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 the Cayman Islands with limited liability)
(Stock Code: 1109)
CONTINUING CONNECTED TRANSACTIONS
FRAMEWORK LOAN AGREEMENTS 2019
STRATEGIC COOPERATION AGREEMENTS 2019
LEASING AND CONCESSIONAIRE FRAMEWORK AGREEMENT 2019
AND
THE PROVISION OF CONSTRUCTION SERVICES,
DECORATION SERVICES AND FURNITURE SERVICES
AND SALES OF CONSTRUCTION MATERIAL
FRAMEWORK AGREEMENT 2019
Reference is made to the announcement of the Company dated 23 December 2016 in relation to the entering into of the 2016 Continuing Connected Transaction Agreements. As the 2016 Continuing Connected Transaction Agreements will expire on 31 December 2019, the Company has entered into new arrangements whereby the annual caps are also renewed under the New Continuing Connected Transaction Agreements.
As applicable size test percentage ratios exceed 0.1% but are less than 5% in respect of the continuing connected transactions under the New Continuing Connected Transaction Agreements, the transactions contemplated thereunder are only subject to the reporting, annual review and announcement requirements but are exempted from the independent shareholders' approval requirements of the Listing Rules.
BACKGROUND
Reference is made to the announcement of the Company dated 23 December 2016 in relation to the entering into of the 2016 Continuing Connected Transaction Agreements. As the 2016 Continuing Connected Transaction Agreements will expire on 31 December 2019, the Company has entered into new arrangements whereby the annual caps are also renewed under the New Continuing Connected Transaction Agreements.
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As applicable size test percentage ratios exceed 0.1% but are less than 5% in respect of the continuing connected transactions under the New Continuing Connected Transaction Agreements, the transactions contemplated thereunder are only subject to the reporting, annual review and announcement requirements but are exempted from the independent shareholders' approval requirements of the Listing Rules.
1. THE FRAMEWORK LOAN AGREEMENTS 2019 Offshore Framework Loan Agreement 2019
Parties: | The Company and CRH |
Date: | 9 December 2019 |
Date of commencement: | 1 January 2020 |
Term of the agreement: | Three years ending 31 December 2022 unless extended |
for a further period | |
Lenders: | The Company and any of its subsidiaries which has |
become a party to the Offshore Framework Loan | |
Agreement 2019 by acceding to its terms, but | |
excluding any entity which is established in the PRC. | |
Borrowers: | CRH, any China Resources Group listed company and |
any of their subsidiaries, which has become a party to | |
the Offshore Framework Loan Agreement 2019 by | |
acceding to its terms, but excluding any entity which is | |
established in the PRC and any member of the Group. | |
Each borrower may borrow in HK$, RMB or United | |
States dollars. | |
Guarantor(s) for loans made | CRH and, in the case of an advance to a subsidiary of a |
by the Group: | China Resources Group listed company, that China |
Resources Group listed company. | |
Aggregate amounts to be | The maximum aggregate amount outstanding lent by |
advanced: | the Group under both of the Framework Loan |
Agreements 2019 is not permitted to exceed the | |
amounts set out under the section below headed | |
''Annual lending caps under the Framework Loan | |
Agreements 2019'' | |
Repayment date: | The repayment date for an advance made under this |
agreement shall be no later than six months after the | |
date of advance. |
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Interest rate in respect of | The | rate per annum as determined | by the relevant |
HK$ advances: | lender and the borrower as being the | aggregate of (i) | |
the relevant HIBOR for such a HK$ advance; and (ii) a | |||
margin, which must not be a negative number and shall | |||
not be less than: | |||
(a) | the higher of (i) the rate at which CRH or a | ||
corporate borrower of similar standing is able to | |||
borrow HK$ in an amount equal to the relevant | |||
advance from a bank or a financial institution for | |||
the relevant period and (ii) the deposit rate which | |||
the lender could have obtained from a bank or a | |||
financial institution for such relevant amount and | |||
period; less | |||
(b) | HIBOR for a period equal to or similar to the | ||
relevant period and which is the most recently | |||
quoted HIBOR as at the time the drawdown | |||
undertaking is signed by the relevant lender. | |||
Interest rate in respect of | The | rate per annum as determined by the relevant | |
United States dollar | lender and the borrower as being the | aggregate of (i) | |
advances: | the | relevant LIBOR for such a United States dollar | |
advance; and (ii) a margin, which must not be a | |||
negative number and shall not be less than: | |||
(a) | the higher of (i) the rate at which CRH or a | ||
corporate borrower of similar standing is able to | |||
borrow United States dollars in an amount equal to | |||
the relevant advance from a bank or a financial | |||
institution for the relevant period and (ii) the | |||
deposit rate which the lender could have obtained | |||
from a bank or a financial institution for such | |||
relevant amount and period; less | |||
(b) | LIBOR for a period equal to or similar to the | ||
relevant period and which is the most recently | |||
quoted LIBOR as at the time the drawdown | |||
undertaking is signed by the relevant lender. |
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Interest rate in respect of | The rate per annum as determined by the relevant |
RMB advances: | lender and the borrower with respect to an advance |
(which must not be a negative number) shall not be less | |
than the higher of (i) the rate at which CRH or a | |
corporate borrower of similar standing is able to borrow | |
RMB in Hong Kong in an amount equal to the relevant | |
advance from a bank or a financial institution for the | |
relevant period and (ii) the deposit rate in Hong Kong | |
