CSSC Offshore & Marine Engineering : CONNECTED AND DISCLOSEABLE TRANSACTION IN RELATION TO DISPOSAL OF EQUITY INTEREST IN CHENGXI YANGZHOU

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.

(a joint stock company with limited liability incorporated in the People's Republic of China)

(H Share Stock Code:00317)

CONNECTED AND DISCLOSEABLE TRANSACTION

IN RELATION TO DISPOSAL OF EQUITY INTEREST IN CHENGXI YANGZHOU

EQUITY TRANSFER AGREEMENT

On 9 March 2020, the Company entered into the Equity Transfer Agreement with CSSC Holdings and CSSC Chengxi, pursuant to which the Company conditionally agreed to sell and CSSC Holdings and CSSC Chengxi conditionally acquired the Target Interest at a total transfer price of RMB963,831,800, of which: CSSC Holdings will acquire 24% equity interest held by the Company in Chengxi Yangzhou at a transfer price of RMB472,080,900; and CSSC Chengxi will acquire the remaining 25% equity interest held by the Company in Chengxi Yangzhou at a transfer price of RMB491,750,900. Upon completion of the Transaction, the Company will not hold any equity interest in Chengxi Yangzhou.

IMPLICATIONS UNDER THE LISTING RULES

As one or more applicable percentage ratios in respect of the Transaction contemplated under the Equity Transfer Agreement exceed 5% but are less than 25%, the Transaction contemplated under the Equity Transfer Agreement constitutes a discloseable transaction of the Company and is subject to the announcement and reporting requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, CSSC is the controlling shareholder of the Company and CSSC Holdings, and the controlling shareholder of CSSC Chengxi is CSSC Holdings. As such, under Rule 14A.07(4) of the Listing Rules, each of CSSC Holdings and CSSC Chengxi is a connected person of the Company and the transaction contemplated under the Equity Transfer Agreement also constitutes a connected transaction of the Company. As one or more applicable percentage ratios in respect of the Transaction contemplated under the Equity Transfer Agreement exceed 5%, the Transaction contemplated under the Equity Transfer Agreement is also subject to the Independent Shareholders' approval requirements, in addition to the reporting and announcement requirements, under Chapter 14A of the Listing Rules.

GENERAL

An extraordinary general meeting of the Company will be held on 24 April 2020, at which, among others, the resolution on the disposal of the Target Interest will be proposed to seek the approval of the Independent Shareholders for the discloseable and connected transaction under the Equity Transfer Agreement. CSSC and its associates (holding a total of 847,685,990 shares of the Company as at the date of this announcement, representing approximately 59.97% of the issued shares of the

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Company) will abstain from voting on the resolution in relation to the Transaction at the EGM. The resolution will be passed as an ordinary resolution and voted on by poll in accordance with the requirements of the Listing Rules.

The Independent Board Committee of the Company will advise Independent Shareholders on the discloseable and connected transaction under the Equity Transfer Agreement, and Vinco Capital Limited will be appointed as the Independent Financial Advisor to advise the Independent Board Committee and Independent Shareholders on the discloseable and connected transaction under the Equity Transfer Agreement.

A circular containing, among other things, (i) further details of the Equity Transfer Agreement; (ii) a letter of opinion from the Independent Financial Advisor to the Independent Board Committee and Independent Shareholders on the transaction contemplated under the Equity Transfer Agreement; and

1. the recommendations from the Independent Board Committee, is expected to be despatched to the Shareholders on or before 7 April 2020 (which is over 15 business days from the date of this announcement under Rule 14.60(7) of the Listing Rules), as additional time is required to compile information and prepare the circular.

EQUITY TRANSFER AGREEMENT

On 9 March 2020, the Company entered into the Equity Transfer Agreement with CSSC Holdings and CSSC Chengxi, pursuant to which the Company conditionally agreed to sell and CSSC Holdings and CSSC Chengxi conditionally acquired the Target Interest at a total transfer price of RMB963,831,800. Upon completion of the Transaction, the Company will not hold any equity interest in Chengxi Yangzhou.

