Renewal of continuing connected transactions

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Tenfu (Cayman) Holdings Company Limited

天福（開曼）控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 6868)

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

Renewed Samoa Master Purchase Agreement

On 27 March 2019, the Company entered into the Renewed Samoa Master Purchase Agreement with Samoa Company, pursuant to which the Company agreed to purchase or procure members of the Group to purchase tea leaves from Samoa Group for a period of three years commencing on 1 January 2020 to 31 December 2022.

As Samoa Company is wholly owned by Mr. Lee Chia Ling, a substantial shareholder of the Company and a Director, and thus Samoa Company is an associate of a core connected person of the Company, the entering into of the Renewed Samoa Master Purchase Agreement and the transactions contemplated thereunder constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

Listing Rules Implications

As the applicable percentage ratios (other than profits ratio) in respect of the transactions under the Renewed Samoa Master Purchase Agreement exceed 5% on an annual basis, the transactions contemplated thereunder will be subject to the reporting, annual review, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules. Mr. Lee Chia Ling and his associates will abstain from voting on the proposed resolution approving the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder at the EGM.

The Independent Board Committee will be established to advise the Independent Shareholders and an independent financial adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder.

A circular containing, among other things, information on the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder, the recommendations of the Independent Board Committee to the Independent Shareholders in relation to the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder, a letter of advice from an independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder and the notice for the EGM to approve the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder will be despatched to the Shareholders on or before 18 April 2019.

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Renewed Samoa Master Purchase Agreement

Reference is made to the announcement of the Company dated 1 November 2016, the circular of the Company dated 21 November 2016 and the poll results announcement of the Company dated 13 December 2016 in respect of the continuing connected transactions in relation to the purchases of tea leaves from Samoa Group for the three years ending on 31 December 2019.

The Group has been purchasing tea leaves from Samoa Group as part of the ordinary and usual course of business. As the 2016 Samoa Master Purchase Agreement will expire on 31 December 2019, the Company has entered into the Renewed Samoa Master Purchase Agreement with Samoa Company to renew the purchase of tea leaves for a period of three years commencing on 1 January 2020 to 31 December 2022.

Details of the Renewed Samoa Master Purchase Agreement

Renewed annual caps: The renewed annual caps under the Renewed Samoa Master Purchase Agreement for the three years ending 31 December 2022 will not exceed RMB155,000,000, RMB170,000,000 and RMB187,000,000, respectively. The renewed annual caps have been determined based on the projected 10% increase in demand of tea leaves by the Group with reference to the market rates for tea leaves, which the Group purchased from independent third parties. In arriving at the renewed annual caps, the Directors have considered (i) the actual transaction amounts for the purchase of tea leaves from Samoa Group for the year ended 31 December 2018 and for the two months ended 28 February 2019; (ii) the expected purchase amount for the year ending 31 December 2019 estimated based on the historical proportion of the actual purchase amount for the two months ended 28 February 2019 to that for the full year ending 31 December 2019; and

(iii)the expected steady demand of the Group's tea leaves in 2019 thanks to the prospects of the sales of the Group's tea leaves and the steady tea consumption in the PRC for the past years.

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Save as disclosed above, other terms of the Renewed Samoa Master Purchase Agreement are the same as the 2016 Samoa Master Purchase Agreement.

Historical transaction amounts under the 2016 Samoa Master Purchase Agreement

The historical transaction amounts that the Group paid/payable to Samoa Group for the purchase of tea leaves for the three years ended 31 December 2018 and the two months ended 28 February

2019 were as follows:

Note: For the entire year ending 31 December 2019.

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Reasons for the transactions under the Renewed Samoa Master Purchase Agreement

The Group is principally engaged in the sale and marketing of a comprehensive range of tea products and the development of product concepts, tastes and packaging designs. The key products of the Group are tea leaves, tea snacks and tea ware, which are sold through a nationwide network of self-owned and third-party owned retail outlets and retail points. Samoa Company and its subsidiaries are engaged in the packaging, marketing and sale of tea leaves as well as the development and sale of tea snacks and tea ware. The Group has been purchasing tea leaves from Samoa Group as part of the ordinary and usual course of business.

Internal Control Measures

The Group adopted the following internal control measures to ensure that the transactions with Samoa Group will be conducted on normal commercial terms going forward:

(i)where applicable and commercially sensible, the Group will continue to request Samoa Group to provide the tea leaves through a bidding process, on arm's length basis and on the best available terms, with reference to the prevailing market prices;

(ii)as part of the internal control measures, the implementation of the Renewed Samoa Master Purchase Agreement and the actual number and amount of tea leaves will be monitored and reviewed by the Board (including the independent non-executive Directors) and the senior management on a regular basis, with reference to terms of similar transactions with the independent third parties;

(iii)the relevant operational divisions of the Group will report regularly to senior management with respect to the actual performance of the transactions of purchase of tea leaves with Samoa Group;

(iv)the Director(s) and/or the Shareholder(s) with an interest in the relevant transaction(s) shall abstain from voting in respect of the resolution(s);

(v)the Group shall use the best endeavour to comply with the relevant reporting, annual review, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules for the continuing connected transactions;

(vi)the Company will engage its auditor to report on the connected transactions between the Group and Samoa Group contemplated under the Renewed Samoa Master Purchase Agreement every year in accordance with Rule 14A.56 of the Listing Rules; and

(vii)the Group will duly disclose in the annual reports and accounts the transactions of purchase of tea leaves with Samoa Group during each financial period, together with the conclusions (with basis) drawn by the independent non-executive Directors whether the transactions are conducted on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

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Directors' View

Given that the tea leaves are being purchased based on prevailing market rates, the Directors (excluding the independent non-executive Directors who will form the view after considering the advice from the independent financial adviser) consider that the Renewed Samoa Master Purchase Agreement is entered into on an arm's length basis, on normal commercial terms, in the usual and ordinary course of business of the Group, and the transactions contemplated under the Renewed Samoa Master Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Listing Rules Implications

Samoa Company is wholly owned by Mr. Lee Chia Ling, a substantial shareholder of the Company and a Director. Accordingly, Samoa Company is an associate of a core connected person of the Company and the entering into of the Renewed Samoa Master Purchase Agreement and the transactions contemplated thereunder constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

Samoa Company is wholly owned by Mr. Lee Chia Ling, a substantial shareholder of the Company and a Director. Accordingly, Mr. Lee Chia Ling, Mr. Lee Rie-Ho, who is the father of Mr. Lee Chia Ling, Mr. Lee Kuo-Lin, who is the elder brother of Mr. Lee Chia Ling, and Mr. Lee Shih-Wei, who is a cousin of Mr. Lee Chia Ling, are considered to be interested in the transactions under the Renewed Samoa Master Purchase Agreement and therefore abstained from voting on the board resolutions for approving the Renewed Samoa Master Purchase Agreement and the transactions contemplated thereunder.

As the applicable percentage ratios (other than profits ratio) in respect of the transactions under the Renewed Samoa Master Purchase Agreement are expected to be more than 5% on an annual basis, the transactions contemplated thereunder will be subject to the reporting, annual review, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules. Mr. Lee Chia Ling and his associates will abstain from voting on the proposed resolution approving the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder at the EGM.

The Independent Board Committee will be established to advise the Independent Shareholders and an independent financial adviser will be appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder.

A circular containing, among other things, information on the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder, the recommendations of the Independent Board Committee to the Independent Shareholders in relation to the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder, a letter of advice from an independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder and the notice for the EGM to approve the Renewed Samoa Master Purchase Agreement and the continuing connected transactions contemplated thereunder will be despatched to the Shareholders on or before 18 April 2019.

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