which the lender could have obtained from a bank or a | |
financial institution for such relevant amount and | |
period. | |
Guarantee: | The guarantors will unconditionally and irrevocably |
guarantee to the relevant lender the due and punctual | |
performance by the borrower (when the guarantor is | |
CRH) or by the borrower which is the guarantor's | |
subsidiary (when the guarantor is a China Resources | |
Group listed company) of the borrower's obligations to | |
that lender in connection with that lender's advance(s) | |
to the borrower made under the Offshore Framework | |
Loan Agreement 2019. For this purpose, each guarantor | |
which is a China Resources Group listed company will | |
enter into a deed of guarantee before its subsidiary is | |
permitted to borrow under the Offshore Framework | |
Loan Agreement 2019. | |
Early repayment: | Both a lender and a borrower may by giving ten |
business days' written notice require the repayment or | |
prepayment of the advance, as the case may be, | |
together with accrued interest. | |
Basis of lending: | All advances will be made at the sole discretion of the |
lender. No security over the assets of the borrower will | |
be provided. All advances will become immediately | |
repayable on demand upon the occurrence of an | |
acceleration event which includes non-payment by the | |
borrower; breaches of the agreement by the borrower | |
which have not been rectified in the specified period; | |
cross-default in a material amount; the enforcement of | |
security; insolvency; dissolution; repudiation; CRH | |
ceasing directly or indirectly to be the single largest | |
shareholder of the relevant borrower; or on the | |
occurrence of a material adverse change as stated in | |
the Offshore Framework Loan Agreement 2019 in | |
respect of the relevant borrower. |
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Onshore Framework Loan Agreement 2019
Parties: | The Company and CRI |
Date: | 9 December 2019 |
Date of commencement: | 1 January 2020 |
Term of the agreement: | Three years ending 31 December 2022 unless extended |
for a further period | |
Lenders: | Any PRC established subsidiary of the Company, which |
has become a party to the Onshore Framework Loan | |
Agreement 2019 by acceding to its terms. | |
Borrowers: | CRI, and any PRC established subsidiary of CRI or a |
China Resources Group listed company, which has | |
become a party to the Onshore Framework Loan | |
Agreement 2019 by acceding to its terms, but | |
excluding CR Bank, CR Trust and any subsidiary of | |
the Company. Each borrower may borrow in RMB. | |
Guarantor: | CRI (except where the borrower is CRI) |
Aggregate amounts to be | The maximum aggregate amount outstanding lent by |
advanced: | the Group under both of the Framework Loan |
Agreements 2019 is not permitted to exceed the | |
amounts set out under the section below headed | |
''Annual lending caps under the Framework Loan | |
Agreements 2019''. | |
Repayment date: | The repayment date for an advance made under this |
agreement shall be no later than six months after the | |
date of advance. | |
Interest rate: | The rate per annum as determined by the relevant |
lender and the borrower. The interest rate shall be no | |
less than the higher of (i) the rate at which CRI or a | |
corporate borrower of similar standing is able to borrow | |
in RMB in an amount equal to the relevant advance | |
from a bank or a financial institution for the relevant | |
period, and (ii) the deposit rate which the lender could | |
have obtained from a bank or a financial institution for | |
such relevant amount and period. | |
Guarantee: | CRI unconditionally and irrevocably guarantees to the |
relevant lenders the due and punctual performance of | |
all borrowers' obligations under the Onshore | |
Framework Loan Agreement 2019. |
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Best endeavours: | If an advance is to be made pursuant to the Onshore |
Framework Loan Agreement 2019 to a borrower which | |
is a subsidiary of a China Resources Group listed | |
company, prior to making that advance, such China | |
Resources Group listed company shall sign a deed of | |
undertaking and undertake that if CRI makes a payment | |
to a lender in connection with the Onshore Framework | |
Loan Agreement 2019 due to a breach by the China | |
Resources Group listed company's subsidiary borrower, | |
then the China Resources Group listed company will | |
use its best endeavours to procure that borrower shall | |
have sufficient funds to, and does, promptly reimburse | |
CRI. This may include such China Resources Group | |
listed company making payments by way of gift or | |
capital contribution or shareholder loan to the borrower | |
(to the extent permitted by PRC law). | |
Basis of lending: | All advances will be made at the sole discretion of the |
lender. No security over the assets of the borrower will | |
be provided. All advances will become immediately | |
repayable on demand upon the occurrence of an | |
acceleration event which includes non-payment by the | |
borrower; breaches of the agreement by the borrower | |
which have not been rectified in the specified period; | |
cross-default in a material amount; the enforcement of | |
security; insolvency; dissolution; repudiation; CRI | |
ceasing directly or indirectly to be the single largest | |
shareholder of the relevant borrower; or on the | |
occurrence of a material adverse change as stated in | |
the Onshore Framework Loan Agreement 2019 in | |
respect of the relevant borrower. |
Annual lending caps under the Framework Loan Agreements 2019
The annual lending caps for the maximum aggregate amount which can be lent by the Group on any single day (inclusive of interest received and anticipated to be received rounded to the nearest million) under both of the Framework Loan Agreements 2019 have been determined after assessing the maximum amount of exposure at any time which the Group is prepared to assume under the Framework Loan Agreements 2019 in the context of its estimated temporarily surplus cash resources.
