Meilleure Health International Industry : (1) REVISION OF ANNUAL CAP OF CONTINUING CONNECTED TRANSACTIONS FOR THE YEAR ENDING 31 DECEMBER 2020; AND (2) CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF FRAMEWORK AGREEMENT

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MEILLEURE HEALTH INTERNATIONAL INDUSTRY GROUP LIMITED

美 瑞 健 康 國 際 產 業 集 團 有 限 公 司

(Incorporated in Bermuda with limited liability)

(Stock Code: 2327)

1. REVISION OF ANNUAL CAP OF CONTINUING CONNECTED TRANSACTIONS FOR THE YEAR ENDING 31 DECEMBER 2020;

AND

1. CONTINUING CONNECTED TRANSACTIONS IN RELATION TO RENEWAL OF FRAMEWORK AGREEMENT

REVISION OF 2020 ANNUAL CAP

Reference is made to the circular of the Company dated 10 May 2018 in relation to, among other things, the Original Framework Agreement entered into between U-Home Group Limited and the Company pursuant to which the Group would provide the Property Sales and Consultancy Services to U-Home Group.

Due to an increase in anticipated total gross floor area of the real estate projects developed by U-Home Group that have been sold and expected to be sold in 2020, the annual amounts for the service fees payable by U-Home Group to the Group in respect of the Property Sales and Consultancy Services for the year ending 31 December 2020 is expected to be higher than the level as envisaged at the time of entering into of the Original Framework Agreement.

On 15 September 2020, U-Home Group Limited and the Company entered into the Third Supplemental Framework Agreement to revise the 2020 Annual Cap for the service fees payable by U-Home Group to the Group in respect of the Property Sales and Consultancy Services under the Original Framework Agreement from RMB26,000,000 (equivalent to approximately HK$29,424,000) to RMB36,000,000 (equivalent to approximately HK$40,741,000).

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LISTING RULES IMPLICATIONS

As U-Home Group Limited is wholly-owned by Mr. Zhou Xuzhou, an executive Director and controlling shareholder of the Company, U-Home Group Limited is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions with U-Home Group Limited contemplated under the Third Supplemental Framework Agreement constitute continuing connected transactions on the part of the Company under Chapter 14A of the Listing Rules.

Since the applicable percentage ratios in respect of the revised 2020 Annual Cap are more than 5% and the aggregate annual consideration is more than HK$10,000,000, the transactions contemplated under the Third Supplemental Framework Agreement are subject to the reporting, announcement, circular, annual review and Independent Shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

CONTINUING CONNECTED TRANSACTIONS

As the Original Framework Agreement will be ending on 31 December 2020, on 15 September 2020, U-Home Group Limited entered into the New Framework Agreement with the Company pursuant to which the Group will provide the Property Sales and Consultancy Services to U-Home Group for a term of three years commencing from 1 January 2021.

LISTING RULES IMPLICATIONS

As U-Home Group Limited is wholly-owned by Mr. Zhou Xuzhou, an executive Director and controlling shareholder of the Company, U-Home Group Limited is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the Continuing Connected Transactions with U-Home Group Limited contemplated under the New Framework Agreement constitute continuing connected transactions on the part of the Company under Chapter 14A of the Listing Rules.

Since the applicable percentage ratios of the Proposed Annual Caps under Chapter 14A of the Listing Rules are, on an annual basis, more than 5% and the aggregate annual consideration is more than HK$10,000,000, the Continuing Connected Transactions are subject to the reporting, announcement, circular, annual review and Independent Shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

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GENERAL

The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders on, among others, (i) the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; and (ii) the New Framework Agreement and the transactions contemplated thereunder. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

A SGM will be convened and held at which the Independent Shareholders will consider, and, if thought fit, approve (i) the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; and (ii) the New Framework Agreement (including but not limited to the Proposed Annual Caps) and the transactions contemplated thereunder.

