THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to any aspect of this circular or as to the action you should take, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in China Isotope & Radiation Corporation, you should at once hand this circular and the accompanying proxy form and reply slip to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.
CHINA ISOTOPE & RADIATION CORPORATION
中國 同輻股份有 限公司
(A joint stock company incorporated in the People's Republic of China with limited liability)
(Stock Code: 1763)
PROPOSED AMENDMENTS TO THE ARTICLES
CONNECTED TRANSACTIONS AND DISCLOSEABLE TRANSACTIONS
AND
PROPOSED APPOINTMENT OF DIRECTORS
Independent Financial Adviser to
the Independent Board Committee and the Independent Shareholders
SOMERLEY CAPITAL LIMITED
A letter from the Board is set out on pages 4 to 29 of this circular. Capitalised terms used on this cover page have the same meanings as defined in this circular.
The Company will convene the EGM at 9:30 a.m. on Monday, 30 December 2019 at Room 305, 3/F, No. 66 Changwa Middle Street, Haidian District, Beijing, China. Notice of the EGM, the proxy form and the reply slip for the EGM have been dispatched and published on 15 November 2019.
5 December 2019
CONTENTS | ||||
Page | ||||
Definitions . . . . | . . . . | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1 | |
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4 | |||
1. | Introduction | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4 | |
2. | Proposed Amendments to the Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5 | ||
3. | Connected Transactions and Discloseable Transactions . . . . . . . . . . . . . . . | 5 | ||
4. | Proposed Appointment of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28 | ||
5. | EGM | . . . . | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28 |
6. | Voting by Poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 28 | ||
7. | Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 29 | ||
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . | 30 | |||
Letter from Somerley | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 32 | ||
Appendix I | - | Proposed Amendments to the Articles . . . . . . . . . . . . . . . . | I-1 | |
Appendix II | - | Biographical Details of Directors Proposed to be | ||
Appointed at the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . | II-1 | |||
Appendix III | - | General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | III-1 |
- i -
DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
"Articles" | the articles of association of the Company, as amended |
from time to time " | |
"Board" | the board of Directors |
"BSIF" | Beijing Science & Technology Innovation Fund (北京市 |
科技創新基金(有限合夥)) | |
"CNNC" | China National Nuclear Corporation, a company |
established under the laws of the PRC on 29 June 1999 | |
which holds approximately 73.83% equity interest in the | |
Company and is the controlling Shareholder | |
"CNNC Capital" | CNNC Capital Holdings Limited (中國核工業集團資本 |
控股有限公司) | |
"Company" | China Isotope & Radiation Corporation (中國同輻股份有 |
限公司), a joint stock company incorporated in the PRC | |
with limited liability | |
"Company Law" | the Company Law of the PRC |
"connected persons" | has the meaning ascribed thereto under the Listing Rules |
"Director(s)" | director(s) of the Company |
"Domestic Share(s)" | domestic share(s) in the share capital of the Company |
with a nominal value of RMB1.00 each, which are | |
subscribed for or credited as paid in RMB | |
"EGM" | the first extraordinary general meeting of 2019 of the |
Company to be held at 9:30 a.m. on Monday, 30 | |
December 2019 at Room 305, 3/F, No. 66 Changwa | |
Middle Street, Haidian District, Beijing, the PRC | |
"Global Offering" | the global offering of H Shares in July 2018 |
"Group" | the Company and its subsidiaries |
- 1 -
DEFINITIONS | |
"H Share(s)" | overseas listed foreign share(s) in the share capital of the |
Company with a nominal value of RMB1.00 each which | |
are subscribed for and traded in HK$ and listed on the | |
Stock Exchange | |
"HK$" | Hong Kong dollars, the lawful currency of Hong Kong |
"Hong Kong" | Hong Kong Special Administrative Region of the PRC |
"Hynergy Industrial Funds" | Hynergy Industrial Funds Management Co., Ltd. (核建產 |
業基金管理有限公司) | |
"Independent Board Committee" | the independent board committee of the Board, |
comprising Mr. Guo Qingliang, Mr. Meng Yan and Mr. | |
Hui Wan Fai, all being the independent non-executive | |
Directors of the Company | |
"Independent Financial Adviser" | Somerley Capital Limited, a corporation licensed to carry |
or "Somerley" | out Type 1 (dealing in securities) and Type 6 (advising on |
corporate finance) regulated activities under the SFO, | |
which has been appointed as the independent financial | |
adviser to make the relevant recommendation to the | |
Independent Board Committee and the independent | |
Shareholders in relation to the Tongchuang Investment | |
Partnership (Limited Partnership) Partnership Agreement | |
and the Tongfu Innovation Industrial Investment Fund | |
Partnership (Limited Partnership) Partnership Agreement | |
and the transactions contemplated thereunder | |
"Key Persons" | the core members of the executive partner management |
team of Tongfu Fund, being Liu Pengbin, Gong Lingling, | |
Xu Zhisui, Sheng Yangfan and Che Te | |
"Latest Practicable Date" | 29 November 2019, being the latest practicable date prior |
to the printing of this circular for the purpose of | |
ascertaining certain information contained herein | |
"Listing Date" | 6 July 2018, being the date on which the H Shares were |
listed and from which dealings therein commenced on the | |
Stock Exchange | |
"Listing Rules" | the Rules Governing the Listing of Securities on The |
Stock Exchange of Hong Kong Limited |
- 2 -
DEFINITIONS | ||||
"PRC" or "China" | the People's Republic of China, excluding, for the | |||
purpose of this circular only, Hong Kong, Macau Special | ||||
Administrative Region of the PRC and Taiwan region | ||||
"Prospectus" | the prospectus of the Company dated 22 June 2018 in | |||
relation to the Global Offering | ||||
"RMB" | Renminbi, the lawful currency of the PRC | |||
"Securities Law" | the Securities Law of the PRC | |||
"SFO" | the Securities and Futures Ordinance, Chapter 571 of the | |||
Laws of Hong Kong (as amended, supplemented, or | ||||
otherwise modified from time to time) | ||||
"Share(s)" | the ordinary shares in the capital of the Company with a | |||
nominal value of RMB1.00 each, comprising the | ||||
Domestic Shares and the H Shares | ||||
"Shareholder(s)" | holder(s) of the Share(s) | |||
"Stock Exchange" | The Stock Exchange of Hong Kong Limited | |||
"Supervisor(s)" | supervisor(s) of the Company | |||
"Tongchuang Investment" | Tongchuang | Investment | Partnership | (Limited |
Partnership) (同創投資合夥企業(有限合夥)) (to be | ||||
established, and the full name of the partnership shall be | ||||
subjected to the pre-approval from local Administration | ||||
for Market Regulation) | ||||
"Tongfu Fund" | Tongfu Innovation Industrial Investment Fund | |||
Partnership (Limited Partnership) (同輻創新產業投資基 | ||||
金合夥企業(有限合夥)) (to be established, and the full | ||||
name of the partnership shall be subjected to the pre- | ||||
approval from local Administration for Market | ||||
Regulation) | ||||
"Tongxin Investment" | Tongxin Business Management (Tianjin) Partnership | |||
(Limited Partnership) (同鑫商業管理(天津)合夥企業 |
(有限合夥)), which was defined as Tongxin Investment Partnership (同心投資合夥企業) in the announcement dated 31 October 2019. Due to the requirement of pre-approval for the name of partnership, the full name of the partnership has been updated to Tongxin Business Management (Tianjin) Partnership
- 3 -
LETTER FROM THE BOARD
CHINA ISOTOPE & RADIATION CORPORATION
中國 同輻股份有 限公司
(A joint stock company incorporated in the People's Republic of China with limited liability)
(Stock Code: 1763) | |
Members of the Board | Registered Office |
Chairman and executive Director: | Room 418, South 4th Floor, Building 1 |
Mr. Meng Yanbin | No. 66 Changwa Middle Street |
Haidian District | |
Executive Directors: | Beijing |
Mr. Wu Jian | PRC |
Mr. Du Jin | |
Head Office and Principal | |
Non-executive Directors: | Place of Business |
Mr. Zhou Liulai | in the PRC |
Mr. Chen Shoulei | No. 66 Changwa Middle Street |
Mr. Chen Zongyu | Haidian District |
Beijing PRC | |
Independent Non-executive Directors: | |
Mr. Guo Qingliang | Principal Place of Business |
Mr. Meng Yan | in Hong Kong |
Mr. Hui Wan Fai | Level 54, Hopewell Centre |
183 Queen's Road East
Hong Kong
Dear Shareholders,
Dear Sir/Madam
PROPOSED AMENDMENTS TO THE ARTICLES
CONNECTED TRANSACTIONS AND DISCLOSEABLE TRANSACTIONS
AND
PROPOSED APPOINTMENT OF DIRECTORS
1. INTRODUCTION
The purpose of this circular, of which this letter forms a part, is to provide you with all the information reasonably necessary to enable you to make an informed decision on whether to vote for or against the proposed resolutions at the EGM.
- 4 -
LETTER FROM THE BOARD
At the EGM, ordinary resolutions will be proposed to consider and, if thought fit, approve, among other things, (i) the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder;
- the appointment of Chang Jinyu as a non-executive Director; and (iii) the appointment of Tian Jiahe as an independent non-executive Director. Special resolution will be proposed to consider and, if thought fit, approve, the proposed amendments to the Articles.
2. PROPOSED AMENDMENTS TO THE ARTICLES
The Board held a meeting on 31 October 2019 to consider and approve the resolution on the proposed amendments to the Articles.
Pursuant to the relevant requirements of the Company Law of the People's Republic of China and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Board proposes to amend the existing Articles of Association according to the actual circumstances of the Company. The proposed amendments to the Articles of Association will further improve the governance of the Company and regulate the operation of the Company.
A special resolution will be proposed at the EGM to consider and, if thought fit, approve the proposed amendments to the Articles, a summary of which is set out in Appendix I to this circular.
3. CONNECTED TRANSACTIONS AND DISCLOSEABLE TRANSACTIONS
- Introduction
On 31 October 2019, the Board has approved the entering into of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement among the Company, Hynergy Industrial Funds and Tongxin Investment (to be established) and the entering into of the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement among the Company, Tongchuang Investment, CNNC Capital and BSIF.
- Major Terms of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement
Parties | : | Hynergy Industrial Funds (as the general partner) |
The Company (as the limited partner) | ||
Tongxin Investment (as the limited partner) |
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LETTER FROM THE BOARD
Name of partnership | : | Tongchuang | Investment | Partnership | (Limited |
Partnership) (to be established, and the full name of | |||||
the partnership shall be subject to the pre-approval | |||||
from local Administration for Market Regulation) | |||||
Place of registration | : | Beijing | |||
Amount of contribution | : | The total amount of contribution paid by the partners | |||
was RMB42.5 million, of which: Hynergy Industrial | |||||
Funds contributed RMB25 million, accounting for | |||||
58.82%; the Company contributed RMB7.5 million, | |||||
accounting for 17.65%; Tongxin Investment | |||||
contributed RMB10 million, accounting for 23.53%. | |||||
The contribution to Tongchuang Investment was | |||||
determined by the Parties after arm's length | |||||
negotiations with reference to the capital requirements | |||||
of Tongchuang Investment. The Company will not | |||||
consolidate its financial statements with those of | |||||
Tongchuang | Investment | Partnership | (Limited | ||
Partnership). The investment in the Tongchuang | |||||
Investment held by the Company will be recognised as | |||||
interests in associates in the consolidated financial | |||||
statements of the Company. | |||||
Method of contribution | : | All partners shall make contribution to Tongchuang | |||
Investment in RMB in cash in accordance with the | |||||
notice of payment of contribution given by the | |||||
executive partner to the limited partners. The payment | |||||
date specified in the notice of payment of first | |||||
contribution is the first settlement date. | |||||
Partners' responsibility | : | The general partner assumes unlimited liability for the | |||
for the debts of | debts of Tongchuang Investment, and the limited | ||||
Tongchuang Investment | partners are responsible for the debts of Tongchuang | ||||
Investment to the extent of the amount of contribution | |||||
paid by them. | |||||
Purpose of Tongchuang | : | Tongchuang Investment, as the general partner of | |||
Investment | Tongfu Fund, is solely for the purpose of investing in, | ||||
operating and managing the Tongfu Fund. | |||||
Term of operation of | : | 10 years, starting from the date of the establishment of | |||
Tongchuang Investment | Tongchuang Investment. Upon the expiration of the | ||||
term of operation of Tongchuang Investment, the | |||||
executive partner shall have the right to decide to | |||||
extend the term of operation of Tongchuang | |||||
Investment no earlier than the clearing time of the | |||||
Tongfu Fund. |
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LETTER FROM THE BOARD
Implementation of | : | The general partner acts as executive partner to | ||||
partnership affairs | implement partnership affairs. | |||||
Investment decision | : | The executive partner shall have the right to determine | ||||
the investment made by Tongchuang Investment in the | ||||||
Tongfu Fund and make payment in accordance with | ||||||
the notice of payment of contribution of the Tongfu | ||||||
Fund. The executive partner will not receive any | ||||||
management fees in respect of the Tongchuang | ||||||
Investment. | ||||||
Distribution | : | (I) Cash distribution | ||||
1. | During the term of operation of Tongchuang | |||||
Investment, after being determined by the | ||||||
executive partner, the cash distributable | ||||||
shall be distributed according to the | ||||||
proportion of the actual contribution paid | ||||||
by each partner; | ||||||
2. Except as otherwise provided, Tongchuang | ||||||
Investment shall distribute the proceeds | ||||||
within 30 days from the date of receipt of | ||||||
the cash income from the investment | ||||||
project. | ||||||
(II) Non-cash distribution | ||||||
1. | Before | liquidation | of | Tongchuang | ||
Investment, the executive partner shall | ||||||
make his best efforts to realize the | ||||||
investment of Tongchuang Investment in | ||||||
cash and avoid making non-cash | ||||||
distribution; but if the executive partner | ||||||
considers at his sole discretion that non- | ||||||
cash distribution is better in the interests of | ||||||
all partners, the executive partner may | ||||||
make non-cash distribution. In making a | ||||||
non-cash distribution, if the non-cash asset | ||||||
to be distributed is a marketable security | ||||||
traded on open market, then its value shall | ||||||
be determined by the average trading price | ||||||
of such marketable security within 20 | ||||||
securities trading days prior to the proposed | ||||||
distribution date; for other non-cash assets, | ||||||
the executive partner | shall | engage an |
independent third party to make a valuation assessment in order to determine the value and protect the interest of the partners;
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LETTER FROM THE BOARD
2. When Tongchuang Investment makes a non-cash distribution, the executive partner shall be responsible for assisting the partners to complete the registration procedure for transfer of the distributed asset, and to assist the partners to perform the information disclosure obligations in respect of accepting the transfer of such asset in accordance with the relevant laws and regulations; partners who accept non- cash distributions may also entrust their distributed non-cash assets to the executive partner for disposal according to their instructions, the specific details of the entrustment shall be agreed by separate agreements between the executive partner and the relevant limited partner.
Applicable law | : | The | laws of | the PRC shall be applicable to the | |
Tongchuang | Investment | Partnership | (Limited | ||
Partnership) Partnership Agreement. | |||||
Dispute resolution | : | Any | dispute | shall be submitted to the Beijing | |
Arbitration Commission by the Parties for arbitration | |||||
in Beijing in accordance with the arbitration rules of | |||||
the Commission. |
The terms of the Tongchuang Investment Partnership (Limited Partnership) Partnership
Agreement are determined by the Parties after arms' length negotiations.
- Major Terms of the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement
Parties | : | Tongchuang Investment (as the general partner) |
The Company (as the limited partner) | ||
CNNC Capital (as the limited partner) | ||
BSIF (as the limited partner) | ||
Name of partnership | : | Tongfu Innovation Industrial Investment Fund |
Partnership (Limited Partnership) (to be established, | ||
and the full name of the partnership shall be subject | ||
to the pre-approval from local Administration for | ||
Market Regulation) | ||
Place of registration | : | Beijing |
- 8 -
LETTER FROM THE BOARD
Amount of contribution | : | The total amount of contribution paid by the partners |
was RMB2,500 million, of which: Tongchuang | ||
Investment contributed RMB50 million, accounting | ||
for 2%; the Company contributed RMB1,200 million, | ||
accounting for 48%; CNNC Capital contributed | ||
RMB800 million, accounting for 32%; BSIF | ||
contributed RMB450 million, accounting for 18%. | ||
The contributions to Tongfu Fund were determined | ||
by the Parties after arm's length negotiations with | ||
reference to the capital requirements of Tongfu Fund. | ||
The Company will not consolidate its financial | ||
statements with those of Tongfu Innovation Industrial | ||
Investment Fund Partnership (Limited Partnership). | ||
The Company's investments in the Tongfu Fund will | ||
be recognised as interests in associates in the | ||
consolidated financial statements of the Company. | ||
Method of contribution | : | All partners shall make contributions to Tongfu Fund |
in RMB in cash. | ||
1. Unless otherwise agreed between the executive | ||
partner and the relevant limited partners, the | ||
executive partner shall generally issue a notice | ||
of payment of contribution to the limited | ||
partners 10 working days in advance, stating the | ||
amount and payment term of contribution | ||
payable by such limited partners. The payment | ||
date specified in the notice of payment of first | ||
contribution is the first settlement date. | ||
2. Unless otherwise agreed by the executive | ||
partner, all capital contribution partners shall | ||
complete the first payment of capital amount | ||
according to the requirements in the notice of | ||
payment of contribution issued by the executive | ||
partner, the percentage of payment shall be 40% | ||
of their respective committed capital | ||
contribution. The remaining amount of capital | ||
shall be paid by two subsequent payments, the | ||
percentage of each payment shall be 30% and | ||
30%, respectively, of their committed capital | ||
contribution amounts. The specific timing of | ||
payment shall be determined by the executive | ||
partner according to the project investment | ||
progress, each of the partners shall make | ||
payment of capital contribution to the Tongfu | ||
Fund in accordance with the committed capital | ||
contribution amount and payment percentage on | ||
the cut-off date (i.e. the date of payment) as | ||
required in the notice of payment of capital | ||
contribution issued by the executive partner. |
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LETTER FROM THE BOARD
Liabilities of the partners for the debts of Tongfu Fund
Scope of investment
- The general partner assumes unlimited liability for the debts of Tongfu Fund, and the limited partners are responsible for the debts of Tongfu Fund to the extent of the amount of contribution paid by them.
- The Tongfu Fund invests in the application areas of nuclear technology, including the production of nuclides, radioactive source, nuclear medicine, medical devices, vitro diagnosis, medical services and industrial nuclear applications, and other areas (including but not limited to nuclear imaging center, cancer hospital and distribution companies in nuclear technology industry) considered and agreed by resolution of the investment decision committee that could generate synergy with the applications of nuclear technology.