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Set out below are the maximum aggregate amounts outstanding on any single day lent by the Group under the Framework Loan Agreements 2016 (inclusive of interest received and receivable) during each of the years ended 31 December 2017 and 2018 and the 10 months ended 31 October 2019:
For the | |||
10 months | |||
For the year ended | ended | ||
31 December | 31 October | ||
2017 | 2018 | 2019 | |
RMB million | RMB million | RMB million | |
Maximum daily aggregate amount | |||
outstanding during the year/ | |||
period | 528 | - | - |
The proposed annual lending caps for the Group on any single day for the term of the Framework Loan Agreements 2019 and a comparison of these caps with the Group's gross cash and bank balances and with the size of the Group using the highest of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules are as follows:
Unaudited | ||||
consolidated | Highest | |||
cash and bank | applicable | |||
Annual lending cap on any single day | balances as at | percentage | ||
for the year ending 31 December | 30 June | ratio | ||
2020 | 2021 | 2022 | 2019 | |
RMB million | RMB million | RMB million | RMB million | % |
4,000 | 4,000 | 4,000 | 63,159 | 1.77 |
Such maximum daily amount is applicable for each day during the relevant year, and such maximum daily amount is calculated on an individual basis as outstanding at the end of each day during the relevant year without aggregating with the daily amount incurred on the days before.
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Financial condition of the guarantors
All advances to any member of the CRI Group will be guaranteed by (i) CRI; (ii) CRH; or (iii) CRH and a China Resources Group listed company, depending on the relevant Framework Loan Agreements 2019 and the identity of the borrower. Both CRI and CRH are regarded as borrowers of undoubted standing in their own markets. CRI is a bond issuer in the PRC and its principal long term credit rating is AAA according to an independent rating agency, China Lianhe Credit Rating Co., Ltd. The summary of the consolidated financial positions of CRI and CRH are as follows:
CRH | CRI | |||
2018 | 2017 | 2018 | 2017 | |
Audited | Audited | Audited | Audited | |
HK$ billion | HK$ billion | RMB billion | RMB billion | |
Total assets | 1,523 | 1,330 | 1,458 | 1,234 |
Cash and bank balances | 161 | 138 | 157 | 132 |
Equity attributable to the | ||||
shareholders of the company | 292 | 275 | 215 | 200 |
Profit attributable to the | ||||
shareholders of the company | 34 | 21 | 23 | 22 |
Cash flow from operation | 94 | 62 | 69 | 40 |
2. THE STRATEGIC COOPERATION AGREEMENTS 2019 CR Bank Strategic Cooperation Agreement 2019
Parties: | CR Bank and the Company |
Date of agreement: | 9 December 2019 |
Date of commencement of | 1 January 2020 |
agreement: | |
Term of the agreement: | Three years ending 31 December 2022, unless extended |
for a further period. | |
Deposit services: | Any deposit made with CR Bank under these |
arrangements will bear the same interest and be on the | |
same terms and conditions as would apply to a similar | |
deposit made by any other customer of the bank, which | |
rates are determined with reference to such other more | |
preferential rates. |
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Other financial services: | Other than deposit services, from time to time, the |
Group may use the commercial banking services of CR | |
Bank including, but not limited to, letter of credit, letter | |
of guarantee, granting of loans with collaterals, bill | |
acceptance and discount services, account receivable | |
factoring services, RMB and foreign currency | |
settlements, provision of loans and security, wealth and | |
cash management services, financial consulting service | |
and other financial services as agreed by the parties. | |
These services will be provided on normal commercial | |
terms which apply to other customers of CR Bank. | |
CR Trust Strategic Cooperation Agreement 2019 | |
Parties: | CR Trust and the Company |
Date of agreement: | 9 December 2019 |
Date of commencement of | 1 January 2020 |
agreement: | |
Term of the agreement: | Three years ending 31 December 2022, unless extended |
for a further period. | |
Trust services: | From time to time, the Group may use services |
provided by CR Trust including, but not limited to, | |
cash management, asset management, custodian trust | |
loan services, equity cooperation, account receivable | |
factoring services, buying and resale services, | |
consulting services and other trust services. These | |
services will be provided on normal commercial terms | |
and will be charged at a rate no less favourable as | |
would apply to similar services provided to any of CR | |
Trust's other clients. |
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Annual caps under the Strategic Cooperation Agreements 2019
Set out below are the approximate historical figures (rounded to the nearest million) of the maximum daily deposit amount, inclusive of interest payable, placed by the Group with CR Bank, and the maximum daily amount of financial services and products provided by CR Bank and CR Trust to the Group (excluding deposit service and financial services provided by CR Bank and CR Trust where only the fees and commissions paid by the Group are used to calculate the relevant percentage ratios) on any single day under the terms of the Strategic Cooperation Agreements during each of the years ended 31 December 2017 and 2018 and the 10 months ended 31 October 2019:
For the | |||
10 months | |||
For the year ended | ended | ||
31 December | 31 October | ||
2017 | 2018 | 2019 | |
RMB million | RMB million | RMB million | |
Maximum daily deposit amount | |||
placed with CR Bank during the | |||
year/period | 2,343 | 2,496 | 2,460 |
Maximum daily amount of other | |||
financial services and products | |||
provided by CR Bank and CR | |||
Trust during the year/period | - | 550 | 500 |
The proposed annual caps for financial services on any single day under both of the Strategic Cooperation Agreements 2019 have been determined after taking into account of the Group's liquidity, business needs and the expected level of services to be received from CR Bank and CR Trust under the Strategic Cooperation Agreements 2019.
