CONTINUING CONNECTED TRANSACTIONS: REVISED ANNUAL CAPS AND EXTENSION OF SELLING AGENCY TRANSACTIONS

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INSPUR INTERNATIONAL LIMITED

浪潮國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 596)

CONTINUING CONNECTED TRANSACTIONS:

REVISED ANNUAL CAPS AND

EXTENSION OF SELLING AGENCY TRANSACTIONS

References are made to the Company's Previous Disclosure in relation to, among others, five categories of continuing connected transactions (including the Selling Agency Transactions) between the Group and the Inspur Group Companies under the Framework Agreement.

As it is expected that the transaction amounts of the Selling Agency Transactions will increase and the parties will continue to conduct the Selling Agency Transactions beyond 31 December 2020, the Company and Inspur Group entered into the Second Supplemental Agreement on 5 November 2019 to: (i) revise the annual caps of the Selling Agency Transactions for: (a) the year ending 31 December 2019 to RMB1,080,000,000 (value of transactions) and RMB10,800,000 (related commission); and (b) the year ending 31 December 2020 to RMB1,180,000,000 (value of transactions) and RMB11,800,000 (related commission); and (ii) continue to conduct the Selling Agency Transactions for the year ending 31 December 2021 with the annual caps of RMB1,306,800,000 (value of transactions) and RMB13,068,000 (related commission). The Second Supplemental Agreement is conditional on the approval of the Independent Shareholders at the EGM.

As the highest applicable percentage ratio under Rule 14.07 of the Listing Rules in respect of the revised and new annual caps of the Selling Agency Transactions is expected to continue to exceed 5%, the transactions contemplated under the Second Supplemental Agreement are subject to the announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

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The EGM will be convened and held for the Independent Shareholders to consider and, if thought fit, approve the Second Supplemental Agreement, including the revised annual caps for the two years ending 31 December 2020 and the extension of the Selling Agency Transactions to the year ending 31 December 2021.

Since the Second Supplemental Agreement and the transactions contemplated thereunder are subject to the Independent Shareholders' approval as required under Chapter 14A of the Listing Rules, Inspur Group and its associates shall abstain from voting on the relevant resolutions.

A circular containing, among others: (i) further details of the transactions contemplated under the Second Supplemental Agreement; (ii) the recommendation from the Independent Board Committee in respect of the Second Supplemental Agreement and the transactions contemplated thereunder; (iii) the advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding the Second Supplemental Agreement and the transactions contemplated thereunder; and (iv) the notice convening the EGM, is currently expected to be despatched to the Shareholders on or about 20 November 2019 in accordance with the Listing Rules.

References are made to the Company's announcement dated 9 May 2018 and circular dated 25 June 2018 (collectively, the "Previous Disclosure") in relation to, among others, five categories of continuing connected transactions (including the Selling Agency Transactions) between the Group and the Inspur Group Companies under the Framework Agreement. Unless otherwise specified, capitalized terms used in this announcement shall have the same meanings as those defined in the Previous Disclosure.

On 12 July 2018, the Company obtained the approval of the Independent Shareholders for five categories of continuing connected transactions (including the Selling Agency Transactions) between the Group and the Inspur Group Companies under the Framework Agreement and the related annual caps for the three financial years ending 31 December 2020.

As it is expected that the transaction amounts of the Selling Agency Transactions will increase and the parties will continue to conduct the Selling Agency Transactions beyond 31 December 2020, the Company and Inspur Group entered into the Second Supplemental Agreement on 5 November 2019 to: (i) revise the annual caps of the Selling Agency Transactions for: (a) the year ending 31 December 2019 to RMB1,080,000,000 (value of transactions) and RMB10,800,000 (related commission); and (b) the year ending 31 December 2020 to RMB1,180,000,000

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(value of transactions) and RMB11,800,000 (related commission); and (ii) continue to conduct the Selling Agency Transactions for the year ending 31 December 2021 with the annual caps of RMB1,306,800,000 (value of transactions) and RMB13,068,000 (related commission). The Second Supplemental Agreement is conditional on the approval of the Independent Shareholders at the EGM.