Investment region | : | Tongfu Fund mainly conducts investment business |
inside the PRC and enhances the guidance that | ||
investment projects should be based in Beijing to | ||
realize the implementation of high-end scientific | ||
research results in Beijing. The total amount, | ||
invested by Tongfu Fund to unlisted enterprises | ||
registered in Beijing and unlisted enterprises not | ||
registered in Beijing but conforming to the functional | ||
position of the capital city, shall not be less than 70% | ||
of the target size of proceeds raised (i.e. RMB2,500 | ||
million) by Tongfu Fund. For instance, Tongfu Fund | ||
intends to invest the companies that currently are not | ||
registered in Beijing but would be introduced to | ||
Beijing later. Tongfu Fund has a potential target | ||
project that provides irradiation service and plans to | ||
move to Beijing. | ||
Pre-emptive right of the | : | When Tongfu Fund exits from an invested project, |
Company | the Company shall have the pre-emptive right to | |
acquire the equity interest of such project held by | ||
Tongfu Fund under the same conditions at the same | ||
price as other potential buyers. The price is based on | ||
the value assessment from independent third party | ||
and is combined with the market accepted price. | ||
Term of operation of | : | eight (8) years, starting from the date of |
Tongfu Fund | establishment of Tongfu Fund. |
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LETTER FROM THE BOARD
Valid duration, investment | : | The | "valid duration" of Tongfu Fund is eight |
period, exit period and | (8) | years from the first settlement day of Tongfu | |
extension period | Fund; | ||
During the valid duration of Tongfu Fund, the | |||
"investment period" is five (5) years from the first | |||
settlement day of Tongfu Fund or until the day when | |||
the total amount of capital contribution by the | |||
partners have been fully utilized in project | |||
investment and for payment of partnership fees; for | |||
the avoidance of doubt, the expiry date of the | |||
investment period shall be the date of occurrence of | |||
any of the following circumstances, whichever the | |||
earlier: | |||
(1) | expiry of the aforesaid term of investment | ||
period; | |||
(2) | date of completion of first settlement for | ||
subsequent funds; | |||
(3) | the total capital amount of Tongfu Fund, after | ||
making reasonable provisions for investment, | |||
payment of partnership fees, repayment of | |||
partnership debts, follow-up investments and | |||
capital contributions which have been signed | |||
and legally binding, has been actually paid and | |||
utilized, that is, Tongfu Fund has basically | |||
completed the investment tasks, or all paid-in | |||
capital of Tongfu Fund has been fully used for | |||
the aforesaid purposes, that is, Tongfu Fund has | |||
no more available funds to continue making | |||
investments; | |||
(4) | Key Persons event has led to termination of | ||
investment period. |
The "exit period" of Tongfu Fund commences from the day after the expiry of the investment period and ends on the expiry date of the valid duration of Tongfu Fund;
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LETTER FROM THE BOARD
Upon expiry of the term of operation of the Tongfu | ||||||||
Fund, if any projects cannot be settled in the term of | ||||||||
operation, partnership meeting can decide to extend | ||||||||
the term of operation in order to meet the investment | ||||||||
need and cover the valid duration. | ||||||||
Upon expiry of the valid duration of Tongfu Fund, if | ||||||||
it is necessary to extend the valid duration due to the | ||||||||
application for listing or the exit from lock-up period | ||||||||
by projects invested by Tongfu Fund or other reasons, | ||||||||
consent from partners with more than 50% of the | ||||||||
paid-in capital of Tongfu Fund, including BSIF, is | ||||||||
required. | ||||||||
Implementation of | : | The | general | partner acts | as executive | partner to | ||
partnership affairs | implement | partnership | affairs, | and | Hynergy | |||
Industrial Funds acts as fund manager to provide | ||||||||
daily operation and investment management services | ||||||||
to Tongfu Fund. | ||||||||
Management fees | : | As | consideration for the | management | and other | |||
services provided to Tongfu Fund in the capacity of | ||||||||
fund manager, all parties have agreed that the | ||||||||
management fees shall be paid by Tongfu Fund at the | ||||||||
fee rate of 1.8% per annum based on the total paid-in | ||||||||
capital contribution amount of limited partners. | ||||||||
Distribution | : | (I) | Cash distribution | |||||
1. Distribution of cash income received by | ||||||||
the project, including dividends and | ||||||||
proceeds of selling any projects, shall be | ||||||||
carried out according to the following | ||||||||
order: | ||||||||
(1) Firstly, refund of capital contribution | ||||||||
to limited partners. | ||||||||
(2) | Secondly, | refund | of | capital | ||||
contribution to the general partner. | ||||||||
(3) Thirdly, if remaining balance exists | ||||||||
after refunding capital | contribution | |||||||
to limited | partners | and | the general |
partner, the amount will be distributed as hurdle return to limited partners (the internal rate of return of 8% per annum is reached).
- 12 -
LETTER FROM THE BOARD
- After satisfying limited partners' hurdle return, compensation will be distributed to the general partner up to 25% of the hurdle return to limited partners.
- Finally, the excess profit, which is the residual profit after refunding capital contribution to limited partners and the general partner, distributing hurdle return to limited partners and compensation to the general partner, will be shared on pro-rata basis. If remaining balance exists, eighty per cent (80%) will be distributed to all partners in accordance with the relative ratio of the principal of investment by all partners; and twenty per cent (20%) will be distributed to the general partner.
2. Timing for distribution of cash income:
Unless otherwise agreed in the Tongchuang Investment Partnership
(Limited Partnership) Partnership Agreement, the types of cash distributions and their respective distribution timing are set out as follows:
Distribution type | Timing |
Cash income, excess within 30 days
profitfrom the date of receipt of cash income from the investment project
Other | after-tax | after the end of the | ||
distributable | income | first | quarter | and |
(the | income | from | the third quarter of | |
managing cash asset | each | year | in | |
and fund asset other | accordance | with | ||
than cash income) | the ratio of paid-in | |||
capital | ||||
contribution of all | ||||
partners |
- 13 -
LETTER FROM THE BOARD
- On dissolution or liquidation of the Tongfu Fund, after overall accounting is completed, any partner who has received any excess amount above the income distribution amount that should be received according to the provisions of this agreement (such as calculation error, including the distribution amounts received by such partner due to capital reduction or exit from partnership) must return such excess amount to Tongfu Fund, or such excess amount shall be deducted from his receivable amount of liquidation distribution, whether he is still a partner of the Tongfu Fund by then. Particularly, when the total income received by the general partner has exceeded income amount receivable when calculated according to the investment in the entire Tongfu Fund project pursuant to the distribution method stipulated under this agreement, the general partner shall return the excess amount to the Tongfu Fund, and such excess amount shall be distributed by the partnership accordingly pursuant to all the projects participated by each of its partners
- Non-cashdistribution
- Before liquidation of the Tongfu Fund, the fund manager shall make his best efforts to realize the investment in Tongfu Fund and avoid to make non-cash distribution; before the expiry of the operation period of Tongfu Fund, the distribution of Tongfu Fund is usually made in cash, but when in compliance with the applicable laws and agreed terms, after consideration by the meeting of partners and consent given by partners accounting for more than 75% of the paid-in capital contribution by partners, marketable securities traded in open market or other forms of non-cash assets may be distributed to the general partner in lieu of cash distribution. After dissolution of the Tongfu Fund, securities with restricted liquidity or other fund assets may be distributed.
- 14 -
LETTER FROM THE BOARD
Subject to the above terms, before completion of the liquidation of Tongfu Fund, the general partner shall make their best efforts to realize the investment in Tongfu Fund in cash and avoid to make non-cash distribution as far as practicable; however if cash distribution is not possible due to the prevailing laws and regulations, and after consideration by the meeting of partners and consent has been given by partners accounting for more than 75% of the paid-in capital contribution by partners, the general partner may receive distribution in non-cash form. If the non- cash assets for distribution are marketable securities traded in open market, the value shall be determined by the average trading price of such marketable securities within twenty (20) trading days of such securities prior to the determination date of distribution; the value of other non-cash assets shall be reasonably determined by the general partner in accordance with the fair market value confirmed by a reputable third party valuation assessment institution which is confirmed by the general partner and agreed by the consultation committee.
2. When non-cash distribution is made by the Tongfu Fund, the fund manager shall be responsible for assisting all partners to complete the registration procedure for the transfer of distributed assets, and to assist the partners to perform the information disclosure obligations in respect of accepting the transfer of such assets in accordance with the relevant laws and regulations; partners who accept non-cash distributions may also entrust their distributed non-cash assets to the fund manager for disposal according to their instructions, the specific details of the entrustment shall be agreed by separate agreements between the fund manager and relevant limited partners.
- 15 -
LETTER FROM THE BOARD
Investment decision | : | Tongfu Fund has put in place a four-member |
committee | investment decision committee of which the members | |
are appointed and dismissed by the executive partner. | ||
The Company may nominate one (1) member, the | ||
executive partner may nominate two (2) members and | ||
the Company may nominate an industry expert. The | ||
chairman of the investment decision committee shall | ||
be either one of members nominated by the executive | ||
partner. The chairman of the investment decision | ||
committee is responsible for convening and presiding | ||
over meetings of the investment decision committee. | ||
The investment decision committee makes decisions | ||
on projects investment and exit of investment for the | ||
Tongfu Fund; | ||
Each member has one vote. For matters requiring | ||
decision of the investment decision committee, it | ||
must be approved by three (3) members. The | ||
decisions made by the investment decision committee | ||
will be considered and executed by the executive | ||
partner and the fund manager. The investment | ||
decision committee does not act as an agent for or | ||
represent the Tongfu Fund. | ||
Investment project | : | Each of BSIF and CNNC Capital are entitled to |
observers | appoint one investment project observer to the | |
investment decision committee to attend the | ||
investment decision committee meeting held to | ||
consider any investment project but the observers do | ||
not have voting rights. | ||
Consultation committee | : | After the establishment of the Tongfu Fund, the |
executive partner shall, within a reasonable time, | ||
form a consultation committee composed of a certain | ||
number of representatives of limited partners to | ||
review and approve related matters. The consultation | ||
committee consists of one (1) member who is | ||
determined by the executive partner. The executive | ||
partner shall appoint a representative as a non-voting | ||
consultation committee member and convener.The | ||
number of members of the consultation committee | ||
can be increased upon the admission of subsequent | ||
partner to the Tongfu Fund. |
- 16 -
LETTER FROM THE BOARD
Unless otherwise agreed, resolution of the consultation committee meeting shall be passed by at least N-1 (including N-1, N is the number of consultation committees) members who have voting rights, but if the number of consultation committee member shall be one (1), the resolution shall be passed by that only member.
The consultation committee has the right to review transactions between the general partner, the fund manager, the Key Persons or the core management team, and the connected persons of the aforementioned persons, or the entities of which the actual controller, shareholder, fund manager, director or consultant are the aforesaid persons and the fund (i.e. connected transactions).
Key Persons | : | The Key | Persons of the executive partner | ||
management team are Liu Pengbin, Gong Lingling, | |||||
Xu Zhisui, Sheng Yangfan and Che Te. Liu Pengbin, | |||||
is responsible for overall management and | |||||
investment decision-making. Gong Lingling, the | |||||
leading cadre of Tongfu Fund, is responsible for the | |||||
whole process of the fund, including fund raising, | |||||
investment, business negotiation, establishment of | |||||
transaction | structure | and | post-investment | ||
management. Xu Zhisui, Sheng Yangfan and Che Te | |||||
participate in the whole process of the fund, | |||||
including fund raising, project investment, business | |||||
negotiation, establishment of transaction structure | |||||
and post-investment management. |
- 17 -
LETTER FROM THE BOARD
The background, experience and expertise of each of the Key Persons are set out as follows:
- Liu Pengbin, is currently the assistant president and general manager of fund management department of Hynergy Industrial Funds. He has successively worked in State Power Investment Corporation Limited (SPIC) and China Nuclear Engineering & Construction Corporation Limited. During his tenure in SPIC, he participated in the reorganization of Hebei Dongfang Thermal Power Company and the acquisition of wind power assets in Inner Mongolia. He has extensive experience in finance and investment, and is the main participant in the establishment of Hynergy Industrial Funds. He is the appointed representative of the Tongchuang Investment and Tongfu Fund. He is also the general partner and executive partner of Tongxin Investment, the limited partner of Tongchuang Investment.
- Gong Lingling, master's degree of Peking University with major in financial engineering, is currently deputy general manager of the department and fund manager of Tongfu fund. Gong has nuclear industry working experience consecutively. Gong worked for China Nuclear Group Finance Company, and then China Guangdong Nuclear Industry Fund Management Co., Ltd., and Hynergy Industrial Fund Management Co., Ltd., engaged in asset management and equity investment. She participated in the investment of Australian Paladin Energy (uranium mine), the project of Argentine Nuclear Power Plant and British Nuclear Power Plant, initiated and raised the China Nuclear Industry Fund, and participated in the due diligence work of investment of China Isotope & Radiation Cooperation (1763.hk) and Hongwei Supply (NEEQ stock code: 833770), dominated the investment of China Clean Energy (NEEQ stock code: 834603). Gong has rich experience in the nuclear industry investing. Gong is the limited partner of Tongxin Investment.
- 18 -
LETTER FROM THE BOARD
- Xu Zhisui, master of science in quantitative finance, has prior experience in PE company and financial services sector. Xu is CFA level III candidate and FRM level II candidate and specialize in business researching, data analysis, financial modeling and business valuation. With demonstrated strong work ethic and ability to learn quickly, Xu is currently focus on investing in medical devices and vitro diagnosis, which is the strategic area of CIRC. Xu is the limited partner of Tongxin Investment.
- Sheng Yangfan, master of science in University Of International Business And Economics, has prior experience in securities company. Sheng is specialize in industry analysis, investment plan design, and business valuation. With demonstrated strong work ethic and ability to learn quickly, Sheng is currently focus on project investment. Sheng is the limited partner of Tongxin Investment.
- Che Te, master of finance from Tsinghua PBC School of Finance and the exchange student in Deutsche Bundesbank University of Applied Sciences. Che joined Hynergy Industrial Funds in 2018, with a focus on investment opportunities in medical devices, nuclear medicine and radioactive sources. Prior to Hynergy Industrial Funds, Che worked in U.S.- China Green Fund, Citic Securities, Bloomberg Businessweek. She is skillful at industry research, investment strategy formulation and public relations. Che is the limited partner of Tongxin Investment.
The Board believes that each of the Key Persons has extensive experience and required expertise in making investments in the application areas of nuclear technology and is able to duly perform their duties under the Tongfu Fund.
Key Persons will not be paid directly from the Tongfu fund. They will receive remuneration in form of salary and bonus as employees in Hynergy Industrial Funds. The remuneration will be paid indirectly from the management fee and excess profit of the fund.
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LETTER FROM THE BOARD
Key Persons provisions | : | During the valid duration of the partnership, the |
management team's Key Persons shall not change | ||
without the consent of the partners in meeting. | ||
Adjustment to the Key Persons can be made by | ||
modifying the partnership agreement upon the | ||
admission of subsequent partners to the Tongfu Fund. | ||
If Gong Lingling or any two Key Persons fail to | ||
perform their duties for more than three consecutive | ||
months or more than 90 days in a year, it constitutes | ||
a "Key Persons event". After the Key Persons event | ||
occurs, the investment period is automatically | ||
suspended. The executive partner shall recommend a | ||
successor within 60 days from the date of occurrence | ||
of the above matters, and shall take the role of a Key | ||
Persons after consideration by the partner meeting | ||
and with the consent of all partners. If the successor | ||
recommended by the executive partner fails to obtain | ||
the unanimous consent of all partners within 90 days | ||
from the date of occurrence of the Key Persons event, | ||
the partner meeting has the right to decide to replace | ||
the executive partner or to decide that the Tongfu | ||
Fund should be dissolved and liquidated. If all | ||
partners agree to the successor of the Key Persons, | ||
the investment period of the Tongfu Fund shall | ||
continue. For the avoidance of doubt, during the | ||
suspension of the investment period of the Tongfu | ||
Fund, the fund manager shall not charge any | ||
management fee for the suspension period. | ||
Competition | : | During the valid duration of the Tongfu Fund, the |
general partner may not invest, in priority to the | ||
Tongfu Fund, in any investment projects within the | ||
Tongfu Fund's target scope of investment. Projects | ||
that the general partner had invested in, or projects | ||
that had already signed up for investment prior to the | ||
establishment of the Tongfu Fund were not subject to | ||
the above restrictions. |
- 20 -
LETTER FROM THE BOARD
Before the expiration of the Tongfu Fund's investment period (including any early termination of the investment period), or before 70% of the fund's total contribution (except for the subscribed capital contribution of the default partner who subscribed but failed to pay) has been used for investment or earmarked for investment, the Key Persons and the core management team and their connected persons, the executive partner and the fund manager shall not initiate or manage a RMB or USD follow-up fund that competes with the Tongfu Fund in terms of investment territory, investment field or investment stage.
The Key Persons shall not take the role of Key Persons in any private equity investment fund of the same type of or in competition with the Tongfu Fund until expiration of investment period of Tongfu Fund (including any early termination of the investment period).
For a company or enterprise invested by a general partner and an investment institution the management of which was entrusted to a general partner, if the general partner does not control or actually control the company, enterprise or institution as a minority shareholder or connected person, the investment behavior of the company, enterprise or institution does not constitute a competition under this agreement.
During the valid duration of the Tongfu Fund, the limited partners may choose to invest separately or jointly with the Tongfu Fund in any investment activities that may compete with the Tongfu Fund.
The follow-up investments made by the fund manager and/or its management team are not considered as horizontal competition or connected transactions.
- 21 -
LETTER FROM THE BOARD
Co-investment mechanism | : | The fund manager and/or its management team may | |||
and joint investment | separately form an investment entity and/or through | ||||
the investment fund or invest directly on all | |||||
investment projects of the Tongfu Fund in order to | |||||
conduct a co-investment. The fund manager and/or its | |||||
management team's co-investment and Tongfu Fund | |||||
shall be subject to the same conditions for the same | |||||
investment project. | |||||
In case of co-investment, the investment made by the | |||||
fund manager and/or its management team in each | |||||
investment project shall be not exceed 10% of the | |||||
total amount invested in the project by the Tongfu | |||||
Fund. | |||||
Tongfu Fund gives some partners joint | investment | ||||
opportunities. | Specifically, | the | investment | ||
opportunities of a project decided to be invested by | |||||
the Tongfu Fund are shared among co-investors. The | |||||
parties may agree on their shares of investment | |||||
through amiable negotiation according to the | |||||
situation, and the partners with co-investment | |||||
appeals shall notify the fund manager when the | |||||
Tongfu Fund is established or incorporated, | |||||
otherwise it shall be deemed to have voluntarily | |||||
given up the opportunity. | |||||
Applicable law | : | The laws of the PRC shall be applicable to the Tongfu | |||
Innovation Industrial Investment Fund Partnership | |||||
(Limited Partnership) Partnership Agreement. | |||||
Dispute resolution | : | Any dispute shall be submitted to the Beijing | |||
Arbitration Commission by the Parties for arbitration | |||||
in Beijing in accordance with the arbitration rules of | |||||
the Commission |
The terms of the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) are determined by the Parties after arms' length negotiations.
- 22 -
LETTER FROM THE BOARD
IV. Reasons and Benefits for Entering into the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement
The Company is a nuclear technology application industry development platform of CNNC and also the leading enterprise in the field of isotopes and irradiation technology applications in China. With the strategic goal of "growing bigger, better and stronger", the Company adheres to its strategy of "industrialisation and internationalisation" and strives to become a leading international supplier of nuclear technology application products and services. In order to facilitate the implementation of the Company's strategy, explore new sources of economic growth and enhance the economic scale and efficiency of the Company, the Company intends to initiate the establishment of Tongfu Innovation Industrial Investment Fund. The fund has the flexibility to invest in the upstream and downstream of the isotopes and irradiation industry in China and provides funds for strategic, expansionary, complementary and collusive mergers and acquisitions. The Company may acquire the investment project by way of pre-emptive right in the future to improve its industrial layout and promote industrial development. The fund will focus mainly on the application areas of nuclear technology, including the production of nuclides, radioactive source, nuclear medicine, medical devices, vitro diagnosis, medical services and industrial nuclear applications. With investments, mergers and acquisitions as pathways to implement the industrial expansion strategy of the Company, it can assist the Company in achieving leapfrog development.
By leveraging on the capital strength and license advantage of CNNC Capital, the internal financial segment of CNNC, introducing government guidance funds, and making use of the industrial advantages of the Company, the Board believes that the establishment of the fund is conducive to strengthening the leading position of the Company in the industry and is a great opportunity for us to further improve our market competitiveness and expand market layout. As a market-oriented emerging industry fund management platform of CNNC, Hynergy Industrial Funds has rich experience in equity investment in nuclear industry, with a deep understanding of the industry characteristics, business operations, merger and acquisition needs and cash flow patterns of the Company as well as the overall capital operation system of the Group. Hynergy Industrial Funds can provide full industrial merger and acquisition services and equity investment proposals of a standard not lower than, or even higher than, major market-oriented equity investment institutions, which enables the Company to reduce costs, increase efficiency, maximize revenue and fully utilize the capital operations advantage of CNNC in the industry. Also, with a comprehensive mechanism of market-oriented incentive and follow-up investment and a team of members who possess solid professional skills and work efficiently and actively, Hynergy Industrial Funds has established sound cooperation mechanisms with the Company from previous business cooperation and creates synergy and complementarity in the industry.
- 23 -
LETTER FROM THE BOARD
However, by entering into the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement, the Company has assumed the responsibility for making contribution, which may have impact on the Company's cash at bank. The return of the investment will be fluctuated in the valid duration due to the risk sharing mechanism of private equity fund and the performance of the invested projects. Additionally, the changes in macroeconomic and regulatory policies may also have adverse effects on the fund or the projects invested by the fund in the future.
