THIS DOCUMENT 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 to be taken, you should consult your stockbroker or other registered securities dealer, bank manager, solicitor, professional accountant or other professional adviser.
If you have sold or transferred all your shares in Dongjiang Environmental Company Limited (the “Company”), you should at once hand this circular and the accompanying reply slip and form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer 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.
DONGJIANG ENVIRONMENTAL COMPANY LIMITED* 東江環保股份有限公司 (a joint stock limited company incorporated in the People’s Republic of China) (Stock code: 00895)
(1) PROPOSED ESTIMATE ON ROUTINE RELATED TRANSACTIONS FOR 2020; (2) SIGNING OF FINANCIAL SERVICES AGREEMENT AND RELATED TRANSACTIONS; (3) FORMULATION OF THE REMUNERATION AND ASSESSMENT SCHEME FOR THE CHAIRMAN; (4) PROPOSAL OF ISSUE OF CORPORATE BONDS; AND (5) NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING IN 2020
Notices convening the second extraordinary general meeting of the Company in 2020 to be held at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the People’s Republic of China (the “PRC”) from 3:00 p.m. on Tuesday, 12 May 2020 is set out on pages 38 to 40 of this circular.
Whether or not you intend to attend the second extraordinary general meeting in 2020, you are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, (for holders of H shares of the Company) as soon as possible, and please return the proxy form not less than 24 hours before the time appointed for the holding of the second extraordinary general meeting in 2020 or any adjournment thereof (as the case may be). Completion and return of the proxy form will not preclude you from attending and voting in person at the second extraordinary general meeting in 2020 or any adjournment thereof (as the case may be) should you so wish.
* For identification purposes only 24 April 2020 CONTENTS
Page
Definitions ...... 1
Letter from the Board ...... 4
Appendix – The Remuneration and Assessment Scheme for the Chairman ...... 33
Notice of the Second Extraordinary General Meeting in 2020 ...... 38
– i – DEFINITIONS
In this circular, unless the context otherwise requires, the following expressions have the following meanings:
“Announcement” the Company’s announcement dated 25 February 2020 in relation to entering into of the Financial Services Agreement
“A Share(s)” A share(s) in the share capital of the Company, with a par value of RMB1.00 each, which are subscribed for and traded in RMB on the Shenzhen Stock Exchange
“Articles of Association” the articles of association of the Company, as amended from time to time
“Board” the Board of Directors
“Company” or “Dongjiang 東江環保股份有限公司 (Dongjiang Environmental Environmental” Company Limited*), a joint stock limited company established in the PRC, the H Shares and A Shares of which are listed on the Stock Exchange and on the Shenzhen Stock Exchange, respectively
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“Credit Facility Services” the credit business including loans, bills acceptance, bills discounting, etc. provided by Rising Finance to the Company pursuant to the Financial Services Agreement
“Deposit Services” the deposit of money services provided to the Company by Rising Finance pursuant to the Financial Services Agreement
“Director(s)” the director(s) of the Company
“EGM” the second extraordinary general meeting of the Company in 2020 to be held at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the PRC at 3:00 p.m. on Tuesday, 12 May 2020 or any adjournment thereof (as the case may be) for the Shareholders to consider, and, if thought fit, to approve, among other things, the proposed estimate on Routine Related Transactions for 2020; signing of Financial Services Agreement and related translations; formulation of the Remuneration and Assessment Scheme for the Chairman; and proposal of issue of corporate bonds
“Financial Services” the Deposit Services, Settlement Services, Credit Facility Services and Other Financial Services under the Financial Services Agreement
– 1 – DEFINITIONS
“Financial Services Agreement” the financial services agreement entered into between the Company and Rising Finance on 25 February 2020 in respect of the provision of the Financial Services by Rising Finance to the Group
“Group” the Company and its subsidiaries
“Guangdong Rising Assets” Guangdong Rising Assets Management Co., Ltd., a limited company established in the PRC, which is a substantial Shareholder of the Company as at the date of this circular
“H Share(s)” the overseas listed foreign share(s) in the share capital of the Company, with a par value of RMB1.00 each, which are subscribed for and traded in HK$ on the Stock Exchange
“HK$” Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date” 22 April 2020, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Original Financial Services” the Deposit Services, Settlement Services and Other Financial Services under the Original Financial Services Agreement
“Original Financial Services the financial services agreement entered into between the Agreement” Company and Rising Finance on 23 January 2019 with effect on 19 March 2019 in respect of the provision of the Original Financial Services by Rising Finance to the Company
“Other Financial Services” all other financial services provided by Rising Finance to the Company pursuant to the Financial Services Agreement other than the Deposit Services, the Settlement Services and the Credit Facility Services
“PRC” the People’s Republic of China, which for the purpose of this circular only, excludes Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan
“Related Person(s), has the meaning ascribed to it under the Shenzhen Listing Related Party(ies)” Rules
– 2 – DEFINITIONS
“Related Transaction(s)” the transaction between the Company and its controlling subsidiary and the Related Person(s), Related Party(ies) under the Shenzhen Listing Rules
“Rising Finance” Guangdong Rising Finance Co., Ltd., a limited company established in the PRC, and a direct wholly-owned subsidiary of Guangdong Rising Assets
“RMB” Renminbi, the lawful currency of the PRC
“Routine Related Transactions” the estimated routine related transactions of the Group for the year ended 31 December 2020 proposed to be approved in the extraordinary general meeting in accordance with the Shenzhen Listing Rules
“Settlement Services” the payment service and collection service as well as other ancillary services related to settlement business provided by Rising Finance to the Company pursuant to the Financial Services Agreement
“Share(s)” the share(s) of the Company, unless specified otherwise, including A Shares and H Shares
“Shareholder(s)” the holders of Share(s)
“Shenzhen Listing Rules” the Rules Governing the Listing of Securities on the Shenzhen Stock Exchange
“Shenzhen Stock Exchange” the Shenzhen Stock Exchange
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“%” per cent
In this circular, the English names of the PRC entities are translations of their Chinese names, and are included herein for identification purpose only. In the event of any inconsistency, the Chinese names shall prevail.
– 3 – LETTER FROM THE BOARD
DONGJIANG ENVIRONMENTAL COMPANY LIMITED* 東江環保股份有限公司 (a joint stock limited company incorporated in the People’s Republic of China) (Stock code: 00895)
Executive Directors: Registered office: Mr. Tan Kan (Chairman) 1/F, 3/F Mr. Yao Shu (Chief Executive Officer) North of 8/F 9/F-12/F Non-executive Directors: Dongjiang Environmental Building Mr. Huang Yiming No. 9 Langshan Road Mr. Lu Bei North Zone of Hi-tech Industrial Park Mr. Jin Yongfu Nanshan District, Shenzhen the PRC Independent non-executive Directors: Mr. Zhu Zhengfu Principal place of business in Hong Kong: Mr. Qu Jiu Hui 6th Floor, O.T.B. Building Mr. Wong Hin Wing 259-265 Des Voeux Road Central Hong Kong
To the Shareholders
Dear Sir or Madam:
(1) PROPOSED ESTIMATE ON ROUTINE RELATED TRANSACTIONS FOR 2020; (2) SIGNING OF FINANCIAL SERVICES AGREEMENT AND RELATED TRANSACTIONS; (3) FORMULATION OF THE REMUNERATION AND ASSESSMENT SCHEME FOR THE CHAIRMAN PLAN; (4) PROPOSAL OF ISSUE OF CORPORATE BONDS; AND (5) NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING IN 2020
INTRODUCTION
This circular aims at providing you with information regarding the proposed estimate on Routine Related Transactions for 2020; signing of Financial Services Agreement and related translations; formulation of the Remuneration and Assessment Scheme for the Chairman; and proposal of issue of corporate bonds.
