Watts International Maritime Engineering : RENEWAL OF CONTINUING CONNECTED TRANSACTION - 2021 MASTER PROCUREMENT AGREEMENT

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华滋国际海洋工程有限公司

Watts International Maritime Engineering Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 2258)

RENEWAL OF CONTINUING CONNECTED TRANSACTION

2021 MASTER PROCUREMENT AGREEMENT

INTRODUCTION

Reference is made to the Prospectus in relation to, among others, the Master Procurement Agreement. As the Master Procurement Agreement has expired on 31 December 2020, on 7 April 2021 (after trading hours), the Company as purchaser and Watts Gallop as vendor entered into the 2021 Master Procurement Agreement in respect of the procurement of Raw Materials from 7 April 2021 to 31 December 2023.

2021 MASTER PROCUREMENT AGREEMENT

The principal terms of the 2021 Master Procurement Agreement are summarized as follow:

Date

7 April 2021 (after trading hours)

Parties

1. the Company
2. Watts Gallop

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Subject matter

Pursuant to the 2021 Master Procurement Agreement, the Group may procure Raw Materials from Watts Gallop Group from time to time during the term of the 2021 Master Procurement Agreement. It is expected that separate definitive procurement agreements will be entered into between the Group and Watts Gallop Group to set out specific terms and conditions of specific transactions pursuant to the principal terms stipulated in the 2021 Master Procurement Agreement.

Term

The 2021 Master Procurement Agreement will be valid from 7 April 2021 to 31 December 2023.

Pricing policy

The transactions contemplated under the 2021 Master Procurement Agreement will be conducted in the ordinary and usual course of business of the Group, on normal commercial terms or better, and on terms which are comparable to or better than those offered by Independent Third Parties.

The prices of the Raw Materials are set through tendering and bidding process, which there must be at least two bidders who are Independent Third Parties attending the tendering and bidding process. The Company will take into consideration factors including, but not limited to, the bidders' sufficient licenses and qualifications, business scale and capacities and will also make reference to the prevailing market terms and prices, as well as the government- prescribed prices or government-guided prices (where applicable).

REASONS FOR AND BENEFITS OF THE 2021 MASTER PROCUREMENT AGREEMENT

The transactions contemplated under the 2021 Master Procurement Agreement are expected to be of a recurrent nature and will occur on a regular and continuing basis in the ordinary and usual course of business of the Group. The 2021 Master Procurement Agreement is intended to streamline the continuing connected transactions between the Group and Watts Gallop Group. The purposes of entering into the 2021 Master Procurement Agreement are to renew the term of the Master Procurement Agreement and to renew the annual caps for the transactions contemplated thereunder, in order to ensure the continuation of the on-going procurement of the Raw Materials from the Watts Gallop Group by the Group.

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The Raw Materials purchased from Watts Gallop Group are primarily used in the construction projects in the Group's ordinary and usual course of business. With years of stable and long-term business relationship between the Group and Watts Gallop Group and Watts Gallop Group's experience in the supply of the Raw Materials, the Directors believe that Watts Gallop Group is able to provide the Group with quality Raw Materials at competitive prices and terms in the open market. In addition, Watts Gallop Group is familiar with the Group's business needs, quality standards and operation requirements through the long-term cooperation with the Group. When compared to the similar Raw Materials offered by Independent Third Parties, the prices and terms offered by Watts Gallop Group are fair and reasonable, and are comparable to or better than those offered by Independent Third Parties. Nevertheless, the Directors consider that based on our historical purchase amount and nature of the Raw Materials purchased from Watts Gallop Group for the three years ended 31 December 2020, the Group were able to purchase such Raw Materials with similar quality standards and business terms from other Independent Third Parties easily, and hence, the Group have no reliance on Watts Gallop Group.

