China Overseas Property : Announcement - Continuing Connected Transactions

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CHINA OVERSEAS PROPERTY HOLDINGS LIMITED

中 海 物 業 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2669)

ANNOUNCEMENT CONTINUING CONNECTED TRANSACTIONS CONTINUING CONNECTED TRANSACTIONS

On 21 August 2017, the Company entered into the COLI Leasing Agreement and the COLI Property Management Utilities Charges Agreement with COLI, a connected person of the Company, to govern the continuing connected transactions between the parties in relation to leasing of premises and property management utilities charges.

IMPLICATION UNDER THE LISTING RULES

COHL is the controlling shareholder of each of COLI and the Company. Therefore, members of COLI Group are connected persons of the Company, and the COLI Leasing Transactions and COLI Property Management Utilities Charges Transactions constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the COLI Leasing Caps, CSC Leasing Caps and COHL Licensing Caps, when aggregated, are 0.1% or more but less than 5% on an annual basis, the transactions contemplated under the COLI Leasing Agreement are subject to reporting, announcement and annual review requirements but will be exempt from independent shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the COLI Property Management Utilities Charges Caps are 0.1% or more but less than 5% on an annual basis, the transactions contemplated under the COLI Property Management Utilities Charges Agreement are subject to reporting, announcement and annual review requirements but will be exempt from independent shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

INTRODUCTION

On 21 August 2017, the Company entered into the COLI Leasing Agreement and the COLI Property Management Utilities Charges Agreement with COLI, a connected person of the Company, to govern the continuing connected transactions between the parties in relation to leasing of premises and property management utilities charges.

COLI LEASING TRANSACTIONS

Reference is made to the listing document of the Company dated 14 October 2015 and the announcement of the Company dated 30 June 2016 in relation to (among others) the continuing connected transactions between COLI Group and the Group regarding leasing of premises by COLI Group to the Group under the Previous COLI Leasing Agreement.

The Directors expect that the Group will continue to lease premises from COLI Group, and occasioned by an expected increase in rental transactions between COLI Group and the Group, on 21 August 2017, COLI and the Company entered into the COLI Leasing Agreement to increase the caps for the transactions under the Previous COLI Leasing Agreement and renew the transactions thereunder.

The principal terms of the COLI Leasing Agreement are summarised as follows:

COLI Leasing Agreement

Date

21 August 2017

Parties

1. COLI

2. the Company

Duration

The COLI Leasing Agreement will commence on 1 October 2017 and end on 30 June 2020.

Terms

Any members of the Group may lease premises from any members of COLI Group in accordance with the terms of the COLI Leasing Agreement, subject to the tenancy agreement recording other detailed terms and conditions in relation to each particular premises leased and shall be on normal commercial terms and terms no more favourable than those offered to independent third parties.

COLI and the Company agreed to terminate the Previous COLI Leasing Agreement upon the taking effect of the COLI Leasing Agreement.

Historical Transaction Amount

The historical total rent paid by the Group to COLI Group for the three years ended 31 December 2016 and the half year ended 30 June 2017 were as follows:

For the year ended 31 December 2014	For the year ended 31 December 2015	For the year ended 31 December 2016	For the half year ended 30 June 2017
Historical Transaction Amount	HK$4,499,000	HK$5,539,000	HK$3,682,000	HK$789,000

Caps

The pro-rated cap under the Previous COLI Leasing Agreement for the period commencing on 1 January 2017 and ending on 30 September 2017, the COLI Leasing Caps for the period commencing on 1 October 2017 and ending on 31 December 2017, the two years ending 31

December 2018 and 2019 and the period commencing on 1 January 2020 and ending on 30 June 2020 are as follows:

For the period commencing on 1 January 2017 and ending on 30 September 2017	For the period commencing on 1 October 2017 and ending on 31 December 2017	For the year ending 31 December 2018	For the year ending 31 December 2019	For the period commencing on 1 January 2020 and ending on 30 June 2020
COLI Leasing Caps	-	HK$4,000,000	HK$13,200,000	HK$13,800,000	HK$7,000,000
Pro-rated cap under the Previous COLI Leasing Agreement	HK$1,400,000	-	-	-	-

Basis of determination of Caps

The COLI Leasing Caps are calculated with reference to (i) new leases expected to be entered into between COLI Group and the Group due to office expansions in Shenzhen expected to take place in 2017 and in Dalian, Chongqing, Foshan and Beijing expected to take place in 2018; and (ii) the expected inflation rate.

Payment Terms for the COLI Leasing Transactions

Rent for the premises leased by the Group are payable by the Group on a monthly basis and on

such payment terms prescribed under the terms of the specific tenancy agreement.

Pricing Basis for the COLI Leasing Transactions

The rent for the premises leased by the Group were determined after arm's length negotiations between the parties, with reference to the prevailing market rentals for comparable properties in the vicinity of similar ages, sizes, uses and attributes.