* For identification purposes only – 4 – LETTER FROM THE BOARD
1. Proposed Estimate on Routine Related Transactions for 2020
I. Basic information of the Routine Related Transactions
(i) Overview of the Related Transactions
In accordance with the requirements in daily production and operation of 2020, the Company and its controlling subsidiaries expect to conduct Routine Related Transactions, such as purchase and sale of products as well as providing and receiving labor services, with its Related Parties, Guangdong Rising Assets and its subsidiaries (excluding the subsidiaries estimated separately in this resolution), Jiangsu High Hope International Group Corporation (including its subsidiaries, hereinafter referred to as “High Hope Group”), Huizhou Dongjiang Veolia Environmental Service Co., Ltd. (hereinafter referred to as “Dongjiang Veolia”), Shenzhen Zhongjin Lingnan Nonfemet Co. Limited (深圳市中金嶺 南有色金屬股份有限公司) (including its branches) (hereinafter referred to as “Zhongjin Lingnan”), Guangdong Fenghua Advanced Technology Holding CO.,LTD (including its branches, hereinafter referred to as “Fenghua Advanced Technology”), Guangzhou Huajian Engineering Construction Co., Ltd. (hereinafter referred to as “Guangzhou Huajian”), Guangdong Zhongnan Construction Co., Ltd. (廣東中南建設有限公司) (hereinafter referred to as “Zhongnan Construction”) and Guangdong Zhongren Group Construction Limited (廣東中人集團建設有限公司) (hereinafter referred to as “Guangdong Zhongren”), with the total amount expected not to exceed RMB335,000,000 (exclusive of tax).
On 5 February 2020, the 49th meeting of the sixth session of the Board of the Company considered and approved the Proposal on Estimated Routine Related Transactions for Year 2020 with 3 votes in favor, 0 votes against and 0 votes abstained. Mr. Tan Kan, Mr. Yao Shu, Mr. Liu Boren, Mr. Huang Yiming, Mr. Lu Bei and Mr. Jin Yongfu, being Directors of the Company, abstained from voting on the proposal in their capacity as related Directors and all the other non-related Directors granted unanimous consent.
The estimated maximum amount of the 2020 Routine Related Transactions is RMB335,000,000 (exclusive of tax). According to the requirements of Shenzhen Listing Rules and the Articles of Association, the Routine Related Transactions are subject to consideration and approval at the general meeting of the Company. The related Shareholders will abstain from voting on the proposal at the extraordinary general meeting.
– 5 – LETTER FROM THE BOARD
(ii) Estimated Type and Amount of the Related Transactions in 2020
Contractual Pricing value or Actual Actual principle estimated amount as at amount Type of Related Content of Related of Related amount in the date of incurred in Transactions Related Party Transactions Transactions 2020 disclosure 2019 (unaudited) RMB0’000 RMB0’000 RMB0’000
Sale of products or Guangdong Rising Selling resourced 300.00 0 0 goods to Related Assets products Parties Zhongjin Lingnan Selling resourced 2,000.00 0 263.40 products Subtotal – 2,300.00 0 263.40 Labor services Guangdong Rising Providing industrial 400.00 0 58.05 rendered to Assets waste treatment Related Parties and technical consulting services Dongjiang Veolia 15,000.00 0 10,906.31 Providing industrial Fenghua Advanced 300 0 105.14 waste treatment Technology services Zhongjin Lingnan 300 0 25.08 Subtotal – 16,000.00 0 11,094.58 Labor services and Guangdong Rising Receiving labor Please refer to the 300.00 0 8.45 goods purchased Assets services and section headed or received from purchasing goods “Pricing policy Related Parties Dongjiang Veolia Receiving industrial and pricing 6,000 0 1,607.99 waste treatment principle” in services this circular for Guangzhou Huajian Receiving engineering details 300 0 56.00 service Zhongnan Receiving engineering 3,000 120.15 509.83 Construction service Guangdong Zhongren Receiving engineering 4,000 0 0 service High Hope Group Rental, property 100 0 33.21 management fee and renovation fee Subtotal – 13,700.00 120.15 2,215.48 Other agreed Dongjiang Veolia Providing brand 1,500.00 0 967.09 transfer of services resources or obligations Subtotal – 1,500.00 0 967.09
Total – – – 33,500.00 120.15 14,540.55
– 6 – LETTER FROM THE BOARD
(iii) Routine Related Transactions Conducted in the Previous Year
Difference Percentage between of actual actual amount to amount and Type of Related Content of Related Actual Estimated the same estimated Date of disclosure Transactions Related Party Transactions amount amount business amount and index (unaudited) (RMB0’000) (RMB0’000) (%)
Sale of products Zhongjin Selling resourced 263.4 2,500.00 0.24% -89% or goods to Lingnan products Related Parties Guangdong Selling resourced 0.00 300.00 – -100% Rising Assets products Subtotal – 263.4 2,800.00 0.24% -91% Labor services Guangdong Providing industrial 58.05 400.00 0.03% -85% rendered to Rising Assets waste treatment Related Parties and technical Please refer to the consulting Announcement services on Estimated Dongjiang Veolia 10,906.31 13,000.00 6.43% -16% Routine Related Fenghua 105.14 400 0.06% -74% Providing industrial Transactions Advanced waste treatment for the Year Technology services 2019 and the Zhongjin 25.08 50 0.01% -50% Announcement Lingnan on New Subtotal – 11,094.58 13,850.00 6.53% -20% Estimated Labor services and Dongjiang Veolia Receiving industrial 1,607.99 8,000.00 1.84% -80% Routine Related goods received waste treatment Transactions for or purchased services the Year 2019 from Related Guangdong Receiving labor 8.45 300.00 0.01% -97% disclosed by Parties Rising Assets services and the Company purchasing goods at www.cninfo. Guangzhou Receiving 56.00 300.00 0.31% -81% com.cn on Huajian engineering 31 January 2019 service and 20 July Subtotal – 1,672.44 8,600.00 2.15% -81% 2019 for details. Other agreed Dongjiang Veolia Providing brand 967.09 1,500.00 21.37% -36% transfer of services resources or obligations Subtotal – 967.09 1,500.00 21.37% -36%
Total – – 13,997.51 26,750.00 – -48%
– 7 – LETTER FROM THE BOARD
II. Information of Related Parties and the Relationship
(i) Basic information of Related Parties
1. Guangdong Rising Assets
Company name: Guangdong Rising Assets Management Co., Ltd.
Registered address: Floor 50-58, The Pinnacle, No.17 Zhujiang West Road, Tianhe District, Guangzhou, Guangdong Province
Registered capital: RMB10 billion
Scope of business: Asset management and operation, equity management and operation, investment operation, management and reinvestment of investment revenue; other businesses authorized by the State-Owned Assets Supervision and Administration Commission on provincial level; contracting overseas projects and international projects tendered in China; contracting the surveying, consultancy, design and supervision of aforementioned overseas projects; export of labour and personnel required for the aforementioned overseas projects; deployment of staff necessary for the aforementioned overseas projects; property leasing; development, sales and deep processing of rare earth mineral products.
For the year ended 2018, Guangdong Rising Assets recorded audited operating revenue of RMB58,247,689,089.97, net profit of RMB4,621,837,889.45 and net assets of RMB47,987,635,888.26.
As at 30 September 2019, Guangdong Rising Assets recorded unaudited revenue of RMB43,548,768,988.45, net profit of RMB4,403,278,058.81 and net assets of RMB49,999,357,527.18.
As it is expected that there will be many Related Parties involved in the Routine Related Transactions between the subsidiaries of Guangdong Rising Assets and the Company and its controlling subsidiaries, which makes it difficult to disclose the information of all Related Parties, the information of Related Parties with estimated transaction amount of less than RMB3 million or 0.5% of the audit net assets of the Company in 2018 are presented under common controlling shareholders on a combined basis.
– 8 – LETTER FROM THE BOARD
2. High Hope Group
Company name: Jiangsu High Hope International Group Corporation
Registered address: No. 91 Baixia Road, Nanjing
Registered capital: RMB2,242,433,192
Scope of business: Self-operation of and acting as agent for the import and export of various types of commodities and technologies, domestic trade, domestic and foreign investment; research and development, manufacturing, warehousing of textile raw materials and finished products; research and development, installation, leasing of electronic devices, computer software and hardware, electronic products and network engineering design, installation, consultation and technical services; real estate development, residential property leasing, property management services, warehousing; wholesale of dangerous chemicals (operate within the scope set out in the permit); wholesale of pre-packaged food products and bulk food products, milk products (including infant formula milk powder), sale of fuel oil, purchase and sale of grain. (Operation for projects subject to approval according to law may only be commenced upon approval by relevant departments).
For the year ended 2018, High Hope Group recorded audited operating revenue of RMB38,983,380,463.38, net profit of RMB1,201,567,956.45 and net assets of RMB5,364,305,301.67.
As at 30 September 2019, High Hope Group recorded unaudited revenue of RMB25,098,930,248.66, net profit of RMB312,055,852.62 and net assets of RMB6,383,228,626.90.
