REASONS FOR AND BENEFITS OF THE TRANSACTIONS The construction of the New Xxxxx Complex was completed in October 2013. The New Xxxxx Complex has a total of 5 blocks with a total gross floor area of 126,703 square metres. Xxxxx Engineering is the legal owner of the New Xxxxx Complex. The Group occupies certain premises at the New Xxxxx Complex as its offices. For the premises that are not occupied by the Group, Xxxxx Engineering would put them for lease in the market so as to better utilise the Group’s assets and to generate returns for the Group. As a result of the changes in operational needs of Xxxxx Xxxxxxx, Xxxxx Nantong negotiated with Xxxxx Engineering for the reduction of gross floor area of the premises at the New Xxxxx Complex that it leased from Xxxxx Engineering. In view that (i) the premises leased to Xxxxx Nantong under the 2016 Xxxxx Nantong Property Leasing Agreement are vacant, (ii) the subject premises of the 2014 Xxxxx Nantong Property Leasing Agreement vacated by Xxxxx Xxxxxxx could be put for lease in the market at prevailing market rates which the Company believes would be no less favourable than the rentals and property management services fees agreed between Xxxxx Engineering and Xxxxx Nantong under the 2014 Xxxxx Nantong Property Leasing Agreement, (iii) the rentals payable under the 2016 Xxxxx Nantong Property Leasing Agreement and the property management services fees payable under the 2016 Xxxxx Nantong Property Management Services Agreement, in each case, reflect prevailing market rates, Xxxxx Engineering agreed to enter into the 2016 Xxxxx Property Leasing Agreement and the 2016 Xxxxx Nantong Property Management Services Agreement with Xxxxx Xxxxxxx and to terminate the 2014 Xxxxx Nantong Property Leasing Agreement and the 2014 Xxxxx Nantong Property Management Services Agreement upon the commencement of the term of the 2016 Xxxxx Nantong Property Leasing Agreement. As Xx. Xxx Xxxx is also a director of Xxxxx Holding, Xx. Xxx Xxxx abstained from voting on the Board resolutions approving the transactions contemplated under the 2016 Xxxxx Nantong Property Leasing Agreement and the 2016 Xxxxx Nantong Property Management Services Agreement. The Directors (including independent non-executive Directors but excluding Xx. Xxx Xxxx who has abstained from voting) are of the view that the 2016 Xxxxx Nantong Property Leasing Agreement and the 2016 Xxxxx Nantong Property Management Services Agreements were entered into after arm’s length negotiation between Xxxxx Engineering and Xxxxx Xxxxxxx and in the ordinary and usual course of business of the Group, reflect normal commercial terms and are in the interests of the Company and its shareholders as a whole, and the terms as well as the proposed annual caps for the transactions thereunder are fair and reasonable. GENERAL INFORMATION The Company is an investment holding company. The principal activity of the Group is the provision of chemical engineering, procurement and construction management, or EPC, services. The Group provides a broad range of integrated services spanning the project life cycle from feasibility studies, consulting services, provision of proprietary technologies, design, engineering, raw materials and equipment procurement and construction management to maintenance and after-sale technical support. Xxxxx Engineering is the principal operating subsidiary of the Company. Xxxxx Xxxxxxx is principally engaged in manufacture and sale of engineering machinery and ancillary steel-structured products, and provision of engineering technology services. LISTING RULES IMPLICATIONS Xxxxx Holding is a controlling shareholder of the Company which is indirectly interested in approximately 78.12% of the total issued share capital of the Company as at the date of this announcement. Hence, Xxxxx Holding is a connected person of the Company. As Xxxxx Nantong is an indirect subsidiary of Xxxxx Holding, Xxxxx Nantong is also a connected person of the Company. Accordingly, the transactions contemplated under the 2016 Xxxxx Nantong Property Leasing Agreement and the 2016 Xxxxx Nantong Property Management Services Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules. Since at least one of the applicable percentage ratios set out in Rule 14.07 of the Listing Rules in respect of the annual caps for the amounts payable by Xxxxx Xxxxxxx under the 2016 Xxxxx Nantong Property Leasing Agreement and the 2016 Xxxxx Nantong Property Management Services Agreement, as aggregated, is, on an annual basis, above 0.1% but below 5%, the transactions contemplated thereunder are only subject to the reporting, annual review and announcement requirements set out in the Listing Rules but are exempt from the independent shareholders’ approval requirement under the Listing Rules.