The Company will contribute a total of RMB1,207.5 million to the Tongchuang Investment Partnership (Limited Partnership) and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership), of which, the initial contribution of the Company will be RMB480 million and the remaining contribution is contingent on the progress of the initial contribution and the subsequent operation of the funds. Among the initial contribution of RMB480 million, RMB200 million will be funded through utilizing the proceeds of the Global Offering while the remaining of the initial contribution will be funded through other internal resources. For the remaining contribution of RMB727.5 million, it will be funded through dividends of group companies and other internal resources without utilizing any IPO proceeds.
The corresponding purpose of the proceeds, the amount utilized and unutilized of the proceeds and the expected time for such utilization is set out as follows:
Amounts | Amounts | Expected time | ||
utilized as of | unutilized as of | Amounts to be | of utilizing the | |
31 October | 31 October | utilized for the | remaining | |
Purpose of IPO proceeds | 2019 | 2019 | transaction | amounts |
Investments/selective | RMB248 | RMB289 | RMB56 million | 2020 |
(mergers) acquisitions | million | million | in 2019; | |
RMB144 million | ||||
in 2020 |
- Implications of the Listing Rules
As at the date of this announcement, CNNC, which directly and indirectly holds approximately 73.83% of the total issued share capital of the Company through Atomic Energy Institute, Nuclear Power Institute, CNNC Fund, 404 Company and B.Y. Investment, is the controlling shareholder of the Company. CNNC holds a 100% equity interest in CNNC Capital and CNNC Capital holds a 35% equity interest in Hynergy Industrial Funds. Therefore, CNNC Capital and Hynergy Industrial Funds are connected persons of the Company as defined in Chapter 14A of the Listing Rules. Therefore, the entering into of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder constitute connected transactions of the Company under Chapter 14A of the Listing Rules.
- 24 -
LETTER FROM THE BOARD
As one or more of the applicable percentage ratios of the transactions under the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement exceed 5% but are less than 25%, the transactions thereunder are subject to the reporting, announcement, annual review and independent Shareholders' approval requirements under Chapter 14A of the Listing Rules. The entering into of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder also constitute discloseable transactions of the Company.
The Directors (excluding the independent non-executive directors (whose opinion is set out in the letter from the Independent Board Committee contained in this circular)) consider that the terms of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement were determined after arm's length negotiations on normal commercial terms, and the transactions contemplated thereunder are fair and reasonable, though are not being entered into in the ordinary and normal course of business of the Group, and are in the interests of the Company and the shareholders as a whole. As none of Directors had a material interest in the transactions contemplated under such agreements, none of them were required to abstain from voting on the relevant board resolutions.
VI. General Information about the Company and the Parties
The Company
The Company and its subsidiaries are primarily engaged in the research, development, manufacturing and sale of diagnostic and therapeutic radio pharmaceuticals and radioactive source products for medical and industrial applications. We also provide irradiation services for sterilization purpose and EPC services for the design, manufacturing and installation of gamma ray irradiation facilities. In addition, we provide independent clinical laboratory services to hospitals and other medical institutions.
Hynergy Industrial Funds
Hynergy Industrial Funds was established on 18 November 2016 with a registered capital of RMB200 million. It is registered with the Asset Management Association of China as a private equity fund manager. Hynergy Industrial Funds was initiated by CNNC Capital and jointly funded and established by China Aerospace Science and Technology Corporation (中國航天科技集團公司) (a joint strategic alliance partner), China Development Bank, China Life Insurance (Group) Company (中國人壽保險(集團)公司) and Agricultural Bank of China. It is held as to 35% by CNNC Capital, as to 20% by China Development Bank Capital Corporation Ltd. (國開金融有限責任公司) and as to 15% by each of China Life Asset Management Company Limited (中國人壽資產管理有 限公司), China Aerospace Investment Holdings Ltd. (航天投資控股有限公司) and ABCI Corporate Management Co., Ltd (農銀國際企業管理有限公司).
- 25 -
LETTER FROM THE BOARD
China Development Bank Capital Corporation Ltd. is a non-listed company, whose ultimate beneficial owner is the Ministry of Finance of the PRC; China Life Asset Management Company Limited is a non-listed company, whose ultimate beneficial owner is the State Council of the PRC; China Aerospace Investment Holdings Ltd. is a non-listed company, whose ultimate beneficial owner is The State-owned Assets Supervision and Administration Commission of the State Council; the ultimate beneficial owner of ABCI Corporate Management Co., Ltd. is Agricultural Bank of China Limited (Stock Code: 1288).
CNNC Capital
CNNC Capital was established in July 2016 and is a wholly-owned subsidiary of CNNC, with a registered capital of RMB7.08 billion. As a specialized management platform for the financial sector of CNNC, CNNC Capital is positioned as a center of industrial finance risk control, industrial finance investment control, industrial financial resource allocation and industrial finance business collaboration of CNNC.
BSIF
BSIF has a total scale of RMB30 billion. The ultimate beneficial owner of BSIF is The State-owned Assets Supervision and Administration Commission of the State Council, which is a third party independent of the Company and connected persons of the Company. It sets up sub-funds around the three stages of original innovation, results transformation and highly sophisticated industries and arranges the amount of funds according to the ratio of 5:3:2. The fund's mission is to achieve "three sets of guidance": the first one is to guide the way to high-end "hard technology" innovation; the second is to guide the way to front-end original innovation; the third is to guide high-end scientific research results which can match up with the capital's positioning to locate in Beijing and to cultivate "highly sophisticated" industry. Through the construction of innovative investment ecosystem, the fund promotes the rapid and steady development of the science and technology industry of Beijing and contributes actively to building a globally influential innovation centre for science and technology in Beijing.
Tongxin Investment
Tongxin Investment (it is subject to industrial and commercial registration and will be incorporated in Tianjin, China) is the follow-up investment platform for Hynergy Industrial Funds employees, with the total contribution of RMB10 million. It will solely be contributed by the employees of Hynergy Industrial Funds. All Hynergy Industrial Funds employees are eligible to invest in the Tongxin Investment, according to Article 13 of Supervision and Administration of Private Investment Funds published by the Asset Management Association of China. The partners shall make contribution to Tongxin Investment with their own money. This follow-up investment mechanism allows the interests of the fund consistent with interest of the management team, motivates team to explore investment opportunities, reduces risks, solves principal-agent issues and guarantees the rights of investors.
- 26 -
LETTER FROM THE BOARD
There are 22 Hynergy Industrial Funds employees who are committed to invest in the Tongxin Investment, their position, amount of subscription and respective shareholding are set out as follow:
Subscription | ||||
Name | Position | Amount | Shareholding | |
(RMB) | ||||
Yu Hongwei | General manager | 2,400,000 | 24% | |
Liu Pengbin | General manager assistant | 1,500,000 | 15% | |
Gong Lingling | Fund manager | 1,000,000 | 10% | |
Yao Yong | Fund manager | 620,000 | 6.2% | |
Xu Zhisui | Project manager | 400,000 | 4% | |
Sheng Yangfan | Project manager | 500,000 | 5% | |
Che Te | Project manager | 400,000 | 4% | |
Mi Shuo | Project manager | 190,000 | 1.9% | |
Zhu Yilin | Project manager | 190,000 | 1.9% | |
Su Lijun | Investment manager | 250,000 | 2.5% | |
Yue Jianguo | Investment manager | 1,000,000 | 10% | |
Zhang Jingya | Risk director | 250,000 | 2.5% | |
Jiang Wenbin | Accounting manager | 350,000 | 3.5% | |
Zhao Gang | Director of president | 350,000 | 3.5% | |
office | ||||
Zhang Ruijie | Fund manager | 50,000 | 0.5% | |
Hu Jingshan | Fund manager | 50,000 | 0.5% | |
Zhu Xiaoyu | Project manager | 50,000 | 0.5% | |
Tang Xuemei | Risk manager | 50,000 | 0.5% | |
Feng Meiling | Senior accountant | 100,000 | 0.5% | |
Dong Yanglin | Senior accountant | 100,000 | 1% | |
Yang Yang | HR director | 100,000 | 1% | |
Niu Jiatian | Investment assistant | 100,000 | 1% | |
Total | ||||
10,000,000 | 100% | |||
Employees to be participating in Tongxin Investment include all of the Key Persons. No connected person or shareholder of the Company is included.
Tongchuang Investment
Tongchuang Investment (it is subject to industrial and commercial registration) acts as the general partner and executive partner of Tongfu Fund, with the total contribution of RMB42.5 million. Hynergy Industrial Funds shall subscribe RMB25 million to the total contribution, which is 58.82% interests in Tongchuang Investment; the Company shall subscribe RMB7.5 million to the total contribution, which is 17.65%; and Tongxin Investment shall subscribed RMB10 million to the total contribution, which is 23.53%.
- 27 -
LETTER FROM THE BOARD
4. PROPOSED APPOINTMENT OF DIRECTORS
The Board has proposed the appointment of Chang Jinyu as a non-executive Director and Tian Jiahe as an independent non-executive Director on 28 June 2019. Ordinary resolutions will be proposed at the EGM to consider and, if thought fit, approve such appointments. Each of the appointment will take effect upon approval from the Shareholders at the EGM.
Biographical details of each of Chang Jinyu and Tian Jiahe are set out in Appendix II to this circular.
5. EGM
The Company will convene the EGM at 9:30 a.m. on Monday, 30 December 2019 at Room 305, 3/F, No. 66 Changwa Middle Street, Haidian District, Beijing, China. Notice of the EGM, the proxy form and the reply slip for the EGM have been dispatched and published on 15 November 2019.
In accordance with the Listing Rules, any Shareholder who has a material interest in the transactions contemplated under the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement is required to abstain from voting on the resolution approving such agreement at the EGM. As at the Latest Practicable Date, CNNC holds approximately 73.83% equity interest in the Company, and is the controlling Shareholder. As such, CNNC and its associates will abstain from voting on such resolution. Save for CNNC and its associates, to the best knowledge, information and belief of the Directors having made all reasonable enquiries, no other Shareholder is required to abstain from voting on such resolution.
6. VOTING BY POLL
Pursuant to Rule 13.39(4) of the Listing Rules and Article 81 of the Articles, any vote of shareholders at a general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the chairman of the EGM will demand a poll in relation to every resolution proposed at the EGM.
- 28 -
LETTER FROM THE BOARD
7. RECOMMENDATION
Your attention is drawn to:
- the letter from the Independent Board Committee set out on pages 30 to 31 of this circular which contains the recommendation of the Independent Board Committee to the independent Shareholders in relation to whether the terms of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable, are being entered into in the ordinary and usual course of business of the Group, and are in the interests of the Company and the Shareholders as a whole; and
- the letter from Somerley set out on pages 32 to 68 of this circular which contains its recommendation to the Independent Board Committee and the independent Shareholders in relation to the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder.
The Board (including the Independent Board Committee after taking into account the advice of Somerley) considers that all resolutions to be proposed at the EGM are in the interests of the Company and the Shareholders as a whole, and recommends the Shareholders to vote in favour of all such resolutions.
Your attention is also drawn to the additional information set out in the appendices to this circular.
By Order of the Board
China Isotope & Radiation Corporation
Meng Yanbin
Chairman
Beijing, the PRC, 5 December 2019
- 29 -
LETTER FROM THE INDEPENDENT BOARD COMMITTEE
CHINA ISOTOPE & RADIATION CORPORATION
中國 同輻股份有 限公司
(A joint stock company incorporated in the People's Republic of China with limited liability)
(Stock Code: 1763)
5 December 2019
Dear independent Shareholders,
Dear Sir/Madam
CONNECTED TRANSACTIONS AND DISCLOSEABLE TRANSACTIONS
We refer to the circular of the Company to the Shareholders dated 5 December 2019 (the "Circular"), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter unless the context otherwise requires.
We have been appointed as members of the Independent Board Committee to advise you as to whether the terms of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable, are being entered into in the ordinary and usual course of business of the Group, and are in the interests of the Company and the Shareholders as a whole.
Somerley has been appointed as the Independent Financial Adviser to you and us in relation to the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder. Details of its recommendation are set out in its letter on pages 32 to 68 of the Circular.
Your attention is also drawn to the letter from the Board set out on pages 4 to 29 of the Circular and the additional information set out in the appendices to the Circular.
Having considered the opinion of Somerley and the terms of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder, we consider that such terms are on normal commercial terms which are fair and reasonable, though are not being entered into in the ordinary and usual course of business of the Group, and are in the interests of the Company and the Shareholders as a whole.
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LETTER FROM THE INDEPENDENT BOARD COMMITTEE
Accordingly, we recommend that you to vote in favour of the ordinary resolution set out in the notice of EGM to approve the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder.
Yours faithfully,
For and on behalf of the
Independent Board Committee
Mr. Guo Qingliang | Mr. Meng Yan | Mr. Hui Wan Fai |
Independent non-executive Directors
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LETTER FROM SOMERLEY
Set out below is the letter of advice from Somerley to the Independent Board Committee and the independent Shareholders in respect of the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement and the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.
SOMERLEY CAPITAL LIMITED
20th Floor
China Building
29 Queen's Road Central
Hong Kong
5 December 2019
To: The Independent Board Committee and the independent Shareholders of China Isotope & Radiation Corporation
Dear Sirs,
CONNECTED TRANSACTIONS AND DISCLOSEABLE TRANSACTIONS
THE TONGCHUANG INVESTMENT PARTNERSHIP
(LIMITED PARTNERSHIP) PARTNERSHIP AGREEMENT
AND
THE TONGFU INNOVATION INDUSTRIAL INVESTMENT
FUND PARTNERSHIP
(LIMITED PARTNERSHIP) PARTNERSHIP AGREEMENT
INTRODUCTION
We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the independent Shareholders in relation to the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement (the "Tongchuang Agreement"), the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement (the "Tongfu Agreement", together with Tongchuang Agreement, the "Agreements") and the transaction contemplated thereunder. Details of the Agreements and the transactions contemplated thereunder are set out in the circular issued by the Company to the Shareholders dated 5 December 2019 (the "Circular"), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.
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LETTER FROM SOMERLEY
On 31 October 2019, the Board of the Company has approved (i) the entering into of the Tongchuang Agreement among the Company, Hynergy Industrial Funds and Tongxin Investment (to be established) for establishing the Tongchuang Investment to invest into the Tongfu Fund and act as the general partner of the Tongfu Fund; and (ii) the entering into of the Tongfu Agreement among the Company, Tongchuang Investment, CNNC Capital and BSIF for establishing the Tongfu Fund to invest in the application areas of nuclear technology.
CNNC is the controlling shareholder of the Company holding, directly and indirectly, approximately 73.83% of total issued share capital of the Company as at the Latest Practicable Date. In addition, CNNC holds a 100% equity interest in CNNC Capital and CNNC Capital holds a 35% equity interest in Hynergy Industrial Funds. As such, CNNC Capital and Hynergy Industrial Funds are connected persons of the Company as defined in Chapter 14A of the Listing Rules. Therefore, the entering into of the Agreements and the transactions contemplated thereunder constitute connected transactions for the Company under Chapter 14A of the Listing Rules. Furthermore, as one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the transactions under the Agreements are more than 5% but all of them are less than 25%, the transactions contemplated thereunder also constitute discloseable transactions for the Company under Chapter 14 of the Listing Rules and are subject to the reporting, announcement, circular and independent Shareholders' approval requirements under Chapters 14 and 14A of the Listing Rules.
The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Guo Qingliang, Mr. Meng Yan and Mr. Hui Wan Fai, has been established to advise the independent Shareholders on the terms of the Agreements and to make a recommendation as to voting. We, Somerley Capital Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the independent Shareholders in the same regard.
We are not associated with the Company, Hynergy Industrial Funds, Tongxin Investment, Tongchuang Investment, CNNC Capital, BSIF, the Tongfu Fund or their respective core connected persons, close associates or associates (all as defined in the Listing Rules) and accordingly are considered eligible to give independent advice on the above matters. Apart from normal professional fee payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, Hynergy Industrial Funds, Tongxin Investment, Tongchuang Investment, CNNC Capital, BSIF, the Tongfu Fund or their respective core connected persons, close associates or associates.
In formulating our opinion, we have reviewed, among other things, the Agreements, the interim report of the Company for the six months ended 30 June 2019 (the "2019 Interim Report"), the annual report of the Company for the year ended 31 December 2018, the prospectus of the Company dated 22 June 2018 (the "Prospectus") and the information as set out in the Circular. We have also discussed with the management of the Group regarding the Agreements and the future prospects of the Group with consideration of the possible impact from the potential investments to be made by the Tongfu Fund.
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LETTER FROM SOMERLEY
We have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Group and have assumed that they are true, accurate and complete. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to believe that any material information has been withheld from us, or to doubt the truth or accuracy of the information provided. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view. We have not, however, conducted any independent investigation into the business and affairs of the Group, nor have we carried out any independent verification of the information supplied.
PRINCIPAL FACTORS AND REASONS CONSIDERED
In formulating our opinion and recommendation, we have considered the principal factors and reasons set out below:
1. Information of the Group
- Business
The Company was incorporated in the PRC with limited liability. Its H Shares (stock code: 1763) have been listed on the Main Board of the Stock Exchange since July 2018.
The Company and its subsidiaries are primarily engaged in the research, development, manufacturing and sale of diagnostic and therapeutic radio pharmaceuticals and radioactive source products for medical and industrial applications. The Group also provides irradiation services for sterilisation purpose and engineering, procurement and construction services for the design, manufacturing and installation of gamma ray irradiation facilities. In addition, the Group provides independent clinical laboratory services to hospitals and other medical institutions.
- Financial performance
Set out in the table below is a summary of the Group's financial performance for the six months ended 30 June 2019 and 2018 and the years ended 31 December 2018 and 2017 (the "Review Period").
For the six months | For the year ended | |||
ended 30 June | 31 December | |||
2019 | 2018 | 2018 | 2017 | |
(RMB | (RMB | (RMB | (RMB | |
million) | million) | million) | million) | |
(Restated) | ||||
Revenue | 1,655 | 1,373 | 3,238 | 2,672 |
Gross profit | 1,190 | 972 | 2,293 | 1,885 |
Net profit attributable to | ||||
the Shareholders | 148 | 118 | 323 | 271 |
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LETTER FROM SOMERLEY
As shown above, revenue of the Group grew from approximately RMB2,672 million for the year ended 31 December 2017 to approximately RMB3,238 million for the year ended 31 December 2018, representing an increase of approximately 21.2%. Revenue of the Group for the six months ended 30 June 2019 was approximately RMB1,655 million, representing an increase of approximately 20.5% as compared with that for the six months ended 30 June 2018. The revenue growth was mainly attributable to the overall increase in revenue across all four segments of the Company, namely pharmaceuticals segment, radioactive source products segment, irradiation segment and independent clinical medical and laboratory services and other businesses segment due to the increasing demand for application of isotopes and irradiation arising from progress of the radioactive pharmaceuticals, medical treatment technologies and nuclear medicine system coupling with the aging population and enhanced health and safety awareness. Accordingly, net profit attributable to the Shareholders increased from approximately RMB271 million for the year ended 31 December 2017 to approximately RMB323 million for the year ended 31 December 2018, representing an increase of approximately 19.2%. Net profit attributable to the Shareholders for the six months ended 30 June 2019 was approximately RMB148 million, representing an increase of approximately 25.4% as compared with that for the six months ended 30 June 2018 due to the overall improvement in business performance.
- Financial position
Set out below is a summary of the financial position of the Group as at 30 June 2019, 31 December 2018 and 2017.