A circular containing, among other things, (i) further details of the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; (ii) further details of the New Framework Agreement and the transactions contemplated thereunder; (iii) a letter of recommendation from the Independent Board Committee; (iv) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the Revision of 2020 Annual Cap and the New Framework Agreement; and (v) a notice convening the SGM will be despatched to the Shareholders on or before 30 September 2020 in compliance with the Listing Rules.

INTRODUCTION

Reference is made to the circular of the Company dated 10 May 2018 in relation to, among other things, the Original Framework Agreement entered into between U-Home Group Limited and the Company pursuant to which the Group would provide the Property Sales and Consultancy Services to U-Home Group. As of the date of this announcement, the proposed annual caps under the Original Framework Agreement have not been exceeded.

REVISION OF 2020 ANNUAL CAP

Due to an increase in anticipated total gross floor area of the real estate projects developed by U-Home Group that have been sold and expected to be sold in 2020, the annual amounts for the service fees payable by U-Home Group to the Group in respect of the Property Sales and Consultancy Services for the year ending 31 December 2020 is expected to be higher than the level as envisaged at the time of entering into of the Original Framework Agreement.

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On 15 September 2020, U-Home Group Limited and the Company entered into the Third Supplemental Framework Agreement to revise the 2020 Annual Cap for the service fees payable by U-Home Group to the Group in respect of the Property Sales and Consultancy Services under the Original Framework Agreement from RMB26,000,000 (equivalent to approximately HK$29,424,000) to RMB36,000,000 (equivalent to approximately HK$40,741,000). The Revision of 2020 Annual Cap shall be effective after being approved at SGM in accordance with the Listing Rules.

The above revised 2020 Annual Cap was determined with reference to the estimated annual sale of real estate projects developed by U-Home Group, which will be based on the number of real estate projects to be developed by U-Home Group, multiplied by 2.5% (being the highest of 1% to 2.5% charged for the service fee). The estimated annual sale of real estate projects was derived from (i) the actual sale amount for the real estate projects already been sold in 2020; and (ii) the anticipated remaining gross floor area to be sold in 2020 multiplied by expected selling price for the relevant projects.

Save and except the revised maximum transaction amount between U-Home Group Limited and the Company as amended and supplemented by the Third Supplemental Framework Agreement, the rest of the provisions of the Original Framework Agreement will remain in full force and effect in accordance with its terms.

NEW FRAMEWORK AGREEMENT

As the Original Framework Agreement will be ending on 31 December 2020, the Board is pleased to announce that on 15 September 2020, U-Home Group Limited entered into the New Framework Agreement with the Company, subject to the approval of the Independent Shareholders at the SGM, pursuant to which the Group will provide the Property Sales and Consultancy Services to U-Home Group for a term of three years commencing from 1 January

2021. Details of the New Framework Agreement are set out below:

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PROVISION OF PROPERTY SALES AND CONSULTANCY SERVICES

U-Home Group is the property developer for approximately 18 new real estate projects covering a total development area of approximately 2.6 million square meters across different cities in the PRC, mainly located in Jiangsu, Anhui and Hunan, and pre-sale of properties will commence from the third quarter of 2020 for certain projects. Pursuant to the New Framework Agreement, U-Home Group will appoint the Group as its marketing and sales agent and the Group will be responsible for providing, among others, the following Property Sales and Consultancy Services:

1. providing property sales and consultancy services for the Projects;
2. providing sales related services for the Projects, including preparation of market research reports, advertising promotion plans and sales strategy;
3. making recommendations of price list and discount pricing strategies for the Projects;
4. recruiting and providing training for the marketing and sales teams; and
5. assisting U-Home Group to obtain the relevant licenses and to handle other matters relating to the Property Sales and Consultancy Services.