The principal terms of the Equity Transfer Agreement are summarised as follows:

Date

9 March 2020

Parties

1. The Company (as transferor);
2. CSSC Holdings (as the transferee); and
3. CSSC Chengxi (as the transferee).

Subject matter

the Company conditionally agreed to sell and CSSC Holdings and CSSC Chengxi conditionally acquired the Target Interest at a total transfer price of RMB963,831,800, of which: CSSC Holdings will acquire 24% equity interest held by the Company in Chengxi Yangzhou at a transfer price of RMB472,080,900; and CSSC Chengxi will acquire the remaining 25% equity interest held by the Company in Chengxi Yangzhou at a transfer price of RMB491,750,900.

Transfer price and pricing basis

With the unanimous agreement of the three parties, with 30 April 2019 as the evaluation benchmark date, relevant audits and asset evaluations were carried out. Wuyige Certified Public Accountants LLP, qualified to perform securities and futures-related business, issued the Audit Report of CSSC Chengxi Yangzhou Shipbuilding Company Limited, and Shanghai Orient Appraisal Co., Ltd. issued an

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Valuation Report on Equity Value of All Shareholders involved in the transfer of the 49% equity interest in CSSC Chengxi Yangzhou Shipbuilding Company Limited by CSSC Offshore & Marine Engineering (Group) Company Limited, which was evaluated in accordance with the asset-based method. The evaluation result was: book value of net assets of Chengxi Yangzhou was RMB1,307,629,200, the evaluation value of net assets was RMB1,967,003,600. Based on this calculation, the transaction price of 49% equity of Chengxi Yangzhou is determined to be RMB963,831,800. Value-added amount of the above-mentioned appraisal is RMB659,374,400, with a value-added rate of 50.43%, which is mainly due to the assets appraisal appreciation of the land use right and buildings in Chengxi Yangzhou. The aforementioned two value-added amounts account for 99.98% of the total value-added amount.

Payment method

The transfer price should be paid in cash. The transfer price will be used to supplement the Company's working capital.

Transaction arrangement

1. Payment period
   The parties agree to pay the price in instalments. The first payment is 51% of the total transaction price, which should be paid within 45 working days after signing the Equity Transfer Agreement. The remaining price should be paid before 31 December 2020.
2. Transfer schedule
   The benchmark date of the equity transaction in the Equity Transfer Agreement is 30 April 2019. The parties should cooperate together to complete the rights transfer of the property rights holder within 10 working days after the Equity Transfer Agreement takes effect, and cooperate with the target enterprise to handle the warrants change registration procedures of the property rights transaction subject.

Conditions to the Equity Transfer Agreement

1. The Company, CSSC Holdings, CSSC Chengxi and Chengxi Yangzhou have performed the internal decision-making procedures in accordance with their articles of association and the relevant rules, and have approved the equity transfer under the Equity Transfer Agreement.
2. The Company has obtained the approval for the Transaction at the general meeting in accordance with the Listing Rules.
3. Equity transfer matters under the Equity Transfer Agreement were approved by the state- owned assets supervision and management institutions or the state-funded enterprise (i.e. CSSC).
4. The asset appraisal agency has issued an valuation report on the transaction subject, and has filed such valuation report through CSSC.

Liability on default

If any party to the Equity Transfer Agreement violates the obligations and commitments under the agreement and causes losses to the other parties, it shall be liable for compensation; if the actions of the defaulting party have a significant adverse effect on the Target Interest or Chengxi Yangzhou,

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which may result in the purpose of the Equity Transfer Agreement cannot be realized, the other parties shall have the right to terminate the Equity Transfer Agreement and demand the defaulting party to compensate for the loss.

