CRRC Corporation Limited - Proxy Solicitation & Information Statement 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CSR Corporation Limited (the “ Company ”), you should at once hand this circular and the enclosed form of proxy and reply slip to the purchaser or the transferee or to the bank, licensed dealer in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

中國南車股份有限公司 CSR CORPORATION LIMITED

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

(Stock code:1766)

(1) PROPOSED ISSUANCE AND PLACING OF NEW A SHARES; (2) CONNECTED TRANSACTION: PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG; (3) PROPOSED APPOINTMENT OF AN ACCOUNTING FIRM AS INTERNAL CONTROL AUDITORS FOR 2011;

(4) PROPOSED PROVISION OF GUARANTEES TO CSR (HONG KONG); AND

(5) NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

A notice convening the 2011 second extraordinary general meeting (the “ EGM ”) to be held at Empark Grand Hotel, No. 69 Banjing Road, Haidian District, Beijing, the PRC at 1:30 p.m. on Monday, 7 November 2011 (registration will begin at 12:30 p.m.) is set out on pages 43 to 47 of this circular.

Whether or not you are able to attend the EGM, you are advised to read the notice of the EGM and to complete the enclosed proxy form in accordance with the instructions printed thereon and return the same to the Company as soon as possible. The proxy form should be returned to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited (for H Shareholders), or to the Board Office of the Company (for A Shareholders) in person or by post as soon as possible and in any event no later than 24 hours before the time stipulated for convening the EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending, and voting at, the EGM or any adjournment thereof if you so wish.

If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to Computershare Hong Kong Investor Services Limited (for H Shareholders) or to the Board Office of the Company (for A Shareholders), on or before Monday, 17 October 2011.

22 September 2011

Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from CMB International. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix I — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
Notice of 2011 Second Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43

— i —

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

“AGM” the 2010 annual general meeting of the Company held on 30 May 2011, at which, among other things, the proposal in relation to the General Mandate was considered and approved
“A Share(s)” ordinary shares in the share capital of the Company with a par value of RMB1.00 each, which are listed on the Shanghai Stock Exchange (stock code: 601766)
“A Shareholder(s)” holder(s) of A Share(s) “Articles of Association” the articles of association of the Company “associates” has the meaning ascribed to it under the Hong Kong Listing Rules
“Board” the board of Directors of the Company “CSRG Subscription” the subscription of new A Shares to be issued under the Proposed Placing by CSRG with not less than RMB6,000 million in cash pursuant to the CSRG Subscription Agreement
“CSRG Subscription Agreement” the conditional subscription agreement for non-public issue of shares in relation to the CSRG Subscription entered into between the Company and CSRG on 16 September 2011
“CSRG” CSR Group ( 中國南車集團公司 ), a wholly state-owned enterprise and the controlling shareholder of the Company as at the Latest Practicable Date
“CSR (Hong Kong)” CSR (Hong Kong) Company Limited (中國南車（香港）有限公司) “CMB International” CMB International Capital Limited, a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Company for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the CSRG Subscription Agreement to be entered into between the Company and CSRG and the CSRG Subscription

“Company” CSR Corporation Limited ( 中國南車股份有限公司 ), a joint stock company incorporated in the PRC with limited liability, the H Shares and A Shares of which are listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, respectively

— ii —

DEFINITIONS

“Company Law” the Company Law of the People’s Republic of China, as amended from time to time

“connected person(s)” has the meaning ascribed to it under the Hong Kong Listing Rules

“controlling shareholder” has the meaning ascribed to it under the Hong Kong Listing Rules

“CSRC” China Securities Regulatory Commission（中國證券監督管理委員會）
“Directors” the directors of the Company
“EGM” the second extraordinary general meeting or any adjournment thereof to be held at Empark Grand Hotel, No. 69 Banjing Road, Haidian District, Beijing, the PRC at 1:30 p.m. on Monday, 7 November 2011 to consider and approve, among other things, the Proposed Placing and CSRG Subscription, the notice of which is set out on pages 43 to 47 of this circular
“Feasibility Report” the feasibility report relating to the use of proceeds from the non-public issue of A Shares approved by the Board on 16 September 2011
“Five Ministries and Commissions” for the purpose of this circular, refers to the Ministry of Finance of the PRC（中國財政部）, CSRC, the National Audit Office of the PRC（中國審計署）, China Banking Regulatory Commission （中國銀行業監督管理委員會）and China Insurance Regulatory Commission（中國保險監督管理委員會）
“General Mandate” an unconditional and general mandate granted to the Directors by Shareholders at the AGM to, either separately or concurrently, issue, allot and/or deal with additional A Shares and/or H Shares, and to make or grant offers, agreements or options in respect of the issue of A Shares and/or H Shares, with the total number of such A Shares and/or H Shares not exceeding 20% of the total issued A Shares and/or H Shares as at 30 May 2011 respectively, provided that certain conditions precedent are fulfilled
“Group” the Company and its subsidiaries
“H Share(s)” the overseas listed foreign invested shares in the share capital of the Company, with a par value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange and traded in HK$ (stock code: 1766)
“H Shareholder(s)”

the holder(s) of H shares

— iii —

DEFINITIONS

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“HK$” the lawful currency of Hong Kong
“Hong Kong Listing Rules”
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended from time to time
“Hong Kong Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Independent Non-executive Director(s)”
the independent non-executive Directors of the Company
“Independent Board Committee”
the independent board committee of the Company comprising Mr. Zhao Jibin, Mr. Yang Yuzhong, Mr. Chen Yongkuan, Mr. Dai Deming and Mr. Tsoi, David, who are Independent Non-executive Directors, to be established for the purpose of advising Independent Shareholders in relation to the CSRG Subscription Agreement and CSRG Subscription
“Independent Financial Adviser”
CMB International, the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the CSRG Subscription Agreement and CSRG Subscription
“Independent Shareholders”
the Shareholders other than CSRG and its associates who are not connected persons with a material interest in CSRG Subscription
“Latest Practicable Date”
19 September 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Original CSRG Subscription Agreement”
the conditional subscription agreement for non-public issue of shares entered into between the Company and CSRG on 13 June 2011 as set out in the circular of the Company dated 21 June 2011
“Original Proposed Placing”
the originally proposed non-public issue and placing of not more than 1,827,242,524 new A Shares by the Company to two target subscribers in total including CSRG and National Social Security Fund as set out in the circular of the Company dated 21 June 2011
“PRC”
the People’s Republic of China, for the purpose of this circular only, excluding Hong Kong, Macau Special Administrative Regions and Taiwan
“Price Determination Date”
17 September 2011, i.e. the date of the announcement of the Board’s resolutions in respect of the Proposed Placing

— iv —

DEFINITIONS

“Price Determination Period”	the period of 20 trading days prior to the Price Determination
	Date of the Proposed Placing, i.e. 17 September 2011
“Proposed Placing”	the proposed non-public issue and placing of not more than
	1,963,000,000 new A Shares by the Company to not more than
	ten (or subject to the upper limit as stipulated by relevant laws
	and regulations at the time of the issuance) target subscribers
	(including CSRG), and the total proceeds to be raised therefrom
	shall not exceed RMB9,000 million;
“Reports on Previous Proceeds”	collectively, the Report of CSR Corporation Limited on the Use
	of Proceeds from Previous A Share Issue (as at 31 December
	2010) and the Report of CSR Corporation Limited on the Use
	of Proceeds from Previous H Share Issue (as at 31 December
	2010) approved by the Board on 16 September 2011
“RMB”	Renminbi, the lawful currency of the PRC
“SASAC”	the State-owned Assets Supervision and Administration
	Commission of the State Council of the PRC（中國國務院國有
	資產監督管理委員會）
“Securities Law”	the Securities Law of the People’s Republic of China, as
	amended from time to time
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
“Share(s)”	A Share(s) and H Share(s)
“Shareholder(s)”	A Shareholder(s) and H Shareholder(s)
“substantial shareholder(s)”	has the meaning ascribed to it under the Hong Kong Listing
	Rules
“trading day”	a day on which the Shanghai Stock Exchange is open for
	dealing or trading in securities
“%”	per cent

— v —

LETTER FROM THE BOARD

中國南車股份有限公司 CSR CORPORATION LIMITED

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

(Stock code:1766)

Executive Directors

Mr. Zhao Xiaogang Mr. Zheng Changhong Mr. Tang Kelin Mr. Liu Hualong

Registered Office:

No. 16, Central West Fourth Ring Road Haidian District Beijing the PRC Postal code: 100036

Independent Non-executive Directors

Mr. Zhao Jibin

Mr. Yang Yuzhong Mr. Chen Yongkuan

Mr. Dai Deming Mr. Tsoi, David

Place of Business in Hong Kong:

Unit H, 41/F, Office Tower, Convention Plaza No. 1 Harbour Road Wanchai Hong Kong 22 September 2011

To H Shareholders

Dear Sirs,

(1) PROPOSED ISSUANCE AND PLACING OF NEW A SHARES;

(2) CONNECTED TRANSACTION: PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG; (3)PROPOSED APPOINTMENT OF AN ACCOUNTING FIRM AS INTERNAL CONTROL AUDITORS FOR 2011;

(4) PROPOSED PROVISION OF GUARANTEES TO CSR (HONG KONG); AND (5) NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

1. INTRODUCTION

Reference is made to the announcement of the Company dated 17 September 2011 in relation to, among other things, cancellation of the Original Proposed Placing, cancellation of the extraordinary general meeting originally scheduled on 29 September 2011, and the Proposed Placing and the CSRG Subscription Agreement.

— 1 —

LETTER FROM THE BOARD

On 16 September 2011, the Board announced that, in response to the changes in capital market environment, the Board had approved to cancel the Original Proposed Placing (including the termination of the Original CSRG Subscription Agreement) and to cancel the extraordinary general meeting originally scheduled on 29 September 2011. In addition, the Board had approved the Proposed Placing, pursuant to which the Company shall issue no more than 1,963,000,000 new A Shares for subscription to no more than ten (or subject to the upper limit as stipulated by relevant laws and regulations at the time of the issuance) target subscribers (including CSRG) at the subscription price of not lower than RMB 4.46 per A Share. The total proceeds to be raised shall not exceed RMB9,000 million.

The Board also announced that as part of the Proposed Placing, the Company had entered into the CSRG Subscription Agreement with CSRG on 16 September 2011, pursuant to which, CSRG shall subscribe for new A Shares, with a par value of RMB1.00 each, to be issued under the Proposed Placing, at a total consideration of not less than RMB6,000 million payable in cash. The subscription price for CSRG shall be the same as that for other target subscribers under the Proposed Placing.

As at the Latest Practicable Date, the Company had 2,024,000,000 H Shares and 9,816,000,000 A Shares in issue. Pursuant to the General Mandate, the Board may issue, allot and/or deal with a maximum of 404,800,000 H Shares and/or 1,963,200,000 A Shares, representing 20% of the total number of H Shares and/or total number of A Shares in issue respectively as at the date of the AGM (i.e. 30 May 2011) approving the General Mandate.

As at the Latest Practicable Date, CSRG, the controlling shareholder of the Company directly and indirectly holding 55.06% equity interests in the Company, was a connected person of the Company under the Hong Kong Listing Rules. Accordingly, the CSRG Subscription Agreement and the CSRG Subscription constitute a connected transaction of the Company under Chapter 14A of the Hong Kong Listing Rules which is subject to reporting, announcement and independent shareholders’ approval requirements under the Hong Kong Listing Rules. The Independent Board Committee has been formed to advise the Independent Shareholders on the terms of the CSRG Subscription Agreement. CMB International has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the same.

In addition, on 5 August 2011, the Board had approved (i) the proposal in relation to the appointment of an accounting firm as internal control auditors for 2011 and the bases for determination of its remuneration; and (ii) the proposal in relation to the provision of guarantees to CSR (Hong Kong). According to relevant requirements of the Articles of Association, the aforesaid proposals shall also be submitted to the Shareholders’ general meeting for consideration and approval.

The purposes of this circular are to provide further information on, among other things, (i) the Proposed Placing; (ii) the CSRG Subscription; (iii) the appointment of an accounting firm as internal control auditors for 2011 and the bases for determination of its remuneration ; (iv) provision of guarantees to CSR (Hong Kong); and (v) the EGM.

The EGM will be convened on Monday, 7 November 2011 at which special resolutions will be proposed to approve, among others, (i) the non-public issue of A Shares of the Company; (ii) the plan of non-public issue of A Shares of the Company; (iii) the CSRG Subscription; and (iv) the authorization to the Board to handle all relevant matters relating to the Proposed Placing. At the EGM, ordinary resolutions will also be proposed to approve (i) that the Company is in compliance with the conditions for the non-public issue of A Shares; (ii) the granting of a waiver to CSRG from its obligation to make a general offer; (iii) the appointment of an accounting firm as internal control auditors for 2011 and the bases for determination of its remuneration and (iv) the provision of guarantees to CSR (Hong Kong).

— 2 —

LETTER FROM THE BOARD

CSRG and its associates will abstain from voting in respect of (i) the special resolution in relation to the non-public issue of A Shares of the Company; (ii) the special resolution in relation to the plan of non-public issue of A Shares of the Company; (iii) the special resolution in relation to the CSRG Subscription; and (iv) the ordinary resolution in relation to the approval of granting a waiver to CSRG from its obligation to make a general offer.

2. PROPOSAL IN RELATION TO THE PROPOSED ISSUANCE AND PLACING OF NEW A SHARES

(1) Class and par value of Shares to be issued

The Shares to be issued are A Shares with a par value of RMB1.00 each.

(2) Method and time of issuance

The Proposed Placing will be carried out by way of non-public issue of A Shares to specific target subscribers and the Company will complete the issuance within 6 months from obtaining the approval for the Proposed Placing from CSRC as and when appropriate.