– 9 – LETTER FROM THE BOARD
3. Dongjiang Veolia
Company name: Huizhou Dongjiang Veolia Environmental Service Co., Ltd.
Registered address: Rm. 102, Block C11, Jinbao Chuangye Garden, No. 20 Zhongkai High-Tech Industry Development Zone, Huizhou City (for office use only)
Registered capital: RMB60 million
Scope of business: Investment and construction in Shiwuliao forest farm, Lianghua Town, Huidong County, operation and management of dangerous waste safety landfill, dangerous waste incineration and treatment, waste battery recycling and treatment, and treatment and utilization of hyper-toxic chemical wastes.
Shareholding Dongjiang Environmental Company Limited (holding structure: 50% of its equity interests), and Veolia Environmental Services (Hong Kong) Company limited (holding 50% of its equity interests)
For the year ended 2018, Dongjiang Veolia achieved audited operating revenue of RMB299,941,207.6, net profit of RMB41,678,356.41 and net asset of RMB191,526,716.29.
As at 30 September 2019, Dongjiang Veolia achieved unaudited operating revenue of RMB271,480,721.96, net profit of RMB13,960,009.14 and net asset of RMB205,102,442.92.
– 10 – LETTER FROM THE BOARD
4. Zhongjin Lingnan
Company name: Shenzhen Zhongjin Lingnan Nonfemet Co. Limited
Registered address: 24-26/F, China Nonferrous Building, No. 6013 Shennan Avenue, Chegong Temple, Futian District, Shenzhen
Registered capital: RMB2,379,790,218
Scope of business: Conducting businesses (actual project details to be separately submitted), domestic commerce (except for franchise and monopoly of goods), economic information consultation (except for restricted items), operating import and export business, setting up branch office in Shaoguan for mining, smelting, manufacturing and processing of non-ferrous mineral products, smelting products, deep-processing of products, comprehensive utilization of products (including the production of sulfuric acid, oxygen, sulfur, gallium, germanium, electric furnace zinc powder) and packaging materials, containers (including steel buckets, plastic woven bags) (the above business scope only applies to its branches and the business licenses is subject to separate filing), construction materials, machinery and equipment and pipeline installation and maintenance, engineering construction, land survey and exploration, scientific research and design and overseas futures business.
For the year ended 2018, Zhongjin Lingnan achieved audited operating revenue of RMB19,963,409,521.93, net profit of RMB909,577,971.95 and net asset of RMB10,716,954,933.85.
As at 30 September 2019, Zhongjin Lingnan achieved unaudited operating revenue of RMB17,341,151,440.08, net profit of RMB651,673,657.15 and net asset of RMB11,163,245,598.53.
– 11 – LETTER FROM THE BOARD
5. Fenghua Advanced Technology
Company name: Guangdong Fenghua Advanced Technology Holding CO., LTD
Registered address: Fenghua Electronic Industrial City, No. 18 Fenghua Road, Zhaoqing, Guangdong
Registered capital: RMB895,233,111
Scope of business: Research, development, production and sales of various types of high-tech and new electronic components, integrated circuits, electronic materials, special electronic equipment and computer network equipment, high-tech transfer and consulting services, operating its own mechanical and electrical products, import and export of complete sets of equipment and related technologies, import of raw and auxiliary materials for scientific research, mechanical equipment, instruments and meters, spare parts, components and technology (operating in accordance with Yue Wai Jing Mao Jin Zi [1999] No. 381), engaged in domestic trade (cannot operate those prohibited by laws, administrative regulations and the State Council, and can independently select and commence operations for those which do not require license by laws, administrative regulations and decisions of the State Council), real estate development and operation. (Operation for projects subject to approval according to law may only be commenced upon approval by relevant departments).
For the year ended 2018, Fenghua Advanced Technology achieved audited operating revenue of RMB4,580,200,601.43, net profit of RMB1,028,820,935.58 and net asset of RMB5,528,052,080.03.
As at 30 September 2019, Fenghua Advanced Technology achieved unaudited operating revenue of RMB2,387,225,437.59, net profit of RMB360,481,231.49 and net asset of RMB5,644,565,120.40.
– 12 – LETTER FROM THE BOARD
6. Guangzhou Huajian
Company name: Guangzhou Huajian Engineering Construction Co., Ltd.
Registered address: Rm. 1903, 19/F, No. 233 Tianfu Road, Tianhe District, Guangzhou
Registered capital: RMB25 million
Scope of business: House and buildings construction, installation of mechanical and electrical equipment, interior decoration, installation of building power systems, etc.
Shareholding Guangdong Huajian Enterprise Group Co., Ltd. (廣 structure: 東華建企業集團有限公司) (holding 88.75% of its equity interests) and Guangdong Heshun Property Management Co., Ltd. (廣東和順物業管理有限公司) (holding 11.25% of its equity interests)
For the year ended 2018, Guangzhou Huajian achieved audited operating revenue of RMB103,902,718.66, net profit of RMB7,965,565.31 and net asset of RMB12,925,244.54.
As at 30 September 2019, Guangzhou Huajian achieved unaudited operating revenue of RMB36,289,322.52, net profit of RMB-126,277.44 and net asset of RMB12,798,967.10.
– 13 – LETTER FROM THE BOARD
7. Zhongnan Construction
Company name: Guangdong Zhongnan Construction Co., Ltd.
Registered address: Ground Floor, No. 81 and 83 Gangyuan Street, Shiliugang Road, Haizhu District, Guangdong Province
Registered capital: RMB85 million
Scope of business: Property construction works; municipal utility construction works; professional fire service construction contracting; building gas system installation service; building air conditioning equipment, ventilation equipment system installation service; mechanical and electrical equipment installation service; lifting equipment installation service; decoration, renovation and cleaning at later stage of construction; earthwork engineering service; drainage construction service; foundation pit support and retaining service; building heating system installation service; building drainage system installation service; building water supply system installation service; gardening and greenery service; landscape and green space construction; interior decoration and renovation; interior decoration design service; property leasing; site leasing (excluding warehousing); car park operation; property management.
Shareholding Guangdong Huajian Enterprise Group Co., Ltd. (100%) structure:
For the year ended 2018, Zhongnan Construction recorded audited operating revenue of RMB1,678,469,402.92, net profit of RMB12,491,019.51 and net assets of RMB177,033,670.69.
As at 30 September 2019, Zhongnan Construction recorded unaudited revenue of RMB1,175,262,591.97, net profit of RMB10,602,610.54 and net assets of RMB187,636,281.23.
– 14 – LETTER FROM THE BOARD
8. Guangdong Zhongren
Company name: Guangdong Zhongren Group Construction Limited
Registered address: Courtyard at No. 300 Zhongcheng Road, Shangyuangang, Tianhe District, Guangzhou
Registered capital: RMB300 million
Scope of business: General contracting of property construction works; general contracting of road construction works; professional contracting of construction, renovation and decoration; professional contracting of explosion and dismantling works; professional contracting of intelligent building engineering; professional contracting of telecommunication construction; cable television broadcasting network design and installation; design, construction and repairing of safety protection system; communication and information network system integration; design, construction, safety assessment and safety supervision of explosion works; self-owned property management and leasing, maintenance of communication and electronic equipment; communication pipelines maintenance and repairing and related technical services; planning, marketing and development of property projects; procurement and sale of engineering equipment and material; computer information system integration and software development.
Shareholding Guangdong Rising Investment Group Co., Ltd. (廣東 structure: 省廣晟建設投資集團有限公司) (85.45%); Zhu Fangben (5.24%); Wu Jianqiang (4.51%); Chen Yuetong (3.25%); Zhang Beilong (1.55%)
For the year ended 2018, Guangdong Zhongren recorded audited operating revenue of RMB1,302,449,270.80, net profit of RMB13,322,516.04 and net assets of RMB311,780,081.49.
As at 30 September 2019, Guangdong Zhongren recorded unaudited revenue of RMB661,232,113.24, net profit of RMB5,770,565.11 and net assets of RMB311,795,623.12.
– 15 – LETTER FROM THE BOARD
(ii) Related Relationship with the Company
As at the Latest Practicable Date, Guangdong Rising Assets, together with its subsidiaries, held a total of 192,000,110 shares of the Company, representing 21.84% of the total share capital of the Company, and is a controlling Shareholder of the Company. According to Rule 10.1.3 (2) of the Shenzhen Listing Rules, Guangdong Rising Assets and its subsidiaries are related legal persons of the Company.