The proposed maximum daily deposit amount, inclusive of interest payable rounded to the nearest million, placed by the Group with CR Bank for the term of the CR Bank Strategic Cooperation Agreement 2019 and a comparison of these caps with the Group's gross cash and bank balances and with the size of the Group using the highest of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules are as follows:
Unaudited | ||||
consolidated | Highest | |||
cash and bank | applicable | |||
Maximum daily deposit amount | balances as at | percentage | ||
for the year ending 31 December | June 30 | ratio | ||
2020 | 2021 | 2022 | 2019 | |
RMB million | RMB million | RMB million | RMB million | % |
3,500 | 3,500 | 3,500 | 63,159 | 2.89 |
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The proposed maximum daily amount of financial services and products provided by CR Bank and CR Trust to the Group (excluding deposit services and financial services provided by CR Bank and CR Trust where only the fees and commissions paid by the Group are used to calculate the relevant percentage ratios) for the term of the Strategic Cooperation Agreements 2019 and a comparison of these caps with the size of the Group using the highest of the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules are as follows:
Highest | ||||
applicable | ||||
Maximum daily amount for the year | percentage | |||
ending 31 December | ratio | |||
2020 | 2021 | 2022 | ||
RMB million | RMB million | RMB million | % | |
CR Bank and CR Trust | 5,000 | 5,000 | 5,000 | 4.13 |
Such maximum daily amount is applicable for each day during the relevant year, and such maximum daily amount is calculated on an individual basis as outstanding at the end of each day during the relevant year without aggregating with the daily amount incurred on the days before. Moreover, given the difference in the nature between (i) deposit services and (ii) other financial services or products provided by CR Bank, separate maximum daily amounts are set for each of these services.
It is expected that the aggregate annual amount of fees and commissions paid by the Group for the financial services provided by CR Bank and CR Trust respectively during the term of the Strategic Cooperation Agreements 2019 will not exceed 0.1% of the percentage ratios, other than the profits ratio, of the Listing Rules, and these arrangements will constitute de minimis transactions under the Listing Rules.
To the extent the aggregate annual amount of fees and commissions paid by the Group for the financial services provided by CR Bank and CR Trust respectively during the term of the Strategic Cooperation Agreements 2019 exceeds 0.1% and is below 5% of such percentage ratios, these arrangements will constitute continuing connected transactions exempted from independent shareholders' approval but will be subject to the annual review by the independent non-executive directors of the Company and the Company's auditors and a further announcement will be made by the Company stating the relevant caps as and when necessary. Under no circumstances will the amounts of fees and commissions paid in any one financial year exceed 5% of the percentage ratios, other than the profits ratio, of the Listing Rules unless the Company has obtained the prior approval of its independent shareholders.
3. THE LEASING AND CONCESSIONAIRE FRAMEWORK AGREEMENT 2019 The Leasing and Concessionaire Framework Agreement 2019
The Group has been, during the normal course of its businesses, entering into leasing and concessionaire arrangements regarding its property portfolio where members of the Group lease premises to members of the CRH Group and associates of CRH. On 9
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December 2019, the Company and CRH entered into the Leasing and Concessionaire Framework Agreement 2019 whereby the annual caps under the existing leasing and concessionaire arrangements are renewed taking into account of the business needs of members of the CRH Group and associates of CRH and the expected level of services to be provided by the Group from 1 January 2020 to 31 December 2022.
Subject to further definitive written agreements, from 1 January 2020 to 31 December 2022 (both days inclusive), the Group will enter into new leasing agreements or new concessionaire agreements with members of the CRH Group and associates of CRH in the ordinary and usual course of business on the following terms:
- each of the leasing or concessionaire arrangements to be entered into by a member of the Group with a member of the CRH Group or an associate of CRH will be documented in a separate written agreement with a lease term of not exceeding:
- for rental properties that will be used as coffee shops, 11 years;
- for rental properties that will be used as supermarkets, 21 years; and
- for rental properties of other uses, three years;
- each leasing or concessionaire arrangement will be entered into on normal commercial terms with the rents, management fees and other charges received by the Group from any members of the CRH Group or associates of CRH being either at market prices or at prices no less favourable to the Group than those available from independent third parties; and
- the performance of obligations under each of the leasing or concessionaire agreement entered into pursuant to the Leasing and Concessionaire Framework Agreement 2019 is subject to compliance of the Listing Rules by the Company.
Annual caps under the Leasing and Concessionaire Framework Agreement 2019
Set out below are the approximate historical figures the Group charged to members of the CRH Group and associates of CRH under the terms of the existing leasing and concessionaire arrangements during each of the years ended 31 December 2017 and
2018 and the 10 months ended 31 October 2019:
For the | ||
10 months | ||
For the year ended | ended | |
31 December | 31 October | |
2017 | 2018 | 2019 |
RMB | RMB | RMB |
million | million | million |
Leasing and concessionaire arrangements
- actual amount charged to members of the
CRH Group and associates of CRH | 227 | 231 | 345 |
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The proposed annual caps for the Leasing and Concessionaire Framework Agreement
2019 for the three years ending 31 December 2022 are as follows:
For the year ending 31 December
2020 2021 2022 RMB million RMB million RMB million
The Leasing and Concessionaire Caps | 650 | 650 | 650 |
The Leasing and Concessionaire Caps are determined by reference to (i) the rental rates under the existing leasing and concessionaire arrangements; (ii) the projected rental rates upon the expiry of the existing leasing and concessionaire arrangements; (iii) the projected monthly turnover of the lessees (for those lessees whose monthly rental is based on monthly turnover); and (iv) the Company's projection of possible additions of offices and retail outlets to be rented by members of the CRH Group and associates of CRH after taking into account of the expected continuous increase in demand for the leasing and concessionaire arrangements with members of the CRH Group and associates of CRH.
4. THE PROVISION OF CONSTRUCTION SERVICES, DECORATION SERVICES AND FURNITURE SERVICES AND SALES OF CONSTRUCTION MATERIAL FRAMEWORK AGREEMENT 2019
The Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019
The Group has been, during the normal course of its businesses, providing construction and decoration services and selling furniture and construction material to members of the CRH Group and associates of CRH. Construction services provided by the Group include building construction, mechanical and electrical engineering and installation as well as urban utilities. Decoration services provided by the Group include interior design, decoration and furnishing of offices, commercial and residential properties. Furniture services provided by the Group include furniture manufacturing and sale.
