Fortune Real Estate Investment Trust : (1) Proposed Increase in Property Development CAP and Amendment to the Trust Deed; (2) Continuing Connected Party Transactions; (3) Proposed Unit Buy-Back Mandate; and (4) Notice of Annual General Meeting and Closure of Register of Unitholders

The Securities and Futures Commission of Hong Kong, Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

FORTUNE REAL ESTATE INVESTMENT TRUST

(a collective investment scheme authorised under section 104

of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong))

(Stock Code: 778)

Managed by

ARA Asset Management (Fortune) Limited

ANNOUNCEMENT

1. PROPOSED INCREASE IN PROPERTY DEVELOPMENT CAP AND AMENDMENT TO THE TRUST DEED;
2. 1. CONTINUING CONNECTED PARTY TRANSACTIONS;

1. 1. PROPOSED UNIT BUY-BACK MANDATE; AND
2. NOTICE OF ANNUAL GENERAL MEETING AND CLOSURE OF REGISTER OF UNITHOLDERS

Independent Financial Adviser

to the Independent Board Committee, the Independent Unitholders and the Trustee

PROPOSED INCREASE IN PROPERTY DEVELOPMENT CAP AND AMENDMENT TO THE TRUST DEED

The Board wishes to announce that the Manager proposes to seek Unitholders' approval by way of Extraordinary Resolution at the AGM to increase the Property Development Cap on investments in Property Development and Related Activities from 10% of the Gross Asset Value of the Deposited Property to 25% of the Gross Asset Value of the Deposited Property and to amend the Trust Deed to reflect such increase.

CONTINUING CONNECTED PARTY TRANSACTIONS

In anticipation of the expiry of the 2018 Extended Waiver, and having regard to the regular, ordinary and ongoing nature of the CK Leasing Transactions, the CK Property Management Transactions and the Manager Leasing Transactions, on 27 April 2021, Fortune REIT (through the Manager) entered into: (i) the CK Leasing Transactions Framework Agreement with CKA, which sets out the framework terms governing the CK Leasing Transactions for the period from 1 January 2022 to 31 December 2024; (ii) the CK Property Management Transactions Framework Agreement with CKA, which sets out the framework terms governing the CK Property Management Transactions (including the transactions under the Property Management Agreement and the Deeds of Mutual Covenants) for the period from 1 January 2022 to 31 December 2024; and (iii) the Manager Leasing Transactions Framework Agreement with the Manager (in its personal capacity), which sets out the framework terms governing the Manager Leasing Transactions (including the transactions under the Manager Lease Agreement) for the period from 1 January 2022 to 31 December 2024.

The CK Leasing Transactions Framework Agreement and the Manager Leasing Transactions Framework Agreement are not conditional upon the approval of the Unitholders. The CK Property Management Transactions Framework Agreement is conditional upon the passing of Ordinary Resolution No. 1 as set out in the Circular. If this condition is not satisfied by 31 December 2021, the CK Property Management Transactions Framework Agreement shall automatically terminate.

The Manager proposes to seek Unitholders' approval by way of Ordinary Resolution at the AGM to approve the CK Property Management Transactions Framework Agreement, the CK Property Management Transactions under the CK Property Management Transactions Framework Agreement and the proposed annual caps applicable thereto for the financial years ending 31 December 2022, 31 December 2023 and 31 December 2024.

PROPOSED UNIT BUY-BACK MANDATE

The Manager further proposes to seek Unitholders' approval by way of Ordinary Resolution at the AGM to grant the Unit Buy-back Mandate to the Manager on behalf of Fortune REIT to buy back Units on the SEHK. Subject to the passing of Ordinary Resolution No. 2, the number of Units which may be bought back pursuant to the Unit Buy-back Mandate is up to 10% of the total number of Units in issue as at the date of the passing of such resolution.

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NOTICE OF ANNUAL GENERAL MEETING AND CLOSURE OF REGISTER OF UNITHOLDERS

Details of the above are more particularly set out in the Circular, which is expected to be despatched to the Unitholders on 28 April 2021.

The AGM will be held at 2:30 p.m. on Friday, 28 May 2021 or any adjournment thereof, at 24th Floor, Admiralty Centre I, 18 Harcourt Road, Hong Kong, for the purpose of considering and, if thought fit, passing with or without amendments, the Ordinary Resolutions set out in the AGM Notice. The Register of Unitholders will be closed from Tuesday, 25 May 2021 to Friday, 28 May 2021 (both days inclusive), during which no transfer of Units will be effected, to determine which Unitholders will qualify to attend and vote at the AGM.

1. PROPOSED INCREASE IN THE PROPERTY DEVELOPMENT CAP AND AMENDMENT TO THE TRUST DEED

On 4 December 2020, the REIT Code was amended to, inter alia, relax the Property Development Cap from 10% to up to 25% of the REIT's gross asset value, provided that: (a) its unitholders have given their consent to such increase by way of resolution at a general meeting; (b) the increase is permitted and effected pursuant to its trust deed; and (c) no objection from the trustee of the REIT has been obtained.

