L.K. Technology Holdings Limited - Proxy Solicitation & Information Statement 2020

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Orient Overseas (International) Limited, you should at once hand the Circular and the proxy form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

(Incorporated in Bermuda with members’ limited liability)

(Stock Code: 316)

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS

AND

REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT AND

RE-ELECTION OF DIRECTOR AND

NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

First Shanghai Capital Limited

Capitalized terms used in this cover page have the same meanings as those defined in the section headed ‘‘Definitions’’ in the Circular. The notice convening the SGM of the Company to be held on Monday, 30th November 2020 at 2:30 p.m. at Dynasty Room, 7th Floor, The Dynasty Club, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong is set out on pages (i) and (ii) of the Circular. A proxy form for use by the Shareholders at the SGM is also enclosed with the Circular.

Whether or not you intend to attend the SGM in person, you are requested to complete and return the accompanying proxy form in accordance with the instructions printed thereon and deposit the same with the Branch Share Registrar at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than forty eight hours before the time appointed for the SGM (or any adjournment thereof). Completion and return of the proxy form will not preclude you from attending and voting in person at the SGM (or any adjournment thereof) should you so wish.

As part of our control measures to safeguard the health and safety of the Shareholders, the Company encourages the Shareholders to consider appointing the chairman of the SGM as their proxy to vote as instructed by the Shareholders on the relevant resolutions at the SGM, instead of attending the SGM in person. Please see pages (iii) and (iv) of the Circular for measures being taken to try to prevent and control the spread of the COVID-19 at the SGM.

11th November 2020

For identification purpose only

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . .	18
APPENDIX I – DETAILS OF DIRECTOR PROPOSED
TO BE RE-ELECTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II – FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	II-1
APPENDIX III – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(i)
PRECAUTIONARY MEASURES FOR SPECIAL GENERAL MEETING . . . . . . . . . . . .	(iii)

– i –

DEFINITIONS

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

‘‘associates’’
has the meaning ascribed to it under the Listing Rules;
‘‘Board’’ the board of Directors of the Company;
‘‘Board Meeting’’

the meeting of the Board held on 29th October 2020 for approving, among other things, the Proposed Revised Bunker Caps and the Shipbuilding Transaction;

‘‘Branch Share Registrar’’
Computershare Hong Kong Investor Services Limited, the branch share registrar of the Company in Hong Kong;
‘‘Builders’’
Dalian and Nantong;
‘‘Bunker Master Agreement’’
the master agreement dated 30th October 2019 and entered into between the Company and COSCO SHIPPING in relation to the purchase of bunker, fuel and oil by OOIL Group from COSCO SHIPPING Group;
‘‘Buyers’’
Newcontainer No.113 (Marshall Islands) Shipping Inc. (‘‘NC113’’), Newcontainer No.115 (Marshall Islands) Shipping Inc. (‘‘NC115’’), Newcontainer No.116 (Marshall Islands) Shipping Inc. (‘‘NC116’’), Newcontainer No.117 (Marshall Islands) Shipping Inc. (‘‘NC117’’), Newcontainer No.118 (Marshall Islands) Shipping Inc. (‘‘NC118’’), Newcontainer No.119 (Marshall Islands) Shipping Inc. (‘‘NC119’’), and Newcontainer No.120 (Marshall Islands) Shipping Inc. (‘‘NC120’’), each an indirect wholly-owned subsidiary of the Company;
‘‘Bye-laws’’
the bye-laws of the Company currently in force;
‘‘CCT Announcement’’
the announcement of the Company dated 30th October 2019 in relation to, among other things, the Bunker Master Agreement between OOIL Group and COSCO SHIPPING Group;
‘‘Circular’’
this circular of the Company dated 11th November 2020;
‘‘Company’’
Orient Overseas (International) Limited（東方海外（國際）有限公司[*] ）, a company incorporated in Bermuda with members’ limited liability and listed on the Main Board of the Stock Exchange (stock code: 316);

– 1 –

DEFINITIONS

‘‘connected person’’
‘‘COSCO SHIPPING’’
‘‘COSCO SHIPPING Group’’
‘‘COSCO SHIPPING Holdings’’
‘‘COSCO SHIPPING Lines’’
‘‘COSCO SHIPPING Ports’’
‘‘Dalian’’
‘‘Directors’’
‘‘Existing Bunker Caps’’
‘‘Faulkner’’

has the meaning ascribed to it under the Listing Rules;

China COSCO SHIPPING Corporation Limited[*] （中國遠洋海運集團有限公司）, a PRC state-owned enterprise and indirectly controls more than 50% of the issued share capital of the Company;
COSCO SHIPPING and its subsidiaries and associates (as defined under the Listing Rules);
COSCO SHIPPING Holdings Co., Ltd.[*] （中遠海運控股股份有限公司）, a joint stock limited company incorporated in the PRC with limited liability and a member of the COSCO SHIPPING Group, the H shares of which are listed on the Main Board of the Stock Exchange (stock code: 1919) and the A shares of which are listed on the Shanghai Stock Exchange (stock code: 601919);
COSCO SHIPPING Lines Co., Ltd.[*] （中遠海運集裝箱運輸有限公司）, a company incorporated in the PRC and a subsidiary of COSCO SHIPPING Holdings;
COSCO SHIPPING Ports Limited（中遠海運港口有限公司）, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 1199);
Dalian COSCO KHI Ship Engineering Co., Ltd.[*] （大連中遠海運川崎船舶工程有限公司）, a company established in the PRC and an indirect subsidiary of COSCO SHIPPING. Nantong directly holds 30% equity interest in Dalian;
the directors of the Company;

the existing annual caps for the purchase of bunker, fuel and oil by OOIL Group from COSCO SHIPPING Group under the Bunker Master Agreement for the three years ending 31st December 2020, 2021 and 2022, as disclosed in the CCT Announcement;

