Connected Transactions: Receiving of Engineering Project Design and Technology Service

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安徽海螺水泥股份有限公司

ANHUI CONCH CEMENT COMPANY LIMITED

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

(Stock Code: 00914)

Connected Transactions:

Receiving of Engineering Project Design and Technology Service

Engineering Project Design and Technology Service

On 10 March 2020, the Company and Conch Design Institute entered into the Engineering Project Design and Technology Service Contract. According to the Contract, Conch Design Institute shall provide certain subsidiaries of the Company with services including engineering design and/or technology transformation of clinker production lines, cement grinding system, aggregate and commodity concrete projects. The contract price is estimated to be RMB166.1 million (equivalent to approximately HK$186.06 million).

Listing Rules Implications

Conch Design Institute is a wholly-owned subsidiary of Conch Holdings and Conch Holdings is the controlling shareholder of the Company. Accordingly, Conch Design Institute is an associate of Conch Holdings and hence a connected person of the Company. The transactions contemplated under the Engineering Project Design and Technology Service Contract thus constitute connected transactions for the Company under Chapter 14A of the Listing Rules. As certain applicable percentage ratios (other than the profits ratio) calculated pursuant to Chapter 14 of the Listing Rules in connection with the transaction amount are more than 0.1% but each of the applicable percentage ratios is less than 5%, the transactions contemplated under the Engineering Project Design and Technology Service Contract 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 10 March 2020, the Company and Conch Design Institute entered into the Engineering Project Design and Technology Service Contract. Details are as follows:

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ENGINEERING PROJECT DESIGN AND TECHNOLOGY SERVICE CONTRACT

On 10 March 2020, the Company and Conch Design Institute entered into the Engineering Project Design and Technology Service Contract, pursuant to which Conch Design Institute shall provide certain subsidiaries of the Company with services including engineering design and/ or technology transformation for the clinker production lines, cement grinding system, aggregate and commodity concrete projects.

Date of the Contract:

10 March 2020

Parties:

(1) The Company

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

(2) Conch Design Institute

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

As at the date of this announcement, Conch Holdings, a controlling shareholder of the Company, holds about 36.40% of the total issued shares of the Company, and hence it is a connected person of the Company. Conch Design Institute is a wholly-owned subsidiary of Conch Holdings. Accordingly, Conch Design Institute is an associate of Conch Holdings and hence a connected person of the Company. The transactions contemplated under the Engineering Project Design and Technology Service Contract thus constitute connected transactions for the Company under Chapter 14A of the Listing Rules.

Major terms of the Contract:

The services ("Services") provided by Conch Design Institute for certain subsidiaries of the Company include engineering design and/ or technology transformation services for certain projects of these subsidiaries (mainly including clinker production lines, cement grinding systems, aggregate production lines and commercial concrete production lines etc.). The relevant subsidiaries of the Company shall respectively enter into individual sub-contracts with Conch Design Institute setting out details of the Services in relation to their projects. The major terms of these individual sub-contracts shall be in line with those of the Engineering Project Design and Technology Service Contract, and the aggregate amount of service fees payable under these individual sub-contracts shall not exceed the total contract

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price ("Contract Price") under the Engineering Project Design and Technology Service Contract.

The respective schedules for the provision of the Services 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 Institute under the relevant individual sub-contracts.

Effective date of the Contract:

The Engineering Project Design and Technology Service Contract was entered into between the Company and Conch Design Institute on 10 March 2020, and was approved by the Board to become effective on the same date.