As at | As at | As at | |||
30 June | 31 December | 31 December | |||
2019 | 2018 | 2017 | |||
(RMB million) | (RMB million) | (RMB million) | |||
(Restated) | |||||
ASSETS | |||||
Non-current assets | |||||
Property, plant and equipment | 1,522 | 1,340 | 766 | ||
Lease prepayments | - | 116 | 64 | ||
Interests in associates | 69 | 86 | 81 | ||
Interest in a joint venture | 32 | 43 | 39 | ||
Deferred tax assets | 212 | 206 | 155 | ||
Others | 475 | 226 | 132 | ||
2,310 | 2,017 | 1,237 | |||
Current assets | |||||
Trade and bill receivables | 1,950 | 1,728 | 1,507 | ||
Cash at bank and on hand | 2,331 | 2,616 | 1,479 | ||
Others | 698 | 542 | 474 | ||
4,979 | 4,886 | 3,460 |
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LETTER FROM SOMERLEY
As at | As at | As at | |||
30 June | 31 December | 31 December | |||
2019 | 2018 | 2017 | |||
(RMB million) | (RMB million) | (RMB million) | |||
(Restated) | |||||
LIABILITIES | |||||
Current liabilities | |||||
Borrowings | 150 | - | - | ||
Trade payables | 146 | 170 | 198 | ||
Accruals and other payables | 2,000 | 1,877 | 1,606 | ||
Others | 149 | 147 | 112 | ||
2,445 | 2,194 | 1,916 | |||
Net current assets | 2,534 | 2,692 | 1,544 | ||
Non-current liabilities | |||||
Borrowings | 99 | 150 | 150 | ||
Provisions | 116 | 113 | 106 | ||
Others | 147 | 108 | 79 | ||
362 | 371 | 335 | |||
EQUITY | |||||
Total equity attributable to the | |||||
Shareholders | 3,564 | 3,502 | 1,869 | ||
Non-controlling interests | 918 | 836 | 577 | ||
4,482 | 4,338 | 2,446 |
As at 30 June 2019, total assets of the Group were approximately RMB7,289 million, representing an increase of approximately 5.6% from that as at 31 December 2018. The Group had a significant portion of (i) cash at bank and on hand, which accounted for approximately 32.0% of the total assets as at 30 June 2019 and substantially increased during the Review Period mainly due to cash proceeds raised from listing of the Company's H shares on the Stock Exchange on 6 July 2018 (the "Listing"); (ii) trade and bill receivables, which accounted for approximately 26.8% of the total assets as at 30 June 2019; and (iii) property, plant and equipment, which accounted for approximately 20.9% of the total assets as at 30 June 2019.
The Group's operation was largely financed by the Shareholders' equity. The adjusted net gearing ratio, calculated as adjusted net debt (i.e. interest-bearing debt plus unaccrued proposed dividends) divided by adjusted equity (i.e. all components of equity less unaccrued proposed dividends), was 6.8% as at 30 June 2019 as compared to 4.4% and 9.1% as at 31 December 2018 and 31 December 2017 respectively and was remain low throughout the Review Period. The fluctuations in the adjusted net gearing ratio during the Review Period were mainly due to the increase in debt during the six months ended 30 June 2019 and the increase in equity attributable to the Shareholders as a result of the issue of new Shares upon
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LETTER FROM SOMERLEY
the Listing. Throughout the Review Period, the Group maintained a net current asset position and such position had improved notably from approximately RMB1,544 million as at 31 December 2017 to approximately RMB2,692 million as at 31 December 2018 due to the increase in cash raised from the Listing. However, net current assets had dropped slightly to approximately RMB2,534 million as at 30 June 2019 due to the increase in current portion of borrowings of the Group.
Net asset value ("NAV") attributable to the Shareholders was approximately RMB3,564 million as at 30 June 2019, representing an increase of approximately 1.8% from that as at 31 December 2018, which was mainly attributable to the profit generated during the first half of 2019.
2. Information of Hynergy Industrial Funds
Hynergy Industrial Funds was established on 18 November 2016 with a registered capital of RMB200 million. It is registered with the Asset Management Association of China as a private equity fund manager. Hynergy Industrial Funds was initiated by CNNC Capital and jointly funded and established by China Aerospace Science and Technology Corporation (中國 航天科技集團公司) (a joint strategic alliance partner), China Development Bank, China Life Insurance (Group) Company (中國人壽保險(集團)公司) and Agricultural Bank of China. It is held as to 35% by CNNC Capital, as to 20% by China Development Bank Capital Corporation Ltd. (國開金融有限責任公司) and as to 15% by each of China Life Asset Management Company Limited (中國人壽資產管理有限公司), China Aerospace Investment Holdings Ltd. (航天投資控股有限公司) and ABCI Corporate Management Co., Ltd (農銀國際企業管理有限
公司).
China Development Bank Capital Corporation Ltd. is a non-listed company, whose ultimate beneficial owner is the Ministry of Finance of the PRC; China Life Asset Management Company Limited is a non-listed company, whose ultimate beneficial owner is the State Council of the PRC; China Aerospace Investment Holdings Ltd. is a non-listed company, whose ultimate beneficial owner is The State-owned Assets Supervision and Administration Commission of the State Council; The ultimate beneficial owner of ABCI Corporate Management Co., Ltd. is Agricultural Bank of China Limited (Stock code: 1288).
3. Information of CNNC Capital
CNNC Capital was established in July 2016 and is a wholly-owned subsidiary of CNNC, with a registered capital of RMB7.08 billion. As a specialised management platform for the financial sector of CNNC, CNNC Capital is positioned as a center of industrial finance risk control, industrial finance investment control, industrial financial resource allocation and industrial finance business collaboration of CNNC.
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LETTER FROM SOMERLEY
4. Information of BSIF
BSIF has a total scale of RMB30 billion. The ultimate beneficial owner of BSIF is The State-owned Assets Supervision and Administration Commission of the State Council, which is a third party independent of the Company and connected persons of the Company. It sets up sub-funds around the three stages of original innovation, results transformation and highly sophisticated industries and arranges the amount of funds according to the ratio of 5:3:2. The fund's mission is to achieve "three sets of guidance": the first one is to guide the way to high-end "hard technology" innovation; the second is to guide the way to front-end original innovation; the third is to guide high-end scientific research results which can match up with the capital's positioning to locate in Beijing and to cultivate "highly sophisticated" industry. Through the construction of innovative investment ecosystem, the fund promotes the rapid and steady development of the science and technology industry of Beijing and contributes actively to building a globally influential innovation centre for science and technology in Beijing.
5. Information of Tongxin Investment
Tongxin Investment (it is subject to industrial and commercial registration and will be incorporated in Tianjin, China) is the follow-up investment platform for Hynergy Industrial Funds employees, with the total contribution of RMB10 million. It will solely be contributed by the employees of Hynergy Industrial Funds. All Hynergy Industrial Funds employees are eligible to invest in the Tongxin Investment, according to Article 13 of Supervision and Administration of Private Investment Funds published by the Asset Management Association of China. The partners shall make contribution to Tongxin Investment with their own money. This follow-up investment mechanism allows the interests of the fund consistent with interest of the management team, motivates team to explore investment opportunities, reduces risks, solves principal-agent issues and guarantees the rights of investors. Further details of the Hynergy Industrial Funds employees who are committed to invest in Tongxin Investment are set out in the letter from the Board contained in the Circular.
6. Information of Tongchuang Investment
Tongchuang Investment (it is subject to industrial and commercial registration) acts as the general partner and executive partner of the Tongfu Fund, with the total contribution of RMB42.5 million. Hynergy Industrial Funds shall subscribe RMB25 million to the total contribution, which is 58.82% interests in Tongchuang Investment; the Company shall subscribe RMB7.5 million to the total contribution, which is 17.65%; and Tongxin Investment shall subscribed RMB10 million to the total contribution, which is 23.53%.
7. Reasons for and benefits of entering into the Agreements
As set out in the letter from the Board contained in the Circular, we noted that the Company is a nuclear technology application industry development platform of CNNC and also the leading enterprise in the field of isotopes and irradiation technology applications in China. With the strategic goal of "growing bigger, better and stronger", the Company adheres to its
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LETTER FROM SOMERLEY
strategy of "industrialisation and internationalisation" and strives to become a leading international supplier of nuclear technology application products and services. In order to facilitate the implementation of the Company's strategy, explore new sources of economic growth and enhance the economic scale and efficiency of the Company, the Company intends to initiate the establishment of Tongfu Innovation Industrial Investment Fund. The fund has the flexibility to invest in the upstream and downstream of the isotopes and irradiation industry in China and provides funds for strategic, expansionary, complementary and collusive mergers and acquisitions. The Company may acquire the investment project by way of pre-emptive right in the future to improve its industrial layout and promote industrial development. The fund will focus mainly on the application areas of nuclear technology, including the production of nuclides, radioactive source, nuclear medicine, medical devices, vitro diagnosis, medical services and industrial nuclear applications. With investments, mergers and acquisitions as pathways to implement the industrial expansion strategy of the Company, it can assist the Company in achieving leapfrog development.
We further noted from the letter from the Board contained in the Circular that the Company will contribute a total of RMB1,207.5 million to the Tongchuang Investment and the Tongfu Fund, of which, the initial contribution of the Company will be RMB480 million and the remaining contribution is contingent on the progress of the initial contribution and the subsequent operation of the funds. Among the initial contribution of RMB480 million, RMB200 million will be funded through utilising the proceeds of the Global Offering while the remaining of the initial contribution will be funded through other internal resources. The corresponding purpose of the proceeds for such utilisation is investments/selective (mergers) acquisitions.
In light of the above, we have reviewed the Company's future plans and proposed use of proceeds in the Prospectus and the revised use of proceeds as stated in the circular of the Company dated 14 May 2019 (which the relevant resolution was subsequently approved on 28 June 2019), which stated that approximately 37.4% of the net proceeds or approximately RMB536.1 million would be utilised for selective acquisition in attractive sectors and downstream industry players of the isotopes and irradiation technology industry to complement the Company's existing operations and align those acquisitions with its expansion strategies. As stated in the 2019 Interim Report, approximately RMB206 million, representing approximately 38.4% of the aforesaid net proceeds, had been used in selective mergers and acquisitions. With this background, it is considered that the establishment of the Tongfu Fund will benefit the Company by retaining its pre-emptive right to acquire the Tongfu Fund's future investment projects while reducing the underlying risk borne with such mergers and acquisitions. For the corresponding potential financial effects on the Group, please refer to the section headed "11. Financial effects of the establishment of the Tongchuang Investment and the Tongfu Fund (together, the "Funds") on the Group" as set out in this letter below.
Also, as stated in the letter from the Board contained in the Circular, by leveraging on the capital strength and license advantage of CNNC Capital, the internal financial segment of CNNC, introducing the government guidance funds, and making use of the industrial advantages of the Company, the Board believes that the establishment of the fund is conducive
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LETTER FROM SOMERLEY
to strengthening the leading position of the Company in the industry and is a great opportunity for the Company to further improve its market competitiveness and expand market layout. As a market-oriented emerging industry fund management platform of CNNC, Hynergy Industrial Funds has rich experience in equity investment in nuclear industry, with a deep understanding of the industry characteristics, business operations, merger and acquisition needs and cash flow patterns of the Company as well as the overall capital operation system of the Group, Hynergy Industrial Funds can provide full industrial merger and acquisition services and equity investment proposals of a standard not lower than, or even higher than, major market-oriented equity investment institutions, which enables the Company to reduce costs, increase efficiency, maximise revenue and fully utilise the capital operations advantage of CNNC in the industry. Also, with a comprehensive mechanism of market-oriented incentive and follow-up investment and a team of members who possess solid professional skills and work efficiently and actively, Hynergy Industrial Funds has established sound cooperation mechanisms with Company from previous business cooperation and creates synergy and complementarity in the industry.
In view of the above, we have reviewed further information on Hynergy Industrial Funds, including five funds currently managed by it. Based on our review, we noted that Hynergy Industrial Funds had managed five funds since 2017 and, in particular, one of the funds with fund size of approximately RMB420.0 million invested in equipment manufacturing and new materials in relation to upstream and downstream of nuclear power plants industry chain. The remaining four funds with an aggregate fund size of approximately RMB538.0 million primarily invested in city construction projects and clean energy industry such as distributed photovoltaics.
Having considered the above, we concur with the management of the Group to enter into of the Agreements for establishment of the Tongchuang Investment and the Tongfu Fund to allow further expansion of the Group through merger and acquisition opportunities while leveraging on the capital and experience of both CNNC Capital and Hynergy Industrial Funds.
8. Principal terms of the Tongchuang Agreement
- Parties
- Hynergy Industrial Funds (as the general partner)
- The Company (as the limited partner)
- Tongxin Investment (as the limited partner)
- Name of partnership
Tongchuang Investment Partnership (Limited Partnership) (to be established, and the full name of the partnership shall be subject to the pre-approval from local Administration for Market Regulation).
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LETTER FROM SOMERLEY
-
Place of registration
Beijing - Amount of contribution
The amounts of contribution to be paid by the partners are as follow:
Percentage of | |||
the contribution | |||
to interests in | |||
Tongchuang | |||
Contribution | Investment | ||
(RMB million) | |||
Hynergy Industrial Funds | 25.0 | 58.82% | |
The Company | 7.5 | 17.65% | |
Tongxin Investment | 10.0 | 23.53% | |
Total | 42.5 | 100.00% | |
The investment in the Tongchuang Investment held by the Company will be recognised as interests in associates in the consolidated financial statements of the Company.
-
Method of contribution
All partners shall make contribution to Tongchuang Investment in RMB in cash. - Partners' responsibility for the debts of Tongchuang Investment
The general partner assumes unlimited liability for the debts of Tongchuang Investment, and the limited partners are responsible for the debts of Tongchuang Investment to the extent of the amount of contribution paid by them.
- Purpose of Tongchuang Investment
Tongchuang Investment, as the general partner of the Tongfu Fund, is solely for the purpose of investing in, operating and managing the Tongfu Fund.
- Term of operation
10 years. Upon the expiration of the term of operation of Tongchuang Investment, the executive partner shall have the right to decide to extend the term of operation of Tongchuang Investment no earlier than the clearing time of the Tongfu Fund.
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LETTER FROM SOMERLEY
-
Implementation of partnership affairs
The general partner acts as executive partner to implement partnership affairs. - Investment decision
The executive partner shall have the right to determine the investment made by Tongchuang Investment in the Tongfu Fund and make payment in accordance with the notice of payment of contribution of the Tongfu Fund. The executive partner will not receive any management fees in respect of the Tongchuang Investment.
- Distribution
- Cash distribution
During the term of operation of Tongchuang Investment, after being determined by the executive partner, the cash distributable shall be distributed according to the proportion of the actual contribution paid by each partner.
(ii) Non-cash distribution
If the executive partner considers at his sole discretion that non-cash distribution is better in the interests of all partners, the executive partner may make non-cash distribution. In making a non-cash distribution, if the non-cash asset to be distributed is a marketable security traded on open market, then its value shall be determined by the average trading price of such marketable security within 20 securities trading days prior to the proposed distribution date; for other non-cash assets, the executive partner shall engage an independent third party to make a valuation assessment in order to determine the value and protect the interest of the partners.
Further details of the Tongchuang Agreement are set out in the letter from the Board contained in the Circular.
As noted from the above, we understand that the Company (as limited partner), Hynergy Industrial Funds (as general partner) and Tongxin Investment (as limited partner) entered into the Tongchuang Agreement for establishing the Tongchuang Investment, which is a typical fund structure whereby the general partner will be responsible for implementing partnership affairs and making investment decision. In addition, it is also a typical arrangement for the general partner and the limited partners to have unlimited and limited responsibilities for the debts of the relevant fund respectively.
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In order to assess the fairness and reasonableness of the principal terms of the Tongchuang Agreement, we have compared them against those of the Comparable Partnerships (as defined below) as set out in the section 10 headed "Market comparable analysis" and we noted that:
- the duration of the Tongchuang Agreement is within the range of the Comparable Partnerships;
- no management fee shall be received by the executive partner of the Tongchuang Investment, which is below the lower end of the range of that of the Comparable Partnerships;
- investment decisions shall be made by the executive partner, which is in line with the practices of the Comparable Partnerships; and
- each partner's share of results is determined according to their respective contribution is considered no less favourable to the Company after taking into account of the distribution mechanism of the Comparable Partnerships.
In light of the above, we are of the view that the principal terms of the Tongchuang Agreement are fair and reasonable to the Company as a limited partner in the Tongchuang Agreement.
9. Principal terms of the Tongfu Agreement
- Parties
- Tongchuang Investment (as the general partner)
- The Company (as the limited partner)
- CNNC Capital (as the limited partner)
- BSIF (as the limited partner)
- Name of partnership
Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) (to be established, and the full name of the partnership shall be subject to the pre-approval from local Administration for Market Regulation).
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-
Place of registration
Beijing - Amount of contribution
The amounts of contribution to be paid by the partners are as follow:
Percentage of the | |||
contributions to | |||
Contributions | the Tongfu Fund | ||
(RMB million) | |||
Tongchuang Investment | 50 | 2% | |
The Company | 1,200 | 48% | |
CNNC Capital | 800 | 32% | |
BSIF | 450 | 18% | |
Total | 2,500 | 100% | |
The investment in the Tongfu Fund held by the Company will be recognised as interests in associates in the consolidated financial statements of the Company.
- Method of contribution
All partners shall make contribution to the Tongfu Fund in RMB in cash. The contribution shall be made in stages by the partners, representing 40%, 30% and 30% of their respective committed capital contribution. The specific timing of payment shall be determined by the executive partner according to the project investment progress.
- Liabilities of partners for the debts of the Tongfu Fund
The general partner assumes unlimited liability for the debts of the Tongfu Fund, and the limited partners are responsible for the debts of the Tongfu Fund to the extent of the amount of contribution paid by them.
- Scope of investment
The Tongfu Fund invests in the application areas of nuclear technology, including the production of nuclides, radioactive source, nuclear medicine, medical devices, vitro diagnosis, medical services and industrial nuclear applications, and other areas (including but not limited to nuclear imaging center, cancer hospital and distribution companies in nuclear technology industry) considered and agreed by resolution of the investment decision committee that could generate synergy with the applications of nuclear technology.
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- Investment region
The Tongfu Fund mainly conducts investment business inside the PRC and enhances the guidance that investment projects should be based in Beijing to realise the implementation of high-end scientific research results in Beijing. The total amount, invested by the Tongfu Fund to unlisted enterprises registered in Beijing and unlisted enterprises not registered in Beijing but conforming to the functional position of the capital city, shall not be less than 70% of the target size of proceeds raised (i.e. RMB2,500 million) by the Tongfu Fund.
- Pre-emptiveright of the Company
When the Tongfu Fund exits from an invested project, the Company shall have the pre-emptive right to acquire the equity interest of such project held by the Tongfu Fund under the same conditions at the same price as other potential buyers. The price is based on the value assessment from independent third party and is combined with the market accepted price.
-
Term of operation
8 years. - Valid duration, investment period, exit period and extension period
The "valid duration" of the Tongfu Fund is 8 years from the first settlement day of the Tongfu Fund.
During the valid duration of the Tongfu Fund, the "investment period" is 5 years from the first settlement day of the Tongfu Fund or until the day when the total amount of capital contribution by the partners have been fully utilised in project investment and for payment of partnership fees.
The "exit period" of the Tongfu Fund commences from the day after the expiry of the investment period and ends on the expiry date of the valid duration of the Tongfu Fund.
Upon expiry of the term of operation of the Tongfu Fund, if any projects cannot be settled in the term of operation, partnership meeting can decide to extend the term of operation in order to meet the investment need and cover the valid duration.
Upon expiry of the valid duration of the Tongfu Fund, if it is necessary to extend the valid duration due to the application for listing or the exit from lock-up period by projects invested by the Tongfu Fund or other reasons, consent from partners with more than 50% of the paid-in capital of the Tongfu Fund, including BSIF, is required.
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- Implementation of partnership affairs
The general partner acts as executive partner to implement partnership affairs, and Hynergy Industrial Funds acts as fund manager to provide daily operation and investment management services to the Tongfu Fund.
(m) Management fees
As consideration for the management and other services provided to the Tongfu Fund in the capacity of fund manager, all parties have agreed that the management fees shall be paid by the Tongfu Fund at the fee rate of 1.8% per annum based on the total paid-in capital contribution amount of limited partners.
- Distribution
- Cash Distribution
Distribution of cash income received by the project, including dividends and proceeds of selling any projects, shall be carried out according to the following order:
- Firstly, refund of capital contribution to the limited partners.
- Secondly, refund of capital contribution to the general partner.
- Thirdly, if remaining balance exists after refunding capital contribution to limited partners and the general partner, the amount will be distributed as hurdle return to limited partners (the internal rate of return of 8% per annum is reached).
- After satisfying limited partners' hurdle return, compensation will be distributed to the general partner up to 25% of the hurdle return to limited partners.
- Finally, the excess profit, which is the residual profit after refunding capital contribution to limited partners and the general partner, distributing hurdle return to limited partners and compensation to the general partner, will be shared on pro-rata basis. If remaining balance exists, 80% will be distributed to all partners in accordance with the relative ratio of the principal of investment by all partners; and 20% will be distributed to the general partner.
