RENEWAL OF CONTINUING CONNECTED TRANSACTIONS - Form 6-K

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in connection with the transactions under the New Agreement ("Continuing Connected Transactions"), for which the Independent Shareholders' approval is being sought, including the annual caps relating thereto (the "Annual Caps"). Details of the Continuing Connected Transactions and the Annual Caps are contained in the circular of the Company dated 30 November 2021 (the "Circular"), of which this letter forms part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as defined in the Circular.

CLIC, the controlling shareholder of the Company, is a connected person of the Company. CLI, a wholly-owned subsidiary of CLIC, is an associate of CLIC, and is therefore a connected person of the Company. As such, the transactions under the New Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Given that the applicable percentage ratios in respect of the annual caps for the transactions under the New Agreement are more than 5%, such transactions are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules. The Company will seek approval from the Independent Shareholders in respect of the transactions under the New Agreement at the EGM. In view of CLI's interests in the transactions under the New Agreement, CLIC will abstain from voting at the EGM to approve such transactions.

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The Independent Board Committee comprising all independent non-executive Directors, namely Tang Xin, Leung Oi-Sie Elsie, Lam Chi Kuen and Zhai Haitao, has been established to advise the Independent Shareholders as to whether the Continuing Connected Transactions (i) are conducted in the ordinary and usual course of business of the Group, on normal commercial terms, and in the interests of the Company and its shareholders as a whole; and (ii) are fair and reasonable so far as the Independent Shareholders are concerned. We, Somerley, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

During the past two years, we were mandated to act as the independent financial adviser to the independent board committee and the independent shareholders of the Company in relation to a potential connected transaction. Notwithstanding the past engagement, as at the Latest Practicable Date, there were no relationships or interests between (a) Somerley and (b) the Group, CLI, and their respective subsidiaries and associates that could reasonably be regarded as a hindrance to our independence as defined under Rule 13.84 of the Listing Rules to act as the Independent Financial Adviser. Apart from normal professional fees payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, CLI, or their respective substantial shareholders or associates.

In formulating our opinion and recommendation, we have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Group and have assumed that they are true, accurate and complete in all material aspects and will remain so up to the time of the EGM. We have also sought and received confirmation from the Directors that all material relevant information has been supplied to us and that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to believe that any material information has been withheld from us, or to doubt the truth, accuracy or completeness of the information provided. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view. We have, however, not conducted any independent investigation into the business and affairs of the Group, CLI, and their respective subsidiaries or associates, nor have we carried out any independent verification of the information supplied.

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PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation on the Continuing Connected Transactions (including the Annual Caps), we have taken the following principal factors and reasons into consideration:

The Group is one of the leading life insurance companies in the PRC. Its products include, among others, life insurance, health insurance and accident insurance. The Group also manages insurance funds permitted by applicable PRC laws and regulations or the State Council and engages in, among others, consulting business, agency business and other businesses permitted by the CBIRC. For the two years ended 31 December 2019 and 2020, the Group recorded total revenues of approximately RMB729.5 billion and RMB805.0 billion respectively. For the first six months in 2021, the Group recorded total revenues of approximately RMB537.1 billion, an increase of approximately 6.5% as compared to the same period last year. As at the Latest Practicable Date, the Company had a market capitalisation of approximately HK$852.6 billion.

CLI is a company established under the laws of the PRC with limited liability. Its principal business includes, among others, the management of funds under entrustment, the alternative investment business, businesses involving insurance asset management products (such as debt investment schemes and equity investment plans), and other businesses approved by the CBIRC and the State Council. As at 31 December 2020, CLI had total assets of approximately RMB24.4 billion, total liabilities of approximately RMB6.5 billion, and equity attributable to its owners of approximately RMB17.9 billion.

