Global Strategic : CONTINUING CONNECTED TRANSACTIONS

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環球戰略集團有限公司

GLOBAL STRATEGIC GROUP LIMITED

環球戰略集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8007) CONTINUING CONNECTED TRANSACTIONS

On 4 January 2017, Yichang Zhongyou, being a 49% indirectly-owned subsidiary of the Company, and Yichang Kunlun entered into the Upstream Natural Gas Sales Agreement pursuant to which Yichang Kunlun agreed to supply and Yichang Zhongyou agreed to purchase natural gas for the period from 1 January 2017 to 31 December 2017.

As Yichang Kunlun is owned as to 49% by Hubei Biaodian and Hubei Biaodian is a substantial shareholder (within the meaning of the GEM Listing Rules) of Yichang Zhongyou holding 41% equity interest in Yichang Zhongyou, whereas Mr. Xiong, is the ultimate controlling shareholder of Hubei Biaodian and a director of Yichang Zhongyou, each of Yichang Kunlun and Hubei Biaodian, are connected persons of the Company and the transactions contemplated under the Upstream Natural Gas Supply Agreement constitute Continuing Connected Transactions for the Company under the GEM Listing Rules.

Given that: (i) each of Yichang Kunlun, Hubei Biaodian and Mr. Xiong is a connected person of the Company only at the subsidiary level; (ii) the Board has approved the Continuing Connected Transactions; and (iii) having considered the terms of the Upstream Natural Gas Supply Agreement and the transactions contemplated thereunder (including the Annual Cap), all the independent non- executive Directors have confirmed that the terms of the Continuing Connected Transactions are fair and reasonable, the Continuing Connected Transactions are on normal commercial terms or better and in the interest of the Company and the Shareholders as a whole, the Continuing Connected Transactions (including the Annual Cap) are exempted from the circular, independent financial advice and Shareholders' approval requirements under Rule 20.99 of the GEM Listing Rules. The Continuing Connected Transactions are subject to the reporting, announcement and annual review requirements under Chapter 20 of the GEM Listing Rules.

CONTINUING CONNECTED TRANSACTIONS Background

On 4 January 2017, Yichang Zhongyou, being a 49% indirectly-owned subsidiary of the Company, and Yichang Kunlun entered into the Upstream Natural Gas Sales Agreement pursuant to which Yichang Kunlun agreed to supply and Yichang Zhongyou agreed to purchase natural gas for the period from 1 January 2017 to 31 December 2017.

Principal terms of the Upstream Natural Gas Sales Agreement Date: 4 January 2017 Parties:

Seller: Yichang Kunlun

Buyer: Yichang Zhongyou

1. Contract period

   The contract period under the Upstream Natural Gas Sales Agreement is from 1 January 2017 up to and including 31 December 2017.

2. Nature of transaction

   Pursuant to the Upstream Natural Gas Sales Agreement, Yichang Kunlun will supply natural gas to Yichang Zhongyou for its Zhijiang Project.

3. Quantity

   For the period from 1 January 2017 to 31 December 2017, Yichang Kunlun will supply 10 million cubic metres of natural gas to Yichang Zhongyou and the daily quantity will be 10 million cubic metres divided by 365 days.

4. Pricing basis

   The price of the natural gas supplied to Yichang Zhongyou is the aggregate of the city-gate prices of natural gas provided by National Development and Reform Commission（ 國家發展和改革委員會） from time to time (subject to adjustments by National Development and Reform Commission (國家 發展和改革委員會) and PetroChina Central China Gas Marketing Company (中國石油華中天然氣 銷售公司)) plus RMB0.045 (including other tax and operating expenses incurred) per cubic metre of natural gas.

5. Payment

During the term of the Upstream Natural Gas Sales Agreement, Yichang Zhongyou will prepay to Yichang Kunlun an amount equivalent to 120% of the estimated provisional value of next month's natural gas purchase amount on the 28th day of each preceding month through bank settlement.

The Annual Cap

The Annual Cap of the transactions contemplated under the Upstream Natural Gas Sales Agreement for the period from 1 January 2017 to 31 December 2017 is approximately RMB20.6 million.

The above Annual Cap was determined with reference to:-

1. estimates on natural gas sale prices with reference to the city-gate price of natural gas consumed by non-residential users as stipulated by the PRC Government;

2. the historical transaction amounts under the 2016 Upstream Natural Gas Sales Agreement for the period from 1 January 2016 to 31 December 2016 of approximately RMB1.14 million; and

3. estimates on the demands for natural gas based on the estimated volumes of natural gas supplied by Yichang Zhongyou to under the Zhijiang Project for the period from 1 January 2017 to 31 December 2017.

Based on the above, the Directors (including the independent non-executive Directors) are of the view that the Annual Cap is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Reasons for and benefits of the Continuing Connected Transactions

As disclosed in the announcement of the Company dated 24 February 2016, Yichang Zhongyou had been in negotiation with a leading natural gas supply company in the PRC (the "Gas Company"), being an Independent Third Party, for a proposed agreement to supply natural gas by the Gas Company to Yichang Zhongyou for the Zhijiang Project. The Zhijiang Project was previously owned by Yichang Kunlun. As advised by the Gas Company, (i) the original account with the Gas Company for the supply of natural gas under the Zhijiang Project is registered under Yichang Kunlun and Yichang Zhongyou is required to register a new gas account (the "New Gas Account") and enter into an upstream natural gas supply agreement with the Gas Company after Yichang Zhongyou obtains the Fuel Gas Operation License and a new business license with the scope of natural gas supply; and (ii) completion of the account registration with the Gas Company will take at least six months following the filing of the formal application of the New Gas Account by Yichang Zhongyou to the Gas Company.

As of the date of this announcement, Yichang Zhongyou has not completed the account registration with the Gas Company for the New Gas Account. Given that Yichang Kunlun has been engaged as the upstream natural gas supplier of Yichang Zhongyou since the commencement of the trial run of the Zhijiang Project and during the term of the 2016 Upstream Natural Gas Sales Agreement, the Directors (including independent non-executive Directors) consider that it is in the best interest of Yichang Zhongyou to continue with the transactions contemplated under the Upstream Natural Gas Sales Agreement to ensure a stable supply of natural gas for the Zhijiang Project pending completion of the registration of the New Gas Account.

The Directors (including independent non-executive Directors) are of the view that the terms of the Upstream Natural Gas Supply Agreement (including the Annual Cap) has been agreed after arm's length negotiation between the parties, are fair and reasonable, on normal commercial terms after taking into account the terms of the original letter of intent entered into between Yichang Kunlun and the Gas Company for the upstream gas supply under the Zhijiang Project, in the ordinary and usual course of business of the Group and are in the interests of the Company and its Shareholders as a whole.

GEM Listing Rules implications

As Yichang Kunlun is owned as to 49% by Hubei Biaodian and Hubei Biaodian is a substantial shareholder (within the meaning of the GEM Listing Rules) of Yichang Zhongyou holding 41% equity interest in Yichang Zhongyou, whereas Mr. Xiong, is the ultimate controlling shareholder of Hubei Biaodian and a director of Yichang Zhongyou, each of Yichang Kunlun and Hubei Biaodian, are connected persons of the Company and the transactions contemplated under the Upstream Natural Gas Supply Agreement constitute Continuing Connected Transactions for the Company under the GEM Listing Rules.