Maanshan Iron & Steel : CONTINUING CONNECTED TRANSACTIONS - SALE AND PURCHASE OF PRODUCTS AGREEMENT, ACCEPTANCE AND

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馬 鞍 山 鋼 鐵 股 份 有 限 公 司

Maanshan Iron & Steel Company Limited

(A joint stock limited company incorporated in the People's Republic of China)

(Stock Code: 00323)

CONTINUING CONNECTED TRANSACTIONS

SALE AND PURCHASE OF PRODUCTS AGREEMENT,

ACCEPTANCE AND PROVISION OF SERVICES AGREEMENT

AND NEW FINANCIAL SERVICE AGREEMENT

SALE AND PURCHASE OF PRODUCTS AGREEMENT

The Existing Products Continuing Connected Transaction Agreements entered into by the Company and China Baowu and the Parent Group will expire on 31 December 2021. On 29 September 2021, the Company entered into the Sale and Purchase of Products Agreement with China Baowu, pursuant to which the Group agreed to continue to sell products to China Baowu Group and China Baowu Group agreed to continue to sell products to the Group during the period from 1 January 2022 to 31 December 2024.

ACCEPTANCE AND PROVISION OF SERVICES AGREEMENT

The Existing Services Continuing Connected Transaction Agreement entered into by the Company and China Baowu and the Parent Group will expire on 31 December 2021. On 29 September 2021, the Company entered into the Sale and Purchase of Products Agreement with China Baowu, pursuant to which the Group agreed to continue to provide services for China Baowu Group and China Baowu Group agreed to continue to provide services for the Group during the period from 1 January 2022 to 31 December 2024.

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NEW FINANCIAL SERVICES AGREEMENT

The Original Financial Services Agreement for the year from 2019 to 2021 entered into by the Finance Company and the Parent Group on 15 August 2018 will expire on 31 December 2021. On 29 September 2021, the Finance Company and the Parent Group entered into the New Financial Services Agreement for the years from 2022 to 2024, pursuant to which the Finance Company agrees to provide the Parent Group and its subsidiaries with deposit services, loan services and other financial services subject to the terms and conditions provided therein.

As of the date of this announcement, China Baowu is the controlling shareholder of the Parent Company and indirectly holds approximately 57.19% of the share capital of the Company. The Parent Company holds approximately 47.59% equity interests of the share capital of the Company, being the controlling shareholder and a connected person of the Company. As of the date of this announcement, the Finance Company is a 91% owned subsidiary of the Company and an indirect subsidiary of the Parent Company. Therefore, China Baowu, the Parent Company and the Finance Company are connected persons of the Company. The transactions under the Sale and Purchase of Products Agreement, the Acceptance and Provision of Services Agreement and the New Financial Services Agreement constitute continuing connected transactions of the Company under Rule 14A of the Listing Rules.

As the applicable percentage ratios under the Listing Rules in respect of the respective Proposed Annual Caps for the transactions contemplated under the Sale and Purchase of Products Agreement, the Acceptance and Provision of Services Agreement and the loan services under the New Financial Services Agreement, on an annual basis, are expected to be more than 5%, such continuing connected transactions are subject to requirements including reporting, announcement, annual review and Independent Shareholders' approval under Rule 14A of the Listing Rules.

The continuing connected transactions under the New Financial Services Agreement were entered into on normal commercial terms. In respect of the deposit services provided by the Finance Company to the Parent Company and its subsidiaries, as the deposit with the Finance Company is for the benefit of the Group where no security over assets of the Group is granted, the Company is exempted from reporting, announcement and Independent Shareholders' approval requirement under Rule 14A of the Listing Rules. In addition, in respect of the service charges of the other financial services under the New Financial Services Agreement, as the applicable ratios are more than 0.1% but less than 5%, they constitute exempted continuing connected transactions of the Company under Rule 14A of the Listing Rules and are exempt from the approval of Independent Shareholders and are only subject to the reporting and announcement requirements set out in Rule 14A of the Listing Rules.

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The Independent Board Committee will advise the Independent Shareholders as to the relevant terms of the continuing connected transactions contemplated under the Sale and Purchase of Products Agreement, the Acceptance and Provision of Services Agreement and the loan services under the New Financial Services Agreement, including the respective Proposed Annual Caps. Halcyon Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to this respect thereof.

