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About CNC Group

CNC Group design and manufactures glassware and products. The company provides glasses to bars, pubs, restaurants and the general public. It is based in Suffolk, England.

CNC Group Headquarter Location

6 Barnes Close Brandon

Suffolk, England,

United Kingdom

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China New City Commercial Development : (1) CONNECTED TRANSACTION IN RELATION TO AMENDMENTS TO THE EXISTING NON-COMPETE UNDERTAKINGS; (2) DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED TRANSFERS AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Mar 4, 2021

03/04/2021 | 05:19am EST Message : 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 licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in China New City Commercial Development Limited, you should at once hand this circular accompanying with the form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the 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 New City Commercial Development Limited ╈㎜于㒮䄬り哆氪㷤僘꡿⪞⺚ (incorporated in the Cayman Islands with limited liability) (Stock code: 1321) AMENDMENTS TO THE EXISTING NON-COMPETE UNDERTAKINGS; (2) DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED TRANSFERS AND Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders SOMERLEY CAPITAL LIMITED Capitalised terms used in this cover page shall have the same meanings as those defined in this circular. A letter from the Board is set out on pages 8 to 42 of this circular. A letter from the Independent Board Committee is set out on pages 43 to 44 of this circular. A letter from Somerley Capital Limited containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 45 to 75 of this circular. A notice convening the EGM to be held on Wednesday, 24 March 2021 at 11:00 a.m. at Crystal Hall, 4th Floor, Holiday Inn Hangzhou Xiaoshan, No. 688 Shanyin Road, Xiaoshan District, Hangzhou, Zhejiang Province, the PRC is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM if you so wish. 5 March 2021 ''Bright (Hong Kong)'' Bright (Hong Kong) Hotels Management Limited( 伯瑞特 ( 香港 )酒店管理有限公司 ), a limited liability company incorporated in Hong Kong on 15 September 2014 and an indirect wholly-owned subsidiary of the Company; ''China'' or ''PRC'' the People's Republic of China, which for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the People's Republic of China and Taiwan; ''Company or ''China New City'' China New City Commercial Development Limited, a company incorporated in the Cayman Islands, the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1321); ''Controlling Shareholders'' or ''CNC Controlling Shareholders'' ''connected person'' has the meanings ascribed to it under the Listing Rules; the controlling shareholders (as defined under the Listing Rules) of the Company, including Ideal World, Zhong An, Whole Good and Mr. Shi; ''Director(s)'' ''EGM'' an extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve the (i) Amended Non-Compete Undertakings; (ii) the Proposed Transfers; and (iii) other relevant matters; ''Existing Non-Compete Undertakings'' the deed of non-compete undertakings dated 31 May 2014 entered into among the Controlling Shareholders and the Company; ''Group'' ''Hangzhou Zhongan Henglong'' Hangzhou Zhongan Henglong Commercial Building Co., Ltd.*( 杭州眾安恒隆商廈有限公司 ), a limited liability company established in the PRC on 20 September 2005, an indirect non-wholly owned subsidiary of the Company and a direct wholly-owned subsidiary of Zhong An Shenglong; ''Hangzhou Zhonghong'' Hangzhou Zhonghong Property Service Co., Ltd.*( 杭州眾 宏 物 業 服 務 有 限 公 司 ), a limited liability company established in the PRC on 18 November 2020 as a result of the demerger of Hangzhou Zhongan Henglong, an indirect non-wholly owned subsidiary of the Company and a direct wholly-owned subsidiary of Zhong An Shenglong; ''HK$'' ''Hong Kong'' ''Ideal World'' Ideal World Investments Limited, a company incorporated in the British Virgin Islands with limited liability on 6 November 2003 which is wholly-owned by Zhong An and a Controlling Shareholder; ''Independent Board Committee'' the independent committee of the Board, comprising the independent non-executive Directors, which has been formed to advise the Independent Shareholders on (i) the terms of the Amended Non-Compete Undertakings and the transactions contemplated thereunder; and (ii) the Proposed Transfers and the transactions contemplated thereunder; ''Independent Financial Adviser'' ''Independent Shareholders'' Somerley Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities as defined under the SFO, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of Amended Non-Compete Undertakings and the Proposed Transfers; shareholders of the Company other than those who are required to abstain from voting on the resolution(s) in respect of the Amended Non-Compete Undertakings and the Proposed Transfers pursuant to the Listing Rules; ''Independent Third Party(ies)'' an individual(s) or a company(ies) who or which, as far as the Directors are aware after having made all reasonable enquiries, is/are not a connected person(s) of the Company within the meaning of the Listing Rules; ''Latest Practicable Date'' ''Listing Date'' ''Listing Rules'' ''Mr. Shi'' Mr. Shi Kancheng( 施侃成)(alias Shi Zhongan( 施中安 )), the chairperson of the Zhong An Board and the Board, an executive director of Zhong An and a non-executive Director and a controlling shareholder (as defined under the Listing Rules) of Zhong An and a Controlling Shareholder; ''PRC GAAP'' ''Proposed Transfers'' the proposed transfers of the entire equity interests in Hangzhou Zhonghong, Yuyao Zhongli and Zhejiang Runzhou pursuant to the Sale and Purchase Agreements, all of which are engaged in commercial property management business of the Group; ''Prospectus'' the prospectus and the supplemental prospectus of the Company dated 17 June 2014 and 30 June 2014, respectively, in relation to the global offering by the Company of its Shares and its listing on the Stock Exchange; ''Purchaser'' Zhong An Zhihui Shenghuo Services Co., Ltd.*( 眾安智慧 生活服務有限公司), a wholly foreign-owned enterprise with limited liability established in the PRC on 14 January 2021 and an indirect wholly-owned subsidiary of Zhong An; ''Qirui'' Qirui Business Management (Hangzhou) Co., Ltd.*( 祺瑞 商業管理( 杭州 )有限公司), a limited liability company established in the PRC on 18 October 2013 and a direct wholly-owned subsidiary of the Company; ''Remaining Zhong An Group'' ''RMB'' ''SFO'' ''Share(s)'' ''Shareholder(s)'' ''SPA A'' the sale and purchase agreement entered into on 3 February 2021 between Bright (Hong Kong) (as vendor), the Purchaser and Zhejiang Runzhou (as target company) pursuant to which Bright (Hong Kong) conditionally agreed to sell, and the Purchaser conditionally agreed to purchase the entire equity interest in Zhejiang Runzhou at a consideration of RMB35.17 million (equivalent to approximately HK$42.20 million); ''SPA B'' the sale and purchase agreement entered into on 3 February 2021 between Zhong An Shenglong (as vendor), the Purchaser and Hangzhou Zhonghong (as target company) pursuant to which Zhong An Shenglong conditionally agreed to sell, and the Purchaser conditionally agreed to purchase the entire equity interest in Hangzhou Zhonghong at a consideration of RMB57.13 million (equivalent to approximately HK$68.56 million); ''SPA C'' the sale and purchase agreement entered into on 3 February 2021 between Zhong An Commercial (as vendor), the Purchaser and Yuyao Zhongli (as target company) pursuant to which Zhong An Commercial conditionally agreed to sell, and the Purchaser conditionally agreed to purchase the entire equity interest in Yuyao Zhongli at a consideration of RMB12.35 million (equivalent to approximately HK$14.82 million); ''Stock Exchange'' ''subsidiary'' ''Target Companies'' has the meanings ascribed to it under the Listing Rules; collectively, Zhejiang Runzhou, Hangzhou Zhonghong and Yuyao Zhongli; ''Vendors'' ''Whole Good'' Whole Good Management Limited( 全好管理有限公司 ) ,a limited liability company incorporated in the British Virgin Islands on 3 May 2007 which is wholly-owned by Mr. Shi and is a controlling shareholder (as defined under the Listing Rules) of Zhong An and a Controlling Shareholder; ''Xiaoshan Yunzhongxia'' Hangzhou Xiaoshan Yunzhongxia Decoration Co., Ltd.