Guangdong Investment : Continuing Connected Transactions - Renewal of Existing Hotel Management Agreements

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(Incorporated in Hong Kong with limited liability) (Stock Code: 0270)

CONTINUING CONNECTED TRANSACTIONS RENEWAL OF EXISTING HOTEL MANAGEMENT AGREEMENTS

Reference is made to the announcement of the Company dated 18 December 2013 in relation to the continuing connected transactions for the Existing Hotel Management Agreements entered into by GIHM China, an indirect wholly-owned subsidiary of the Company, on 18 December 2013.

The Existing Hotel Management Agreements are due to expire on 31 December 2016. On 16 December 2016, GIHM China and the respective connected persons entered into the New Hotel Management Agreements for a term of three years from 1 January 2017 to 31 December 2019.

Both Kwong Leung Hing and Take Win are indirect wholly-owned subsidiaries of GDH which is the substantial shareholder of the Company holding approximately 54.60% interest in the Company. Dongshen is a direct wholly-owned subsidiary of Guangdong Holdings, the ultimate controlling shareholder of the Company. Accordingly, Kwong Leung Hing, Take Win and Dongshen are connected persons of the Company and the New Hotel Management Agreements constitute continuing connected transactions of the Company pursuant to the Listing Rules.

The annual hotel management fee to be received by GIHM China from each of Kwong Leung Hing, Take Win and Dongshen under the New Henan Hotel Agreement, the New Shanghai Hotel Agreement and the New GDH Inn Agreement, respectively is less than 0.1% of all applicable percentage ratios of the Listing Rules. Pursuant to Rule 14A.76(1) of the Listing Rules, each of the aforesaid individual transaction is exempt from the reporting, annual review, announcement and independent shareholders' approval requirements. The aggregate hotel management fees to be received by GIHM China and the annual caps under the Existing Hotel Management Agreements for the years of 2014, 2015 and 2016 disclosed in the previous announcement dated 18 December 2013 amounted to RMB7,770,000, RMB8,175,000 and RMB8,780,000, respectively.

Nonetheless, the aggregate hotel management fees to be received by GIHM China, as calculated with reference to the aforesaid historical amounts and the projection of the total management fees to be received based on the projection of the operating results of the hotels concerned, including the room rates, occupancy rates and other revenue (if any) of those hotels, and thus the annual caps under the New Hotel Management Agreements for the years of 2017, 2018 and 2019 are estimated to be RMB8,000,000 (equivalent to approximately HK$9,292,000), RMB8,500,000 (equivalent to approximately HK$9,872,750) and RMB9,000,000 (equivalent to approximately HK$10,453,500), respectively. The highest annual cap for the three years, which amounts to RMB9,000,000 (equivalent to approximately HK$10,453,500), exceeds 0.1% but is less than 5% of the relevant applicable percentage ratio of the Listing Rules. Accordingly, the New Hotel Management Agreements are subject to the reporting and announcement requirements of the Listing Rules but are exempt from the independent shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.

The Company will comply with the annual review requirements under Rules 14A.55 to 14A.57 of the Listing Rules in relation to the New Hotel Management Agreements.

NEW HOTEL MANAGEMENT AGREEMENTS

On 16 December 2016, GIHM China, an indirect wholly-owned subsidiary of the Company, and the respective connected persons entered into the New Henan Hotel Agreement, the New Shanghai Hotel Agreement and the New GDH Inn Agreement. Pursuant to the New Hotel Management Agreements, GIHM China will provide hotel management services to the hotels owned by the respective connected persons for a term of three years from 1 January 2017 to 31 December 2019 at the respective management fee scale and on the following principal terms:-

Agreement	Hotel	Management Fee Scale	2017 (RMB)	2018 (RMB)	2019 (RMB)
New Henan Hotel Agreement	Guangdong Hotel (Henan)	2% on total operating income plus 6% of GOP	4,000,000	4,200,000	4,500,000
New Shanghai Hotel Agreement	Guangdong Hotel (Shanghai)	2% on total operating income plus 6% of GOP	3,200,000	3,500,000	3,800,000
New GDH Inn Agreement	GDH Inn Hotel (Donghu)	2% on total operating income plus 2% of GOP, subject to fulfillment of performance targets	130,000	140,000	150,000

Estimated Total Management Fee	7,330,000	7,840,000	8,450,000
Annual Cap	8,000,000	8,500,000	9,000,000

REASONS FOR ENTERING INTO THE NEW HOTEL MANAGEMENT AGREEMENTS

The Existing Hotel Management Agreements are due to expire on 31 December 2016 and the renewal of the agreements will provide GIHM China with continuous supplementary income as well as maintaining its customer portfolio and market presence in the industry. The services as contemplated under the New Hotel Management Agreements are in the ordinary and usual course of business of GIHM China. The management fees are of prevailing market standard and other terms and conditions of the New Hotel Management Agreements are on normal commercial terms or better and arrived on an arm's length negotiations between GIHM China and the respective connected persons.