INFORMATION OF THE PARTIES

The Company

The Company is the core subsidiary and holding platform company of CSSC (a large state-owned enterprise) in South China. As of the date of this announcement, the Company has two major subsidiaries, namely GSI and CSSC Huangpu Wenchong Shipbuilding Company Limited, and their principal activities cover four major segments including defense equipment, shipbuilding, offshore engineering and non-ship business, with principal products of shipbuilding and marine products including military ships, special supporting ships, public service ships, oil tankers, feeder container ships, ro-ro passenger ships, semi-submerged ships and polar module carriers, offshore platform, as well as non-ship products including steel structures and sets of electromechanical equipment.

CSSC Holdings

CSSC Holdings was established in China on 12 May 1998. As at the date of this announcement, its controlling shareholder is CSSC. CSSC Holdings' main business is investment in marine industry and diesel engine production industry, civil ship sales, manufacturing, installation and sales of special equipment for ships and electromechanical equipment, and technology development, technology transfer, technical services and technical consulting in marine technology field, and it also engages in import and export of goods and technology as well as free equipment rental.

CSSC Chengxi

CSSC Chengxi was established in China on 26 December 1973. As of the date of this announcement, its controlling shareholder is CSSC Holdings. CSSC Chengxi's main business is ship dismantling; repair of ships; recovery of ship dismantling materials (excluding productive waste metals); manufacturing and repair of marine engineering equipment; construction of steel structures; manufacture and repair of steel structures; manufacturing of cranes, mechanical and electrical equipment and other processing business; repair of aerial work vehicles, engineering vehicles and electromechanical equipment; sales of ship recycling materials; development, training and consulting services of ship engineering technology; design of ship engineering; leasing of machinery and equipment; self-operated and agented import and export of various commodities and technologies, with the exception of those restricted or forbidden by the state on enterprises; contract overseas projects related to exported self-produced equipment as well as domestic international bidding projects, and export equipment and materials required for overseas projects; general cargo transportation.

BASIC INFORMATION OF CHENGXI YANGZHOU

Chengxi Yangzhou was established in China in January 2015. As at the date of this announcement, the equity of Chengxi Yangzhou is held by the Company, CSSC Holdings and CSSC Chengxi at 49%, 25% and 26%, respectively.

Chengxi Yangzhou is mainly engaged in the production and sales of various types of vessels that below 50,000 tons such as refined oil tankers, chemical tankers, liquefied gas tankers, offshore petroleum engineering vessels, etc., and ocean transportation of refined oil and chemicals.

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Set out below is the summary of the financial information of Chengxi Yangzhou for the years ended

31 December 2017 and 2018 and the nine months ended 30 September 2019:

					Unit: RMB (Yuan)
			Year ended 31	Year ended 31	Nine months ended
			December 2017	December 2018	30September 2019
			(audited)	(audited)	(unaudited)
Total assets		1,320,065,325.39	1,699,460,329.71	1,509,146,941.83
Net assets		1,308,119,114.41	1,307,408,018.00	1,307,836,136.05
			From 1 January 2017	From 1 January 2018 to	From 1 January 2019 to
			to 31 December 2017	31 December	30 September 2019
			(audited)	2018(audited)	(unaudited)
Turnover		77,294,323.82	677,329,815.95	455,42,735.95
Net	profit	(before	6,750,623.03	974,634.62	806,727.80
taxation)
Net loss (after taxation)	5,060,683.52	655,288.14	605,045.85

Upon completion of the Transaction, the Company will not hold any equity interest in Chengxi Yangzhou.