To facilitate the cooperation between U-Home Group and the Group, U-Home Group will assist the Group in providing, among others, the following services:

1. providing the relevant information of the Projects to the Group, including but not limited to copy of the general layout plan, floor plan, design sketches, construction standard, decoration standard, finishing standard and amenities standard; and
2. supervising the Property Sales and Consultancy Services provided by the Group, including but not limited to advertising and promotion proposals, sales execution plan, sales price, discount pricing strategies as well as reviewing and approving the relevant documents relating to the Property Sales and Consultancy Services prepared by the Group on a timely basis.

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Service fees

U-Home Group will pay the Group a service fee for the Property Sales and Consultancy Services, which represents the sales commission fee calculated at the rate of 1% to 2.5% of the total amount of revenue generated from the sales of each real estate project as prescribed under the relevant agreement to be entered into between the Group and U-Home Group.

The general pricing principles of service fees payable by U-Home Group for the Property Sales and Consultancy Services are determined with reference to (i) the prevailing market rate of service fees in respect of providing similar property sales and consultancy services that are charged by other comparable Independent Third Parties of similar operational size and scale to the Company in the market; (ii) the expressed interest and estimated demand from U-Home Group on the Property Sales and Consultancy Services to be provided by the Group; and (iii) the prevailing rate of service fees in respect of providing similar property sales and consultancy services to the Independent Third Parties by the Group, on terms no less favourable to the Group i.e. at fees higher or equal to the market price for similar services than those available to the Independent Third Parties.

Although there is no pricing policy or guideline published or adopted for the Property Sales and Consultancy Services within the market, the sales and marketing team of the Group will be responsible for reviewing and determining the pricing of service fee based on market information obtained from third party agency regarding the pricing of different types of property sales and consultancy services (including sales planning and property promotion of commercial and residential properties) in the real estate market. It will then submit a proposal to the management of the Group for approval and assessment on the reasonableness of the pricing according to the general pricing principles. As there are alternative sources of service providers with comparable pricing and scope of services, the sales and marketing team of the Group will also make reference to the price of similar services offered from about 1-3 Independent Third Parties for comparison purpose. In particular, the sales and marketing team will conduct desktop research in respect of the sales commission charged by real estate agents in the PRC market for providing similar property sales and consultancy services prior to determining the actual service charge for a particular project. After determining the service fee to be charged to a member of U-Home Group, the chief executive officer of the Company will proceed to negotiate and agree on an arm's length basis with the member of U-Home Group. The sales and marketing team of the Group currently comprises 23 staff and is led by Ms. Zhou Juan, a general manager of the Group. As part of the internal control measures of the Group, Ms. Zhou Juan will be responsible for reviewing and approving the terms of the actual services to be provided by the Group to U-Home Group.

Proposed Annual Caps for Property Sales and Consultancy Services

The historical amounts for each of the two years ended 31 December 2019 in respect of Property Sales and Consultancy Services were RMB25,984,000 (equivalent to approximately HK$29,406,000) and RMB25,954,000 (equivalent to approximately HK$29,372,000), respectively.

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The maximum annual aggregate amounts for the service fees payable by U-Home Group to the Group for each of the three years ending 31 December 2023 in respect of the Property Sales and Consultancy Services will not exceed RMB40,000,000 (equivalent to approximately HK$45,268,000), RMB40,000,000 (equivalent to approximately HK$45,268,000) and RMB40,000,000 (equivalent to approximately HK$45,268,000), respectively.

The Proposed Annual Caps for the three years ending 31 December 2023 have been determined with reference to (i) the historical figures of the actual amounts for the service fees payable by U-Home Group to the Group in respect of the Property Sales and Consultancy Services under the Original Framework Agreement; (ii) the anticipated number of real estate projects to be developed by U-Home Group in the PRC in the coming three years; (iii) the anticipated demand in Property Sales and Consultancy Services for the real estate projects developed by U-Home Group in the PRC market for the three years ending 31 December 2023; and (iv) expected selling price for relevant projects.