* ( 杭 州 蕭 山 雲 中 霞 裝 飾 有 限 公 司 ), a limited liability company established under the laws of the PRC on 1 April 1997, and a holder of 10% equity interest of Zhong An Shenglong, which is a 90% held indirect subsidiary of the Company. The beneficial owners of Xiaoshan Yunzhongxia are Ms. Qi Xiaomin( 戚小敏)and Mr. Chen Junmin( 陳軍 民 ); Yuyao Zhong An Time Square Commercial Management Co., Ltd.*( 余 姚 眾 安 時代 廣 場 商 業 管 理 有 限 公 司 ) ,a limited liability company established in the PRC on 6 December 2011, an indirect non-wholly owned subsidiary of the Company and a direct wholly-owned subsidiary of Zhong An Commercial; ''Yuyao Zhongli'' Yuyao Zhongli Property Management Co., Ltd.*( 余姚眾力 物 業 管 理 有 限 公 司 ), a limited liability company established in the PRC on 24 November 2020 as a result of the demerger of Yuyao Zhong An, an indirect non-wholly owned subsidiary of the Company and a direct wholly-owned subsidiary of Zhong An Commercial; ''Zhejiang Runzhou'' Zhejiang Runzhou Property Services Co., Ltd.*( 浙江潤洲 物 業 服 務 有 限 公 司 ), formerly known as Runzhou (Zhejiang) Hotel Management Co., Ltd.*( 潤洲( 浙江 )酒店 管理有限公司 ), a limited liability company established in the PRC on 27 November 2014, an indirect wholly-owned subsidiary of the Company and a direct wholly-owned subsidiary of Bright (Hong Kong); ''Zhong An'' Zhong An Group Limited( 眾安集團有限公司 ), a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 672), and a Controlling Shareholder; ''Zhong An Board'' ''Zhong An Commercial'' Zhong An Commercial Group Co., Ltd.*( 眾安商業集團有 限 公 司 ), formerly known as Hangzhou Zhongjia Commercial Management Co., Ltd.*( 杭州眾嘉商業管理有 限公司 ), a limited liability company established in the PRC on 18 November 2016, an indirect non-wholly owned subsidiary of the Company, which is owned as to approximately 54.99% by Zhong An Shenglong and approximately 45.01% by Zhejiang Agricultural Bank of China Phoenix Investment Management Co., Ltd.*( 浙江農 銀鳳凰投資管理有限公司); ''Zhong An Group'' ''Zhong An Management'' Zhejiang Zhong An Property Management Co., Ltd.*( 浙江 眾安物業服務有限公司 ), formerly known as Hangzhou Xiaoshan Zhong An Property Management Co., Ltd.*(杭 州 蕭 山 眾 安 物 業 服 務 有 限 公 司 ), a limited liability company established in the PRC on 18 November 1998 and an indirect non-wholly owned subsidiary of Zhong An; ''Zhong An Shenglong'' Zhejiang Zhongan Shenglong Commercial Co., Ltd.*( 浙江 眾安盛隆商業有限公司 ), a limited liability company established in the PRC on 9 September 2013 and an indirect non-wholly owned subsidiary of the Company which is owned as to 90% by Qirui and 10% by Xiaoshan Yunzhongxia; and ''%'' per cent. * Translated English names of Chinese entities for which no official English translation exists are unofficial translations for identification purpose only and should not be regarded as the official English translation of the Chinese names. Certain amounts and percentage figures included in this circular have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them. For illustrative purpose, amounts denominated in RMB in this circular have been translated into HK$ at the exchange rate of RMB1=HK$1.20. China New City Commercial Development Limited ╈㎜于㒮䄬り哆氪㷤僘꡿⪞⺚ (incorporated in the Cayman Islands with limited liability) (Stock code: 1321) AMENDMENTS TO THE EXISTING NON-COMPETE UNDERTAKINGS; (2) DISCLOSEABLE AND CONNECTED TRANSACTIONS IN RELATION TO THE PROPOSED TRANSFERS; AND INTRODUCTION Reference is made to the joint announcement issued by Zhong An and the Company on 3 February 2021 (the ''Joint Announcement''). The purpose of this circular is to provide you with information reasonably necessary to enable you to make a decision on whether to vote for or against the resolutions to be proposed at the EGM for the approval of (i) the Amended Non-Compete Undertakings; and (ii) the Proposed Transfers. (1) AMENDMENTS TO THE EXISTING NON-COMPETE UNDERTAKINGS Reference is made to the Existing Non-Compete Undertakings entered into on 31 May 2014 among the Controlling Shareholders and the Company. Unless otherwise defined in this circular, capitalised terms used in this section headed ''Amendments to the Existing Non-Compete Undertakings'' in this circular shall have the same meanings as those defined in the Prospectus. The Existing Non-Compete Undertakings The Company is an indirect subsidiary of Zhong An which was spun off as a separate listing entity by Zhong An on the Main Board of the Stock Exchange in 2014. On 31 May 2014, in order to eliminate any potential competition between the Remaining Zhong An Group and the Group during the Company's listing process, the Controlling Shareholders and the Company entered into the Existing Non-Compete Undertakings. Controlling Shareholders' Undertakings Under the Existing Non-Compete Undertakings, each of the Controlling Shareholders irrevocably and unconditionally undertake on joint and several basis to the Company that during the period commencing from the Listing Date and until the earlier of (i) in respect of a Controlling Shareholder, the day on which the Controlling Shareholder concerned (individually or taken as a whole with the other Controlling Shareholders) ceases to be a controlling shareholder (within the meaning ascribed to it under the Listing Rules from time to time) for the purpose of the Listing Rules; or (ii) the date on which Shares shall cease to be listed on the Stock Exchange or (if applicable) other stock exchange (the ''Relevant Period''), each of the Controlling Shareholders shall, and shall procure that his/its associates (other than the Group) to: (a) save for the Excluded Business (as defined below), not, directly or indirectly, carry on, invest in or be engaged in the Restricted Business of the Remaining Zhong An Group (as defined under the section headed ''the Amended Non-Compete Undertakings'' in this circular); (b) not solicit any existing or then existing employee of the Group for employment by it or its respective associates (excluding the Group); (c) not, without the consent from the Company, make use of any information pertaining to the business of the Group which may have come to their knowledge in their capacity as the Controlling Shareholders and/or Directors for the purpose of competing with the Restricted Business of the Remaining Zhong An Group; (d) in respect of any proposals received by any of the Controlling Shareholders or their respective associates (excluding the Group) involving the marketing, sales and development of any Restricted Business of the Remaining Zhong An Group, it/he shall notify the Company and provide the Company with all necessary information in respect of the relevant proposal as soon as practicable, refer the relevant proposal to the Group and use all reasonable endeavours to procure the person who communicated the proposal to the Controlling Shareholders or their respective associates to contact the Group directly regarding the proposal; and (e) not carry on, invest in or be engaged in any proposals received by any of the Controlling Shareholders or their respective associates (excluding the Group) as referred to in paragraph (d) of the above in any event, whether the Group has decided to take up the opportunity under such proposal(s) or not. China New City's Undertakings Under the Existing Non-Compete Undertakings, the Company irrevocably and unconditionally undertakes to each of the