(3) Number of Shares to be issued

The number of A Shares to be issued under the Proposed Placing shall be determined as follows:

Total number of A Shares to be issued under the Proposed Placing = total amount of proceeds to be raised/subscription price for A Shares under the Proposed Placing (please refer to paragraph 2(6) below for specific pricing principle)

where the number of A Shares to be issued under the Proposed Placing shall, in any event, not exceed 1,963,000,000 Shares, representing: (i) approximately 20% of the existing issued A Shares and approximately 16.58% of the existing total issued share capital of the Company; and (ii) approximately 16.67% of the enlarged issued A Shares and approximately 14.22% of the enlarged total issued share capital (assuming full subscription and issuance of the maximum of 1,963,000,000 new A Shares under the Proposed Placing) of the Company upon completion of the Proposed Placing. The maximum aggregate nominal value of the new A Shares to be issued, with a par value of RMB1.00 each, is RMB1,963,000,000.

After the Company obtains the approval of the Proposed Placing by CSRC, the ultimate number of new A Shares to be issued shall, by reference to the subscription applications made by the target subscribers, be determined by the Board (pursuant to the authorization granted by the Shareholders’ general meeting) following the consultations with the sponsor(s) (lead underwriter(s)) of the Proposed Placing.

— 3 —

LETTER FROM THE BOARD

(4) Target subscribers

On 16 September 2011, the Board approved the Proposed Placing, pursuant to which the Company will issue a maximum of 1,963,000,000 new A Shares for subscription to no more than ten (or the upper limit as stipulated by relevant laws and regulations at the time of the issuance) target subscribers (including CSRG). The total amount of proceeds to be raised shall not exceed RMB9,000 million. Other target subscribers than CSRG may include: securities investment fund managers, securities companies, trust investment firms, financial companies, insurance institutional investors, qualified foreign institutional investors (including proprietary accounts or investment product accounts managed by the aforesaid investors), other domestic legal person investors and natural persons.

As at the Latest Practicable Date, the Company has not entered into any agreements with any potential investors pursuant to the Proposed Placing except for the CSRG Subscription Agreement. To the best knowledge, information and belief of the Directors, except for CSRG, the Company (i) is not aware that any other potential investors and their respective ultimate beneficial owners are connected persons of the Company; and (ii) is not certain whether they will become substantial shareholders of the Company after their respective subscription for the new A Shares pursuant to the Proposed Placing. The Company will make appropriate disclosure in accordance with the relevant requirements of the Hong Kong Listing Rules should there be any changes or if otherwise necessary. The Company will use its best effort to ensure that the target subscribers, other than CSRG, and their ultimate beneficial owners are third parties independent of the Company and its connected persons and will seek independent Shareholders’ approval should any of the other target subscribers be a connected person of the Company.

Upon the obtaining of the approval of the Proposed Placing from CSRC, the Company and the sponsor(s) (lead underwriter(s)) will, within the valid period of the CSRC’s approval, determine an appropriate time to proceed with the Proposed Placing. The sponsor(s) (lead underwriter(s)) will dispatch the invitations to price bidding to potential target subscribers in accordance with relevant provisions under the Implementation Rules of Non-public Issue of Shares by Listed Companies（《上市公司非公開發行股票實施細則》）. Within a specified period after the dispatch of the invitations to price bidding, the Company and the sponsor(s) (lead underwriter(s)) will collect from such potential target subscribers their respective completed subscription application forms in which the bidding price and number of shares to be subscribed for are indicated. After the expiration of the period for price bidding, the Company and sponsor(s) (lead underwriter(s)) will then determine the target subscribers (other than CSRG) based on the subscription application bidding prices indicated in their respective application forms in accordance with the principle of higher priority to higher bidding prices and in accordance with relevant provisions and procedures as set out in the Implementation Rules of Non-public Issue of Shares by Listed Companies.

(5) Method of subscription

All target subscribers shall subscribe for A Shares to be issued under the Proposed Placing in cash. CSRG will not influence or participate in any price bidding process, and agreed to accept the result of the price bidding process. The subscription price for A Shares applicable to CSRG will be the same as the price applicable to other target subscribers.

— 4 —

LETTER FROM THE BOARD

(6) Subscription price and pricing principle

The Price Determination Date of the Proposed Placing shall be the date of the announcement of the resolutions in respect of the Proposed Placing passed at the 8th meeting of the second session of the Board, i.e. 17 September 2011. The subscription price shall be no lower than 90% of the average trading price of A Shares during the 20 trading days immediately preceding the Price Determination Date (i.e., the minimum subscription price per new A Share is RMB4.46) . In particular, the average trading price of A Shares during the 20 trading days immediately preceding the Price Determination Date is determined using the total turnover of A Shares during the 20 trading days immediately preceding the Price Determination Date divided by the total trading volume of A Shares during the 20 trading days immediately preceding the Price Determination Date. After the approval of the Proposed Placing by CSRC is obtained, the final subscription price shall, after taking into account relevant laws, regulations, other regulatory documents and market conditions and in accordance with the principle of higher priority to higher bidding prices by reference to the subscription application bidding prices indicated by the target subscribers, be determined by the Board (pursuant to the authorization granted by the Shareholders’ general meeting) following the consultations with the sponsor(s) (lead underwriter(s)) of the Proposed Placing.

CSRG will not influence or participate in any price bidding process, and has agreed to accept the result of the price bidding process. The subscription price for A Shares applicable to CSRG will be the same as the price applicable to other target subscribers.

In case that no other target subscriber participates in subscription price bidding or has conducted effective subscription price bidding, the Company and the sponsor(s) (lead underwriter(s)) of the Proposed Placing will consider using the minimum subscription price as the final subscription price for the Proposed Placing.

The abovementioned minimum subscription price shall be adjusted accordingly if there is any ex-rights or ex-dividend event occurs between the Price Determination Date and the issuance date of the Proposed Placing. The Board will ensure that, in any event, the subscription price so adjusted (if applicable) will not represent a discount of 20% or more to the benchmarked price provided under Rule 13.36(5) of the Hong Kong Listing Rules.

The net price to the Company of each new A Share to be issued will be determined and disclosed upon completion of the Proposed Placing and the determination of relevant expenses incurred or to be incurred in relation to the Proposed Placing in accordance with the requirements of the Hong Kong Listing Rules.

As at 16 September 2011, which was also the date of finalization of the terms of issuance under the Proposed Placing, the closing price of the A Shares was RMB4.61 per Share.

— 5 —

LETTER FROM THE BOARD

(7) Effective conditions, implementation and termination of the Proposed Placing

The Proposed Placing is conditional upon, among other things, (i) the passing of all resolutions in respect of the Proposed Placing by the Shareholders at the EGM as required by the relevant PRC laws and regulations; (ii) the obtaining of the approvals from SASAC and CSRC as required under relevant laws, regulations and regulatory documents; and (iii) the application for and the obtaining from CSRC a waiver from its obligation to make a mandatory offer by CSRG. Upon satisfaction of the above conditions precedent, the Company will apply for the share issuance and listing to the Shanghai Stock Exchange and China Securities Depository and Clearing Corporation Limited to complete all approval procedures of the Proposed Placing.

The subscription by other investors under the Proposed Placing will not proceed if CSRG Subscription does not proceed due to whatever reasons.

(8) Rights of the new A Shares

The new A Shares to be issued pursuant to the Proposed Placing, when fully paid up and issued, will rank pari passu in all respects amongst themselves and with the A Shares in issue at the time of issue and allotment of such new A Shares.

Upon completion of the Proposed Placing, holders of new A Shares, together with all existing Shareholders of the Company, will be entitled to all accumulated, retained and undistributed profits of the Company at the time of the Proposed Placing.

(9) Lock-up period

Under the Proposed Placing, the target subscribers (other than CSRG) shall not transfer the new A Shares subscribed for within 12 months from the date of completion of the Proposed Placing; CSRG shall not transfer the new A Shares subscribed for within 36 months from the date of completion of the Proposed Placing.

— 6 —

LETTER FROM THE BOARD

(10) Use of proceeds

The gross proceeds to be raised from the Proposed Placing will be not more than RMB9,000 million, which is intended to be used in the following projects after deducting all relevant expenses:

No. Project name Category I: High-speed and heavy-duty rolling stock industrialisation and extension services projects 1 Construction project of high-speed MUs industrialisation base 2 Upgrade project of high-speed MUs supporting industry 3 Inter-city MUs R&D and industrialisation construction project 4 R&D and industrial upgrade project of high-powered electric locomotives and rapid transit vehicles 5 Construction project of repair and service base for “concord” electric locomotives Category II: Inter-city and rapid transit vehicles maintenance bases and service network construction projects 6 Guangzhou CSR rapid transit vehicles maintenance and assembly base project 7 Luoyang rapid transit assembly and service base project 8 Guangdong CSR transit vehicles maintenance and manufacturing base construction project (phase one) 9 Kunming rapid transit equipment base construction project 10 Ningbo rapid transit equipment base project (phase I) Category III: Projects for enhancing corporate independent innovation capabilities 11 High-speed MUs testing and appraisal capabilities construction project 12 High-speed MUs key technology testing and verification system construction project 13 Low-and-medium-speed magnetic levitation commissioning line construction and vehicle development and manufacture project 14 Locomotive testing and verification and 3D engineering application system construction project Category IV: Projects for extended industry services and new business expansion 15 New energy automobile experiment and testing of capability and capacity improvement project 16 Project of high-efficiency and energy-conserving electrical machine industrialisation and innovative ability 17 Financial leasing projects Category V: Supplement to the Company’s working capital 18 Replenishing working capital of the Company TOTAL	Total investment (RMB million) 5,369.2 2,730 119 1,150 900.2 470 4,540.43 737.02 239.75 2,793.57 320 450.09 880.63 414.34 120 266.29 80 2,560.73 206.6 354.13 2,000 1,455 1,455 14,805.99	Proceeds to be invested (RMB million) 3,100 1,000 100 900 650 450 1,550 140 85 1,100 40 185 435 70 60 230 75 2,460 180 280 2,000 1,455 1,455 9,000

— 7 —

LETTER FROM THE BOARD

In the event that the actual amount of the net proceeds raised from Proposed Placing is less than the aggregate amount of the proceeds proposed to be invested in the aforementioned projects, the Company will adjust or reduce the proposed amount of proceeds to be invested in any one or more projects, and will make up for the shortfall by utilizing other self-financing. Before the proceeds from the Proposed Placing are in place, the Company will, according to the actual progress of individual projects, use selffinancing to invest in these projects in advance, and the proceeds from the Proposed Placing, when in place, will be used to replace such self-financing invested. In the event that the actual amount of capital required for the projects is less than the actual amount of net proceeds raised, the Company will apply the remaining proceeds to supplement the Company’s working capital.

(11) Applications for listing of the new A Shares

The Company will apply to the Shanghai Stock Exchange for the listing of, and permission to deal in, the new A Shares. Dealing in the A Shares to be issued under the Proposed Placing on the Shanghai Stock Exchange will commence upon expiration of the lock-up period.

(12) Validity of resolutions

The resolutions approving the Proposed Placing will be valid for 12 months, commencing from the date of passing of such resolutions at the EGM.

Each of the matters referred to in the above paragraphs (1) to (12) in respect of the Proposed Placing will be individually subject to consideration and approval by way of a special resolution at the EGM. CSRG and its associates, being connected Shareholders, will abstain from voting on such resolutions.

(13) Report on previous proceeds

According to the requirements of relevant laws and regulations and regulatory documents such as the Measures for Administration of the Issue of Securities by Listed Companies(《上市公司證券發行管理辦法》), the Implementation Rules for the Nonpublic Issue of Shares by Listed Companies(《上市公司非公開發行股票實施細則》), and Regulations for Reports on the Use of Proceeds from Previous Fund Raising (《關於前次募集資金使用情況報告的規定》) issued by CSRC, the Company has, upon verification of the use of proceeds from previous issue of A Shares and H Shares as at 31 December 2010, prepared the Report of CSR Corporation Limited on the Use of Proceeds from Previous A Share Issue and the Report of CSR Corporation Limited on the Use of Proceeds from Previous H Share Issue.

According to the above reports, the Company had issued 3,000,000,000 A Shares and 1,840,000,000 H Shares on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, respectively, in August 2008. The Company received aggregate subscription price in the amount of RMB6,540 million and HK$4,784 million (equivalent to RMB4,197.1259 million) from Shareholders. After deduction of underwriting commission and other fees incurred in the issuance, the actual net proceeds raised from A Share issue and H Share issue amounted to RMB6,369.41 million and HK$4,590.2478 million (equivalent to RMB4,077.1497 million), respectively.

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LETTER FROM THE BOARD

The Company confirmed that the actual use of proceeds raised from previous issuance of A Shares and H Shares in projects invested was consistent with the proposals of the use of proceeds as disclosed in the previous A Share prospectus and H Shares prospectus with respect to the initial public offering of the Company, and there is no actual change in the actual investment projects.

After examining the use of proceeds from previous fund raising, Ernst & Young Hua Ming has issued the Verification Report on the Use by CSR Corporation Limited of Proceeds from Previous A Shares Issue (Ernst & Young Hua Ming (2011) Zhuan Zi No. 60626562_A05) and the Verification Report on the Use by CSR Corporation Limited of Proceeds from Previous H Shares Issue (Ernst & Young Hua Ming (2011) Zhuan Zi No. 60626562_A06). Ernst & Young Hua Ming was of the opinion that the Reports on Previous Proceeds were prepared by the Company in accordance with Regulations for Reports on the Use of Proceeds from Previous Fund Raising promulgated by CSRC, and reflected in all material respects the use of proceeds from the previous fund raising.

According to requirements of CSRC, the Reports on Previous Proceeds will be submitted to the Shareholders for their consideration and approval by way of an ordinary resolution at the EGM.

