Towngas China : Announcements and Notices -

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1083)

CONTINUING CONNECTED TRANSACTIONS

The Board would like to announce that on 5 December 2016, the Company entered into:

1. the Master Project Management Agreement with Shenyang Sanquan pursuant to which Shenyang Sanquan shall from time to time provide Project Management Services to members of the Group according to their needs, and the relevant member of the Group shall pay to Shenyang Sanquan relevant service fees in connection therewith; and

2. the Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement with Zhuhai S-Tech pursuant to which Zhuhai S-Tech shall from time to time provide System Software, Cloud Computing System and Safety Inspection Supporting Services to members of the Group according to their needs, and the relevant member of the Group shall pay to Zhuhai S-Tech relevant fees in connection therewith.

As each of Shenyang Sanquan and Zhuhai S-Tech is a subsidiary of HKCG, which in turn is a controlling shareholder of the Company, each of Shenyang Sanquan and Zhuhai S-Tech is a connected person of the Company under the Listing Rules. The entering into of the CCT Master Agreements, and the CCT Transactions contemplated thereunder, which are all to be carried out in the ordinary and usual course of business of the Group and are expected to continue and extend over a period of time, will therefore constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Since the Annual Cap Amounts for each of the CCT Transactions exceed HK$3,000,000 but some of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules in respect of the Annual Cap Amounts under each of the CCT Transactions are more than 0.1% but less than 5%, each of the CCT Transactions is only subject to the reporting, announcement and annual review requirements but is exempt from the independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

THE MASTER PROJECT MANAGEMENT AGREEMENT

The Group is in the business of, inter alia, the sales and distribution of piped gas in the PRC and the Group will from time to time construct gas facilities for the purposes of transporting gas. In this connection, members of the Group had from time to time entered into Project Management Transactions with Shenyang Sanquan pursuant to the 2014 Master Project Management Agreement, which will expire on 31 December 2016. Although the demand for the Project Management Services would depend on the business requirements of the Group, it is envisaged that members of the Group will from time to time in their ordinary course of business continue to enter into Project Management Transactions after the expiration of the 2014 Master Project Management Agreement. The Company had therefore on 5 December 2016 entered into the Master Project Management Agreement with Shenyang Sanquan to set out the principal terms and conditions governing the Project Management Transactions. Set out below are the principal terms of the Master Project Management Agreement:

Date:

5 December 2016

Parties:

The Company and Shenyang Sanquan, a non wholly-owned subsidiary of HKCG

Subject Matter:

Pursuant to the Master Project Management Agreement, Shenyang Sanquan shall from time to time provide Project Management Services to members of the Group according to their needs, and the relevant member of the Group shall pay to Shenyang Sanquan relevant service fees in connection with the provision of the Project Management Services. Each Project Management Transaction will be effected and governed by terms of the relevant service contract to be entered into between the relevant member of the Group and Shenyang Sanquan.

Duration:

The Master Project Management Agreement shall be for a term commencing from 1 January 2017 to 31 December 2019 (both days inclusive) unless terminated by either party to the Master Project Management Agreement by not less than one month's written notice.

Pricing Basis and Other Terms:

Pursuant to the Master Project Management Agreement, the terms of each Project Management Transaction (including but not limited to the amount of service fees payable by the Group and the payment terms) shall be determined on a fair basis and on normal commercial terms, negotiated on an arm's length basis and be on similar basis as the relevant member of the Group transacts business with other independent third party service providers and shall be on terms which from the Group's perspective are no less favourable to the Group than those which the Group could obtain from other independent third party service providers.

The relevant member of the Group will, before placing any purchase order or entering into any service contracts with Shenyang Sanquan, make reference to the pricing of similar types of services in the market and then shortlist at least two service providers. It will then make evaluation based on the scale, degree of difficulty of the project, geographical location, duration of the project etc.. After reviewing and considering the above factors, the management of the relevant member of the Group will then decide on whether to place a purchase order or enter into a service contract with Shenyang Sanquan.