Controlling Shareholders that during the Relevant Period, the Company shall, and shall procure that its associates (other than the Controlling Shareholders and the Remaining Zhong An Group) to: (a) save for the Excluded Business, not, directly or indirectly, carry on, invest in or be engaged in the Restricted Business of the Group (as defined under the section headed ''the Amended Non-Compete Undertakings'' in this circular); (b) not solicit any existing or then existing employee of the Remaining Zhong An Group for employment by it or its respective associates (excluding the Remaining Zhong An Group); (c) not, without the consent from Zhong An, make use of any information pertaining to the business of the Remaining Zhong An Group which may have come to the Company's knowledge in its capacity as subsidiary of Zhong An for the purpose of competing with the Restricted Business of the Group; (d) in respect of any proposals received by members of the Group or their respective associates (excluding the Remaining Zhong An Group) involving the marketing, sales and development of any Restricted Business of the Group, the Group shall notify the Remaining Zhong An Group and provide the Remaining Zhong An Group with all necessary information in respect of the relevant proposal as soon as practicable, refer the relevant proposal to the Remaining Zhong An Group and use all reasonable endeavours to procure the person who communicated the proposal to the relevant member of the Group or its associates to contact the Remaining Zhong An Group directly regarding the proposal; and (e) not carry on, invest in or be engaged in any proposals received by the relevant member of the Group or its associates (excluding the Remaining Zhong An Group) as referred to in paragraph (d) of the above in any event, whether the Remaining Zhong An Group has decided to take up the opportunity under such proposal(s) or not. Excluded Business The excluded business (the ''Excluded Business'') as referred to under the Existing Non-Compete Undertakings means: (a) the development and sale of any land or properties by the Remaining Zhong An Group or the Group in relation to the joint property development on mixed commercial-residential use land projects subject to compliance with the mechanism as set out in the Existing Non-Compete Undertakings; (b) the provision of property management services to the mixed commercial-residential properties from time to time owned and/or developed by the Remaining Zhong An Group or the Group, and the provision of property management services to the Group by Zhong An Management pursuant to the Property Management Agreement for the Hidden Dragon Bay project; (c) the development and investment by the Remaining Zhong An Group in the VC Hotel (provided that the VC Hotel shall be exclusively managed by the Group in accordance with the terms and condition of the Pre-opening Management Agreement) and the sale thereof to the Group and other transactions contemplated under the Land Acquisition Agreement; (d) the development, sales and/or investment by the Remaining Zhong An Group in shops and car parking spaces ancillary to the residential properties from time to time owned and/or under development and/or future development by the Remaining Zhong An Group, provided that the aggregate GFA of these shops to which the relevant residential property project relates shall not exceed 10% of the planned total GFA of the relevant residential property project; (e) the direct or indirect investments of the Controlling Shareholders and/or their respective associates (excluding the Group) in the Shares or other securities of the Company (but not that of any other member of the Group); (f) the Group's existing investment in the Times Square Residential Portion and the transactions contemplated under the Cooperation Agreement; (g) any direct or indirect investment by the Controlling Shareholders and/or their respective associates (excluding the Group) in the shares of a publicly listed company (excluding any member of the Group) whereby: (i) the aggregate investment by such Controlling Shareholder and/or his/its associates (excluding the Group) does not exceed 5% of the entire issued share capital of that company; (ii) none of such Controlling Shareholder and/or his/its associates will be the single largest shareholder of that company; and (iii) none of such Controlling Shareholder and/or his/its associates will be involved in the operation and management of that company and/or its subsidiaries. (h) any direct or indirect investment by the Group and/or its associates (other than the Controlling Shareholders and the Remaining Zhong An Group) in the shares of a publicly listed company (excluding Zhong An and any other member of the Remaining Zhong An Group) whereby: (i) the aggregate interests held by the Group and/or its associates (other than the Controlling Shareholders and the Remaining Zhong An Group) does not exceed 5% of the entire issued share capital of that company; (ii) none of the members of the Group and/or its associates (other than the Controlling Shareholders and the Remaining Zhong An Group) will be the single largest shareholder of that company; and (iii) none of the members of the Group and/or its associates (other than the Controlling Shareholders and the Remaining Zhong An Group) will be involved in the operation and management of that company and/or its subsidiaries. For further information on the Existing Non-Compete Undertakings, please refer to pages 392 to 399 of the Prospectus. Amendments to the Existing Non-Compete Undertakings Under the Existing Non-Compete Undertakings, the Remaining Zhong An Group is principally engaged in the development, sale of and management of residential properties in the PRC while the Group is principally engaged in the development, sale of, investment in, and management of commercial properties in the PRC. Over six years have passed since the Controlling Shareholders and the Company entered into the Existing Non-Compete Undertakings, during which the landscape of the PRC property management market has evolved rapidly. At around the time of the spin-off and listing of the Company, the Existing Non-Compete Undertakings were entered into to create a more defined focus for the Group to be a pure play property developer for commercial properties in the PRC, while the Remaining Zhong An Group to be a pure play property developer for residential properties in the PRC. The Directors are of the view that the Existing Non-Compete Undertakings are not tailored for property management business and do not satisfactorily delineate property management service provided to mixed commercial-residential use properties and restrict the development of the property management business of the Group and the Remaining Zhong An Group. Zhong An and the Company plan to consolidate all property management business to the Remaining Zhong An Group and such plan will provide the Group with an opportunity to dispose all of its commercial property management business. For details of the reasons, please refer to the section headed ''Reasons for and Benefits of the Amended Non-Compete Undertakings and the Proposed Transfers'' in this circular. Pursuant to the Existing Non-Compete Undertakings, each of the Controlling Shareholders has undertaken to the Company that, amongst others, they would not directly or indirectly, carry on, invest in or be engaged in commercial property management business in the PRC. Given the circumstances, the Controlling Shareholders and the Company consider that proposed amendments to the Existing Non-Compete Undertakings have to be incorporated before the commercial property management business can be transferred from the Group to the Remaining Zhong An Group. Upon the Amended Non-Compete Undertakings becoming effective and the Proposed Transfers