Fairwood : Connected Transaction - Renewal of Tenancy Agreement

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FAIRWOOD HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 52)

CONNECTED TRANSACTION RENEWAL OF TENANCY AGREEMENT

On 26 February 2021, Fairwood, an indirect wholly-owned subsidiary of the Company, as tenant, and Hibony, as landlord, entered into the New Tenancy Agreement to renew the tenancy of the Premises for a term of three (3) years commencing on 1 March 2021 and expiring on 29 February 2024 (both days inclusive), with an option granted to Fairwood to renew the tenancy for a further term of three years.

Hibony is a connected person of the Company by virtue of being an associate of Mr Dennis Lo who is an Executive Chairman and substantial Shareholder of the Company, as defined under the Listing Rules. Accordingly, the entering into of the New Tenancy Agreement constitutes connected transaction of the Company under Chapter 14A of the Listing Rules.

In accordance with HKFRS 16 "Leases", the Group is required to recognize the value of the right-of-use asset in connection with the New Tenancy Agreement and this transaction will be regarded as an acquisition of an asset by the Group pursuant to the Listing Rules. The estimated value of the right-of-use asset to be recognized by the Group under the New Tenancy Agreement is approximately HK$12,879,000. Shareholders should note that the above figure is unaudited and may be subject to adjustment in the future.

As the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the estimated value of the right-of-use asset to be recognized by the Group under the New Tenancy Agreement are more than 0.1% but less than 5%, the entering into of the New Tenancy Agreement is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and Shareholders' approval requirements under Chapter 14A of the Listing Rules.

BACKGROUND

Reference is made to the announcement of the Company dated 27 February 2018 containing details of the Expiring Tenancy Agreement. Fairwood did not exercise the option to renew within the prescribed period under the Expiring Tenancy Agreement.

After negotiation, Fairwood and Hibony agreed to enter into the New Tenancy Agreement torenew the tenancy of the Premises with principal terms being set out below.

New Tenancy Agreement

Date	: 26 February 2021
Landlord	: Hibony
Tenant	: Fairwood
Premises	: Portion of first floor of Morning Light Building, No. 7-9 Hong Ning Road,
Kwun Tong, Kowloon, Hong Kong.

Term

• : Three (3) years commencing on 1 March 2021 and expiring on 29 February 2024 (both days inclusive).

  Rental

• : HK$200,000 per month payable in cash in advance on the first day of each month from 1 March 2021. Rental payable is exclusive of management fee and government rates. An independent professional valuer has provided Fairwood with current rental opinion in respect of the Premises based on market rental information of comparable properties and the rental payable under the New Tenancy Agreement was determined in accordance with such opinion.

  Deposit

• : HK$600,000, representing three months' rental payable upon the signing of the New Tenancy Agreement by Fairwood.

  Rent-free period

• : (i) first month of the term (i.e. commencing on 1 March 2021 to 31 March 2021); and

  (ii) first month of the option term (i.e. commencing on 1 March 2024 to 31

  March 2024).

  Option Term

• : An option is granted to Fairwood to renew the tenancy of the Premises for a further term of three years at an open market rent to be mutually agreed but shall in any event not more than HK$260,000 per month. The option to renew is exercisable by Fairwood at its sole and absolute discretion.

Historical Rentals

The historical rentals under the Expiring Tenancy Agreement, excluding management fee and government rates, for each of the financial years of the Company ended on 31 March 2018, 31 March 2019 and 31 March 2020 and ending on 31 March 2021 were HK$260,000, HK$3,120,000, HK$2,990,838 and HK$2,756,000 respectively.

Reasons for the transaction

Fairwood has been operating a fast food restaurant at the Premises since April 2012.

Byentering into the New Tenancy Agreement, Fairwood will maintain its business operations at the same location which will not only enable Fairwood to continue serving the customers that it has built up over the past nine years, but also maintain its competitive advantage by remaining its business network in this district. Therefore, Fairwood and the Company consider it as beneficial to enter into the New Tenancy Agreement.

An independent professional valuer has provided Fairwood with the current rental opinion in respect of the Premises based on market rental information of comparable properties. The rental payable under the New Tenancy Agreement was determined in accordance with the opinion provided by that independent professional valuer.

