Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

FONG'S INDUSTRIES COMPANY LIMITED

*

(Incorporated in Bermuda with limited liability)

(Stock Code: 641)

CONTINUING CONNECTED TRANSACTION RENEWAL OF TENANCY AGREEMENT

The Board announces that on 30 December 2013, Fong's National Engineering Company, Limited, an indirect wholly-owned subsidiary of the Company, entered into the Tenancy Agreement with the Landlord for the renewal of the lease of the Premises on similar terms for a term of three years commencing on 1 January 2014 and ending on 31 December 2016.
The Landlord is a company controlled by Mr. Fong Sou Lam. Mr. Fong is the Chairman Emeritus of the Company and the father of Mr. Fong Kwok Leung, Kevin (an Executive Director of the Company) as well as a substantial shareholder (as defined in the Listing Rules) of the Company holding approximately 17.67% of the issued share capital of the Company. Therefore, the Landlord is a connected person by reason of it being an associate of a connected person of the Company within the meaning of Rule 14A.11 of the Listing Rules. Accordingly, the Tenancy Agreement constitutes a continuing connected transaction for the Company under the Listing Rules.
Since the applicable percentage ratios (as defined in the Listing Rules) for the transaction contemplated under the Tenancy Agreement are on an annual basis more than 0.1% but less than 5%, the transaction under the Tenancy 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.
Details of the Tenancy Agreement will be included in the Company's published annual reports and accounts for each of the financial years during which the transaction persists.

The Board announces that on 30 December 2013, Fong's National Engineering Company, Limited, an indirect wholly-owned subsidiary of the Company, entered into the Tenancy Agreement with the Landlord for the renewal of the lease of the Premises on similar terms for a term of three years commencing on 1 January 2014 and ending on 31 December 2016.
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TENANCY AGREEMENT DATED 30 DECEMBER 2013 Landlord:

Sou Lam Company, Limited

Tenant:

Fong's National Engineering Company, Limited

Premises:

Units Nos. 1, 2 and 3 on the Ground Floor, whole of the Second Floor, whole of the Fifth Floor, portions of the Seventh Floor and whole of the Eighth Floor (with flat roof and portions of top roof) of the factory building situated at 22-28 Cheung Tat Road, Tsing Yi, Hong Kong, having a total gross floor area of approximately 97,498 square feet.

Lease term:

Three years commencing on 1 January 2014 and ending on 31 December 2016.

Rent:

HK$922,000 per month payable in cash monthly in advance exclusive of government rates, government rent, management fee and other outgoings.

Options to early termination:

The Tenant is entitled to terminate the Tenancy Agreement by serving not less than six months written notice to the Landlord provided that such notice shall not be served earlier than 31 December 2014. In respect of the early termination of the Tenancy Agreement, the Tenant and the Landlord shall execute a surrender agreement and any legal costs to be incurred relating thereto shall be solely borne by the Tenant.

Deposit:

HK$1,844,000, representing two months' rent payable upon the signing of the Tenancy Agreement and shall be refunded to the Tenant without interest within 30 days upon the expiry or termination of the Tenancy Agreement provided that the Tenant has not breached any of the terms and conditions of the Tenancy Agreement.

ANNUAL CAP

The annual rent payable by the Tenant under the Tenancy Agreement for each of the three financial years ending 31 December 2014, 2015 and 2016 will not exceed HK$11,064,000.
Save and except the Tenancy Agreement, there are no other existing continuing connected transactions with the Landlord and its associates which are discloseable under the Listing Rules.
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REASONS FOR THE TENANCY AGREEMENT

The existing three tenancy agreements dated 28 December 2010, 1 November 2011 and 30 April
2012 respectively entered into between the Landlord and the Tenant in respect of certain premises in the Building with an aggregate floor area of approximately 104,966 square feet at a monthly rent of HK$697,438 will expire on 31 December 2013, details of which were disclosed in the Company's published Annual Report 2012.
The Board considers it to be commercially necessary and beneficial to enter into the Tenancy Agreement so that the Company and its subsidiaries can continue to use the Premises for general office as well as industrial or godown purposes in their ordinary and usual course of business. The Tenancy Agreement is considered to be beneficial to the Group as it can avoid unnecessary disturbance to the daily business operations of the Group and can also save the relocation costs.
The terms of the Tenancy Agreement have been arrived at after arm's length negotiations and are on normal commercial terms. The monthly rent has been determined by reference to an independent rental valuation dated 9 October 2013 by CS Surveyors Limited, which is not a connected person of the Company, as defined in the Listing Rules. The independent rental valuation was prepared by reference to the rent chargeable by the Landlord for similar leases in the same building of which the Premises form part and the open market rent of properties of comparable size and location.
The Directors, including the independent non-executive Directors, consider that the Tenancy Agreement has been entered into in the ordinary and usual course of business of the Group, on normal commercial terms, fair and reasonable, and in the interests of the Company and its shareholders as a whole.