The Directors (including the independent non-executive Directors) are of the view that the 2021 Master Procurement Agreement is entered into in the ordinary course of the Group's business and on normal commercial terms, and its terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

ANNUAL CAPS AND BASIS FOR ANNUAL CAPS

The historical transaction amount and annual cap under the Master Procurement Agreement for each of the three years ended 31 December 2020 and the period from 1 January 2021 to

7 April 2021 is set out below:

Historical Transaction Amount

	Year ended	Year ended	Year ended	Period from
	31 December	31 December	31 December 1 January 2021 to
	2018	2019	2020	7 April 2021
Historical Transaction Amount	Nil	RMB13,000,000	Nil	Nil

Historical Annual Caps
	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2018	2019	2020
Historical Annual Caps	RMB15,200,000	RMB21,600,000	RMB26,000,000

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New Annual Caps

The annual caps for the transactions contemplated under the 2021 Master Procurement Agreement for the three years ending 31 December 2023 are set out as follows:

	Year ending	Year ending	Year ending
	31 December	31 December	31 December
	2021	2022	2023
Annual caps	RMB20,000,000	RMB20,000,000	RMB20,000,000

The annual caps under the 2021 Master Procurement Agreement were determined with reference to the historical transaction amounts listed above and after taking into consideration (i) the historical unit price of the Raw Materials and (ii) the number of projects on hand or expected to be held and the expected demand for the Raw Materials to be procured therewith.

INTERNAL CONTROL MEASURES REGARDING THE 2021 MASTER PROCUREMENT AGREEMENT

To ensure the Company's compliance with the above pricing policies from time to time, the Company adopted a series of internal control policies in its daily operations. Such internal control policies are conducted and supervised by the finance department and the audit department of the Company:

1. the Company has adopted and implemented a consistent management system on connected transactions. According to the system, the finance department is responsible for the information gathering on and monitoring of connected transactions, and conducting evaluation on the fairness of the transaction terms and the pricing terms;
2. the independent non-executive Directors will review such continuing connected transactions under the 2021 Master Procurement Agreement to ensure such agreement is entered into on normal commercial terms, fair and reasonable, and carried out pursuant to the terms of such agreement. The auditor of the Company will also conduct an annual review on the pricing and annual caps of such continuing connected transactions under the 2021 Master Procurement Agreement; and
3. the internal audit department of the Company will conduct periodical monitoring and evaluation on whether the procedures of connected transactions conform with the internal control requirements of the Company.

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INFORMATION OF THE RELEVANT PARTIES

The Company

The Company is a company incorporated in the Cayman Islands on 20 December 2017. The Group is a leading port, waterway, marine engineering and municipal public engineering services provider in the PRC and is committed to the services of (i) port infrastructure, (ii) waterway engineering, (iii) construction of public infrastructure within cities, (iv) urban greening and (v) construction of buildings.

Watts Gallop

Watts Gallop is an investment holding company established under the laws of the PRC on 13 November 2003, and as at the date of this announcement, its subsidiaries are principally engaged in real estate development, investment in property, property management, property leasing, production and manufacturing of transport and storage equipment for new energy, and trade service in the PRC.

As at the date of this announcement, Watts Gallop is ultimately owned as to 56.00% by Mr. Wang Shizhong, 8.66% by Mr. Ye Kangshun, 6.00% by Mr. Wang Xiuchun, 4.00% by Mr. Li Hongwei, 4.00% by Mr. Huang Guanming, 4.00% by Mr. Li Weifei, 2.70% by Mr. Tang Jinxin, 2.06% by Mr. Pan Xinfa, 2.00% by Ms. Zhu Weier, 1.50% by Ms. Zhou Meng, 1.36% by Mr. Shen Jianli, 1.36% by Mr. Wang Shiqin, 1.36% by Mr. Jin Yuhuan, 1.00% by Mr. Lu Yang, 1.00% by Mr. Yan Xinsheng, 1.00% by Mr. Wang Likai, 0.50% by Ms. Wan Yun, 0.50% by Mr. Xu Mingsong, 0.50% by Ms. Zhu Qiulian, and 0.50% by Mr. Chen Yan.