(14) Feasibility Report

The detailed uses of proceeds from the Proposed Placing are set out in paragraph 2(10) headed “Use of Proceeds” in the circular.

In accordance with the Feasibility Report, the proceeds from the Proposed Placing are intended to be used for investing in five major categories of projects of the Company, which are summarized as follows:

Category I: High-speed and heavy-duty rolling stock industrialisation and extension services projects

It is explicitly specified in China’s Outline of the Twelfth Five-Year Plan for National Economic and Social Development that the construction of passenger railway lines, interregional trunk lines and coal transportation routes should be accelerated and high-speed railways should also be developed so as to build a high-speed passenger railway network and to strengthen the heavy-loaded transportation network. To meet the requirements for rapid and heavy-loaded development of railway transportation, the Company plans to use the proceeds from the Proposed Placing to construct high-speed MUs industrialisation bases projects, high-speed MUs ancillary industrial upgrade project, inter-city multiple units research, manufacturing and industrialisation project, high-powered electric locomotives and rapid transit vehicles research, development and industrial upgrade project and concord electric locomotive overhaul base project. The implementation of these projects will greatly enhance our research and development capabilities and manufacturing level in respect of high-speed MUs and high-powered electric locomotives.

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LETTER FROM THE BOARD

The total investment amount for this category of projects is RMB5,369.2 million, RMB3,100 million of which is intended to be funded out of the proceeds from the Proposed Placing.

Category II: Inter-city and rapid transit vehicles maintenance bases and service network construction projects

With China’s urbanization and rapid development of the regional economy, the demands for regional passenger transport are also growing rapidly. It is necessary for resourcesconserving and environment-friendly inter-city rail transit networks to be built to speed up the process of regional economic integration. Railway transit is an important measure to improve urban transportation and a major component in implementing the sustainable development strategy in large cities. It is an inevitable trend for competent large cities to develop public transit networks centered on railway transit, and proactively introduce subways and light rail transits with large and medium passenger transportation capacities. The Company plans to use the proceeds from the Proposed Placing to construct maintenance, assembly and service bases for inter-city MUs and rapid transit vehicles in Guangzhou, Luoyang, Jiangmen, Kunming and Ningbo, so as to boost our capability in assembling and overhauling inter-city and rapid transit vehicles, and effectively facilitate the regional and urban railway construction in these regions.

The total investment amount for this category of projects is RMB4,540.43 million, RMB1,550 million of which is intended to be funded out of the proceeds from the Proposed Placing.

Category III: Projects for enhancing corporate independent innovation capabilities

Guided by the overall requirements of the State Council for “introducing advanced technologies, collaborating in design and production, and building Brand China”, the Company, through technology introduction, absorption and renovation, has basically grasped the world-leading core technologies in rolling stock. However, compared with our overseas peers, we still lag behind in the fields such as fundamental and forward-looking research and original technological innovation. In a bid to further boost our independent innovation capabilities, the Company has arranged 4 R&D experimental projects, namely high-speed MUs experimental verification capability project, high-speed MUs key technologies experimental verification system project, medium- and low-speed maglev pilot line construction and vehicles research and manufacturing project, and locomotive experimental verification and three-dimension engineering application system construction project.

The total investment amount for this category of projects is RMB880.63 million, RMB435 million of which is intended to be funded out of the proceeds from the Proposed Placing.

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LETTER FROM THE BOARD

Category IV: Projects for extended services of industry chains and new business expansion

On 10 October 2010, the State Council promulgated the Decision on Accelerating the Cultivation and Development of Strategic New Industries (No.32 (2010) of the State Council) (《關於加快培育和發展戰略性新興產業的決定》), with a view to accelerating the cultivation and development of the seven major strategic new industries, namely the industries of energy conservation and environmental protection, new-generation information technology, bio-industry, high-end equipment manufacturing, new energy, new materials and new energy automobiles. The new energy automobiles and highlyefficient energy-saving electric motor business the Company operates fall into the aforesaid seven major strategic new industries. The Company intends to use the proceeds from the Proposed Placing to enhance its capability in manufacturing of new energy automobiles and key components, and invest in industrialisation and innovation capability fostering project for efficient and energy-saving electric motors. Through implementation of the new energy automobile projects, the Company will be able to boost relevant R&D capabilities, seize the opportunity arising from industrialisation of new energy automobiles and develop the passenger car business with high technological level, large scale of production & sales and comprehensive industrial chain layout. The industrialisation and innovation capability fostering project for efficient and energy-saving electric motor can help bridge the gap from the world’s cutting-edge technologies and promote technological innovation and industrial upgrade of the railway transit industry.

In addition, in order to enhance the Company’s intensive management level, we will also use the proceeds for the development of financial lease projects. The implementation of such projects will enable us to boost the overall resources utilization efficiency, explore new business models and foster new profit drivers.

The total investment amount for this category of projects is RMB2,560.73 million, RMB2,460 million of which is intended to be funded out of the proceeds from the Proposed Placing.

Category V: Supplement to the Company’s working capital

As the Company has a relatively high debt level and a higher percentage of short-term liabilities, with the gradual tightening of monetary policies, the difficulty in and cost of any future debt financing may rise considerably. To optimize financial structure, reduce financial risks and finance costs and achieve sustained, rapid and healthy development of the Company, the Company intends to use RMB1,455 million of the proceeds from the Proposed Placing to replenish the Company’s working capital.

The Board considers that the investment projects to be financed by proceeds from the Proposed Placing are in line with relevant industry policies of the State and the overall strategic development of the Company, and will enjoy promising market prospects and economic benefits; these projects, upon completion, can further boost our profitability, nurture profit growth points, enhance competitiveness and improve financial structure; and the use of proceeds is reasonable, feasible and in the interests of the Company and the Shareholders as a whole.

In accordance with the regulations of CSRC, the Feasibility Report will be submitted to the Shareholders for consideration and approval at the EGM by way of an ordinary resolution.

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LETTER FROM THE BOARD

(15) Authorizations to the Board in connection with the Proposed Placing

The Board also proposes that the EGM approve the authorizations to the Board (or the Chairman of the Board as applicable) by way of a special resolution to handle matters in connection with the Proposed Placing within the scope of relevant laws and regulations, including:

to authorize the Board to handle all application matters in connection with the Proposed Placing;
to authorize the Board to appoint the sponsor(s) (lead underwriter(s)) and other intermediaries to handle all application matters in connection with the Proposed Placing;
to authorize the Board to adjust the specific plan for the Proposed Placing and supplement, amend and adjust the application documents relating to the Proposed Placing in accordance with the policy changes regarding non-public issue of A Shares and the review opinions of the related regulatory authorities on the Proposed Placing;
to authorize the Board to formulate and organize the implementation of the specific plan for the Proposed Placing according to specific conditions, including but not limited to, issuance time, targets for price bidding process, issue price, final number of shares to be issued, size of proceeds and selection of target subscribers;
to authorize the Board to sign, amend, supplement, submit, report and effect all documents and agreements in connection with the Proposed Placing;
to authorize the Board to establish a special bank account designated for the proceeds and proceed with relevant matters, and sign relevant documents and agreements in respect of the investment projects to be financed by proceeds from the Proposed Placing;
to authorize the Board to handle the capital verification procedures relating to the Proposed Placing;
to authorize the Board to adjust the investment projects and specific arrangements thereof within the authorization scope of the EGM and in accordance with relevant regulatory requirements and the actual condition of the securities market, including: determining the specific arrangements of the actual use of proceeds for the aforesaid purposes by the priority of investment projects, actual investment amount, actual capital requirement and implementation progress, and in accordance with the approval, endorsement, filing or implementation of these projects, the progress and actual amount of proceeds raised; adjusting the plan for the Proposed Placing and the use of proceeds in line with any changes in State policies and new requirements of regulatory authorities in relation to non-public issue or any changes in market conditions (including the feedback opinions from approving authorities in respect of the application for the Proposed Placing), except where re-approval at a general meeting is otherwise required by any relevant laws and regulations and the articles of association of the Company and provided that relevant laws and rules are complied with;
to authorize the Board to handle the capital increase matters in connection with the use of proceeds;

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LETTER FROM THE BOARD

to authorize the Board to handle such relevant matters as subscription, registration, lock-up and listing of shares upon completion of the Proposed Placing;
to authorize the Board, upon completion of the Proposed Placing, to handle matters such as change in the registered capital, amend the corresponding terms of the articles of association of the Company and execute relevant registration changes with the administration for industry and commerce;
to authorize the Board to handle other matters relating to the Proposed Placing;
Such authorizations shall be valid for a period of 12 months after being approved at the EGM of the Company.

With respect to authorization No.4 referred to above, such authorization is proposed to be granted in accordance with the relevant PRC laws and regulations and it is a generally accepted practice in similar A Share issue transactions. Such authorization is also considered necessary and incidental to the implementation of the Proposed Placing. Such authorization granted to the Board is subject to and restricted by the terms as set out in special resolution Nos.1 and 2 referred to in the notice convening the EGM as set out on pages 43 to 47 of this circular, and the Board does not have the power to change the terms as set out in those special resolutions. The Board will exercise such power reasonably for the purpose of implementing the Proposed Placing on terms as may be approved by the Shareholders.

As at the Latest Practicable Date, no sponsor (lead underwriter) has been appointed with respect to the Proposed Placing. Sponsor(s) will be appointed in due course, and in any event not later than the filing of application to CSRC for approval of the Proposed Placing. The selection criteria for sponsor(s) include, among other things, the candidates’ qualifications and experience in similar transactions.

(16) Fund raising in the past twelve months

Except for the Original Proposed Placing which was canceled by the Board, the Company has not conducted any fund raising activities involving the issue of equity shares within the 12 months immediately prior to the Latest Practicable Date.

(17) General Mandate to issue new A Shares

The Company will issue and place new A Shares pursuant to the General Mandate as approved by the Shareholders. Under the General Mandate, the Board is authorized to issue and place not more than 1,963,200,000 A Shares and/or 404,800,000 H Shares. As at the Latest Practicable Date, the Company has not issued any A Shares or H Shares pursuant to the General Mandate.

The Directors (including the Independent Non-executive Directors) consider that the terms of the Proposed Placing (including the subscription price) are on normal commercial terms, fair and reasonable based on the current market conditions and in the interests of the Company and the Shareholders as a whole.

Shareholders and potential investors should be aware that the Proposed Placing is subject to the conditions precedent set out above, and consequently the Proposed Placing may or may not proceed. Accordingly, they are advised to exercise caution when dealing in the Shares.

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LETTER FROM THE BOARD

3. PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG

(1) New A Shares to be subscribed by CSRG

As part of the Proposed Placing, the Company entered into the CSRG Subscription Agreement with CSRG on 16 September 2011, pursuant to which CSRG will subscribe in cash for new A Shares of a par value of RMB1.00 each at the same subscription price as that applicable to other subscribers for a total consideration of not less than RMB6,000 million.

Assuming that the maximum of 1,963,000,000 new A Shares under the Proposed Placing are issued and fully subscribed by CSRG, immediately upon completion of the CSRG Subscription, CSRG will hold (directly and indirectly) in aggregate 8,481,800,000A Shares, representing approximately 72.01% of the enlarged total issued A Shares and approximately 61.45% of the enlarged total issued share capital of the Company.

CSRG agreed that the subscription and issuance under the CSRG Subscription Agreement is not conditional on the completion of issuance to other subscribers under the Proposed Placing.

According to the relevant PRC laws and regulations, upon completion of the issue of new A Shares to CSRG, the change in shareholding of CSRG in the Company will trigger a general offer obligation on the part of CSRG. CSRG agreed to file an application to CSRC for a waiver from its obligation to make a general offer in accordance with relevant provisions under the Measures for the Administration of Acquisition of Listed Companies (《上市公司收購管理辦法》). Should the waiver from the obligation of CSRG to make a general offer not granted by CSRC, CSRG shall give up its subscription for the A Shares to be issued under the Proposed Placing and the CSRG Subscription Agreement shall terminate immediately.

If, owing to reasons relating to CSRC’s approval, the number of subscription shares eventually acquired by CSRG is different from (lower than) the number as disclosed in the announcement on Board resolutions of the Company or as agreed in the CSRG Subscription Agreement, the Company will not be liable to issue the shortfall of the subscription shares.

(2) Subscription price payment method

(a) After the CSRG Subscription Agreement comes into effect, CSRG agrees that the subscription price will, as agreed upon in the payment notice issued by the Company and the sponsor(s) of the Proposed Placing, be paid in one lump sum in cash to the bank account specially maintained by the sponsor(s) for the Proposed Placing. Such payments, after capital verification and deduction of relevant fees, shall then be transferred to the special account of the Company designated for raised proceeds from the Proposed Placing.
(b) Upon payment of the subscription price by CSRG, the Company should register the A Shares subscribed by CSRG with the securities depository and clearing institution as soon as practicable so that CSRG can become the legitimate holder of such A Shares.

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LETTER FROM THE BOARD

(c) If the Proposed Placing finally does not proceed due to the subsequent withdrawal of approval or endorsement by regulatory authorities for whatever reason, the Company will return the subscription price paid in cash by CSRG (if any) along with the interest calculated at the demand deposit rate in the relevant period to CSRG and no new A shares will be registered in the name of CSRG accordingly.

(3) Conditions of the CSRG Subscription Agreement becoming effective

The CSRG Subscription Agreement shall become effective after being signed and sealed by the legal representatives or authorised representatives of CSRG and the Company, and upon the following conditions having been fulfilled:

(a) consideration and approval by the Board and the Shareholders’ general meeting of the Company respectively of all matters relating to the Proposed Placing (including but not limited to the consideration and approval of the CSRG Subscription and all connected transactions thereunder by the Independent Shareholders);
(b) the approval of the Proposed Placing by SASAC ;
(c) CSRC granting a waiver to CSRG from its obligation to make a general offer as a result of its subscription for the A Shares to be issued under the Proposed Placing; and
(d) the approval by CSRC of the Proposed Placing.