INFORMATION ABOUT THE GROUP AND THE LANDLORD

The Group is principally engaged in the manufacture and sale of dyeing and finishing machines, trading of stainless steel supplies as well as manufacture and sale of stainless steel casting products.
The Landlord is engaged in property investment for rental income.

CONTINUING CONNECTED TRANSACTION

The Landlord is a company controlled by Mr. Fong Sou Lam. Mr. Fong is the Chairman Emeritus of the Company and the father of Mr. Fong Kwok Leung, Kevin (an Executive Director of the Company) as well as a substantial shareholder (as defined in the Listing Rules) of the Company holding approximately
17.67% of the issued share capital of the Company. Therefore, the Landlord is a connected person by reason of it being an associate of a connected person of the Company within the meaning of Rule 14A.11 of the Listing Rules. Accordingly, the Tenancy Agreement constitutes a continuing connected transaction for the Company under the Listing Rules.
Mr. Fong Kwok Leung, Kevin is a common director of both the Company and the Tenant, he has abstained from voting on the board resolutions in relation to the transaction contemplated under the Tenancy Agreement.
Save as disclosed above, to the best of the Directors' knowledge, information and belief, having made all reasonable enquires, no Directors have a material interest in the transaction contemplated under the Tenancy Agreement.
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There are no agreements of the Company in the last 12 months besides the Tenancy Agreement and the previous tenancy agreements which would require aggregation pursuant to Rule 14A.25 of the Listing Rules.
Since the applicable percentage ratios (as defined in the Listing Rules) for the transaction contemplated under the Tenancy Agreement are on an annual basis more than 0.1% but less than 5%, the transaction under the Tenancy 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.
Details of the Tenancy Agreement will be included in the Company's published annual reports and accounts for each of the financial years during which the transaction persists.

DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:
"Annual Cap" the maximum amount of rent payable under the Tenancy Agreement for each of the three financial year ending 31 December 2014, 2015 and
2016
"Board" the board of Directors
"Building" the factory building situated at 22-28 Cheung Tat Road, Tsing Yi, Hong
Kong
"Company" Fong's Industries Company Limited, an exempted company incorporated in Bermuda with limited liability, the issued shares of which are listed on the main board of the Stock Exchange
"connected person" has the same meaning ascribed thereto under the Listing Rules
"Director(s)" the director(s) of the Company
"Group" the Company and its subsidiaries
"Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China
"Landlord" Sou Lam Company, Limited
"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange
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"Premises" Units Nos. 1, 2 and 3 on the Ground Floor, whole of the Second Floor, whole of the Fifth Floor, portions of the Seventh Floor and whole of the Eighth Floor (with flat roof and portions of top roof) of the Building, having a total gross floor area of approximately 97,498 square feet
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Tenancy Agreement" the tenancy agreement dated 30 December 2013 entered into between the Landlord and the Tenant in relation to the Premises for a term of three years from 1 January 2014 to 31 December 2016 (both days inclusive) at a monthly rent of HK$922,000
"Tenant" Fong's National Engineering Company, Limited, an indirect wholly- owned subsidiary of the Company
"HK$" Hong Kong dollar, the lawful currency of Hong Kong
"%" per cent.
On behalf of the Board

Fong's Industries Company Limited He Fengxian

Chairman

As at the date of this announcement, our Chairman and Executive Director is Ms. He Fengxian; our Vice-Chairman and Non-executive Director is Mr. Ye Maoxin; our other Executive Directors are Mr. Ji Xin (Chief Executive Officer), Mr. Wan Wai Yung and Mr. Fong Kwok Leung, Kevin; and our Independent Non-Executive Directors are Mr. Zhou Yucheng, Mr. Ying Wei, Dr. Yuen Ming Fai and Dr. Keung Wing Ching.

Hong Kong, 31 December 2013

* For identification purpose only

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