CONNECTED TRANSACTIONS

Transcription

1 CONNECTED PERSONS Following completion of the Global Offering, Yonyou will hold more than 10% of our issued share capital and will remain as our substantial shareholder. Under Rules 14A.11(1) and (4) of the Listing Rules, Yonyou and its associates will be our connected persons. Accordingly, the transactions between our Group and Yonyou and/or its associates, which will continue after the Listing, will constitute our continuing connected transactions under Chapter 14A of the Listing Rules. CONTINUING CONNECTED TRANSACTIONS We have entered into certain agreements with Yonyou, including the NC and EHR System-Renting Framework Agreement, the Software Products Commissioned Manufacturing and Service Framework Agreement and the Property Lease Framework Agreement (collectively, the Framework Agreements ). Transactions under the Framework Agreements will constitute our continuing connected transactions under Chapter 14A of the Listing Rules. Summary Table of Our Continuing Connected Transactions Nature of transaction Applicable Listing Rules Waiver Sought Exempt continuing connected transaction NC and EHR System-Renting Framework Agreement 14A.33(3) N/A Non-exempt continuing connected transactions Software Products Commissioned Manufacturing and Service Framework Agreement 14A.34 Waiver from announcement requirement , , Property Lease Framework Agreement 14A.34 Waiver from announcement requirement 5, , , EXEMPT CONTINUING CONNECTED TRANSACTION The following transaction is made in the ordinary course of business and on normal commercial terms where each of the applicable percentage ratios (other than the profits ratio) calculated pursuant to Rule of the Listing Rules will, as our Directors currently expect, not exceed 0.1% on an annual basis. Under Rule 14A.33(3) of the Listing Rules, the transaction is exempted from the reporting, annual review, announcement and independent Shareholders approval requirements under Chapter 14A of the Listing Rules

2 NC and EHR System-Renting Framework Agreement Parties: Yonyou (as the lessor) Our Company (as the lessee) Particulars of the transaction: It is expected that after completion of the Global Offering, Yonyou and/or its associates may from time to time lease the NC and EHR systems to us in support of our daily administrative functions. Thus, we entered into the NC and EHR System-Renting Framework Agreement with Yonyou on January 23, The NC and EHR System-Renting Framework Agreement is valid for a term commencing from the Listing Date and expiring on December 31, 2016 and is renewable for a term of three years, subject to compliance with all applicable laws and regulations of the PRC and the requirements of the Listing Rules. Reasons for the transaction: NC system is a comprehensive financial management software and EHR system is a comprehensive HRM software, both of which are helpful to facilitate an effective corporate governance system of our Group. Pricing policy: The rental payable by our Group for the NC and EHR systems are agreed after arm s length negotiations between relevant parties with reference to the cost of the development and maintenance of such systems and shall comply with applicable laws and regulations. Termination: During the term of NC and EHR System-Renting Framework Agreement, our Company can serve not less than 30 days prior written notice to Yonyou to terminate the NC and EHR System-Renting Framework Agreement. Historical amounts: None of the members in our Group had previously rented the NC or EHR system from Yonyou or its associates, therefore no reference to the historical amount could be made. Annual caps: The maximum aggregate annual amount of rental payable by our Group for the three years ended December 31, 2014, 2015, and 2016 shall not exceed the caps set out below: Total rental Basis of caps: The above annual caps were mainly determined with reference to: (i) the estimated market rates for the renting of similar financial management software and HRM software; (ii) the estimated period of usage of the NC and EHR system; (iii) the costs incurred by the depreciation of servers during such estimated period of usage; (iv) the expenses incurred by renting auxiliary facilities; and (v) the labor costs in respect of the development and maintenance of the NC and EHR system

3 NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS The following transactions are made in the ordinary course of business and on normal commercial terms where, as our Directors currently expect, each of the applicable percentage ratios (except for the profits ratio) calculated pursuant to Rule of the Listing Rules will not exceed 5% on an annual basis. Under Rule 14A.34 of the Listing Rules, the following transactions will be subject to the reporting, announcement and annual review requirements but will be exempted from the independent Shareholders approval requirement under Chapter 14A of the Listing Rules. Software Products Commissioned Manufacturing and Service Framework Agreement Parties: Yonyou (as the service provider) Our Company (as the service purchaser) Particulars of the transaction: It is expected that after completion of the Global Offering, Yonyou will continue to provide packaging services to us in respect of our CD-ROM products which contain our software products. Thus, we entered into the Software Products Commissioned Manufacturing and Service Framework Agreement with Yonyou on February 17, The Software Products Commissioned Manufacturing and Service Framework Agreement is valid for a term commencing from February 17, 2014 and expiring on December 31, 2016 and is renewable for a term of three years, subject to compliance with all applicable laws and regulations of the PRC and the requirements of the Listing Rules. Reasons for the transaction: We began to share the packaging line of CD-ROM products with Yonyou since the establishment of Chanjet Software, our predecessor company. Given that packaging does not form a significant part of our business and such services are readily available in the market, we are of the view that it is not cost effective for us to operate and maintain a standalone packaging line for such products. Pricing Policy: The pricing of the packaging services in respect of our CD-ROM products is determined in accordance with the market price, that is, the price of the same or similar packaging services provided by an Independent Third Party during the ordinary course of business and on normal commercial terms. Termination: During the term of the Software Products Commissioned Manufacturing and Service Framework Agreement, each of the parties can serve not less than three months prior written notice to the other party to terminate the Software Products Commissioned Manufacturing and Service Framework Agreement. Historical amounts: The service fees payable to Yonyou regarding the abovementioned packaging services for the three years ended December 31, 2011, 2012 and 2013 were approximately RMB947,851, RMB1,111,473 and RMB849,320, respectively