(4) Lock-up arrangement

Pursuant to the CSRG Subscription Agreement, CSRG has undertaken not to transfer any of the new A Shares it has subscribed for within 36 months from the date of the completion of the Proposed Placing.

(5) General Information on the Parties to the CSRG Subscription Agreement

(a) The Company

The Company, established as a joint stock limited company in the PRC on 28 December 2007, is one of the largest rolling stock manufacturers and solutions providers in the world and is also one of the largest rolling stock manufacturers and solutions providers in China.

(b) CSRG

CSRG is a large-scale state-owned enterprise approved by the State Council, which was established on 2 July 2002, and is one of the promoters of the Company. CSRG is a controlling shareholder of the Company holding, directly and indirectly, 55.06% of the Company’s total issued share capital as at the Latest Practicable Date. CSRG is therefore a connected person of the Company. CSRG is primarily engaged in equity management, assets management, and the production of ancillary products and the provision of social support services.

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LETTER FROM THE BOARD

(6) Implications under the Hong Kong Listing Rules

CSRG is the controlling shareholder of the Company and thus a connected person of the Company. The CSRG Subscription constitutes a connected transaction of the Company, and is thereby subject to reporting, announcement and independent shareholders’ approval requirements under the Hong Kong Listing Rules. The proposal relating to the CSRG Subscription will be proposed by way of a special resolution at the EGM for the Independent Shareholders to approve. CSRG (holding, directly and indirectly, 55.06% of the Company’s equity interest as at the Latest Practicable Date) and its associates will abstain from voting in respect of the relevant resolution at the EGM.

The terms of the CSRG Subscription Agreement were determined after arm’s length negotiations between the Company and CSRG. The Directors (including the Independent Non-executive Directors) consider that the terms of the CSRG Subscription Agreement, including the subscription price, are on normal commercial terms and are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Mr. Zhao Xiaogang, the Chairman of the Company, has abstained from voting on the Board resolutions approving the CSRG Subscription, due to his position as the general manager and legal representative of CSRG. Save as mentioned above, none of the Directors has material interest in the CSRG Subscription and hence no other Director has abstained form voting on such Board resolutions.

4. PROPOSAL IN RELATION TO COMPLIANCE WITH THE CONDITIONS FOR THE NON-PUBLIC ISSUE OF A SHARES BY THE COMPANY

In accordance with the Company Law, the Securities Law, the Measures for Administration of the Issue of Securities by Listed Companies and the Implementation Rules for the NonPublic Issuance of Shares by Listed Companies issued by CSRC and other related regulations in relation to the conditions of non-public issue of A shares by listed companies, the Company conducted internal review and self-examination and considers that the Company has complied with the regulations of the prevailing laws and rules on non-public issue of A Shares, and satisfied the conditions for non-public issue of A Shares.

This resolution will be put forward at the EGM as an ordinary resolution for consideration and approval by the Shareholders.

5. PROPOSAL IN RELATION TO THE PLAN ON NON-PUBLIC ISSUE OF A SHARES BY THE COMPANY

In accordance with the Company Law, the Securities Law, the Measures for Administration of the Issue of Securities by Listed Companies, No.25 of Standard of Content and Format on Information Disclosure for Publicly Listed Companies-Listed Company Non-Public Share Issue — Proposal and Issuance Report (《公開發行證券的公司信息披露內容與格式準則第25號上市公司非公開發行股票預案和發行情況報告書》) and the Implementation Rules for the NonPublic Issuance of Shares by Listed Companies of CSRC as well as other relevant regulations, the Company formulates the Plan on Non-Public Issue of A Shares by the Company.

The major content of the plan of non-public issue of A Shares of the Company has been included in relevant sections of this circular. This proposal will be put forward at the EGM as a special resolution for consideration and approval by the Shareholders. CSRG and its associates, being connected Shareholders, will abstain from voting on this resolution.

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LETTER FROM THE BOARD

6. PROPOSAL IN RELATION TO THE APPROVAL OF GRANTING A WAIVER TO CSRG FROM ITS OBLIGATION TO MAKE A GENERAL OFFER

As the shareholding of CSRG, the controlling shareholder of the Company, held in the Company would increase upon completion of the Proposed Placing, an obligation to make a general offer on the part of CSRG will be triggered accordingly. CSRG will file an application to CSRC for a waiver in respect of such general offer obligation in accordance with relevant provisions under the Measures for the Administration of Acquisition of Listed Companies (CSRC Order No. 35). The Board proposed a proposal to be put forward at the EGM to approve the granting of a waiver to CSRG from its obligation to make a general offer arising from its subscription under the Proposed Placing. CSRC’s approval of such waiver to CSRG is conditional upon the approval by the Shareholders at the EGM of the same waiver to CSRG.

This proposal will be put forward at the EGM as an ordinary resolution for consideration and approval by the Shareholders. CSRG and its associates, being connected Shareholders, will abstain from voting on this resolution.

7. EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

The shareholding structures of the Company as at the Latest Practicable Date and immediately after completion of the Proposed Placing and the CSRG Subscription are set out in the table below:

As at the Latest Practicable Date

Name of Shareholder CSRG and its associates Public holders of A Shares Holders of H Shares Total	Number of Shares held 6,518,800,000 A Shares 3,297,200,000 A Shares 2,024,000,000 H Shares 11,840,000,000 Shares	Percentage of the issued A Share capital of the Company 66.41% 33.59% — 100%	Percentage of the total issued share capital of the Company 55.06% 27.85% 17.09% 100%

Assuming (1) a total of 1,963,000,000 A Shares to be issued under the Proposed Placing being fully subscribed by CSRG; and (2) no issuance of any other Shares by the Company during the period from the Latest Practicable Date till completion of the Proposed Placing and the CSRG Subscription, immediately after completion of the Proposed Placing and the CSRG Subscription:

Name of Shareholder CSRG and its associates Public holders of A Shares Holders of H Shares Total	Number of Shares held 8,481,800,000 A Shares 3,297,200,000 A Shares 2,024,000,000 H Shares 13,803,000,000 Shares	Percentage of the enlarged issued A Share capital of the Company 72.01% 27.99% — 100%	Percentage of the enlarged total issued share capital of the Company 61.45% 23.89% 14.66% 100%

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LETTER FROM THE BOARD

8. REASONS FOR AND BENEFITS OF THE PROPOSED PLACING AND CSRG SUBSCRIPTION

The Directors consider that the fund raising activity mainly revolves around the existing principal business of the Company. Upon completion of the Proposed Placing and following the implementation of projects to be invested by raised proceeds, the Company will enhance its capabilities in R&D, manufacturing, maintenance and after-sale services of multiple units, high-powered electric locomotives, rapid transit vehicles and new energy automobile industries, which will not only help enhance the R&D capabilities of the Company but also boost its consolidated strength as well as its competitiveness in the international market. Upon completion of the Proposed Placing, the consolidated development capabilities of the Company will be strengthened, thus enabling the Company to achieve its strategic goals.

Following the completion of the Proposed Placing, the capital strength of the Company will increase, its capital structure will be optimized and its pressure on repayment of liabilities will be alleviated to a certain degree, and the Company’s resilience against financial risks will be effectively boosted.

The rolling stock manufacturing and electric car manufacturing sectors in which the Company operates will develop with great support from government policies and embrace favourable development opportunities in the future, as they fall respectively into the high-end equipment manufacturing and new energy automobile industries which are among the seven major strategic new industries as specified in the State Council’s Decision on Accelerating the Cultivation and Development of Strategic New Industries (No.32 [2010] of the State Council) (《關於加快培育和發展戰略性新興產業的決定》) promulgated on 10 October 2010.

The Board had considered various other means of fund raising which is on a pro-rata manner, such as rights issue and open offer. However, after due and careful consideration by the Board, the Board is of the view that the Proposed Placing by way of a non-public issuance of new A Shares is the most preferable method over others as the non-public issuance, as compared with rights issue and open offer, is a relatively speedy method in terms of PRC approval process whereas other fund raising means present higher uncertainties and risks given the current capital market situation. In addition, the Board expects that the non-public issuance, coupled with the relatively long lock-up period, will have less adverse effect on the share price of the Company. Further, subscription by other long term investors in the non-public issuance demonstrates the recognition of the value of the Company and confidence such investors place in the Company which may help stabilize the share price of the Company. Therefore, the Board considers that the Proposed Placing is in the best interests of the Company and its investors at large.

In addition, the CSRG Subscription also demonstrates the confidence CSRG places in the Company and support to the development of the Company’s business, which is conducive to enhancing the market image of the Company and stabilizing the trading price of the Company’s Shares. The Directors (including the Independent Non-executive Directors) consider that the terms of the CSRG Subscription Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. The CSRG Subscription constitutes a connected transaction of the Company under the Hong Kong Listing Rules.

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LETTER FROM THE BOARD

9. THE PROPOSAL IN RELATION TO THE APPOINTMENT OF AN ACCOUNTING FIRM AS INTERNAL CONTROL AUDITORS FOR 2011 AND THE BASES FOR DETERMINATION OF ITS REMUNERATION BY THE COMPANY

According to the requirements for corporate internal control promulgated by the Five Ministries and Commissions, the Company, with simultaneous listing status on the Shanghai Stock Exchange and the Hong Kong Stock Exchange, shall appoint auditors in 2011 to conduct an audit as to whether the Company and its subsidiaries have complied with the Basic Standards for Enterprise Internal Control （《企業內部控制基本規範》）promulgated by the Five Ministries and Commissions as at 31 December 2011 and issue an audit opinion in respect thereof.

In May 2011, it was approved at the general meeting of the Company to appoint Ernst & Young Hua Ming as domestic auditors for the Company’s 2011 financial report of A Shares. As such accounting firm will conduct necessary tests on the internal control relating to the financial report during its audit of the annual report, relevant proposal had been considered and passed at the 7th meeting of the second session of the Board of the Company, and it was agreed to appoint Ernst & Young Hua Ming to conduct relevant internal control audit for a term of one year until the 2011 annual general meeting. Meanwhile, it was proposed that the Board be authorised by the general meeting to determine matters in relation to its remuneration.

This proposal will be put forward at the EGM as an ordinary resolution for consideration and approval by the Shareholders.

10. THE PROPOSAL IN RELATION TO THE PROVISION OF GUARANTEES TO CSR (HONG KONG)

The proposal in relation to arrangement of guarantees by the Company and its subsidiaries for 2011 was considered and passed at the 24th meeting of the first session of the Board of the Company, whereby it was agreed that the Company and its directly wholly-owned subsidiaries could provide guarantees of RMB9,473 million for subsidiaries of the Company and, as agreed by the Board after taking into account the potential changes of the basis of estimation, that the Company and its directly wholly-owned subsidiaries could provide guarantees to parties other than the guaranteed parties mentioned in the proposal within their respective scope of total guarantees when such guarantees are provided by the same party and are only available to non wholly-owned subsidiaries with gearing ratios of no more than 70%.

In order to satisfy its capital need to finance its business development, the Company provided an internal guarantee with a term of one year to CSR (Hong Kong), a wholly owned subsidiary of the Company, for an external loan in an amount of HK$421 million on 8 June 2011. According to our estimation of the future business condition, the gearing ratio of CSR (Hong Kong) may exceed 70% by the end of 2011. Henceforth, to ensure compliance of the above guarantee, the matter relating to the capacity of CSR (Hong Kong) as a guaranteed party with a gearing ratio exceeding 70% shall be put forward at the general meeting for consideration. The relevant proposal was considered and passed at the 7th meeting of the second session of the Board , whereby it was agreed that such guarantee could be granted to CSR (Hong Kong). The provision of such guarantee is hereby put forward at the general meeting for consideration.

This proposal will be put forward at the EGM as an ordinary resolution for consideration and approval by the Shareholders.

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LETTER FROM THE BOARD

11. NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

A notice convening the EGM to be held at Empark Grand Hotel, No. 69 Banjing Road, Haidian District, Beijing, PRC at 1:30 p.m. on Monday, 7 November 2011 (registration will begin at 12:30 p.m.) is set out on pages 43 to 47 of this Circular.

The proxy form and the reply slip for the EGM are also enclosed herewith.

If you intend to appoint a proxy to attend the EGM, you are required to complete and return the enclosed proxy form in accordance with the instructions printed thereon as soon as possible. For H Shareholders, the proxy form should be returned to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, and for A Shareholders, the proxy form should be returned to the Company’s Board Office, in person or by post as soon as possible but in any event not less than 24 hours before the time stipulated for convening the EGM or any adjourned meeting thereof. Completion and return of the proxy form will not preclude you from attending and voting at the EGM or at any adjourned meeting if you so wish.

If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to Computershare Hong Kong Investor Services Limited (for H Shareholders) or to the Company’s Board Office (for A Shareholders) on or before Monday, 17 October 2011.

The Company’s Board Office is located at No. 16, Central West Fourth Ring Road, Haidian District, Beijing 100036, PRC (Telephone: (86)10 5186 2188, Fax: (86)10 6398 4785). The Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, is located at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (Telephone: (852) 2862 8555).

12. RECOMMENDATION

The Directors (including the Independent Non-executive Directors) consider that all the above-mentioned resolutions are in the interests of the Company and the Shareholders as a whole, and therefore recommend all Shareholders to vote in favour of the proposed resolutions at the EGM.

