Anhui Conch Cement : connected transaction announcement

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安徽海螺水泥股份有限公司

(a joint stock limited company incorporated in the People's Republic of China)

(Stock Code: 00914)

On 25 April 2017, the Company and Conch Design entered into the Design and Technical Service Contract, pursuant to which Conch Design has agreed to provide certain subsidiaries of the Company with certain services, including engineering design and/or technical upgrading for certain projects including clinker production lines, cement grinding mill, aggregate and residue heat electricity generation projects. The transactions as contemplated under the Design and Technical Service Contract constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

Conch Design is a wholly-owned subsidiary of Conch Holdings, a controlling shareholder of the Company. Accordingly, Conch Design is an associate of Conch Holdings and hence a connected person of the Company. The transactions contemplated under the Design and Technical Service Contract thus constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

Since one of the applicable percentage ratios as prescribed under Chapter 14 of the Listing Rules (other than the profits ratio) for the Contract Price payable under the Design and Technical Service Contract is more than 0.1% but all applicable percentage ratios are less than 5%, these transactions are subject to the annual review and disclosure requirements, and are exempt from the Independent Shareholders' approval requirement under Rule 14A.76(2) of the Listing Rules.

On 25 April 2017, the Company and Conch Design entered into the Design and Technical Service Contract, pursuant to which Conch Design has agreed to provide certain subsidiaries of the Company with certain services, including engineering design and/or technical upgrading for certain project including clinker production lines, cement grinding mill, aggregate and residue heat electricity generation projects to be constructed by such subsidiaries.

25 April 2017

1. The Company

   The Group is principally engaged in the production and sale of cement and commodity clinker.

2. Conch Design

Conch Design is an enterprise established in the PRC, and is principally engaged in the design services for the building materials industry and in cement technology development. It possesses a Grade A qualification in the relevant industry.

As at the date of this announcement, Conch Holdings, the controlling shareholder of the Company, is interested in approximately 36.78% of the entire issued share capital of the Company and thus a connected person of the Company. Conch Design is a wholly-owned subsidiary of Conch Holdings. Accordingly, Conch Design is an associate of Conch Holdings and hence a connected person of the Company. The transactions contemplated under the Design and Technical Service Contract thus constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

Conch Design has agreed to provide the following services ("Services") to certain subsidiaries of the Company: (i) engineering design and/or technical upgrading of certain projects (mainly including clinker production lines, cement grinding mill, aggregate production line and residual heat electricity generation systems, and other facilities for production); and (ii) design and services regarding application software for production control system, sales and product distribution system, production data transfer and quality control system for cement grinding mill, aggregate production lines and/or residual heat electricity generation projects.

The subsidiaries of the Company concerned shall respectively enter into individual sub-contracts with Conch Design regarding the services in relation to other matters for their projects (including engineering designs and project consultations), and shall enter into individual sub-contracts with Conch Information Engineering Company (a wholly-owned subsidiary of Conch Design) regarding the details of the technical design of the projects. The major terms of these individual sub-contracts shall be in line with those of the Design and Technical Service Contract, and the aggregate amount of service fees payable under these individual sub-contracts shall not exceed the total contract price ("Contract Price") under the Design and Technical Service Contract.

The respective schedules for the design of the projects will be determined based on the commencement date and work progress of the individual projects and will be agreed between the relevant subsidiaries of the Company and Conch Design or Conch Information Engineering Company under the relevant individual

sub-contracts.

The Design and Technical Service Contract was entered into between the Company and Conch Design on 25 April 2017, and was approved by the Board to become effective on the same date.

The total Contract Price of the Design and Technical Service Contract is RMB73,280,000 (equivalent to approximately HK$82,974,772). The price was determined by the Parties after arm's length negotiation with reference to the [2002] Price Document No. 10 and Fee Scale for Project Inspection and Design promulgated by the National Development and Reform Commission of the PRC and the Ministry of Construction of the PRC in 2002, as well as the project scale, investment amount, scope of design, technical standards and the prevailing market prices for provision of similar services. Payment of the Contract Price will be financed by the Group's internal resources.