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LETTER FROM SOMERLEY
(ii) Non-cash distribution
Before liquidation of the Tongfu Fund, the fund manager shall make his best efforts to realise the investment in the Tongfu Fund and avoid to make non-cash distribution; before the expiry of the operation period of the Tongfu Fund, the distribution of the Tongfu Fund is usually made in cash, but when in compliance with the applicable laws and agreed terms, after consideration by the meeting of partners and consent given by partners accounting for more than 75% of the paid-in capital contribution by partners, marketable securities traded in open market or other forms of non-cash assets may be distributed to the general partner in lieu of cash distribution. After dissolution of the Tongfu Fund, securities with restricted liquidity or other fund assets may be distributed.
Subject to the above term, before completion of the liquidation of the Tongfu Fund, the general partner shall make their best efforts to realise the investment in the Tongfu Fund in cash and avoid to make non-cash distribution as far as practicable; however if cash distribution is not possible due to the prevailing laws and regulations, and after consideration by the meeting of partners and consent has been given by partners accounting for more than 75% of the paid-in capital contribution by partners, the general partner may receive distribution in non-cash form. If the non-cash assets for distribution are marketable securities traded in open market, the value shall be determined by the average trading price of such marketable securities within 20 trading days of such securities prior to the determination date of distribution; the value of other non-cash assets shall be reasonably determined by the general partner in accordance with the fair market value confirmed by a reputable third party valuation assessment institution which is confirmed by the general partner and agreed by the consultation committee.
- Investment decision committee
The Tongfu Fund has put in place a four-member investment decision committee of which the members are appointed and dismissed by the executive partner. The Company may nominate one member, the executive partner may nominate two members and the Company may nominate an industry expert. The chairman of the investment decision committee shall be either one of members nominated by the executive partner. The chairman of the investment decision committee is responsible for convening and presiding over meetings of the investment decision committee.
The investment decision committee makes decisions on projects investment and exit of investment for the Tongfu Fund.
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LETTER FROM SOMERLEY
- Investment project observers
Each of BSIF and CNNC Capital are entitled to appoint one investment project observer to the investment decision committee to attend the investment decision committee meeting held to consider any investment project but the observers do not have voting rights.
- Consultation committee
After the establishment of the Tongfu Fund, the executive partner shall, within a reasonable time, form a consultation committee composed of a certain number of representatives of limited partners to review and approve related matters. The consultation committee consists of one member who is determined by the executive partner. The executive partner shall appoint a representative as a non-voting consultation committee member and convener. The number of members of the consultation committee can be increased upon the admission of subsequent partner to the Tongfu Fund.
- Key Persons
The Key Persons of the executive partner management team are Liu Pengbin, Gong Lingling, Xu Zhisui, Sheng Yangfan and Che Te. Liu Pengbin, is responsible for overall management and investment decision-making. Gong Lingling, the leading cadre of the Tongfu Fund, is responsible for the whole process of the fund, including fund raising, investment, business negotiation, establishment of transaction structure and post- investment management. Xu Zhisui, Sheng Yangfan and Che Te participate in the whole process of the fund, including fund raising, project investment, business negotiation, establishment of transaction structure and post-investment management.
In view of the above, we have obtained and reviewed the resume of each of the Key Persons of the executive partner management team and noted their past experience in the relevant investment scope and fund management.
- Key Persons provisions
During the valid duration of the partnership, the management team's Key Persons shall not change without the consent of the partners in meeting. Adjustment to the Key Persons can be made by modifying the partnership agreement upon the admission of subsequent partners to the Tongfu Fund.
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LETTER FROM SOMERLEY
- Competition
During the valid duration of the Tongfu Fund, the general partner may not invest, in priority to the Tongfu Fund, in any investment projects within the Tongfu Fund's target scope of investment. Projects that the general partner had invested in, or projects that had already signed up for investment prior to the establishment of the Tongfu Fund were not subject to the above restrictions.
Before the expiration of the Tongfu Fund's investment period (including any early termination of the investment period), or before 70% of the fund's total contribution (except for the subscribed capital contribution of the default partner who subscribed but failed to pay) has been used for investment or earmarked for investment, the Key Persons and the core management team and their connected persons (as defined in Chapter 14A of the Listing Rules), the executive partner and the fund manager shall not initiate or manage a RMB or USD follow-up fund that competes with the Tongfu Fund in terms of investment territory, investment field or investment stage.
The Key Persons shall not take the role of Key Persons in any private equity investment fund of the same type of or in competition with the Tongfu Fund until expiration of investment period of the Tongfu Fund (including any early termination of the investment period).
During the valid duration of the Tongfu Fund, the limited partners may choose to invest separately or jointly with the Tongfu Fund in any investment activities that may compete with the Tongfu Fund.
- Co-investmentmechanism and joint investment
The fund manager and/or its management team may separately form an investment entity and/or through the investment fund or invest directly on all investment projects of the Tongfu Fund in order to conduct a co-investment. The fund manager and/or its management team's co-investment and the Tongfu Fund shall be subject to the same conditions for the same investment project.
In case of co-investment, the investment made by the fund manager and/or its management team in each investment project shall be not exceed 10% of the total amount invested in the project by the Tongfu Fund.
The Tongfu Fund gives some partners joint investment opportunities. Specifically, the investment opportunities of a project decided to be invested by the Tongfu Fund are shared among co-investors. The parties may agree on their shares of investment through amiable negotiation according to the situation, and the partners with co-investment appeals shall notify the fund manager when the Tongfu Fund is established or incorporated, otherwise it shall be deemed to have voluntarily given up the opportunity.
Further details of the Tongfu Agreement are set out in the letter from the Board contained in the Circular.
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LETTER FROM SOMERLEY
10. Market comparable analysis
In order to further assess the fairness and reasonableness of the principle terms of the Tongfu Agreement, we have compared its terms against those of similar fund partnership agreements entered into and announced by companies listed on the Shenzhen Stock Exchange and the Shanghai Stock Exchange from 30 September 2019 to 30 October 2019 (the "Comparable Partnerships"), being a period of approximately one month prior to the date of the announcement of the Company in relation to the approval of the entering into of the Tongfu Agreement (the "Comparable Partnerships Review Period"). The duration of the Comparable Partnership Review Period, in our opinion, is sufficient to establish a reasonable and meaningful sample size of comparable fund partnership agreements reflecting the recent market practices and sentiment in the PRC. In addition, since the Tongfu Agreement will be executed in the PRC, the comparison against fund partnership agreements entered into by companies listed on the Shenzhen Stock Exchange and the Shanghai Stock Exchange is considered appropriate and reasonable. Overall, we consider the 38 identified Comparable Transactions an exhaustive, fair and representative list of relevant fund partnership agreements based on the said criteria above.
As mentioned in section 7 headed "Reasons for and benefits of entering into the Agreements" above, Hynergy Industrial Funds currently manages five funds. For the avoidance of doubt, these five funds are not included in the Comparable Partnerships as they do not satisfy the aforesaid selection criteria. Also, it should be noted that the Comparable Partnerships may have different investment scopes and regions as compared to those of the Tongfu Fund. Having said that, we are of the view that investment scopes and regions should not be a critical factor in determining the principal terms of the Comparable Partnerships. Accordingly, despite having potentially different investment scopes and regions, the Comparable Partnerships provide a general reference of the terms for this type of transaction in the PRC under the current market environment, we consider them to be relevant in assessing the fairness and reasonableness of the principal terms of the Tongfu Agreement.
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- 51 -
Set out below is a summary comparing the principal terms of the Tongfu Agreement and the Comparable Partnerships as set out in the relevant
announcements.
Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
30 October 2019 | 002404 | Zhejiang Jiaxin Silk | 7 | 3 | 4 | Yes | 2% Same as the Tongfu | Annualised return rate of | 20% | Approval by | Manufacturing, environment | ||
Co., Ltd ("Jiaxin | Agreement except for | 8% | general | protection, | |||||||||
Silk") | (1) the order of returning | partner | telecommunications, | ||||||||||
the capital contribution to | media and technology and | ||||||||||||
the general partner ("GP") | medical industry | ||||||||||||
and limited partner(s) | |||||||||||||
("LP") is not distinguished; | |||||||||||||
and (2) it does not specify | |||||||||||||
a cap on the compensation | |||||||||||||
distributable to the GP. | |||||||||||||
30 October 2019 | 603985 | Jiangyin Hengrun | 10 | 3 | 4 | Yes | 2% Same as Jiaxin Silk. | Annualised return rate of | 20% | Approval by | Same as Jiaxin Silk | ||
Heavy Industries | 8% | general | |||||||||||
Co., Ltd | partner | ||||||||||||
30 October 2019 | 300302 | Toyou Feiji | 6 | 4 | 2 | Yes | N/A | Same as Jiaxin Silk except | Annualised return rate of | 20% | N/A | Information technology and | |
Electronics Co., | for the order of hurdle | 8% | new materials for military | ||||||||||
Ltd ("Toyou | return distribution to GP | use | |||||||||||
Feiji | and LP is not distinguished. | ||||||||||||
Electronics") |
SOMERLEY FROM LETTER
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
30 October 2019 | 603029 | Shandong Swan | 8 | 6 | 2 | Yes | 2% (1% for | Same as the Tongfu | Annualised return rate of | 20% | N/A | Agriculture, information | |
Cotton Industrial | exit period) | Agreement except that it | 5% | security, manufacture of | |||||||||
Machinery Co., | does not specify a cap on | high-end equipment, new | |||||||||||
Ltd ("Swan | the compensation | technologies and energy | |||||||||||
Cotton") | distributable to the GP. | saving technologies | |||||||||||
30 October 2019 | 000833 | Guangxi Yuegui | 5 | 3 | 2 | Yes | One-off | Distribution according to the | N/A | N/A | N/A | Enterprises or projects in | |
Guangye | management | capital contribution of | the jurisdiction of Heyuan | ||||||||||
Holdings Co., | fee (Note 3) | partners. | City, Guangdong Province | ||||||||||
Ltd ("Guangxi | |||||||||||||
Yuegui") | |||||||||||||
29 October 2019 | 600848 | Shanghai Lingang | 8 | 6 | 2 | Yes | 1.50% | Same as the Toyou Feiji | Internal rate of return | 20% | N/A | City development | |
Holdings Co., | Electronics. | ("IRR") of 8% | |||||||||||
Ltd | |||||||||||||
29 October 2019 | 300598 | Archermind | 5 | N/A | N/A | Yes | 2% (1.5% for | (1) Return capital contribution | Annualised return rate of | N/A | N/A | Artificial intelligence and | |
Technology | exit period) | to partners; and (2) the | 8% | advance manufacturing | |||||||||
(Nanjing) Co., | remaining balance shall be | ||||||||||||
Ltd | distributed to partners as | ||||||||||||
hurdle return according to | |||||||||||||
the threshold rate. |
SOMERLEY FROM LETTER
Distribution policy
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Threshold rate for | |||||||||
Extension | Annual | distribution of hurdle | |||||||
Date of | Stock | Investment | Exit | of | management | return after return of | |||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution |
(number of | (number of | (number of | |||||||
years) | year(s)) | year(s)) | |||||||
29 October 2019 | 300012 | Centre Testing | 5 | 2 | 3 | Yes | 2% | Same as the Tongfu | IRR of 8% |
International | Agreement except for order | ||||||||
Group Co., Ltd | of returning the capital | ||||||||
contribution to the GP and | |||||||||
LP is not distinguished. | |||||||||
26 October 2019 | 300497 | Jiangxi Fushine | 6 | N/A | N/A | Yes | N/A | N/A | N/A |
Pharmaceutical | |||||||||
Co., Ltd | |||||||||
26 October 2019 | 300770 | Guangdong South | 7 | N/A | N/A | N/A | N/A | (1) Return capital contribution | N/A |
New Media Co., | to partners; (2) upon | ||||||||
Ltd | satisfying certain | ||||||||
conditions, additional | |||||||||
compensation shall be paid | |||||||||
to the fund manager; and | |||||||||
(3) the remaining capital | |||||||||
shall be distributed | |||||||||
according to the proportion |
of capital contribution of partners.
Distribution of | ||
excess profit to | ||
the general | ||
partner after | ||
the return of | ||
capital | ||
contribution | ||
and | Restriction of | |
distribution of | transfer by | Investment scope(s) (and |
hurdle return | limited partner | region(s), if applicable) |
20% | N/A | Companies principally |
engaged in quality | ||
certification and | ||
inspection | ||
N/A | N/A | Medical industry |
N/A | N/A | New generation of |
information technology, | ||
entertainment and | ||
upstream or downstream | ||
industry of Guangdong | ||
South New Media Co Ltd | ||
(300770.SZ) |
SOMERLEY FROM LETTER
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
25 October 2019 | 300634 | Richinfo | 8 | N/A | N/A | Yes | 2.5% | (1) Return capital | Annualised compound | 20% - 25% | Approval by | Unlisted entities in the PRC | |
Technology Co., | contribution to the LP; | return rate of 8% | general | ||||||||||
Ltd | partner |
(2) the remaining balance shall be distributed to the LP as hurdle return according to the threshold rate;
(3) the remaining balance after process numbered
(2) above shall be distributed to as to 80% to the GP and 20% to the LP until the amount reaches 20% of the total amount in the processes numbered (2) to (3) above;
SOMERLEY FROM LETTER
Distribution policy
- 55 -
Extension | Annual | ||||||
Date of | Stock | Investment | Exit | of | management | ||
announcement | code | Company name | Duration | period | period | duration | fee Distribution mechanism |
(number of | (number of | (number of | |||||
years) | year(s)) | year(s)) |
(4) remaining balance after the processes numbered
(1) to (3) above will be distributed as to 20% to the GP and 80% to the LP until its return reaches certain threshold rate;
(5) any excess profit will be distributed as to 75% to the GP and 25% to the LP until such excess profit is equal to the aggregate amounts distributed in the processes numbered (2) to (4) above; and
(6) any excess profit after process numbered (5) above will be distributed as to 25% to the GP and 75% to the LP.
Threshold rate for distribution of hurdle return after return of capital contribution
Distribution of | ||
excess profit to | ||
the general | ||
partner after | ||
the return of | ||
capital | ||
contribution | ||
and | Restriction of | |
distribution of | transfer by | Investment scope(s) (and |
hurdle return | limited partner | region(s), if applicable) |
SOMERLEY FROM LETTER
25 October 2019 | 600350 | Shandong Hi-speed 10 | N/A | N/A | Yes | 1% N/A | N/A | N/A N/A | Transportation company |
Company Limited |
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
24 October 2019 | 600588 | Yonyou Network | 15 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Not specified | |
Technology Co., | |||||||||||||
Ltd | |||||||||||||
24 October 2019 | 603517 | Juewei Food Co., | 7 | 3 | N/A | Yes | 1% (1) Return capital contribution | IRR of 8% | 20% | N/A | Related industries of the | ||
Ltd | to the LP; (2) the | partners to the fund | |||||||||||
remaining balance shall be | |||||||||||||
distributed to the LP as | |||||||||||||
hurdle return according to | |||||||||||||
the threshold rate; and (3) | |||||||||||||
any excess profit after the | |||||||||||||
processes numbered (1) to | |||||||||||||
(2) above will be | |||||||||||||
distributed as to 20% to the | |||||||||||||
GP and 80% to the LP, | |||||||||||||
respectively. | |||||||||||||
23 October 2019 | 603387 | Getein Biotech Inc | 7 | 4 | 3 | Yes | 1% | Same as the Tongfu | Annualised return rate of | 20% | N/A | Medical industry | |
Agreement except that if | 8% | ||||||||||||
the annualised return rate is | |||||||||||||
larger than 20%, the | |||||||||||||
amount exceeding 20% | |||||||||||||
would be distributed as to | |||||||||||||
30% to the GP. |
SOMERLEY FROM LETTER
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
22 October 2019 | 603722 | Wuxi Acryl | 5 | 2 | 3 | Yes | N/A | Same as Guangxi Yuegui | N/A | N/A | Approval by all | Not specified | |
Technology Co., | partners | ||||||||||||
Ltd | |||||||||||||
19 October 2019 | 002415 | Hangzhou | 8 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | Upstream and downstream | |
Hikvision Digital | industries of Hikvision | ||||||||||||
Technology Co., | |||||||||||||
Ltd | |||||||||||||
("Hikvision") | |||||||||||||
17 October 2019 | 002151 | Beijing Bdstar | 6 | 3 | 3 | Yes | 2% | (1) Return capital contribution | N/A | 20% | N/A | Aviation and satellite | |
Navigation Co., | to partners; and | applications | |||||||||||
Ltd | (2) remaining balance shall | ||||||||||||
be distributed as to 20% to | |||||||||||||
the GP and 80% to the LP, | |||||||||||||
respectively. | |||||||||||||
17 October 2019 | 300710 | Hangzhou Prevail | 5 | 3 | 2 | Yes | N/A | Same as Jiaxin Silk. | Annualised return rate of | 20% | N/A | Companies engaged in | |
Optoelectronic | 6% | similar business to | |||||||||||
Equipment Co., | Hangzhou POE, | ||||||||||||
Ltd ("Hangzhou | intelligent manufacturing, | ||||||||||||
POE") | 5G and Internet of | ||||||||||||
Things. | |||||||||||||
16 October 2019 | 300347 | Hangzhou Tigermed | 10 | N/A | N/A | Yes | N/A | N/A | N/A | N/A | N/A | Biotech companies and | |
Consulting Co., | contract research | ||||||||||||
Ltd | organisations |
SOMERLEY FROM LETTER
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
15 October 2019 | 300338 | Changsha Kaiyuan | 7 | 5 | 2 | Yes | 1.5% (1) Return capital contribution | Annualised return rate of | 20% | Approval by | Education | ||
Instruments Co., | to the LP; (2) return capital | 8% | general | ||||||||||
Ltd | contribution to the GP; | partner | |||||||||||
(3) the remaining balance | |||||||||||||
shall be distributed to the | |||||||||||||
LP as hurdle return | |||||||||||||
according to the threshold | |||||||||||||
rate; and (4) any excess | |||||||||||||
profit after the processes | |||||||||||||
numbered (1) to (3) above | |||||||||||||
will be distributed as to | |||||||||||||
20% to the GP and 80% to | |||||||||||||
the LP, respectively. | |||||||||||||
12 October 2019 | 002355 | Xingmin Intelligent | 5 | N/A | N/A | Yes | N/A | (1) Return capital contribution | N/A | N/A | N/A | Advance manufacturing | |
Transportation | to partners; and (2) the | ||||||||||||
System | remaining balance shall be | ||||||||||||
("Xingmin") | distributed according to the | ||||||||||||
proportion of capital | |||||||||||||
contribution of partners. | |||||||||||||
12 October 2019 | 603683 | Shanghai Smith | 4 | 1 | 3 | Yes | 2% (Note 4) Same as Jiaxin Silk. | Annualised return rate of | 20% | Approval by | Not specified | ||
Adhesive New | 8% | general | |||||||||||
Material Co., Ltd | partner |
SOMERLEY FROM LETTER
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
12 October 2019 | 300773 | Lakala Payment | 8 | N/A | N/A | Yes | N/A | (1) Return capital contribution | N/A | 20% | N/A | Technologies for the | |
Co., Ltd | to partners; and (2) the | application in finance | |||||||||||
("Lakala | remaining balance shall be | industry | |||||||||||
Payment") | distributed as to 20% to the | ||||||||||||
GP and 80% to the LP, | |||||||||||||
respectively. | |||||||||||||
12 October 2019 | 002120 | Yunda Holding Co., | 7 | 5 | 2 | Yes | N/A | (1) Return capital contribution | Annualised return rate of | 10% | N/A | Upstream and downstream | |
Ltd | to the LP; (2) the | 8% | of logistics industry | ||||||||||
remaining balance shall be | |||||||||||||
distributed to the LP as | |||||||||||||
hurdle return according to | |||||||||||||
the threshold rate; and (3) | |||||||||||||
any excess profit after the | |||||||||||||
processes numbered (1) and | |||||||||||||
(2) above will be | |||||||||||||
distributed as to 10% to the | |||||||||||||
GP and 90% to the LP, | |||||||||||||
respectively. | |||||||||||||
12 October 2019 | 600551 | Time Publishing | 8 | 5 | 3 | Yes | 2% Same as Lakala Payment | N/A | 20% | N/A | Cultural education, big | ||
and Media Co., | consumption and | ||||||||||||
Ltd | innovative technology |
SOMERLEY FROM LETTER
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Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
11 October 2019 | 002152 | GRG Banking | 8 | 6 | 2 | Yes | 2% Same as Lakala Payment | N/A | 20% | N/A | Investment in strategic | ||
Equipment Co., | emerging industries, | ||||||||||||
Ltd | high-end modern service | ||||||||||||
industries, high-end | |||||||||||||
equipment and intelligent | |||||||||||||
manufacturing industries | |||||||||||||
as stated in the | |||||||||||||
Guangzhou State-owned | |||||||||||||
Enterprises Innovation | |||||||||||||
Investment Catalogue (廣 | |||||||||||||
州市國企創新投資目錄). | |||||||||||||
11 October 2019 | 002157 | Jiangxi Zhenbang | 5 | 3 | 2 | Yes | N/A | (1) Return capital contribution | Annualised return rate of | N/A | Approval by all | Pig breeding and farm mill | |
Technology Co., | to LP1 (Note 5); (2) return | 6% | partners | ||||||||||
Ltd | capital contribution to the | ||||||||||||
rest of the partners; (3) the | |||||||||||||
remaining balance shall be | |||||||||||||
distributed to LP1 first as | |||||||||||||
hurdle return according to |
the threshold rate; and
(4) any excess profit after the processes numbered
(1) to (3) above will be distributed by the proportion of investment among the rest of the partners.