As at the Latest Practicable Date, High Hope Group, together with its subsidiaries, held a total of 94,287,507 shares of the Company, representing 10.72% of the total share capital of the Company, and is the second largest Shareholder of the Company. According to Rule 10.1.3 (4) of the Shenzhen Listing Rules, High Hope Group and its subsidiaries are related legal persons of the Company.
As Dongjiang Veolia is not included in the consolidated financial statements of the Company, Dongjiang Veolia is a joint stock subsidiary of the Company. Mr. Tan Kan, Director of the Company assumes the office of director in Dongjiang Veolia. According to Rule 10.1.3 (3) of the Shenzhen Listing Rules, Dongjiang Veolia is a related legal person of the Company.
Zhongjin Lingnan is the controlling subsidiary of Guangdong Rising Assets, the controlling Shareholder of the Company. According to Rule 10.1.3 (2) of the Shenzhen Listing Rules, Zhongjin Lingnan is a related legal person of the Company.
Fenghua Advanced Technology is the controlling subsidiary of Guangdong Rising Assets, the controlling Shareholder of the Company. According to Rule 10.1.3 (2) of the Shenzhen Listing Rules, Fenghua Advanced Technology is a related legal person of the Company.
Guangzhou Huajian is the controlling sub-subsidiary of Guangdong Rising Assets, the controlling Shareholder of the Company. According to Rule 10.1.3 (2) of the Shenzhen Listing Rules, Guangzhou Huajian is a related legal person of the Company.
Zhongnan Construction is the wholly-owned sub-subsidiary of Guangdong Rising Assets, the controlling Shareholder of the Company. According to Rule 10.1.3 (2) of the Shenzhen Listing Rules, Zhongnan Construction is a related legal person of the Company.
Guangdong Zhongren is the controlling sub-subsidiary of Guangdong Rising Assets, the controlling Shareholder of the Company. According to Rule 10.1.3 (2) of the Shenzhen Listing Rules, Guangdong Zhongren is a related legal person of the Company.
(iii) Analysis on Performance Capacity
The aforesaid Related Parties have maintained sound performance, normal operation and stable financial situation, and currently, there is no possibility of forming bad debts in relation to the amount payable to the Company nor possibility of non-performance.
– 16 – LETTER FROM THE BOARD
III. Pricing Principle and Transaction Price of the Related Transactions
All the Related Transactions between the Group and the Related Parties were determined by both parties through negotiation based on the principle of fairness and reasonableness, in accordance with normal commercial terms, and with reference to the prevailing market price or cost plus reasonable profit ratio, without actions which prejudice the interests of the Company and its Shareholders.
The Group will enter into the relevant contracts with these Related Parties and conduct the transactions under the contracts according to the actual conditions of the routine production and operation as well as the principle of openness, impartiality, fairness and justice.
IV. Purpose of the Related Transactions and Their Effect on the Company
(i) Purpose of the Related Transactions
The Routine Related Transactions between the Company together with its controlling subsidiaries and the Related Parties mainly include purchase and sales of the products and acceptance of the labour services. Such transactions can reduce the related selling expenses of the Company while enlarging the sales of the products of the Company, and help reduce the purchase links of the Company as well as effectively promote the sustainable and stable development of the production and operation of the Company.
(ii) Effect on the Company
The Related Transactions between the Company together with its controlling subsidiaries and the Related Parties are within the ordinary operational businesses conducted by the Company together with its controlling subsidiaries in combination with the actual conditions of their routine production and operation based on the principle of openness, impartiality, fairness and justice without circumstances which prejudice the interests of the Company and its Shareholders. Neither would they have any negative effect on the current and future financial situations as well as operating results of the Company, nor affect the independence of the Company.
– 17 – LETTER FROM THE BOARD
V. Verification Opinions from Independent Directors
Mr. Zhu Zhengfu, Mr. Qu Jiu Hui and Mr. Wong Hin Wing, the independent Directors of the Company, have provided prior acknowledgement to the estimated Routine Related Transactions for the year 2020 and expressed their independent opinions as follows:
The Company’s estimated Routine Related Transactions for the year 2020 were based on the Company’s needs of the routine operation and in compliance with the Company’s requirements of the current and future business. The estimates of the Related Transactions were conducted fairly,voluntarily, equally and with consideration, and the transaction price was determined based on market price, which was a fair pricing without violating the principle of openness, impartiality and fairness.The estimated Routine Related Transactions for the year 2020 will not affect the independence of the Company or its ability to recover amount receivables, nor prejudice the interests of the Company as a whole and the legal interests of minority Shareholders. Such transactions are in line with the strategic planning for long-term development of the Company and benefit the sustainable and stable development of the Company.
While the Board of the Company was considering the proposal estimate on the Related Transactions for 2020, the related Directors, abstained from voting for the proposal, and its voting procedure and process complied with the relevant regulations under the laws and regulations and the Articles of Association without circumstances which prejudice the interests of the Company and its public Shareholders.
2. Signing of Financial Services Agreement and Related Transactions
Reference is made to the announcement of the Company dated 24 January 2019 and the circular of the Company dated 1 March 2019 in relation to the entering into the Original Financial Services Agreement between the Company and Rising Finance in relation to the provision of the financial services by Rising Finance to the Company. The term of the Original Financial Services Agreement is from 19 March 2019 to 18 March 2020.
On 25 February 2020, the Company entered into the Financial Services Agreement with Rising Finance, in relation to the provision of Financial Services by Rising Finance to the Group with a term of one year taking effect upon the Financial Services Agreement having been approved by the independent Shareholders at the EGM.
– 18 – LETTER FROM THE BOARD
Financial Services Agreement
(a) Major Terms
The major terms of the Financial Services Agreement are summarized as follows:
Date 25 February 2020
Parties (a) the Company; and (b) Rising Finance
Duration One year taking effect upon the Financial Services Agreement having been approved by the independent Shareholders at the EGM.
Pricing policy and Deposit Services: The deposit rate of the deposit services provided pricing principle by Rising Finance to the Group is determined based on the RMB deposit benchmark rate promulgated by the People’s Bank of China, and shall not be lower than the deposit rate available to the Group from major commercial banks and financial institutions of the PRC for the same period and of similar nature.
Credit Facility Services: Rising Finance undertakes to provide preferential credit interest rates and other rates for loans, bills acceptance, bills discounting etc. provided to the Group, which shall not be higher than the credit interest rates and other rates available to the Group from other financial institutions of the PRC for the same period and of similar nature.
Settlement Services: The settlement fees charged by Rising Finance for the provision of Settlement Services to the Group shall not be higher than the service fees available to the Group from other national financial institutions of the PRC.
Other Financial Services: The fees charged for the provision of other financial services shall be in compliance with the fees standard prescribed by the People’s Bank of China or the China Banking Regulatory Commission in respect of such services.
The fees under the Financial Services Agreement will be settled in cash.
– 19 – LETTER FROM THE BOARD
Cooperation Principles
As the Group is in non-exclusive cooperation with Rising Finance, the Group is entitled to be at liberty to engage any other financial services provided by other financial institutions. Under the same terms, the Company shall preferentially engage the financial services provided by Rising Finance.
Rising Finance will provide the abovementioned non-exclusive financial services to the Group based on the following major terms of the Financial Services Agreement:
1. Deposit Services
(a) The Group will open a deposit account with Rising Finance, and deposit its funds into the deposit account opened with Rising Finance based on the principle of free deposit into and withdrawal from the account. Deposit can be in the form of current deposit, time deposit, call deposit and agreement savings etc.;
(b) The deposit rate of the Deposit Services provided by Rising Finance to the Group is determined based on the RMB deposit benchmark rate promulgated by the People’s Bank of China, and shall be no less than the deposit rate available to the Group from national commercial banks and financial institutions of the PRC for the same period and of similar nature;
(c) Rising Finance guarantees the safety of the funds deposited by the Group, and the Group may withdraw the deposits on the same day on which its instruction is given to Rising Finance in accordance with its procedural requirements.
2. Settlement Services
(a) Rising Finance will provide fund payment service and fund collection service, as well as other ancillary services related to settlement operations to the Group;
(b) The settlement fees charged by Rising Finance for the provision of above Settlement Services to the Group shall not be higher than the service fees available to the Group from national financial institutions of the PRC of the same nature.