Yours faithfully, By Order of the Board CSR Corporation Limited Zhao Xiaogang Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

中國南車股份有限公司 CSR CORPORATION LIMITED

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

(Stock code:1766)

22 September 2011

To the Shareholders

Dear Sirs,

CONNECTED TRANSACTION: SUBSCRIPTION OF NEW A SHARES BY CSRG

We refer to the circular dispatched to the shareholders of CSR Corporation Limited (the “ Company ”) on 22 September 2011 (the “ Circular ”), of which this letter forms a part. Unless otherwise indicated, capitalized terms used in this letter shall have the same meanings as those defined in the Circular.

We have been appointed as the members of the Independent Board Committee to advise the Independent Shareholders as to whether the CSRG Subscription Agreement and the transaction contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Pursuant to Chapter 14A of the Hong Kong Listing Rules, CMB International has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the CSRG Subscription Agreement and the transaction contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

We wish to draw your attention to the letter from the Board as set out on pages 1 to 20 of the Circular and the letter from CMB International as set out on pages 22 to 38 of the Circular.

Having considered the advice given by the Independent Financial Adviser, we are of the opinion that the CSRG Subscription Agreement and the CSRG Subscription contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM.

Yours faithfully, For and on behalf of the Independent Board Committee CSR Corporation Limited Zhao Jibin, Yang Yuzhong, Chen Yongkuan, Dai Deming, Tsoi, David

Independent Non-executive Directors

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LETTER FROM CMB INTERNATIONAL

The following is the text of a letter from CMB International for the purpose of incorporation in this circular in connection with its advice to the Independent Board Committee and Independent Shareholders in respect of the terms of the CSRG Subscription Agreement.

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CMB INTERNATIONAL
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CMB International Capital Limited Units 1803-04, 18/F, Bank of America Tower 12 Harcourt Road Central, Hong Kong

22 September 2011

To: The Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONNECTED TRANSACTION: PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the terms of the CSRG Subscription Agreement, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in this circular dated 22 September 2011 (the “ Circular ”) issued by the Company, of which this letter forms part. Unless otherwise stated, terms used herein shall have the same meanings as those defined in the Circular.

The Board announced that the Board has approved the Proposed Placing on 16 September 2011, pursuant to which the Company shall issue a maximum of 1,963,000,000 new A Shares for subscription by not more than 10 (or subject to the upper limit as stipulated by relevant laws and regulation of the time of issuance) target investors (including CSRG) at a minimum subscription price of not lower than RMB4.46 per A Share.

The Board has also announced that as part of the Proposed Placing, the Company had entered into the CSRG Subscription Agreement with CSRG on 16 September 2011, pursuant to which, CSRG would subscribe for new A Shares, with par value of RMB1.00 each, to be issued under the Proposed Placing, at a total consideration of not less than RMB6,000 million payable in cash. The subscription price for CSRG shall be the same as that for other subscribers, the total proceeds to be raised from the Proposed Placing (including the CSRG Subscription) is expected to be not more than RMB9,000 million.

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LETTER FROM CMB INTERNATIONAL

According to the Letter from the Board, the final subscription price shall be determined by the Board after obtaining the approval of the Proposed Placing by CSRC, pursuant to the authorization granted by the Shareholders’ general meeting and taking into account the relevant laws, regulations, other regulatory documentations and market conditions, and in compliance with the principle of higher priority to higher bidding prices by reference to subscription application bidding prices indicated by the target subscribers and consultations with the sponsor(s) (lead underwriter(s)) of the Proposed Placing. CSRG will not participate in any price bidding process, and has agreed to accept the result of the price bidding process. The subscription price for A Shares offered to CSRG will be the same as the price applicable to other target subscribers. In case that no other target subscriber participates in subscription price bidding or has conducted effective subscription price bidding, the Company and the sponsor(s) (lead underwriter(s)) of the Proposed Placing will consider using the minimum subscription price as the final subscription price for the Proposed Placing.

As stated in the Letter from the Board, the Company will use its best effort to ensure that the target subscribers, other than CSRG, and their ultimate beneficial owners are third parties independent of the Company and its connected person and will seek independent Shareholders’ approval should any of the other target subscribers be a connected person of the Company.

As at the Latest Practicable Date, the Company had 2,024,000,000 H Shares and 9,816,000,000 A Shares in issue. Pursuant to the General Mandate, the Board may issue, allot and/or deal with a maximum of 404,800,000 H Shares and/or 1,963,200,000 A Shares, representing 20% of the total number of H Shares and total number of A Shares in issue respectively as at 30 May 2011, the date of the AGM approving the General Mandate.

As at the Latest Practicable Date, CSRG, the controlling shareholder of the Company directly and indirectly holding 55.06% equity interest in the Company, is a connected person of the Company under the Hong Kong Listing Rules. Accordingly, the CSRG Subscription pursuant to the CSRG Subscription Agreement constitutes a connected transaction of the Company under Chapter 14A of the Hong Kong Listing Rules and is subject to reporting, announcement and independent shareholders’ approval requirements under the Hong Kong Listing Rules.

The EGM will be convened on Monday, 7 November 2011 at which special and ordinary resolutions will be proposed to approve, among others, the Proposed Placing and the CSRG Subscription. CSRG and its associates will abstain from voting in respect of (i) the special resolution in relation to the non-public issue of A Shares of the Company; (ii) the special resolution in relation to the plan of non-public issue of A Shares of the Company; (iii) the special resolution in relation to the CSRG Subscription; and (iv) the ordinary resolution in relation to the approval of granting a waiver to CSRG from its obligation to make a general offer.

An Independent Board Committee comprising all the Independent Non-executive Directors, namely Messrs. Zhao Jibin, Yang Yuzhong, Chen Yongkuan, Dai Deming and Tsoi, David, has been formed to consider and advise the Independent Shareholders on whether the terms of the CSRG Subscription Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. We, CMB International, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on whether the terms of the CSRG Subscription Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM CMB INTERNATIONAL

BASIS OF OUR OPINION

In formulating our recommendation, we have relied, without assuming any responsibility for independent verification, on the information, opinions and facts supplied and representations made to us by the Directors, who have assumed full responsibility for the accuracy of the information contained in the Circular, and that any information and representations made to us are true, accurate and complete in all material respects as at the date hereof and that they may be relied upon. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company. We have discussed with the management of the Company regarding their plans and prospects of the Company. We have also relied on certain information available to the public and have assumed such information to be accurate and reliable, and we have not independently verified the accuracy of such information. We have also assumed that statements and representations made or referred to in the Circular were accurate at the time they were made and continue to be accurate at the date of the Circular. We consider that we have reviewed sufficient information to reach an informed view in order to provide a reasonable basis for our advice. We have not, however, carried out any independent verification of the information provided to us nor have we conducted any form of independent in-depth investigation into the businesses and affairs of the Company or any of their respective subsidiaries. As the Independent Financial Adviser to the Independent Board Committee, we have not been involved in the negotiations in respect of the terms of the CSRG Subscription Agreement and the transactions contemplated thereunder.

Our opinion is necessarily based upon the financial, economic, market, regulatory, and other conditions as they exist on, and the facts, information, and opinions made available to us as of the date of this letter. We have no obligation to update this opinion to take into account events occurring after the date on which this opinion is delivered to the Independent Board Committee. This letter is for the information of the Independent Board Committee solely in connection with their consideration of the terms of the CSRG Subscription Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole and is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purpose, without our prior written consent.

CMB International is a licensed corporation to carry out regulated activities of dealing in securities and advising on corporate finance under the SFO. CMB International and its affiliates, whose ordinary business involves the trading of, dealing in and the holding of securities, may be involved in the trading of, dealing in, and the holding of the securities of the Company for client accounts.

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LETTER FROM CMB INTERNATIONAL

INFORMATION OF THE GROUP AND CSRG

As stated in the Letter from the Board, the Company is established as a joint stock limited company in the PRC on 28 December 2007. The Group is one of the largest rolling stock manufacturers and solutions providers in the world and is also one of the largest rolling stock manufacturers and solutions providers in China.

As stated in the Letter from the Board, CSRG is a large-scale state-owned enterprise approved by the State Council, which was established on 2 July 2002, and is one of the promoters of the Company. CSRG is a controlling shareholder of the Company, holding directly and indirectly, 55.06% of the Company’s total issued share capital as at the Latest Practicable Date. CSRG is therefore a connected person of the Company. CSRG is primarily engaged in equity management, assets management, and the production of ancillary products and the provision of social support services.

Set out below is a summary of the Group’s financial information prepared in accordance with the International Financial Reporting Standards (the “ IFRS ”) for the year ended 31 December 2009 and 2010; and for the six months ended 30 June 2011 which are extracted from the annual report of the Company for the year ended 31 December 2010 (the “ Annual Report 2010 ”) and the interim report of the Company for the six months ended 30 June 2011 (the “ Interim Report 2011 ”), respectively:

Revenue Gross profit Profit for the year / period Profit for the year / period attributable to the owners of the Company Total assets Total liabilities Net assets Equity attributable to owners of the Company	For the year ended 31 December 2009 2010 RMB’000 RMB’000 45,620,751 63,912,435 7,167,010 10,967,704 2,116,182 3,249,971 1,678,153 2,531,437 As at 31 December 2009 2010 RMB’000 RMB’000 55,238,315 73,565,671 34,917,164 49,724,921 20,321,151 23,840,750 17,330,168 19,244,185	For the six months ended 30 June 2011 RMB’000 (Unaudited) 39,563,098 7,085,427 2,619,259 2,044,547 As at 30 June 2011 RMB’000 (Unaudited) 92,918,069 66,990,225 25,927,844 20,797,529

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LETTER FROM CMB INTERNATIONAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation in respect of the terms of the CSRG Subscription Agreement and the transactions contemplated thereunder, we have considered the following principal factors and reasons:

I. Reasons for and the benefits of the Proposed Placing and the CSRG Subscription

As stated in the Letter from the Board, the Directors consider that the fund raising activity mainly revolves around the existing principal business of the Company. Upon completion of the Proposed Placing and following the implementation of projects to be invested by raised proceeds, the Company will enhance its capabilities in R&D, manufacturing maintenance and after-sale services of multiple units, high-powered electric locomotives, rapid transit vehicles and new energy automobile industries, which will not only help enhance the R&D capabilities of the Company but also boost its consolidated strength as well as its competitiveness in the international market. Upon completion of the Proposed Placing, the consolidated development capabilities of the Company will be strengthened, thus enabling the Company to achieve its strategic goals.

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LETTER FROM CMB INTERNATIONAL

In addition, the Directors consider the CSRG Subscription also demonstrates the confidence CSRG places in the Company, which is conducive to enhancing the market image of the Company and stabilize the trading price of the Company’s Shares. The Directors (including the Independent Non-Executive Directors) consider that the terms of the CSRG Subscription Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. The CSRG Subscription constitutes a connected transaction of the Company under the Hong Kong Listing Rules.

Taking into account of the above, we concur with the view of the Directors that it is in the interests of the Company and the Shareholders as a whole to raise fund for different projects for the future development of the Group through equity financing by way of the Proposed Placing (including the CSRG Subscription).

II. The number of shares to be issued and the target subscribers for the Proposed Placing and the CSRG Subscription

The Proposed Placing

As stated in the Letter from the Board, the number of new A Shares to be issued and subscribed for under the Proposed Placing shall not exceed 1,963,000,000 at the minimum subscription price of not less than RMB4.46 per A Share. CSRG will use no less than RMB6,000 million to subscribe for new A Shares in cash under the Proposed Placing.

As stated in the Letter from the Board, as at the Latest Practicable Date, to the best knowledge, information and belief of the Directors, other than CSRG, the Company is not aware that any other potential investors nor its ultimate beneficial owners (i) is connected person of the Company and (ii) is not certain whether they will become substantial Shareholders of the Company after their respective subscription for the new A Shares pursuant to the Proposed Placing. The Company will make appropriate disclosure in accordance with the relevant requirements of the Hong Kong Listing Rules should there be any changes or if otherwise necessary. The Company will use its best effort to ensure that the target subscribers, other than CSRG, and their ultimate beneficial owners are third parties independent of the Company and its connected person and will seek independent Shareholders’ approval should any of the other target subscribers be a connected person of the Company.

As stated in the Letter from the Board, a maximum of 1,963,000,000 new A shares will be issued under the Proposed Placing, representing: (i) approximately 20.00% of the existing issued A Shares and approximately 16.58% of the existing total issued share capital of the Company as at the Latest Practicable Date; and (ii) assuming full subscription and a total issue of 1,963,000,000 new A Shares under the Proposed Placing then abovementioned 1,963,000,000 new A shares representing approximately 16.67% of the enlarged issued A Shares and approximately 14.22% of the enlarged total share capital in issue . The aggregate nominal value of the new A Shares to be issued, with a par value of RMB1.00 each, is not more than RMB1,963,000,000.

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LETTER FROM CMB INTERNATIONAL

The CSRG Subscription

CSRG, a state-owned enterprise, is the Company’s controlling shareholder directly and indirectly holding 55.06% equity interests of the Company as at the Latest Practicable Date.

As stated in the Letter from the Board, as part of the Proposed Placing, the Company had entered into the CSRG Subscription Agreement with CSRG on 16 September 2011, pursuant to which CSRG would subscribe for new A Shares, with par value of RMB1.00 each, to be issued under the Proposed Placing, at a total consideration of not less than RMB6,000 million payable in cash.

According to the Letter from the Board, the final subscription price shall be determined by the Board after obtaining the approval of the Proposed Placing by CSRC, pursuant to the authorization granted by the Shareholders’ general meeting and taking into account the relevant laws, regulations, other regulatory documentations and market conditions, and in compliance with the principle of higher priority to higher bidding prices be referance to the subscription application bidding prices indicated by the target subscribers and consultations with the sponsor(s) (lead underwritter(s)) of the Proposed Placing. CSRG will not participate in any price bidding process, and has agreed to accept the result of the price bidding process. The subscription price for A Shares applicable to CSRG will be the same as the price applicable to other target subscribers.