On 9 December 2019, the Company and CRH, entered into the Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019 whereby the annual caps under the existing provision of construction services, decoration services and furniture services arrangements are renewed and the annual caps in respect of the sales of construction material are determined. Each contract of construction, decoration or furniture services or sales of construction material will be entered into on normal commercial terms and the prices will be either at market prices or at prices no less favourable to the Group than those available from independent third parties.
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Annual caps under the Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019
Set out below are the approximate historical figures the Group charged to members of the CRH Group and associates of CRH under the terms of the existing provision of construction services, decoration services and furniture services arrangements during each of the years ended 31 December 2017 and 2018 and the 10 months ended 31 October 2019:
For the | ||
10 months | ||
For the year ended | ended | |
31 December | 31 October | |
2017 | 2018 | 2019 |
RMB | RMB | RMB |
million | million | million |
Construction services arrangements
- actual amount charged to members of the
CRH Group and associates of CRH | 198 | 817 | 800 |
Decoration services arrangements
- actual amount charged to members of the
CRH Group and associates of CRH | 191 | 255 | 132 |
Sale of construction materials
- actual amount charged to members of the
CRH Group and associates of CRH | 26 | 112 | 50 |
The proposed annual caps for the Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019 for the three years ending 31 December 2022 are as follows:
For the year ended 31 December | |||
2020 | 2021 | 2022 | |
RMB million | RMB million | RMB million | |
The Construction Caps | 1,800 | 1,800 | 1,800 |
The Decoration Caps | 650 | 650 | 650 |
The Construction Material Caps | 1,000 | 1,000 | 1,000 |
It is expected that the aggregate annual amounts of furniture services the Group may charge to members of the CRH Group and associates of CRH during the term of the Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019 will not exceed 0.1% of the applicable percentage ratios of the Listing Rules, and these arrangements will constitute de minimis transactions under the Listing Rules.
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The Construction Caps are determined with reference to (i) the nature of the transactions; (ii) the existing scale and operations of the businesses of the Group; and
- the anticipated demand for construction services of the CRH Group and associates of CRH on the basis of its planned real estate development projects to be implemented from 2020 to 2022.
The Decoration Caps are determined with reference to (i) the nature of the transactions;
- the existing scale and operations of the businesses of the Group; (iii) the anticipated growth and development of businesses of the CRH Group and associates of CRH; and
- the anticipated demand for decoration services by the CRH Group and associates of CRH on the basis of its planned real estate development projects to be implemented from 2020 to 2022.
The Construction Material Caps are determined with reference to (i) the nature of the transactions; (ii) the existing scale and operations of the businesses of the Group; and
- the anticipated demand for construction material of the CRH Group and associates of CRH on the basis of its planned real estate development projects to be implemented from 2020 to 2022.
5. REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS
The Framework Loan Agreements 2019 provide the Company with greater flexibility in the management of its surplus cash resources by enabling it to lend a portion of its surplus cash resources and those of its subsidiaries to other CRI Group companies, including CRI and CRH. The annual lending caps for the maximum aggregate amount which can be lent by the Group on any single day have been determined after assessing the maximum amount of exposure at any time which the Group is prepared to assume under the Framework Loan Agreements 2019 in the context of its estimated temporary surplus cash resources as well as the historical amount lent by the Group as set out on page 7 of this announcement.
The Strategic Cooperation Agreements 2019 will enable the Group to use the deposit and other financial services of CR Trust and CR Bank and to support their development within the CRI Group on normal commercial terms and on a scale which will not place the Group's resources at risk or affect its relationship with other financial institutions.
The Leasing and Concessionaire Framework Agreement 2019 is expected to provide the Group with a secure and stable revenue source from high quality tenants. The Group owns a portfolio of properties including office buildings and shopping malls and other properties in various cities in the PRC. These properties are offered to the general public for leasing or concessionaire arrangements. Members of the CRH Group and associates of CRH are engaged in various businesses including but not limited to the manufacture and distribution of daily consumer goods as well as retail, investments and operation in infrastructure and public utilities projects. They have needs to lease properties, mainly office and retail outlet premises for their operations. The payments of the leasing or concessionaire arrangements are expected to be settled by way of cash on a monthly basis. It is in the commercial interests of the Group to lease some of its
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properties to members of the CRH Group and associates of CRH, given that they are usually tenants of high quality with low risk in failure or deferral in making rental payments.
The Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019 is consistent with the businesses and commercial objectives of the Group and is expected to increase the revenue and therefore profitability of the Group. In addition, as the CRH Group and associates of CRH have no expertise and management resources in property construction, decoration and furniture business and construction material procurement, the transactions contemplated under the Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019 allow the Group to provide the construction, decoration and furniture services and sell construction material to the CRH Group and associates of CRH in the ordinary course of business.
All Directors (including the independent non-executive Directors) consider that the New Continuing Connected Transaction Agreements were negotiated on an arm's length basis, are on normal commercial terms and were entered into in the ordinary and usual course of business of the Group, and the relevant terms and annual caps are fair and reasonable and in the interests of the Company and its shareholders as a whole.
GENERAL INFORMATION
CRI
CRI, a borrower and guarantor under the Onshore Framework Loan Agreement 2019, is the holding company of CRH.
