REASONS FOR THE JOINT VENTURE

The Company has been looking for suitable investment or business opportunities to diversify the business of the Group with an objective to broaden the Group’s income sources. The Company is of the view that the business of financial leasing and in particular, agricultural machinery leasing which will grow rapidly in the PRC, is a suitable opportunity given that financial leasing is highly encouraged by the PRC government. On 24 December 2011, the “Guidance Catalogue of Industries for Foreign Investment (2011 Revision)”(《外商 投资产业指导目录(2011年修订)》)was issued where foreign enterprise investing in financial leasing company in the PRC was switched from restricted category to permitted category. Besides, the “Measures for the Administration of Finance Leasing Companies”(《金融租赁公司管理办法》) revised by the China Banking Regulatory Commission and which became effect on 13 March 2014 relaxed the entry requirements, expanded the business scope of the financial leasing company and launched a pilot scheme which allowed the financial leasing company to set up subsidiaries. Moreover, the Board considers that by virtue of the《国务院关于促进农业机械化和农机工业又好又快发展的意见》(《Opinions of the State Council on the Promotion of Agricultural Mechanization and Agricultural Machinery Industry Good and Rapid Development*》) issued on 5 July 2010, the growth of agricultural machinery leasing will continue. As a result, the Board believes that financial leasing will have a good business prospect and development in the future. By establishing Dongkui, the financial resources of its equity holders can be utilized for funding its capital. Moreover, Dongkui may (i) leverage on the listing status of the Company and Jianghuai Engine; (ii) leverage on the existing client base of Jianghuai Engine for its business development; and (iii) make use of the risk management experience of Shanghai Dongsheng in recruiting relevant talents for Dongkui. Therefore, the Company considers that the business of Dongkui is feasible.