The abovementioned minimum subscription price of RMB4.46 per A Share shall be adjusted accordingly if there is any ex-rights or ex-dividend event occurs between the Price Determination Date and the issuance date of the Proposed Placing. The Directors confirmed that they did not identify any other events which would affect the subscription price under the Proposed Placing at the Latest Practicable Date. The Board will ensure that, in any event, the subscription price so adjusted (if applicable) will not represent a discount of 20% or more to the benchmarked price provided under Rule 13.36(5) of the Hong Kong Listing Rules.

As stated in the Letter from the Board, assuming that the maximum of 1,963,000,000 new A Shares under the Proposed Placing are issued and fully subscribed by CSRG, immediately upon completion of the CSRG Subscription, CSRG will hold directly and indirectly in aggregate of approximately 8,481,800,000 A Shares, representing directly and indirectly approximately 72.01% of the enlarged total issued A Shares and 61.45% of the total issued share capital of the Company.

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LETTER FROM CMB INTERNATIONAL

As advised by the Directors, the terms of the CSRG Subscription Agreement (other than the subscription price) were determined after arm’s length negotiations between the Company and CSRG. The Directors considers that the terms of the CSRG Subscription Agreement (other than the subscription price) are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Please refer to the paragraph headed “Proposed Subscription of New A Shares by CSRG” set out in the Letter from the Board contained in this Circular for details of the CSRG Subscription.

Thus, we understand that the number of new A shares to be issued is subject to the finalization of subscription price. The final subscription price shall be determined by the Board after obtaining the approval of the Proposed Placing by CSRC, pursuant to the authorization granted by the Shareholders’ general meeting and taking into account the relevant laws, regulations, other regulatory documentations and market conditions, and in compliance with the principle of higher priority to higher bidding prices based on the subscription application bidding prices indicated by the target subscribers and consultations with the sponsor(s) (lead underwritter(s)) of the Proposed Placing. CSRG will not participate in any price bidding process, and has agreed to accept the result of the price bidding process. The subscription price for A Shares applicable to CSRG will be the same as the price applicable to other target subscribers. In this regards, we are of the view that the mechanism for the determination of total number of new A shares to be issued to CSRG under the Proposed Placing and CSRG subscription is fair and reasonable.

III. The minimum subscription price under the Proposed Placing and the CSRG Subscription

Minimum subscription price under the Proposed Placing and the CSRG Subscription

As stated in the Letter from the Board, the Price Determination Date of the Proposed Placing shall be the date of the announcement of the resolution in respect of the Proposed Placing passed at the 8th meeting of the second session of the Board, i.e. 17 September 2011. The minimum subscription price under the Proposed Placing is RMB4.46 per new A share representing a discount of approximately 9.90% of the average trading price of A Shares of the Company during the 20 trading days immediately preceding the Price Determination Date (the average trading price of A Shares during the 20 trading days immediately preceding the Price Determination Date, being RMB4.95 per A Share, was determined using the total turnover of A Shares during the 20 trading days immediately preceding the Price Determination Date divided by the total trading volume of A Shares during the 20 trading days immediately preceding the Price Determination Date (“ 20-day Average Trading Price ”)).

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LETTER FROM CMB INTERNATIONAL

According to the Letter from the Board, the final subscription price shall be determined by the Board after obtaining the approval of the Proposed Placing by CSRC, pursuant to the authorization granted by the Shareholders’ general meeting and taking into account the relevant laws, regulations, other regulatory documentations and market conditions, and in compliance with the principle of higher priority to higher bidding prices based on the subscription application bidding prices indicated by the target subscribers and consultations with the sponsor(s) (lead underwritter(s)) of the Proposed Placing. CSRG will not participate in any price bidding process, and is willing to accept the result of the price bidding process. The subscription price for A Shares applicable to CSRG will be the same as the price applicable to other target subscribers. In case that no other target subscriber participates in subscription price bidding or has conducted effective subscription price bidding, the Company and the sponsor(s) (lead underwriter(s)) of the Proposed Placing will consider using the minimum subscription price as the final subscription price for the Proposed Placing.

As advised by the Directors, in accordance with the Company Law, the Securities Law, the Measures Governing the Issue of Securities by Listed Companies and the Implementation Rules for the Non-Public Issue of Shares by Listed Companies issued by CSRC and other related regulations in relation to the conditions of non-public issue of A shares by listed companies, the Company conducted internal review and self-examination and considers that the Company has complied with the regulations of the prevailing laws and rules on non-public issue of A Shares, and satisfied the conditions for non-public issue of A Shares.

Fairness and reasonableness of minimum subscription price under the Proposed Placing

In order to ascertain the fairness and reasonableness of minimum subscription price RMB4.46 per A Share under the Proposed Placing, we consider that it would be appropriate, as well as to our best knowledge, to carry out a market comparison for other issuances of new shares by way of non-public issuance with the subscription prices were determined by price bidding process conducted by other companies listed on the Shanghai Stock Exchange which were initially announced between 15 May 2011 and 16 September 2011, being the date of the Board Meeting in relation to the Proposed Placing, (the “ A Share Comparables ”), as reference.

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LETTER FROM CMB INTERNATIONAL

Set out below is the summary for the A Share Comparables:

					Discount of
					the placing/
					minimum
					subscription
					price to
			Minimum	20-day	20-day
Date of			subscription	Average	Average
announcement	Name of the listed company	Stock Code	price	Trading Price	Trading Price
			(RMB)	(RMB)	(RMB)
20 May 2011	COFCO Tunhe Co., Ltd.	600737	10.47	11.63	9.97%
23 May 2011	Huadian Power International	600027	3.69	4.10	10.00%
	Corporation Limited
26 May 2011	Befar Group Co., Ltd.	601678	18.27	20.3	10.00%
13 Jun 2011	Changyuan Group Ltd.	600525	7.52	8.36	10.05%
20 Jun 2011	Xinjiang Qingsong Building	600425	20.84	23.16	10.02%
	Materials And Chemicals
	(Group) Co.,Ltd
21 Jun 2011	Yueyang Forest&Paper Co.,Ltd.	600963	8.39	8.74	4.00%
	(note 1)
23 Jun 2011	Xinyu Iron and Steel Co.,Ltd.	600782	6.23	6.91	9.84%
4 Jul 2011	Zhejiang Medicine Co.,Ltd.	600216	27.98	31.08	9.97%
5 Jul 2011	Shanghai Aerospace Automobile	600151	9.96	11.04	9.78%
	Electromechanical Co.,Ltd.
6 Jul 2011	Inner Mongolia Lantai	600328	10.49	11.65	9.96%
	Industrial Co., Ltd.
8 Jul 2011	Guangzhou Development Industry	600098	6.52	7.24	9.94%
	(Holdings) Co.,Ltd.
8 Jul 2011	Jiangxi Lianchuang	600363	10.1	11.22	9.98%
	Optoelectronic Science and
	Technology Co.,Ltd.
12 Jul 2011	Hainan Airlines Company Ltd.	600221	6.42	7.13	9.96%
18 Jul 2011	Fangda Carbon New Material	600516	12.16	13.51	9.99%
	Co., Ltd.
28 Jul 2011	Shanghai Electric Power Co.,Ltd.	600021	5.21	5.83	10.63%
30 Jul 2011	Anhui Chaodong Cement Co.,Ltd.	600318	19.51	21.67	9.97%
11 Aug 2011	Chinese Universe Publishing and	600373	14.99	16.65	9.97%
	Media Co.,Ltd.
18 Aug 2011	Eastern Gold Jade Co., Ltd.	600086	19.42	21.58	10.01%
18 Aug 2011	Fengfan Stock Limited Company	600482	15.04	16.71	9.99%
24 Aug 2011	Fiberhome Telecommunication	600498	25.7	28.55	9.98%
	Technologies Co.,Ltd.
6 Sep 2011	Gem-Year Industrial Co.,Ltd.	601002	11.91	13.23	9.98%
8 Sep 2011	Shanxi Coking Co.,Ltd.	600740	12.03	13.37	10.02%
15 Sep 2011	Beiqi Foton Motor Co., Ltd.	600166	7.12	7.90	9.87%
17 Sep 2011	The Company	601766	4.46	4.95	9.90%
	Highest				10.63%
	Lowest				4.00%
	Average				9.73%

Source: The Shanghai Stock Exchange and Bloomberg

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LETTER FROM CMB INTERNATIONAL

Note 1: The minimum subscription price of Yueyang Forest&Paper Limited (“Yueyang”) is RMB8.39, which is discounted by approximately 4.00% as compared to 20-day Average Trading Price of Yueyang. According to the non-public issuance proposal published on 21 June 2011 by Yueyang, the minimum subscription price RMB of 8.39 shall not less than 90% of the 20-day Average Trading Price of Yueyang(i.e. Approximately RMB7.87)

Independent Shareholders should note that the businesses, prospects and use of proceeds of the A Share Comparables illustrated above are not the same as the Company, as such, the above information on the A Share Comparables should be read with care. We did not conduct our selection of the A Share Comparables according to the industry, size of fund raising and market capitalisation because nearly all the minimum subscription prices of non-public issuances with the subscription prices determined by price bidding are priced towards the price floor as stipulated by the relevant PRC laws and regulations, that is, the minimum subscription price of the A shares under a non-public issue cannot be lower than 90% of the average trading price for 20 trading days immediately prior to and including the Last Trading Date. As such, industry, size of fund raising and market capitalisation are not the major determining factors we considered when we selected the A Share Comparables.

As illustrated in the table above, all the non-public issue and placing minimum subscription prices of the A Share Comparables are approximately 90% to the respective 20-day Average Trading Price. The minimum subscription price of RMB4.46 per A Share represents a discount of approximately 9.90% to the average trading price of approximately RMB4.95 per A Share as quoted on the Shanghai Stock Exchange for the last 20 trading days immediately prior to and including the Last Trading Date. As such, we consider that the determination mechanism of the minimum subscription price under the Proposed Placing (including CSGR Subscription) is a common practice in Shanghai Stock Exchange and thus consider to be reasonable.

Having considered that:
i) the Proposed Placing is a commercial decision of the Company and the final subscription price shall be determined by the Board after obtaining the approval of the Proposed Placing by CSRC, pursuant to the authorization granted by the Shareholders’ general meeting and taking into account the relevant laws, regulations, other regulatory documentations and market conditions, and in compliance with the principle of higher priority to higher bidding prices by reference to the subscription application bidding prices indicated by the target subscribers and consultations with the sponsor(s) (lead underwritter(s)) of the Proposed Placing. CSRG will not participate in any price bidding process, and is willing to accept the result of the price bidding process. The subscription price for A Shares applicable to CSRG will be the same as the price applicable to other target subscribers applicable.;
ii) the minimum subscription price under the Proposed Placing (including the CSRG Subscription) is in conformity with the issuing procedure and pricing mechanism made by relevant authorities department in the PRC and is in line with the market practice;

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LETTER FROM CMB INTERNATIONAL

iii) the minimum subscription price of RMB4.46 per A Share under the Proposed Placing falls within the range of the A Share Comparables;
iv) the valuation and investors in the A share market are different from those in the H share market; and
v) based on the Group’s net assets value as at 31 December 2010 and 30 June 2011 in amount of approximately RMB23,840.8 million and RMB 25,927.8 million, respectively and assuming 1,963,000,000 new A Shares are all subscribed at the minimum subscription price of RMB4.46 per A Share, the net assets per Share attributable to all owners of the Company will increase from approximately RMB2.01 and RMB2.19 to approximately RMB2.36 and RMB2.51 respectively upon completion of the Proposed Placing (including CSRG Subscription) without requiring the Independent Shareholders to pay any consideration to the Company.

Having considered the above, we are of the view that the basis of determination of the minimum subscription price under the Proposed Placing (including CSRG Subscription) is fair and reasonable.

IV. Rights and Lock-up period of new A shares

As stated in the Letter from the Board, the new A Shares to be issued under the Proposed Placing, when fully paid up and issued, will rank pari passu in all respects amongst themselves and with the A Shares in issue at the time of issue and allotment of such new A Shares. Upon completion of the Proposed Placing, holders of new A Shares, together with all existing Shareholders of the Company, will be entitled to all accumulated, retained and undistributed profits of the Company at the time of the Proposed Placing.

As stated in the Letter from the Board, under the Proposed Placing, CSRG shall not transfer the new A Shares subscribed for within 36 months from the date of completion of the Proposed Placing. As advised by the Directors, the abovementioned lock-up period is in accordance with the relevant PRC laws and regulations.

Having considered (i) the new A shares will rank pari passu in all respects amongst themselves and with the existing A Shares; and (ii) CSRG shall not transfer their new A shares within a lock-up period of 36 months, which is conducive to the stablisation of the Company’s share price after the non-public issue of the new A shares. We consider such terms are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM CMB INTERNATIONAL

V. Alternative fund raising methods

As advised by the Directors, apart from the Proposed Placing, they have considered various fund raising methods, including debt financing, placement of new H Shares in Hong Kong to independent investors, rights issue and open offer.

Debt financing

As referred to the financial information prepared in accordance with the IFRS as set out in the Annual Report 2010 and Interim Report 2011, the Group’s gearing ratio (calculated as total liabilities divided by total assets) were approximately 67.6% and 72.1% as at 31 December 2010 and 30 June 2011, respectively; and finance costs were approximately RMB316.6 million and 369.3 million for the year ended 31 December 2010 and 30 June 2011, respectively. The Directors consider that the current gearing ratio of the Group is relatively high. In view of the current financial condition of the Group, the Directors believe that obtaining further borrowings or other bank financing would increase the Group’s gearing ratio and finance costs, which, in turn, will have a negative impact on the performance of the Group’s financial results.