CRH
CRH, a borrower and guarantor under the Offshore Framework Loan Agreement 2019 and a party to the Leasing and Concessionaire Framework Agreement 2019 and the Provision of Construction Services, Decoration Services and Furniture Services and Sales of Construction Material Framework Agreement 2019, is a conglomerate in Hong Kong and the PRC that is principally engaged in seven core businesses, namely consumer products, power, real estate, cement, gas, pharmaceutical and financial services, as well as other operations including healthcare, microelectronics, textiles and chemical products.
CR Bank
CR Bank, a party to the CR Bank Strategic Cooperation Agreement 2019, is a licensed bank regulated by the China Banking Regulatory Commission and headquartered in Zhuhai. As at 30 November 2019, CR Bank had around 100 branches and sub-branches, comprising one head office, two branches (one in Hengqin and one in Zhuhai) and 37 sub-branches located in Zhuhai City, one branch and 26 sub-branches located in Shenzhen, one branch and three sub-branches located in Zhongshan City, one branch and seven sub-branches located in Foshan City, one branch and six sub-branches located in Dongguan City, one branch and three sub-branches located in Huizhou City, one branch located in Guangzhou city, and one rural bank in each of Deqing, Guangdong and Baise, Guangxi.
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CR Bank has achieved tremendous growth in its operational scale, geographical coverage and capital base over the past years. The following table illustrates the growth of CR Bank's assets, deposits, loans and total equity over the period of 5 years from 31 December 2013 to
31 December 2018:
Percentage | |||
As at 31 December | increase | ||
2013 | 2018 | ||
RMB billion | RMB billion | % | |
Total Assets | 129.58 | 174.51 | 34.67 |
Deposits | 66.01 | 112.27 | 70.08 |
Loans | 35.10 | 87.85 | 150.28 |
Equity attributable to owners of the company | 7.65 | 12.72 | 66.27 |
CR Trust
CR Trust is a party to the CR Trust Strategic Cooperation Agreement 2019. As at the date of this announcement, CRI holds a 51% equity interest in CR Trust and the remaining 49% equity interest of CR Trust is held by Shenzhen Investment Holdings Co., Ltd.. The registered capital of CR Trust is approximately RMB11 billion. With the headquarters located in Shenzhen, China, CR Trust is authorised by the relevant regulatory body to conduct business on a nationwide basis in the PRC.
CR Trust has achieved respectable growth in its operational scale, geographical coverage and capital base over the past years. The following table illustrates the growth of CR Trust's assets and total equity over a period of 5 years from 31 December 2013 to 31 December 2018:
Percentage | |||
As at 31 December | increase | ||
2013 | 2018 | ||
RMB billion | RMB billion | % | |
Total Assets | 13.29 | 23.88 | 79.68 |
Equity attributable to owners of the company | 12.16 | 20.28 | 66.78 |
Trust assets under management | 364.30 | 954.92 | 162.12 |
Revenue for the year | 2.78 | 2.87 | 3.24 |
The Group
The Group is principally engaged in the development and sales of developed properties, property investments and management, hotel operations and the provision of construction, decoration and other property development related services in the PRC.
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The turnover, total assets and cash balance of the Group from 2017 to 2019 are as illustrated in the tables below:
As at/For the | 31 December | ||||
6 months ended | As at | As at | 2017 to | 31 December | |
30 June | 31 December | 31 December | 31 December | 2018 to 30 June | |
2019 | 2018 | 2017 | 2018 | 2019 | |
Percentage | Percentage | ||||
increase | increase | ||||
RMB billion | RMB billion | RMB billion | % | % | |
Total assets | 727.1 | 655.7 | 480.5 | 36.5 | 10.9 |
Cash | 63.2 | 71.0 | 53.8 | 32.0 | (11.0) |
Turnover for the | |||||
year/period | 45.8 | 121.2 | 101.9 | 18.9 | n/a |
LISTING RULES IMPLICATIONS
By virtue of CRI being the controlling shareholder of CRH, which in turn holds a controlling interest in the Company, CRI and CRH are connected persons to the Company as defined under the Listing Rules. As at the date of this announcement, as CRI, being a controlling shareholder of the Company, holds approximately 75.33% and 51% of the registered capital of CR Bank and CR Trust respectively, CR Bank and CR Trust are connected persons of the Company under the Listing Rules.
As the applicable size test percentage ratios exceed 0.1% but are less than 5% in respect of the continuing connected transactions under the New Continuing Connected Transaction Agreements, the transactions contemplated thereunder are only subject to the reporting, annual review and announcement requirements but are exempted from the independent shareholders' approval requirements of the Listing Rules.
None of the Directors have a material interest in the transactions under the New Continuing Connected Transaction Agreements, and none of them abstained from voting on the relevant board resolutions approving the New Continuing Connected Transaction Agreements and the transactions contemplated thereunder.
OPINION OF INDEPENDENT FINANCIAL ADVISER
As the term of the certain type of leases to be entered into pursuant to the Leasing and Concessionaire Framework Agreement 2019 may exceed three years, pursuant to Rule 14A.52 of the Listing Rules, the Company has appointed Somerley Capital Limited as the independent financial adviser to advise the reasons for the relevant leases to have a term exceeding three years and to confirm that it is normal business practice for agreements of this type to be of such duration.
In arriving at its opinion, Somerley Capital has reviewed, among other things, the information as set out in this announcement, the Leasing and Concessionaire Framework Agreement 2019 and information on certain existing leases entered into between the Group and independent third parties.
