Tingyi Cayman Islands : PROPOSED CONTINUING CONNECTED TRANSACTIONS

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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)

PROPOSED CONTINUING CONNECTED TRANSACTIONS

The Board proposes the entering into of (i) the Tingzheng Supply Agreement, (ii) the Marine Vision Supply Agreement, and (iii) the Ting Tong Logistics Agreement. Such agreements will constitute continuing connected transactions of the Company, each for a term of three financial years ending 31 December 2025.

As each of Tingzheng, Marine Vision and Ting Tong is beneficially owned by family members and relatives of Mr. Wei Hong-Ming, the Chairman of the Board and an executive Director of the Company, and Mr. Wei Hong-Chen, an executive Director of the Company, each of Tingzheng, Marine Vision and Ting Tong is hence a connected person of the Company for the purpose of Chapter 14A of the Listing Rules, and the transactions contemplated under the Tingzheng Supply Agreement, the Marine Vision Supply Agreement, and the Ting Tong Logistics Agreement will 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 each of the Tingzheng Supply Agreement, the Marine Vision Supply Agreement and the Ting Tong Logistics Agreement are expected to exceed 5%, the transactions contemplated under each of the Tingzheng Supply Agreement, the Marine Vision Supply Agreement and the Ting Tong Logistics Agreement will be subject to the reporting, annual review, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

An independent financial adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of Continuing Connected Transactions. A circular containing, amongst others, details of the Continuing Connected Transactions, a letter from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Continuing Connected Transactions, a letter from the Independent Board Committee to the Independent Shareholders in relation to the Continuing Connected Transactions, together with a notice convening the EGM to be held on Monday, 13 June 2022 is expected to be despatched to the Shareholders on or around 28 April 2022.

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INTRODUCTION

The Board proposes the entering into of (i) the Tingzheng Supply Agreement, (ii) the Marine Vision Supply Agreement, and (iii) the Ting Tong Logistics Agreement. Such agreements will constitute continuing connected transactions of the Company, each for a term of three financial years ending 31 December 2025. Such agreements will be entered into upon approvals by the Independent Shareholders.

THE TINGZHENG SUPPLY AGREEMENT

Reference is made to the announcements of the Company dated 21 November 2019 and 16 December 2019 and the circular of the Company dated 23 December 2019 in relation to the 2019 Tingzheng Agreement. As the 2019 Tingzheng Agreement is due to expire on 31 December 2022, the Board proposes the entering into of the Tingzheng Supply Agreement to enable the Group to continue to purchase flexible plastic packaging materials and plastic products from Tingzheng and its subsidiaries for the Group's operation requirements in the upcoming three years. The principal terms of the Tingzheng Supply Agreement are set out below:

Subject:	The Group will purchase flexible plastic packaging materials and
	plastic products from Tingzheng and its subsidiaries.
Term:	Three financial years commencing on 1 January 2023 and ending
	on 31 December 2025.
Price:	The price of the products to be supplied by Tingzheng and its
	subsidiaries to the Group will be based on the quoted price for the
	products to be supplied. Such quoted price will be determined on
	a quarterly basis based on arm's length negotiations between the
	parties and on normal commercial terms with reference to:
	i.	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;
	ii.	if there are insufficient comparable transactions to (i) 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 quality; and

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1. if both (i) and (ii) 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 Tingzheng Supply Agreement will be calculated on a monthly basis upon delivery of the products, with additional credit terms of 60 days. The payment will be made on the monthly payment day specified by the Group after the end of the credit terms.

Cap amount: Pursuant to the Tingzheng Supply Agreement, the Group has agreed to purchase products from Tingzheng and its subsidiaries based on the pricing policy stated above during the term of the Tingzheng Supply Agreement subject to the following annual caps:

Financial year ending

31 December

2023 2024 2025

RMB' million RMB' million RMB' million

Transaction amount

2,700

3,000

3,300

The annual caps for the Tingzheng Supply Agreement were determined based on the historical transaction amount with Tingzheng and its subsidiaries, and the Group's expected demand for the products supplied by Tingzheng and its subsidiaries.

The historical transaction amount of the products supplied by Tingzheng and its subsidiaries for the two financial years ended 31 December 2021 and the two months ended 28 February 2022 are set out below:

			For the
			two months
	For the year ended	ended
	31 December		28 February
	2020	2021	2022
	RMB' million RMB' million RMB' million
Annual cap	2,200	2,300	2,400(Note)
Historical transaction
amount	2,154	2,236	272

Note: The annual cap for 2022 is for the whole financial year.

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Condition

The Tingzheng Supply Agreement is subject to the Company's compliance with the requirements of the Listing Rules with respect to continuing connected transactions, including approval from the Independent Shareholders.

Reasons for entering the Tingzheng Supply Agreement

Tingzheng and its subsidiaries have been supplying flexible plastic packaging materials and plastic products to the Group for more than fifteen years. Such products are being used for the packaging of the Group's products in the ordinary and usual course of business of the Group.

Tingzheng and its subsidiaries are among the leading producers of flexible plastic packaging materials and plastic products in the PRC. They have multiple standardised factories covering the production centers of the Group, which can ensure the timely and stable supply of high quality standardised products to the Group. The Group has always been committed to food safety and quality guarantee, and has high requirements for its suppliers, such as the ability to provide stable and sufficient quantities of high quality standardised products in a timely manner. The Group has been satisfied with the quality of the products supplied by Tingzheng and its subsidiaries, and has not encountered any issue with the quality of the products supplied by Tingzheng and its subsidiaries. As the 2019 Tingzheng Agreement is due to expire on 31 December 2022, the Tingzheng Supply Agreement is being entered into to enable the Group to continue to purchase the products from Tingzheng and its subsidiaries for the Group's operation requirements in the upcoming three years.

As the Tingzheng Supply Agreement is being entered into in the ordinary and usual course of business of the Company 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 other independent third party suppliers, the Directors (excluding the independent non-executive Directors) consider that the transactions under the Tingzheng 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. The independent non-executive Directors will form their view after taking advice from the independent financial adviser. Mr. Wei Hong-Ming, the Chairman of the Board and an executive Director of the Company, and Mr. Wei Hong-Chen, an executive Director of the Company, are considered to be interested in the transactions contemplated under the Tingzheng Supply Agreement and have avoided discussion and abstained from voting on the board resolution to approve the Tingzheng Supply Agreement.

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THE MARINE VISION SUPPLY AGREEMENT

Reference is made to the announcement of the Company dated 18 October 2019 in relation to the 2019 Marine Vision Agreement. As the 2019 Marine Vision Agreement is due to expire on 31 December 2022, the Board proposes the entering into of the Marine Vision Supply Agreement to enable the Group to continue to purchase carton box products from Marine Vision and its subsidiaries for the Group's operation requirements in the upcoming three years. The principal terms of the Marine Vision Supply Agreement are set out below:

Subject:	The Group will purchase carton box products from Marine Vision
	and its subsidiaries.
Term:	Three financial years commencing on 1 January 2023 and ending
	on 31 December 2025.
Price:	The price of the products to be supplied by Marine Vision and its
	subsidiaries to the Group will be based on the quoted price for the
	products to be supplied. Such quoted price will be determined on
	a quarterly basis based on arm's length negotiations between the
	parties and on normal commercial terms with reference to:
	i.	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;
	ii.	if there are insufficient comparable transactions to (i) 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
		quality; and
	iii.	if both (i) and (ii) 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 Marine Vision Supply Agreement will be calculated on a monthly basis upon delivery of the products, with additional credit terms of 60 days. The payment will be made on the monthly payment day specified by the Group after the end of the credit terms.

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