Faulkner Global Holdings Limited, a company incorporated in the British Virgin Islands and a member of the COSCO SHIPPING Group, directly holds 75% of the issued share capital of the Company;

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DEFINITIONS

‘‘Group’’
‘‘HK$’’
‘‘Hong Kong’’
‘‘Independent Board Committee’’
‘‘Independent Financial Adviser’’
‘‘Independent Non-Executive Directors’’
‘‘Independent Shareholders’’
‘‘Latest Practicable Date’’
‘‘Listing Rules’’
‘‘March Transaction’’

the Company and its subsidiaries;

Hong Kong Dollars, the lawful currency of Hong Kong; Hong Kong Special Administrative Region of the PRC;
an independent board committee of the Board comprising all the Independent Non-Executive Directors of the Company (except Dr. Chung Shui Ming Timpson, Mr. Yang Liang Yee Philip and Ms. Chen Ying), who have no material interests in the Proposed Revised Bunker Caps and the Shipbuilding Transaction;
First Shanghai Capital Limited（第一上海融資有限公司）, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the Proposed Revised Bunker Caps and the terms of the Shipbuilding Transaction;

the independent non-executive Directors of the Company, namely Mr. Chow Philip Yiu Wah, Dr. Chung Shui Ming Timpson, Mr. Yang Liang Yee Philip, Ms. Chen Ying and Mr. So Gregory Kam Leung;

Shareholders other than those who are members of the COSCO SHIPPING Group;
6th November 2020, being the latest practicable date before the printing of the Circular for ascertaining certain information for the purpose of inclusion in the Circular;

the Rules Governing the Listing of Securities on the Main Board of the Stock Exchange;

the transactions contemplated under the shipbuilding contracts all dated 10th March 2020 for the construction of the March Vessels, which constituted a major transaction and a connected transaction of the Company, and the details of which are contained in the announcement of the Company dated 10th March 2020 and the circular of the Company dated 9th April 2020;

– 3 –

DEFINITIONS

‘‘March Vessels’’
five units of 23,000 TEU container vessels, three of which are being constructed by Nantong and two of which are being constructed by Dalian under the five shipbuilding contracts all dated 10th March 2020;
‘‘Model Code’’
Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 to the Listing Rules;
‘‘Nantong’’ Nantong COSCO KHI Ship Engineering Co., Ltd.[*] （南通中遠海運川崎船舶工程有限公司）, a company established in the PRC and an associate of COSCO SHIPPING which indirectly holds 50% equity interest in Nantong;
‘‘OOIL Group’’ the Company and its subsidiaries and associates (as defined under the Listing Rules);
‘‘PRC’’ the People’s Republic of China;
‘‘Proposed Revised Bunker Caps’’
the proposed revised annual caps for the purchase of bunker, fuel and oil by OOIL Group from COSCO SHIPPING Group under the Bunker Master Agreement for the three years ending 31st December 2022;
‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
‘‘SGM’’
the special general meeting of the Company to be held on Monday, 30th November 2020 at 2:30 p.m. at Dynasty Room, 7th Floor, The Dynasty Club, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong, or any adjournment thereof;
‘‘Shares’’
ordinary shares of US$0.10 each in the share capital of the Company;
‘‘Shareholders’’

holder(s) of the Share(s);

– 4 –

DEFINITIONS

‘‘Shipbuilding Contracts’’

the following seven shipbuilding contracts all dated 30th October 2020, each of which relates to one Vessel and contains substantially the same terms: (i) three shipbuilding contracts entered into by Nantong with each of NC113, NC115 and NC116 respectively in respect of the three related Vessels; and (ii) four shipbuilding contracts entered into by Dalian with each of NC117, NC118, NC119 and NC120 respectively in respect of the four related Vessels;

‘‘Shipbuilding Transaction’’ the transactions contemplated under the Shipbuilding Contracts;
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;
‘‘subsidiaries’’ has the meaning ascribed to it under the Listing Rules; and ‘‘subsidiary’’ means any one of them;
‘‘Takeovers Code’’ the Codes on Takeovers and Mergers and Share Buy-backs;
‘‘TEU’’ twenty-foot equivalent container unit;
‘‘US$’’ United States Dollars, the lawful currency of the United States;
‘‘Vessels’’ seven units of 23,000 TEU container vessels, three of which will be constructed by Nantong and four of which will be constructed by Dalian according to the respective Shipbuilding Contracts; and ‘‘Vessel’’ means any of them; and
‘‘%’’ per cent.

Note: The exchange rate used for reference purpose in the Circular is US$1.00 to HK$7.8.