– 20 – LETTER FROM THE BOARD
3. Credit Facility Services
(a) Conditional upon satisfying the relevant national laws and regulations, Rising Finance will provide Credit Facility Services to the Group based on the operational and development needs of the Group, while the Group may utilize the comprehensive credit facility provided by Rising Finance to handle loans, bills acceptance, bills discounting, guarantee and financing operations in other forms;
(b) Rising Finance undertakes to provide preferential credit interest rates and other rates for loans, bills acceptance, bills discounting provided to the Group, which shall not be higher than the credit interest rates and other rates available to the Group from other national financial institutions of the PRC for the same period and of similar nature;
(c) Both parties will enter into separate implementation agreements to set out the details of the Credit Facility Services.
4. Other Financial Services
(a) Rising Finance will provide Other Financial Services within its scope of operation to the Group on the instructions or requests of the Group, and before Rising Finance provides Other Financial Services to the Group, both parties shall negotiate and enter into separate implementation agreements to set out detailed terms;
(b) The fees charged by Rising Finance for the provision of Other Financial Services shall be in compliance with the fees standard prescribed by the People’s Bank of China or the China Banking Regulatory Commission in respect of such services.
Conditional upon the compliance with the Financial Services Agreement, the Group and Rising Finance shall enter into further specific contracts or agreements in respect of the provision of relevant specific financial services projects respectively to specify the specific rights and duties of both parties.
– 21 – LETTER FROM THE BOARD
(b) Historical Transaction Amounts and Annual Caps
Historical Transaction Amounts
The historical transaction amounts under the Original Financial Services Agreement as at the date of the Announcement were as follows:
Fees paid to Rising Finance Maximum Maximum for Settlement comprehensive daily deposit Services and credit facility of amount of Other Financial Credit Facility Period Deposit Services Services Services (RMB) (RMB) (RMB)
For the period ended 31 December 2019 118,925,103.80 0 310,000,000 The date of the Announcement 48,011,035.31 0 250,000,000
Historical Annual Caps:
The historical caps for the transactions under the Original Financial Services Agreement are as follows:
Fees paid to Rising Finance Maximum Maximum for Settlement comprehensive daily deposit Services and credit facility of amount of Other Financial Credit Facility Period Deposit Services Services Services (RMB) (RMB) (RMB)
For the period ended 31 December 2019 240,000,000 800,000 1,000,000,000 From 1 January 2020 to 18 March 2020 240,000,000 200,000 1,000,000,000
– 22 – LETTER FROM THE BOARD
(c) Proposed Annual Caps and Benchmark:
For the period commencing from the EGM and ending on the date of the first anniversary of the EGM, the proposed annual caps of the transactions under the Financial Services Agreement are as follows:
Fees paid to Rising Finance Maximum Maximum daily for Settlement comprehensive deposit amount Services and credit facility of of Deposit Other Financial Credit Facility Period Services Services Services (RMB) (RMB) (RMB)
For the period ending 31 December 2020 240,000,000 800,000 1,000,000,000 From 1 January 2021 to the first anniversary of the EGM 240,000,000 200,000 1,000,000,000
The proposed caps above was determined by reference to the current market condition of such services and the financial needs of the Company. The Company will authorize the Chairman of the Board or his authorised person to process related procedures and sign related documents with the authorized capacity.
The proposed maximum daily deposit amount of Deposit Services was determined taking into account the following factors including: (i) the historical maximum daily outstanding balances mentioned above; and (ii) estimation of cash amounts of the Group available for deposit after taking into account the business development plans and the growth profile of the Group.
The proposed maximum fees paid to Rising Finance for Settlement Services and Other Financial Services were determined taking into account the following factors including: (i) the historical maximum fees paid to Rising Finance for Settlement Services and Other Financial Services mentioned above; and (ii) an estimation of the demand of Settlement Services and Other Financial Services of the Group after taking into account the business development plans and the operations of the Group.
– 23 – LETTER FROM THE BOARD
Risk Assessment and Risk Prevention
Rising Finance has obtained legal and effective qualification, established the corresponding corporate governance structure and internal control system, set up the organization structure aligned with its operation, appointed various required professionals with corresponding competence, and adopted the corresponding risk management and control measures, which are in compliance with the provisions under the Administrative Measures on Finance Companies of Corporate Groups (企 業集團財務公司管理辦法). As Rising Finance maintains normal operation, and has sufficient funds, sound internal control, healthy asset quality, high capital adequacy, and adequate provision, the risk of conducting financial services business with it is controllable.
To effectively prevent, timely control and resolve the risk of the deposits deposited with Rising Finance by the Company, to guarantee the safety of the funds, and also to protect the interests of the Shareholders, the Company formulated the Risk Assessment Report on Developing Financial Business Including Deposit at Guangdong Rising Finance Co., Ltd by combining the relevant requirements of regulatory institutions including the China Securities Regulatory Commission.
Internal Control Measures
In accordance with the Listing Rules, the Group will comply at all times with the applicable provisions under Rules 14A.34 and 14A.51 to 14A.59 of the Listing Rules in respect of the transactions contemplated under the Financial Services Agreement. In addition, in order to safeguard the interests of the Company and the Shareholders as a whole, the Company has adopted the following guidelines and principles in monitoring the transactions between the Group and Rising Finance, namely:
• the Company will report the transactions under the Financial Services Agreement to the independent non-executive Directors during each of the audit committee meetings (if necessary);
• the transactions contemplated thereunder the Financial Services Agreement will be reviewed by the auditors and the independent non-executive Directors of the Company every year and reported in the annual report of the Company which provides a check and balance to ensure that the transactions under the Financial Services Agreement were conducted in accordance with the terms of the Financial Services Agreement, on normal commercial terms (or terms no less favourable than terms available from the independent parties), and in accordance with the pricing principles of the Company pursuant to the Listing Rules; and
• the Company will review the transactions with Rising Finance to identify any transactions that may be at risk of exceeding the proposed cap(s), and any measures to be taken in respect of such transactions. The Group has established a series of measures and policies to ensure that the transactions will be conducted in accordance with the terms of the Financial Services Agreement.
– 24 – LETTER FROM THE BOARD
Reasons for and Benefits of Entering into the Financial Services Agreement
The non-banking financial business of Rising Finance is part of the national financial system, and is subject to continuing and strict regulation by the national regulatory department. The Financial Services Agreement entered into between the Company and Rising Finance specifies that the pricing of various financial services provided by Rising Finance to the Group shall follow the relevant requirements, if any, the same level financial services fees standard promulgated by the People’s Bank of China or the China Banking Regulatory Commission, or under the same conditions, be not higher than the same level financial services fees from major national commercial banks or financial institutions of the PRC for the same period.
When Rising Finance handles the Deposit Services, Settlement Services, Credit Facility Services and Other Financial Services for the Group, both parties shall conduct the business on an equal and voluntary, complementary, mutually beneficial, as well as cooperative and win-win basis. The implementation of such connected transactions is conducive to meet the operational business development demand of the Company, and to optimize the financial management of the Company, increase capital management gains, and expand financial cooperation institutions scope, as well as provide capital support to the sustainable and sound development of the Company. And it will not prejudice the interests of the Company and its Shareholders, nor effect the independence of the Company.
The Directors (including the independent non-executive Directors) consider that the Financial Services Agreement is entered into on an arm’s length basis and is on normal commercial terms, and the terms of the Financial Services Agreement, the proposed caps for the Deposit Services and Settlement Services and Other Financial Services contemplated under the Financial Services Agreement are fair and reasonable, and in the interests of the Company and its Shareholders as a whole.
Information of the Parties
The Company is a joint stock limited company incorporated in the PRC. The Group is primarily engaged in (i) disposal and treatment of waste; (ii) production and sales of recycled products and renewable energy; (iii) construction and provision of environmental systems and services; (iv) renewable energy utilization; and (v) trading of chemical products and others.
Rising Finance is a non-banking financial institution established under the approval of the China Banking Regulatory Commission, and the company legally holds the Financial License which is continuously effective. According to the laws and regulations related to finance companies of corporate groups, the company is qualified to provide financial services for Guangdong Rising Assets and its member units. Rising Finance handles financial and financing consultancy, credit appraisal and relevant consultancy, agency business for the member units; assists member units in collection and payment of transactions amounts; approved insurance agency business; provides guarantee for member units; handles entrust loans between member units; handles bills acceptance and discounting for member units; handles internal transfer settlement and corresponding settlement, liquidation plans design among member units; attracts deposits from member units; handles loan and financing lease for member units; engages in inter-bank lending; other businesses approved by the China Banking Regulatory Commission.