Placement of new H Shares in Hong Kong to independent investors

As advised by the Directors, in view of the rapid business growth of the Group in the PRC in recent years and the funding requirement of the Group in Renminbi to finance its operation and new projects in the PRC, it will be in the interest of the Company to issue new A Shares to obtain the funding directly in Renminbi. If the Company conducts fund raising exercise by issuance of new H Shares in Hong Kong, the Company is required to convert the foreign currencies raised from such issue to Renminbi, as well as to go through relevant procedures and approvals as required by the relevant PRC rules and regulations to transfer the proceeds back to the PRC for the Group’s uses.

As advised by the Directors, under the relevant PRC laws and regulations, the non-public issue of new A shares to investors is generally subject to a lock-up period of not less than 12 months. Based on the current structure of the proposed issue of new A Shares, CSRG shall not transfer their new A Shares within 36 months from the completion date of the Proposed Placing. However, there is no similar compulsory regulatory requirement in relation to lock-up for H shares listed in Hong Kong. With such a relatively longer lock-up period, the Directors are of the view that the proposed issue of new A Shares has limited negative impact on to the A Share market price of the Company.

— 34 —

LETTER FROM CMB INTERNATIONAL

As to the best knowledge of the Directors, there are no relevant statutory provisions or regulations that impose a lock-up period for H Share investors, the Directors believe that H Share investors would be unlikely to accept a lock-up period similar to that is currently imposed on the A Share investors under the proposed issue of A Shares if the H Share investors were requested to voluntarily accept such lock-up period. If a placing of H Shares is to be conducted by the Company, the H Shares may be freely disposed by the H Share investors in the market immediately after the completion of such placing. In this circumstances, the Directors estimate that placing of H Shares by the Company at a certain discount to the current share price of the H Shares and without a lock-up imposed on the H Share investors are likely to have negative impact on the share price of the H Shares. As such, the Directors consider that the Proposed Placing (including CSRG Subscription) of A Shares is a better method of financing and is in the best and the longterm interests of the Company and the Shareholders as a whole.

Given the volatile and unpredictable market conditions in near future, the Directors are of the view that a relatively speedy financing method is preferable. In light of the above, the Directors are of the opinion that the Proposed Placing (including CSRG Subscription) which is a non-public issue and placing of A Shares is a preferable method of fund raising for the Company.

Rights issue and open offer

As advised by the Directors, a rights issue is an offer by way of rights to existing holders of securities which enables those holders to subscribe securities in proportion to their existing holdings. An open offer is an offer to public to subscribe securities, whether or not in proportion to their existing holdings, which are not allotted to them on renounceable documents. As rights issues and open offers have to be fully underwritten under Rule 7.19 and Rule 7.24 of the Hong Kong Listing Rules respectively in normal circumstances, they have to be completed in a relatively short time frame in order to mitigate the market risk to be borne by underwriters.

As stated in the Letter from the Board and confirmed by the Directors, the cancellation of the Original Proposed Placing is mainly due to the change in capital market environment. The Board had considered various other means of fund raising which is on a pro-rata manner, such as rights issue and open offer. However, after due and careful consideration by the Board, the Board is of the view that the Proposed Placing by way of a non-public issuance of new A Shares is the most preferable method over others as the non-public issuance, as compared with rights issue and open offer, is a relatively speedy method in terms of PRC approval process whereas other fund raising means present higher uncertainties and risks given the current capital market situation. In addition, the Board expects that the non-public issuance, coupled with the relatively long lock-up period, will have less adverse effect on the share price of the Company. Further, subscription by other long term investors in the non-public issuance demonstrates the recognition of the value of the Company and confidence such investors place in the Company which may help stabilize the share price of the Company. Therefore, the Board considers that the Proposed Placing is in the best interests of the Company and its investors at large.

— 35 —

LETTER FROM CMB INTERNATIONAL

In light of the above, we concur with the view of the Directors that it is in the interests of the Company and the Shareholders as a whole to raise funds by the Proposed Placing (including the CSRG Subscription) given that the issue of new A Shares in the Proposed Placing will strengthen the capital base and financial position of the Group, and would enable the Company to raise funds in Renminbi in a timely manner.

VI. Possible financial effects of the Proposed Placing

The total proceeds from the Proposed Placing (including the CSRG Subscription) is expected to be RMB9,000 million before deduction of relevant expenses assuming the value of all new A Shares that equivalent to RMB9,000 million are fully subscribed. Set out below is the analysis of the possible financial effects of the Proposed Placing (including the CSRG Subscription) on the Group’s financial position upon completion of the Proposed Placing (including the CSRG Subscription):

Net assets attributable to owners of the Company

According to the financial information prepared in accordance with the IFRS as set out in the Annual Report 2010 and Interim Report 2011, the Group had audited net assets attributable to owners of the Company of approximately RMB19,244.2 million as at 31 December 2010; and the Group had unaudited net assets attributable to owners of the Company of approximately RMB20,797.5 million as at 30 June 2011. With the injection of the total proceeds from the Proposed Placing (including the CSRG Subscription) of not more than RMB 9,000 million in cash, the net assets attributable to owners of the Company will be enhanced by the net proceeds upon completion of the Proposed Placing.

Gearing ratio

According to the financial information prepared in accordance with the IFRS as set out in the Annual Report 2010 and Interim Report 2011, the Group’s gearing ratio (calculated as total liabilities divided by total assets) were approximately 67.6% and 72.1% as at 31 December 2010 and 30 June 2011, respectively. Upon completion of the Proposed Placing (including the CSRG Subscription), the Group’s total assets would be enhanced by the total proceeds of not more than RMB9,000 million. Accordingly, the gearing ratio would be decreased upon completion of the Proposed Placing.

In view of the above, we consider that the Proposed Placing (including CSRG Subscription) will have positive effect on the financial position of the Group and thus, we are of the view that the CSRG Subscription is in the interests of the Company and the Shareholders as a whole.

— 36 —

LETTER FROM CMB INTERNATIONAL

VII. Dilution effect on shareholding

Upon completion of the Proposed Placing (including the CSRG Subscription), it is anticipated that the shareholding structure of the Company will be as follows:

CSRG and
its associates
Public Holders of
A Shares
Public Holders of
H Shares
Total

As at Last Practicable Date and
prior to the Completion of
Proposed Placing
Immediately after completion of
Proposed Placing (assuming (1) full
subscription and a total issue of
1,963,000,000 new A Shares under
the Proposed Placing and fully
subscribed by CSRG; and
(2) no issuance of any other Shares
by the Company during the period
from the Latest Practicable Date till
completion of the Proposed Placing and
the CSRG Subscription, immediately after
completion of the Proposed Placing and
the CSRG Subscription )
Number of
Shares held
Approximate
percentage of
shareholding in
the Company’s
total issued
share capital
Number of
Shares held
Approximate
percentage of
shareholding in
the Company’s
total issued
share capital
6,518,800,000
A Shares
55.06%
8,481,800,000
A Shares
61.45%
3,297,200,000
A Shares
27.85%
3,297,200,000
A Shares
23.89%
2,024,000,000
H Shares
17.09%
2,024,000,000
H Shares
14.66%
11,840,000,000
Shares
100.00%
13,803,000,000
Shares
100.00%

As illustrated in the table above, assuming(1) full subscription and a total issue of 1,963,000,000 new A Shares under the Proposed Placing and fully subscribed by CSRG; and (2) no issuance of any other Shares by the Company during the period from the Latest Practicable Date till completion of the Proposed Placing and the CSRG Subscription, immediately after completion of the Proposed Placing and the CSRG Subscription, then CSRG will hold 8,481,800,000 A Shares of the Company directly and indirectly, which accounts for approximately 61.45% of the enlarged issued share capital of the Company immediately upon completion of the Proposed Placing (including CSRG Subscription). In the meanwhile, the shareholding of the public holders of A Shares will decrease from approximately 27.85% to approximately 23.89% of the enlarged issued share capital of the Company whilst the shareholding of public holders of H Shares will be diluted from approximately 17.09% to approximately 14.66% of the enlarged issued share capital of the Company immediately upon completion of the Proposed Placing (including CSRG Subscription).

— 37 —

LETTER FROM CMB INTERNATIONAL

Having considered that the interest of the Independent Shareholders in the Company will only be slightly diluted and based on the Group’s net assets value as at 31 December 2010 and 30 June 2011 in amount of approximately RMB23,840.8 million and RMB 25,927.8 million, respectively and assuming 1,963,000,000 new A Shares are all subscribed at the minimum subscription price of RMB4.46 per A Share, the net assets per Share attributable to all owners of the Company will increase from approximately RMB2.01 and RMB2.19 to approximately RMB2.36 and RMB2.51 respectively upon completion of the Proposed Placing (including CSRG Subscription) without requiring the Independent Shareholders to pay any consideration to the Company. We consider that the dilution effect on the shareholding interest of the Independent Shareholders arising from the Proposed Placing (including the CSRG Subscription) is acceptable.

RECOMMENDATION

Having considered the above principal reasons and factors, we consider that the terms of the CSRG Subscription Agreement, including the subscription price of the CSRG Subscription, are fair and reasonable and on normal commercial terms and the CSRG Subscription is in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolutions in respect of the CSRG Subscription Agreement to be proposed at the EGM.

Yours faithfully, For and on behalf of

CMB International Capital Limited Kenny How Managing Director Corporate Finance Department

— 38 —

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(1) Directors, Supervisors and Chief Executives’ Interests in the Securities of the Company
(a) Reference is made to the announcement of the Company dated 28 April 2011 in relation to the grant of share options. The Board resolved on 27 April 2011 to grant A Share options to the following Directors under the share option scheme adopted by the Company on 26 April 2011. Such options shall be exercisable upon the fulfilment of all effective conditions under the share option scheme:

			Number of
			A Shares to be subscribed
			under
Name of Director	Grant date	Exercise price	the options
Zhao Xiaogang	27 April 2011	RMB5.43	200,000
Zheng Changhong	27 April 2011	RMB5.43	200,000
Tang Kelin	27 April 2011	RMB5.43	170,000
Liu Hualong	27 April 2011	RMB5.43	170,000

(b) As at the Latest Practicable Date, the following Directors and supervisors had interests in the A Shares and H Shares, further details of which are set out below:

			Class of	Number of
			Shares	Shares
Name	Position	Date of purchase	purchased	purchased
Zhao Xiaogang	Chairman of the Board	12 August 2011	A Shares	80,000
Zheng Changhong	Vice Chairman of the Board and President	12 August 2011	A Shares	60,000
Tang Kelin	Executive Director and Vice President	12 August 2011	A Shares	50,000
Liu Hualong	Executive Director	12 August 2011	A Shares	50,000
Zhao Jibin	Independent Non-executive Director	16 August 2011	A Shares	30,000
Yang Yuzhong	Independent Non-executive Director	12 August 2011	A Shares	30,000
Chen Yongkuan	Independent Non-executive Director	12 August 2011	A Shares	34,100
Dai Deming	Independent Non-executive Director	17 August 2011	A Shares	30,000
Tsoi, David	Independent Non-executive Director	8 August 2011	H Shares	50,000
Wang Yan	Chairman of the supervisory committee	15 August 2011	A Shares	30,000
Qiu Wei	Employee representative supervisor	15 August 2011	A Shares	30,000

— 39 —

GENERAL INFORMATION

APPENDIX I

Save as disclosed in (a) and (b) above, as at the Latest Practicable Date, to the knowledge of the Company, none of the Directors, supervisors, chief executives and their respective associates had interests or short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of SFO (including interests or short positions which any Director, supervisor or chief executive is taken or deemed to have under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein or which are required, pursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers as set out in Appendix 10 to the Hong Kong Listing Rules to be notified to the Company and the Hong Kong Stock Exchange (which for this purpose shall be deemed to apply to the supervisors to the same extent as it applies to the Directors).

(2) Directors’ Positions in Other Companies

As at the Latest Practicable Date, as far as the Company is aware, the following Director is employed by the following company which has interests or short positions in the shares or underlying shares of the Company which are required to be notified to the Company pursuant to Divisions 2 and 3 of Part XV of SFO:

Name of Director Position held in the specific company

Zhao Xiaogang General Manager (Legal representative) of CSRG

3. CONSENT AND QUALIFICATION OF EXPERT

CMB International has given and has not withdrawn its consent to the issue of this circular with the inclusion herein of its letter of advice dated 22 September 2011, and report and references to its name included in the form and context in which it appears.

The following is the qualification of the expert who has given an opinion or advice, which is contained in this circular:

Name Qualification CMB International a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, the said expert had no shareholding in any member of the Group, or any right to subscribe for or to nominate other persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, the above expert was not interested, directly or indirectly, in any assets which had since 31 December 2010, being the date on which the latest published audited accounts of the Company were made up, been acquired or disposed of by or leased to, or proposed to be acquired or disposed of by or leased to, any member of the Group.

— 40 —

GENERAL INFORMATION

APPENDIX I

4. NO MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading positions of the Company since 31 December 2010, being the date of the latest published audited financial statements of the Company.

5. SERVICE CONTRACTS OF THE DIRECTORS AND SUPERVISORS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had entered into any service contract with the Company which is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest in other business which competes or may compete with the business of the Group.

7. DIRECTORS AND SUPERVISORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any interest, either directly or indirectly, in any assets which had since 31 December 2010, being the date on which the latest published audited accounts of the Company were made up, been acquired or disposed of by or leased to, or proposed to be acquired or disposed of by or leased to, any member of the Group.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and was significant to the business of the Group.

8. MATERIAL LITIGATION

As at the Latest Practicable Date, the Group was a party to certain litigations arising from the ordinary course of business. The likely outcome of such contingent liabilities, lawsuits or other legal proceedings cannot be ascertained at present, but the management of the Group believes that, any possible legal liability which may incur from the aforesaid litigation shall not have material adverse effect on the financial position of the Group.