For identification purposes only

– 5 –

LETTER FROM THE BOARD

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

(Incorporated in Bermuda with members’ limited liability) (Stock Code: 316)

Executive Directors: Mr. XU Lirong (Chairman) Mr. HUANG Xiaowen (Chief Executive Officer) Mr. YANG Zhijian Mr. FENG Boming

Principal Office: 31st Floor Harbour Centre 25 Harbour Road Wanchai Hong Kong

Non-Executive Directors:

Mr. TUNG Lieh Cheung Andrew Mr. YAN Jun Ms. WANG Dan Mr. IP Sing Chi Ms. CUI Hongqin

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Independent Non-Executive Directors: Mr. CHOW Philip Yiu Wah Dr. CHUNG Shui Ming Timpson Mr. YANG Liang Yee Philip Ms. CHEN Ying Mr. SO Gregory Kam Leung

11th November 2020

To the Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS AND

REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT AND RE-ELECTION OF DIRECTOR AND NOTICE OF SPECIAL GENERAL MEETING

1. INTRODUCTION

The purpose of the Circular is to provide the Shareholders with, among others, (i) further information on (a) the Shipbuilding Transaction, (b) the Proposed Revised Bunker Caps, and (c) re-election of Director; (ii) a letter from the Independent Board Committee; (iii) a letter from the

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LETTER FROM THE BOARD

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (iv) other information in accordance with the requirements of the Listing Rules.

2. SHIPBUILDING TRANSACTION

Reference is made to the announcement of the Company dated 30th October 2020 in respect of the Shipbuilding Transaction.

On 30th October 2020, the Buyers (seven indirect wholly-owned subsidiaries of the Company) respectively entered into the Shipbuilding Contracts on substantially the same terms with the respective Builders for the construction of seven Vessels for an aggregate consideration of US$1,103.876 million (equivalent to approximately HK$8,610.23 million). Among the Shipbuilding Contracts, (i) three of which were entered into with Nantong for the construction of the related three Vessels for a consideration of US$157.68 million (equivalent to approximately HK$1,229.90 million) for each Vessel; and (ii) four of which were entered into with Dalian for the construction of the related four Vessels for a consideration of US$157.709 million (equivalent to approximately HK$1,230.13 million) for each Vessel.

a) Finance Terms

The Company currently envisages that bank financing will be arranged for the Shipbuilding Transaction and expects to finance for not less than 60% of the contract price of each Vessel with the financing guaranteed by the Company which will be finalised before the delivery of the Vessels with the balance of the contract price to be funded from internal resources. If the bank financing arrangement could not be arranged, the full contract price of each Vessel would come from the internal resources of the Group, which is expected to be sufficient for this purpose.

b) Contract Terms

The terms of the Shipbuilding Contracts (including the consideration for each Vessel) were determined on an arm’s length basis and on normal commercial terms (based on price comparable to market price agreed between a willing buyer and a willing seller, payment terms, technical terms and delivery dates that meet the Company’s requirements), pursuant to the tender process referred to in the sub-section c) headed ‘‘Reasons for and Benefits of the Shipbuilding Transaction’’ below.

Under each of the Shipbuilding Contracts, the relevant Buyer shall pay the respective consideration of US$157.68 million or US$157.709 million (as the case may be) in cash in five instalments based on progress intervals on the construction of each Vessel with a smaller proportion of contract price payable in the first four instalments and the majority of the payment payable upon delivery of the Vessel.

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LETTER FROM THE BOARD

The Vessels are expected to be delivered between the third quarter of year 2023 and the third quarter of 2024 subject to any early delivery or delay in delivery (subject to a maximum liquidated damages of approximately US$9.63 million) as provided in each of the Shipbuilding Contracts.

c) Reasons for and Benefits of the Shipbuilding Transaction

It is the view of the Directors that the Group should order the Vessels, following the entering of the shipbuilding contracts for the March Vessels as part of the Group’s long-term strategic development and growth plan, to build and deploy mega-sized vessels that bring optimal fleet structure and capacity, economy of scale to the Group that would enhance the Group’s cost competitiveness and improve operation efficiency; it would also consolidate our position at the top echelon in the industry and leading market share position in strategic trades.

Based on the Group’s evaluation on price, technical competency and delivery schedule, Nantong’s and Dalian’s offer is optimal amongst the bidders (including the independent-thirdparty shipbuilders) in the tender process in that they meet the above factors.

It is in the commercial interests of and to the corporate benefit for the Group to enter into the Shipbuilding Contracts with the Builders, being builders for the March Vessels, as the Vessels are a repeat of the March Vessels and engaging the same Builders will provide synergy in construction. After being engaged to construct the March Vessels, the Builders have an improved understanding of the Group’s operational and technical requirements and standard for its newbuildings. The Company understood that the Builders have open docks and capacity for new orders of mega-sized vessels such as the Vessels.

Following delivery of the Vessels, the Group’s fixed assets will increase whilst current assets will decrease and long term liabilities will increase depending on the proportion of the contract price funded from internal resources and external finance; and there is no immediate material impact on earnings of the Group by reason only of the Shipbuilding Transaction.

d) Listing Rules Implications

Nantong is an associate of COSCO SHIPPING which indirectly holds 50% equity interest in Nantong. Dalian is an indirect subsidiary of COSCO SHIPPING. COSCO SHIPPING (through its wholly-owned subsidiaries) holds 36% equity interest, and Nantong directly holds 30% equity interest, respectively, in Dalian. COSCO SHIPPING indirectly controls more than 50% of the issued share capital of the Company. Accordingly, both Nantong and Dalian are connected persons of the Company under Chapter 14A of the Listing Rules, and the Shipbuilding Transaction constitutes a connected transaction of the Company.