In view of the above pricing basis, the Directors (including the Independent Non-executive Directors) consider that the pricing under the COLI Leasing Transactions are on normal commercial terms, fair and reasonable and not more favourable than the terms offered to the Group by other independent third parties.

Reasons of and Benefits for the COLI Leasing Transactions

Given that the relevant premises are owned by COLI Group, the Directors believe that maintaining the COLI Leasing Agreement with COLI Group will ensure the Group's stability in using the relevant premises and to regulate the future leasing agreements with COLI Group under the COLI Leasing Agreement. Also, the Group will be able to avoid any unnecessary disruption to the operations of the Group and minimise any unnecessary relocation costs.

The terms of the COLI Leasing Agreement were determined after arm's length negotiation between the Group and COLI Group with reference to the prevailing market rent of comparable properties in the vicinity of similar ages, sizes, uses and attributes.

The Directors (including the Independent Non-executive Directors) consider that the COLI Leasing Agreement, its respective terms and the transactions contemplated thereunder (including the COLI Leasing Caps) are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable and in the interests of the Company and its shareholders as a whole.

COLI PROPERTY MANAGEMENT UTILITIES CHARGES TRANSACTIONS

Occasioned by COLI Group's centralisation of payment of utilities charges for properties owned by COLI Group and managed by the Group as the property management company, on 21 August 2017, COLI and the Company entered into the COLI Property Management Utilities Charges Agreement, the principal terms of which are summarised as follows:

COLI Property Management Utilities Charges Agreement

Date

21 August 2017

Parties

1. COLI

2. the Company

Duration

The COLI Property Management Utilities Charges Agreement will commence on 1 October 2017 and end on 30 June 2020.

Terms

COLI Group will centralise the payment of utilities charges for properties owned by COLI Group and managed by the Group as the property management company. For properties owned by COLI Group which are managed by the Group, the Group shall, on behalf of tenants in such properties, consolidate and make payment of utilities charges incurred in individual units of the tenants to COLI Group, and COLI Group shall in turn, make payment of utilities charges incurred in the overall properties to the individual third party utilities service providers.

No historical transaction amount is available as the above is a new arrangement between the parties.

Caps

The COLI Property Management Utilities Charges Caps for the period commencing on 1 October 2017 and ending on 31 December 2017, the two years ending 31 December 2018 and 2019 and the period commencing on 1 January 2020 and ending on 30 June 2020 are as follows:

For the period commencing on 1 October 2017 and ending on 31 December 2017	For the year ending 31 December 2018	For the year ending 31 December 2019	For the period commencing on 1 January 2020 and ending on 30 June 2020
COLI Property Management Utilities Charges Caps	HK$16,400,000	HK$70,800,000	HK$80,100,000	HK$43,000,000

Basis of determination of Caps

The COLI Property Management Utilities Charges Caps are calculated with reference to (i) the historical amounts directly paid to water supplies department and electricity supplies department; and (ii) general inflation rate.

Payment Terms for COLI Property Management Utilities Charges Transactions

Utilities charges are payable by the Group on a monthly basis and on such payment terms prescribed under the terms of the specific agreement between the parties.

Pricing Basis for COLI Property Management Utilities Charges Transactions

The utilities charges were determined with reference to the actual amount of utilities charges being charged to COLI Group by the independent third party utilities services provider without any mark-up.

In view of the above pricing basis, the Directors (including the Independent Non-executive Directors) consider that the pricing under the COLI Property Management Utilities Charges Transactions are on normal commercial terms, fair and reasonable and not more favourable than the terms offered to the Group by other independent third parties.

Reasons of and Benefits for the COLI Property Management Utilities Charges Transactions

Although COLI Group will centralise the payment of utilities charges for properties owned by COLI Group and managed by the Group as the property management company, the individual tenants in such properties have been used to the practice of making such payments to the Group as the property management services provider. Hence, for the convenience of the individual tenants and maintenance of quality of services provided by the Group to the individual tenants, the Group will continue to collect utilities charges from individual tenants and consolidate utilities charges for the overall properties to COLI Group.

The Directors (including the Independent Non-executive Directors) consider the COLI Property Management Utilities Charges Agreement, its terms and the transactions contemplated thereunder (including the COLI Property Management Utilities Charges Caps) are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable and in the interests of the Company and its shareholders as a whole.

INFORMATION OF THE PARTIES

The Group is one of the leading property management companies in the PRC with operations also covering Hong Kong and Macau and is principally engaged in property management services and value-added services.

COLI Group is principally engaged in the business of property development and investment and other operations.