LISTING RULES IMPLICATIONS

As at the date of this announcement, Mr. Wang Shizhong, a non-executive Director and a controlling Shareholder of the Company, owns 56% equity interest in Watts Gallop. Mr. Wang Shizhong and the parties acting in concert with him (including Mr. Ye Kangshun, Mr. Wang Xiuchun, Ms. Zhou Meng, Mr. Wang Shiqin and Mr. Wang Likai) together own an aggregate of 74.52% equity interest in Watts Gallop. As such, Watts Gallop is a connected person of the Company. The 2021 Master Procurement Agreement and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) (other than the profits ratio) in respect of the highest annual cap under the 2021 Master Procurement Agreement exceeds 0.1% but less than 5%, the 2021 Master Procurement Agreement is subject to the reporting, announcement and annual review requirements, but is exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.

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Mr. Wang Xiuchun, Mr. Wang Shizhong, Mr. Wang Lijiang and Mr. Wang Likai, being Directors of the Company, have abstained from voting on the Board resolutions approving the 2021 Master Procurement Agreement and the transactions contemplated thereunder.

DEFINITIONS

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

"2021 Master Procurement	the master procurement agreement entered into on 7
Agreement"	April 2021 between the Company as purchaser and Watts
	Gallop as vendor in respect of the procurement of the Raw
	Materials for a term of 7 April 2021 to 31 December 2023.
"Board"	the board of Directors of the Company
"Company"	Watts International Maritime Engineering Limited, a
	company incorporated in the Cayman Islands with limited
	liability, the shares of which are listed on the main board of
	the Stock Exchange
"connected persons"	has the meaning ascribed to it under the Listing Rules
"controlling shareholder(s)"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	the director(s) of the Company
"Group"	the Company and its subsidiaries from time to time
"Independent Third Parties"	an individual(s) or a company(ies) who or which/are not
	connected person(s) of our Company within the meaning of
	the Listing Rules
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange

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"Master Procurement	the master procurement agreement entered into on 19
Agreement"	October 2018 between the Company as purchaser and
	Watts Gallop as vendor in respect of the procurement of the
	Raw Materials for the three years ended 31 December 2020
"PRC"	the People's Republic of China, which for the purpose
	of this announcement only excludes Hong Kong Special
	Administrative Region, Macau Special Administrative
	Region and Taiwan
"Raw Materials"	all raw materials and other consumables related to
	production and operation of the Group
"RMB"	Renminbi, the lawful currency of the PRC
"Shares"	the ordinary share(s) of HK$0.01 each in the issued share
	capital of the Company
"Shareholder(s)"	holder(s) of the issued Share(s)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Watts Gallop"	Shanghai Watts Gallop Holding Group Co., Ltd.* (上海
	華滋奔騰控股集團有限公司), a company established in
	the PRC with limited liability and a connected person of
	the Company. As at the date of this announcement, Watts
	Gallop is owned as to 56.00% by Mr. Wang Shizhong,
	8.66% by Mr. Ye Kangshun, 6.00% by Mr. Wang Xiuchun,
	4.00% by Mr. Li Weifei, 4.00% by Mr. Li Hongwei, 4.00%
	by Mr. Huang Guanming, 2.70% by Mr. Tang Jinxin,
	2.06% by Mr. Pan Xinfa, 2.00% by Ms. Zhu Weier, 1.00%
	by Mr. Wang Likai, 1.50% by Ms. Zhou Meng, 1.36% by
	Mr. Shen Jianli, 1.36% by Mr. Wang Shiqin, 1.36% by Mr.
	Jin Yuhuan, 1.00% by Mr. Yan Xinsheng, 1.00% by Mr. Lu
	Yang, 0.50% by Ms. Wan Yun, 0.50% by Ms. Zhu Qiulian,
	0.50% by Mr. Xu Mingsong, and 0.50% by Mr. Chen Yan

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"Watts Gallop Group"	Watts Gallop and its subsidiaries and/or associate from time
	to time
	By Order of the Board
	Watts International Maritime Engineering Limited
	Wang Xiuchun
	Chairman and Executive Director
Shanghai, 7 April 2021

As at the date of this announcement, the Board comprises Mr. Wang Xiuchun, Ms. Wan Yun, Mr. Wang Lijiang and Mr. Wang Likai as executive Directors; Mr. Wang Shizhong as non-executive Director; Mr. Wang Hongwei, Mr. How Sze Ming and Mr. Sun Dajian as independent non-executive Directors.

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