being materialised, the Group will redirect and focus its resources on commercial property development and property leasing, operations and management of hotel and cinema, and other new emerging business such as education and film and entertainment. The Amended Non-Compete Undertakings In view of the above, on 3 February 2021, each of the Controlling Shareholders and the Company entered into the Amended Non-Compete Undertakings to amend the Existing Non-Compete Undertakings, which will supersede and replace in its entirety the Existing Non-Compete Undertakings. In summary, pursuant to the Amended Non-Compete Undertakings, any member of the Remaining Zhong An Group will be entitled to be engaged in property management business (including but not limited to residential, commercial or mixed commercial-residential use properties and related ancillary services and for the avoidance of doubt, does not include operations and management of hotel and cinema) in the PRC, and the Group will no longer be engaged in any property management business (excluding operations and management of hotel and cinema) in the PRC. For illustrative purpose, the proposed material amendments to the Existing Non-Compete Undertakings are set out in blackline in the table as follows and such wordings will be adopted in the Amended Non-Compete Undertakings: Existing Non-Compete Undertakings INTERPRETATION ''Restricted Business of the CNC Group'' means any business which will or may compete with the business currently and from time to time engaged by the Remaining Zhong An Group, including but not limited to the development or sale of or investment in or management of residential properties in the PRC from time to time ''Restricted Business of the Remaining Zhong An Group'' means any business which will or may compete with the business currently and from time to time engaged by the CNC Group, including but not limited to the development or sale of or investment in or management of commercial properties and/or land development in the PRC from time to time ''Remaining Zhong An Group'' INTERPRETATION ''Restricted Business of the CNC Group'' means any business which will or may compete with the business currently and from time to time engaged by the Remaining Zhong An Group, including but not limited to the (i) development or sale of or investment in or management of residential properties in the PRC from time to time; and (ii) property management business (including but not limited to residential, commercial or mixed commercial-residential use properties and related ancillary services and for the avoidance of doubt, does not include operations and management of hotel and cinema) in the PRC ''Restricted Business of the Remaining Zhong An Group'' means any business which will or may compete with the business currently and from time to time engaged by the CNC Group, including but not limited to the development or sale of or investment in or management of commercial properties and/or land development and operations and management of hotel and cinema in the PRC from time to time ''Remaining Zhong An Group'' Group; and ''member(s) of the Remaining Zhong An Group '' shall be construed accordingly; means Zhong An and/or its subsidiaries from time to time, excluding members of the CNC Group; and ''member(s) of the Remaining Zhong An Group '' shall be construed accordingly; Existing Non-Compete Undertakings 3.1 (a) save for the Excluded Business, not, directly or indirectly, carry on, invest in or be engage in the Restricted Business of the Remaining Zhong An Group; (a) save for the Excluded Business, not, directly or indirectly, carry on, invest in or be engaged in the Restricted Business of the Remaining Zhong An Group; (b) not solicit any existing or then existing employee of the CNC Group for employment by it or its respective associates (excluding the CNC Group); (b) save and except the management team and certain employees of Zhejiang Runzhou, Hangzhou Zhonghong and Yuyao Zhongli whose employment will be transferred pursuant to the Sale and Purchase Agreements, not solicit any existing or then existing employee of the CNC Group for employment by it or its respective associates (excluding the CNC Group); Existing Non-Compete Undertakings THE CNC CONTROLLING SHAREHOLDERS' UNDERTAKINGS (c) not, without the consent from China New City, make use of any information pertaining to the business of the CNC Group which may have come to their knowledge in their capacity as the CNC Controlling Shareholders and/or directors of China New City for the purpose of competing with the Restricted Business of the Remaining Zhong An Group; (c) not, without the consent from China New City, make use of any information pertaining to the business of the CNC Group which may have come to their knowledge in their capacity as the CNC Controlling Shareholders and/or directors of China New City for the purpose of competing with the Restricted Business of the Remaining Zhong An Group; (d) in respect of any proposals received by any of the CNC Controlling Shareholders or their respective associates (excluding the CNC Group) involving the marketing, sales and development of any Restricted Business of the Remaining Zhong An Group, it/he shall notify China New City and provide China New City with all necessary information in respect of the relevant proposal as soon as practicable, refer the relevant proposal to the CNC Group and use all reasonable endeavours to procure the person who communicated the proposal to the CNC Controlling Shareholders or their respective associates to contact the CNC Group directly regarding the proposal; and (d) in respect of any proposals received by any of the CNC Controlling Shareholders or their respective associates (excluding the CNC Group) involving the marketing, sales and development of any Restricted Business of the Remaining Zhong An Group, it/he shall notify China New City and provide China New City with all necessary information in respect of the relevant proposal as soon as practicable, refer the relevant proposal to the CNC Group and use all reasonable endeavours to procure the person who communicated the proposal to the CNC Controlling Shareholders or their respective associates to contact the CNC Group directly regarding the proposal; and Existing Non-Compete Undertakings THE CNC CONTROLLING SHAREHOLDERS' UNDERTAKINGS (e) not carry on, invest in or be engaged in any proposals received by any of the CNC Controlling Shareholders or their respective associates (excluding the CNC Group) as referred to in Clause 3.1(d) above in any event, whether the CNC Group has decided to take up the opportunity under such proposal(s) or not. (e) not carry on, invest in or be engaged in any proposals received by any of the CNC Controlling Shareholders or their respective associates (excluding the CNC Group) as referred to in Clause 3.l (d) above in any event, whether the CNC Group has decided to take up the opportunity under such proposal(s) or not. 3.2 (a) each of the CNC Controlling Shareholders jointly and severally undertakes to China New City that: (i)he or it shall, and procure his/its respective associates (other than the CNC Group) to, provide to the CNC Group and/or the directors (including independent non-executive directors) of China New City from time to time all information necessary for annual review by the independent non-executive directors of China New City with regard to compliance with the terms and conditions of this Deed by the CNC Controlling Shareholders; and (i)he or it shall, and procure his/its respective associates (other than the CNC Group) to, provide to the CNC Group and/or the directors (including independent non-executive directors) of China New City from time to time all information necessary for annual review by the independent non-executive directors of China New