REASONS FOR AND PURPOSES OF THE TRANSACTION AND ITS IMPACT ON THE COMPANY

1. Reasons for and Purposes of the Transaction
   Chengxi Yangzhou was originally a wholly-owned subsidiary of the Company. In July 2017, in accordance with the Company's development strategy and combined with the Company's actual situation, the Company transferred its 51% equity in Chengxi Yangzhou to CSSC, its holding company. In November 2017, CSSC transferred the aforesaid 51% equity interest of Chengxi Yangzhou to CSSC Holdings and CSSC Chengxi, and the Company waived the relevant pre-emptive right to acquire the said equity interest. CSSC Holdings and CSSC Chengxi respectively acquired 25% and 26% equity interest in Chengxi Yangzhou. After completion of the above transfers, Chengxi Yangzhou becomes a subsidiary of CSSC Chengxi.
   Currently, Chengxi Yangzhou is an investee company. In conjunction with the Company's future development positioning, the Company intends to transfer its 49% equity in Chengxi Yangzhou to CSSC Holdings and CSSC Chengxi. CSSC Holdings and CSSC Chengxi respectively acquired 25% and 26% equity interest in Chengxi Yangzhou.
2. Impact of the Transaction on the Company
3. 1. The transfer of 49% equity in Chengxi Yangzhou to CSSC Holdings and CSSC Chengxi will help improve the comprehensive utilization efficiency of resources, and supplement the Company's cash flow.
   2. After the completion of the Transaction, the Company will no longer hold any equity interest in Chengxi Yangzhou, and it is expected to realize investment income of

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approximately RMB323 million, which will increase the total profit for 2020 by approximately RMB323 million. The specific accounting treatment shall be subject to the results of the annual audit and confirmation by the accountant. The Company will not provide guarantees for or entrusted funds to Chengxi Yangzhou, nor will Chengxi Yangzhou occupy funds of the Company.

IMPLICATIONS UNDER THE LISTING RULES

As one or more applicable percentage ratios in respect of the Transaction contemplated under the Equity Transfer Agreement exceed 5% but are less than 25%, the Transaction contemplated under the Equity Transfer Agreement constitutes a discloseable transaction of the Company and is subject to the announcement and reporting requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, CSSC is the controlling shareholder of the Company and CSSC Holdings, and the controlling shareholder of CSSC Chengxi is CSSC Holdings. As such, under Rule 14A.07(4) of the Listing Rules, each of CSSC Holdings and CSSC Chengxi is a connected person of the Company and the transaction contemplated under the Equity Transfer Agreement also constitutes a connected transaction of the Company. As one or more applicable percentage ratios in respect of the Transaction contemplated under the Equity Transfer Agreement exceed 5%, the Transaction contemplated under the Equity Transfer Agreement is also subject to the Independent Shareholders' approval requirements, in addition to the reporting and announcement requirements, under Chapter 14A of the Listing Rules.

GENERAL

An extraordinary general meeting of the Company will be held on 24 April 2020, at which, among others, the resolution on the disposal of Target Interest will be proposed to seek the approval of the Independent Shareholders for the discloseable and connected transaction under the Equity Transfer Agreement. CSSC and its associates (holding a total of 847,685,990 shares of the Company as at the date of this announcement, representing approximately 59.97% of the issued shares of the Company) will abstain from voting on the resolution in relation to the Transaction at the EGM. The resolution will be passed as an ordinary resolution and voted on by poll in accordance with the requirements of the Listing Rules.

The Independent Board Committee of the Company will advise Independent Shareholders on the discloseable and connected transaction under the Equity Transfer Agreement, and Vinco Capital Limited will be appointed as the Independent Financial Advisor to advise the Independent Board Committee and Independent Shareholders on the discloseable and connected transaction under the Equity Transfer Agreement.

A circular containing, among other things, (i) further details of the Equity Transfer Agreement; (ii) a letter of opinion from the Independent Financial Advisor to the Independent Board Committee and Independent Shareholders on the transaction contemplated under the Equity Transfer Agreement; and

1. the recommendations from the Independent Board Committee, is expected to be despatched to the Shareholders on or before 7 April 2020 (which is over 15 business days from the date of this announcement under Rule 14.60(7) of the Listing Rules), as additional time is required to compile information and prepare the circular.