Under the current provisions of the Trust Deed, Fortune REIT is allowed to engage in Property Development and Related Activities up to 10% of the Gross Asset Value of the Deposited Property. The Manager is of the view that, following the REIT Code Amendments, allowing Fortune REIT to engage in Property Development and Related Activities in excess of the existing limit of 10% of the Gross Asset Value of the Deposited Property to not more than 25% of the Gross Asset Value of the Deposited Property, being the proposed increase in the Property Development Cap, is beneficial to Fortune REIT and the Unitholders as a whole. In particular, the enhanced flexibility can provide Fortune REIT with more options in selecting acquisition targets and will enable the Manager to pursue further investment opportunities for Fortune REIT as and when they arise.

In connection with the proposed increase in the Property Development Cap, the Manager proposes consequential amendments to the Trust Deed (being the Property Development Cap Amendment), the full text of which is set out in Appendix I to the Circular.

The proposed increase in the Property Development Cap and the Property Development Cap Amendment are subject to Unitholders' approval pursuant to clause 28 of the Trust Deed and 7.2AA(a), 7.2AA(b) and 9.6 of the REIT Code. The Manager proposes to seek such approval by way of Extraordinary Resolution No. 1.

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2. CONTINUING CONNECTED PARTY TRANSACTIONS

2.1 Background

At the time of authorisation of Fortune REIT in 2010, the Manager had applied for, and the SFC had granted, waivers from strict compliance with Chapter 8 of the REIT Code in respect of certain continuing connected party transactions of Fortune REIT, which were subsequently modified and/or extended on 19 January 2012, 16 September 2013, 17 April 2015 and 27 April 2018. Details of the 2018 Extended Waiver, which is due to expire on 31 December 2021, and the categories of continuing connected party transactions which are the subject of the 2018 Waiver are more particularly set out in the 2018 Circular.

On 4 December 2020, the REIT Code was revised to, inter alia, broadly align the requirements applicable to connected party transactions of REITs with the requirements for companies listed on the SEHK. Following the changes to the REIT Code, save as otherwise provided in the REIT Code or the guidelines issued by the SFC from time to time, all connected party transactions of REITs will be regulated with reference to the requirements applicable to listed companies under Chapter 14A of the Listing Rules to the extent appropriate and practicable, including whether certain connected party transactions are continuing connected party transactions, available exemptions and the conditions thereof and unitholders' approval, disclosure, reporting, annual review and other requirements. All pre-existing waivers shall continue to apply until expiry according to their terms or until otherwise modified or revoked.

Since the 2018 Extended Waiver is due to expire on 31 December 2021, the continuing connected party transactions of Fortune REIT which are the subject of the 2018 Extended Waiver will, upon such expiry, be regulated with reference to Chapter 14A of the Listing Rules.

The categories of such continuing connected party transactions which will be regulated with reference to Chapter 14A of the Listing Rules upon the expiry of the 2018 Extended Waiver on 31 December 2021 are as follows:

1. as part of the Fortune REIT Group's ordinary and usual course of business, leasing and licensing transactions have been, or will from time to time be, conducted between a member of the Fortune REIT Group on the one hand and a member of the CKA Connected Persons Group on the other hand in respect of any part of Fortune REIT's Properties (the "CK Leasing Transactions");
2. as part of the Fortune REIT Group's ordinary and usual course of business, leasing and licensing transactions (including the transactions under the Manager Lease Agreement) have been, or will from time to time be, conducted between a member of the Fortune REIT Group on the one hand and a member of the Manager Group on the other hand in respect of any part of Fortune REIT's Properties (the "Manager Leasing Transactions"); and

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1. as part of the Fortune REIT Group's ordinary and usual course of business, the following categories of property management transactions have been, or will from time to time be, conducted between a member of the Fortune REIT Group on the one hand and a member of the CKA Connected Persons Group on the other hand in respect of any part of Fortune REIT's Properties (the "CK Property Management Transactions")
2. 1. the transactions under the Property Management Agreement, including the provision of property management, lease management and marketing services by the Property Manager for Fortune REIT's Properties;
   2. the transactions which the Property Manager, as agent for the relevant registered owners of Fortune REIT's Properties, have entered into, or will from time to time enter into, with third party service providers (which may be members of the CKA Connected Persons Group) for the provision of, among other things, cleaning, maintenance, security, car park management and other ancillary services for Fortune REIT's Properties; and
   3. the transactions under the deeds of mutual covenants applicable to any part of Fortune REIT's Properties and by which the registered owners of such properties are bound (the "Deeds of Mutual Covenants"), including the provision of maintenance and other ancillary services for the common areas and facilities by the relevant property manager thereunder (which may be members of the CKA Connected Persons Group).

The following table sets out the applicable existing annual caps under the 2018 Extended Waiver:

1. As defined in the 2018 Circular.

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