SOMERLEY FROM LETTER
- 61 -
Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
10 October 2019 | 002215 | Shenzhen Noposion | 9 | 5 | 2 | Yes | 1% (Nil for | Same as Jiaxin Silk. | Annualised return rate of | 20% | Approval by all | Agricultural supply side | |
Agrochemicals | exit period) | 6% | partners | structural reform project, | |||||||||
Co., Ltd | as well as the upstream | ||||||||||||
("Noposion") | and downstream to | ||||||||||||
Noposion | |||||||||||||
10 October 2019 | 600903 | Guizhou Gas Group | 3 | N/A | N/A | Yes | 2% (1) Residual income shall be | Annualised return rate of | 20% | Approval by all | Upstream and downstream | ||
Corporation Ltd | paid for the management | 10% | partners | of the natural gas | |||||||||
fee first; (2) if the | industry, other energy | ||||||||||||
annualised investment | segments | ||||||||||||
return rate is less or equal | |||||||||||||
to 10%, the remaining | |||||||||||||
balance shall be distributed | |||||||||||||
according to proportion of | |||||||||||||
capital contribution of | |||||||||||||
partners; or if the | |||||||||||||
annualised investment | |||||||||||||
return rate is over 10%, the | |||||||||||||
remaining balance shall be |
distributed as to 20% to the GP and 80% to the LP, respectively.
SOMERLEY FROM LETTER
- 62 -
Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
8 October 2019 | 000876 | New Hope Liuhe | 6 | 3 | 3 | N/A | One-off | (1) Return capital contribution | Annualised return rate of | 20% | N/A | Projects in relation to feed | |
Co., Ltd | management | to the LP; (2) Certain one- | 8% | and aquaculture in | |||||||||
fee (Note 3) | off management fee to the | Xinmin City, Shenyang, | |||||||||||
GP if there is remaining | Kangping County of the | ||||||||||||
balance after process | PRC | ||||||||||||
numbered (1) above; (3) the | |||||||||||||
remaining balance shall be | |||||||||||||
distributed to the LP as | |||||||||||||
hurdle return according to | |||||||||||||
the threshold rate; and | |||||||||||||
(4) any excess profit after | |||||||||||||
the processes numbered | |||||||||||||
(1) to (3) above shall be | |||||||||||||
distributed as to 20% to the | |||||||||||||
GP and 80% to the LP, | |||||||||||||
respectively. | |||||||||||||
1 October 2019 | 300119 | Tianjin Ringpu Bio- | 7 | N/A | N/A | N/A | N/A | Same as Guangxi Yuegui | N/A | N/A | N/A | Artificial intelligence | |
technology Co., | technology, biotech, new | ||||||||||||
Ltd | energy and new materials | ||||||||||||
1 October 2019 | 300672 | Hunan Goke | 7 | 3 | 4 | Yes | N/A | (1) Return capital contribution | N/A | N/A | Approval by all | Wireless connection | |
Microelectronics | to partners; and (2) the | partners | technology and ultra-high | ||||||||||
Co., Ltd | remaining balance shall be | definition video | |||||||||||
only distributed to the LP | integrated circuit | ||||||||||||
according to the proportion | |||||||||||||
of capital contribution. |
SOMERLEY FROM LETTER
Distribution policy
- 63 -
Extension | Annual | |||||||
Date of | Stock | Investment | Exit | of | management | |||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism |
(number of | (number of | (number of | ||||||
years) | year(s)) | year(s)) | ||||||
1 October 2019 | 600848 | Shanghai Lingang | 7 | 4 | 3 | Yes | 2% (1.5% for | Same as the Tongfu |
Holdings Co., | exit period) | Agreement except that the | ||||||
Ltd | return of capital | |||||||
contribution to the GP will | ||||||||
take place after the | ||||||||
distribution of hurdle | ||||||||
return. | ||||||||
1 October 2019 | 603068 | Beken Corporation | 7 | N/A | N/A | N/A | 1% | N/A |
30 September | 300194 | Fuan | 5 | 3 | 2 | Yes | 2% | Same as Swan Cotton. |
2019 | Pharmaceutical | (1% for exit | ||||||
Co., Ltd | period) |
Distribution of | |||
excess profit to | |||
the general | |||
partner after | |||
the return of | |||
capital | |||
Threshold rate for | contribution | ||
distribution of hurdle | and | Restriction of | |
return after return of | distribution of | transfer by | Investment scope(s) (and |
capital contribution | hurdle return | limited partner | region(s), if applicable) |
Annualised return rate of | 20% and 35% | N/A | Industrial Internet related |
8% | if the excess | industry | |
profit | |||
exceeds | |||
100% of the | |||
total capital | |||
contribution | |||
by all | |||
partners | |||
N/A | N/A | N/A | Conductors, information, |
communication and | |||
Internet industries, | |||
Internet of Things, | |||
electronic components, | |||
industrial automation, | |||
cloud computing, | |||
artificial intelligence, | |||
software, e-commerce and | |||
advanced manufacturing | |||
industries in the PRC | |||
Annualised return rate of | 20% | N/A | Medicine or drug |
10% | development |
SOMERLEY FROM LETTER
- 64 -
Distribution policy | |||||||||||||||
Distribution of | |||||||||||||||
excess profit to | |||||||||||||||
the general | |||||||||||||||
partner after | |||||||||||||||
the return of | |||||||||||||||
capital | |||||||||||||||
Threshold rate for | contribution | ||||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |||
(number of | (number of | (number of | |||||||||||||
years) | year(s)) | year(s)) | |||||||||||||
30 September | 300485 | Beijing Science Sun | 8 | N/A | N/A | Yes | 2% | Same as the Tongfu | Annualised return rate of | 20% | N/A | Medical healthcare | |||
2019 | Pharmaceutical | Agreement | 8% | ||||||||||||
Co., Ltd | |||||||||||||||
30 September | 601618 | Metallurgical | 15 | N/A | N/A | N/A | 1% | Same as Xingmin | N/A | N/A | Projects in Chengdu and | ||||
2019 | Corporation of | Sichuan in the PRC | |||||||||||||
China Ltd | Annualised | Annualised IRR | |||||||||||||
return | compound | ||||||||||||||
rate | return | ||||||||||||||
rate | |||||||||||||||
Maximum | 15 | 6 | 4 | 2.5% | 10% | 8% | 8% | 35% | |||||||
Minimum | 3 | 1 | 2 | 1% | 5% | 8% | 8% | 10% |
SOMERLEY FROM LETTER
- 65 -
Distribution policy | |||||||||||||
Distribution of | |||||||||||||
excess profit to | |||||||||||||
the general | |||||||||||||
partner after | |||||||||||||
the return of | |||||||||||||
capital | |||||||||||||
Threshold rate for | contribution | ||||||||||||
Extension | Annual | distribution of hurdle | and | Restriction of | |||||||||
Date of | Stock | Investment | Exit | of | management | return after return of | distribution of | transfer by | Investment scope(s) (and | ||||
announcement | code | Company name | Duration | period | period | duration | fee | Distribution mechanism | capital contribution | hurdle return | limited partner | region(s), if applicable) | |
(number of | (number of | (number of | |||||||||||
years) | year(s)) | year(s)) | |||||||||||
31 October 2019 | 1763 | The Company (the | 8 | 5 | 3 | 1.8% | (1) Return capital contribution | IRR of 8% | 20% | N/A | Application areas of nuclear | ||
Tongfu | to the LP; (2) return capital | technology inside the | |||||||||||
Agreement) | contribution to the GP; | PRC and enhances the | |||||||||||
(3) remaining balance shall | guidance that investment | ||||||||||||
be distributed as hurdle | projects should be based | ||||||||||||
return to the LP according | in Beijing to realise the | ||||||||||||
to the threshold rate; | implementation of high- | ||||||||||||
(4) after satisfying limited | end scientific research | ||||||||||||
partners' hurdle return, | results in Beijing. | ||||||||||||
compensation will be | |||||||||||||
distributed to the general | |||||||||||||
partner up to 25% of the | |||||||||||||
hurdle return to limited | |||||||||||||
partners; and (5) any excess | |||||||||||||
profit after the processes | |||||||||||||
numbered (1) to (4) above | |||||||||||||
shall be distributed as to | |||||||||||||
20% to the GP and 80% to | |||||||||||||
the LP, respectively. |
Source: Announcements published in respect of the Comparable Partnerships by the respective companies.
Notes:
- "N/A" denotes not disclosed as the corresponding information was not disclosed in the respective announcement.
- Threshold rate means the percentage investment return regarding the profit distribution arrangement as stated in the respective agreement of the Comparable Partnerships.
- One-offmanagement fee was required instead of annual management fee.
- Management fee will only be paid to GP when there is remaining balance after distribution of the hurdle return.
- "LP1" was a state-owned investment company with the highest priority in distribution arrangement.
SOMERLEY FROM LETTER
LETTER FROM SOMERLEY
As illustrated in the table above, (i) the duration of the Comparable Partnerships ranged from 3 years to 15 years; (ii) the investment period of the Comparable Partnership ranged from 1 year to 6 years; (iii) the exit period of the Comparable Partnership ranged from 2 years to 4 years; (iv) annual management fee of the Comparable Partnerships ranged from 1% to 2.5%;
- threshold rate for distribution of hurdle return after return of capital contribution of the Comparable Partnerships referenced to, (a) annualised return rate ranged from 5% to 10%; (b) the annualised compound return rate of 8%; and (c) the IRR of 8%; (vi) distribution of excess profit to the GP ranged from 10% to 35%; and (vii) the absence of the restriction of transfer by limited partners in the Tongfu Agreement is apparently similar to those in the Comparable Partnerships.
Furthermore, as regarding the distribution mechanism, 7 out of the 38 Comparable Partnerships did not disclose the distribution mechanism in the respective announcements. Amongst the remaining 31 Comparable Partnerships, there are (i) 1 Comparable Partnership with distribution mechanism identical to that of the Tongfu Agreement. Although this Comparable Partnership adopted annualised return rate instead of the IRR as the measuring parameter for the hurdle return, which is different from that of the Tongfu Agreement, it does follow the same distribution mechanism of the Tongfu Fund; and (ii) 12 Comparable Partnerships with distribution mechanisms being highly similar to that of the Tongfu Agreement except for minor differences in some specific arrangements, which include (a) the order of returning the capital contribution to GP and LP is not specified; (b) the order of hurdle return distribution to GP and LP is not specified; (c) the maximum compensation distributable to the GP is not specified; and (d) additional compensation to GP if a return condition is met. As regarding the remaining 18 Comparable Partnerships, the distribution mechanisms vary among themselves and are incomparable to the distribution mechanism of the Tongfu Agreement. Overall, despite not all the Comparable Partnerships follow the same distribution mechanism, we are of the view that the distribution mechanism of the Tongfu Agreement to be broadly in line with certain Comparable Partnerships.
In view of the above, we consider that the principal terms (including the distribution policy) of the Tongfu Agreement are generally in line with the principal terms of the Comparable Partnerships.
11. Financial effects of the establishment of the Tongchuang Investment and the Tongfu Fund (together, the "Funds") on the Group
- Earnings
As discussed with the management of the Group and as mentioned above, given the valid duration and profit distribution mechanism of the Tongfu Fund and in particular the initial five-year investment period, the establishment of the Tongfu Fund is not expected to have any significant contribution to the earnings of the Group for the years ending 31 December 2019 and 2020. Nevertheless, the Funds may bring additional earnings, as a
- 66 -
LETTER FROM SOMERLEY
result of recognition of the changes in the net asset value of the Funds, to the Group in the consolidated statement of profit or loss of the Company, subject to the actual financial performance of the Funds, in long term.
- NAV
The NAV attributable to the Shareholders was approximately RMB3,564 million as at 30 June 2019. Upon the establishment of the Funds, the Company's investments in the Funds will be recognised as interests in associates in the consolidated statement of financial position of the Company. The establishment of the Funds is not expected to have any immediate material impact on the NAV of the Group. In the long run, the changes in the NAV of the Funds will be equity accounted for in the consolidated statement of financial position of the Company and hence may affect the NAV of the Group.
- Liquidity
As at 30 June 2019, the cash at bank and on hand and the net current assets (i.e. total current assets less total current liabilities) of the Group were approximately RMB2,331 million and approximately RMB2,534 million respectively. According to the letter from the Board contained in the Circular, the Company's committed capital contributions to the Funds under the Agreements amounted to RMB1,207.5 million, the initial contribution of which amounting to RMB480 million will be satisfied as to (i) an aggregate of RMB200 million through utilising the proceeds of the Global Offering; and (ii) the remaining of the initial contribution of RMB280 million through other internal resources. Having taken into account of the above and the capital contribution will be made in three stages and the specific timing of payment shall be determined by the executive partner in accordance to the project investment progress, we consider that the Company's committed capital contributions to the Funds will reduce the liquidity in some extent over the "valid duration" but the immediate adverse impact on the working capital of the Company will not be very substantial.
- Gearing
The adjusted net gearing ratio of the Group, being adjusted net debt (i.e. interest-bearing debt plus unaccrued proposed dividends) divided by adjusted equity (i.e. all components of equity less unaccrued proposed dividends), was approximately 6.8% as at 30 June 2019. As the Company's contributions to the Funds will be recognised as interests in associates and the cash at bank and on hand will be reduced on the other hand, the total assets will remain unchanged. Therefore, there will be no immediate impact on the adjusted net gearing ratio of the Group after the establishment of the Funds.
- 67 -
LETTER FROM SOMERLEY
OPINION AND RECOMMENDATION
Having considered the above principal factors and reasons, we consider that the entering into of the Agreements, though not in the ordinary and usual course of business of the Group, is in the interests of the Company and the Shareholders as a whole and the terms of the Agreements are on normal commercial terms and fair and reasonable so far as the independent Shareholders are concerned.
We therefore advise the Independent Board Committee to recommend, and we ourselves recommend, the independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the entering into of the Agreements and the transactions contemplated thereunder.
Yours faithfully,
for and on behalf of
SOMERLEY CAPITAL LIMITED
Danny Cheng
Director
Mr. Danny Cheng is a licensed person registered with the Securities and Futures Commission and a responsible officer of Somerley Capital Limited, who is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over 15 years' of experience in the corporate finance industry.
