Continuing connected transactions supplemental agreements to the master property management framework agreements and revision of annual caps

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.

Xingye Wulian Service Group Co. Ltd.

興 業 物 聯 服 務 集 團 有 限 公 司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 9916)

CONTINUING CONNECTED TRANSACTIONS

SUPPLEMENTAL AGREEMENTS TO THE MASTER PROPERTY

MANAGEMENT FRAMEWORK AGREEMENTS

AND

REVISION OF ANNUAL CAPS

Independent Financial Advisor

to the Independent Board Committee and the Independent Shareholders

SUPPLEMENTAL AGREEMENTS AND REVISION OF ANNUAL CAPS

Reference is made to the prospectus of the Company dated 25 February 2020 in relation to the Master Property Management Framework Agreements and the respective transactions contemplated thereunder and the annual caps.

After considering the expected expansion in the scale and scope of the Property Management and Value-added Services to be provided to Ever Diamond Group and Zensun Enterprises Group to include the Property Management and Value-added Services for sales offices and show flats of Ever Diamond Group and Zensun Enterprises Group, on 28 August 2020, the Company entered into the Ever Diamond Supplemental Agreement with Ever Diamond and the Zensun Enterprises Supplemental Agreement with Zensun Enterprises to amend certain terms of the Ever Diamond Master Property Management Framework Agreement and the Zensun Enterprises Master Property Management Framework Agreement respectively. Further, the Board also proposed to revise the annual caps for the respective transactions contemplated under the Ever Diamond Master Property Management Framework Agreement and the Zensun Enterprises Master Property Management Framework Agreement for each of the three financial years ending 31 December 2022. The Supplemental Agreements are conditional upon approval by the Independent Shareholders at the EGM having been obtained.

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LISTING RULES IMPLICATIONS

Ms. Zhang is our non-executive Director and one of our controlling shareholders and therefore is a connected person of the Company. As at the date of this announcement, the entire issued share capital in Ever Diamond and approximately 66.76% of the number of issued shares of Zensun Enterprises are ultimately owned by a discretionary trust established by Ms. Huang, who is the mother of Ms. Zhang, as settlor and protector, and Vistra Trust (Singapore) Pte. Limited as trustee and Ms. Huang and Ms. Zhang as beneficiaries under the discretionary trust. Accordingly, Ever Diamond Group and Zensun Enterprises Group are associates of Ms. Zhang and connected persons of the Company under Rule 14A.07(4) of the Listing Rules.

Given that one or more of the applicable percentage ratios based on the aggregate revised annual caps in relation to the Property Management and Value-added Services to be provided by the Group under the Master Property Management Framework Agreements (as amended by the Supplemental Agreements) exceed 25% and the aggregate revised annual caps exceed HK$10,000,000, the Supplemental Agreements, the Transactions and the Revised Annual Caps constitute continuing connected transactions of the Company and are subject to re-compliance with the announcement, circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

GENERAL

The Company will convene an EGM for the purpose of seeking approval from the Independent Shareholders in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps.

An Independent Board Committee has been established to consider the Supplemental Agreements, the Transactions and the Revised Annual Caps and to advise the Independent Shareholders on whether or not the Supplemental Agreements, the Transactions and the Revised Annual Caps are fair and reasonable, on normal commercial terms or better and in the ordinary and usual course of the business of the Group, and in the interests of the Company and the Shareholders as a whole. VBG Capital has been appointed as the Independent Financial Advisor to advise the Independent Board Committee and the Independent Shareholders in this regard.

A circular containing, among other things, (a) further information about the Supplemental Agreements, the Transactions and the Revised Annual Caps; (b) a letter of advice from VBG Capital to the Independent Board Committee and the Independent Shareholders in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps; (c) a letter of recommendation from the Independent Board Committee in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps; and (d) a notice of the EGM, will be despatched to the Shareholders on or before 18 September 2020.

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THE SUPPLEMENTAL AGREEMENTS

Reference is made to the prospectus of the Company dated 25 February 2020 in relation to the Master Property Management Framework Agreements and the respective transactions contemplated thereunder and the annual caps.

As disclosed in the prospectus of the Company dated 25 February 2020, the Company entered into the Ever Diamond Master Property Management Framework Agreement with Ever Diamond, the Zensun Development Master Property Management Framework Agreement with Zensun Development and the Zensun Enterprises Master Property Management Framework Agreement with Zensun Enterprises on 18 February 2020 for a term commencing from the Listing Date to 31 December 2022 pursuant to which the Company agreed to provide the Property Management and Value-added Services to Ever Diamond Group, Zensun Development Group and Zensun Enterprises Group respectively. In respect of the continuing connected transactions under each of the Master Property Management Framework Agreements, the Stock Exchange has granted a waiver from strict compliance with the announcement, circular and independent shareholders' approval requirements subject to the condition that the aggregate amounts of each of the Master Property Management Framework Agreements for each of the three financial years ending 31 December 2022 will not exceed their respective annual caps. For the principal terms of the Master Property Management Framework Agreements, please refer to the prospectus of the Company dated 25 February 2020.