ANNUAL REVIEW OF THE CONTINUING CONNECTED TRANSACTIONS

The independent non-executive Directors shall review annually the continuing connected transactions and confirm in the Company's annual report for the year in question whether such transactions have been entered into:

1. in the usual and ordinary course of business of the Company;
2. either on normal commercial terms or, if there is no available comparison, on terms that are no less favorable than terms available to or from Independent Third Parties; and
3. in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interest of the Shareholders as a whole.

The auditors of the Company shall review annually the continuing connected transactions and confirm in a letter to the Directors (a copy of which shall be provided to the Stock Exchange) in respect of each relevant financial year, that the continuing connected transactions:

1. have received the approval of the Directors (including the independent non-executive Directors);
2. are in accordance with the pricing principles as stated in the relevant agreements;
3. have been entered into in accordance with the relevant agreements governing the continuing connected transactions; and
4. have not exceeded the relevant proposed annual caps as set out above.

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REASONS FOR AND BENEFITS OF REVISING 2020 ANNUAL CAP AND ENTERING INTO THE NEW FRAMEWORK AGREEMENT

The Board has been carefully monitoring the historical transacted amounts of the continuing connected transactions. Taking into account the various basis set out above and in view of the increase in anticipated total gross floor area of the real estate projects developed by U-Home Group that have been sold and expected to be sold in 2020, the Board envisages that the annual amounts for the service fees payable by U-Home Group to the Group in respect of the Property Sales and Consultancy Services for the year ending 31 December 2020 would exceed the original annual cap under the Original Framework Agreement. The Board therefore proposes to revise and increase the 2020 Annual Cap.

Nanjing Mei Jia Rui, the wholly-owned subsidiary of the Company, is principally engaged in the sales of properties and consultancy services to serve as the sole platform for U-Home Group in the provision of sales of properties and consultancy services in the PRC. Under this business model, Nanjing Mei Jia Rui undertakes and develops the business of sales of properties and consultancy services, while U-Home Group only engages in the construction and development of properties in the PRC, which enables it to focus on its core business of construction and development of properties. Nanjing Mei Jia Rui and U-Home Group can further enhance their respective reputations in the real estate market of the PRC by entering into the New Framework Agreement. Currently, 7 employees of Nanjing Mei Jia Rui possess relevant recognised qualifications as property sales agent in the PRC and years of experience in such business. The consultancy business aims to build a professional customer services and sales team for the cultivation of sales and professional personnel for the Group's core business in the future.

The Directors (excluding Mr. Zhou Xuzhou who had abstained from voting on the resolutions of the Board in view of his material interest in the Revision of 2020 Annual Cap and the New Framework Agreement and the independent non-executive Directors who will form their views after considering the recommendation from the Independent Financial Adviser) consider that

1. the revised 2020 Annual Cap is fair and reasonable and in the interests of the Company and its Shareholders as a whole; (ii) the terms of the Third Supplemental Framework Agreement and the transactions contemplated thereunder have been entered into in the ordinary and usual course of business of the Group; on normal commercial terms or better to the Group; and on terms that are fair and reasonable and in the interests of the Company and its Shareholders as a whole; (iii) the New Framework Agreement was entered into in the ordinary and usual course of business of the Group on normal commercial terms; and (iv) the terms of the New Framework Agreement and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

Save for Mr. Zhou Xuzhou (who is an executive Director and controlling shareholder of the Company), none of the Directors has a material interest in the Third Supplemental Framework Agreement and the New Framework Agreement and the transactions contemplated thereunder. Accordingly, none of the other Directors is required to abstain from voting on the relevant

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Board resolutions to approve (i) the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; and (ii) the New Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps).

To the best of the knowledge of the Directors, information and belief having made all reasonable enquiries, save for Mr. Zhou Xuzhou, no other Shareholders have material interests in the Third Supplemental Framework Agreement and the New Framework Agreement and the transactions contemplated thereunder. Accordingly, save for the Mr. Zhou Xuzhou, no other Shareholders are required to abstain from voting at SGM for the resolution to approve (i) the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; and (ii) the New Framework Agreement and the transactions contemplated thereunder (including the Proposed Annual Caps).

