BYD ELECTRONIC (INTERNATIONAL) COMPANY LIMITED 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 Hong Kong under the Companies Ordinance with limited liability)
(Stock code: 285)Website: http://www.byd-electronic.com
CONTINUING CONNECTED TRANSACTIONS
On 31 July 2014, the Company entered into the Supply Chain Management Service Agreement with BYD (H.K.) and the transactions contemplated thereunder constitute continuing connected transactions of the Company, pursuant to which BYD (H.K.) agrees to provide purchasing service to the Group from the date of the Supply Chain Management Service Agreement to 31
December 2015. Under this arrangement, BYD (H.K.) will provide purchase order execution and logistic support to the Group, including but not limited to consolidation of purchase orders from the Group in respect of production equipment, machineries and raw materials for the Group's production of handset components and modules, selection of appropriate suppliers, negotiation with suppliers for bulk purchase discount and delivery schedule, as well quality control and inspection and provide legal and other consultation services to the Group on matters in relation to purchasing.
As BYD is the controlling Shareholder of the Company indirectly interested in approximately
65.76% of the issued share capital of the Company and BYD (H.K.) is a wholly-owned subsidiary of BYD, BYD (H.K.) is a connected person of the Company. As such, the transactions contemplated under the Supply Chain Management Service Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.
As the applicable percentage ratios stipulated under Rule 14.07 of the Listing Rules in respect of the proposed annual caps for the transactions under the Supply Chain Management Service Agreement are more than 0.1% but less than 5%, the transactions under the Supply Chain Management Service Agreement are subject to the reporting and announcement requirements but are exempt from the independent Shareholders' approval requirement pursuant to Rule 14A.76(2) of the Listing Rules.
31 July 2014
parties
(a) the Company; and
(b) BYD (H.K.)
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Pursuant to the terms of the Supply Chain Management Service Agreement, BYD (H.K.) agrees to provide purchasing service to the Group from the date of the Supply Chain Management Service Agreement to 31 December 2015. Under this arrangement, BYD (H.K.) will provide purchase order execution and logistic support to the Group, including but not limited to consolidation of purchase orders from the Group in respect of production equipment, machineries and raw materials for the Group's production of handset components and modules, selection of appropriate suppliers, negotiation with suppliers for bulk purchase discount and delivery schedule, as well quality control and inspection and provide legal and other consultation services to the Group on matters in relation to purchasing.
In consideration of BYD (H.K.) providing the purchasing service to the Group, BYD (H.K.) will charge the Company a purchasing service fee of 0.32% of the total costs of purchase (excluding value added tax or other applicable taxes, discounts, allowances or returns) but which shall not be more than RMB40,000,000 in a financial year, payable in cash within 20 days after the end of each month. The rate of the purchasing service fee was determined with reference to (i) the fixed cost nature of the expenses to be incurred by BYD (H.K.) in rendering the purchasing service to the Group; and (ii) the revenue expected to be generated by the Group. The management of the Group will review the aforesaid pricing policy on a regular basis.
The Company estimates that the purchasing service fee payable by the Company to BYD (H.K.)
under the Supply Chain Management Service Agreement for each of the two years ending 31
December 2014 and 31 December 2015 will not exceed RMB40,000,000, and such amounts have accordingly been set as the proposed annual cap amounts. The annual cap amounts were determined based on arm's length negotiations between BYD (H.K.) and the Company with reference to (i) the expenses to be incurred by BYD (H.K.) in rendering the purchasing service to the Group; and (ii) the expected volume of purchases placed by the Group.
The Group has continuously and actively considered different means to control or minimise its production costs, so as to maintain or enhance its competitiveness. Pursuant to the terms of the Supply Chain Management Service Agreement, BYD (H.K.) will negotiate with various suppliers on a centralised basis for both the BYD Group and the Group, which will enable the Group to save time and costs in negotiation as the Group will no longer need to negotiate with suppliers individually. The Group will also benefit from bulk purchasing which will enable the Group to enjoy more favourable terms than if members of the Group and the BYD Group were to undertake their purchasing individually. Under this arrangement, procurement of products by the Group could be better coordinated and transacted in a more efficient manner. For the above reasons, the Directors (including the independent non-executive Directors) consider that the transactions under the Supply Chain Management Service Agreement have been negotiated on an arm's length basis, on normal commercial terms and that the terms and conditions of the Supply Chain Management Service Agreement, including the proposed annual caps, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
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The Group is principally engaged in the business of the manufacture and sales of handset components and modules, the provision of handset assembly services, and the provision of parts and assembly services of other electronic products.