The Group has achieved continuous growth in recent years and maintains a leading position in the PRC life insurance market. In 2020 and the first six months of 2021, the Group's net premiums earned increased by approximately 7.9% and 3.6% year-on-year to approximately RMB604.7 billion and RMB442.6 billion, while the net profit attributable to equity holders of the Company amounted to approximately RMB50.3 billion and RMB41.0 billion respectively. The Group's investment assets increased to approximately RMB4,457.3 billion as at 30 June 2021 from approximately RMB4,095.5 billion as at 31 December 2020, and mainly comprised bonds, term deposits, stocks and funds, with an overall gross investment yield of approximately 5.3% and 5.7 in 2020 and the first six months of 2021 respectively.

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As set out in the letter from the Board, the Company has actively pushed forward the management of entrusted investments in both domestic and international markets, proactively diversified its investment types and channels, strengthened its investment capabilities and professional management, and constantly improved its portfolio allocations. As advised by the management of the Group, as part of its ordinary and usual course of business, the Company has been entrusting other assets managers, including CLI and other independent third parties, for the management its investment assets. In 2020 and the first six months of 2021, the Company recorded net investment income of approximately RMB154.5 billion and RMB82.0 billion, representing approximately 19.2% and 15.3% of its total revenue during the corresponding periods, respectively. CLI, being the alternative investment platform for companies within the CLIC group, has been providing investment and management services to the Company since 2013 in respect of the assets entrusted to it. As at 30 June 2021, the Group's investment portfolio entrusted to CLI amounted to approximately RMB376.6 billion, representing approximately 8.4% of its total investment assets.

The Existing Agreement was approved by the then independent shareholders of the Company at a shareholder's meeting held on 6 June 2018, for a term from 1 January 2019 to 31 December 2021. Given that the Existing Agreement will expire on 31 December 2021, the Company proposes to enter into the New Agreement with CLI, upon obtaining the approval of the Independent Shareholders at the EGM, for a term of two years commencing from 1 January 2022. Unless a party serves the other party a written notice for non-renewal prior to 90 working days before the expiry date of the New Agreement, the New Agreement will be automatically renewed for one year from the expiry date thereof.

By entering into the New Agreement, the Company can leverage the industry experience, investment expertise and resources network of CLI in the alternative investment market to further develop the alternative investment business. Through investing in the alternative investment products, the Company can further broaden its investment portfolio, diversify its investment risk and capture investment opportunities. In addition, CLI will provide the Company with professional operating services with respect to the equity/real estate funds invested by the Company at its own discretion, which will enhance the efficiency in subsequent management of such investment.

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Summarised below are the principal terms of the New Agreement. Further details are disclosed under the section headed "PRINCIPAL TERMS OF THE NEW AGREEMENT" in the letter from the Board.

General

Pursuant to the New Agreement, CLI will invest and manage assets entrusted to it by the Company (the "Entrusted Assets"), on a discretionary basis, within the scope of utilization of insurance funds as specified by the Regulatory Authorities and in accordance with the requirements of applicable laws and regulations and the investment guidelines of the Company.

The Entrusted Assets include:

The Company retains the title of the Entrusted Assets and CLI is authorized to invest and manage such Entrusted Assets for and on behalf of the Company. For the projects involving the subscription of non-standard financial products and quasi-securitization financial products, the Investment and Management Services to be provided by CLI to the Company may vary from projects to projects, which mainly include matters associated with the screening and selection of investment projects, due diligence on investment projects, appointment of intermediaries, decision-making on investments, negotiation and execution of investment-related agreements, closing of investment projects, product management, daily management of capital accounts, subsequent management of investment projects, and exit from investment projects.

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For the Existing Projects involving equity/real estate investments, the Investment and Management Services provided by CLI to the Company mainly include assisting the Company with regulatory filings, risk management, accounting management, insolvency management, connected transactions management, emergency disposal, post-investment valuation, stress tests, management of insignificant post-investment matters, and formulation of exit plans and proposals. With respect to the management of significant post-investment matters in relation to the Existing Projects and the exit from the direct investment projects, CLI shall formulate and submit project proposals and exit plans to the Company for approval. Such project proposals and plans, if approved by the Company, shall be implemented by CLI.