A circular that includes (i) the details of the Sale and Purchase of Products Agreement, the Acceptance and Provision of Services Agreement and the loan services under the New Financial Services Agreement, including the respective Proposed Annual Caps, (ii) the letter from the Independent Board Committee to the Independent Shareholders, (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders as to the relevant terms of the Sale and Purchase of Products Agreement, the Acceptance and Provision of Services Agreement and the loan services under the New Financial Services Agreement and the respective Proposed Annual Cap, (iv) and the notice of convening the EGM, will be dispatched to the Shareholders on or before 20 October 2021.

1. SALE AND PURCHASE OF PRODUCTS AGREEMENT
   The Existing Products Continuing Connected Transaction Agreements entered into by the Company and China Baowu and the Parent Group will expire on 31 December 2021. On 29 September 2021, the Company entered into the Sale and Purchase of Products Agreement with China Baowu, pursuant to which the Group agreed to continue to sell products to China Baowu Group and China Baowu Group agreed to continue to sell products to the Group during the period from 1 January 2022 to 31 December 2024. The principal terms of the Agreements are set out below:
   Date
   29 September 2021
   Parties
2. 1. The Company; and
   2. China Baowu

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Subject matter

The Company agreed to sell products to China Baowu Group through itself and the Group, including steel, ingot, coke, iron oxide, metallurgical accessories and materials (stainless steel belt, cable, tools, etc.) and other product (labor insurance, office supplies, etc.); electricity, domestic water, industrial treated water, blast furnace gas, coke oven gas, converter gas, steam, compressed air, other gases and slag, etc..

China Baowu itself agreed to sell products to the Company Group through itself and China Baowu Group, including ore, lime, scrap steel, steel billets, refractory materials, spare parts, complete equipment, non-standard spare parts and other commodities (coke, coal, alloy, oil, gas, etc.).

Both parties agreed to adopt an appropriate, reasonable and fair pricing method in accordance with the principle of fairness in formulating the transactions under the Sale and Purchase of Products Agreement. The terms of the products (including but not limited to pricing and payment) to be sold by the Group to China Baowu Group shall not be more favourable than those to the independent third parties provided by the Group for similar categories of products. The terms of the products (including but not limited to pricing and payment) to be sold by China Baowu Group to the Group shall not be less favourable than those provided by the independent third parties to the Group for similar categories of products.

During the term of the Sale and Purchase of Products Agreement, the Company has the right to decide whether to enter into transactions with any independent third parties in respect of the transactions contemplated under the Sale and Purchase of Products Agreement.

Consideration

The price shall be based on state-prescribed price, if any. In the absence of state-prescribed price, the pricing shall be based on the market price, which shall be determined through open tenders, price comparison, arm's length negotiations between the parties, and shall be based on normal commercial terms.

The pricing regarding the products to be sold by the Group to China Baowu Group shall not be lower than the price of the same categories of products sold by the Group to independent third parties.

The pricing regarding the products to be sold by China Baowu Group to the Group shall not be higher than the price of the same categories of products sold by the independent third parties to the Group.

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In accordance with the current price standards, the price benchmarks adopted in other transactions under the Sale and Purchase of Products Agreement are as follows:

Category	Principle of Pricing	Items
Products sold by	Government price	Electricity/domestic water/industrial
the Group to		treated water
China Baowu	Market price	Blast furnace gas/coke oven gas/
Group		converter gas/steam/compressed air/
		other gases, etc.
	Market price	Steel/ingot/coke/iron oxide/
		metallurgical accessories/materials
		(stainless steel belt, cable, tools,
		etc.)/labor insurance, office
		supplies, etc.
Products	Market price	Ore/lime/scrap steel/steel billets/
purchased by		refractory materials/spare parts and
the Group from		complete equipment/non-standard
China Baowu		spare parts, etc.
Group	Market price	Other commodities (coke, coal, oil,
		etc.)
Payment

Regarding the payment of electricity, domestic water, industrial treated water, blast furnace gas, coke oven gas, converter gas, steam, compressed air, other gases and slag, etc. sold by the Group to China Baowu Group, the sum for the sales with respect to the previous month shall be paid by China Baowu Group to the Group at the beginning of each month and settlement will be done on a monthly basis. For the payment of steel, ingot, coke, iron oxide and other products (labour insurance, office supplies, etc.), at the end of each month, China Baowu Group shall pay to the Group the estimated sum in advance for the sales with respect to the following month and settlement will be done on a monthly basis. As for the payment of metallurgical accessories and other materials (stainless steel belts, cables, tools, etc.), the sum for the sales with respect to the previous month shall be paid by China Baowu Group to the Group and settlement shall be done on a monthly basis.

For the products sold by China Baowu Group to the Group, the Group shall pay for them within 30 business days after the Group has received and verified the quality of the goods.

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