SELLING AGENCY TRANSACTIONS

The Group appoints the Inspur Group Companies as its selling agent in respect of various IT service products of the Group (such as ERM software, finance software and products of outsourced software). Some of the business may be generated from public tenders made by the Inspur Group Companies. The Group will be involved in the negotiation and finalization of the terms of supply of IT products to the ultimate third party customers and ensure that the supply of IT products is on normal commercial terms. The Inspur Group Companies will place orders with the Group for supply of the products from time to time. After acceptance of the orders by the Group, the Group will directly provide the products to the customers. After the delivery of the products to the customers, the Inspur Group Companies will issue sale invoices to the customers and the Group will issue sales invoice to the Inspur Group Companies for settlement of the payment of the products.

The Group pays selling agency commission of not more than 1% (calculated on the price of the relevant products payable by the customers) to the Inspur Group Companies. The Inspur Group Companies will deduct the related commission from the price received from the customers and pay back the net proceeds to the Group within five days.

Existing annual caps

According to the Framework Agreement, the annual cap amounts in relation to the Selling Agency Transactions are:

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The actual transaction amounts of Selling Agency Transactions provided under the Framework Agreement for the year ended 31 December 2018 were approximately RMB582,930,000 (value of transactions) and RMB5,823,000 (related commission), which did not exceed the annual Selling Agency Transactions cap for that year. The Directors confirm that the annual caps of the Selling Agency Transactions provided under the Framework Agreement for the year ending 31 December 2019 have not been exceeded as at the date of this announcement.

Reasons for and benefits of entering into the Second Supplemental Agreement

As a result of the increase in demand for the Company's various IT service products selling through the Inspur Group Companies as its selling agent, the transaction amounts of the Selling Agency Transactions provided under the Framework Agreement for the nine months ended 30 September 2019 have reached approximately RMB600,526,338 (value of transactions) and RMB6,002,665 (related commission). Based on the public tenders made and sale orders on hand under negotiation, the Company expects that the growth in demand for its IT service products will continue for the rest of 2019, 2020 and 2021. As such, the existing annual caps of the Selling Agency Transactions for 2019 and 2020 would not be sufficient for the expected transaction volume. The Company would like to revise the annual caps in respect of the Selling Agency Transactions for the two years ending 31 December 2020. The Company would also like to continue to conduct the Selling Agency Transaction with the Inspur Group Companies for the year ending 31 December 2021.

Internal control measures for the transactions

The market strategies, including the pricing mechanisms, are determined by the Company's operations department. There is a segregation of duties between the Company's sales department and operations department. The sales department is responsible for contacting customers, setting quotation and entering into the contracts. The operations department is in charge of setting the price and other terms, through which it will control and monitor the fee quotation. The operations department will periodically review and conduct internal audit and, if necessary, adjust the pricing and commercial terms with reference to the market situation and the same or similar transactions entered into by the Inspur Group Companies with Independent Third Parties.

The Directors (including independent non-executive directors of the Company) will review the pricing terms and the payment terms of the Selling Agency Transactions each year so as to confirm that the terms are fair and reasonable, on normal commercial terms or better than those offered to or by Independent Third Parties and in the interests of the Company and the Shareholders as a whole.

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REVISED AND NEW ANNUAL CAPS

On 5 November 2019, the Company entered into the Second Supplemental Agreement with Inspur Group, pursuant to which the parties agree that, conditional upon the obtaining of the approval of the Independent Shareholders to: (i) revise the annual caps of the Selling Agency to: (a) for the year ending 31 December 2019, RMB1,080,000,000 (value of transactions) and RMB10,800,000 (related commission); and (b) for the year ending 31 December 2020, RMB1,180,000,000 (value of transactions) and RMB11,800,000 (related commission); and (ii) continue to conduct the Selling Agency Transaction for the year ending 31 December 2021 with the annual caps of RMB1,306,800,000 (value of transactions) and RMB13,068,000 (related commission).

The revised annual caps of the Selling Agency Transactions provided for the two years ending 31 December 2020 and the new annual caps of the Selling Agency Transactions provided for the year ending 31 December 2021 are determined after taking into account the following factors and assumption: (i) recent historical transacted amount of Selling Agency Transactions; (ii) orders which have been fulfilled and sale orders on hand; and (iii) an expected annual growth rate of 10% assuming continued growth in demand for Selling Agency Transactions and general inflation.