– 25 – LETTER FROM THE BOARD
Listing Rules Implications
As at the date of the Announcement, Rising Finance is a direct wholly-owned subsidiary of Guangdong Rising Assets, the substantial Shareholder of the Company. Hence, pursuant to the Rule 14A.07(4) of the Listing Rules, Rising Finance is a connected person of the Company. As such, the entering into of the Financial Services Agreement and the transactions contemplated thereunder constitutes a continuing connected transaction under Chapter 14A of the Listing Rules.
As one or more of the relevant percentage ratios (as defined under Rule 14.07 of the Listing Rules) (other than the profits ratio) of the Deposit Services under the Financial Services Agreement on an annual basis exceeds 0.1% but is or are less than 5%, such services under the Financial Services Agreement is exempt from the circular (including independent financial advice) and the independent Shareholders’ approval requirements but are subject to the reporting, announcement and annual review requirements under Chapter 14A of the Listing Rules.
As all of the applicable percentage ratio(s) (as defined under Rule 14.07 of the Listing Rules) (other than the profits ratio) in respect of the Settlement Services and Other Financial Services under the Financial Services Agreement on an annual basis is or are lower than 0.1%, such services under the Financial Services Agreement are exempt from the reporting, announcement, annual review requirements, circular (including independent financial advice) and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.
In addition, the Credit Facility Services provided by Rising Finance to the Group under the Financial Services Agreement are on normal commercial terms, and there are no assets of the Group accredited to Rising Finance as collateral in respect of such Credit Facility Services under the Financial Services Agreement. As such, the Credit Facility Services provided by Rising Finance to the Group under the Financial Services Agreement represents financial assistance provided by a connected person for the benefit of the Group and are therefore fully exempted from all the reporting, announcement, annual review and independent Shareholders’ approval requirements pursuant to the Rule 14A.90 of the Listing Rules.
Rising Finance is a Related Party of the Company. According to the Rule 10.2.5 of Shenzhen Listing Rules, the entering into the Financial Services Agreement between the Company and Rising Finance is a Related Transaction and is subject to independent Shareholders’ approval.
3. Formulation of the Remuneration and Assessment Scheme for the Chairman
In order to further improve the standard of management of the Company, establish and perfect the incentive and restraint mechanism of the Company and create greater benefits for the Company and its Shareholders, the Remuneration and Assessment Scheme for the Chairman is formulated based on the industrial characteristics and actual situation of the Company in accordance with the principle of equivalence in responsibilities, rights and interests as well as in compliance with the relevant regulations under the Company Law, the Code of Corporate Governance for Listed Companies and the Articles of Association. For the Remuneration and Assessment Scheme for the Chairman, please see Appendix.
– 26 – LETTER FROM THE BOARD
4. Proposed Public Issue of Corporate Bonds
Reference is made to the Company’s announcement dated 13 April 2020 in relation to proposed issue of corporate bonds by the Company. On 10 April 2020, the Board approved and resolved to submit to the Shareholders for considering, and if thought fit, approving the public issue of the corporate bonds with an aggregate principal amount of not exceeding RMB1.5 billion (inclusive of RMB1.5 billion) (the “Corporate Bonds”) in the PRC. The resolutions concerning the issue of the Corporate Bonds will be proposed at the extraordinary general meeting.
According to the Company Law of the PRC and the Articles of Association, the public issue of the Corporate Bonds is subject to the approval of the Shareholders of the Company and relevant regulatory authorities.
Proposed Public Issue of Corporate Bonds
The proposed arrangements for the public issue of the Corporate Bonds are set out below:
1. Principal amount, The aggregate principal amount of the Corporate Bonds issuing price and shall not be more than RMB1.5 billion (inclusive of issuing size RMB1.5 billion). The nominal value of each bond is RMB100, issuing at par value. The specific issuing size shall be determined by the Board or its authorized persons subject to the approval at the general meeting based on the funding needs of the Company and the market conditions at the time of issue, but shall be within the above mentioned range.
2. Issuing method The Corporate Bonds will be publicly issued to qualified investors who fulfill the requirements of the relevant laws. Upon approval, the issue of the Corporate Bonds may be in one or multiple tranches. The specific issuing method, arrangement and tranches shall be determined by the Board or its authorized persons subject to the approval at the general meeting based on the funding needs of the Company and the market conditions at the time of issue.
3. Issuing target, The Corporate Bonds will be issued to professional subscription investors in accordance with the requirements under the method and placing relevant laws and regulations, and shall be subscribed by arrangement to such professional investors in cash. No preferential placing Shareholders in relation to the issue of Corporate Bonds will be available to the Shareholders of the Company.
– 27 – LETTER FROM THE BOARD
4. Bond maturity and The Corporate Bonds to be publicly issued will have a term type of maturity not exceeding 5 years (inclusive of 5 years) and can be either single-term type or multiple terms hybrid type. Specific terms of maturity and the issuing size of each type shall be determined by the Board or its authorized persons subject to the approval at the general meeting prior to the issue, based on the relevant regulations, market conditions and the funding needs of the Company at the time of issue.
5. Bonds interests and The Corporate Bonds bear a fixed interest rate. Specific interest payment coupon interest rate and its payment method shall be method determined by the Board and its authorized persons, subject to the approval at the general meeting, with the lead underwriter by way of negotiation with reference to the results of offline book-building and in accordance with the relevant PRC regulations. The coupon rate of the bonds is calculated annually at a simple rather than compound interest rate.
6. Use of proceeds The proceeds of the issue of the Corporate Bonds are intended to be applied to the repayment of interest bearing loans, increasing working capital, investment in and operations of projects relating to the principal business of the Company or any other use allowed by regulatory authorities. If the available time for funds is not in line with the progress of the implementation of project(s), the Company may invest other funds first according to the actual needs and replace them after the full funding of such proceeds. Specific use of proceeds shall be determined by the Board or its authorized persons, subject to the approval at the general meeting, based on the funding needs of the Company, investments to projects and the market conditions.
7. Place of listing of Subject to satisfying the prerequisites of listing, application issued bonds for listing of and trading in the Corporate Bonds will be made to the Shenzhen Stock Exchange.
8. Guarantee The Corporate Bonds are unsecured.
9. Terms of adjustment The Board or its authorized persons, subject to the approval of principal interest at the general meeting, shall determine whether to include rate, redemption or terms of adjustment of principal interest rate, redemption repurchase or repurchase for the issue of the Corporate Bonds in accordance with the relevant regulations and market conditions.
– 28 – LETTER FROM THE BOARD
10. Underwriting The Corporate Bonds are to be underwritten by way of standby commitment.
11. Guarantee of In the event of expected inability to repay principal and repayment measures interests or inability to repay principal and interests when they become due, the Board or its authorized persons, subject to the approval at the general meeting, will implement, as a minimum, the following measures:
(1) no dividend will be distributed to the Shareholders;
(2) suspend the implementation of projects that incur capital expenditure such as material external investments, acquisitions and mergers;
(3) adjust, reduce or suspend the payment of salary and bonus to the Directors and senior management of the Company; and
(4) key personnel accountable for such event will not be allowed for re-designation.
12. Validity of resolution The resolution in relation to the issue of the Corporate Bonds will be effective within 12 months from the approval and passing of resolution at the general meeting.