After considering the expected expansion in the scale and scope of the Property Management and Value-added Services to be provided to Ever Diamond Group and Zensun Enterprises Group to include the Property Management and Value-added Services for sales offices and show flats of Ever Diamond Group and Zensun Enterprises Group, on 28 August 2020, the Company entered into the Ever Diamond Supplemental Agreement with Ever Diamond and the Zensun Enterprises Supplemental Agreement with Zensun Enterprises to amend certain terms of the Ever Diamond Master Property Management Framework Agreement and the Zensun Enterprises Master Property Management Framework Agreement respectively. Further, the Board also proposed to revise the annual caps for the respective transactions contemplated under the Ever Diamond Master Property Management Framework Agreement and the Zensun Enterprises Master Property Management Framework Agreement for each of the three financial years ending 31 December 2022. The Supplemental Agreements are conditional upon approval by the Independent Shareholders at the EGM having been obtained.

The Company did not enter into any supplemental agreement with Zensun Development and the Board did not propose to revise the annual cap for the transactions contemplated under the Zensun Development Master Property Management Framework Agreement.

Principal terms

Principal terms of the Ever Diamond Master Property Management Framework Agreement and the Zensun Enterprises Master Property Management Framework Agreement as amended by the Supplemental Agreements are summarised as follows:

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Pursuant to the Supplemental Agreements, the Property Management and Value-added Services to be provided by the Group to Ever Diamond Group and Zensun Enterprises Group shall be amended to include:

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Agreements):

For property management services for (i) common areas of properties under management; (ii) greening and gardening services for sales offices and show flats; and (iii) exclusive use areas designated by Ever Diamond or Zensun Enterprises (as the case may be), fees to be charged are based on a unit rate for each square metre of GFA being managed by the Group.

For property management services for sales offices and show flats (save for greening and gardening services), fees to be charged are based on a fixed sum per month determined by a mark-up of approximately 8% on cost incurred by the Group in providing the services.

For value-added services, fees to be charged are based on a unit rate or fixed sum determined by a mark-up of a minimum of 8% on cost incurred by the Group in providing the services.

For each property project requiring property management services in common areas, the Group shall receive tender invitations from Ever Diamond Group or Zensun Enterprises Group. For other Property Management and Value-added Services (including property management services to sales offices and show flats and exclusive use areas designated by Ever Diamond Group or Zensun Enterprises Group, and value-added services), the Group shall receive quotations invitations from Ever Diamond Group or Zensun Enterprises Group.

If the Group decides to submit a tender or quotation, the Group shall determine its tender sum or quotation after taking into account (i) the nature and location of the properties; (ii) scope and quality of the service required; (iii) expected operational costs (including staff costs, subcontracting costs, material costs and operational administrative expenses); (iv) standard fees or pricing guidance on property management fees designated by local government and/or relevant regulatory authorities (if any); (v) the 50% discount for the property management fees the Group usually offers for unsold properties; and (vi) potential competitors' pricing. The service fees and terms set out in the tender or quote shall be no less favourable to the Group than the standard fees to be offered and terms available to Independent Third Parties.

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Save as disclosed above, all existing terms and conditions under the Ever Diamond Master Property Management Framework Agreement and the Zensun Enterprises Master Property Management Framework Agreement shall remain unchanged.

There shall be no change to the terms and conditions of the Zensun Development Master Property Management Framework Agreement.

HISTORICAL TRANSACTION AMOUNT

For the three years ended 31 December 2019, the historical transaction amount for the Property Management and Value-added Services provided by the Group to Ever Diamond Group and Zensun Enterprises Group are set out as follows:

For the year ended 31 December

2017 2018 2019 RMB' million RMB' million RMB' million Approximately Approximately Approximately

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REASONS FOR AND BENEFITS OF THE SUPPLEMENTAL AGREEMENTS AND REVISION OF THE ANNUAL CAPS

The Group has adopted a strategy for further expansion of its property management business, and the property management services provided to Ever Diamond Group and Zensun Enterprises Group are expanded to include, among others, security, cleaning, greening and gardening, parking space management, repair and maintenance and customer services to sales offices and show flats developed by Ever Diamond Group and Zensun Enterprises Group. The sales offices and show flats of Ever Diamond Group and Zensun Enterprises Group at which Property Management and Value-added Services are provided are located at Non-Residential Properties, therefore the Group considered that the property management services provided to sales offices and show flats are of similar nature to its existing business, and the provision of property management services to sales offices and show flats is merely an expansion of the existing scope of its property management business.