Contract Price and basis for its determination:

The total Contract Price of the Engineering Project Design and Technology Service Contract is RMB166,100,000 (equivalent to approximately HK$186,058,495). The price was determined with reference to the Provisions for the Management of Engineering Survey Design Charges (Pricing Scale Document [2002] No. 10) (《工程勘察設計收費管理規定》 （計價格[2002]10 號）) and Engineering Survey Design Fee Standard (《工程勘察設計收 費標準》) promulgated by National Development and Reform Commission of the PRC and the Ministry of Construction of the PRC; and Provisional Provisions for the Early Stage Engineering Consulting Charges for Construction Projects (Pricing Scale [1999] No. 1283) (《建設項目前期工作諮詢收費暫行規定》（計價格[1999]1283 號）) promulgated by National Development and Reform Commission of the PRC, as well as the project scale, investment amount, scope of design, technology standards, the prevailing market prices for provision of similar services, and the contract price and actual transaction amount of the 2019 Contract (as defined below) and agreed between both Parties on the basis of equality and mutual benefit. The Contract Price will be paid by the Group using its internal funds.

Under the Engineering Project Design and Technology Service Contract, payment of the Contract Price will be made by the Group pursuant to the schedules to be agreed under the individual sub-contracts: (i) 20% to 30% 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 60% to 75% of the contract sum payable under the individual sub-contract will be paid in installments in accordance with the project design progress and the delivery of design documents; and (iii) the remaining 5% to 10% of the contract sum payable under the individual sub-contract will be paid after the inspection of the production line within the scope of the engineering design before commencing production.

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Reference is made to the announcement of the Company dated 1 March 2019 ("2019 Announcement") in relation to the engineering design and technology service contract entered into by the Company and Conch Design Institute on 1 March 2019 ("2019 Contract"). As disclosed in the 2019 Announcement, the contract price under the 2019 Contract was RMB89.07 million (equivalent to approximately HK$104,423,368 at that time). According to the Company's unaudited management accounts, the actual transaction amount under the 2019 Contract was approximately RMB34 million (equivalent to approximately HK$ 38,085,423), which did not exceed the contract price.

The Company would like to state that the Engineering Project Design and Technology Service Contract is a new agreement entered into by the Parties. Certain terms (including the scope of design) included in the Contract are different from those in the 2019 Contract, and the identity of certain subsidiaries of the Company being service recipients are also different. Although the Engineering Project Design and Technology Service Contract is not the renewal or extension agreement of the 2019 Contract, as similar services are procured from the same party (i.e. Conch Design Institute), in the course of negotiation of the Contract Price of the Engineering Project Design and Technology Service Contract, reference was made to the contract price and historical transaction amount of the 2019 Contract.

REASONS FOR THE TRANSACTIONS

The Company and Conch Design Institute have entered into previous transactions by which Conch Design Institute has provided related services for clinker production lines, cement grinding systems, aggregates and commodity concrete projects of various subsidiaries of the Company. Conch Design Institute has extensive experience and relevant qualification in the design of cement and clinker production line projects and the development of cement technology. The Company believes that engaging Conch Design Institute as the provider of such services to the Group is conducive to the smooth advancement of preliminary works of the Group's engineering projects and ensuring the quality of project engineering.

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

IMPLICATION UNDER THE LISTING RULES

Conch Design Institute is a wholly-owned subsidiary of Conch Holdings and Conch Holdings is the controlling shareholder of the Company. Accordingly, Conch Design Institute is an associate of Conch Holdings and hence a connected person of the Company. The transactions contemplated under the Engineering Project Design and Technology

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Service Contract constitute connected transactions for the Company under Chapter 14A of the Listing Rules. As certain applicable percentage ratios (other than the profits ratio) calculated pursuant to Chapter 14 of the Listing Rules in connection with the transaction amount are more than 0.1% but each of the applicable percentage ratios is less than 5%, the transactions contemplated under the Engineering Project Design and Technology Service Contract 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.