In addition, the Board will also propose at the EGM to authorize the Board or its authorized persons to handle relevant matters related to the proposed public issue of the Corporate Bonds pursuant to the relevant laws and regulations as well as the market conditions, including but not limited to the followings:
1. to formulate the specific issuing plan of this public issue of the Corporate Bonds and to revise, adjust the issuing terms and other matters of this issue of the Corporate Bonds to the extent permitted by relevant state laws, regulations, regulatory documents and taking into account of the needs of the Company and the specific conditions of market, including but not limited to the specific issuing size, bonds maturity, coupon rates or the basis for its determination, issuing price, issuing method, targets, issuing time or timing, whether or not to issue in tranches, issuing tranches and the issuing size of each tranche, specific usage, use and amount of proceeds, whether or not and how to include any resale or redemption option or nominal interest rates adjustment option and other terms, guarantee matter, credit rating arrangement, specific guarantee for bonds repayment, specific measures for subscription, specific placing arrangement, maturity and method for payment for principle with interests, bonds transfer arrangement, ratio of online-to-offline issuance, listing arrangement and other matters related to the issuance of corporate bonds;
– 29 – LETTER FROM THE BOARD
2. to determine and appoint the intermediaries for the public issue of the Corporate Bonds, to assist the Company in handling the matters related to the filing, listing and quotation and transfer of the public issue of the Corporate Bonds, including but not limited to authorize, sign, execute, amend and complete all necessary documents, contracts, agreements, various announcements and other legal documents related to the filing, issue and listing of the Corporate Bonds, and make relevant information disclosure according to laws and regulations and other regulatory documents;
3. to sign, amend, execute all contracts, agreements, documents, various announcements and other legal documents related to the filing, issue and listing of the Corporate Bonds;
4. to select the bonds trustee manager for the bonds under the issue, and to sign and execute the entrusted bonds management agreement and formulate the rules on the meetings of the holders of the bonds;
5. to determine the specific usage and amount of proceeds raised according to the financial conditions and actual situations of the Company;
6. in the event of any change in polices of regulatory department or regulatory authority for bonds on the issuance of Corporate Bonds, except the matters subject to re-approval at the general meeting by poll under the requirements of relevant laws, regulations and Articles of Association, to adjust accordingly on the matters related to the public issuance of the Corporate Bonds and issue scheme, according to the opinions of regulatory department or regulatory authority for bonds;
7. to decide whether to continue to carry out this issuance of the Corporate Bonds according to actual situation, in the event of any material changes in market environment or policies, laws and regulation, regulatory opinions of the competent department;
8. to set up a special fund-raising account for the issue of Corporate Bonds, and reserve and use such funds according to relevant provision and sign relevant regulatory agreement;
9. upon issuance of the Corporate Bonds, in the event of the expected failure of the payment of the principle and interest of the bonds or failure of the payment of the same upon maturity of such bonds, the Company shall take at least the following measures:
(1) no dividend will be distributed to the Shareholders;
(2) suspend the implementation of projects that incur capital expenditure such as material external investments, acquisitions and mergers;
– 30 – LETTER FROM THE BOARD
(3) adjust, reduce or suspend the payment of salary and bonus to the Directors and senior management of the Company; and
(4) key personnel accountable for such event will not be allowed for re-designation
10. to deal with relevant matters related to registering, issuing, listing,transfer and termination procedures of this public issue of Corporate Bonds;
11. to deal with other relevant matters in relation to the public issue of the Corporate Bonds; and
12. the authorizations are valid from the date on which the same are considered and approved at the general meeting to the date on which the matters under such authorizations are completed.
Reasons and Benefits for the Proposed Public Issue of Corporate Bonds
The Directors are of the view that the public issue of the Corporate Bonds will further broaden the company’s financing channels, optimize the financial structure, and reduce the cost of capital.
Accordingly, the public issue of the Corporate Bonds will benefit the Company as well as the long-term interests of Shareholders.
Proposed public issue of Corporate Bonds may or may not be carried out and no preferential offer will be made to the Shareholders of the Company. Shareholders and investors are advised to exercise cautions when dealing in the securities of the Company.
THE SECOND EXTRAORDINARY GENERAL MEETING IN 2020 AND CLOSURE OF REGISTER OF MEMBERS OF H SHARES
Set out on pages 38 to 40 of this circular are the notices convening and holding the second extraordinary general meeting in 2020 at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the PRC on 3:00 p.m. on Tuesday, 12 May 2020 .
The register of members of H Shares is to be closed from Tuesday, 28 April 2020 to Tuesday, 12 May 2020 (both days inclusive), during which no transfer of H Shares will be registered for the identification of Shareholders qualified to attend and vote at the second extraordinary general meeting in 2020. In order to be entitled to attend and vote at the second extraordinary general meeting in 2020, share transfer documents accompanied by relevant H Share certificates should be lodged with the Company’s H Share registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not later than 4:30 p.m. on Monday, 27 April 2020. Shareholders whose names appear on the register of members of the H Shares at 4:30 p.m. on Monday, 27 April 2020 are entitled to attend and vote at the second extraordinary general meeting in 2020 (for holders of H Shares).
– 31 – LETTER FROM THE BOARD
The proxy form for the use in connection with the second extraordinary general meeting in 2020 is enclosed with this circular. You are requested to complete the enclosed proxy form in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, (for holders of H shares of the Company) as soon as possible, and please return the proxy form not less than 24 hours before the time appointed for the holding of the second extraordinary general meeting in 2020 or any adjournment thereof (as the case may be). Completion and return of the proxy form will not preclude you from attending and voting in person at the second extraordinary general meeting in 2020 or any adjournment thereof (as the case may be) should you so wish.
LISTING RULES REQUIREMENTS
According to the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. Therefore, resolutions put to vote at the EGM will be taken by way of poll.
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.
RECOMMENDATION
Having considered the reasons set out herein, the Directors consider that the above matters are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolutions to be proposed at the second extraordinary general meeting in 2020.
By order of the Board Dongjiang Environmental Company Limited* Tan Kan Chairman
Shenzhen, the PRC, 24 April 2020
* For identification purposes only
– 32 – APPENDIX THE REMUNERATION AND ASSESSMENT SCHEME FOR THE CHAIRMAN
THE REMUNERATION AND ASSESSMENT SCHEME FOR THE CHAIRMAN
1. GENERAL PROVISIONS
1.1 In order to further enhance the standard of management, establish and improve incentive and restraint mechanism of Dongjiang Environmental Company Limited* (hereinafter referred to as the “Company”) and create greater benefits for the Company and its Shareholders, this Scheme is formulated on the basis of the actual situation of the Company and the industrial characteristics in accordance with the principle of equality in responsibilities, rights and interests as well as in compliance with the relevant regulations under the Company Law, the Code of Corporate Governance for Listed Companies and the Articles of Association.
1.2 The remuneration for the chairman is determined based on the following principles:
A. To adhere to the principle of combining distribution in accordance with labour with responsibilities, rights and interests;
B. Adhere to market orientation, combining industry attributes and development condition of the Company;
C. Adhere to the principle of linking remuneration standard with operational effectiveness and objectives;
D. Adhere to the principle of combining remuneration with the Company’s long-term interests, strengthen incentives and constraints and promote the Company’s long-term and stable development.
2. CONSTITUTION, STANDARD AND PAYOUT OF THE ANNUAL REMUNERATION
2.1 The Chairman’s remuneration consists of basic salary and performance compensation, i.e.: annual remuneration = basic salary + performance compensation
2.2 Approval of annual remuneration
2.3 The annual remuneration is determined in accordance with the Company’s operational performance and the results of the chairman’s personal performance assessment. The calculation formula is as follows:
Annual remuneration = basic salary + performance compensation × personal assessment coefficient
1) Basic salary: the annual fixed basic salary, which is determined based on four times of the average social salary of employees in the previous year announced by the Shenzhen Municipal Government, which is generally approved once a year.
– 33 – APPENDIX THE REMUNERATION AND ASSESSMENT SCHEME FOR THE CHAIRMAN
2) Performance compensation is determined based on the Company’s annual assessment of the corresponding proportion of net profit; and is combined with the status of satisfaction of the business targets (or budget targets) set at the beginning of the year, so as to reflect the guiding role of comprehensive budget management for business management. The specific corresponding proportion is as follows:
Maximum value of performance Net profit attributable to compensation Aggregated the Parent Company Proportion base by stages maximum value (RMB ten thousand) (Unit: RMB (Unit: RMB ten thousand) ten thousand)
0-5,000 (not inclusive) 0.4% of the net profit attributable 20 20 to the Parent Company 5,000-10,000 (inclusive) 0.35% of the net profit attributable 17.5 37.5 to the Parent Company 10,000-20,000 (inclusive) 0.3% of the net profit attributable 30 67.5 to the Parent Company 20,000-30,000 (inclusive) 0.25% of the net profit attributable 25 92.5 to the Parent Company 30,000-50,000 (inclusive) 0.2% of the net profit attributable 40 132.5 to the Parent Company 50,000-100,000 (inclusive) 0.15% of the net profit attributable 75 207.5 to the Parent Company 100,000-150,000 (inclusive) 0.1% of the net profit attributable 50 257.5 to the Parent Company 150,000 or above 0.05% of the net profit attributable ⋯ ⋯ to the Parent Company
A. At the beginning of each year, the target value of the performance compensation of the Chairman is determined in accordance with the budget target of the net profit attributable to the annual assessment net profit budget target;
B. After the end of the year, the actual value of performance compensation is calculated based on an assessment of the actually attained net profit value;
C. If the calculated performance remuneration is lower than four times of the Shenzhen average social salary last year, the actual value of the performance remuneration shall be determined based on four times of the Shenzhen average social salary last year;
D. If the net profit for the annual assessment is negative, the actual value of performance compensation shall be determined at three times of the average social salary of Shenzhen in the previous year.
