Tingyi Cayman Islands : RENEWAL OF CONTINUING CONNECTED TRANSACTIONS PURCHASE OF CARTON BOX PRODUCTS

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TINGYI (CAYMAN ISLANDS) HOLDING CORP.

康 師 傅 控 股 有 限 公 司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 0322)

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

PURCHASE OF CARTON BOX PRODUCTS

On 18 October 2019, the Company and Marine Vision entered into the Supply Agreement for the Group to continue to purchase carton box products from Marine Vision and its subsidiaries for a term of three financial years ending 31 December 2022.

Marine Vision is a company beneficially owned by family members and relatives of Mr. Wei Hong-Ming, an executive Director and the Chairman of the Board of the Company, and Mr. Wei Hong-Chen, an executive Director of the Company. Accordingly, Marine Vision is a connected person of the Company for the purpose of Chapter 14A of the Listing Rules and the purchase of carton box products by the Group from the Supplier constitutes continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the annual transaction amount under the Supply Agreement are expected to be more than 0.1% but less than 5%, the transactions contemplated under the Supply Agreement are subject to the reporting, annual review and announcement requirements and exempt from the requirement of Independent Shareholders' approval under Chapter 14A of the Listing Rules.

BACKGROUND

Reference is made to the announcements of the Company dated 12 May 2017, 10 November 2017 and 14 December 2017 in relation to the 2017 Agreement.

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The 2017 Agreement is due to expire on 31 December 2019. The Supply Agreement is being entered into to enable the Group to continue to purchase carton box products from the Supplier. Brief particulars of the Supply Agreement are set out below:

THE SUPPLY AGREEMENT

Date:	18 October 2019
Parties:	(1)	Marine Vision; and
	(2)	the Company
	Marine Vision is a company beneficially owned by family
	members and relatives of Mr. Wei Hong-Ming and Mr. Wei
	Hong-Chen, both being executive Directors of the Company.
	Accordingly, Marine Vision is a connected person of the
	Company for the purpose of Chapter 14A of the Listing
	Rules.
Subject:	The Group will purchase carton box products from Marine
	Vision and its subsidiaries.
Term:	Three financial years commencing on 1 January 2020 and
	ending on 31 December 2022.
Price:	The price of the carton box products supplied by the
	Supplier to the Group will be based on the quoted price for
	the products to be supplied by the Supplier. Such quoted
	price will be determined based on arm's length negotiations
	between the parties on normal commercial terms on a
	quarterly basis with reference to:
	(a)	the prevailing market price for the same or substantially
		similar products, taking into account the price of the
		same or substantially similar products with comparable
		order quantities and quality offered by independent
		third party suppliers;
	(b)	if there are insufficient comparable transactions to (a)
		above, on normal commercial terms comparable to
		those received from independent third parties in respect
		of the same or substantially similar products with
		comparable quantities; and

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1. if both (a) and (b) above are not applicable, by reference to the average price of similar products previously purchased by the Group, and on normal commercial terms which are no less favourable to the Group than that are available from independent third parties.

	Payment for the products under the Supply Agreement will
	be on a monthly basis with 60 days' credit terms.
Cap amount:	Pursuant to the Supply Agreement, the Group has agreed to
	purchase carton box products from the Supplier based on the
	pricing policy stated above during the term of the agreement
	subject to the following annual caps:
			Financial year ending
			31 December
			2020	2021	2022
			RMB'000	RMB'000	RMB'000
	Transaction amount	2,320,000	2,510,000	2,590,000
	The annual caps for the Supply Agreement were determined
	based on the historical transaction amount with the Supplier
	and the Group's expected demand for carton box products
	supplied by the Supplier.
	The historical purchases from the Supplier for the three
	financial years ended 31 December 2018 and the six months
	ended 30 June 2019 are set out below:
					For the
					six months
		For the year ended 31 December	ended
		30 June
		2016	2017	2018	2019
		RMB'000	RMB'000	RMB'000	RMB'000
	Annual cap	N/A	2,203,000	2,485,000	2,680,000
		(Note 1)		(Note 2)
	Purchases from	1,725,475	1,973,112	2,016,915	1,000,868
	the Supplier

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Note:

1. No annual cap was set as the Supplier was owned by an independent third party prior to May 2017.
2. For the entire year of 2019.

