China Oriental : Announcements and Notices - Continuing Connected Transactions Between the Company and Oriental Sheet Piling

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.

CHINA ORIENTAL GROUP COMPANY LIMITED

中 國 東 方 集 團 控 股 有 限 公 司 *

（ incorporated in Bermuda with limited liability）

（Stock code：581）

CONTINUING CONNECTED TRANSACTIONS BETWEEN THE COMPANY AND ORIENTAL SHEET PILING

CONTINUING CONNECTED TRANSACTIONS BETWEEN THE COMPANY AND ORIENTAL SHEET PILING

Reference is made to the announcements of the Company dated 4 June 2014, 9 June 2014 and 23 November 2015 pursuant to which, it were stated, inter alia, that the existing annual cap for the continuing connected transactions between the Company and Oriental Sheet Piling in respect of the supply of certain quantities of the Steel Products by the Company and/or its subsidiaries to Oriental Sheet Piling and/or its subsidiaries under the Existing Framework Agreements for each of the three years ending 31 December 2014, 2015 and 2016 will not exceed RMB120,000,000, RMB139,000,000 and RMB139,000,000

respectively. The Existing Framework Agreements expired on 31 December 2016.

The Board hereby announces that on 6 January 2017, the Company entered into the Renewal OSP Framework Agreement with Oriental Sheet Piling for a further term of three years commencing from 1 January 2017 and expiring on 31 December 2019.

It is expected that the proposed OSP Annual Cap for the continuing connected transactions contemplated under the Renewal OSP Framework Agreement for each of the three years ending 31 December 2017, 2018 and 2019 will not exceed RMB150,000,000, RMB150,000,000 and RMB150,000,000 respectively.

The proposed OSP Annual Cap has been determined after taking into account (i) the historical transaction figures under the Existing Framework Agreements; (ii) the estimated demand of the Steel Products by Oriental Sheet Piling and/or its subsidiaries; (iii) the estimated production capacity of the Steel Products of the Group; (iv) the prevailing market price of the Steel Products; (v) the anticipated market price of the related raw materials during the term of the Renewal OSP Framework Agreement; and (vi) the expected fluctuation in the market prices of the Steel Products in the forthcoming next three years.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, Oriental Sheet Piling and its ultimate beneficial owner(s) are connected persons of the Company, the transactions contemplated under the Renewal OSP Framework Agreement constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

The highest applicable percentage ratio (as defined under Rule 14.07 of the Listing Rules) (other than the profits ratio) in respect of the proposed OSP Annual Cap under the Renewal OSP Framework Agreement is on an annual basis more than 1% but less than 5%. The continuing connected transactions contemplated under the Renewal OSP Framework Agreement are therefore subject to reporting, announcement and annual review requirements and exempt from the circular and shareholders' approval requirement pursuant to Rule 14A.76(2) of the Listing Rules.

The Directors (including the Independent Non-executive Directors) are of the view that the continuing connected transactions contemplated under the Renewal OSP Framework Agreement are entered into in the ordinary and usual course of business of the Group and have been negotiated on an arm's length basis between the Company and Oriental Sheet Piling, and the terms thereof are on normal commercial terms, fair and reasonable and in the interest of the Company and its Shareholders as a whole.

As Mr. Ondra OTRADOVEC owns equity interests in ArcelorMittal, he has abstained from voting on the respective board resolutions approving the proposed OSP Annual Cap, the Renewal OSP Framework Agreement and the transactions contemplated thereunder. Other than Mr. Ondra OTRADOVEC, none of the Directors has a material interest in the proposed OSP Annual Cap and the continuing connected transactions contemplated under the Renewal OSP Framework Agreement. Therefore, apart from Mr. Ondra OTRADOVEC, none of the Directors has abstained from voting on the respective board resolutions approving the proposed OSP Annual Cap, the Renewal OSP Framework Agreement and the transactions contemplated thereunder.

CONTINUING CONNECTED TRANSACTIONS BETWEEN THE COMPANY AND ORIENTAL SHEET PILING

Reference is made to the announcements of the Company dated 4 June 2014, 9 June 2014 and 23 November 2015 pursuant to which, it were stated, inter alia, that the existing annual cap for the continuing connected transactions between the Company and Oriental Sheet Piling in respect of the supply of certain quantities of the steel products ("Steel Products") by the Company and/or its subsidiaries to Oriental Sheet Piling and/or its subsidiaries under the existing Framework Agreement and Supplemental Agreement (collectively the "Existing Framework Agreements") for each of the three years ending 31 December 2014, 2015 and 2016 will not exceed RMB120,000,000, RMB139,000,000 and RMB139,000,000

respectively. The Existing Framework Agreements expired on 31 December 2016.