City with regard to compliance with the terms and conditions of this Amended Deed by the CNC Controlling Shareholders; and Existing Non-Compete Undertakings THE CNC CONTROLLING SHAREHOLDERS' UNDERTAKINGS (ii)to make an annual declaration as to compliance with the terms and conditions of this Deed in the annual report of China New City. (ii)to make an annual declaration as to compliance with the terms and conditions of this Amended Deed in the annual report of China New City. (b) (b) Zhong An undertakes to China New City that: (i)Zhong An will have appropriate corporate governance measures to ensure that, in the event that any of its directors and/or their respective associates has material interest in any matter to be deliberated by the board of directors of Zhong An in relation to the compliance and enforcement of this Deed, he/she shall disclose his/her interests to the board of directors of Zhong An and may not vote on the resolution(s) of the board of directors of Zhong An approving the matter and shall not be counted towards the quorum for the voting; (i)Zhong An will have appropriate corporate governance measures to ensure that, in the event that any of its directors and/or their respective associates has material interest in any matter to be deliberated by the board of directors of Zhong An in relation to the compliance and enforcement of this Amended Deed, he/ she shall disclose his/her interests to the board of directors of Zhong An and may not vote on the resolution(s) of the board of directors of Zhong An approving the matter and shall not be counted towards the quorum for the voting; Existing Non-Compete Undertakings (ii) in respect of each of its financial year ending after Listing of the Shares, its shall instruct its auditors or independent financial advisers to review such documents as the auditors or independent financial advisers may require and confirm to its board of directors that the mechanism set out under Clause 6 has been complied with during such financial year; THE CNC CONTROLLING SHAREHOLDERS' UNDERTAKINGS (ii) in respect of each of its financial year ending after Listing of the Shares the dateonwhichthisAmended Deed takes effect, its it shall instruct its auditors or independent financial advisers to review such documents as the auditors or independent financial advisers may require and confirm to its board of directors that the mechanism set out under Clause 6 has been complied with during such financial year; (iii) it shall provide to China New City from time to time all information necessary for annual review by the auditors and/or independent financial advisers of China New City as referred to in Clause 4.2(b) below; and (iii) it shall provide to China New City from time to time all information necessary for annual review by the auditors and/or independent financial advisers of China New City as referred to in Clause 4.2 (b)(a) below; and (iv)it shall provide to China New City from time to time all information necessary for the independent board committee of China New City to make decision to proceed with the property development on the Mixed-use Land as a Participating Developer and the terms and conditions for the Joint Development. (iv) it shall provide to China New City from time to time all information necessary for the independent board committee of China New City to make decision to proceed with the property development on the Mixed-use Land as a Participating Developer and the terms and conditions for the Joint Development. Existing Non-Compete Undertakings (a) the development and sale of any land or properties by the Remaining Zhong An Group or the CNC Group in relation to the joint property development on mixed commercial-residential use land projects subject to compliance with the mechanism as set out in Clause 6 below; (a) the development and sale of any land or properties by the Remaining Zhong An Group or the CNC Group in relation to the joint property development on mixed commercial-residential use land projects subject to compliance with the mechanism as set out in Clause 6 below; (b) the provision of property management services to the mixed commercial-residential properties from time to time owned and/or developed by the Remaining Zhong An Group or CNC Group, and the provision of property management services to CNC Group by Zhong An Management pursuant to the Property Management Agreement for China New City's Hidden Dragon Bay project; (b) the provision of property management services to the mixed commercial-residential properties from time to time owned and/or developed by the Remaining Zhong An Group or CNC Group, and the provision of property management services to CNC Group by Zhong An Management pursuant to the Property Management Agreement for China New City's Hidden Dragon Bay project; Existing Non-Compete Undertakings EXCLUDED BUSINESS (c) the development and investment by the Remaining Zhong An Group in the VC Hotel (provided that the VC Hotel shall be exclusively managed by the CNC Group in accordance with the terms and condition of the Pre-opening Management Agreement) and the sale thereof to the CNC Group and other transactions contemplated under the Land Acquisition Agreement; EXCLUDED BUSINESS Agreement; (d) the development, sales and/or investment by the Remaining Zhong An Group in shops and car parking spaces ancillary to the residential properties from time to time owned and/or under development and/or future development by the Remaining Zhong An Group, provided that the aggregate GFA of these shops to which the relevant residential property project relates shall not exceed 10% of the planned total GFA of the relevant residential property project; (d)(c) the development, sales and/or investment by the Remaining Zhong An Group in shops and car parking spaces ancillary to the residential properties from time to time owned and/or under development and/or future development by the Remaining Zhong An Group, provided that the aggregate GFA of these shops to which the relevant residential property project relates shall not exceed 10% of the planned total GFA of the relevant residential property project; (e) the direct or indirect investments of the CNC Controlling Shareholders and/or their respective associates (excluding the CNC Group) in the Shares or other securities of China New City (but not that of any other member of the CNC Group); (e)(d) the direct or indirect investments of the CNC Controlling EXCLUDED BUSINESS (f) the CNC Group ' s existing investment in the Times Square Residential Portion and the transactions contemplated under the Cooperation Agreement; (f)(e) the CNC Group ' s existing investment in the Times Square Residential Portion and the transactions contemplated under the Cooperation Agreement; (g) any direct or indirect investment by the CNC Controlling Shareholders and/or their respective associates (excluding the CNC Group) in the shares of a publicly listed company (excluding any member of the CNC Group) whereby: (g)(f) any direct or indirect investment by the CNC Controlling Shareholders and/or their respective associates (excluding the CNC Group) in the shares of a publicly listed company (excluding any member of the CNC Group and/or the Remaining Zhong An Group) whereby: (i) the aggregate investment by such CNC Controlling Shareholder and/or his/its associates (excluding the CNC Group) does not exceed 5% of the entire issued share capital of that company; and (ii) none of such CNC Controlling Shareholder and/ or his/its associates will be the single largest shareholder of that company; and (iii) none of such CNC Controlling Shareholder and/ or his/its associates will be involved in the operation and management of that company and/or its subsidiaries. (i) the aggregate investment by such CNC Controlling Shareholder and/or his/its associates (excluding the CNC