Shirble Department Store China : DISCLOSEABLE TRANSACTION IN RELATION TO THE LEASE AGREEMENT

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Shirble Department Store Holdings (China) Limited

歲寶百貨控股（中國）有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00312)

DISCLOSEABLE TRANSACTION

IN RELATION TO THE LEASE AGREEMENT

The Board announces that on 15 October 2019, the Lessee (a wholly-owned subsidiary of the Company) and the Lessor entered into the Lease Agreement in respect of a lease of the Premises in the PRC commencing from 15 October 2019 to 9 October 2039.

Upon the implementation of IFRS 16 from 1 January 2019, the Company will recognise a right-of-use asset in its financial statements if it enters into a lease transaction as lessee, which will constitute a "transaction" as defined under Rule 14.04(1)(a) of the Listing Rules. Hence, the Lease Agreement constitutes a notifiable transaction (as defined in Chapter 14 of the Listing rules) for the Company.

As one of the applicable percentage ratios (as defined under the Listing Rules) with reference to the total amount of rental under the Lease Agreement exceeds 5% but is below 25%, the Lease Agreement constitutes a discloseable transaction (as defined in Chapter 14 of the Listing Rules) for the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

The Board announces that on 15 October 2019, the Lessee (a wholly-owned subsidiary of the Company) and the Lessor entered into the Lease Agreement in respect of a lease of the Premises in the PRC commencing from 15 October 2019 to 9 October 2039.

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THE LEASE AGREEMENT

The table below sets forth a summary of the principal terms of the Lease Agreement:

Date	:	15 October 2019
Parties	:	(a) The Lessor, as lessor; and
		(b) the Lessee (a wholly-owned subsidiary of the Company),
		as lessee.
		To the best of the Directors' knowledge, information and
		belief, and having made all reasonable enquiries, the Lessor
		and its ultimate beneficial owners are Independent Third
		Parties.
Premises	: The main commercial and annex building of Building No. 1
		and the annex building of Building No. 11, China Southern
		Pearl Garden, Hangcheng Avenue, Baoan District, Shenzhen,
		the PRC.
Usage of the Premises	: For the operation of department store business of the Group
		or for sub-leasing purpose.
Term	: Commencing from 15 October 2019 and expiring on 9
		October 2039. The commencement date of the tenancy shall
		be deferred if the Conditions Precedent (as defined below)
		are not satisfied on or before 10 October 2019.

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Conditions Precedent	: The commencement of the tenancy shall be subject to the
	following conditions (the "Conditions Precedent") having
	been satisfied by 10 October 2019:
	(a) the delivery conditions of the Premises set forth in the
	Lease Agreement having been complied with by the
	Lessor;
	(b) the Premises having been inspected and certified by
	the relevant fire service department; and
	(c) the Lessee having inspected and being satisfied with
	the Premises according to the agreed delivery
	conditions, and signed a confirmation accepting the
	delivery of the Premises from the Lessor.
	In the event that the Conditions Precedent are not satisfied
	after 60 days from 10 October 2019, the Lessor shall pay the
	Lessee a penalty of RMB10,000 for each day of delay; and
	in the event the Conditions Precedent are not satisfied after
	180 days from 10 October 2019, the Lessee shall have the
	right to terminate the Lease Agreement, and the Lessor shall
	compensate the Lessee for such amount representing two
	times the amount of the Deposit (as defined below) as the
	agreed amount of damages suffered by the Lessee as a result
	of the breach on the part of the Lessor.
Rental payment	: The total rental payable by the Lessee under the Lease
	Agreement shall be RMB290.9 million (equivalent to
	HK$322.6 million).
	The annual rental for the first year of the tenancy shall be
	paid within 15 days from the commencement of the tenancy.
	Thereafter, the rental will be payable on a monthly basis.
Renewal of the original	: After the expiration of the original term of the Lease
term of the Lease	Agreement, the Lessee shall have the priority to lease the
Agreement	Premises under the same conditions.

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Termination	: The	Lessee may terminate the Lease Agreement on the
	occurrence of any of the following events:
	(a)	the Lessor leasing to a third party other properties
		owned by it or its affiliates in the same development
		project in which the Premises are located for the
		operation of supermarket business in competition with
		the Lessee;
	(b)	change of usage of the Premises by the relevant
		government department, resulting in the Premises
		becoming unsuitable for the Lessee's continued
		operations;
	(c)	the Lessor creating a mortgage on the Premises which
		adversely affects the Lessee's rights under the Lease
		Agreement;
	(d)	the Lessor breaching its obligations under the Lease
		Agreement, resulting in the Premises becoming
		unsuitable for the Lessee's continued operations or the
		Lease Agreement becoming unenforceable;
	(e)	any force majeure events adversely affecting the
		business of the Lessee for over twelve (12) months;
	(f)	resumption of land by the government authorities
		where the Premises is located; and
	(g)	the Lessee's business at the Premises making losses for
		a consecutive period of 12 months, and the Lessee has
		given the Lessor notice in writing three months in
		advance to terminate the Lease Agreement.

The Lessor may terminate the Lease Agreement in the event the Lessee breaches its obligations under the Lease Agreement, resulting in the Lease Agreement becoming unenforceable.