The Directors (including the independent non-executive Directors) are of the view that the New Hotel Management Agreements are entered into in the ordinary and usual course of business of GIHM China, on normal commercial terms or better and the terms of the New Hotel Management Agreements (including the respective aggregate annual management fees for the years from 2017 to 2019 under the New Hotel Management Agreements) are fair and reasonable and are in the interests of the Company and its shareholders as a whole.

Mr. HUANG Xiaofeng, Mr. CAI Yong and Mr. WU Jianguo, Directors of the Company, are also directors of Guangdong Holdings and GDH. Mr. ZHANG Hui, Ms. ZHAO Chunxiao, Mr. LAN Runing and Mr. LI Wai Keung, Directors of the Company, are also directors of GDH. Save for Mr. WU Jianguo who was absent from the relevant Board meeting of the Company, all of the abovenamed Directors present at the aforesaid Board meeting were not counted in the quorum and did not vote on the Directors' resolutions approving, inter alia, the entering into of the New Hotel Management Agreements and the annual caps of the aggregate annual management fees of the New Hotel Management Agreements for the three years from 2017 to 2019. Guangdong Holdings holds 100% interest in GDH and is the ultimate holding company of the Company. CONNECTED PERSONS Both Kwong Leung Hing and Take Win are indirect wholly-owned subsidiaries of GDH which is the substantial shareholder of the Company holding approximately 54.60% interest in the Company. Dongshen is a direct wholly-owned subsidiary of Guangdong Holdings, the ultimate controlling shareholder of the Company. Accordingly, Kwong Leung Hing, Take Win and Dongshen are connected persons of the Company and the New Hotel Management Agreements constitute continuing connected transactions of the Company pursuant to the Listing Rules.

LISTING RULES IMPLICATIONS

The annual hotel management fee to be received by GIHM China from each of Kwong Leung Hing, Take Win and Dongshen under the New Henan Hotel Agreement, the New Shanghai Hotel Agreement and the New GDH Inn Agreement, respectively is less than 0.1% of all applicable percentage ratios of the Listing Rules. Pursuant to Rule 14A.76(1) of the Listing Rules, each of the aforesaid individual transaction is exempt from the reporting, annual review, announcement and independent shareholders' approval requirements. The aggregate hotel management fees to be received by GIHM China and the annual caps under the Existing Hotel Management Agreements for the years of 2014, 2015 and 2016 disclosed in the previous announcement dated 18 December 2013 amounted to RMB7,770,000, RMB8,175,000 and RMB8,780,000, respectively.

Nonetheless, the aggregate hotel management fees to be received by GIHM China, as calculated with reference to the aforesaid historical amounts and the projection of the total management fees to be received based on the projection of the operating results of the hotels concerned, including the room rates, occupancy rates and other revenue (if any) of those hotels, and thus the annual caps under the New Hotel Management Agreements for the years of 2017, 2018 and 2019 are estimated to be RMB8,000,000 (equivalent to approximately HK$9,292,000), RMB8,500,000 (equivalent to approximately HK$9,872,750) and RMB9,000,000 (equivalent to approximately HK$10,453,500), respectively. The highest annual cap for the three years, which amounts to RMB9,000,000 (equivalent to approximately HK$10,453,500), exceeds 0.1% but is less than 5% of the relevant applicable percentage ratio of the Listing Rules. Accordingly, the New Hotel Management Agreements are subject to the reporting and announcement requirements of the Listing Rules but are exempt from the independent shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.
The Company will comply with the annual review requirements under Rules 14A.55 to 14A.57 of the Listing Rules in relation to the New Hotel Management Agreements.
PRINCIPAL BUSINESSES OF THE COMPANY AND THE CONNECTED PERSONS
The Company and its subsidiaries are principally engaged in investment holding, water resources, property holding and investment, hotel ownership and operation, hotel management, department store operation and investments in other infrastructure projects.
The principal business of GIHM China is provision of hotel management services.
The principal business for each of Kwong Leung Hing, Take Win and Dongshen is investment holding.
DEFINITIONS:
In this announcement, the following expressions shall have the following meanings unless the context requires otherwise:
"Board"	the board of Directors;
"Company"	Guangdong Investment Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Main Board of the Stock Exchange;
"Directors"	the director(s) of the Company;
"Dongshen"	深圳市東深投資控股有限公司(Shenzhen Dongshen Investment Holding Company Limited*), an enterprise established under the laws of the PRC;
"Existing GDH Inn Agreement"	the management service agreement dated 18 December 2013 entered into between GIHM China and Dongshen in relation to the management of GDH Inn Hotel (Donghu) for a term of three years from 1 January 2014 to 31 December 2016;