Parkson Retail : Major Transaction

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PARKSON RETAIL GROUP LIMITED

百 盛 商 業 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 3368)

MAJOR TRANSACTION:

ENTERING INTO A LEASE AGREEMENT AS LESSEE IN

RESPECT OF A PROPERTY IN BEIJING, THE PRC

THE NEW LEASE AGREEMENT

On 6 June 2019, the Tenant (an indirect wholly-owned subsidiary of the Company) and the Landlord entered into a New Lease Agreement in respect of the Property located in Beijing, the PRC. Prior to entering into the New Lease Agreement, the Tenant had been occupying the Property as tenant for its retail business since 1999 pursuant to the Previous Lease Agreement. On 26 February 2019, the Tenant and the Landlord entered into Seven Lease Agreements. For details of the Seven Lease Agreements, please refer to the announcement of the Company dated 3 April 2019.

Pursuant to IFRS 16, the entering into the New Lease Agreement as lessee will require the Group to recognise the Property as the right-of-use asset in which the amount was approximately RMB2.2 million calculated with reference to the aggregated present value of the fixed lease payments as discounted using a discount rate which is equivalent to the Company's incremental borrowing rate during the entire terms of the New Lease Agreement, thus the entering into the New Lease Agreement and the transaction contemplated thereunder will be regarded as an acquisition of asset by the Group.

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IMPLICATIONS UNDER THE LISTING RULES

The transaction contemplated under the New Lease Agreement is regarded as an acquisition of asset under the Listing Rules and is required to be aggregated for determining the classification of the transaction under Rule 14.06 of the Listing Rules. On the basis of the acquisition of right-of-use asset under the New Lease Agreement, the amount recognised by the Group pursuant to IFRS 16 is approximately RMB2.2 million.

As one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the consideration under the New Lease Agreement, when aggregated with the total consideration under the Seven Lease Agreements, for the acquisition of the right-of-use assets recognised by the Group pursuant to IFRS 16 are more than 25%, the entering into the New Lease Agreement constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is therefore subject to the announcement, circular and shareholders' approval requirements under Chapter 14 of the Listing Rules.

To the best of the knowledge of the Directors, no Shareholders or any of their respective associates has any material interest in the New Lease Agreement and none of the Shareholders is required to abstain from voting in favour of the resolution to approve the entering into the New Lease Agreement. A closely allied group of Shareholders interested in an aggregated of 1,448,270,000 Shares, representing approximately 54.97% of the total issued share capital of the Company has given its written approval of the entering into of the New Lease Agreement and the transaction contemplated thereunder. The written approval of the aforementioned group of Shareholders has been accepted in lieu of holding a general meeting of the Company pursuant to Rule 14.44 of the Listing Rules.

A circular containing, among other things, information relating to the New Lease Agreement is expected to be despatched to the Shareholders for information purposes only in accordance with Rule 14.41(a) of the Listing Rules on or before 28 June 2019.

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1. INTRODUCTION

The Board is pleased to announce that on 6 June 2019, the Tenant (an indirect wholly- owned subsidiary of the Company) and the Landlord entered into the New Lease Agreement in respect of the Property located in Beijing, the PRC. Prior to entering into the New Lease Agreement, the Tenant had been occupying the Property as tenant for its retail business since 1999 pursuant to the Previous Lease Agreement. On 26 February 2019, the Tenant and the Landlord entered into Seven Lease Agreements. For details of the Seven Lease Agreements, please refer to the announcement of the Company dated 3 April 2019. A summary of the principal terms of the New Lease Agreement and the relevant information is set out below.

2. NEW LEASE AGREEMENT

2.1 New Lease Agreement

Date	:	6 June 2019
Parties	:	Tenant: Parkson Retail Development Co., Ltd.*（百
		盛商業發展有限公司）, an indirect wholly-owned
		subsidiary of the Company, as tenant
		Landlord: China National Arts and Crafts Group
		Company Limited*（中國工藝美術集團有限公司）as
		landlord
Relevant Premise	:	The area at the east side inside the south gate of
		Xu Room on the 1st floor of the Museum (the
		"Property").
Total gross area	:	189 sq. m
Term	: 7 June 2019 to 6 December 2021
Rental	:	The total rental payable under the New Lease
		Agreement is approximately RMB2.5 million. The
		rental shall be paid on quarterly basis.
Deposit	: No deposit was paid.
Use	:	Department store retail, entertainment, property
		management and related ancillary services
Effective date	:	7 June 2019
of the lease
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2.2 Other material terms

1. The Tenant may sub-lease part of the Property under the New Lease Agreement; and
2. the Tenant has a priority of lease of the Property should the Landlord wish to lease the Property after the expiry of the terms under the New Lease Agreement and if the Tenant can match the terms offered by the Landlord to other potential tenants.

3. BASIS FOR DETERMINATION OF THE RENTAL AND OTHER INFORMATION

The terms of the New Lease Agreement (including the rental) were determined after arm's length negotiations between the Landlord and the Tenant, with reference to the mechanism for determining the rentals under the Seven Lease Agreements, the amounts of the rental payable under the Seven Lease Agreements and the prevailing market rentals for properties of similar type, age and location.

The rental and other amounts payable by the Tenant under the New Lease Agreement are expected to be financed by the internal resources of the Group.

4. INFORMATION ON THE PARTIES

1. The Group and the Tenant
   The principal activities of the Group are the operation and management of a network of department stores in the PRC.
   The Tenant is an indirect wholly-owned subsidiary of the Company whose scope of business includes, retail, whole-sale and import and export.
2. Landlord
   The Landlord is a company established in the PRC whose scope of business includes art work, jewellery, gifts, tourist souvenirs, exhibition and leasing of venues and exhibition tools.

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To the best knowledge and belief of the Directors having made all reasonable enquiries, the Landlord and its ultimate owner(s) are third parties independent of, and not connected with, the Company and its connected persons (as defined under the Listing Rules).

5. REASONS AND BENEFITS FOR ENTERING INTO THE NEW LEASE AGREEMENT

The Tenant was the existing tenant of the Property under the Previous Lease Agreement. The Group has been carrying out retail business at the Property since 1999. The operation at the Property has brought stable revenue to the Group during the past years. The New Lease Agreement, with a term of approximately 2.5 years and to expire on 6 December 2021, allows the continuity of the Group's retail operation at a place which is familiar to the Group's customers for long term. On the basis of the disclosure in section 3 of this announcement, the Board is of the view that the rentals are reasonable and the terms of the New Lease Agreement, taken as a whole, are fair and reasonable.

Having taken into account the above reasons and benefits, the Directors (including all the independent non-executive Directors) consider that the terms of the New Lease Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

6. IMPLICATIONS UNDER THE LISTING RULES

6.1 Acquisition of asset by the Company

Pursuant to IFRS 16, the entering into the New Lease Agreement as a lessee will require the Group to recognise the Property as the right-of-use asset, thus the entering into the New Lease Agreement and the transaction contemplated thereunder will be regarded as an acquisition of asset by the Group under the Listing Rules.

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