4 Annual caps: The maximum aggregate annual amount of service fees for the three years ended December 31, 2014, 2015, and 2016 shall not exceed the caps set out below: Total service fees , , Basis of caps: The above annual caps were mainly determined with reference to: (i) the historical service fees paid by us to Yonyou for the packaging services; (ii) the potential increase in our production capacity and sales amount after the Global Offering, which will lead to corresponding increase in the demand for packaging services; and (iii) potential increase in labor costs in respect of provision of packaging services. Property Lease Framework Agreement Parties: Yonyou (as the lessor) Our Company (as the lessee) Particulars of the transaction: It is expected that after completion of the Global Offering, Yonyou and/or its subsidiaries will continue to lease certain properties to our Group for office use. Thus, we entered into the Property Lease Framework Agreement with Yonyou on February 17, The Property Lease Framework Agreement is valid for a term commencing from the Listing Date and expiring on December 31, 2016 and is renewable for a term of three years, subject to compliance with all applicable laws and regulations of the PRC as well as the requirements of the Listing Rules. Reasons for the transaction: As our Group has been using the properties of Yonyou historically as offices units, the Directors are of the view that it is in the interest of the Group in terms of cost, time and stability to enter into the Property Lease Framework Agreement instead of finding and relocating to alternative properties. Pricing Policy: The pricing of the properties to be leased are determined in accordance with the market price, that is, the rental payments for the same or similar properties to be leased by an Independent Third Party in the same or similar region. Termination: During the term of the Property Lease Framework Agreement, each of the parties can serve not less than three months prior written notice to the other party to terminate the Property Lease Framework Agreement. Historical amounts: The rentals incurred to Yonyou and/or its subsidiaries by our Group for the three years ended December 31, 2011, 2012 and 2013 were RMB5,936,874, RMB6,251,563 and RMB6,725,270, respectively

5 Annual caps: The maximum aggregate annual amount of rental payments for the years ended December 31, 2014, 2015, and 2016 shall not exceed the caps set out below: Total rental 5, , , Basis of caps: The above annual caps were mainly determined with reference to: (i) decrease in the floor area of the properties leased from Yonyou and/or its subsidiaries in 2014 and 2015; (ii) the prevailing market rate of the same or similar properties in the locality; and (iii) the fluctuation of such prevailing market rate in the next three years. WAIVER APPLICATION FOR NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS By virtue of Rule 14A.34 of the Listing Rules, the transactions under the sub-section headed Non-exempt Continuing Connected Transactions will constitute continuing connected transactions which are subject to the reporting, annual review and announcement requirements but are exempt from the independent Shareholders approval requirement under Chapter 14A of the Listing Rules. As the above non-exempt continuing connected transactions are expected to continue on a recurring and continuing basis in the ordinary and usual course of business of our Group, the Directors consider that compliance with the above announcement requirements would be impractical and would incur unnecessary administrative costs to our Group. Accordingly, the Sole Sponsor has applied, on behalf of our Company, to the Stock Exchange for, and the Stock Exchange has granted, a waiver to us under Rule 14A.42(3) of the Listing Rules from compliance with the announcement requirement in respect of the above non-exempt continuing connected transactions, subject to the following conditions: (i) (ii) in respect of the continuing connected transactions under the sub-section Non-exempt Continuing Connected Transactions above, the aggregate value of each of the non-exempt continuing connected transactions for each financial year not exceeding the relevant annual cap amount as stated above; and in respect of the continuing connected transactions under the sub-section Non-exempt Continuing Connected Transactions above, as required under Rule14A.42(3) of the Listing Rules, our Company will comply with the applicable provisions under Rules 14A.35(1), 14A.35(2), 14A.36, 14A.37, 14A.38, 14A.39 and 14A.40 of the Listing Rules. In addition, our Company will fully comply with the requirements under Chapter 14A of the Listing Rules for the non-exempt continuing connected transactions conducted after December 31, 2016 and before the expiry of the various agreements referred to under the sub-section Non-exempt Continuing Connected Transactions above unless a further waiver from strict compliance with the relevant requirements under the Listing Rules in respect of such non-exempt continuing connected transactions is granted to our Company

6 In the event of any future amendments to the Listing Rules imposing more stringent requirements than those applicable as of the Latest Practicable Date on the continuing connected transactions referred to in this prospectus, we will take immediate steps to ensure compliance with such new requirements within reasonable time. CONFIRMATION FROM INDEPENDENT PROPERTY VALUER Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent property valuer, is of the view that the proposed annual caps for the rental payable by our Group to Yonyou or its associates under the Property Lease Framework Agreement are fair, reasonable and are consistent with prevailing market rates for similar premises in similar locations. CONFIRMATION FROM OUR DIRECTORS Having taken into account the information above, our Directors (including our independent non-executive Directors) are of the view that the non-exempt continuing connected transactions as set out above have been and will be entered into during our ordinary and usual course of business, on normal commercial terms, and the terms of the Framework Agreements are fair and reasonable and in the interest of us and our Shareholders as a whole, and that the proposed annual caps for these non-exempt continuing connected transactions are fair and reasonable and in the interests of us and our Shareholders as a whole. CONFIRMATION FROM THE SOLE SPONSOR Having taken into account the information above, the Sole Sponsor is of the view that the non-exempt continuing connected transactions as set out above are entered into and will be entered into during our ordinary and usual course of business, on normal commercial terms, and the terms of Framework Agreements are fair and reasonable and in the interest of us and our Shareholders as a whole, and that the proposed annual caps of these non-exempt continuing connected transactions are fair and reasonable and in the interests of us and our Shareholders as a whole