Consideration and right-of-use asset recorded following the signing of the Lease Agreement

Pursuant to the IFRS 16, the total consideration under the Lease Agreement represents the aggregate amount of rental payments to be made over the term of the Lease Agreement measured at present value basis, which amounts to RMB163.2 million (equivalent to HK$181.0 million) as of the date of this announcement. The amount of rental payments over the term of the Lease Agreement will be settled out of the internal financial resources of the Group.

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REASONS FOR AND BENEFITS OF ENTERING INTO THE LEASE AGREEMENT

One of the principal businesses of the Group is the operation of department stores and sub-leasing store spaces to different retailers for rental income. Due to nature of its retail business, members of the Group enter into lease agreements from time to time for the lease of properties from Independent Third Parties as retail space.

The terms of the Lease Agreement, including the rental payments, were determined after arm's length negotiations between the Lessor and the Lessee upon normal commercial terms taking into consideration the prevailing market price for comparable premises in the vicinity of the Premises. The entering into of the Lease Agreement is part of the department store business of the Group. The Board confirms that the terms of the Lease Agreement are on normal commercial terms, fair and reasonable and the entering into of the Lease Agreement is in the interests of the Company and its shareholders as a whole.

INFORMATION OF THE PARTIES

The Group is principally engaged in the operation of department stores in the PRC and property business. The Lessee is a wholly-owned subsidiary of the Company. Its principal business is the operation of department stores in the PRC.

The Lessor is a limited liability company established in the PRC, and the principal businesses are importation of aviation materials, supply of materials, property management and development, provision of airport transportation services and aircraft cleaning services.

IMPLICATIONS UNDER THE LISTING RULES

Upon the implementation of IFRS 16 from 1 January 2019, the Company will recognise a right-of-use asset in its financial statements if it enters into a lease transaction as lessee, which will also constitute a "transaction" as defined under Rule 14.04(1)(a) of the Listing Rules. Hence, the Lease Agreement constitutes a notifiable transaction (as defined in Chapter 14 of the Listing rules) for the Company.

As one of the applicable percentage ratios (as defined under the Listing Rules) with reference to the total amount of rental payment under the Lease Agreement exceeds 5% but is below 25%, the Lease Agreement constitutes a discloseable transaction (as defined in Chapter 14 of the Listing Rules) for the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

None of the Directors has a material interest in the transaction contemplated under the Lease Agreement and has abstained from voting on the Board resolutions to approve the transaction contemplated under the Lease Agreement.

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DEFINITIONS USED IN THIS ANNOUNCEMENT

Unless the context requires otherwise, the capitalised terms used herein shall have the following meanings:

"Board"	the board of Directors;
"Company"	Shirble Department Store Holdings (China) Limited (歲寶
	百貨控股（中國）有限公司), a company incorporated in the
	Cayman Islands with limited liability, whose shares are
	listed on the Stock Exchange (stock code 00312);
"Director(s)"	the director(s) of the Company (including all independent
	non-executive director(s)) of the Company;
"Group"	the Company and its subsidiaries;
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong;
"Hong Kong"	The Hong Kong Special Administrative Region of the
	People's Republic of China;
"IFRS"	International Financial Reporting Standards issued by the
	Hong Kong Institute of Certified Public Accountants;
"Independent Third Party"	a party independent of and not connected with the Company
	and its connected persons;
"Lease Agreement"	the lease agreement entered into between the Lessor and the
	Lessee on 15 October 2019 in relation to the lease of the
	Premises;
"Lessee"	Shenzhen Shirble Chain Store Limited Liability Company* (深
	圳歲寶連鎖商業發展有限公司), a wholly-owned subsidiary of
	the Company;
"Lessor"	Shenzhen Southern Airlines Economic Development Co.,
	Ltd.* (深圳市南方航空經濟發展有限公司), an Independent
	Third Party and a wholly-owned subsidiary of China
	Southern Airlines Company Limited (中國南方航空股份有
	限公司) whose shares are listed on the Stock Exchange
	(stock code: 1055);

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"Listing Rules"	The Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited;
"RMB"	Renmibi, the lawful currency of the PRC;
"PRC"	The People's Republic of China which for the purpose of
	this announcement does not include Hong Kong, the Macau
	Special Administrative Region of the People's Republic of
	China and Taiwan;
"Premises"	the main commercial and annex building of Building No. 1
	and the annex building of Building No. 11, China Southern
	Pearl Garden, Hangcheng Avenue, Baoan District, Shenzhen,
	the PRC; and
"Stock Exchange"	The Stock Exchange of Hong Kong Limited.

For illustration purposes, amounts in RMB have been translated into HK$ at the rate of RMB1 = HK$1.1090.

By order of the Board

Shirble Department Store Holdings (China) Limited

YANG Xiangbo

Co-Chairman and Executive Director

Hong Kong, 15 October 2019

As of the date of this announcement, the Board is comprised of six Directors, namely Mr. YANG Xiangbo (Co-Chairman), Mr. HAO Jian Min (Co-Chairman) and Mr. YANG Ti Wei (Chief Executive Officer) as the executive Directors and Mr. CHEN Fengliang, Mr. JIANG Hongkai and Mr. FOK Hei Yu as the independent non-executive Directors.

• The English names of the Chinese entities included in this announcement are unofficial translations of their Chinese names and are included in this announcement for identification purpose only.

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