SHK HONG KONG INDUSTRIES LTD Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
(Incorporated in Hong Kong with limited liability)
(Stock Code: 666)
CONTINUING CONNECTED TRANSACTIONS CONTINUED APPOINTMENT OF
YU MING INVESTMENT MANAGEMENT LIMITED AS INVESTMENT MANAGER
On 20th November, 2015, the Company entered into the New Management Agreement with YMIM in relation to the appointment of YMIM as the Company's investment manager for the Management Period. The New Management Agreement is conditional upon approval of Independent Shareholders and shall, if approved in the EGM, commence on the Renewal Date.
YMIM, as the investment manager of the Company, is a connected person of the Company pursuant to Rule 14A.08 of the Listing Rules, as such, the transaction contemplated by the New Management Agreement constitutes continuing connected transactions of the Company under Chapter 14A of the Listing Rules. As the relevant percentage ratios are less than 25% but the proposed annual caps are more than HK$10 million on an annual basis, the transaction contemplated under the New Management Agreement is subject to reporting, announcement, Independent Shareholders' approval and annual review requirement under Chapter 14A of the Listing Rules.
An independent board committee of the Company comprising all of the independent non-executive Directors, namely Mr. Albert Ho, Mr. Peter Lee Yip Wah and Mr. Louie Chun Kit, has been formed to advise the Independent Shareholders in respect of the New Management Agreement and the annual caps thereunder.
Beijing Securities Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in these regards.
A circular containing, among others, further details of the New Management Agreement, the advice of the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the recommendation of the Independent Board Committee and a notice convening the EGM, will be despatched to the Shareholders as soon as practicable but no later than 4th December, 2015.
NEW MANAGEMENT AGREEMENT
On 20th November, 2015, the Company entered into the New Management Agreement with YMIM in relation to the appointment of YMIM as the Company's investment manager for the Management Period. The New Management Agreement is conditional upon approval of Independent Shareholders and shall, if approved in the EGM, commence on the Renewal Date.
Principal terms
The principal terms of the New Management Agreement are on the same basis as the Previous Management Agreement. They include:
Duration
The Management Period (3 years)
Services
YMIM shall provide non-exclusive investment management services and administrative services to the Company, including:
to identify and carry out analysis or investigation of investment opportunities; and
to advise on acquisitions and realizations of investments and submit relevant proposals to the Board for approval.
Remuneration
Management Fee: 0.375% of the Gross NAV for each quarter, calculated as the arithmetical average of the published Gross NAV on the last day of each calendar month during each relevant quarter, and payable quarterly in arrears by the Company to YMIM.
Performance Fee: 20% of the amount by which the audited Net Asset Value of each year ended 31st December exceeds the High Watermark as at the relevant Financial Year, and payable annually in arrears by the Company to YMIM.
Annual caps
The maximum annual Management Fee and Performance Fee payable by the Company to YMIM under the New Management Agreement are proposed to be as follows:
Financial Year | 2016 HK$ | 2017 HK$ | 2018 HK$ |
Management Fee | 20,000,000 | 30,000,000 | 35,000,000 |
Performance Fee | 65,000,000 | 1 05,000,000 | 1 35,000,000 |
Proposed annual caps | 85,000,000 | 1 35,000,000 | 1 70,000,000 |
The computation basis of the proposed annual caps is the same as the Previous Management Agreement, which assumes that the Company will achieve approximately 35% annual increase in Net Asset Value before accrual of the Performance Fee. For convenience, the annual caps are rounded to the nearest HK$5 million. It is determined after taking into account of (i) the Net Asset Value appreciation of the Group as at 31st October, 2015; (ii) the historical transaction amounts for the period under the Previous Management Agreement as disclosed in the paragraph headed ''Transaction amounts and the current annual caps'' below; and (iii) an expected increase in volatility of the Hang Seng Index (the ''HSI'') expected to remain elevated in the coming three years as compared with the year 2015.
The following table sets out the highest, lowest and the difference between highest and lowest of HSI for each of the years from 2013 and 2015 (up to the date of the New Management Agreement), covering the Previous Period:
Year Highest Lowest Difference
2013 | 24,039 | 19,814 | 4,225 |
2014 | 25,318 | 21,182 | 4,136 |
2015 | 28,443 | 20,557 | 7,886 |
One of the major reasons for the increase in volatility of HSI in 2015 (up to the date of the New Management Agreement) is the intensifying divergence of global monetary policy directions. In particular, Federal Reserve of the United States is expected to increase interest rate in near future, while People's Bank of China is on the path of cutting interest rate. Hong Kong's liquidity will be in a tug of war in coming years, conducive to higher volatility of HSI. High volatility can enhance potential investment return albeit with higher risks.
Therefore, the Board considers that maintaining the anticipated annual increase of 35% in the Net Asset Value is fair and reasonable.
Transaction amounts and the current annual caps
The following is a summary of the transaction amounts under the Previous Management Agreement from 1st January, 2013 to 31st December, 2015 and the annual caps for each of the three years ending 31st December, 2015:
Financial Year | 2013 HK$ | 2014 HK$ | 2015 HK$ |
Management Fee (note 1) | 19,254,000 | 20,361,000 | 20,469,000 |
Performance Fee (note 2) | 23,013,000 | 21,444,000 | T o be comput ed |
Total transaction amounts | 42,267,000 | 41,805,000 | T o be comput ed |
Annual caps | 75,000,000 | 125,000,000 | 155,000,000 |
Notes: |
The amount of the Management Fee for the financial year 2015 comprises the actual Management Fee accrued up to 31st October, 2015 and the estimated Management Fee for the two months of November and December, 2015 calculated by reference to the published Net Asset Value as at 31st October, 2015.
The Company will not make an estimate of the amount of the Performance Fee for the financial year 2015 (which is calculated by reference to the audited Net Asset Value as at the financial year end of 2015) as it may be inaccurate and misleading.
Condition of the New Management Agreement
The New Management Agreement is conditional upon the approval of Independent Shareholders at the EGM. If the condition is not satisfied on or before 31st December, 2015, the New Management Agreement shall lapse and none of the parties thereto shall have any obligations and liabilities thereunder.
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