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LETTER FROM THE BOARD

As the seven Shipbuilding Contracts were entered into with the entities who are connected with each other, the Shipbuilding Contracts are aggregated as one transaction under Rule 14A.82(1) of the Listing Rules. As the highest of the applicable percentage ratios in respect of the Shipbuilding Transaction (on its own and when aggregated with the March Transaction under the Listing Rules) exceeds 25% but is less than 100%, the Shipbuilding Transaction constitutes a major transaction and a connected transaction of the Company subject to the reporting, announcement, circular and independent shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

3. PROPOSED REVISED BUNKER CAPS

Reference is made to (i) the CCT Announcement; and (ii) the announcement of the Company dated 30th October 2020 in respect of, among others, the Proposed Revised Bunker Caps.

On 30th October 2019, the Company and COSCO SHIPPING entered into, among other things, the Bunker Master Agreement in relation to the purchase of bunker, fuel and oil by OOIL Group from COSCO SHIPPING Group for a term of three years from 1st January 2020 to 31st December 2022.

In view of the reasons set out in the sub-section b) headed ‘‘Reasons for and Benefits of the Proposed Revised Bunker Caps’’ below, the Board has resolved to propose increasing the annual caps for the transactions under the Bunker Master Agreement and that all the terms of the Bunker Master Agreement will remain unchanged.

The actual transaction amounts under the Bunker Master Agreement from 1st January 2020 (i) up to the Latest Practicable Date did not exceed the Existing Bunker Cap for the year ending 31st December 2020; and (ii) it is currently anticipated that such amounts up to the date of the SGM seeking the approval of the Proposed Revised Bunker Caps will not exceed the relevant Existing Bunker Cap.

a) Historical Transaction Amounts and Proposed Revised Bunker Caps

Historical transaction 1st July 2018 to 31st December 2018: US$133,078,000 amounts: 1st January 2019 to 31st December 2019: US$230,280,000 1st January 2020 to 30th September 2020: US$90,753,000 Existing Bunker Caps for 2020: US$120,000,000 the financial years ending: 2021: US$120,000,000 2022: US$120,000,000 Proposed Revised Bunker 2020: US$135,000,000 Caps for the financial 2021: US$370,000,000 years ending: 2022: US$410,000,000

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LETTER FROM THE BOARD

The above Proposed Revised Bunker Caps are determined by reference to (i) the existing scale and operations of OOIL Group’s business and the business plan of OOIL Group, and the resumption of purchase of Low Sulphur Fuel from COSCO SHIPPING Group in the financial years 2021 and 2022 when compared with 2020, as explained in the sub-section b) headed ‘‘Reasons for and Benefits of the Proposed Revised Bunker Caps’’ below; (ii) the anticipated growth and development of OOIL Group under COSCO SHIPPING Group; (iii) the anticipated achievement in synergies and better operational efficiency growth from efficient bunkering facilities of COSCO SHIPPING Group at various ports in the PRC that complement the Group’s trades and services to China; and (iv) anticipated increase in energy costs and interest costs when the global economy resumes and normalizes after absorbing the impacts of COVID-19, and the global environment in our industry; against historical amounts of similar transactions under the previous bunker master agreement dated 24th July 2018 and the Bunker Master Agreement for the periods set out above from 1st July 2018 to 30th September 2020.

b) Reasons for and Benefits of the Proposed Revised Bunker Caps

As of 1st January 2020, when the use of Low Sulphur Fuel became mandatory, the Group deployed a bunker supply plan that had switched significant volume from China to Singapore, until the Group is assured of the quality and quantity of Low Sulphur Fuel from China. Over the course of 2020, it has been established that China’s quality is good, and supply of Low Sulphur Fuel is steady and was offered at competitive price. This allowed the Group to revert to previous supply pattern which is consistent with its vessels deployment in China. Following the recent review of the Group’s bunker requirement and operation environment, and taking into consideration that COSCO SHIPPING Group has met the Group requirements on both the quality and quantity of Low Sulphur Fuel which was offered at competitive cost than other independent suppliers, the Company has decided to increase the Existing Bunker Caps in pursuit of the Group’s operation needs and strategy.

The containment measures taken for the COVID-19 have caused disruptions to supply chain network, transportation, logistics and related activities. In anticipation of the COVID-19 vaccines being available in 2021 and the potential gradual recovery of consumers’ demand and in the manufacturing and logistics activities in 2021, there is a strong expectation of an increase in cargo volumes leading to an increase in the consumption of oil, and international crude oil price may have an upsurge, leading to the rebound of the bunker price to resume to or even surpass the bunker unit price before the outbreak of the pandemic.

In this connection, it is anticipated that the Existing Bunker Caps will not be sufficient to meet the relevant expected upsurges in business activities and oil price for the financial years ending 31st December 2020, 2021 and 2022. The Board has resolved to propose increasing the annual caps for the transactions under the Bunker Master Agreement accordingly and that all the terms of the Bunker Master Agreement will remain unchanged.

