Asian Growth Properties Limited Cost-Sharing Arrangement (6631N)
July 29 2014 - 12:13PM
UK Regulatory
TIDMAGP
RNS Number : 6631N
Asian Growth Properties Limited
29 July 2014
29 July 2014
ASIAN GROWTH PROPERTIES LIMITED
Related Party Transaction - Cost-Sharing Arrangement
The board of directors (the "Board") of Asian Growth Properties
Limited (the "Company", together with its subsidiaries, the
"Group") (AIM Stock Code: AGP), the Hong Kong based China property
development and investment company, announces that on 29 July 2014,
the Company together with various subsidiaries of the Company
(together, the "AGP Service Recipients") have entered into an
agreement (the "Cost Sharing Agreement") with South-East Asia
Investment And Agency Company, Limited ("SEAI"), a wholly-owned
subsidiary of S E A Holdings Limited ("SEA") (the holding company
of the Company), for the use of SEAI's personnel and facilities on
a cost-sharing basis for the purpose of the Group to carrying out
its corporate, project and property management activities.
Cost-sharing arrangement
Subsequent to the termination of the previous management
agreement with effect from 1 January 2014 and the consideration of
alternative structures to provide the necessary resources to the
Group, SEAI has now agreed that the Group may continue to use
SEAI's personnel and facilities on a cost-sharing basis to carry
out the corporate, project and property management activities of
the Group. In consideration of SEAI making available its personnel
and facilities to the Group, the AGP Service Recipients agree to
pay their proportionate share of the costs incurred by SEAI (the
"Net Costs") for the use of SEAI's personnel and facilities from 1
January 2014.
The Net Costs is the proportion of staff costs and indirect
costs to be borne by the AGP Service Recipients and will be
calculated by reference to the time spent by SEAI's personnel on
the services to each of the AGP Service Recipients (with a mark-up
of 5%), plus the reimbursable costs incurred by SEAI on behalf of
the AGP Service Recipients (on a dollar-for-dollar basis). Each of
the AGP Service Recipients should bear and pay its proportion of
the Net Costs.
The Cost Sharing Agreement is for no fixed time period. However,
the termination provisions are such that AGP and/or any of the AGP
Service Recipients can terminate their participation in the Cost
Sharing Agreement by giving SEAI three months' notice. AGP can also
terminate the participation of an AGP Service Recipient. SEAI can
terminate their participation in the Cost Sharing Agreement on
three months' notice but AGP can request SEAI to extend the notice
period by up to a further six months to facilitate an orderly
handover.
The Board considers that the use of the personnel and facilities
of SEAI on a cost-sharing basis is in the best interest of the
Company. The Net Costs under the Cost Sharing Agreement is expected
to be significantly lower than the management fees paid to SEAI
under the previous management agreement and will avoid the Group in
incurring large set up costs or difficulties in recruiting the
necessary personnel to handle the corporate, project and property
management activities of the Group. Assuming the Cost Sharing
Agreement is in force for the year 2013, SEAI estimated that the
Net Costs (excluding third party reimbursable costs) was
approximately HK$110 million (GBP8.58 million) and compares
favourably to HK$148.087 million (GBP11.55 million) that was paid
under the previous management agreement for the year 2013, based on
the exchange rate of GBP1 = HK$12.8184 as at 31 December 2013.
Definition of the types of costs in the Cost Sharing
Agreement
"Indirect Costs" means all external and internal indirect costs
incurred by SEAI, which cannot be directly attributed to a
particular service provided to a particular AGP Service Recipient,
including but not limited to facilities charges (including
maintenance, utilities and supplies), travel costs, depreciation of
fixed assets and all expenses to third parties of SEAI, including
all goods and services tax, value added tax and other taxes, duties
and levies chargeable to such Indirect Costs but excluding taxes,
withholding taxes and/or similar levies, which are normally
expected to be borne by SEAI itself, if legally required.
"Reimbursable Costs" means the sum of all external and all
internal direct costs incurred by SEAI and directly attributable to
a particular service provided to a particular AGP Service
Recipient, which will be invoiced to the relevant AGP Service
Recipient on a dollar-for-dollar basis.
"Staff Costs" means salaries and bonuses, wages for permanent
and temporary employees, expatriate costs (where applicable),
mandatory provident fund contributions and other pension benefits,
insurance benefits and other costs and overheads directly
attributable to SEAI's employees.
Other information
SEAI is a direct wholly-owned subsidiary of SEA which in turn
holds an effective 97.17% shareholding interest in the Company.
Accordingly, SEAI is a related party of the Company under the AIM
Rules for Companies. The execution of the Cost Sharing Agreement
constitutes a related party transaction of the Company under the
AIM Rules for Companies.
The terms of the Cost Sharing Agreement were negotiated by the
Company and SEAI and arrived at on an arm's length basis. The
Company's directors that are independent of SEA and SEAI, namely
Mr. Richard Öther Prickett and Mr. David Andrew Runciman, consider,
having consulted with Panmure Gordon (UK) Limited, the nominated
advisor of the Company, that the terms of the Cost Sharing
Agreement are fair and reasonable insofar as the shareholders of
the Company are concerned.
For more information, please contact:
Lu Wing Chi Tel: +852 2828 6363
Executive Director
Asian Growth Properties Limited
Richard Gray Tel: +44 207 886 2500
Andrew Potts
Panmure Gordon (UK) Limited
(Nominated Advisor)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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