Gelonghui June 21st 丨Fangyuan Life Service (09978.HK) announcement,On June 21, 2023, Fangyuan Life Service (an indirect wholly-owned subsidiary of the company) and the sellerHeshan Fudu Property Development Co., LtdA replacement agreement was concluded. According to this, Fangyuan Life Services has conditionally agreed to induce the relevant buyer to pay a down payment of approximately RMB 4 million and to offset the outstanding receivables owed by the seller to the relevant buyer of approximately RMB 16 million by accepting the transfer of such property from the seller to the relevant buyer.“Total outstanding receivables” refers to approximately RMB 58.2 million, the total amount still outstanding as of April 30, 2023, and payable by the seller to Fangyuan Life Services and its subsidiaries;

The total cost of the replacement transaction will include the down payment and offset price paid in cash. The set-off will take effect on the date of set-off after all prerequisites have been met, at which time: (a) the set-off price shall be deemed to have paid an amount equal to the outstanding receivable to Fangyuan Life Services and its subsidiaries to settle that amount; and (b) the relevant buyer shall be deemed to have paid the set-off price to the seller, after which the seller shall not file any claim for the total cost after the set-off against the relevant buyer. In order to implement the replacement transaction, the seller and the relevant buyer will enter into separate property pre-sale agreements for each property.

Since the seller failed to settle the total amount of outstanding receivables as scheduled, and it was anticipated that the seller would not be able to settle the total amount of outstanding receivables in the near future, a replacement transaction was made. The total amount of outstanding receivables comes from property agency and property management services previously provided by the Group to sellers. After all other means have been exhausted to recover the total amount of outstanding receivables, the contracting party agrees to transfer the property to the relevant buyer to fully settle the seller's outstanding receivables. In the context of the recovery of the Chinese property market, the company discovered that the resale value of the poetic property located in Fangyuan. Heshan Yunshan could rise. The Group intends to hold such properties for investment purposes. The Group is exploring other options to recover the balance of the total outstanding receivables.

The directors believe that by carrying out replacement transactions, the Group (i) instantly reduces the credit risk associated with the total amount of outstanding receivables by transferring the settlement price of such properties; and (ii) benefiting from a possible increase in the resale value of such properties when the Chinese property market recovers, this will improve the Group's overall financial situation in the future.