Group) does not exceed 5% of the entire issued share capital of that company; and (ii) none of such CNC Controlling Shareholder and/ or his/its associates will be the single largest shareholder of that company; and (iii) none of such CNC Controlling Shareholder and/ or his/its associates will be involved in the operation and management of that company and/or its subsidiaries. Existing Non-Compete Undertakings EXCLUDED BUSINESS Amended Non-Compete Undertakings EXCLUDED BUSINESS (h) any direct or indirect investment by the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) in the shares of a publicly listed company (excluding Zhong An and any other member of the Remaining Zhong An Group) whereby: (h)(g) any direct or indirect investment by the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) in the shares of a publicly listed company (excluding Zhong An and any other member of the Remaining Zhong An Group) whereby: (i) the aggregate interests held by the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) does not exceed 5% of the entire issued share capital of that company; and (i) the aggregate interests held by the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) does not exceed 5% of the entire issued share capital of that company; and (ii) none of the members of the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) will be the single largest shareholder of that company; and (ii) none of the members of the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) will be the single largest shareholder of that company; and (iii) none of the members of the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) will be involved in the operation and management of that company and/or its subsidiaries. (iii) none of the members of the CNC Group and/or its associates (other than the CNC Controlling Shareholders and the Remaining Zhong An Group) will be involved in the operation and management of that company and/or its subsidiaries. Other terms of the Amended Non-Compete Undertakings Other than the material amendments as set out in the above and the related ancillary amendments, other terms remain unchanged as compared to the Existing Non-Compete Undertakings. Conditions precedent of the Amended Non-Compete Undertakings The Amended Non-Compete Undertakings are subject to: (a) the Zhong An Board having approved (i) the Amended Non-Compete Undertakings and the transactions contemplated thereunder; and (ii) the Proposed Transfers and the transactions contemplated thereunder; (b) the Board and the Independent Shareholders at the EGM having approved (i) the Amended Non-Compete Undertakings and the transactions contemplated thereunder; and (ii) the Proposed Transfers and the transactions contemplated thereunder; and (c) each of the Sale and Purchase Agreements having become unconditional in all material respects. If any of the above conditions precedent to the Amended Non-Compete Undertakings is not fulfilled on or before 31 December 2021 (or such later date as may be agreed between the parties), the Amended Non-Compete Undertakings and all rights and obligations thereunder will cease and terminate. In such circumstances, the Existing Non-Compete Undertakings will remain in effect. Corporate Governance Measures To ensure compliance of the Amended Non-Compete Undertakings, Zhong An and the Company will continue with the corporate governance measures set out on pages 400 and 401 of the Prospectus, in particular: (a) the independent non-executive Directors shall review, at least on an annual basis, the compliance with and enforcement of the terms of the Amended Non-Compete Undertakings by the Controlling Shareholders; (b) the Company will disclose any decisions on matters reviewed by the independent non-executive Directors relating to compliance and enforcement of the Amended Non-Compete Undertakings (which include those decisions on matters in relation to joint development on a mixed-use land), either through the annual report or by way of announcement; (c) the Company will disclose in the corporate governance report of the annual report on how the terms of the Amended Non-Compete Undertakings have been complied with and enforced; (d) in the event that any of the Directors and/or their respective associates has material interest in any matter to be deliberated by the Board in relation to the compliance and enforcement of the Amended Non-Compete Undertakings, he/she shall disclose his/her interests to the Board and may not vote on the resolutions of the Board approving the matter and shall not be counted towards the quorum for the voting pursuant to the applicable provisions in the Articles of Association; and (e) Zhong An has undertaken to the Group that it will have appropriate corporate governance measures to ensure that, in the event that any of its directors and/or their respective associates has material interest in any matter to be deliberated by the Zhong An Board in relation to the compliance and enforcement of the Amended Non-Compete Undertakings, he/she shall disclose his/her interests to the Zhong An Board and may not vote on the resolution(s) of the Zhong An Board approving the matter and shall not be counted towards the quorum for the voting. Furthermore, as additional internal control measure, the Company and Zhong An will distribute reminders containing the relevant requirements and restrictions as set out in the Amended Non-Compete Undertakings to the directors, senior management and relevant management team and employees of both the Remaining Zhong An Group and the Group to ensure that they are fully aware of the revised business delineation arrangements (i.e. the Remaining Zhong An Group will be engaged in property management business (including but not limited to residential, commercial or mixed commercial-residential use properties and related ancillary services and for the avoidance of doubt, does not include operations and management of hotel and cinema) in the PRC, while the Group will no longer be engaged in any property management business (excluding operations and management of hotel and cinema) in the PRC). (2) PROPOSED TRANSFERS OF COMPANIES ENGAGING IN COMMERCIAL PROPERTY MANAGEMENT BUSINESS FROM THE GROUP TO THE REMAINING ZHONG AN GROUP The Proposed Transfers On 3 February 2021, the Purchaser, an indirect wholly-owned subsidiary of Zhong An, entered into SPA A, SPA B and SPA C with, among others, Bright (Hong Kong), Zhong An Shenglong and Zhong An Commercial, respectively. Pursuant to the Sale and Purchase Agreements, the Purchaser conditionally agreed to purchase and Bright (Hong Kong), Zhong An Shenglong and Zhong An Commercial conditionally agreed to sell the entire equity interests of Zhejiang Runzhou, Hangzhou Zhonghong and Yuyao Zhongli, respectively at an aggregate consideration of RMB104.65 million (equivalent to approximately HK$125.58 million). The Amended Non-Compete Undertakings and the Proposed Transfers are inter-conditional and completion of the Amended Non-Compete Undertakings and the Proposed Transfers shall take place simultaneously. The Target Companies are principally engaged in provision of commercial property management services in Zhejiang province of the PRC. Sale and Purchase Agreements SPA A SPA C Purchaser The consideration was determined after arm's length negotiations between the Purchaser and each of the Vendors having taken into account, amongst other things, (i) the valuation of Zhejiang Runzhou, Hangzhou Zhonghong and Yuyao Zhongli of RMB41.01 million (equivalent to approximately HK$49.21 million), RMB81.42 million (equivalent to approximately HK$97.71 million) and RMB17.18 million (equivalent to approximately HK$20.61 million), respectively, based on the price to earnings ratio of comparable transactions, less (ii) dividends which will be paid out of the distributable profits of Zhejiang