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LETTER FROM THE BOARD

c) Listing Rules Implications

COSCO SHIPPING indirectly controls more than 50% of the issued share capital of the Company. Accordingly, members of COSCO SHIPPING Group are connected persons of the Company under Chapter 14A of the Listing Rules. The transactions contemplated under the Bunker Master Agreement constitute continuing connected transactions of the Company.

Pursuant to Rule 14A.54 of the Listing Rules, the Company shall re-comply with the announcement and shareholders’ approval requirements under Chapter 14A of the Listing Rules applicable to the annual caps for the continuing connected transactions under the Bunker Master Agreement before such caps are exceeded.

As the highest of the applicable percentage ratios of the Proposed Revised Bunker Caps exceeds 5%, the Proposed Revised Bunker Caps are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

d) Internal Control Procedures

Annual review by the auditors and the Independent Non-Executive Directors, as part of the Group’s internal control systems, are in place to ensure that the transactions between the Group and its connected persons are conducted in accordance with the pricing policy. Apart from this, the Company would:-

identify and register the connected transactions in a system designed to track the connected transactions;
carry out regular checking and reconciliation to ensure the completeness and accuracy of the connected transactions recorded in the system;

– report the transaction amounts monthly, so that the Group’s management can be informed of the status of the connected transactions in a timely manner and assess if the transactions can be conducted within the annual cap;

– examine the pricing of the transactions regularly to ensure that the connected transactions are conducted in accordance with the pricing terms thereof, including reviewing the transaction records of OOIL Group, for the purchase or provision of similar goods or services from or to independent third parties; and

in relation to each annual cap for the continuing connected transactions under the Bunker Master Agreement, set appropriate internal monitoring limits, such that the Company will be alerted at appropriate times prior to reaching the relevant annual caps.

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LETTER FROM THE BOARD

4. THE PROPOSED REVISED BUNKER CAPS AND THE SHIPBUILDING TRANSACTION

The Board (including the Independent Non-Executive Directors after taking into account the advice from the Independent Financial Adviser) considers that the terms of the Shipbuilding Contracts are fair and reasonable, and the Shipbuilding Transaction is on normal commercial terms and in the ordinary and usual course of business of the Group, and in the interests of the Company and the Shareholders as a whole.

The Board (including the Independent Non-Executive Directors after taking into account the advice from the Independent Financial Adviser) also considers that the Bunker Master Agreement is in the ordinary and usual course of business of the Group and on normal commercial terms, and that the terms of the Bunker Master Agreement and the Proposed Revised Bunker Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

On the date of the Board Meeting, Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Yang Zhijian and Mr. Feng Boming, the Executive Directors of the Company, were holding directorships and/ or senior management positions in COSCO SHIPPING, its subsidiaries or its associates; Dr. Chung Shui Ming Timpson, the Independent Non-Executive Director of the Company, was an external director of COSCO SHIPPING; Mr. Yang Liang Yee Philip, the Independent NonExecutive Director of the Company, was an independent non-executive director of COSCO SHIPPING Holdings and COSCO SHIPPING Ports; and Ms. Chen Ying, the Independent NonExecutive Director of the Company, was an external director of COSCO SHIPPING Lines. Accordingly, each of them was considered to have a material interest in the Proposed Revised Bunker Caps and the Shipbuilding Transaction and had abstained from voting on the relevant resolutions at the Board Meeting.

At the Board Meeting, other than Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Yang Zhijian, Mr. Feng Boming, Dr. Chung Shui Ming Timpson, Mr. Yang Liang Yee Philip and Ms. Chen Ying, none of the other Directors had a material interest in the Proposed Revised Bunker Caps and the Shipbuilding Transaction, and none of them had abstained from voting on the relevant resolutions.

An Independent Board Committee comprising all the Independent Non-Executive Directors (except Dr. Chung Shui Ming Timpson, Mr. Yang Liang Yee Philip and Ms. Chen Ying) has been established to advise the Independent Shareholders on the Proposed Revised Bunker Caps and the terms of the Shipbuilding Transaction and on how to vote on the resolutions in respect of the Proposed Revised Bunker Caps and the Shipbuilding Transaction at the SGM. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

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LETTER FROM THE BOARD

Faulkner, being a member of the COSCO SHIPPING Group and therefore having material interest in the Proposed Revised Bunker Caps and the Shipbuilding Transaction, will abstain from voting on the relevant resolutions in respect thereof at the SGM. As at the Latest Practicable Date, Faulkner directly held 75% of the issued share capital of the Company. To the best knowledge of the Directors, as at the Latest Practicable Date, save as disclosed above, no other shareholders are required to abstain from voting on the resolutions proposed at the SGM.

5. INFORMATION ON RELEVANT PARTIES

The Group is principally engaged in the provision of container transport and logistics services.

To the best of the Directors’ knowledge, information and belief, Nantong is a company established in the PRC and is an associate of COSCO SHIPPING, and in which each of COSCO SHIPPING and Kawasaki Heavy Industries Ltd. (‘‘Kawasaki’’, a heavy industrial manufacturer whose shares are listed on the Tokyo Stock Exchange) indirectly or directly holds 50% equity interest respectively. Nantong is principally engaged in the business of manufacturing, sales and repairing of ships (including trial-run for self-built ships).