– 34 – APPENDIX THE REMUNERATION AND ASSESSMENT SCHEME FOR THE CHAIRMAN
3) Personal assessment coefficient: The Chairman ’s personal annual performance assessment scores correspond to the four grades A, B, C, and D, and the assessment coefficient is determined based on the corresponding grades, i.e.:
Grade A: assessment results of 90 points and above, coefficient interval (1.1-1.2)
Grade B: assessment results of 80 points and above, coefficient interval (1-1.09)
Grade C: assessment results of 70 points and above, coefficient interval (0.8-0.99)
Grade D: assessment results of below 70 points, coefficient interval (0-0.79)
2.3 Salary payment
1) Basic salary: monthly payment.
2) Performance compensation: In order to ensure the balance of remuneration, according to the progress of achievement of the Company’s business goals (or budget goals), the performance compensation can be partially pre-paid, and the monthly upper limit of pre-paid performance compensation is the performance compensation target value/12 * 60%.
3) After the annual assessment is completed, the annual remuneration shall be settled. In principle, performance compensation will be paid within six months after the end of each fiscal year. If the assessment is delayed or there are other special circumstances, the payment can be extended appropriately.
4) If the Chairman does not hold office for the whole year or resigns during the term of office, the Chairman’s departure salary settlement should be settled in accordance with the assessment results after the annual assessment.
3. REWARDS AND INCENTIVES
1) When the assessment value or other operating indicators of the Company’s assessment net profit exceed the annually approved budget target or benchmark value, additional incremental rewards may be drawn. The specific plan should be submitted to the Board for consideration and implementation, and is consistent with the incremental incentives and constraints of the “incentive, restraint, and fault tolerance” pilot enterprises.
2) Special rewards can be given to the Chairman if the Chairman has made outstanding contributions to the Company’s development, such as technological progress, management innovation, etc.
3) The company can further improve the long-term incentive and restraint mechanism of the Chairman by implementing equity incentive plan etc.
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4) The Board may give rewards on top of the total annual salary of the Chairman according to the Company’s condition on exceeded operating goals and the Chairman’s work performance. The reward distribution proposal will be implemented after approval by the Shareholders’ meeting.
4 PERFORMANCE ASSESSMENT
4.1 The performance evaluation indicators of the Chairman of the board are reviewed and approved by the Board, focusing on assessing the satisfaction of the Company’s annual business performance goals and personal performance
4.2 Individual performance appraisal indicators:
A) fulfillment of the Chairman’s duties stipulated in the Articles of Association, the Rules of Procedure for the Board of Directors or other documents as well as the execution of resolutions approved by the Board and the general meeting;
B) performance of duties in respect of observing laws and disciplines, information transmission, corporate image, secrecy preservation and handling of major unexpected events.
4.3 Within 60 days after the end of each fiscal year, the Chairman shall submit an annual report on work to the Board, and shall make a self-appraisal for the fulfillment of operating and appraisal objectives (or budget objectives) within the appraisal period.
4.4 During the assessment year, if the following incidents occurs (including but not limited to), and if thereby resulting in significant and adverse effects or major losses to the Company, except for relevant departments to process according to law, the Board can deduct assessment scores in the annual assessment by reference to the nature and degree of influence of the event, until the assessment grade is lowered:
1) Any mistakes in business decisions, causing the Company to suffer a major loss in assets;
2) Any sub-standard operational management, causing the occurrence of major safety and quality accidents of the Company and causing the Company to suffer serious adverse impacts or losses;
3) Violation of the “Regulations on the Clean Practice of the Leaders of State-owned Enterprises” and the implementation of the relevant regulations of the “Regulations on the Clean Practice of the Leaders of the State-owned Enterprises” in Guangdong Province, which were dealt with by warnings and discussions, re-designation from position, demotion, and removal from position;
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4) The Chairman fails to attend any Board meetings or general meetings for three consecutive times without any reasons, or intentionally causes the inability for any Board meetings or general meetings to be held normally;
5) “Three Important and One Large” violations; and
6) Other matters or circumstances identified by the Company.
5 OTHERS
5.1 The social insurance and other packages of the Chairman shall be subject to the relevant national regulations and the requirements for listed companies as well as specific situation of the Company.
5.2 The Chairman’s annual remuneration is an income before tax, and the Chairman shall pay, according to law, its individual income tax which is withheld by the Company.
5.3 The proposal will be implemented after being reviewed by the Board and approved by the general meeting.
5.4 From the effective date of this scheme, the Company’s Chairman’s compensation scheme (2018 revised draft) will automatically expire.
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DONGJIANG ENVIRONMENTAL COMPANY LIMITED* 東江環保股份有限公司 (a joint stock limited company incorporated in the People’s Republic of China) (Stock code: 00895)
NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING IN 2020
NOTICE IS HEREBY GIVEN that the second extraordinary general meeting (the “EGM”) of Dongjiang Environmental Company Limited* (the “Company”) in 2020 will be held at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the People’s Republic of China (the “PRC”) at 3:00 p.m. on Tuesday, 12 May 2020 for the purpose of considering and, if thought fit, passing the following resolutions:
ORDINARY RESOLUTIONS
1. The resolution on the estimation of routine connected transactions for 2020;
2. The resolution on the entering into of the “Financial Services Agreement” and related transactions;
3. The resolution on the formulation of the “Remuneration and Assessment Scheme for the Chairman”;
4. The resolution on the satisfaction by the Company of the conditions for issuing corporate bonds;
SPECIAL RESOLUTIONS
5. To consider and approve resolution on proposal of issue of corporate bonds by the Company (on an item by item basis).
5.1 Principal amount, issuing price and issuing size;
5.2 Issuing method;
5.3 Issuing targets, methods of subscription and placing arrangements to shareholders of the Company;
5.4 Maturity and type of bonds;
5.5 Interests and interest payment method of bonds;
* For identification purposes only
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5.6 Use of proceeds;
5.7 Place of listing of bonds;
5.8 Guarantee;
5.9 Terms of adjustment of principal interest rate, redemption or repurchase;
5.10 Underwriting method;
5.11 Guarantee of repayment measures; and
5.12 Validity of resolution;
6. The resolution on proposing at the general meeting of shareholders to authorize the board of directors or persons authorized by the board of directors to handle matters related to the issuance of corporate bonds.
By order of the Board Dongjiang Environmental Company Limited* Tan Kan Chairman
Shenzhen, the PRC, 13 April 2020
* For identification purpose only
Notes:
1. The register of members of the Company will be closed from Tuesday, 28 April 2020 to Tuesday, 12 May 2020 (both days inclusive) during which no transfer of shares will be effected. For the identification of the shareholders of the Company (the “Shareholders”) who are qualified to attend and vote at the EGM, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) not later than 4:30 p.m. on Monday, 27 April 2020.
2. Holders of H shares whose names appear on the register of members of H shares of the Company at 4:30 p.m. on Monday, 27 April 2020 are entitled to attend and vote at the EGM.
3. Whether or not you are able to attend the EGM, you are requested to complete form of proxy in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) as soon as possible, but in any event, not less than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish.
4. A form of proxy for use at the EGM is enclosed herewith. In the case of a joint holding, the form of proxy may be signed by any joint holder, but if more than one joint holder is present at the EGM, whether in person or by proxy, that one of the joint holders whose name stands first on the register of members in respect of the relevant joint holding shall alone be entitled to vote in respect thereof.
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5. If the proxy form is signed by a person under a power of attorney or other authority, a notarially certified copy of that power of attorney or authority shall be deposited at the same time as mentioned in the proxy form.
6. Shareholders and their proxies should produce identity proof when attending the EGM.
7. The EGM is not expected to last for more than half a day. Shareholders shall be responsible for their own travelling and accommodation expenses for attending the EGM.
As at the date of this notice, the Board of Directors of the Company comprises two executive Directors, being Mr. Tan Kan, Mr. Yao Shu; three non-executive Directors, Mr. Huang Yiming, Mr. Lu Bei and Mr. Jin Yongfu and three independent non-executive Directors, being Mr. Zhu Zhengfu, Mr. Qu Jiu Hui and Mr. Wong Hin Wing.
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