CK Life Sciences Intl : Continuing Connected Transactions – Provision of Management Services

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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 0775)

CONTINUING CONNECTED TRANSACTIONS PROVISION OF MANAGEMENT SERVICES

The Board announces that on 31 May 2017 (after trading hours), RMSPL (a wholly-owned subsidiary of the Company) and IPL (a wholly-owned subsidiary of CKPH) entered into the Management Agreement in relation to, among other things, the appointment of RMSPL to provide the Services to IPL in respect of the Properties in the Territory.

Given that Mr. Li Ka-shing, Mr. Li Tzar Kuoi, Victor (being a Director) and the Trust have been deemed as a group of connected persons by the Stock Exchange and they currently directly or indirectly hold an aggregate of approximately 31.16% of the issued share capital of CKPH, CKPH may be regarded as a connected person of the Company under the Listing Rules. IPL, being a wholly-owned subsidiary of CKPH, may also be regarded as a connected person of the Company under the Listing Rules, and the entering into of the Management Agreement between RMSPL and IPL constitutes continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the Annual Caps for the transactions contemplated under the Management Agreement exceed 0.1% but are less than 5%, the Management Agreement and the transactions contemplated thereunder are subject to the reporting, announcement and annual review requirements but are exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

The Board announces that on 31 May 2017 (after trading hours), RMSPL (a wholly-owned subsidiary of the Company) and IPL (a wholly-owned subsidiary of CKPH) entered into the Management Agreement in relation to, among other things, the appointment of RMSPL to provide the Services to IPL in respect of the Properties in the Territory.

The main terms of the Management Agreement and other information relating thereto are set out below.

THE MANAGEMENT AGREEMENT Date : 31 May 2017

Parties

RMSPL (as manager) IPL (as principal)

RMSPL was incorporated under the laws of Australia on 10 March 2017. It is acknowledged that Services provided to IPL between the Commencement Date and the date of the Management Agreement, if any, were provided on behalf of RMSPL by CK Life Sciences Limited, a wholly-owned subsidiary of the Company, in anticipation of the formal registration of RMSPL and the entering into and signing of the Management Agreement between the parties. RMSPL assumes responsibility in favour of IPL for performance of the Management Agreement from the Commencement Date in all respects.

Provision of services

RMSPL agrees to provide or procure the provision of certain services to IPL in the Territory, details of which are as follows (the "Services"):

1. general management services, including, among others, preparing monthly reports to IPL as to the business relating to the Properties, supervising the performance of, and day to day administration of the Properties, dispersing and collecting IPL's funds and fulfilling its obligations relating to the Properties, with the prior approval of IPL, assisting IPL to retain advisors and service providers necessary for the management of the Properties, establishing and operating bank accounts, maintaining books of accounts for IPL, maintaining applicable licences required to manage the Properties, presenting to IPL opportunities in the Territory, monitoring and reporting on credit quality of major tenants of the Properties, liaising with applicable regulators as required, ensuring IPL is kept informed of material changes relating to the business of IPL, valuation of the Properties, procuring tax compliance services in respect of IPL and/or the Properties, preparing forecasts in respect of IPL's activities in the Territory and/or the Properties;

2. property services, including, among others, collecting and managing and reporting to IPL on rent payments and other charges due to IPL, negotiating, administering and enforcing leases and other contracts in connection with the Properties, managing and supervising the repair, operation and maintenance of the Properties, effecting and maintaining insurances for the Properties and regularly inspecting the Properties;

3. leasing services, including, among others, arranging for the Properties to be leased, advertised and marketed, recommending to IPL for the engagement of leasing agents, contractors and other necessary parties, recommending leasing strategy of the Properties and using best endeavours to assist with negotiating and securing tenancies for the Properties;

4. acquisition and disposal services, including, among others, identifying potential investment opportunities and disposals of the Properties and preparing relevant reports; and with the prior consent of IPL, managing the acquisition of any investment of IPL, assisting IPL with pursuing disposal or acquisition opportunity and negotiations with purchaser or vendor, preparing Properties for sale, undertaking due diligence and engaging service providers for acquisition of Properties; and

5. capital expenditure and re-development services, including, among others, in respect of the refurbishment and redevelopment of the Properties, submitting recommendations to IPL, making all necessary arrangements, making recommendations for the engagement of agents, contractors and other parties, managing, monitoring, supervising and directing agents, contractors and other parties and attending site meetings.

Term

The rights and obligations under the Management Agreement will continue for the period beginning on the Commencement Date and ending on the earlier of:

1. the date on which the Management Agreement is terminated in accordance with the terms of the Management Agreement; or

2. the date on which all the Properties are sold or disposed of; or

3. 31 December 2019.

   Fees

   For each Fee Period, RMSPL will be entitled to an amount equal to the sum of the Management Fee and the Acquisition Success Fee incurred in that Fee Period. The fees are payable within 14 business days following receipt of RMSPL's invoice for the fees by IPL.

   For the purposes of the calculation of the fees:
4. "Acquisition Success Fee" means a fee payable upon successful completion of the acquisition of Property from time to time agreed by IPL to be acquired and form part of the "Properties" to be managed under the Management Agreement, and such fee (excluding GST) is equal to 0.75% of GST exclusive purchase price of a Property;
5. "Fee Period" means each calendar month with the first fee period commencing on the Commencement Date; and the last fee period ending at the end of the Term; and
6. "Management Fee" means the management fee for each Fee Period and such fee (excluding GST) is equal to one twelfth of 0.45% of the total aggregate value of the Properties as determined in accordance with the valuation principles set out in the Management Agreement.

The fees were negotiated and determined by the parties on an arm's length basis after taking into consideration of, among others, prevailing market conditions (including the practice and charges for similar services in the Territory), the scope and complexity of the historical transactions (including but not limited to the number of parties and length of negotiation involved), the scope of services and the level of manpower, expertise and resources required for provision of the management services by RMSPL to IPL.

The amount of fees payable by IPL to RMSPL pursuant to the Management Agreement for the period from the Commencement Date to the date of the Management Agreement is estimated to be approximately AUD310,580 (equivalent to approximately HK$1,806,892.3), which falls below the de minimis threshold under Rule 14A.76(1) of Chapter 14A of the Listing Rules.

Historical transaction amounts

The historical amount paid by IPL to the Group for transactions of a nature similar to those under the Management Agreement in respect of the period from 6 April 2016 to 31 December 2016 was approximately AUD834,693 (equivalent to approximately HK$4,856,076.9), which falls below the de minimis threshold under Rule 14A.76(1) of Chapter 14A of the Listing Rules.

Annual Caps and basis of determination

The continuing connected transactions under the Management Agreement will be subject to Annual Caps as set out below:

Period Aggregate value of Management Fee and Acquisition Success Fee payable by IPL to RMSPL

(HK$)

For the year ending 31 December 2017 12,000,000

For the year ending 31 December 2018 17,000,000

For the year ending 31 December 2019 20,000,000