Condition

The Supply Agreement is subject to the Company's compliance with the requirements of the Listing Rules with respect to continuing connected transactions.

Reasons for the Supply Agreement

The Supplier has been supplying carton box products to the Group for many years. Such products are being used for the packaging of the Group's products and in the Group's ordinary course of operation. As the 2017 Agreement entered into between the Company and Marine Vision is due to expire on 31 December 2019, the Supply Agreement is being entered into to enable the Group to continue to purchase carton box products from the Supplier.

As the Supply Agreement is being entered into in the usual and ordinary course of business of the Group and the terms have been negotiated on an arm's length basis and on normal commercial terms, with the purchase price of the products being based on prevailing market price of the same or substantially similar products offered by independent third parties, the Directors (including the independent non-executive Directors but excluded Mr. Wei Hong-Ming and Mr. Wei Hong-Chen, both being executive Directors of the Company, who are considered to be interested in the transactions contemplated under the Supply Agreement and have abstained from voting for the resolution proposed to approve the Supply Agreement) consider that the transactions under the Supply Agreement and the proposed annual caps thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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INTERNAL CONTROL PROCEDURES AND PRICING POLICY

To ensure that the terms of the continuing connected transactions of the Group are fair and reasonable and no less favourable to the Group than those available to/from independent third parties, the Group has a set of internal control procedures and pricing policy in place under which:

Internal control procedures

1. the Group maintains a list of carefully selected suppliers. The list is regularly reviewed and updated. For a supplier to become listed, the Group will initially conduct and must be satisfied with the factory visits to the supplier, the supplier must also have a good track record with the Group in terms of the quality of the products which is reviewed by the quality assurance team of the Group (the "Quality Assurance Department"). The supplier must have also had a track record of at least one year. Further, if the supplier has not supplied any goods to the Group for more than a year, the supplier will be delisted from the Group's supplier list and the Group will initiate the full selection procedure (including factory visits and quality checks) for the supplier to be relisted onto the suppliers list;
2. with respect to any potential orders, the research and development department of the Group (the "R&D Department") will first discuss and formulate the details of the specifications of the order (including materials, safety, functions, design for carton box products and the specification for the relevant products);
3. after such formulation by the R&D Department, based on their experience and taking into account similar purchases made by the Group, the Purchasing Department will obtain quotations from the Supplier and also select not less than two and on average about three suppliers from the Group's suppliers list which are independent third parties for quotations in order to ascertain the prevailing market price;
4. the selection criteria of the suppliers will be based on their quotation, delivery times, payment terms, specifications, quality, safety and recent performance; and
5. upon delivery of the products (whether by the Supplier or independent third party suppliers), the Quality Assurance Department will conduct checks to review (including but not limited to quality and safety) and assess whether the products have been supplied in accordance with the terms of each contract.

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Pricing policy

1. the pricing policy for all the continuing connected transactions of the Group will be supervised and monitored by the accounting department of the Group and the management of the Group dedicated with the responsibility of supervising the continuing connected transactions of the Group to ensure that the relevant continuing connected transactions are being conducted on normal commercial terms and will not be prejudicial to the interests of the Company and the Shareholders as a whole;
2. in respect of any order for carton box products, the Group will assess the level of order to be placed and based on the size of the order, obtain reference quotations from independent third party suppliers for setting the prevailing market price;
3. the relevant personnel from the accounting department and the management of the Group will conduct regular checks to review and assess whether the transactions contemplated under the relevant continuing connected transactions are conducted in accordance with the terms of its respective agreement and will also regularly update the market price for the purpose of considering if the price charged for a specific transaction is fair and reasonable and in accordance with the aforesaid pricing policy;
4. the independent non-executive Directors will review the transactions under the relevant continuing connected transaction and the auditors of the Company will also conduct an annual review on the pricing terms and annual caps thereof.