- 68 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
A summary of the proposed amendments to the Articles is set out as follows:
Contents of the Original Articles | Amended to | ||
Article 1 China Isotope & Radiation | Article 1 China Isotope & Radiation | ||
Corporation (hereinafter referred to as the | Corporation (hereinafter referred to as the | ||
"Company") is a joint stock limited liability | "Company") is a joint stock limited liability | ||
company founded under the Company Law | company founded under the Company Law | ||
of the People's Republic of China | of the People's Republic of China | ||
(hereinafter referred to as the "Company | (hereinafter referred to as the "Company | ||
Law"), Securities Law of the People's | Law"), Securities Law of the People's | ||
Republic of China, the Special Regulations | Republic of China, the Special Regulations | ||
of the State Council on the Overseas | of the State Council on the Overseas | ||
Offering and Listing of Shares by Joint | Offering and Listing of Shares by Joint | ||
Stock | Limited Companies (hereinafter | Stock | Limited Companies (hereinafter |
referred to as the "Special Provisions"), the | referred to as the "Special Provisions"), the | ||
Mandatory Provisions for the Articles of | Mandatory Provisions for the Articles of | ||
Association of Companies to be Listed | Association of Companies to be Listed | ||
Overseas (hereinafter referred to as the | Overseas (hereinafter referred to as the | ||
"Mandatory Provisions"), the Letter of | "Mandatory Provisions"), the Letter of | ||
Opinions of Overseas Listing Department of | Opinions of Overseas Listing Department of | ||
CSRC and Production System Department | CSRC and Production System Department | ||
of the State Commission for Restructuring | of the State Commission for Restructuring | ||
the Economic System on the Supplemental | the Economic System on the Supplemental | ||
Amendments to the Articles of Association | Amendments to the Articles of Association | ||
of Companies to be Listed in Hong Kong | of Companies to be Listed in Hong Kong | ||
(hereinafter referred to as the "CSRC | (hereinafter referred to as the "CSRC | ||
Overseas Letter"), the Rules Governing the | Overseas Letter"), the Rules Governing the | ||
Listing of Securities on the Stock Exchange | Listing of Securities on the Stock Exchange | ||
of Hong Kong Limited (hereinafter referred | of Hong Kong Limited (hereinafter referred | ||
to as the "Hong Kong Listing Rules") as | to as the "Hong Kong Listing Rules") as | ||
well as other relevant laws and | well as other relevant laws and | ||
administrative rules of the People's Republic | administrative rules of the People's Republic | ||
of China. | of China. | ||
As a corporation established through the | As a corporation established through the | ||
overall alteration from China Isotope Co., | overall alteration from China Isotope Co., | ||
Ltd., the Company was registered and | Ltd., the Company was registered and | ||
licensed at the State Administration for | licensed at the former State Administration | ||
Industry and Commerce on December 6, | for Industry and Commerce on December 6, | ||
2011. The Company's unified social credit | 2011. The Company's unified social credit | ||
code | is: 91110000100001019X. The | code | is: 91110000100001019X. The |
founders of the Company are China National | founders of the Company are China National | ||
Nuclear Corporation (hereinafter referred to | Nuclear Corporation (hereinafter referred to | ||
as "CNNC"), China Institute of Atomic | as "CNNC"), China Institute of Atomic | ||
Energy (hereinafter referred to as "CIAE"), | Energy (hereinafter referred to as "CIAE"), | ||
and Nuclear Power Institute of China | and Nuclear Power Institute of China | ||
(hereinafter referred to as "NPIC"). | (hereinafter referred to as "NPIC"). | ||
- I-1 -
APPENDIX I | PROPOSED AMENDMENTS TO THE ARTICLES | |||||||||||||
Contents of the Original Articles | Amended to | |||||||||||||
Article 3 The Company's domicile is: Room | Article 3 The Company's domicile is: Room | |||||||||||||
611, Sinochem Tower, Fuxingmenwai Street | 418, South 4th Floor, Building 1, No. 66, | |||||||||||||
No. A2, Beijing, 100045; phone: 86-10- | Changwa Middle Street, Haidian District | |||||||||||||
68522774; fax: 86-10-68512374. | Room 611, Sinochem Tower, Fuxingmenwai | |||||||||||||
Street No. A2, Beijing, | 100045 | 100089; | ||||||||||||
phone: 86-10-68522774; fax: 86-10- | ||||||||||||||
68512374. | ||||||||||||||
Article 9 According to the Constitution of | Article 9 According to the Constitution of | |||||||||||||
the Communist Party of China, the Company | the Communist Party of China, the Company | |||||||||||||
shall set up the organization of Communist | shall set up the organization of Communist | |||||||||||||
Party of China. The Party Committee shall | Party of China. The Party Committee shall | |||||||||||||
give full play to its leading role by | give full play to its leading role by | |||||||||||||
controlling the direction, managing the | controlling the direction, managing the | |||||||||||||
overall situation and ensuring the | overall situation and ensuring the | |||||||||||||
implementation of policies. The Company | implementation of policies. The Company | |||||||||||||
shall establish the working organs of the | shall establish the working organs of the | |||||||||||||
Party, provide the Party Committee with | Party, provide the Party organization Party | |||||||||||||
enough working personnel and guarantee its | Committeewith enough working personnel | |||||||||||||
working funds. | and guarantee its working funds. | |||||||||||||
Article 13 The scope of business of the | Article 13 The scope of business of the | |||||||||||||
Company: sales of in vivo radioactive | Company: sales of in vivo radioactive | |||||||||||||
medicines and in vitro radioactive diagnostic | medicines and in vitro radioactive diagnostic | |||||||||||||
reagents (valid up to 31 December 2021); | reagents | (valid up to 31 December 2021); | ||||||||||||
sales of Class I, II, III, IV and V radioactive | sales of Class I, II, III, IV and V radioactive | |||||||||||||
sources; sales of Class II and III irradiation | sources; sales of Class II and III irradiation | |||||||||||||
facilities; sales of unsealed radioactive | facilities; sales of unsealed radioactive | |||||||||||||
substances; venue for operation of Class C | substances; venue for operation of Class C | |||||||||||||
unsealed radioactive substances (valid up to | unsealed radioactive substances (valid up to | |||||||||||||
30 June 2022); sales of Class I, II and III | 30 June 2022); sales of Class I, II and III | |||||||||||||
medical appliance; import and export | medical appliance; import and export | |||||||||||||
businesses; | sales | of | electronics, | businesses; | sales | of | electronics, | |||||||
communication | equipment, | light | industrial | communication | equipment, | light | industrial | |||||||
products, | automotive | accessories, | chemical | products, | automotive | accessories, | chemical | |||||||
materials and chemical products (excluding | materials and chemical products (excluding | |||||||||||||
hazardous chemicals), steel, paper sheet, | hazardous chemicals), steel, paper sheet, | |||||||||||||
textiles, articles of daily use and cultural | textiles, articles of daily use and cultural | |||||||||||||
products; | property | management; | cultural | products; | property | management; | cultural | |||||||
exchange; and technology consulting and | exchange; and technology consulting and | |||||||||||||
services related to the above businesses. | services related to the above businesses. | |||||||||||||
- I-2 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to |
Article 61 The shareholders' general | Article 61 The shareholders' general |
meeting shall have the following functions | meeting shall have the following functions |
and powers: | and powers: |
- To decide the Company's operation (I) To decide the Company's operation
policies and investment plans; | policies and investment plans; | ||||||||||||
(II) | To elect and replace the directors who | (II) | To elect and replace the directors who | ||||||||||
are not the employee representatives, | are not the employee representatives, | ||||||||||||
and to determine matters relating to the | and to determine matters relating to the | ||||||||||||
remuneration of the directors; | remuneration of the directors; | ||||||||||||
(III) | To elect and replace the supervisors | (III) | To elect and replace the supervisors | ||||||||||
who | are | not | the | employee | who | are | not | the | employee | ||||
representatives | and | to | determine | representatives | and | to | determine | ||||||
matters relating to the remuneration of | matters relating to the remuneration of | ||||||||||||
such supervisors; | such supervisors; | ||||||||||||
(IV) | To consider and approve the reports of | (IV) | To consider and approve the reports of | ||||||||||
the Board of Directors; | the Board of Directors; | ||||||||||||
(V) | To consider and approve the reports of | (V) | To consider and approve the reports of | ||||||||||
the Board of Supervisors; | the Board of Supervisors; | ||||||||||||
(VI) | To consider and approve the annual | (VI) | To consider and approve the annual | ||||||||||
financial budgets and final accounts of | financial budgets and final accounts of | ||||||||||||
the Company; | the Company; | ||||||||||||
(VII) To | consider | and | approve | the profit | (VII) To | consider | and | approve | the profit | ||||
distribution plans and plans for | distribution plans and plans for | ||||||||||||
recovery of losses of the Company; | recovery of losses of the Company; | ||||||||||||
(VIII) To make | resolutions | on | increase or | (VIII) To make | resolutions | on | increase or | ||||||
reduction of the Company's registered | reduction of the Company's registered | ||||||||||||
capital; | capital; | ||||||||||||
(IX) | To make resolutions on the merger, | (IX) | To make resolutions on the merger, | ||||||||||
division, | reorganization, | dissolution, | division, | reorganization, | dissolution, | ||||||||
liquidation and other matters of the | liquidation and other matters of the | ||||||||||||
Company; | Company; | ||||||||||||
(X) | To make resolutions on the issuance of | (X) | To make resolutions on the issuance of | ||||||||||
debentures by the Company; | debentures by the Company; |
- I-3 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to | ||||||||||
(XI) | To | make | resolutions | on | the | (XI) | To | make | resolutions | on | the |
appointment, | dismissal or | stopping | appointment, | dismissal or | stopping | ||||||
reappointment | accounting | firm | for | reappointment | accounting | firm | for | ||||
annual auditing; | annual auditing; | ||||||||||
(XII) To amend the Articles; | (XII) To amend the Articles; | ||||||||||
(XIII) To | consider | the proposal of | a | (XIII) To | consider | the proposal of | a | ||||
shareholder holding 3% or more | shareholder holding 3% or more | ||||||||||
(inclusive of 3%) of the voting rights in | (inclusive of 3%)of the voting rights in | ||||||||||
the shares; | the shares; | ||||||||||
(XIV) To consider and approve the matters in | (XIV) To consider and approve the matters in | ||||||||||
relation to purchase or disposal of | relation to purchase or disposal of | ||||||||||
material assets or provision of | material assets or provision of | ||||||||||
guarantee by the Company of a value | guarantee by the Company of a value | ||||||||||
exceeding 30% of the Company's latest | exceeding 30% of the Company's latest | ||||||||||
audited total assets within one year; | audited total assets within one year; | ||||||||||
(XV) To consider and approve the external | (XV) To consider and approve the external | ||||||||||
guarantees specified in Article 62; | guarantees specified in Article 62; | ||||||||||
(XVI) To consider and approve the share | (XVI) To consider and approve the share | ||||||||||
incentive plan; | incentive plan; | ||||||||||
(XVII) To consider and approve the change in | (XVII) To consider and approve the change in | ||||||||||
the use of proceeds; | the use of proceeds; | ||||||||||
(XVIII) Other matters which are required to be | (XVIII) Other matters which are required to be | ||||||||||
determined at the shareholders' general | determined at the shareholders' general | ||||||||||
meeting in accordance with the laws, | meeting in accordance with the laws, | ||||||||||
administrative | regulations | and | the | administrative | regulations | and | the | ||||
Articles. | Articles. | ||||||||||
- I-4 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to | |||
Article 64 A general meeting shall either be | Article 64 A general meeting shall either be | |||
an annual general meeting or an | an annual general meeting or an | |||
extraordinary general | meeting. Annual | extraordinary general meeting. Annual | ||
general meetings shall be held once every | general meetings shall be held once every | |||
year and within six (6) months from the | year and within six (6) months from the | |||
close of the preceding accounting year. | close of the preceding accounting year. | |||
The Board of Directors shall convene an | The Board of Directors shall convene an | |||
extraordinary general meeting within two | extraordinary general meeting within two | |||
(2) months from the occurrence of any of the | (2) months from the occurrence of any of the | |||
following circumstances: | following circumstances: | |||
(I) | When the number of directors is less | (I) | When the number of directors is less | |
than the statutory minimum number | than the statutory minimum number | |||
stipulated in the Company Law or two- | stipulated in the Company Law or two- | |||
thirds of the number specified in the | thirds of the number specified in the | |||
Articles; | Articles; | |||
(II) | When the unrecovered losses of the | (II) | When the unrecovered losses of the | |
Company amount to one third of the | Company amount to one third of the | |||
total amount of its paid-in share | total amount of its paid-in share | |||
capital; | capital; | |||
(III) | When any shareholder individually or | (III) | When any shareholder individually or | |
jointly holding 10% or more (inclusive | jointly holding 10% or more | |||
of 10%) of the total voting shares of the | (inclusive of 10%)of the total voting | |||
Company requests in writing for the | shares of the Company requests in | |||
convocation of | an extraordinary | writing for the convocation of an | ||
general meeting; | extraordinary general meeting; | |||
(IV) When deemed necessary by the Board | (IV) When deemed necessary by the Board | |||
of Directors; | of Directors; | |||
(V) | When requested by the Board of | (V) | When requested by the Board of | |
Supervisors; | Supervisors; | |||
(VI) | Any other circumstances stipulated in | (VI) | Any other circumstances stipulated in | |
the laws, administrative regulations or | the laws, administrative regulations or | |||
the Articles. | the Articles. | |||
- I-5 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to |
Article 109 The Board of Directors is | Article 109 The Board of Directors is |
accountable to the shareholders' general | accountable to the shareholders' general |
meeting and shall exercise the following | meeting and shall exercise the following |
functions and powers: | functions and powers: |
- To convene and report to the (I) To convene and report to the
shareholders' general meeting; | shareholders' general meeting; | ||
(II) | To implement the resolutions adopted | (II) | To implement the resolutions adopted |
at shareholders' general meetings; | at shareholders' general meetings; | ||
(III) | To decide on the Company's business | (III) | To decide on the Company's business |
plans and investment plans; | plans and investment plans; | ||
(IV) To formulate the Company's annual | (IV) To formulate the Company's annual | ||
financial budgets and final accounts; | financial budgets and final accounts; | ||
(V) | To formulate the Company's proposal | (V) | To formulate the Company's proposal |
on profit distribution and plan for | on profit distribution and plan for | ||
recovery of losses; | recovery of losses; | ||
(VI) | To formulate proposals for increases or | (VI) | To formulate proposals for increases or |
reduction of the Company's registered | reduction of the Company's registered | ||
capital and proposals for the issue of | capital and proposals for the issue of | ||
corporate bonds; | corporate bonds; | ||
(VII) To formulate plans for repurchase of | (VII) To formulate plans for repurchase of | ||
the Company's shares, or merger, | the Company's shares, or merger, | ||
division, dissolution, or change of | division, dissolution, or change of | ||
corporate formation of the Company; | corporate formation of the Company; | ||
(VIII) To consider and approve the matters in | (VIII) To consider and approve the matters in | ||
relation to purchase and disposal of | relation to purchase and disposal of | ||
material assets of a value not more than | material assets of a value not more than | ||
30% of the Company's latest audited | 30% of the Company's latest audited | ||
total assets, and to authorize the | total assets, and to authorize the | ||
management team to make a decision | management team to make a decision | ||
thereon according to actual needs; | thereon according to actual needs; |
- I-6 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to | ||||||||||||||||
(IX) | To appoint or dismiss the Company's | (VIII IX)To appoint or dismiss the Company's | |||||||||||||||
general manager, and to decide on the | general manager, and to decide on the | ||||||||||||||||
appointment or dismissal of senior | appointment or dismissal of senior | ||||||||||||||||
management officer such as deputy | management officer such as deputy | ||||||||||||||||
general manager, | chief | accountant, | general manager, | chief | accountant, | ||||||||||||
chief legal officer and chief engineer | chief legal officer and chief engineer | ||||||||||||||||
pursuant to the nomination of the | pursuant to the nomination of the | ||||||||||||||||
general manager result and decide on | general manager result and decide on | ||||||||||||||||
the appointment or dismissal of the | the appointment or dismissal of the | ||||||||||||||||
secretary to the Board of Directors | secretary to the Board of Directors | ||||||||||||||||
pursuant to the nomination of the | pursuant to the nomination of the | ||||||||||||||||
chairman of the Board of Directors; | chairman of the Board of Directors; | ||||||||||||||||
(X) | To decide on the matters relating to the | (IX | X) To decide on the matters relating to the | ||||||||||||||
remuneration of the aforesaid senior | remuneration of the aforesaid senior | ||||||||||||||||
management officers; | management officers; | ||||||||||||||||
(XI) | To formulate the Company's basic | (X | XI) | To | formulate | the | Company's | basic | |||||||||
management system; | management system; | ||||||||||||||||
(XII) To formulate proposals for amendment to the | (XI | XII) | To formulate proposals for amendment | ||||||||||||||
Articles; | to the Articles; | ||||||||||||||||
(XIII) To decide | on the setup of internal | (XII | XIII) | To | decide | on | the | setup | of internal | ||||||||
management | institutions of | the | management | institutions | of | the | |||||||||||
Company; | Company; | ||||||||||||||||
(XIV) To decide on the setup and adjustment | (XIII | XIV) | To decide on the setup and adjustment | ||||||||||||||
of the special committees of the Board; | of the special committees of the Board; | ||||||||||||||||
(XV) Matters | such | as | investments, | (XIV | XV) | Matters | such | as | investments, | ||||||||
acquisitions or disposals of assets, | acquisitions or disposals of assets, | ||||||||||||||||
financing | and connected | transactions | financing | and | connected | transactions | |||||||||||
that require decisions to be made by the | that require decisions to be made by the | ||||||||||||||||
Board of Directors in accordance with | Board of Directors in accordance with | ||||||||||||||||
the Hong Kong Listing Rules; | the Hong Kong Listing Rules; | ||||||||||||||||
(XVI) To evaluate and determine the nature | (XV | XVI) | To | evaluate and determine | the | nature | |||||||||||
and degree of risk acceptable for the | and degree of risk acceptable for the | ||||||||||||||||
Company in achieving the strategic | Company in achieving the strategic | ||||||||||||||||
target, to ensure that the Company | target, to ensure that the Company | ||||||||||||||||
establishes | and | maintains | an | establishes | and | maintains | an | ||||||||||
appropriate | and | effective | risk | appropriate | and | effective | risk | ||||||||||
management | and | internal | monitoring | management and internal | monitoring | ||||||||||||
system, to continuously supervise this | system, to continuously supervise this | ||||||||||||||||
system, and to ensure that check is | system, and to ensure that check is | ||||||||||||||||
conducted at least once a year, on | conducted at least once a year, on | ||||||||||||||||
whether the system of the Company | whether the system of the Company | ||||||||||||||||
and its subsidiaries is effective; | and its subsidiaries is effective; | ||||||||||||||||
- I-7 -
APPENDIX I | PROPOSED AMENDMENTS TO THE ARTICLES | ||
Contents of the Original Articles | Amended to | ||
(XVII) To decide on other major affairs of the | (XVI XVII) To decide on other major affairs of the | ||
Company, save for matters required to | Company, save for matters required to | ||
be resolved at shareholders' general | be resolved at shareholders' general | ||
meeting as specified under the | meeting as specified under the | ||
Company Law and the Articles; | Company Law and the Articles; | ||
(XVIII) To exercise other functions and powers | (XVII XVIII) To exercise other functions and powers | ||
conferred by the laws, administrative | conferred by the laws, administrative | ||
regulations, the Articles and the | regulations, the Articles and the | ||
shareholders' general meetings. | shareholders' general meetings. | ||
With the exception of matters specified in | With the exception of matters specified in | ||
sub-paragraphs (6), (7) and (12), which shall | sub-paragraphs(6)(VI), (7)(VII)and | ||
be passed by two-thirds or more of the | (12)(XI), which shall be passed by two- | ||
directors by voting, the resolutions of the | thirds or more of the directors by voting, the | ||
Board of Directors in respect to any other | resolutions of the Board of Directors in | ||
aforesaid matters may be passed by more | respect to any other aforesaid matters may | ||
than half of all directors. | be passed by more than half of all directors. | ||
A resolution made by the Board of Directors | A resolution made by the Board of Directors | ||
on a connected transaction must take effect | on a connected transaction must take effect | ||
only after consideration and approval by | only after consideration and approval by | ||
independent non-executive directors. | independent non-executive directors. | ||
Article 113 Notice shall be given to all the | Article 113 Notice shall be given to all the | ||
directors and supervisors fourteen (14) days | directors and supervisors fourteen (14) days | ||
prior to a regular meeting of the Board of | prior to a regular meeting of the Board of | ||
Directors, and a reasonable period prior to | Directors, and | within a reasonable period | |
an extraordinary meeting of the Board of | prior to an extraordinary meeting of the | ||
Directors. The office of the Board of | Board of Directors. The office of the Board | ||
Directors shall serve written notice of the | of Directors shall serve written notice of the | ||
meeting to all the directors and supervisors | meeting to all the directors and supervisors | ||
by hand, fax, express mail service or other | by hand, fax, express mail service or other | ||
means of electronic communication. Notices | means of electronic communication. Notices | ||
that are not served by hand shall be | that are not served by hand shall be | ||
confirmed by telephone and record shall be | confirmed by telephone and record shall be | ||
made accordingly. | made accordingly. | ||
- I-8 -
APPENDIX I | PROPOSED AMENDMENTS TO THE ARTICLES | |||||
Contents of the Original Articles | Amended to | |||||
Article 115 The meetings of the Board of | Article 115 The meetings of the Board of | |||||
Directors are valid only when more than one | Directors are valid only when more than one | |||||
half of the directors or their authorized | half of the directors or their authorized | |||||
representatives are present. | representatives are present. | |||||
Each director shall have one vote. All the | Each director shall have one vote. All the | |||||
resolutions made by the Board of Directors | resolutions made by the Board of Directors | |||||
require the affirmative votes of more than | require the affirmative votes of more than | |||||
half of the directors, unless otherwise | half of the directors, unless otherwise | |||||
specified by the laws, administrative | specified by the laws, administrative | |||||
regulations and the Articles. | regulations and the Articles. | |||||
When the number of negative votes is equal | When the number of negative votes is equal | |||||
to that of affirmative votes, the chairman of | to that of affirmative votes, the chairman of | |||||
the Board of Directors has the right to cast | the Board of Directors has the right to cast | |||||
one more vote. | one more vote. | |||||
Article 123 The Company shall have one | Article 123 The Company shall have one | |||||
general manager, several deputy general | general manager, several deputy general | |||||
managers, one chief accountant, one chief | managers, one chief accountant, one chief | |||||
legal officer, one chief engineer and one | legal officer, one chief engineer | and one | ||||
secretary to the Board of Directors. They are | secretary to the Board of Directors. They are | |||||
appointed or dismissed by the Board of | appointed or dismissed by the Board of | |||||
Directors. | Directors. | |||||
Article 128 Members of the Board of | Article 128 Members of the Board of | |||||
Supervisors shall comprise of three (3) | Supervisors shall comprise of three (3) | |||||
representatives of shareholders and two (2) | representatives of shareholders and two (2) | |||||
representatives of staff and workers. The | representatives of staff and workers. The | |||||
representatives of shareholders are elected | supervisors | of | representatives | of | ||
and dismissed by the shareholders' general | shareholders are elected and dismissed by | |||||
meeting; and the representatives of staff and | the shareholders' general meeting; and the | |||||
workers are democratically elected and | supervisors of representatives of staff and | |||||
dismissed by the Company's staff. | workers are democratically elected and | |||||
dismissed by the Company's staff. | ||||||
Article 135 Each supervisor shall have one | Article 135 Each supervisor shall have one | |||||
vote. Resolutions of the Board of | vote. Resolutions of the Board of | |||||
Supervisors shall be passed by the | Supervisors shall be passed by the | |||||
affirmative votes of two-thirds or more | affirmative votes of two-thirdsor more | |||||
(inclusive of two-thirds) of the members of | (inclusive of two-thirds)of the members of | |||||
Board of Supervisors. | Board of Supervisors. | |||||
- I-9 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to | ||
Article 155 To decide on major issues of the | Article 155 To decide on major operational | ||
Company, the Board of Directors and the | and management matters | issues | of the |
managers shall firstly listen to the Party | Company, the Board of Directors and the | ||
committee of the Company. | managers shall firstly listen to the Party | ||
committee of the Company. | |||
Article 157 The Party committee of the | Article 157 The Party committee of the | ||
Company performs the following duties in | Company performs the following duties in | ||
accordance with the internal regulations of | accordance with the internal regulations of | ||
the Party, such as the Constitution of the | the Party, such as the Constitution of the | ||
Communist Party of the PRC: | Communist Party of the PRC: |
- To ensure and supervise the (I) To ensure and supervise the
implementation of the Party and | implementation of the Party and | ||||
national policies in the Company, and | national policies in the Company, and | ||||
to implement the significant strategic | to implement the significant strategic | ||||
decisions of the Party Central | decisions of the Party Central | ||||
Committee and the State Council as | Committee and the State Council as | ||||
well as the relevant important work | well as the relevant important work | ||||
deployment of national ministries and | deployment of national ministries and | ||||
commissions, | group | companies and | commissions, | group | companies and |
higher Party organization; | higher Party organization; | ||||
(II) To adhere to the principle of the Party | (II) To adhere to the principle of the Party | ||||
in charge of cadres in combination with | in charge of cadres in combination with | ||||
the selection of operating managers by | the selection of operating managers by | ||||
the Board of Directors in compliance | the Board of Directors in compliance | ||||
with the law and the operating | with the law and the operating | ||||
managers' exercise the right of staff | managers' exercise the right of staff | ||||
deployment in compliance with the | deployment in compliance with the | ||||
law. The Party committee deliberates | law. The Party committee deliberates | ||||
the candidates nominated by the Board | the candidates nominated by the Board | ||||
of Directors or the general manager | of Directors or the general manager | ||||
and | provides | suggestions. | and | provides | suggestions. |
Alternatively, it may recommend and | Alternatively, it may recommend and | ||||
nominate the candidates to the Board | nominate the candidates to the Board | ||||
of Directors or the general manager, | of Directors or the general manager, | ||||
investigate the candidates to be | investigate the candidates to be | ||||
appointed with the Board of Directors, | appointed with the Board of Directors, | ||||
and | provide | suggestions through | and | provide | suggestions through |
brainstorming; | brainstorming; |
- I-10 -
APPENDIX I PROPOSED AMENDMENTS TO THE ARTICLES
Contents of the Original Articles | Amended to | |||||||||
(III) To study and discuss the Company's | (III) To study and discuss the Company's | |||||||||
reform, development and stability, the | reform, development and stability, the | |||||||||
significant matters relating to operation | significant matters relating to operation | |||||||||
management, and the major issues | management, and the major issues | |||||||||
involving the employees' interests, and | involving the employees' interests, and | |||||||||
to provide suggestions; | to provide suggestions; | |||||||||
(IV) To assume the principle responsibility | (IV) To assume the principle responsibility | |||||||||
for comprehensive and strict Party | for comprehensive and strict Party | |||||||||
governance. To lead the Company's | governance. To lead the Company's | |||||||||
ideological and political work, united | ideological and political work, united | |||||||||
front work, spiritual civilization and | front work, spiritual civilization and | |||||||||
corporate culture construction, and the | corporate culture construction, and the | |||||||||
work of such groups as the labor union | work of such groups as the labor union | |||||||||
and the Communist Youth League. To | and the Communist Youth League. To | |||||||||
lead the construction of the Party's | lead the construction of the Party's | |||||||||
working style and its clean and honest | working style and its clean and honest | |||||||||
administration, | and | support | the | administration, | and | support | the | |||
Disciplinary | Commission | in | Disciplinary | Commission | in | |||||
performing | its | supervision | performing | its | supervision | |||||
responsibility. | responsibility.To promote the Party's | |||||||||
political | construction, | ideological | ||||||||
construction, | organizational | |||||||||
construction, | working | style | ||||||||
construction, | and | discipline | ||||||||
construction | in | a comprehensive | ||||||||
way, and carry out system | ||||||||||
construction | throughout | them, | ||||||||
deepen | the | anti-corruption | ||||||||
campaign, | constantly | improve | the | |||||||
quality of the Party's construction, | ||||||||||
lead and support the Disciplinary | ||||||||||
Commission | in | performing | its | |||||||
supervision responsibility. | ||||||||||
Article 199 The Articles are written in | Article 199 The Articles are written in | |||||||||
Chinese. Should there be any discrepancy | Chinese. Should there be any discrepancy | |||||||||
between the versions in other languages and | between the versions in other languages and | |||||||||
the Chinese version, the Chinese version | the Chinese version, the Chinese version | |||||||||
most recently filed with the Beijing | most recently filed with the company | |||||||||
Administration for Industry and Commerce | registration | authority | Beijing | |||||||
shall prevail. | Administration for Industry and Commerce | |||||||||
shall prevail. | ||||||||||
- I-11 -
APPENDIX II | BIOGRAPHICAL DETAILS OF DIRECTORS |
PROPOSED TO BE APPOINTED AT THE EGM | |
Biographical details of the Directors who are proposed to be appointed at the EGM are set out as follows:
Chang Jinyu, aged 47, served as an engineer of the Structural Design Department of Hangzhou Dongfang Communication Metalworking Factory (杭州東方通信金工分廠 ) from July 1994 to January 1997. She acted as the deputy general manager of the Project Department of Shanghai Galaxy Digital Investment Co., Ltd. (上海星河數碼投資有限公司) from June 2000 to April 2005. She was the senior manager of the Investment Planning Department of SIIC (上 實集團) from April 2005 to April 2006, the assistant supervisor and supervisor of the Business Administration Department of SIIC Management (Shanghai) Limited (上實管理(上海)有限公 司) from April 2006 to April 2010, the supervisor of the Investment Department of SIIC Management (Shanghai) Limited (上實管理(上海)有限公司) from April 2010 to March 2013, and the assistant general manager of SIIC Management (Shanghai) Limited (上實管理(上海)有 限公司) from March 2013 to March 2014. Since March 2014, she has been the executive deputy general manager (part time) of Shanghai Road and Bridge Development Co., Ltd. (上海路橋 發展有限公司). Since August 2017, she has been the deputy general manager (part-time) of SIIC Management (Shanghai) Limited (上實管理(上海)有限公司). Since September 2018, she has been the deputy general manager of Shanghai Galaxy Digital Investment Co., Ltd. (上海 星河數碼投資有限公司) as well as the chairperson of SIIC Hangtai Galaxy Energy Co., Ltd. (上實航太星河能源有限公司). In July 1994, Ms. Chang Jinyu graduated from Shanghai Jiao Tong University majoring in mechanical design and process and obtained a bachelor's degree in Engineering. In June 2000, she graduated from Shanghai University of Finance and Economics majoring in money and banking and obtained a master's degree in Finance.