Service fees

Pursuant to the New Agreement, the Company will pay CLI (a) the investment management service fee, the real estate operation management service fee and the performance reward in relation to the Existing Projects, and (b) the product management fee and the performance reward in relation to the New Project, respectively.

Investment management service fee

The Company will pay CLI the investment management service fee based on the fee standard as set out in the Past and Existing Agreements and the investment guidelines then in force when the investment was made, on a quarterly basis, and such fee generally ranges from 0.05% to 0.6% for fixed return projects and 0.05% to 0.3% for non-fixed return projects.

Real estate operation management service fee

With respect to the Company's entrustment to CLI for operation of the underlying properties under the Existing Projects, the Company will pay CLI the real estate operation management service fee, calculated by multiplying the EBITDA (i.e. the sum of net profit, income taxes, depreciation of fixed assets, amortization of intangible assets, amortization of long-term deferred expenses and interest payments) derived from the relevant real estate projects in a given year by a fee rate ranging from 3% to 6%, on a quarterly basis.

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The specific standard for the fee rate will be determined by the parties after negotiation with reference to the market conditions, the stage of project operation and the expected performance of the assets, and will be set out in the investment guidelines provided by the Company to CLI.

Performance reward

For those Existing Projects with non-fixed return, if the internal rate of return of such projects is higher than 8% in principle, the Company will pay CLI a performance-based bonus, at the time of exit from the projects. The parties shall calculate the performance-based bonus at the rate of 15% (if the internal rate of return is more than 8% but less than 10%) or 20% (if the internal rate of return is more than 10%) in respect of such portion of profits.

The Company will conduct an examination and appraisal evaluation every year with respect to the Investment and Management Services in accordance with the New Agreement, the investment guidelines and the relevant measures for the performance appraisal of investments. Based on the annual appraisal result, the Company will pay CLI a floating management fee, or reduce the investment management service fee payable to CLI. The floating management fee shall range from -10% to +10% of the calculating base, which shall be no more than 20% of the investment management service fee of the current period. If the amount of the floating management fee is negative, it shall be deducted from the investment management service fee payable by the Company to CLI in that given year. The specific mechanism for determining the floating management fee is set out in the investment guidelines provided by the Company to CLI.

The Company will provide CLI with the investment guidelines on an annual basis. The Company's 2021 investment guidelines for CLI, as approved by the Board (including all independent non-executive Directors), set out the strategy of allocation of insurance funds in different kinds of investments, the detailed fee arrangement in relation to the Investment and Management Services, principles of investment, the management and exit of investment projects, and risk management requirements. As confirmed by the management of the Group, any material changes to the 2021 investment guidelines shall be approved by all independent non-executive Directors and the Board as a whole, and the Company will formulate each of its 2022, 2023 and 2024 investment guidelines with reference to the New Agreement and the 2021 investment guidelines. The aforesaid investment guidelines and related subsequent changes (if any) shall be approved in the same manner as described above for the 2021 investment guidelines.

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Product management fee

CLI shall charge the Company the product management fee pursuant to the relevant product contracts, and no investment management service fee will be charged separately. The product management fee rate shall be determined with reference to the fee rate charged by independent third parties for the products of a similar type and taking into account the market environment and the form of management. The parties agree that the product management fee rate payable by the Company in respect of any particular product shall not exceed 0.6% per annum and shall not be less favourable than the most preferential fee rate determined between CLI and any other subscribers in respect of the same product. If the subscription of the same product by any independent third party accounts for 20% or more of the total subscription amount, the Company will pay the product management fee to CLI at the same fee rate as that payable by such independent third party. The specific product management fee rate and payment method will be specified in the product contracts to be entered into between the parties in relation to the subscription of the related products.