DEFINITIONS

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

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"A Share(s)"	domestic share(s) of the Company with a nominal value of RMB1.00 each,
	listed on the Shanghai Stock Exchange
"Board"	the board of directors of the Company
"business	statutory business day(s) in the PRC, excluding Saturday, Sunday or statutory
day(s)"	holidays
"Company"	CSSC Offshore & Marine Engineering (Group) Company Limited, a joint-
	stock company incorporated in the PRC with limited liability, the H shares of
	which are listed on the main board of the Stock Exchange (H share stock
	code: 317) and the A shares of which are listed on the Shanghai Stock
	Exchange (A share stock code: 600685);
"connected	shall have the meanings ascribed to it under the Listing Rules
person(s)"
"controlling	shall have the meanings ascribed to it under the Listing Rules
shareholder"

"CSSC"China State Shipbuilding Corporation Limited* (中國船舶工業集團有限公

司), a state-owned enterprise and state-authorised investment institution directly supervised and managed by the State-owned Assets Supervision and Administration Commission. As at the date of this announcement, CSSC directly and indirectly holds 847,685,990 shares of the Company, representing 59.97% of the issued shares of the Company, and is the controlling shareholder of the Company

"CSSC	China CSSC Holdings Limited* (中國船舶工業股份有限公司), a joint stock
Holdings"	company with limited liability incorporated in China, which shares are listed
	on the Shanghai Stock Exchange (stock code: 600150, abbreviated stock
	name: CSSC Holdings*(中國船舶))
"Chengxi	CSSC Chengxi Yangzhou Shipbuilding Company Limited* (中船澄西揚州
Yangzhou"	船舶有限公司), as of the date of this announcement, the Company holds
	49% of its equity interest
"CSSC	CSSC Chengxi Shipbuilding Co., Ltd.* (中船澄西船舶修造有限公司), a
Chengxi"	company incorporated in China, which controlling shareholder is CSSC
	Holdings
"Director(s)"	director(s) of the Company
"Equity	the equity transfer contract dated 9 March 2020 among the Company, CSSC
Transfer	Holdings and CSSC Chengxi in relation to the transfer of 49% equity interest
Agreement"	in Chengxi Yangzhou
"Group"	the Company and its subsidiaries
"H Shares"	the overseas listed foreign invested shares of the Company listed on the Stock
	Exchange
"Hong Kong"	Hong Kong Special Administrative Region of the PRC
"Independent	a committee under the Board to be established to consider the Transaction,
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Board	comprising the independent non-executive Directors
Committee"
"Independent	shareholder(s) of the Company other than CSSC and its associates, who is/are
Shareholder(s)"	not involved in or interested in the Transaction under the Equity Transfer
	Agreement
"Independent	Vinco Capital Limited, a licensed corporation to carry out type 1 (dealing in
Financial	securities) and type 6 (advising on corporate finance) regulated activities
Advisor"	under the Securities and Futures Ordinance, being the independent financial
	advisor engaged by the Company to advise the Independent Board
	Committee and the Independent Shareholders on the discloseable and
	connected transaction contemplated under the Equity Transfer Agreement
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock Exchange
"China" or	the People's Republic of China
"PRC"
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholder(s)"	holder(s) of Share(s)
"Share(s)"	share(s) in the share capital of the Company with nominal value of RMB1.00
	each
"Stock	The Stock Exchange of Hong Kong Limited
Exchange"
"subsidiary(ies)"	shall have the meanings ascribed to it under the Listing Rules
"Target	49% equity interest in Chengxi Yangzhou
Interest"
"Transaction"	the transfer of the Target Interest by the Company under the conditions and
	terms of the Equity Transfer Agreement
"%"	per cent

• For identification purpose only

By order of the Board

CSSC Offshore & Marine Engineering (Group) Company Limited

Li Zhidong

Company Secretary

Guangzhou, 9 March 2020

As at the date of this announcement, the Board comprises eleven Directors, namely executive Directors Mr. Han Guangde, Mr. Chen Zhongqian, Mr. Chen Liping, Mr. Sheng Jigang, Mr. Xiang Huiming and Mr. Chen Ji, non-executive Director Mr. Shi Jun and independent non-executive Directors Mr. Wang Yichu, Mr. Min Weiguo, Mr. Liu Renhuai and Mr. Yu Shiyou.

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