INFORMATION ON THE PARTIES

Information of the Group

The Company is principally engaged in investment holding. The Group is principally engaged in healthcare related business, trading business, agency business, properties investment and leasing business as well as properties development business.

Information of U-Home Group

U-Home Group Limited is a company established in the PRC and wholly owned by Mr. Zhou Xuzhou, an executive Director and controlling shareholder of the Company. U-Home Group is principally engaged in property real estate development, financial investment, property management and hotel management in various cities in the PRC.

LISTING RULES IMPLICATIONS

As U-Home Group Limited is wholly-owned by Mr. Zhou Xuzhou, an executive Director and controlling shareholder of the Company, U-Home Group Limited is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, (i) the transactions with U-Home Group Limited contemplated under the Third Supplemental Framework Agreement; and (ii) the Continuing Connected Transactions with U-Home Group Limited contemplated under the New Framework Agreement constitute continuing connected transactions on the part of the Company under Chapter 14A of the Listing Rules.

Pursuant to the Listing Rules, if the Company proposes to revise the annual cap for a continuing connected transaction, the Company must re-comply with the provisions of Chapter 14A of the Listing Rules in relation to the relevant connected transaction.

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Since the applicable percentage ratios in respect of the revised 2020 Annual Cap are more than 5% and the aggregate annual consideration is more than HK$10,000,000, the transactions contemplated under the Third Supplemental Framework Agreement are subject to the reporting, announcement, circular, annual review and Independent Shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

In addition, since the applicable percentage ratios of the Proposed Annual Caps under Chapter 14A of the Listing Rules are, on an annual basis, more than 5% and the aggregate annual consideration is more than HK$10,000,000, the Continuing Connected Transactions are subject to the reporting, announcement, circular, annual review and Independent Shareholders' approval requirements pursuant to Chapter 14A of the Listing Rules.

GENERAL

The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders on, among others, (i) the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; and (ii) the New Framework Agreement and the transactions contemplated thereunder. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

A SGM will be convened and held at which the Independent Shareholders will consider, and, if thought fit, approve (i) the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company; and (ii) the New Framework Agreement (including but not limited to the Proposed Annual Caps) and the transactions contemplated thereunder.

A circular containing, among other things, (i) further details of the Revision of 2020 Annual Cap and the entering into of the Third Supplemental Framework Agreement by the Company;

1. further details of the New Framework Agreement and the transactions contemplated thereunder; (iii) a letter of recommendation from the Independent Board Committee;

1. a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the Revision of 2020 Annual Cap and the New Framework Agreement; and (v) a notice convening the SGM will be despatched to the Shareholders on or before 30 September 2020 in compliance with the Listing Rules.

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DEFINITIONS

In this announcement, the following expressions will have the following meanings unless the context requires otherwise:

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"Revision of 2020 Annual Cap" the revision of 2020 Annual Cap for the transactions contemplated under the Original Framework Agreement

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"%"percentage

By Order of the Board

Meilleure Health International Industry Group Limited

Zhou Wen Chuan

Executive Director and Chief Executive Officer

Hong Kong, 15 September 2020

As at the date of this announcement, the Board comprises Mr. Zhou Xuzhou, Dr. Zeng Wentao and Ms. Zhou Wen Chuan as executive Directors, Dr. Mao Zhenhua as non-executive Director and Mr. Gao Guanjiang, Professor Chau Chi Wai, Wilton and Mr. Wu Peng as independent non-executive Directors.

For the purpose of this announcement, the exchange rate of RMB1.00 = HK$1.1317 have been used for currency translation, where applicable. Such an exchange rate is for illustrative purposes and does not constitute representations that any amount in HK$ or RMB has been, could have been or may be converted at such a rate.

*  For identification purpose only

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