Performance reward

For those New Projects with non-fixed return, if the internal rate of return of such projects is higher than 8% in principle, the Company will pay CLI a performance-based bonus, at the time of exit from the projects. The specific performance-based bonus will be determined with reference to the standard for the performance-based bonus applicable to the Existing Projects with non-fixed return as disclosed above and be specified in the product contracts to be entered into between the parties in relation to the subscription of the related products.

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General

CLI will provide the Operating Services to the Company with respect to the equity/real estate funds invested by the Company at its own discretion, including but not limited to assisting the Company with daily operations, such as the post-investment filing of relevant reports and statements, risk management, regulatory check, accounting management, insolvency management and filing of connected transactions.

Service fees

The Company will pay CLI an entrusted operating fee, calculated by multiplying the paid-in capital contribution of the Company in the equity/real estate funds that were invested at the Company's discretion by a fee rate of 0.02% per annum, payable on a quarterly basis.

Other provisions

Under the New Agreement, CLI undertakes that if, in the entrusted investment and management agreements and/or entrusted operation agreements entered into between CLI and other principals, such other principals are entitled to any preferential treatments or any treatments more favourable than those enjoyed by the Company, CLI shall offer the same treatments to the Company. CLI is required under the New Agreement to inform the Company in writing of any preferential treatments it offers to other principals within 5 working days after it offers such treatments.

Term

After obtaining the approval from the Independent Shareholders at the EGM, the Company and CLI will enter into the New Agreement for a term of two years, which will take effect from 1 January 2022. Unless a party serves the other party a written notice for non-renewal prior to 90 working days before the expiry date of the New Agreement, the New Agreement will be automatically renewed for one year from the expiry date thereof.

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Comparison of fee rates in the New Agreement with fee rates with independent third parties

As set out earlier in this section, the Company will pay CLI different types of service fees in relation to the Existing Projects and the New Projects.

As confirmed by the management of the Group, all the service fees in relation to the Existing Projects payable by the Company to CLI in the coming years will be determined based on terms of the Past and Existing Agreements and the investment guidelines given by the Company in prior years. The Past and Existing Agreements were approved by the then independent shareholders of the Company at shareholders' meetings held on 29 December 2015, 31 May 2017 and 6 June 2018 in accordance with the requirements under the Listing Rules. The investment guidelines given by the Company (including any subsequent changes) were approved by all independent non-executive Directors and the Board as a whole. As such, our analysis on the fee rates in this section mainly focus on those in relation to the Investment and Management Services for the New Projects and the Operating Services.

Investment and Management Services for the New Projects

For the purpose of assessing the reasonableness of the product management fee limit of 0.6%, we have discussed with the management of the Group and obtained sample agreements for investments in non-standard financial products and/or quasi-securitization financial products (excluding strategic investment projects) made by the Company with CLI and independent third-parties, which were selected on a random basis from all executed contracts during the period from 1 January 2020 to 30 June 2021 (the "Sample Contracts"). Management of the Group has confirmed to us that they have provided to us an exhaustive list of contracts for the above transactions and time period. On the basis of the Sample Contracts, we note that the product management fees charged for the relevant product contracts by CLI and independent third parties are in the range of between approximately 0.10% to 0.35% and approximately 0.06% to 0.4%, respectively, which indicated that the ranges of fees charged by CLI and independent third parties are broadly comparable. As advised by the management of the Group, the fee rate limit of 0.6% under the New Agreement is to cater for the potential changes in the market environment and the different set-up of the product and management form, and the final product management fee rate shall be determined with reference to, among others, the fee rate charged by independent third parties for products of a similar type. The Company has implemented internal procedures to ensure that the actual product management fee payable by the Company in respect of any particular product shall be fair and reasonable and on normal commercial terms, and shall not be less favourable than the most preferential fee rate determined between CLI and any other subscribers in respect of the same product, as detailed in section below headed "4. Internal Control Procedures". In addition, we note that in respect of projects with non-fixed return, the arrangement of performance

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reward for the New Projects under the New Agreement is determined with reference to the market conditions and benchmarked to those applicable to the Existing Projects.