The Board hereby announces that on 6 January 2017, the Company entered into the Renewal OSP Framework Agreement with Oriental Sheet Piling for a further term of three years commencing from 1 January 2017 and expiring on 31 December 2019.

Principal Terms of the Renewal OSP Framework Agreement Date

6 January 2017

Parties

1. Oriental Sheet Piling (as purchaser); and

2. the Company (as supplier)

Subject Matter

The Company and/or its subsidiaries will sell to Oriental Sheet Piling and/or its subsidiaries and Oriental Sheet Piling and/or its subsidiaries will purchase from the Company and/or its subsidiaries the Steel Products.

Term

From 1 January 2017 to 31 December 2019

Pricing Policy

Given Oriental Sheet Piling is currently the sole customer of the Group for export sale of the specific type of the Steel Products, the price for the Steel Products would be set by reference to the production costs to be incurred by the Group, the Group's anticipated profits as well as the prevailing sale price of other independent third party suppliers selling the products similar to the Steel Products. The management of the Group will review the aforesaid pricing policy on a regular basis and will separately negotiate with Oriental Sheet Piling and/or its subsidiaries on normal commercial terms on the price of the Steel Products pursuant to the regular review when Oriental Sheet Piling and/or its subsidiaries places order with the Group. In light of this, the Directors consider that the aforesaid method and procedures for determining the price for the sale of the Steel Products to Oriental Sheet Piling and/or its subsidiaries can ensure that the continuing connected transactions contemplated under the Renewal OSP Framework Agreement will be conducted on normal commercial terms and not prejudicial to the interests of the Company and its Shareholders as a whole.

Proposed OSP Annual Cap for the Continuing Connected Transactions contemplated under the Renewal OSP Framework Agreement

The historical transaction figures of the purchase of Steel Products by Oriental Sheet Piling and/or its subsidiaries from the Group and/or its subsidiaries under the Existing Framework Agreements for the three years ended 31 December 2014, 2015 and 2016 are respectively set out as follows:-

Transactions	Year ended 31 December 2014		Year ended 31 December 2015		Year ended 31 December 2016
Existing Annual Cap (RMB)	Historical transaction figures (RMB)	Existing Annual Cap (RMB)	Historical transaction figures (RMB)	Existing Annual Cap (RMB)	Historical transaction figures (RMB)
purchase of the Steel Products	120,000,000	48,178,000	139,000,000	105,563,000	139,000,000	65,312,000 (Note 1)

Note 1:

The historical transaction figures for the purchase of the Steel Products by the Oriental Sheet Piling and/or its subsidiaries from the Company and/or its subsidiaries for the year ended 31 December 2016 only covered the period from 1 January 2016 to 30 November 2016.

It is expected that the proposed OSP Annual Cap for the continuing connected transactions contemplated under the Renewal OSP Framework Agreement for each of the three years ending 31 December 2017, 2018 and 2019 will not exceed the amounts set out below:

For the year ending 31 December	RMB
2017	150,000,000
2018	150,000,000
2019	150,000,000

The proposed OSP Annual Cap has been determined after taking into account (i) the historical transaction figures under the Existing Framework Agreements; (ii) the estimated demand of the Steel Products by Oriental Sheet Piling and/or its subsidiaries; (iii) the estimated production capacity of the Steel Products of the Group; (iv) the prevailing market price of the Steel Products; (v) the anticipated market price of the related raw materials during the term of the Renewal OSP Framework Agreement; and (vi) the expected fluctuation in the market prices of the Steel Products in the forthcoming next three years.

REASONS AND BENEFITS FOR ENTERING INTO THE CONTINUING CONNECTED TRANSACTIONS UNDER THE RENEWAL OSP FRAMEWORK AGREEMENT

The supply of the Steel Products to Oriental Sheet Piling and/or its subsidiaries will generally expand the sale revenues and increase the sale proceeds of the Group. The unit price of the Steel Products is determined with reference to the then and the prevailing market prices (as the case may be) of comparable products at the relevant time. The Steel Products were and will be sold to Oriental Sheet Piling and/or its subsidiaries at prices no less than such market prices or the prices to other independent third party customers (with comparable quality and conditions) by the Group.