Tian Jiahe, aged 68, was a resident physician of the Radiology Department of The General Hospital of the People's Liberation Army (解放軍總醫院) from January 1976 to October 1976, a physician in-charge and associate chief physician of the Isotopes Office of the Radiology Department of The General Hospital of the People's Liberation Army (解放軍總醫 院) from October 1976 to June 1987, a chief physician and professor of the Nuclear Medicine Department of The General Hospital of the People's Liberation Army (解放軍總醫院) from June 1987 to November 2000, and a chief physician of the Medical Imaging Centre of The General Hospital of the People's Liberation Army (解放軍總醫院) from November 2000 to December 2017. Since December 2017, he has been a deputy chief of the Professor Board of the Nuclear Medicine Department, member of the Party Committee and head of the Medical Imaging Centre of The General Hospital of the People's Liberation Army (解放軍總醫院). In December 1975, Mr. Tian Jiahe graduated from School of Radiology of the Medical School of Jilin University (吉林醫科大學) and obtained a bachelor's degree in Medicine. In December 1980, he graduated from The University of New South Wales, Australia (澳大利亞新南威爾士 大學) with a master's degree in Medicine.
As at the Latest Practicable Date, Chang Jinyu and Tian Jiahe did not hold any other positions with the Company or other members of the Group, nor did they hold any other directorships in the last three years in public companies the securities of which are listed on any securities market in Hong Kong or overseas.
- II-1 -
APPENDIX II | BIOGRAPHICAL DETAILS OF DIRECTORS |
PROPOSED TO BE APPOINTED AT THE EGM | |
As at the Latest Practicable Date, Chang Jinyu and Tian Jiahe did not have any relationships with any Directors, supervisors of the Company, senior management, substantial or controlling Shareholders, nor any interest in the shares of the Company within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571).
Subject to approval from the Shareholders at the Shareholders' general meeting, each of Chang Jinyu and Tian Jiahe will enter into a service contract with the Company for a term from the date when the appointments are approved at the Shareholders' general meeting to the date on which the term of office of the second session of the Board expires, and they shall be eligible for reelection and re-appointment upon the expiry of their terms of office. Chang Jinyu and Tian Jiahe will not receive any remuneration in respect of their appointments as non-executive Directors and independent non-executive Director respectively.
Save as disclosed, there are no other matters relating to the appointment of each of Chang Jinyu and Tian Jiahe that need to be brought to the attention of the Shareholders, nor is there any information that needs to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
- II-2 -
APPENDIX III | GENERAL INFORMATION |
1. RESPONSIBILITY STATEMENT
This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries confirm that, to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.
2. DISCLOSURE OF INTEREST
Directors, Supervisors and chief executive of the Company
As at the Latest Practicable Date, based on the information available to the Company and to the best knowledge of the Directors, none of the Directors, Supervisors or chief executive of the Company had any interest or short position in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which was required to be entered in the register kept by the Company pursuant to section 352 of the SFO, or which was required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers.
Substantial Shareholders
As at the Latest Practicable Date, so far as was known to the Directors, the following persons (other than the Directors, Supervisors and chief executive of the Company) had interests or short positions in the Shares or underlying shares of the Company which were required to be disclosed to the Company and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were required to be entered in the register pursuant to section 336 of SFO:
Approximate | |||||
Approximate | percentage of | ||||
percentage of | shareholding in | ||||
shareholding in | the total share | ||||
Number of | the relevant | capital of the | |||
Shareholder | Class of shares | Nature of interest | shares held(6) | class | Company |
(%) | (%) | ||||
CNNC(1) | Domestic Shares | Beneficial owner/ | 236,150,233 (L) | 98.43 | 73.83 |
Interest of | |||||
controlled | |||||
corporation | |||||
China Institute of Atomic | Domestic Shares | Beneficial owner | 58,534,835 (L) | 24.40 | 18.30 |
Energy ("CIAE") |
- III-1 -
APPENDIX III | GENERAL INFORMATION | ||||
Approximate | |||||
Approximate | percentage of | ||||
percentage of | shareholding in | ||||
shareholding in | the total share | ||||
Number of | the relevant | capital of the | |||
Shareholder | Class of shares | Nature of interest | shares held(6) | class | Company |
(%) | (%) | ||||
Nuclear Power Institute of | Domestic Shares | Beneficial owner | 46,994,835 (L) | 19.59 | 14.69 |
China ("NPIC") | |||||
Beijing CNNC Industry | Domestic Shares | Beneficial owner | 18,779,342 (L) | 7.83 | 5.87 |
Investment Fund (LLP) | |||||
("CNNC Fund") | |||||
Shanghai Industrial | H Shares | Interest of | 19,912,400 (L) | 24.90 | 6.23 |
Investment (Holdings) | controlled | ||||
Company Limited | corporation | ||||
("SIIC")(2) | |||||
Shanghai Industrial | H Shares | Interest of | 11,906,400 (L) | 14.89 | 3.72 |
Investment Treasury | controlled | ||||
Company Limited(2) | corporation | ||||
Shanghai Investment | H Shares | Interest of | 11,906,400 (L) | 14.89 | 3.72 |
Holdings Limited(2) | controlled | ||||
corporation | |||||
Shanghai Industrial Holdings | H Shares | Interest of | 11,906,400 (L) | 14.89 | 3.72 |
Limited ("SIHL")(2) | controlled | ||||
corporation | |||||
S.I. Infrastructure | H Shares | Interest of | 11,906,400 (L) | 14.89 | 3.72 |
Holdings Limited(2) | controlled | ||||
corporation | |||||
Sure Advance Holdings | H Shares | Beneficial owner | 11,906,400 (L) | 14.89 | 3.72 |
Limited ("Sure | |||||
Advance")(2) | |||||
Shanghai Shangshi (Group) | H Shares | Interest of | 8,006,000 (L) | 10.01 | 2.50 |
Co., Ltd. ("Shanghai | controlled | ||||
Shangshi")(2) | corporation | ||||
Shanghai Pharmaceuticals | H Shares | Interest of | 8,006,000 (L) | 10.01 | 2.50 |
Holding Co. Ltd | controlled | ||||
("SPH")(2) | corporation | ||||
Shanghai Pharmaceuticals | H Shares | Beneficial owner | 8,006,000 (L) | 10.01 | 2.50 |
(HK) Investment Limited | |||||
("SPH HK") | |||||
Beijing State-owned Assets | H Shares | Interest of | 10,899,000 (L) | 13.63 | 3.41 |
Management Co., Ltd.(3) | controlled | ||||
corporation | |||||
Beijing Industrial | H Shares | Beneficial owner | 10,899,000 (L) | 13.63 | 3.41 |
Developing Investment | |||||
Management Co., Ltd. | |||||
China Structural Reform | H Shares | Beneficial owner | 8,155,000 (L) | 10.20 | 2.55 |
Fund Corporation Limited |
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APPENDIX III | GENERAL INFORMATION | ||||
Approximate | |||||
Approximate | percentage of | ||||
percentage of | shareholding in | ||||
shareholding in | the total share | ||||
Number of | the relevant | capital of the | |||
Shareholder | Class of shares | Nature of interest | shares held(6) | class | Company |
(%) | (%) | ||||
Serenity Capital | H Shares | Investment manager | 4,801,600 (L) | 6.00 | 1.50 |
Management, Ltd.(4) | |||||
Serenity Investment Master | H Shares | Beneficial owner | 4,801,600 (L) | 6.00 | 1.50 |
Fund Limited | |||||
Pandanus Associates Inc. | H Shares | Interest of | 5,685,600 (L) | 7.11 | 1.78 |
("Pandanus | controlled | ||||
Associates")(5) | corporation | ||||
Pandanus Partners L.P. | H Shares | Interest of | 5,685,600 (L) | 7.11 | 1.78 |
("Pandanus Partners")(5) | controlled | ||||
corporation | |||||
FIL Limited ("FIL")(5) | H Shares | Interest of | 5,685,600 (L) | 7.11 | 1.78 |
controlled | |||||
corporation | |||||
Fidelity China Special | H Shares | Beneficial owner | 5,651,600 (L) | 7.07 | 1.77 |
Situations PLC ("Fidelity | |||||
China") |
Notes:
- CNNC directly holds 106,676,903 Domestic Shares of the Company, representing approximately 44.47% of the domestic share capital of the Company. Each of CIAE and NPIC is a public institute controlled and managed by CNNC and holds 58,534,835 and 46,994,835 Domestic Shares, respectively, representing approximately 24.40% and 19.59% of the domestic share capital of the Company, respectively. CNNC Fund is a non-wholly-owned subsidiary of CNNC and holds 18,779,342 Domestic Shares, representing approximately 7.83% of the domestic share capital of the Company. Each of CNNC 404 Company Limited ("404 Company") and Baoyuan Investment Co., Ltd ("Baoyuan Investment") is a wholly-owned subsidiary of CNNC and holds 3,755,868 Domestic Shares and 1,408,450 Domestic Shares, respectively, representing approximately 1.57% and 0.59% of the domestic share capital of the Company, respectively. CNNC is deemed to be interested in the Domestic Shares held by CIAE, NPIC, CNNC Fund, 404 Company and Baoyuan Investment under the SFO, which in aggregate represents approximately 98.43% of the domestic share capital of the Company.
- By virtue of the SFO, SIIC is deemed to be interested in a total of 19,912,400 H Shares, of which 11,906,400 H Shares and 8,006,000 H Shares are held by Sure Advance and SPH HK, each being a controlled corporation of SIIC. SIIC holds 100% equity interest in Shanghai Industrial Investment Treasury Company Limited, while Shanghai Industrial Investment Treasury Company Limited directly holds 100% equity interest in Shanghai Investment Holdings Limited, which in turn holds approximately 55.13% equity interest in SIHL. SIHL directly holds 100% equity interest in S.I. Infrastructure Holdings Limited, which directly holds 100% equity interest in Sure Advance. In addition, SIIC directly holds 100% equity interest in Shanghai Shangshi, which directly holds 33.60% equity interest in SPH, while SPH directly holds 100% equity interest in SPH HK.
- Beijing Industrial Developing Investment Management Co., Ltd. is a direct wholly-owned subsidiary of Beijing State-owned Assets Management Co., Ltd. By virtue of the SFO, Beijing State-owned Assets Management Co., Ltd. is deemed to be interested in the 10,899,000 H Shares held by Beijing Industrial Developing Investment Management Co., Ltd.
- III-3 -
APPENDIX III | GENERAL INFORMATION |
- Serenity Investment Master Fund Limited is 100% controlled by Serenity Capital Management, Ltd. By virtue of the SFO, Serenity Capital Management, Ltd. is deemed to be interested in the 4,801,600 H Shares held by Serenity Investment Master Fund Limited.
- Fidelity China is managed by FIL Investment Services (UK) Limited, which is an indirectly wholly-owned subsidiary of FIL. By virtue of the SFO, FIL is deemed to be interested in the 5,651,600 H Shares held by Fidelity China. FIL is indirectly controlled by Pandanus Partners which, in turn, is indirectly wholly-owned by Pandanus Associates. By virtue of the SFO, Pandanus Partners is deemed to be interested in the 5,685,600 H Shares held by FIL and Pandanus Associates is deemed to be interested in the 5,685,600 H Shares held by Pandanus Partners.
- (L) represents long position.
Save as disclosed and so far as was known to the Directors, as at the Latest Practicable Date, no other persons (other than the Directors, Supervisors and chief executive of the Company) had any interest or short position in the Shares or underlying shares of the Company which was required to be disclosed to the Company and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or which was required to be entered in the register kept by the Company pursuant to section 336 of SFO.
Interests in assets or contracts or arrangements significant to the Group
As at the Latest Practicable Date, none of the Directors or Supervisors had any direct or indirect interest in any asset which has been, since 31 December 2018 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or is proposed to be acquired or disposed of by or leased to any member of the Group.
As at the Latest Practicable Date, none of the Directors or Supervisors was materially interested in any contract or arrangement subsisting at such date and which is significant in relation to the business of the Group.
Service contracts
As at the Latest Practicable Date, there was no existing or proposed service contract (excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation)) between any of the Directors or Supervisors and any member of the Group.
Competing interest
As at the Latest Practicable Date, none of the Directors or any of their respective associates was interested in any business (apart from the Group's business) which competes or is likely to compete directly or indirectly with the Group's business.
- III-4 -
APPENDIX III | GENERAL INFORMATION |
3. MATERIAL LITIGATION
As at the Latest Practicable Date, no litigation or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.
4. EXPERT'S QUALIFICATION AND CONSENT
The following is the qualification of the Independent Financial Adviser who has given its advice for inclusion in this circular:
Name | Qualification |
Somerley Capital Limited | a corporation licensed to carry out Type 1 (dealing in |
securities) and Type 6 (advising on corporate finance) | |
regulated activities under the SFO |
The Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which they respectively appear.
As at the Latest Practicable Date, the Independent Financial Adviser had no shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
As at the Latest Practicable Date, the Independent Financial Adviser had no direct or indirect interest in any asset which has been, since 31 December 2018 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or is proposed to be acquired or disposed of by or leased to any member of the Group.
The letter and recommendation from the Independent Financial Adviser are set out on pages 32 to 68 of this circular and are given for incorporation in this circular.
5. MATERIAL ADVERSE CHANGE
The Directors confirm that, as at the Latest Practicable Date, there had been no material adverse change in the financial or trading position of the Company since 31 December 2018, being the date to which the latest published audited accounts of the Company were made up.
6. GENERAL
- The Company's registered office is at Room 418, South 4th Floor, Building 1, No. 66 Changwa Middle Street, Haidian District, Beijing, the PRC.
- The Company's head office and principal place of business in the PRC is No. 66 Changwa Middle Street, Haidian District, Beijing, the PRC.
- III-5 -
APPENDIX III | GENERAL INFORMATION |
- The Company's principal place of business in Hong Kong at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong.
- The Company's joint company secretaries are Mr. Wu Laishui and Ms. Kam Mei Ha Wendy. Ms. Kam is a fellow member of both of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in United Kingdom.
- The Company's H share registrar is Computershare Hong Kong Investor Services Limited, whose business address is at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong.
- In the event of inconsistency, the English version of this circular shall prevail over the Chinese version.
7. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection during normal business hours at the Company's principal place of business in Hong Kong at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong from the date of this circular up to and including the date of the EGM:
- the memorandum and articles of association of the Company;
- the Tongchuang Investment Partnership (Limited Partnership) Partnership Agreement;
- the Tongfu Innovation Industrial Investment Fund Partnership (Limited Partnership) Partnership Agreement;
- the letter from the Board, the text of which is set out on pages 4 to 29 of this circular;
- the letter from the Independent Board Committee, the text of which is set out on pages 30 to 31 of this circular;
- the letter from Somerley, the text of which is set out on pages 32 to 68 of this circular;
- the written consent of Somerley referred to in the paragraph headed "Expert's Qualification and Consent" above in this appendix; and
- this circular.
- III-6 -
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China Isotope & Radiation Corporation published this content on 05 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 December 2019 08:34:05 UTC