Under the Design and Technical Service Contract, payment of the Contract Price will be made pursuant to the schedules to be agreed under the individual sub-contracts: (i) 20% of the contract sum payable under the relevant individual sub-contract will be paid as deposit within 10 days after the individual sub-contract becoming effective; (ii) about 70% to 75% of the contract sum payable under the individual sub-contract will be paid in stages in accordance with the project design progress and the delivery of design documents; and (iii) the remaining 5% to 10% of the contract sum will be paid after the production line, constructed pursuant to the engineering design services provided, having passed its inspection before commencement of operation.

Conch Design has extensive experience in providing design services for building materials industry and cement technology development, and possesses a Grade A qualification in the relevant industry. The projects to be covered under the Design and Technical Service Contract relate to technical upgrading and engineering design services for cement, commodity clinker and aggregate production lines, which design services are within the scope of ordinary and usual course of business of Conch Design.

The Group is principally engaged in production and sale of cement and commodity clinker. The Services received by the Group relate to the Group's ordinary and usual course of business and the above transactions will not bring significant impact on the financial position and operating results of the Company.

Conch Design is a wholly-owned subsidiary of Conch Holdings, a controlling shareholder of the Company. Accordingly, Conch Design is an associate of Conch Holdings and hence a connected person of the Company. The transactions contemplated under the Design and Technical Service Contract constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

Since one of the applicable percentage ratios as prescribed under Chapter 14 of the Listing Rules (other than the profits ratio) for the Contract Price payable under the Design and Technical Service Contract is more than 0.1% but all applicable percentage ratios are less than 5%, the said transactions are subject to the annual review and disclosure requirements and are exempt from the Independent Shareholders' approval requirement pursuant to Rule 14A.76(2) of the Listing Rules.

According to the Rules ("SSE Listing Rules") Governing the Listing of Stocks on Shanghai Stock Exchange, Conch Design is a connected person of the Group, and accordingly the transactions contemplated under the Design and Technical Service Contract constitute connected transactions for the Company under the SSE Listing Rules. Since the Contract Price is less than 0.5% of the Group's latest audited net asset value, an ad hoc announcement is not required to be published for the said transactions under the SSE Listing Rules.

The Design and Technical Service Contract and the transactions as contemplated thereunder were approved unanimously by the Directors (including the independent non-executive Directors), at which Board meeting, Mr Gao Dengbang, Mr Wang Jianchao and Mr Ding Feng (who are the directors of Conch Holdings or senior managers and hence have connected relationship with Conch Design) have abstained from voting on the relevant resolutions. Save as disclosed above, none of the Directors has any material interests in the Design and Technical Service Contract and the transactions contemplated thereunder nor has any of them abstained from voting in respect of the relevant resolutions. The Directors (including the independent non-executive Directors) are of the view that:

1. the terms and conditions of the Design and Technical Service Contract and the transactions contemplated thereunder are in the ordinary and usual course of business of the Company and are fair and reasonable and in the interests of the Company and its Shareholders as a whole;

2. the procedures for considering and approving the Design and Technical Service Contract and the transactions contemplated thereunder were conducted in compliance with the Company Law of the PRC, the Listing Rules, the SSE Listing Rules and the articles of association of the Company;

3. the terms and conditions of the Design and Technical Service Contract and the transactions as contemplated thereunder are agreed between the Parties on the basis of equality and mutual benefits, are on normal commercial terms and are in accordance with the principle of fair and equal consideration; and

4. the basis for the determination of the Contract Price and its payment methods are in compliance with the relevant regulations of the PRC, the connected transaction rules as prescribed under the SSE Listing Rules and the applicable legal procedures. They reflect the principles of integrity, fairness and impartiality, and do not constitute any act that will prejudice the interests of the Company and its Shareholders as a whole. In addition, the Design and Technical Service Contract and the transactions contemplated thereunder are beneficial to the development of the Parties and are in their mutual benefit.