The Company's finance department provides guidance and advice to the Company's operation department on the amount incurred under the Selling Agency Transactions each year. By monitoring the Selling Agency Transactions, the finance department will analyse the implementation of the Selling Agency Transactions monthly and ensure the compliance of the transactions contemplated under the Second Supplemental Agreement.

Apart from the aforementioned revisions, all the terms under the Framework Agreement remain unchanged.

The Directors (excluding the independent non-executive Directors who will express their view after receiving advice from the Independent Financial Adviser) are of the view that the Second Supplemental Agreement was entered into on normal commercial terms and in the ordinary and usual course of business of the Group, and the terms of the Second Supplemental Agreement together with the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE GROUP

The Company is a company incorporated in the Cayman Islands with limited liability, whose Shares are listed and traded on the Main Board of the Stock Exchange (Stock Code: 596).

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The principal activities of the Group are software development and provision of cloud service and Internet of Things solution. The Group caught up with the growth trend of enterprises' demand for digital transformation, focused on "cloud + data + AI" and made full use of new technologies such as cloud computing, big data, Internet of Things, artificial intelligence and block chain to accelerate the upgrading of management software products and cloud services over the past few years. Inspur Enterprise Cloud enterprise resource planning was taken as the new momentum of enterprise transformation and upgrading, aiming to help customers build intelligent enterprises.

INFORMATION ON THE INSPUR GROUP COMPANIES

Inspur Group is a controlling shareholder and the ultimate beneficial owner of the Company. Inspur Group is an investment holding company established in the PRC. The Inspur Group Companies are committed to be the leading suppliers of cloud computer solutions in China and provides IT services and products to customers from more than 50 countries, meeting the information-based demands of governments and corporations all-around.

LISTING RULES IMPLICATIONS OF THE SECOND SUPPLEMENTAL

AGREEMENT

Inspur Group is a company established in the PRC and, as at the date of the announcement, is interested in approximately 54.58% of the issued share capital of the Company through its subsidiaries. Under the Listing Rules, Inspur Group is a connected person of the Company and the transactions contemplated under the Second Supplemental Agreement will constitute continuing connected transactions of the Company.

As the highest applicable percentage ratio under Rule 14.07 of the Listing Rules in respect of the revised and new annual caps of the Selling Agency Transactions is expected to continue to exceed 5%, the transactions contemplated under the Second Supplemental Agreement are subject to the announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

EGM

The EGM will be convened and held for the Independent Shareholders to consider and, if thought fit, approve the Second Supplemental Agreement, including the revised annual caps for the two years ending 31 December 2020 and the extension of the Selling Agency Transactions to the year ending 31 December 2021.

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Since the Second Supplemental Agreement and the transactions contemplated thereunder are subject to the Independent Shareholders' approval as required under Chapter 14A of the Listing Rules, Inspur Group and its associates shall abstain from voting on the relevant resolutions.

GENERAL

Amasse Capital Limited has been appointed as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders to advise them on the terms of the Second Supplemental Agreement. The Independent Board Committee, comprising all the independent non-executive Directors, will be established by the Company to advise the Independent Shareholders as to whether the terms of the Second Supplemental Agreement and the transactions contemplated thereunder are fair and reasonable and whether the transactions are in the interests of the Company and the Shareholders as a whole and to advise the Independent Shareholders on how to vote.

A circular containing, among others: (i) further details of the transactions contemplated under the Second Supplemental Agreement; (ii) the recommendation from the Independent Board Committee in respect of the Second Supplemental Agreement and the transactions contemplated thereunder; (iii) the advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding the Second Supplemental Agreement and the transactions contemplated thereunder; and (iv) the notice convening the EGM, is currently expected to be despatched to the Shareholders on or about 20 November 2019 in accordance with the Listing Rules.

DEFINITIONS

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

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• All the English translation of certain Chinese names or words in this circular is included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

By Order of the Board

Inspur International Limited

Wang Xingshan

Chairman

Hong Kong, 5 November 2019

As at the date of this announcement, the Board comprises Mr. Wang Xingshan, Mr. Lee Eric Kong and Mr. Jin Xiaozhou, Joe as executive Directors, Mr. Dong Hailong as non-executive Director and Ms. Zhang Ruijun, Mr. Wong Lit Chor, Alexis and Mr. Ding Xiangqian as independent non-executive Directors.

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