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In order to understand the reasons for having duration of longer than three years for the leases of supermarkets and coffee shops to be entered into under the Leasing and Concessionaire Framework Agreement 2019 (the ''Leases''), Somerley Capital has discussed with the management of the Company and noted that (a) the longer duration of the Leases will enable the tenants of the Leases to minimise recurrence of expenses in relation to the initial set up and interior decoration of the properties; and (b) the business nature of the relevant tenancies of the Leases as retail operators needs them to enter into long-term lease agreements in order to secure strategic and prime locations in highly competitive retail industry with the objectives to enhance customers' loyalty and maintain stable sales revenue.
In considering whether it is normal business practice for lease agreements of similar nature to the Leases to have a term of such duration, Somerley Capital has:
- obtained and reviewed the exhaustive list of existing lease agreements entered into between the Group and independent third parties, which comprise 13 and 54 transactions involving the leasing of properties of the Group in the PRC to independent third parties for operations of supermarkets and coffee shops respectively;
- identified and reviewed 57 transactions involving the leasing of properties in the PRC for operations of supermarkets, which remain effective as at the date of this announcement, as disclosed by Hong Kong listed supermarket operators; and
- identified and reviewed the transactions involving the leasing of properties in the PRC for operation of restaurant as disclosed by Hong Kong listed restaurant operators (items (i), (ii) and (iii) above together, the ''Comparable Transactions'').
Noteworthy, Somerley Capital had extended its research by taking into account of leasing of properties in the PRC for operations of restaurants since (a) other than the Comparable Transactions relating to operations of coffee shops in the properties of the Group in the PRC in item (i) above, there is a limited number of the Comparable Transactions involving the leasing of properties in the PRC for operations of coffee shops by other Hong Kong listed companies that can be identified from the website of the Stock Exchange; and (b) there are similarities between operations of restaurants and coffee shops.
Based on the above, Somerley Capital noted that (a) the durations of the 70 Comparable Transactions relating to operations of supermarkets, comprising 13 transactions in item (i) and 57 transactions in item (ii) above, range from approximately 9 to 21 years, of which 67 of these Comparable Transactions have lease terms of 15 years or above; (b) the durations of the 54 Comparable Transactions relating to operations of coffee shops in item (i) above range from approximately 5 to 16 years, of which 36 of these 54 Comparable Transactions have lease terms of 10 years or above; and (c) the durations of the Comparable Transactions relating to operations of restaurants in item (iii) above range from approximately 3 to 15 years. Accordingly, the maximum duration of the Leases falls within the range of the durations of the Comparable Transactions.
Based on the above considerations, Somerley Capital is of the opinion that the proposed duration of the Leases permissible under the Leasing and Concessionaire Framework Agreement 2019 is normal business practice for agreements of this type to be of such duration.
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DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
''2016 Continuing Connected | Together, (1) the Framework Loan Agreements 2016; (2) |
Transaction Agreements'' | Strategic Cooperation Agreements 2016; (3) the framework |
agreement entered into between the Company and CRH on | |
23 December 2016 in relation to the leasing and | |
concessionaire arrangements between the Group and the | |
CRH Group and associates of CRH for the three years | |
ending 31 December 2019; and (4) the framework | |
agreement entered into between the Company and CRH on | |
23 December 2016 in relation to the provision of | |
construction, decoration and furniture services by the Group | |
to the CRH Group and associates of CRH for the three years | |
ending 31 December 2019; |
''Board''
''China Resources Group listed company (or companies)''
''Company''
the board of Directors of the Company;
any company (or companies) in the CRI Group, which is (or are) listed on the Main Board of the Stock Exchange as at the date of this announcement, other than the Company;
China Resources Land Limited a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Main Board of the Stock Exchange;
''connected person'' | has the meaning ascribed to it under the Listing Rules; |
''Construction Caps'' | the proposed maximum annual consideration to be paid by |
members of the CRH Group and associates of CRH to the | |
Group for each of the three years ending 31 December 2022 | |
in relation to the construction services to be rendered by the | |
Group to members of the CRH Group and associates of | |
CRH; | |
''Construction Material | the proposed maximum annual consideration to be paid by |
Caps'' | members of the CRH Group and associates of CRH to the |
Group for each of the three years ending 31 December 2022 | |
in relation to the sales of construction material by the Group | |
to members of the CRH Group and associates of CRH; | |
''CR Bank'' | China Resources Bank of Zhuhai Co., Ltd. (珠海華潤銀行股 |
份有限公司), a municipal bank headquartered in Zhuhai, in | |
which CRI holds approximately a 75.33% equity interest as | |
at the date of this announcement; |
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''CR Bank Strategic | the strategic cooperation agreement entered into by CR |
Cooperation Agreement | Bank and the Company on 23 December 2016; |
2016'' | |
''CR Bank Strategic | the strategic cooperation agreement entered into by CR |
Cooperation Agreement | Bank and the Company on 9 December 2019; |
2019'' | |
''CR Trust'' | China Resources SZITIC Trust Co., Ltd. (華潤深國投信託 |
有限公司), in which CRI holds a 51% equity interest as at | |
the date of this announcement; | |
''CR Trust Strategic | the strategic cooperation agreement entered into by CR |
Cooperation Agreement | Trust and the Company on 23 December 2016; |
2016'' | |