The Directors, including the independent non-executive Directors, consider that the New Tenancy Agreement has been entered into in the ordinary and usual course of business of the Company, on normal commercial terms which are fair and reasonable, and in the interests of the Company and the Shareholders as a whole. Mr Dennis Lo and Mr Francis Lo abstained from voting on the board resolution for approving the transaction as detailed in this announcement.

Principal business activities of the Company, Fairwood and Hibony

The principal business activity of the Company is investment holding.

The principal business activities of Fairwood are investment holding and the operation of a chain of restaurants in Hong Kong.

Hibony is principally engaged in property investment in Hong Kong.

Details of the connected relationship and implications under the Listing Rules

As at the date of this announcement, Hibony is a company which is indirectly wholly-owned by Mr Dennis Lo, hence, Hibony is a connected person of the Company by virtue of being an associate of Mr Dennis Lo who is an Executive Chairman and substantial Shareholder of the Company. Accordingly, the entering into of the New Tenancy Agreement constitutes connected transaction of the Company under Chapter 14A of the Listing Rules.

In accordance with HKFRS 16 "Leases", the Group is required to recognize the value of the right-of-use asset in connection with the New Tenancy Agreement and this transaction will be regarded as an acquisition of an asset by the Group pursuant to the Listing Rules. The estimated value of the right-of-use asset to be recognized by the Group under the New Tenancy Agreement is approximately HK$12,879,000. Shareholders should note that the above figure is unaudited and may be subject to adjustment in the future.

As the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the estimated value of the right-of-use asset to be recognized by the Group under the New Tenancy Agreement are more than 0.1% but less than 5%, the entering into of the New Tenancy Agreement is subject to the reporting and announcement requirements but exempt from the circular (including independent financial advice) and Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Definitions
"associate"	has the meaning ascribed thereto under the Listing Rules;
"Board"	the board of Directors;
"Company"	Fairwood Holdings Limited, an exempted company incorporated in
Bermuda with limited liability, whose shares are listed on the Main
Board of the Stock Exchange;
"connected person"	has the meaning ascribed thereto under the Listing Rules;
"Directors"	the directors of the Company;
"Expiring Tenancy	the tenancy agreement dated 27 February 2018 entered into between
Agreement"	Fairwood and Hibony in respect of the Premises for a term of three (3)
years commencing on 1 March 2018 and expiring on 28 February 2021
with an option granted to Fairwood to renew the tenancy for a further
term of three years;
"Fairwood"	Fairwood Fast Food Limited, a company incorporated in Hong Kong
with limited liability and is an indirect wholly-owned subsidiary of the
Company;
"Group"	the Company and its subsidiaries;
"Hibony"	Hibony Limited, a company incorporated in Hong Kong with limited
liability, which is indirectly wholly-owned by Mr Dennis Lo;
"Hong Kong"	the Hong Kong Special Administrative Region of the People's Republic
of China;
"HKFRS"	Hong Kong Financial Reporting Standards issued by the Hong Kong
Institute of Certified Public Accountants;
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock Exchange;
"Mr Dennis Lo"	Mr Dennis Lo Hoi Yeung, the Executive Chairman and substantial
Shareholder of the Company;
"Mr Francis Lo"	Mr Lo Fai Shing Francis, Chief Executive Officer and Executive
Director of the Company and an associate of Mr Dennis Lo;
"New Tenancy	Tenancy Agreement dated 26 February 2021 entered into between
Agreement"	Fairwood and Hibony in respect of the Premises;
"Premises"	Portion of first floor of Morning Light Building, No. 7-9 Hong Ning
Road, Kwun Tong, Kowloon, Hong Kong;
4

"Shareholder(s)"	holder(s) of the shares of the Company;
"Stock Exchange"	The Stock Exchange of Hong Kong Limited; and
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong.

By Order of the Board

Mak Yee Mei Company Secretary

Hong Kong, 26 February 2021

As at the date of this announcement, the Directors of the Company are:

Executive Directors: Mr Dennis Lo Hoi Yeung (Executive Chairman), Mr Lo Fai Shing Francis (Chief Executive Officer), Ms Mak Yee Mei and Ms Peggy Lee; and

Independent Non-executive Directors: Mr Ng Chi Keung, Mr Joseph Chan Kai Nin, Dr Peter Lau Kwok Kuen, Mr Tony Tsoi Tong Hoo and Mr Peter Wan Kam To.

Website:www.fairwoodholdings.com.hk