Operating Services

For the purpose of assessing the reasonableness of the entrusted operating fee, being 0.02% per annum, we have discussed with the management of the Group the determination basis, which is referenced to the fee quotation obtained in March 2021 for similar scope of services from an international accounting firm, which is an independent third-party service provider. We understand that the Company did not engage independent third parties to provide comparable Operating Services in the past, and we have been provided with the abovementioned fee quotation, in which the service provider indicates that for a fund size of RMB10 billion, they will charge an annual fee rate of 0.02%, same as the proposed rate to be charged by CLI.

As set out in the letter from the Board, the Company has adopted the following internal control procedures to ensure the individual transactions will be conducted in accordance with the terms of the New Agreement, on normal commercial terms and in accordance with the pricing policies:

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We have reviewed the relevant internal control policies relating to the Continuing Connected Transactions, and have received confirmation from the management of the Group that they have been, and will continue to be followed. In terms of fees to be charged by CLI, we have been provided with a list of non-standard financial products and quasi-securitization financial products that CLI is participated in the establishment and issuance, and subscribed by the Company during the period from 1 January 2020 to 30 June 2021. The list summarises details of the relevant product contracts (such as investment scale and horizon, estimated investment yield, proportion subscribed by independent third parties, as well as the product management fee rate). Management of the Group and representatives of CLI confirmed to us that the product management fees chargeable to the Company and chargeable to other independent subscribers to such financial products are the same at each closing of subscription.

In these circumstances, we concur with the Company that the methods and procedures adopted above can ensure the transactions under the New Agreement will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its minority shareholders. In addition, the independent non-executive Directors and auditors of the Company will review the Continuing Connected Transactions each year, details of which are set out in the section below headed "6. Reporting requirements and conditions of the Continuing Connected Transactions".

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Set out below are the historical transaction amounts of (i) the contractual amount of assets newly entrusted by the Company to CLI for investment and management (the "Entrusted Amount") and (ii) the fees for the Investment and Management Services paid by the Company to CLI (including the investment management service fee, floating management fee, performance-based bonus and real estate operation management service fee) (the "Fee Paid"), as well as the related annual caps under the Existing Agreement for the two years ended 31 December 2020 and for the six months ended 30 June 2021:

We note that the annual caps of the Entrusted Amount had not been fully utilised during the periods under review, with utilisation rates of approximately 6.6%, 29.2% and 13.3% for the year 2019, 2020 and for the first half of 2021 respectively. The utilisation rates of the annual caps of the Fee Paid were approximately 46.9%, 32.8% and 25.8% during the corresponding period. As advised by the management of the Group, the relatively low utilisation rate of the Entrusted Amount in 2019 of approximately 6.6% was mainly due to the unsatisfactory investment environment as a result of, among others, the slowdown in growth of China economy in recent years and assets management industry. While the utilisation rates in 2020 and the first half of 2021 of approximately 29.2% and 13.3% respectively were higher compared to 2019, the overall utilisation rates were still considered low (all below 30%), principally due to the unexpected outbreak of COVID-19 pandemic since early 2020, with one or more clusters of outbreak across China in 2021, thereby negatively affecting CLI's investment processes for new projects under consideration. The above, coupled with the decline in rates of return for the fixed and non-fixed return projects, resulted in a lower-than-expected Fee Payable during the periods under review.

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Notwithstanding the above, we are advised by the management of the Group that China economy continued its recovery from COVID-19 pandemic in recent months, and CLI is in the process of restarting and accelerating its investment processes for new projects in the second half of 2021, which is expected to result in higher utilisation rates for the full year of 2021.

New Entrusted Amount

The annual caps on the contractual amount of assets to be newly entrusted by the Company to CLI for investment and management ("New Entrusted Amount") for each of the three years ending 31 December 2024 is RMB65,000 million (or its equivalent in foreign currency).