Runzhou, Hangzhou Zhonghong and Yuyao Zhongli in the amount of RMB5.84 million (equivalent to approximately HK$7.01 million), RMB24.29 million (equivalent to approximately HK$29.15 million) and RMB4.83 million (equivalent to approximately HK$5.79 million), respectively, and payable to the respective Vendors on or before the date of completion of the Proposed Transfers. In respect of the valuation of the Target Companies, the parties identified the comparable companies based on: (i) transactions involving transfer of majority equity interests of subject companies principally engaged in property management in the PRC by Hong Kong listed companies which were announced and completed in the past 12 months prior to the date of the Sale and Purchase Agreements; and (ii) the net profit/aggregate net profit after taxation of the subject companies in above sub-paragraph (i) for the year ended 31 December 2019 falling within the range of 30% higher or lower than the aggregate net profit after taxation of the Target Companies during the corresponding year. The average price to earnings ratio of the above comparable transactions is approximately 10.74 times. Having considered the development plan of the Target Companies as stated in the section headed ''Reasons for and Benefits of the Amended Non-Compete Undertakings and the Proposed Transfers'' in this circular, the valuation of the Target Companies is based on the price to earnings ratio of approximately 10 times. The Purchaser intends to make payment of the aggregate consideration of RMB104.65 million (equivalent to approximately HK$125.58 million) by the Remaining Zhong An Group's internal financial resources and payable by the Purchaser in the following manner:- (i) in respect of Zhejiang Runzhou:- a. an amount of RMB29.89 million (equivalent to approximately HK$35.87 million), which represents approximately 85% of the consideration, shall be paid in cash upon satisfaction (or waiver) of the conditions precedent set out in SPA A to a wholly-owned subsidiary of Bright (Hong Kong) which is a limited liability company established in the PRC; and b. an amount of RMB5.28 million (equivalent to approximately HK$6.33 million), which represents approximately 15% of the consideration, shall be paid in cash within five business days from the date of completion of the Proposed Transfers to a wholly-owned subsidiary of Bright (Hong Kong) which is a limited liability company established in the PRC; (ii) in respect of Hangzhou Zhonghong:- a. an amount of RMB48.56 million (equivalent to approximately HK$58.28 million), which represents approximately 85% of the consideration, shall be paid in cash upon satisfaction (or waiver) of the conditions precedent set out in SPA B to Zhong An Shenglong; and b. an amount of RMB8.57 million (equivalent to approximately HK$10.28 million), which represents approximately 15% of the aggregate consideration, shall be paid in cash within five business days from the date of completion of the Proposed Transfers to Zhong An Shenglong; (iii) in respect of Yuyao Zhongli:- a. an amount of RMB10.50 million (equivalent to approximately HK$12.60 million), which represents approximately 85% of the consideration, shall be paid in cash upon satisfaction (or waiver) of the conditions precedent set out in SPA C to Zhong An Commercial; and b. an amount of RMB1.85 million (equivalent to approximately HK$2.22 million), which represents approximately 15% of the aggregate consideration, shall be paid in cash within five business days from the date of completion of the Proposed Transfers to Zhong An Commercial. The aggregate consideration is reached after arm's length negotiation between the parties and the Directors consider that the consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Conditions precedent of the Sale and Purchase Agreements The Sale and Purchase Agreements shall take effect upon the satisfaction of the following conditions precedent: (a) from the date of the Sale and Purchase Agreements and up to the date of completion of the Proposed Transfers, in relation to the Vendors, (i) there has been no material adverse change which would lead to non-consummation of the Sale and Purchase Agreements; (ii) the representations and warranties from the Vendors are accurate and true in all material respects; and (iii) there has been no material breach of the Sale and Purchase Agreements; (b) from the date of the Sale and Purchase Agreements and up to the date of completion of the Proposed Transfers, in relation to the Purchaser, (i) there has been no material adverse change which would lead to non-consummation of the Sale and Purchase Agreements; (ii) the representations and warranties from the Purchaser are accurate and true in all material respects; and (iii) there has been no material breach of the Sale and Purchase Agreements; (c) the Zhong An Board having approved (i) the Amended Non-Compete Undertakings and the transactions contemplated thereunder; and (ii) the Proposed Transfers and the transactions contemplated thereunder; (d) the Board and the Independent Shareholders at the EGM having approved (i) the Amended Non-Compete Undertakings and the transactions contemplated thereunder; and (ii) the Proposed Transfers, and the transactions contemplated thereunder pursuant to the Listing Rules; and (e) each of the Sale and Purchase Agreements having become unconditional in all material respects except for the condition therein relating to the other Sale and Purchase Agreements having become unconditional. Condition (a) above may be waived by the Purchaser and condition (b) above may be waived by the Vendors. Conditions (c), (d) and (e) above may not be waived. Completion The Vendors and the Purchaser shall proceed with the registration procedures with the relevant PRC authorities for the equity transfers of the relevant Target Companies within 10 business days upon satisfaction (or waiver) of the conditions precedent set out in the Sale and Purchase Agreements. Completion shall take place when the registration of the equity transfers of the relevant Target Companies is completed. The Target Companies represent the Group's entire operation in commercial property management business. Upon completion of the Proposed Transfers, the Target Companies will cease to be subsidiaries of the Company and the Group will no longer be engaged in any property management business in the PRC. The Target Companies will become indirect wholly-owned subsidiaries of the Remaining Zhong An Group and their respective financial results will continue to be consolidated into the consolidated financial statements of the Zhong An Group. Structure Charts in relation to the Proposed Transfers The following charts set out the simplified organisation structures in relation to the Proposed Transfers. As at the Latest Practicable Date: Note: Bright (Hong Kong) is held indirectly by the Company. Immediately upon completion of the Proposed Transfers: Mr. Shi 1,718 1,967 As at 30 September 2020, the unaudited net assets of Zhejiang Runzhou, Hangzhou Zhonghong and Yuyao Zhongli were approximately RMB12.74 million, RMB25.79 million and RMB7.85 million, respectively. Note: Hangzhou Zhonghong is a limited liability company established in the PRC on 18 November 2020 as a result of the demerger of Hangzhou Zhongan Henglong. Yuyao Zhongli is a limited liability company established in the PRC on 24 November 2020 as a result of the demerger of Yuyao Zhong An. Pursuant to the demerger of Hangzhou Zhongan Henglong and Yuyao Zhong An on 18 November 2020 and 24 November 2020, respectively, the entire commercial property management business of Hangzhou Zhongan Henglong and Yuyao Zhong An were transferred to Hangzhou Zhonghong and Yuyao Zhongli, respectively. The revenue, net profit before and after taxation and net assets of Hangzhou Zhonghong and Yuyao