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

DIRECTORS' APPROVAL OF AND OPINIONS ON THE TRANSACTIONS

The Engineering Project Design and Technology Service Contract and the transactions as contemplated thereunder were approved unanimously by the Directors (including the independent non-executive Directors). During the Board meeting, Mr Gao Dengbang, Mr Wang Jianchao and Mr Ding Feng (by virtue of their positions as director or senior management of Conch Holdings, which would render them to have deemed connected relationships with Conch Design Institute) abstained from the voting in respect of the relevant resolution. Save as disclosed above, none of the Directors of the Company has any material interests in the Engineering Project Design and Technology Service Contract and the transactions contemplated thereunder, or are required to abstain from voting in respect of the relevant resolution. The Directors (including the independent non-executive Directors) are of view that:

1. the Engineering Project Design and Technology Service Contract and the transactions contemplated thereunder are in the ordinary and usual course of business of the Company and on normal commercial terms or better and are in the interests of the Company and its Shareholders as a whole;
2. the procedures for determining and approving the Engineering Project Design and Technology Service Contract and the transactions contemplated thereunder were in compliance with the Company Law of the PRC, the Listing Rules, SSE Listing Rules and the articles of association of the Company;

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1. the terms and conditions of the Engineering Project Design and Technology Service Contract and the transactions contemplated thereunder are agreed between the Parties on the basis of equality and mutual benefits, are in accordance with the principle of fair and equal consideration, which are fair and reasonable; and
2. the basis for the determination of the Contract Price and payment methods of the Engineering Project Design and Technology Service Contract are in compliance with the relevant regulations of the PRC, the connected transaction rules as prescribed under the SSE Listing Rules and the 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 Engineering Project Design and Technology Service Contract and the transactions contemplated thereunder are beneficial to the business development of the Parties and are in their mutual benefits.

DEFINITIONS

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

"associate"	has the meaning ascribed thereto under the Listing Rules
"Board"	the board of Directors of the Company
"Company"	Anhui Conch Cement Company Limited (安徽海螺水泥股份有
	限公司), a joint stock limited company established in the PRC,
	with its H shares listed on the Stock Exchange and its A shares
	listed on the SSE
"Conch Design Institute"	Anhui Conch Construction Materials Design Institute Co., Ltd.
	(安徽海螺建材設計研究院有限責任公司), a wholly-owned
	subsidiary of Conch Holdings and a connected person of the
	Company
"Conch Holdings"	Anhui Conch Holdings Company Limited (安徽海螺集團有限
	責任公司), the controlling shareholder of the Company
"connected person(s)"	has the meaning ascribed thereto under the Listing Rules
"controlling shareholder"	has the meaning ascribed thereto under the Listing Rules
"Directors"	the directors of the Company
"Engineering Project	the Engineer Project Design and Technology Service Contract
Design and Technology	dated 10 March 2020 and entered into between the Company
Service Contract" or	and Conch Design Institute
"Contract"
"Group"	the Company and its subsidiaries

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"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"Parties"	parties to the Engineering Project Design and Technology
	Service Contract, i.e. the Company and Conch Design Institute
"PRC"	the People's Republic of China, which for the purpose of this
	announcement excludes the Hong Kong Special Administrative
	Region, the Macau Special Administrative Region and Taiwan
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholder(s)"	registered holder(s) of A shares and/or H shares of the Company
"SSE"	Shanghai Stock Exchange
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"%"	per cent

In this announcement, unless otherwise specified, for illustration purpose only, the exchange rate for RMB to HK$ is HK$1.00= RMB0.89273. Such exchange rate has been used, where applicable, for illustration purposes only and does not constitute a representation that any amounts were or may have been exchanged at this or any other rates or at all.

By Order of the Board

Anhui Conch Cement Company Limited

Joint Company Secretary

Yu Shui

Wuhu City, Anhui Province, the PRC

10 March 2020

As at the date of this announcement, the Board comprises (i) Mr Gao Dengbang, Mr Wang Jianchao, Mr Wu Bin and Mr Li Qunfeng as executive Directors; (ii) Mr Ding Feng as non-executive Director; (iii) Mr Yang Mianzhi, Mr Leung Tat Kwong Simon and Ms Zhang Yunyan as independent non-executive Directors.

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