To the best of the Directors’ knowledge, information and belief, Dalian is a company established in the PRC and is an indirect subsidiary of COSCO SHIPPING, and Dalian’s other direct shareholders are Nantong and Kawasaki. Dalian is principally engaged in the business of design, manufacturing, sales and repairing of ships (excluding military ships).

To the best of the Directors’ knowledge, information and belief, the scope of business of COSCO SHIPPING includes international shipping, ancillary business in international maritime transportation, import and export of goods and technologies, international freight agency business, leasing of self-owned vessels, sale of vessels, containers and steel, and maritime engineering.

6. RE-ELECTION OF DIRECTOR

Pursuant to code provision A.4.2 of Appendix 14 to the Listing Rules, all directors appointed to fill a casual vacancy should be subject to election by shareholders at the first general meeting after their appointment. Accordingly, Mr. Huang Xiaowen, who was appointed on 10th August 2020, is subject to election by Shareholders at the SGM and, being eligible, will offer himself for re-election at the SGM.

The recommendation to the Board for the proposed re-election of Mr. Huang Xiaowen as an Executive Director was made after having considered the structure, size and composition of the Board and performance of the Board (including the Independent Non-Executive Directors) with reference to the board diversity policy and the nomination policy of the Company.

Details of Mr. Huang Xiaowen, who has offered himself for re-election at the SGM, are set out in Appendix I to this Circular.

– 13 –

LETTER FROM THE BOARD

7. SPECIAL GENERAL MEETING

The SGM will be held for the Shareholders to consider, and if thought fit, approve the Proposed Revised Bunker Caps and the Shipbuilding Transaction and the re-election of Mr. Huang Xiaowen as an Executive Director.

A notice of the SGM is set out on pages (i) and (ii) of the Circular. Whether or not you intend to be present at the SGM, you are requested to complete the accompanying proxy form and return it in accordance with the instructions printed thereon and deposit the same with the Branch Share Registrar at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as practicable and in any event so as to be received not less than forty eight hours before the time fixed for the SGM (or any adjournment thereof). Completion and return of the proxy form will not preclude you from attending and voting at the SGM (or any adjournment thereof) should you so wish and in such event, the proxy form appointing the proxy shall be deemed to be revoked.

The register of members of the Company will be closed from 25th November 2020 to 30th November 2020, both days inclusive, to ascertain the Shareholders entitled to attend and vote at the SGM. During this period, no transfer of shares will be registered. To be eligible to attend and vote at the SGM, all share transfer documents must be accompanied with the relevant share certificates and lodged with the Branch Share Registrar at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on 24th November 2020.

8. VOTING BY POLL

Pursuant to Rule 13.39(4) of the Listing Rules, all resolutions set out in the notice of the SGM will be voted by poll. The results of the poll voting will be announced by the Company after the SGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

9. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 16 and 17 of the Circular and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 18 to 42 of the Circular in connection with the Proposed Revised Bunker Caps and the Shipbuilding Transaction, and the principal factors and reasons considered by the Independent Financial Adviser in arriving at such advice.

– 14 –

LETTER FROM THE BOARD

The Independent Board Committee, having taken into account the terms of the Proposed Revised Bunker Caps and the Shipbuilding Transaction and the advice of the Independent Financial Adviser, is of the opinion that the Proposed Revised Bunker Caps and the Shipbuilding Transaction are on normal commercial terms or better and in the ordinary and usual course of business of the Group, and that the terms of the Proposed Revised Bunker Caps and the Shipbuilding Transaction are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to approve the Proposed Revised Bunker Caps and the Shipbuilding Transaction.

The Board recommends the Independent Shareholders to vote in favour of the resolutions to approve the Proposed Revised Bunker Caps and the Shipbuilding Transaction at the SGM, and further recommends the Shareholders to vote in favour of the proposed re-election of the Director at the SGM.

10. ADDITIONAL INFORMATION

Your attention is drawn to the information set out in Appendix I to Appendix III to the Circular.

Yours faithfully, By Order of the Board Orient Overseas (International) Limited XU Lirong Chairman

For identification purpose only

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

(Incorporated in Bermuda with members’ limited liability) (Stock Code: 316)

11th November 2020

To the Independent Shareholders of the Company

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS AND REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT

We refer to the Circular issued by the Company to the Shareholders dated 11th November 2020 (the ‘‘Circular’’) of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings in this letter.

We have been appointed by the Board to advise the Independent Shareholders as to whether (i) the Proposed Revised Bunker Caps and the Shipbuilding Transaction are on normal commercial terms or better and in the ordinary and usual course of business of the Group, and (ii) the Proposed Revised Bunker Caps and the terms of the Shipbuilding Transaction are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

First Shanghai Capital Limited has been appointed to act as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Proposed Revised Bunker Caps and the Shipbuilding Transaction. The text of the letter of advice from the Independent Financial Adviser containing their recommendations and the principal factors they have taken into account in arriving at their recommendations are set out from pages 18 to 42 of the Circular.

Having taken into account the terms of the Proposed Revised Bunker Caps and the Shipbuilding Transaction and the advice of the Independent Financial Adviser, we are of the opinion that (i) the Proposed Revised Bunker Caps and the Shipbuilding Transaction are on normal commercial terms or better and in the ordinary and usual course of business of the Group, and that (ii) the Proposed Revised Bunker Caps and the terms of the Shipbuilding Transaction are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 16 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We therefore recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the SGM in relation to the Proposed Revised Bunker Caps and the Shipbuilding Transaction.