The unaudited actual transaction amount for the Property Management and Value-added Services provided by the Group to Ever Diamond Group and Zensun Enterprises Group for the six months ended 30 June 2020 are as follows:

As at the date of this announcement, the Group has been selected to provide property management services for the following number of sales offices and show flats for projects of Ever Diamond Group and Zensun Enterprises Group.

In anticipation of the additional Property Management and Value-Added Services to be provided by the Group to sales offices and show flats for projects of Ever Diamond Group and Zensun Enterprises Group, being a new type of Non-Residential Properties to which the Group provide services to, the Board expected that the annual caps under the Master Property Management Framework Agreements would be exceeded and proposed to revise the annual caps.

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The Revised Annual Caps were determined with reference to the following factors:

1. the unaudited actual transaction amounts incurred under the Ever Diamond Master Property Management Framework Agreement and the Zenson Enterprises Master Property Management Framework Agreement for the six months ended 30 June 2020;
2. the number and scale of sales offices and show flats for which the Group has been invited to provide a fee quotation or has already been selected to provide property management services;
3. the delivery date and sales timetable of the properties for which the Group has been invited to provide a fee quotation or has already been selected to provide property management services;
4. the historical success rate in securing property management projects in sales offices and show flats of Ever Diamond Group and Zensun Enterprises Group through quotations; and
5. the expected delivery date, expected GFA to be delivered and expected proportion of unsold properties and carparks of other pipeline properties remaining unchanged.

In the future, the Group may also provide similar property management services to sales offices and show flats of property projects developed by Independent Third Parties should suitable opportunities arise.

The Directors are of the view that despite the Group has been providing property management services to sales offices and show flats, the businesses of the Group continues to be clearly delineated from the business of Henan Zensun Property Management Co., Ltd.* (河南正商物 業管理有限公司), a company indirectly wholly-owned by Zensun Development which focused primarily on providing property management services for Residential Properties after considering the following factors:

1. the Group will only provide property management services to sales offices and show flats located at Non-Residential Properties;
2. the Group will continue to primarily cater for the needs of corporate entities as it aims to provide premium services to property developers to facilitate their sales at the sales offices and show flats; and
3. Henan Zensun Property Management Co., Ltd.* (河南正商物業管理有限公司) does not provide property management services to sales offices and show flats.

Ms. Huang is the settlor and protector of the discretionary trust which ultimately owns the entire issued share capital in Ever Diamond and approximately 66.76% of the number of issued shares of Zensun Enterprises, and Ms. Zhang is the daughter of Ms. Huang. Therefore, Ms. Zhang, a non-executive Director of the Company, is considered to have material interests in the Supplemental Agreements, the Transactions and the Revised Annual Caps and had abstained from voting on the Board resolutions of the Company to approve the Supplemental Agreements, the Transactions and the Revised Annual Caps. Save for the aforementioned, no other Director has a material interest in any of the Supplemental Agreements and therefore is required to abstain from voting on the Board resolutions of the Company to approve any of the Supplemental Agreements, the Transactions and the Revised Annual Caps.

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In view of the above, the Directors (excluding the independent non-executive Directors forming the Independent Board Committee whose view will be given after considering the advice of the Independent Financial Advisor, and Ms. Zhang who has abstained in this regard) are of the opinion that the terms of the Supplemental Agreements and the Transactions and the Revised Annual Caps are (i) on normal commercial terms and in the ordinary and usual course of the business of the Group; (ii) are fair and reasonable; and (iii) are in the interests of the Company and the Shareholders as a whole.

INTERNAL CONTROL

The Company has established various internal control measures to monitor the transactions contemplated under the Master Property Management Services Framework Agreements (as amended by the Supplemental Agreements), including:

1. prior to providing the Property Management and Value-added Services, the marketing department shall obtain the standard fees or pricing guidance on property management fees (if any) designated by local government and/or relevant regulatory authorities and the prevailing market price of the relevant Property Management and Value-added Services. In addition, the marketing department checks the recent provision of the Property Management and Value-added Services by the Group to Independent Third Parties to ensure that the price and terms offered to Zensun Group shall be no less favourable to the Group than that offered to Independent Third Parties;
2. the Company has appointed its chief financial officer, who is familiar with the finance and business operations of the Group, to monitor the aggregate amount of the transactions contemplated under the Master Property Management Framework Agreements (as amended by the Supplemental Agreements) and assesses on a monthly basis whether the annual cap thereunder may be exceeded;
3. the independent non-executive Directors conduct annual reviews with respect to the transactions contemplated under the Master Property Management Framework Agreements (as amended by the Supplemental Agreements) and confirm in the annual report, pursuant to the requirements under the Listing Rules, whether such continuing connected transactions have been entered into in the ordinary and usual course of business of the Group, are on normal commercial terms, and in accordance with the Master Property Management Framework Agreements (as amended by the Supplemental Agreements) on terms that are fair and reasonable and in the interests of the Company and its Shareholders as a whole; and
4. the Company's external auditors conduct annual reviews of the Master Property Management Framework Agreements (as amended by the Supplemental Agreements) and the transactions contemplated thereunder in accordance to the Listing Rules.