The Directors consider that the pricing policy and the internal control procedures of the Group are effective to ensure that the transactions contemplated under the relevant continuing connected transaction will be conducted on normal commercial terms and not prejudicial to the interests of the Company and the Shareholders as a whole.

INFORMATION ON MARINE VISION

Marine Vision is a limited liability company incorporated in the British Virgin Islands. It is an investment holding company having subsidiaries principally engaged in the manufacture and sale of carton box products in the PRC.

IMPLICATIONS UNDER THE LISTING RULES

Marine Vision is beneficially owned by family members and relatives of Mr. Wei Hong-Ming and Mr. Wei Hong-Chen, both being executive Directors of the Company.

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Marine Vision is hence a connected person of the Company for the purpose of the Listing Rules and the transactions contemplated under the Supply Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the annual transaction amount under the Supply Agreement are expected to be more than 0.1% but less than 5%, the transactions contemplated under the Supply Agreement are subject to the reporting, annual review and announcement requirements and exempt from the requirement of Independent Shareholders' approval under Chapter 14A of the Listing Rules.

GENERAL

The Group is principally engaged in the production and distribution of instant noodles and beverage products in the PRC.

At the Board meeting held to approve the Supply Agreement, Mr. Wei Hong-Ming and Mr. Wei Hong-Chen are considered to be interested in the transactions contemplated under the Supply Agreement and have abstained from voting for the resolution proposed to approve the Supply Agreement.

DEFINITIONS

In this announcement, the following expressions shall have the meanings set out below unless the context requires otherwise:

"2017 Agreement"	the supply agreement dated 12 May 2017 between
	the Company and Marine Vision, and its
	amendments and supplements;
"associate"	has the meaning ascribed to it under the Listing
	Rules;
"Board"	the board of directors of the Company;
"Company"	Tingyi (Cayman Islands) Holding Corp., a
	company incorporated in the Cayman Islands with
	limited liability, the shares of which are listed on
	the main board of the Stock Exchange;
"connected person(s)"	has the meaning ascribed to it under the Listing
	Rules;
"Director(s)"	the director(s) of the Company;
"Group"	the Company and its subsidiaries;

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"Hong Kong"	the Hong Kong Special Administrative Region of
	the PRC;
"Independent Shareholders"	Shareholders other than Marine Vision and its
	associates;
"Listing Rules"	the Rules Governing the Listing of Securities on
	the Stock Exchange;
"Marine Vision"	Marine Vision Investment Inc., a company
	incorporated in the British Virgin Islands with
	limited liability;
"PRC"	the People's Republic of China;
"RMB"	Renminbi, the lawful currency of the PRC;
"Shareholder(s)"	shareholder(s) of the Company;
"Stock Exchange"	The Stock Exchange of Hong Kong Limited;
"Supplier"	Marine Vision and its subsidiaries;
"Supply Agreement"	the agreement dated 18 October 2019 between the
	Company and Marine Vision; and
"%"	per cent.
	By order of the Board of
	Tingyi (Cayman Islands) Holding Corp.
	Mr. Junichiro Ida
	Vice-Chairman and Executive Director
Hong Kong, 18 October 2019

As at the date of this announcement, Mr. Wei Hong-Ming, Mr. Junichiro Ida, Mr. Lin Chin-Tang, Mr. Wei Hong-Chen, Mr. Koji Shinohara and Mr. Yuko Takahashi are executive Directors of the Company. Mr. Hsu Shin-Chun, Mr. Lee Tiong-Hock and Mr. Hiromu Fukada are independent non-executive Directors of the Company.

Website: http://www.masterkong.com.cn

http://www.irasia.com/listco/hk/tingyi

* For identification purposes only

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