In order to assess the reasonableness of the New Entrusted Amount, we have discussed with the management of the Group the bases and assumptions underlying the projections, which have been determined with reference to (i) the existing investment portfolio of assets managed by CLI for and on behalf of the Company as at 30 June 2021 (the "Existing Portfolio"), (ii) the investment plans provided by CLI for years 2022 to 2024 (the "Existing Investment Plan(s)"), (iii) the expected increase in investment amount and demands for product allocation of the Company during the term of the New Agreement, and (iv) the historical and expected performance of the investments made or to be made by CLI for and on behalf of the Company.

We have discussed with the management of the Group and reviewed the preparation basis for the Existing Portfolio and the Existing Investment Plans. We note that the Group had Existing Portfolio of more than RMB376.6 billion. As confirmed by the management of the Group, as at the Latest Practicable Date, save for projects representing approximately 6.2% of the investments in the Existing Portfolio, neither CLI nor the Company has any plan to exit from any of the current investments in the Existing Portfolio, and that CLI and the Company will continue to maintain the investments in the Existing Portfolio in coming three years. In terms of future investments, the Existing Investment Plans set out over 50 pipeline projects, expected to be invested by CLI for and on behalf of the Company with an aggregate investment amount over RMB100 billion. We have discussed with the management of the Group and CLI the pipeline projects, and have reviewed relevant documentations, including project description, expected investment amount and investment horizon, relating to the selected projects from the list of projects in the Existing Investment Plans. We understand from the management of the Group that the projects may fall within the scope of the Entrusted Assets in the upcoming three years, and such aggregate amount under the Existing Investment Plans is over 150% of the total New Entrusted Amount in 2022. In addition to the Existing Investment Plans, CLI will continue to seek other projects that satisfy the Company's assets

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allocation requirements and investment criteria, and the aggregate investment amount of such projects as may be identified by CLI during the term of the New Agreement is expected to be at a similar level as that of the above pipeline projects.

Fee Cap

The annual cap on the fees for the Investment and Management Services (including the investment management service fee, product management fee, real estate operation management service fee and performance reward) and the Operating Services (i.e. the entrusted operation fee) (the "Fee Cap") for each of the three years ending 31 December 2024 is RMB2,000 million.

In order to assess the reasonableness of the Fee Cap, we have discussed with the management of the Group and reviewed the investments made in prior years and to be made in the upcoming years, and the basis of setting the relevant management fee rates under the previous entrusted investment and management agreements. The Fee Cap has been determined by the Company with reference to (i) the size of the Existing Portfolio as at 30 June 2021 and the expected investments to be made in the coming three years, (ii) the applicable fee rates stipulated under the New Agreement, (iii) the exit plans for certain Existing Projects, and (iv) the historical and expected performance of investments made or to be made by CLI for and on behalf of the Company.

We have reviewed and discussed with the management of the Group the calculation of the Fee Cap for each of 2022, 2023 and 2024, which is determined mainly with reference to capital contributions expected to be made (please refer to the sub-section above headed "Entrusted Amount" for details of such annual cap set) and historical management fee rates. We have reviewed the calculation of the Fee Cap, and note that the expected management fee rate used for estimating the Fee Cap for each of 2022, 2023 and 2024 is similar to the average management fee rates in the past. In addition, the Group has taken into account the performance-based bonus that may be payable as a result of the potential exit of certain investments in the Existing Portfolio. In this respect, we have obtained the exit proposals, which were selected on a random basis from the list of Existing Projects that the Group may exist in the coming years. We have reviewed and discussed with the management of the Group the calculation of the performance-based bonus, which followed the terms of the Past and Existing Agreements and the investment guidelines given by the Company in prior years. The relevant management fee rates under the New Agreement, as stated in the section above headed "3. Principal terms of the New Agreement", will be determined with reference to market standards and industry practices, taking into account the price of similar transactions with independent third parties.