Zhongli for the years ended/as at 31 December 2018 and 2019, and the nine months ended/as at 30 September 2020 represent the pro forma financial information of Hangzhou Zhongan Henglong and Yuyao Zhong An in relation to the entire commercial property management business. FINANCIAL EFFECT OF THE TRANSACTIONS Upon completion of the Proposed Transfers, the expected gains from the Proposed Transfers is approximately RMB58.27 million (equivalent to approximately HK$69.93 million) (before taxation and transaction costs) which is calculated on the basis of the difference between the aggregate consideration for the Proposed Transfers and the net asset value of the Target Companies as at 30 September 2020. The actual gain to be recorded by the Group will be subject to review and final audit by the auditors of the Company. Proposed use of proceeds by the Group The Board intends to apply the net proceeds from the Proposed Transfers in the following manner: (i) approximately 80% for future investments, among which approximately 70% will be allocated for potential acquisitions of land parcels in the PRC for its commercial property development business and the remaining 10% will be allocated for other investment opportunities for new emerging business such as education and film and entertainment through mergers and acquisitions of suitable entities as and when suitable opportunity arises; and (ii) approximately 20% as general working capital. As at the Latest Practicable Date, the Group has not yet identified any specific acquisition or investment target. REASONS FOR AND BENEFITS OF THE AMENDED NON-COMPETE UNDERTAKINGS AND THE PROPOSED TRANSFERS Over six years have passed since the Controlling Shareholders (including Zhong An) and the Company entered into the Existing Non-Compete Undertakings, during which the landscape of the PRC property market has evolved rapidly. At around the time of the spin-off and listing of the Company, the Existing Non-Compete Undertakings were entered into to create a more defined focus for the Group to be a pure play property developer for commercial properties in the PRC, while the Remaining Zhong An Group to be a pure play property developer for residential properties in the PRC. The Directors are of the view that the reasons for and benefits of the entering into of the Amended Non-Compete Undertakings and the Proposed Transfers are as follows: The property management service delineation under the Existing Non-Compete Undertakings does not satisfactorily delineate business of the Group and the Remaining Zhong An Group Mixed commercial-residential use properties may encompass several different types of properties such as residential properties, office buildings, shopping malls, leisure facilities (such as cinemas), small office/home office and serviced apartments. According to theindustry consultant of Zhong An, to ensure the level of property management service offered, mixed commercial-residential use properties generally appoint one property management service provider to provide property management service for each mixed commercial-residential use property. Therefore, it is a common practice for property management companies in the PRC to operate a diversified property management business covering management of residential, commercial and/or mixed commercial-residential use properties. Further, it is impracticable to engage more than one property management company in respect of the relevant projects which comprised of mixed commercial-residential use properties in view of certain regulatory and practicable restrictions in the PRC. Pursuant to the Regulation on Property Managemen(t 《物業管理條例》)of the PRC, for each property management area designated, there should only be one property management enterprise serving as the property management service provider. Despite the enterprise managing the area may subcontract certain specialised services, such as security, cleaning and maintenance services to third-party subcontractors, it is prohibited from subcontracting the property management services in its entirety or partially (e.g. commercial portion) to another party. Although the Existing Non-Compete Undertakings provide that, amongst others, property management services to mixed commercial-residential properties from time to time owned and/or developed by the Remaining Zhong An Group or the Group is excluded from the restricted business of the Group and the Remaining Zhong An Group, the Directors consider that such exclusion does not cover property management service provided to properties which are neither owned nor developed by the Remaining Zhong An Group or the Group. As such, the Directors consider that the proposed amendments to the Existing Non-Compete Undertakings is necessary to clarify the business delineation between the Group and the Remaining Zhong An Group. Upon completion of the Amended Non-Compete Undertakings, the Remaining Zhong An Group will be engaged in property management business (including but not limited to residential, commercial or mixed commercial-residential use properties and related ancillary services and for the avoidance of doubt, does not include operations and management of hotel and cinema) in the PRC, while the Group will no longer be engaged in any property management business (excluding operations and management of hotel and cinema) in the PRC. Better allocation of resources and manpower between the Remaining Zhong An Group and the Group As disclosed in the Company's annual report 2018 and annual report 2019, (i) commercial property management business contributed to approximately 1.72% and 2.20% of the Group's revenue, respectively, and accounted for a relatively small contribution to the Group's revenue; and (ii) commercial property development business is the Company's strongest performing business in terms of profitability which contributed to approximately 82.01% and 78.46% of the Group's revenue for the years ended 31 December 2018 and 2019, respectively. As at the Latest Practicable Date, the property management business of the Group mainly relates to commercial properties such as serviced apartments, office buildings, shopping malls and other ancillary facilities in the PRC. The Target Companies only have six commercial property management projects which are management of properties developed/ owned by the Group, its joint ventures or its associates. Besides, the Group has no plan to pursue new property management project nor to expand its commercial property management operation in the near future. Meanwhile, having considered that the majority of the Company's resources and personnel in relation to provision of commercial property management services are derived from Zhong An at the time of the spin-off in 2014 and the Remaining Zhong An Group has more sizeable and experienced management and operational team for its property management business than the Group, the Directors consider that it would be appropriate and reasonable to transfer the entire commercial property management business to the Remaining Zhong An Group with the aim to consolidate all property management business while the Company can continue focusing on its core business of commercial property development or other investment opportunities for new emerging business such as education and film and entertainment in order to allow a better allocation of resources between the Remaining Zhong An Group and the Group. The Company also has an experienced team to conduct the new emerging business. The Company has a team of approximately 20 people in the United Kingdom and a team of approximately 10 people in the PRC operating the Group's education business. The Company has also hired a senior official with over six years of experience in relevant industries for overseeing th

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