''CR Trust Strategic | the strategic cooperation agreement entered into by CR |
Cooperation Agreement | Trust and the Company on 9 December 2019; |
2019'' | |
''CRI'' | China Resources Inc. (formerly known as China Resources |
Co., Limited), a limited liability company incorporated in | |
the PRC, which is the holding company of CRH and the | |
banking and trust activities in which the CRI Group has an | |
interest; | |
''CRI Group'' | CRI, CRH and their respective subsidiaries; |
''CRH'' | China Resources (Holdings) Company Limited, a company |
incorporated in Hong Kong with limited liability and the | |
intermediate holding company of the CRI Group in Hong | |
Kong, holding all the CRI Group's material interests apart | |
from its banking and trust activities; | |
''CRH Group'' | CRH and its respective subsidiaries; |
''Decoration Caps'' | the proposed maximum annual consideration to be paid by |
members of the CRH Group and associates of CRH to the | |
Group for each of the three years ending 31 December 2022 | |
in relation to the decoration services to be rendered by the | |
Group to members of the CRH Group and associates of | |
CRH; | |
''Directors'' | the directors of the Company; |
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''Framework Loan | the Framework Loan Agreement and Guarantee for advances |
Agreements 2016'' | in Hong Kong Dollar, Renminbi and United States Dollar |
entered into by CRH and the Company on 23 December | |
2016 and the Framework Loan Agreement and Guarantee | |
for advances in RMB entered into by CRI and the Company | |
on 23 December 2016; |
''Framework Loan Agreements 2019''
''Group'' ''HIBOR'' ''HK$''
''Hong Kong''
''independent shareholders''
''Leasing and concessionaire Caps''
the Offshore Framework Loan Agreement 2019 and the Onshore Framework Loan Agreement 2019;
the Company and its subsidiaries;
the Hong Kong Inter-Bank Offered Rate;
means Hong Kong dollars, the lawful currency of Hong Kong;
the Hong Kong Special Administrative Region of the PRC;
shareholders of the Company other than CRI and its associates, as defined in the Listing Rules;
the proposed maximum annual consideration to be paid by members of the CRH Group and associates of CRH to the Group for each of the three years ending 31 December 2022 in relation to the leasing or concessionaire arrangements to be rendered by the Group to members of the CRH Group and associates of CRH;
''Leasing and Concessionaire | the framework agreement entered into between the Company |
Framework Agreement | and CRH on 9 December in relation to the leasing and |
2019'' | concessionaire arrangements between the Group and the |
CRH Group and associates of CRH for the three years | |
ending 31 December 2022; | |
''LIBOR'' | the London Inter-Bank Offered Rate, or in case LIBOR is |
not available, a substituted rate generally available in the | |
market and generally accepted by market participants as a | |
reference lending rate, which rate shall be chosen by the | |
relevant parties to replace LIBOR for the purposes of the | |
Offshore Framework Loan Agreement 2019; | |
''Listing Rules'' | the Rules Governing the Listing of Securities on The Stock |
Exchange of Hong Kong Limited; |
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''New Continuing Connected | Together, (1) the Framework Loan Agreements 2019; (2) |
Transaction Agreements'' | Strategic Cooperation Agreements 2019; (3) the Leasing and |
Concessionaire Framework Agreement 2019; and (4) | |
Provision of Construction Services, Decoration Services and | |
Furniture Services and Sales of Construction Material | |
Framework Agreement 2019; | |
''Offshore Framework Loan | the Framework Loan Agreement and Guarantee for advances |
Agreement 2019'' | in HK$, Renminbi and United States Dollar entered into by |
CRH and the Company on 9 December 2019; | |
''Onshore Framework Loan | the Framework Loan Agreement and Guarantee for advances |
Agreement 2019'' | in RMB entered into by CRI and the Company on 9 |
December 2019; | |
''PRC'' | the People's Republic of China (for the purpose of this |
announcement, excluding Hong Kong and Macau Special | |
Administrative Region); | |
''Provision of Construction | the framework agreement entered into between the Company |
Services, Decoration | and CRH on 9 December 2019 in relation to the provision |
Services and Furniture | of construction, decoration and furniture services and sales |
Services and Sales of | of construction material by the Group to the CRH Group |
Construction Material | and associates of CRH for the three years ending 31 |
Framework Agreement | December 2022; |
2019'' | |
''RMB'' | Renminbi, the lawful currency of the PRC; |
''Somerley Capital'' | Somerley Capital Limited, which is licensed under the |
Securities and Futures Ordinance (Cap. 571 of the Laws of | |
Hong Kong) to carry out Type 1 (dealing in securities) and | |
Type 6 (advising on corporate finance) regulated activities | |
and appointed as the independent financial adviser to the | |
Company in relation to the Leasing and Concessionaire | |
Framework Agreement 2019 pursuant to Rule 14A.52 of the | |
Listing Rules; | |
''Stock Exchange'' | The Stock Exchange of Hong Kong Limited; |
''Strategic Cooperation | the CR Bank Strategic Cooperation Agreement 2016 and the |
Agreements 2016'' | CR Trust Strategic Cooperation Agreement 2016; |
''Strategic Cooperation | the CR Bank Strategic Cooperation Agreement 2019 and the |
Agreements 2019'' | CR Trust Strategic Cooperation Agreement 2019; |
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''%'' | per cent. |
For illustration purposes, amounts in RMB have been translated into HK$ at the rate of RMB1= HK$1.12.
By Order of the Board
China Resources Land Limited
TANG Yong
Chairman
PRC, 9 December 2019
As at the date of this announcement, the executive directors of the Company are Mr. Tang Yong, Mr. Li Xin, Mr. Zhang Dawei, Mr. Xie Ji, Mr. Shen Tongdong and Mr. Wu Bingqi; the non-executive directors of the Company are Mr. Yan Biao, Mr. Chen Ying, Mr. Wang Yan and Mr. Chen Rong; and the independent non-executive directors of the Company are Mr. Andrew Y. Yan, Mr. Ho Hin Ngai, Bosco, Mr. Wan Kam To, Peter, Mr. Zhong Wei and Mr. Sun Zhe.
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Disclaimer
China Resources Land Limited published this content on 09 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 December 2019 11:35:01 UTC