Yours faithfully,

For and on behalf of

THE INDEPENDENT BOARD COMMITTEE

Mr. Chow Philip Yiu Wah Independent Non-Executive Director

Mr. So Gregory Kam Leung Independent Non-Executive Director

For identification purpose only

– 17 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter to the Independent Board Committee and the Independent Shareholders from the Independent Financial Adviser setting out its opinion and recommendation regarding (i) the Shipbuilding Transaction pursuant to the Shipbuilding Contracts; and (ii) the Proposed Revised Bunker Caps for the transactions under the Bunker Master Agreement for the purpose of inclusion in the Circular.

==> picture [55 x 42] intentionally omitted <==

First Shanghai Capital Limited 19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong

11th November 2020

To the Independent Board Committee and the Independent Shareholders

Orient Overseas (International) Limited 31st Floor, Harbour Centre 25 Harbour Road Wanchai Hong Kong

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS AND REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of (i) the Shipbuilding Transaction pursuant to the Shipbuilding Contracts; and (ii) the Proposed Revised Bunker Caps for the transactions under the Bunker Master Agreement (collectively, the ‘‘Non-exempt Transactions’’), details of which are contained in the circular to the Shareholders dated 11th November 2020 (the ‘‘Circular’’), of which this letter forms part. Unless the context requires otherwise, capitalized terms used in this letter shall have the same meanings as those defined in the Circular.

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

It is anticipated that the Existing Bunker Caps will not be sufficient to meet the relevant expected upsurges in business activities and oil price for the financial years ending 31st December (the ‘‘FY(s)’’) 2020, 2021 and 2022. The Board has resolved to increase (subject to Independent Shareholders’ approval) the annual caps for the transactions under the Bunker Master Agreement accordingly and that all the terms of the Bunker Master Agreement will remain unchanged.

LISTING RULES IMPLICATIONS

Shipbuilding Transaction

– 19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed Revised Bunker Caps

As the highest of applicable percentage ratios of the Proposed Revised Bunker Caps exceeds 5%, the Proposed Revised Bunker Caps are subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising two out of the five Independent NonExecutive Directors, namely Mr. CHOW Philip Yiu Wah and Mr. SO Gregory Kam Leung, has been established to consider the Non-exempt Transactions, and to advise the Independent Shareholders on the fairness and reasonableness in relation to the terms of the Non-exempt Transactions.

As the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether or not the Non-exempt Transactions are conducted in the ordinary and usual course of business of the Group; (ii) whether or not the Non-exempt Transactions are on normal commercial terms or better, in the interests of the Company and the Shareholders as a whole, and the terms of the Non-exempt Transactions are fair and reasonable so far as the Independent Shareholders are concerned; and (iii) how the Independent Shareholders should vote in relation to the ordinary resolutions to be proposed for approving the Non-exempt Transactions at the SGM.

OUR INDEPENDENCE

We are not connected with the Directors, chief executive and substantial Shareholders of the Company or any of their respective subsidiaries or associates, nor any party acting, or presumed to be acting, in concert with any of them, and are therefore considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders.

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Independent Shareholders should note that, within the past two years prior to the Latest Practicable Date, we were engaged as the independent financial adviser by the Company for the provision of financial advice to its then independent board committee and independent shareholders for the following two occasions (collectively the ‘‘Previous Engagements’’):

continuing connected transactions conducted with COSCO SHIPPING Group as detailed in the circular of the Company dated 28th November 2019 (the ‘‘November Circular’’); and
a major transaction and a connected transaction regarding construction of five vessels conducted with COSCO SHIPPING Group as detailed in the circular of the Company dated 9th April 2020.

Other than the Previous Engagements with the Company as an independent financial adviser, we have also acted, and are currently acting, as the independent financial adviser to the independent board committee and the independent shareholders of COSCO SHIPPING Holdings, which is the controlling shareholder of the Company and a subsidiary of COSCO SHIPPING, for the previous discloseable transaction and connected transaction in respect of construction of five vessels conducted by COSCO SHIPPING Holdings as detailed in its circular dated 27th April 2020 and this Shipbuilding Transaction. Nantong and Dalian are an associate and a subsidiary of COSCO SHIPPING respectively, and the counter-parties to this Shipbuilding Transaction in respect of the Shipbuilding Contracts. Apart from normal professional fees paid or payable to us in connection with the aforesaid appointments, no arrangements exist whereby we had received any fees or benefits from the Company, COSCO SHIPPING Group and their respective subsidiaries and/or associates.

Given (i) our independent roles in the Previous Engagements and the two current engagements with the Company as well as COSCO SHIPPING Holdings in respect of the Shipbuilding Transaction (the ‘‘Current Engagements’’); (ii) none of the members of our parent group is a direct party to the Shipbuilding Contracts and the Bunker Master Agreement; and (iii) our fees for the two Current Engagements in addition to the Previous Engagements represented an insignificant percentage of revenue of our parent group, we consider that the Previous Engagements together with the two Current Engagements would not affect our independence and objectivity to provide our advice and form our opinion in respect of the entering into of the Shipbuilding Contracts and the Proposed Revised Bunker Caps.

