Applied Development : Announcement of Discloseable and Continuing Connected Transaction in relation to Tenancy Agreement

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Incorporated in Bermuda with limited liability)

(Stock Code: 519)

DISCLOSEABLE AND CONTINUING

CONNECTED TRANSACTION

IN RELATION TO TENANCY AGREEMENT

THE TENANCY AGREEMENT

On 14 June 2019, Superform Investment (an indirect wholly-owned subsidiary of the Company), as landlord, entered into the Tenancy Agreement with Ruihua International, as tenant, in respect of the Premises for a term of 18 months commencing from 1 July 2019 and ending on 31 December 2020 with an option to renew for a further term of 18 months.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Ruihua International is a wholly-owned subsidiary of Hongkong Ruihua, a substantial shareholder of the Company, holding approximately 22.35% of the issued share capital of the Company. Given that Ruihua International is an associate of Hongkong Ruihua and constitutes a connected person of the Company, the transaction contemplated under the Tenancy Agreement constitutes a continuing connected transaction for the Company under the Listing Rules.

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As one or more of the applicable percentage ratios set forth under Rule 14.07 of the Listing Rules in respect of the annual cap for the Tenancy Agreement exceed 5% but are less than 25%, and the annual cap for the Tenancy Agreement is less than HK$10,000,000, the transaction contemplated under the Tenancy Agreement constitutes (i) a discloseable transaction of the Company that is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules; and (ii) a continuing connected transaction of the Company that is subject to the reporting, announcement and annual review requirements but is exempt from circular (including independent financial advice) and independent shareholders' approval requirements under Chapter 14A.76(2) of the Listing Rules.

THE TENANCY AGREEMENT

The Board announces that, after trading hours on 14 June 2019, Superform Investment (as the landlord) and Ruihua International (as the tenant) entered into a Tenancy Agreement in respect of the leasing of the Premises, for a term of 18 months commencing from 1 July 2019 and ending on 31 December 2020 with an option to renew for a further term of 18 months.

The principal terms of the Tenancy Agreement are set out below.

Date

14 June 2019

Parties

1. Superform Investment, as the landlord; and
2. Ruihua International, as the tenant.

Premises

The Premises is located at Offices 2401B & 2402A on the 24th Floor of Tower One, Lippo Centre, No. 89 Queensway, Hong Kong, the gross floor area of which is 1,537 square feet.

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Term

The term of the Tenancy Agreement commences from 1 July 2019 and ends on 31 December 2020. Both Superform Investment and Ruihua International have the option to renew the Tenancy Agreement by serving one-month notice in writing of such desire to renew to the other party before the expiration of the original term of the Tenancy Agreement. Unless otherwise stated in a written notice by the other party which shall be served within 14 working days upon receipt of the written notice of the desire to renew, and if Ruihua International has observed and performed the terms and conditions of the Tenancy Agreement to the satisfaction of Superform Investment, then the Tenancy Agreement shall be renewed for a further term of 18 months.

Usage

For use as office.

Rental

HK$98,368 per month (exclusive of management and air-conditioning charges, Government rates and all other outgoings and utilities charges payable by Ruihua International) with a rent-free period of 15 days commencing from 1 July 2019 to 15 July 2019 (both days inclusive).

The terms of the Tenancy Agreement were arrived after arm's length negotiations between the parties to the Tenancy Agreement and determined with reference to, amongst other things, the current market rent payable for similar properties in the vicinity.

Management and Air-Conditioning Charges and Government Rates

In addition to the monthly rental, Ruihua International shall also pay management and air- conditioning charges of HK$10,759 per month to Superform Investment. Ruihua International is also required to pay the Government rates with respect to the Premises during the term of the Tenancy Agreement.

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ANNUAL CAP

The annual caps in respect of the transaction contemplated under the Tenancy Agreement for each of the financial years ending 30 June 2020 and 2021 are as follows:

	Annual cap	Annual cap
	amount	amount
	for the year	for the year
	ending	ending
	30 June 2020	30 June 2021
	(HK$)	(HK$)
Annual cap	1,260,340	654,762

The annual caps were determined based on the aggregate of the monthly rental and the management and air-conditioning charges payable by Ruihua International under the Tenancy Agreement after taking into account the rent-free period.

INFORMATION ON COMPANY AND THE GROUP

The Company is an investment holding company and the Group is principally engaged in resort and property development, property investment and investment holding.

INFORMATION ON THE PARTIES TO THE TENANCY AGREEMENT

Superform Investment

Superform Investment is a wholly-owned subsidiary of the Company principally engaged in property investment.

Ruihua International

Ruihua International is a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of Hongkong Ruihua (a substantial shareholder of the Company holding approximately 22.35% of issued share capital of the Company) and hence an associate of Hongkong Ruihua. Ruihua International is a licensed corporation to carry out Type 4 (advising on securities) and Type 9 (asset management) regulated activities under the SFO.

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REASONS FOR AND BENEFITS OF ENTERING INTO THE TENANCY AGREEMENT

The Group is principally engaged in resort and property development, property investment and investment holding. The Company started to sub-divide units of the investment property at the whole 24th floor of Tower One, Lippo Centre, No. 89 Queensway, Hong Kong in October 2018 and completed such sub-division in February 2019. The Board intends to lease and/or sell the Group's investment property at Lippo Centre in sub-divided units with their prevailing market prices. The Board believes that entering into the Tenancy Agreement will generate stable rental income and contribute satisfactory returns to the Group.

In view of the above, the Directors (including the independent non-executive Directors) are of the view that (i) the Tenancy Agreement has been entered into in the ordinary and usual course of business of the Group; (ii) the terms of the Tenancy Agreement, including the annual cap, are fair and reasonable and are on normal commercial terms or better; and (iii) the transaction contemplated under the Tenancy Agreement is in the interests of the Company and its shareholders as a whole.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Ruihua International is a wholly-owned subsidiary of Hongkong Ruihua, a substantial shareholder of the Company, holding approximately 22.35% of the issued share capital of the Company. Given that Ruihua International is an associate of Hongkong Ruihua and constitutes a connected person of the Company, the transaction contemplated under the Tenancy Agreement constitutes a continuing connected transaction for the Company under the Listing Rules.

None of the Directors has any material interest in the transaction contemplated under the Tenancy Agreement and therefore none of the Directors has abstained from voting on the Board resolution(s).

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