THE MASTER SYSTEM SOFTWARE, CLOUD COMPUTING SYSTEM AND SAFETY INSPECTION SUPPORTING SERVICES AGREEMENT

Members of the Group had from time to time need to install and use the System Software and the Cloud Computing System in connection with their business operations and had from time to time:

1. engaged Towngas Telecom (Shenzhen) to provide Cloud Computing System and Supporting Services pursuant to the 2014 Master Cloud Computing System and Supporting Services Agreement, which will expire on 31 December 2016; and

2. engaged Zhuhai S-Tech to provide System Software and Safety Inspection Supporting Services.

Although the demand for the System Software, Cloud Computing System and Safety Inspection Supporting Services would depend on the business requirements of the Group, it is envisaged that members of the Group will from time to time in their ordinary course of business continue to enter into transactions for obtaining the System Software, Cloud Computing System and Safety Inspection Supporting Services after the expiration of the term of the 2014 Master Cloud Computing System and Supporting Services Agreement. The Company had therefore on 5 December 2016 entered into the Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement with Zhuhai S-Tech to set out the principal terms and conditions governing the System Software, Cloud Computing System and Safety Inspection Supporting Services Transactions. Set out below are the principal terms of the Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement:

Date:

5 December 2016

Parties:

The Company and Zhuhai S-Tech, a wholly-owned subsidiary of HKCG

Subject Matter:

Pursuant to the Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement, Zhuhai S-Tech shall from time to time provide System Software, Cloud Computing System and Safety Inspection Supporting Services to members of the Group according to their needs, and the relevant member of the Group shall pay to Zhuhai S-Tech relevant fees in connection with the System Software, Cloud Computing System and Safety Inspection Supporting Services. Each System Software, Cloud Computing System and Safety Inspection Supporting Services Transaction will be effected and governed by terms of the relevant contract to be entered into between the relevant member of the Group and Zhuhai S-Tech.

Duration:

The Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement shall be for a term commencing from 1 January 2017 to 31 December 2019 (both days inclusive) unless terminated by either party to the Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement by not less than one month's written notice.

Pricing Basis and Other Terms:

Pursuant to the Master System Software, Cloud Computing System and Safety Inspection Supporting Services Agreement, the terms of each System Software, Cloud Computing System and Safety Inspection Supporting Services Transaction (including but not limited to the amount of fees payable by the Group and the payment terms) shall be determined on a fair basis and on normal commercial terms strictly in accordance with relevant laws and regulations of the PRC and commercial transaction management and monitoring procedures of the Group, and shall be on terms which from the Group's perspective are no less favourable to the Group than those which the Group could obtain from other independent third party service providers.

The relevant member of the Group will, before placing any purchase order or entering into any contracts with Zhuhai S-Tech, make reference to the pricing of similar types of products and services in the market and then shortlist at least two service providers. It will then make evaluation based on the relevant laws and regulations of the PRC, commercial transaction management and monitoring procedures of the Group and the favourable terms offered to the Group by Zhuhai S-Tech. After reviewing and considering the above factors, the management of the relevant member of the Group will then decide on whether to place a purchase order or enter into a contract with Zhuhai S-Tech.

HISTORICAL FIGURES

The aggregate approximate amounts paid by the Group to (i) Shenyang Sanquan in connection with the Project Management Services and (ii) Zhuhai S-Tech in connection with System Software and Safety Inspection Supporting Services respectively for the years ended 31 December 2014 and 2015 and for the 9 months ended 30 September 2016 were as follows:

For the year ended 31 December 2014 For the year ended 31 December 2015 For the 9 months ended 30 September 2016

To Shenyang Sanquan in connection with the Project Management Services

RMB3,984,000

(approximately HK$4,485,000)

RMB5,184,000

(approximately HK$5,837,000)

RMB4,122,000

(approximately HK$4,641,000)

To Zhuhai S-Tech in connection with the System Software and Safety Inspection Supporting Services

RMB129,000

(approximately HK$145,000)

RMB53,000

(approximately HK$60,000)

RMB132,000

(approximately HK$149,000)