Fengya Enterprise was owned by the issued share capital of Times Neighbourhood
50.58% equity. Therefore, Times Neighbourhood is an associate of a connected person of the Company.
Chapter A is a connected person. Therefore, under Chapter 14 of the Listing Rules
Chapter A, the transactions contemplated under the Master Agreement constitute continuing connected transactions of the Company.


As certain applicable percentage ratios of the highest annual caps for transactions contemplated under the Master Agreement under the Listing Rules exceed 0.1%, all applicable percentage ratios are below
5%, the transactions contemplated under the Master Agreement are subject to the reporting, annual review and announcement requirements under Chapter 14A of the Listing Rules, but are exempt from the independent shareholder approval requirements.


Since Mr. Cen is the controlling shareholder of the Times Neighborhood, Mr. Cen Zhaoxiong is the brother of Mr. Cen, and Mr. Bai Xihong (“Mr. Bai”) and Mr. Li Qiang (“Mr. Li”) are non-executive directors of the Times Neighbourhood, they have approved

The general agreement and the relevant board resolutions of the transactions to be conducted under it have abstained from voting.


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General matters

The company is one of the leading property developers in China, focusing on the development of residential properties in the high-end market. The Company's business includes property development, namely the development of residential and commercial properties held for sale, and property leasing, namely the development, leasing and subleasing of commercial properties owned by the company or third parties.


Times Neighborhood Group is principally engaged in the provision of (i) property management services, which mainly include security, cleaning, horticultural and repair and maintenance services;
(ii) non-owner value-added services, including construction site services, co-sale services and land reclamation cleaning services;
(iii) community value-added services, including public space rental and parking space management, and living services; and


(iv) other professional services. As of the date of this announcement, Times Neighborhood consists of
(i) Fengya Enterprise directly owns 50.58% of the equity, while Fengya Enterprise is owned by
(a) 60% equity interest in Jiaming Investment Co., Ltd., which is wholly-owned by Mr. Cen and (b) East Profit Management Limited
*) Owns 40% equity,
The company is wholly-owned by Ms. Li Yiping, the spouse of Mr. Cen;
(ii) Mr. Bai directly owns 2.12% of the equity; (iii) Mr. Li directly owns 0.14% of the equity; and
(iv) Public shareholders directly own 47.16% of the shares.

Paraphrase

In this announcement, unless the context otherwise requires, the following terms shall have the meaning set out below:
“Feng Ya Enterprises” Fung Ya Enterprises Limited, a company incorporated in the British Virgin Islands

Limited company, the controlling shareholder of the Company as at the date of this announcement. “Associate” means the meaning ascribed to it in the Listing Rules. Incorporated

Exempted limited company whose shares are listed on the main board of the Stock Exchange (shares

Code:
1233)
`` Connected person '' has the meaning ascribed to it under the Listing Rules `` controlling shareholder '' has the meaning ascribed to it under the Listing Rules

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"Hong Kong" means the Hong Kong Special Administrative Region of the PRC "Independent Third Party" means that the Directors are fully aware, informed and convinced of all reasonable enquiries made by the Directors,

Persons or companies not connected with the Company or any of its connected persons

Company and their respective ultimate beneficial owners "Listing Date" means December 19, 2019, the shares of Times Neighbourhood in the United Nations

The date of the listing of the Stock Exchange "Listing Rules" refers to the Rules Governing the Listing of Securities on the Stock Exchange. "Master Agreement" means the provision of equipment sales, installation and maintenance services by the Company and the Times Neighborhood.

The general agreement dated December 3, 2019 “Mr. Cen” refers to Mr. Cen Zhaoxiong, one of the company's controlling shareholders and executive director. “China” refers to the People ’s Republic of China. “RMB” refers to RMB. Fiat currency “Shareholders” means shareholders of the Company. “Split” refers to the division of Times Neighbourhood and its independent listing on the main board of the Stock Exchange. “Stock Exchange” means The Stock Exchange of Hong Kong Limited. Incorporated in the Cayman Islands

Exempted limited company whose shares are listed on the main board of the Stock Exchange (shares

Code:
9928), before the completion of the spin-off

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`` Time Neighborhood Group '' means Time Neighborhood and its subsidiaries

``% '' Means percentage

By order of the board

Times China Holdings Limited

executive director

Li Qiang

Hong Kong, January 9, 2020

As at the date of this announcement, the executive directors are Mr. Cen Zhaoxiong, Mr. Guan Jianhui, Mr. Bai Xihong, Mr. Li Qiang,
Mr. Cen Zhaoxiong and Mr. Niu Zheng; and the independent non-executive directors are Mr. Jin Qingjun, Ms. Sun Hui and Mr. Huang Weiwen.



* For identification only – 9 –



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