— 41 —

GENERAL INFORMATION

APPENDIX I

9. MISCELLANEOUS

(i) Mr. Shao Renqiang and Mr. Wong Kai Yan, Thomas act as joint company secretaries of the Company. Mr. Shao, a senior accountant, has been serving as company secretary of the Company since August 2008. Mr. Wong, a qualified accountant and a member of Hong Kong Institute of Certified Public Accountants since July 1999, has been serving as company secretary of the Company since August 2008.
(ii) The registered office of the Company is at No. 16 Central West Fourth Ring Road, Haidian District, Beijing, the PRC.
(iii) The Company’s H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, is situated at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 7 November 2011:

(i) the CSRG Subscription Agreement;
(ii) the letter of recommendation from the Independent Board Committee dated 22 September 2011, the text of which is set out on page 21 of this circular;
(iii) the letter of advice issued by the Independent Financial Adviser dated 22 September 2011, the text of which is set out on page 22 to 38 of this circular;
(iv) the written consent given by CMB International as referred to in the paragraph headed “Consent and Qualification of Expert” in Appendix I of this circular;
(v) the Feasibility Report; and
(vi) the Reports on Previous Proceeds.

— 42 —

NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

中國南車股份有限公司 CSR CORPORATION LIMITED

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

(Stock code:1766)

NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2011 second extraordinary general meeting (the “ EGM ”) of CSR Corporation Limited (the “ Company ”) will be held at Empark Grand Hotel, No. 69 Banjing Road, Haidian District, Beijing, the PRC at 1:30 p.m. on Monday, 7 November 2011 (registration will begin at 12:30 p.m.) for the purpose of considering and approving, if appropriate, the following resolutions (unless otherwise indicated, capitalized terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 22 September 2011):

SPECIAL RESOLUTIONS

To consider and approve the proposal in relation to the non-public issue of A Shares of the Company, in respect of which CSRG and its associates, being connected Shareholders, will abstain from voting.

“ That

the following items of the non-public issue of A Shares by the Company within the PRC be and are hereby individually approved and be implemented subsequent to the obtaining of the relevant approvals from relevant governmental authorities in the PRC:

1.01 Class and par value of shares to be issued
1.02 Method and time of issuance
1.03 Number of shares to be issued
1.04 Target subscribers
1.05 Method of subscription
1.06 Lock-up period
1.07 Subscription price and pricing policy
1.08 Use of proceeds
1.09 Arrangement relating to the accumulated undistributed profits prior to the non-public issue of A Shares

— 43 —

NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

1.10 Place of listing
1.11 Validity of the resolution in relation to the non-public issue of A Shares
1.12 Effectiveness, implementation and termination of the non-public issue of A Shares”

(Relevant details are set out in the circular of the Company dated 22 September 2011.)

To consider and approve the proposal in relation to the plan of non-public issue of A Shares of the Company. CSRG and its associates, being connected Shareholders, will abstain from voting on this proposal. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider, approve and permit CSRG Subscription and the CSRG Subscription Agreement entered into by the Company and CSRG, the terms thereof and all transactions contemplated thereunder, and Board to be authorized to do all such acts and things and to sign and execute all documents and to take such steps as the Board (or any Directors) may in their absolute discretion consider necessary and appropriate to give effect to the CSRG Subscription Agreement. CSRG and its associates will abstain from voting on this proposal. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider and approve the authorisation to the Board to handle relevant matters in connection with the Proposed Placing.

“ That

The Board (or the Chairman of the Board as applicable) be authorized to handle matters in connection with the Proposed Placing within the scope of relevant laws and regulations, including:

(1) to authorize the Board to handle all application matters in connection with the Proposed Placing;
(2) to authorize the Board to appoint the sponsor(s) (lead underwriter(s)) and other intermediaries to handle all application matters in connection with the Proposed Placing;
(3) to authorize the Board to adjust the specific plan for the Proposed Placing and supplement, amend and adjust the application documents relating to the Proposed Placing in accordance with the policy changes regarding non-public issue of A Shares and the review opinions of the related regulatory authorities on the Proposed Placing;
(4) to authorize the Board to formulate and organize the implementation of the specific plan for the Proposed Placing according to specific conditions, including but not limited to, issuance time, target subscribers, issue price, final number of shares to be issued, size of proceeds and selection of target subscribers;
(5) to authorize the Board to sign, amend, supplement, submit, report and effect all documents and agreements in connection with the Proposed Placing;

— 44 —

NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

(6) to authorize the Board to establish a special bank account designated for the proceeds and proceed with relevant matters, and sign relevant documents and agreements in respect of the investment projects to be financed by proceeds from the Proposed Placing;
(7) to authorize the Board to handle the capital verification procedures relating to the Proposed Placing;
(8) to authorize the Board to adjust the investment projects and specific arrangements thereof within the authorization scope of the EGM and in accordance with relevant regulatory requirements and the actual condition of the securities market, including: determining the specific arrangements of the actual use of proceeds for the aforesaid purposes by the priority of investment projects, actual investment amount, actual capital requirement and implementation progress, and in accordance with the approval, endorsement, filing or implementation of these projects, the progress and actual amount of proceeds raised; adjusting the plan for the Proposed Placing and the use of proceeds in line with any changes in State policies and new requirements of regulatory authorities in relation to non-public issue or any changes in market conditions (including the feedback opinions from approving authorities in respect of the application for the Proposed Placing), except where re-approval at a general meeting is otherwise required by any relevant laws and regulations and the articles of association of the Company and provided that relevant laws and rules are complied with;
(9) to authorize the Board to handle the capital increase matters in connection with the use of proceeds;
(10) to authorize the Board to handle such relevant matters as subscription, registration, lockup and listing of shares upon completion of the Proposed Placing;
(11) to authorize the Board, upon completion of the Proposed Placing, to handle matters such as change in the registered capital, amend the corresponding terms of the articles of association of the Company and execute relevant registration changes with the administration for industry and commerce;
(12) to authorize the Board to handle other matters relating to the Proposed Placing; and
(13) such authorizations shall be valid for a period of 12 months after being approved at the EGM of the Company.”

— 45 —

NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTIONS

To consider and approve the proposal in relation to compliance with the conditions for the nonpublic issue of A Shares by the Company. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider and approve the proposal in relation to the granting of a waiver to CSRG from its obligation to make a general offer . CSRG and its associates, being connected Shareholders, will abstain from voting on this proposal. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider and approve the proposal in relation to the Feasibility Report on the use of proceeds from the Proposed Placing by the Company. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider and approve the proposal in relation to Report on Previous Proceeds of the Company. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider and approve the proposal in relation to the appointment of an accounting firm as internal control auditors for 2011 and the bases for determination of its remuneration by the Company. (Relevant details are set out in the circular of the Company dated 22 September 2011.)
To consider and approve the proposal in relation to the provision of guarantees to CSR (Hong Kong). (Relevant details are set out in the circular of the Company dated 22 September 2011.)

By Order of the Board CSR Corporation Limited Zhao Xiaogang Chairman

Beijing, the PRC 22 September 2011

— 46 —

NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

Notes:

Details of the above proposals are set out in the circular of the Company dated 22 September 2011(“ Circular ”).
The H Share register of members of the Company will be closed from Saturday, 8 October 2011 to Monday, 7 November 2011 (both days inclusive), during which period no transfer of H Shares will be registered. H Shareholders who intend to attend the EGM must deliver all transfer instruments, accompanied by the relevant share certificates, to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, no later than 4:30 p.m. on Friday, 7 October 2011 . H Shareholders whose names appear on the register of members of the Company maintained by Computershare Hong Kong Investor Services Limited on or before the above date will be eligible to attend the EGM.
Shareholders who intend to attend the EGM in person or by proxy should return the reply slip for the EGM to the Board Office of the Company (for A Shareholders) or the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited (for H Shareholders), by hand, by post or by fax on or before Monday, 17 October 2011 . The Board Office is located at No. 16, Central West Fourth Ring Road, Haidian District, Beijing 100036, the PRC (Telephone: (86)10 5186 2188, Fax: (86)10 6398 4785). The Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited, is located at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (Telephone: (852) 2862 8555).
In order to be valid, the instrument appointing a proxy together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or authority, should be completed and deposited at the Company’s Board Office (for A Shareholders) or the H Share Registrar of the Company, Computershare Hong Kong Investor Services Limited (for H Shareholders), at least 24 hours before the EGM or any adjourned meeting thereof. Completion and return of the proxy form will not preclude a Shareholder from attending in person and voting at the EGM or any adjournment thereof should he/she so wish.
Any Shareholder entitled to attend and vote at the EGM to be convened by the above notice is entitled to appoint one or more proxies to attend and vote on behalf of him/her. A proxy needs not be a Shareholder.
In case of joint Shareholders and the Shareholder or the proxy attending the EGM is more than one person, the vote of the senior joint shareholder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint shareholder(s) and for this purpose seniority will be determined by the order in which the names appear in the register of members of the Company in respect of the joint shareholdings.
The EGM is expected to last for about half a day. Shareholders who attend the meeting in person or by proxy shall bear their own travelling and accommodation expenses. Shareholders or their proxies shall produce their identity documents when they attend the EGM.

— 47 —

AI assistant

CRRC Corporation Limited — Proxy Solicitation & Information Statement 2011

50153_rns_2011-09-21_0468405c-af67-4c34-887e-68b324dd7f88.pdf

中國南車股份有限公司 CSR CORPORATION LIMITED

(1) PROPOSED ISSUANCE AND PLACING OF NEW A SHARES; (2) CONNECTED TRANSACTION: PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG; (3) PROPOSED APPOINTMENT OF AN ACCOUNTING FIRM AS INTERNAL CONTROL AUDITORS FOR 2011;

(4) PROPOSED PROVISION OF GUARANTEES TO CSR (HONG KONG); AND

(5) NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

中國南車股份有限公司 CSR CORPORATION LIMITED

Executive Directors

Registered Office:

Independent Non-executive Directors

Place of Business in Hong Kong:

(1) PROPOSED ISSUANCE AND PLACING OF NEW A SHARES;

1. INTRODUCTION

2. PROPOSAL IN RELATION TO THE PROPOSED ISSUANCE AND PLACING OF NEW A SHARES

(1) Class and par value of Shares to be issued

(2) Method and time of issuance

(3) Number of Shares to be issued

(4) Target subscribers

(5) Method of subscription

(6) Subscription price and pricing principle

(7) Effective conditions, implementation and termination of the Proposed Placing

(8) Rights of the new A Shares

(9) Lock-up period

(10) Use of proceeds

(11) Applications for listing of the new A Shares

(12) Validity of resolutions

(13) Report on previous proceeds

(14) Feasibility Report

Category I: High-speed and heavy-duty rolling stock industrialisation and extension services projects

Category II: Inter-city and rapid transit vehicles maintenance bases and service network construction projects

Category III: Projects for enhancing corporate independent innovation capabilities

Category IV: Projects for extended services of industry chains and new business expansion

Category V: Supplement to the Company’s working capital

(15) Authorizations to the Board in connection with the Proposed Placing

(16) Fund raising in the past twelve months

(17) General Mandate to issue new A Shares

3. PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG

(1) New A Shares to be subscribed by CSRG

(2) Subscription price payment method

(3) Conditions of the CSRG Subscription Agreement becoming effective

(4) Lock-up arrangement

(5) General Information on the Parties to the CSRG Subscription Agreement

(a) The Company

(b) CSRG

(6) Implications under the Hong Kong Listing Rules

4. PROPOSAL IN RELATION TO COMPLIANCE WITH THE CONDITIONS FOR THE NON-PUBLIC ISSUE OF A SHARES BY THE COMPANY

5. PROPOSAL IN RELATION TO THE PLAN ON NON-PUBLIC ISSUE OF A SHARES BY THE COMPANY

6. PROPOSAL IN RELATION TO THE APPROVAL OF GRANTING A WAIVER TO CSRG FROM ITS OBLIGATION TO MAKE A GENERAL OFFER

7. EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

8. REASONS FOR AND BENEFITS OF THE PROPOSED PLACING AND CSRG SUBSCRIPTION

9. THE PROPOSAL IN RELATION TO THE APPOINTMENT OF AN ACCOUNTING FIRM AS INTERNAL CONTROL AUDITORS FOR 2011 AND THE BASES FOR DETERMINATION OF ITS REMUNERATION BY THE COMPANY

10. THE PROPOSAL IN RELATION TO THE PROVISION OF GUARANTEES TO CSR (HONG KONG)

11. NOTICE OF 2011 SECOND EXTRAORDINARY GENERAL MEETING

12. RECOMMENDATION

中國南車股份有限公司 CSR CORPORATION LIMITED

CONNECTED TRANSACTION: SUBSCRIPTION OF NEW A SHARES BY CSRG

CONNECTED TRANSACTION: PROPOSED SUBSCRIPTION OF NEW A SHARES BY CSRG

INTRODUCTION

BASIS OF OUR OPINION

INFORMATION OF THE GROUP AND CSRG

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Reasons for and the benefits of the Proposed Placing and the CSRG Subscription

II. The number of shares to be issued and the target subscribers for the Proposed Placing and the CSRG Subscription

III. The minimum subscription price under the Proposed Placing and the CSRG Subscription

IV. Rights and Lock-up period of new A shares

V. Alternative fund raising methods

Rights issue and open offer

VI. Possible financial effects of the Proposed Placing

VII. Dilution effect on shareholding

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(2) Directors’ Positions in Other Companies

3. CONSENT AND QUALIFICATION OF EXPERT

4. NO MATERIAL ADVERSE CHANGE

5. SERVICE CONTRACTS OF THE DIRECTORS AND SUPERVISORS

CRRC Corporation Limited Proxy Solicitation & Information Statement 2011