LISTING RULES IMPLICATIONS

COHL is the controlling shareholder of each of COLI and the Company. Therefore, members of COLI Group are connected persons of the Company, and the COLI Leasing Transactions and COLI Property Management Utilities Charges Transactions constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the COLI Leasing Caps, CSC Leasing Caps and the COHL Licensing Caps, when aggregated, are 0.1% or more but less than 5% on an annual basis, the transactions contemplated under the COLI Leasing Agreement are subject to reporting, announcement and annual review requirements but will be exempt from independent shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

As the applicable percentage ratios for the COLI Property Management Utilities Charges Caps are 0.1% or more but less than 5% on an annual basis, the transactions contemplated under the COLI Property Management Utilities Charges Agreement are subject to reporting, announcement and annual review requirements but will be exempt from independent shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

As none of the Directors has any material interest in the COLI Leasing Transactions and COLI Property Management Utilities Charges Transactions, none of the them is required to abstain from voting on the resolutions passed by the Board approving the COLI Leasing Agreement and the COLI Property Management Utilities Charges Agreement and the transactions contemplated thereunder.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:

"Board"	the board of Directors
"COHL"	China Overseas Holdings Limited, a company incorporated in Hong Kong with limited liability, and the controlling shareholder of the Company
"COHL Group"	COHL and its subsidiaries (excluding subsidiary(ies) listed on any stock exchange) from time to time
"COHL Licensing Caps"	the maximum total amount payable for the licensing of premises under the license agreement dated 26 June 2017 entered into between COHL as the licensor and the Company as the licensee for the period between 1 October 2017 and 31 December 2017 of approximately HK$1,121,000, for each of the two years ending 31 December 2018 and 2019 of approximately HK$3,757,000 and HK$4,075,000, respectively, and for the period between 1 January 2020 and 30 September 2020 of approximately HK$3,065,000, details of the license agreement with the transactions contemplated thereunder are set out in the Company's announcement dated 26 June 2017
"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)
"COLI Group"	COLI and its subsidiaries (excluding subsidiary(ies) listed on any stock exchange) from time to time
"COLI Leasing Agreement"	the framework agreement dated 21 August 2017 entered into between COLI and the Company in respect of the Group's leasing of premises from COLI Group
"COLI Leasing Caps"	the maximum total rent payable by the Group to COLI Group for each year/period under the COLI Leasing Agreement

"COLI Leasing Transactions"	transactions contemplated under the COLI Leasing Agreement
"COLI Property Management Utilities Charges Agreement"	the framework agreement dated 21 August 2017 entered into between COLI and the Company in respect of the Group's payment of property management utilities charges to COLI Group
"COLI Property Management Utilities Charges Caps"	the maximum total amount payable by the Group to COLI Group for each year/period under the COLI Property Management Utilities Charges Agreement
"COLI Property Management Utilities Charges Transactions"	transactions contemplated under the COLI Property Management Utilities Charges Agreement
"Company"	China Overseas Property Holdings Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on the Main Board of the Stock Exchange (stock code: 2669)
"connected person(s)", "controlling shareholder(s)", "percentage ratio(s)", "subsidiary(ies)"	each has the meaning ascribed to it in the Listing Rules
"CSC"	China State Construction International Holdings Limited, a company incorporated in the Cayman Islands with limited liability and whose shares are listed on the Main Board of the Stock Exchange (stock code: 3311)
"CSC Group"	CSC and its subsidiaries (excluding subsidiary(ies) listed on any stock exchange) from time to time
"CSC Leasing Caps"	the maximum total rent payable by the Group to CSC Group under the framework agreement dated 7 August 2017 entered into between CSC and the Company in respect of the Group's leasing of premises from CSC Group for the period commencing on 1 October 2017 and ending on 31 December 2017 of approximately HK$1,300,000, for the two years ending 31 December 2018 and 2019 of approximately HK$5,200,000 and HK$5,200,000, and for the period commencing on 1 January 2020 and ending on 30 June 2020 of approximately HK$2,600,000, details of the framework agreement with the transactions contemplated thereunder are set out in the Company's announcement dated 7 August 2017
"Director(s)"	the director(s) of the Company

"Group"	the Company and its subsidiaries from time to time
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"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, the Macau Special Administrative Region of the People's Republic of China and Taiwan
"Previous COLI Leasing Agreement"	the framework agreement entered into between COLI and the Company on 9 October 2015 in respect of the leasing of premises to the Group by COLI Group and the supplemental agreement in relation thereto dated 30 June 2016
"SFO"	Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"%"	per cent.

By order of the Board of

China Overseas Property Holdings Limited Yan Jianguo

Chairman and Non-executive Director

Hong Kong, 21 August 2017

As at the date of this announcement, the Board comprises eight Directors, of which one is Non-executive Director, namely Mr. Yan Jianguo (Chairman); four are Executive Directors, namely Ms. Wang Qi (Vice Chairman and Chief Executive Officer), Mr. Luo Xiao (Vice President), Mr. Shi Yong (Vice President) and Mr. Kam Yuk Fai (Deputy Chief Financial Officer); and three are Independent Non- executive Directors, namely Mr. Lim Wan Fung, Bernard Vincent, Mr. Suen Kwok Lam and Mr. Yung Wing Ki, Samuel.