INFORMATION OF THE GROUP, EVER DIAMOND GROUP AND ZENSUN ENTERPRISES GROUP

The Group is principally engaged in the provision of property management and value-added services and property engineering services.

To the best of the Directors' knowledge, Ever Diamond Group is principally engaged in property development business in the PRC and Zensun Enterprises Group is principally engaged in the businesses of property development, property investment, project management and sales services and securities trading and investment.

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LISTING RULES IMPLICATIONS

Ms. Zhang is our non-executive Director and one of our controlling shareholders and therefore is a connected person of the Company. As at the date of this announcement, the entire issued share capital in Ever Diamond and approximately 66.76% of the number of issued shares of Zensun Enterprises are ultimately owned by a discretionary trust established by Ms. Huang, who is the mother of Ms. Zhang, as settlor and protector, and Vistra Trust (Singapore) Pte. Limited as trustee and Ms. Huang and Ms. Zhang as beneficiaries under the discretionary trust. Accordingly, Ever Diamond Group and Zensun Enterprises Group are associates of Ms. Zhang and connected persons of the Company under Rule 14A.07(4) of the Listing Rules.

Other than Ever Diamond Group and Zensun Enterprises Group being associates of Ms. Zhang, as at the date of this announcement, Zensun Development is a 30%-controlled company held indirectly by Ms. Zhang. Therefore, as disclosed in the prospectus of the Company dated 25 February 2020, the transactions have been aggregated under Rule 14A.81 of the Listing Rules, on the basis that the Master Property Management Framework Agreements were entered into by the Group with Ever Diamond, Zensun Development and Zensun Enterprises, which are parties connected with each other.

Given that one or more of the applicable percentage ratios based on the aggregate revised annual caps in relation to the Property Management and Value-added Services to be provided by the Group under the Master Property Management Framework Agreements (as amended by the Supplemental Agreements) exceed 25% and the aggregate revised annual caps exceed HK$10,000,000, the Supplemental Agreements, the Transactions and the Revised Annual Caps constitute continuing connected transactions of the Company and are subject to re-compliance with the announcement, circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

THE EGM

The Company will convene an EGM for the purpose of seeking approval from the Independent Shareholders in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps.

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Foison Amber Development Limited, being the controlling shareholder and an associate of Ms. Zhang, holding 226,350,000 shares, representing approximately 56.59% of the entire issued share capital of the Company as at the date of this announcement, shall have a material interest in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps and shall be required to abstain from voting on the resolution of the Company in approving the Supplemental Agreements, the Transactions and the Revised Annual Caps at the EGM. Save for the aforementioned and to the best knowledge, information and belief of the Directors, no other Shareholder has a material interest in the Supplemental Agreements, the Transactions and the Revised Annual Caps and is required to abstain from voting on the resolution of the Company in approving any of the Supplemental Agreements, the Transactions and the Revised Annual Caps at the EGM.

An Independent Board Committee has been established to consider the Supplemental Agreements, the Transactions and the Revised Annual Caps and to advise the Independent Shareholders on whether or not the Supplemental Agreements, the Transactions and the Revised Annual Caps are fair and reasonable, on normal commercial terms or better and in the ordinary and usual course of the business of the Group, and in the interests of the Company and the Shareholders as a whole. VBG Capital, has been appointed as the Independent Financial Advisor to advise the Independent Board Committee and the Independent Shareholders on the Supplemental Agreements, the Transactions and the Revised Annual Caps.

A circular containing, among other things, (a) further information about the Supplemental Agreements, the Transactions and the Revised Annual Caps; (b) a letter of advice from VBG Capital to the Independent Board Committee and the Independent Shareholders in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps; (c) a letter of recommendation from the Independent Board Committee in relation to the Supplemental Agreements, the Transactions and the Revised Annual Caps; and (d) a notice of the EGM, will be despatched to the Shareholders on or before 18 September 2020.

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• For identification purposes only

By Order of the Board

Xingye Wulian Service Group Co. Ltd.

Zhu Jie

Chairman and Chief Executive Officer

Hong Kong, 28 August 2020

As at the date of this announcement, the Board comprises one executive Director namely, Mr. Zhu Jie, three non-executive Directors, namely, Ms. Zhang Huiqi, Mr. Wang Jinhu and Mr. Liu Zhenqiang, and three independent non-executive Directors, namely, Mr. Xu Chun, Mr. Feng Zhidong and Mr. Zhou Sheng.

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