The BYD Group is principally engaged in the manufacture and sales of rechargeable batteries, electro-mechanical parts for electronic devices and handsets as well as automobiles.
BYD (H.K.) is principally engaged in trading brokerage, agency and services, including process management and agency of procuring business, international transportation agency, logistics distribution information systems, exporting and importing business, and the provision of logistics consultation services.
As BYD is the controlling Shareholder of the Company indirectly interested in approximately
65.76% of the issued share capital of the Company and BYD (H.K.) is a wholly-owned subsidiary of BYD, BYD (H.K.) is a connected person of the Company. As such, the transactions contemplated under the Supply Chain Management Service Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules. Mr. WANG Chuan-fu, a non-executive Director of the Company, is also an executive director and chairman of the board of directors of BYD and is interested in approximately 23.05% of the total issued share capital of BYD as at the date of the Supply Chain Management Service Agreement. Mr. WU Jing-sheng, a non-executive Director of the Company, is also the vice president and chief financial officer of BYD and is interested in approximately 0.18% of the total issued share capital of BYD as at the date of the Supply Chain Management Service Agreement. Accordingly, Mr. WANG Chuan-fu and Mr. WU Jing-sheng, being Directors who may have a material interest, have voluntarily abstained from voting on the board resolutions of the Company concerning the transactions contemplated under the Supply Chain Management Service Agreement.
As the applicable percentage ratios stipulated under Rule 14.07 of the Listing Rules in respect of the proposed annual caps for the transactions under the Supply Chain Management Service Agreement are more than 0.1% but less than 5%, the transactions under the Supply Chain Management Service Agreement are subject to the reporting and announcement requirements but are exempt from the independent Shareholders' approval requirement pursuant to Rule 14A.76(2) of the Listing Rules.
The terms of the Supply Chain Management Service Agreement have been negotiated on an arm's length basis. The Directors, including the independent non-executive Directors, believe that the Supply Chain Management Service Agreement has been entered into in the ordinary and usual course of the business of the Company on normal commercial terms and the terms of the Supply Chain Management Service Agreement are fair and reasonable and in the interests of the Shareholders as a whole.
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In this announcement, the following expressions shall have the meanings set out below unless the context otherwise requires:
"associate(s)" has the meaning ascribed to it under the Listing Rules
"Board" the board of Directors
"BYD" BYD Company Limited (t 52 � )t)t � � % �), a company incorporated in the PRC whose H shares are listed on the Main Board of the Stock Exchange and A shares are listed on the Small and Medium Enterprise Board of Shenzhen Stock Exchange
"BYD (H.K.)" BYD (H.K.) Co., Ltd, a company incorporated in Hong Kong and a wholly-owned subsidiary of BYD
"BYD Group" BYD and its subsidiaries (excluding, except where the context indicates otherwise, the Group)
"Company" BYD Electronic (International) Company Limited (t52��-f-(�
�)��%�), a company incorporated under the laws of Hong
Kong, whose Shares are listed on the Main Board of the Stock
Exchange
"connected person(s)" has the meaning ascribed to it under the Listing Rules "controlling Shareholder" has the meaning ascribed to it under the Listing Rules "Director(s)" the director(s) of the Company
"Group" the Company and its subsidiaries
"Hong Kong" the Hong Kong Special Administrative Region of the People's
Republic of China
"Listing Rules" the Rules Governing the Listing of Securities on the Stock
Exchange
"PRC" th e P eop le's R epu blic of Ch ina , f or the pu rpos es of thi s announcement, e xcluding Hong K ong, Macau Special Administrative Region of the PRC and Taiwan
"Supply Chain Management
Service Agreement"
the agreement dated 31 July 2014 between the Company and BYD (H.K.) in relation to the provision of purchasing services by BYD (H.K.) to the Group
"Shares" the shares of the Company
"Shareholders" holder(s) of the Shares
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"Stock Exchange" The Stock Exchange of Hong Kong Limited
"subsidiary(ies)" has the meaning ascribed to it under the Listing Rules
"RMB" Renminbi, the lawful currency of the PRC "%" per cent.
By Order of the Board
Director
Hong Kong, 31 July 2014
As at the date of this announcement, the executive Directors are Ms. LI Ke and Mr. SUN Yi-zao; the non-executive Directors are Mr. WANG Chuan-fu and Mr. WU Jing-sheng; and the independent non-executive Directors are Mr. CHUNG Kwok Mo John, Mr. Antony Francis MAMPILLY and Mr. LIANG Ping.
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