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Generally speaking, in our opinion, it is in the interests of the Company and its shareholders to determine the Annual Caps in a way that can accommodate the potential growth of the Group's business and takes into account the Group's future investment requirements against the backdrop of the future development of China insurance industry. Further, as CLI reinitiated and accelerated its investment processes for new projects due to the economic resilience in China, the Company expects an increase in investments with CLI.

Provided that the Continuing Connected Transactions are subject to annual review by the Independent Non-executive Directors and auditors of the Company (as discussed below), as required under the Listing Rules, the Group would have the desirable flexibility in entrusting CLI to make investments on the Company's behalf for future returns if the Annual Caps are tailored to future business growth. CLI is principally engaged in the investment and asset management business, with a focus on the alternative investment market. As at 31 December 2020, CLI, on behalf of the Company, had invested in a total of 126 projects, including 38 projects newly invested in 2020. This compares to 17 and 12 newly invested projects in 2018 and 2019 respectively. According to the management of the Group, CLI has continued to enhance its investment capability in anticipation of the growth in demand for investment and asset management requirements from the Group.

We note that the Continuing Connected Transactions relate to financial investments are subject to market forces. Given that the actual fees payable in the future pursuant to the New Agreement and the relevant investment guidelines are partly a function of how CLI's investments perform in the market, we consider that this uncertainty needs to be taken into account when evaluating the Annual Caps. On this basis, in assessing the reasonableness of the Annual Caps, we have discussed with the management of the Group the factors taken into account as stated earlier in this section, and we consider it reasonable for the Company to take into account the above factors in determining the Annual Caps.

Pursuant to Rules 14A.55 to 14A.59 of the Listing Rules, the Continuing Connected Transactions are subject to the following annual review requirements:

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In light of the reporting requirements attached to the Continuing Connected Transactions, in particular, (i) the restriction of the value of the Continuing Connected Transactions by way of the Annual Caps; and (ii) the ongoing review by the Independent Non-executive Directors and auditors of the Company of the terms of the New Agreement and the Annual Caps not being exceeded, we are of the view that appropriate measures will be in place to monitor the conduct of the transactions and assist to safeguard the interests of the Independent Shareholders.

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OPINION AND RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that the Continuing Connected Transactions are in the ordinary and usual course of business of the Group, on normal commercial terms, and in the interests of the Company and its shareholders as a whole. We also consider that the Continuing Connected Transactions (including the Annual Caps) are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, that the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the transactions under the New Agreement.

Mr. John Wong is a licensed person registered with the Securities and Futures Commission of Hong Kong and a responsible officer of Somerley, which is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over ten years of experience in the corporate finance industry.

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This supplemental circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this supplemental circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this supplemental circular misleading.

As at the Latest Practicable Date, none of the Directors, Supervisors and chief executive of the Company or their respective associates had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules.

As at the Latest Practicable Date, Mr. Wang Bin, Mr. Su Hengxuan, Mr. Yuan Changqing and Mr. Wang Junhui, all being Directors, and Mr. Niu Kailong, a Supervisor, are directors or employees of CLIC, which has an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

As at the Latest Practicable Date, the Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2020 (the date to which the latest published audited accounts of the Company were made up).

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As at the Latest Practicable Date, none of the Directors or Supervisors had any existing or proposed service contract with the Company or any of its subsidiaries which is not terminable within one year without payment of compensation (other than statutory compensation).

As at the Latest Practicable Date, none of the Directors or their close associates had interests in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group which would fall to be disclosed under the Listing Rules.

As at the Latest Practicable Date:

The following is the qualification of the expert who has given opinions or advice, which are contained or referred to in this supplemental circular:

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As at the Latest Practicable Date, Somerley:

A copy of the New Agreement will be published on the HKExnews website of the Hong Kong Exchanges and Clearing Limited (https://www.hkexnews.hk) and the website of the Company (https://www.e-chinalife.com) from the date of this supplemental circular up to and including the date of the EGM.

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