Save as the aforesaid, as at the Latest Practicable Date, we did not have any other relationships or interests with the Company, COSCO SHIPPING Holdings and their respective subsidiaries and/or associates, nor any party acting, or presumed to be acting, in concert with any of them. Accordingly, we consider that we are independent pursuant to Rule 13.84 of the Listing Rules, and are qualified to give independent advice in respect of the Non-exempt Transactions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

In formulating our opinion, we have relied on the information, facts and representations contained or referred to in the Circular and the information, facts and representations provided by, and the opinions expressed by the Directors, the Company and the management of the Group (the ‘‘Management’’). We have assumed that all statements, information, facts, opinions and representations made or referred to in the Circular were true, accurate and complete at the time they were made and continued to be true, accurate and complete as at the date of the Circular.

We consider that we have (i) obtained and reviewed all information and documents of the Group relevant to an assessment of the fairness and reasonableness of the terms of the Nonexempt Transactions, including but not limited to (a) the Shipbuilding Contracts, (b) the previous five shipbuilding contracts for the March Transaction (the ‘‘March Shipbuilding Contracts’’), (c) the Company’s annual reports for each of the two FYs 2018 and 2019 (the ‘‘Annual Report(s)’’), (d) the Company’s interim report for the six months ended 30th June 2020 (the ‘‘Interim Report’’), (e) the Company’s circulars dated 27th May 2011, 23rd April 2015 and 9th April 2020 in respect of construction of vessels, (f) the Company’s feasibility study reports in respect of this Shipbuilding Transaction and the March Transaction, (g) working schedule for setting and calculating the Proposed Revised Bunker Caps and the underlying sample invoices under the Bunker Master Agreement; (ii) researched the relevant market and other conditions and trends relevant to the pricing of the Shipbuilding Transaction; and (iii) reviewed the fairness, reasonableness and completeness of any assumptions or projections relevant to the Shipbuilding Transaction. Based on the foregoing, we confirm that we have taken all reasonable steps, which are applicable to the Shipbuilding Transaction and the Proposed Revised Bunker Caps, as referred to in Rule 13.80 of the Listing Rules (including the notes thereto).

We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have no reason to doubt the truth, accuracy and completeness of the statements, information, facts, opinions and representations provided to us by the Directors, the Company and the Management. The Directors have confirmed to us that no material facts have been omitted from the information supplied and opinions expressed and we have no reason to doubt that any relevant material facts have been withheld or omitted from the information provided and referred to in the Circular, or the reasonableness of the opinions and representations provided to us by the Group. All the Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that, to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and that there are no other facts not contained in the Circular the omission of which would make any statement in the Circular misleading. We have relied on such information and opinions and have not however, conducted any independent investigation into the business, financial conditions and affairs or the future prospects of the Group, COSCO SHIPPING Holdings, the Builders and COSCO SHIPPING Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation regarding the Non-exempt Transactions to be conducted pursuant to the Shipbuilding Contracts as well as the Bunker Master Agreement, we have taken into consideration the following principal factors and reasons:

I. SHIPBUILDING TRANSACTION

1. Information of the Group

The Group is principally engaged in the provision of container transport and logistics services. According to the Annual Reports and the Interim Report, almost all (i.e. over 96%) of the revenue of the Group for each of the two FYs 2018 and 2019 and the six months ended 30th June 2020 were generated from container transport and logistics service business.

Orient Overseas Container Line Limited (‘‘OOCLL’’), the principal subsidiary of the Company, is one of the world’s largest integrated international transportation, logistics and terminal companies, and is an industry leader in the use of information technology and e-commerce to manage the entire cargo transport process. OOCLL’s modern fleet today includes some of the youngest, largest, fuel efficient, and environmentally friendly vessels carrying cargo on hundreds of trade routes around the world, providing a vital link in global trade.

2. Information of COSCO SHIPPING Group

COSCO SHIPPING

According to the information provided by COSCO SHIPPING Holdings, and to the best of the Directors’ knowledge, information and belief, COSCO SHIPPING is a state-owned enterprise established in the PRC. The scope of business of COSCO SHIPPING includes international shipping, ancillary business in international maritime transportation, import and export of goods and technologies, international freight agency business, leasing of self-owned vessels, sale of vessels, containers and steel, and maritime engineering.

Nantong

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on our independent research from the website of Nantong at http://www.nacks.com, we noted that Nantong is a large-scale shipbuilding joint venture between COSCO SHIPPING Group and Kawasaki. The total fleet of COSCO SHIPPING comprises 1,114 vessels with a capacity of 85.32 million deadweight tons, ranking No. 1 in the world. Kawasaki has two world-class shipyards at Kobe and Sakaide, Japan. COSCO SHIPPING and Kawasaki have been enjoying a good cooperation for several decades. In order to take the full advantage of both sides in capital, shipbuilding technology, ship market and management experience, COSCO SHIPPING and Kawasaki jointly invested RMB5 billion to establish Nantong in the PRC. Nantong mainly engages in the construction of various kinds of bulk carriers, oil tankers, super-panamax container ship and large-scale car carrier and special ship etc..

Dalian

Further according to our independent research from the website of Dalian at http://www.dacks.com.cn, Dalian was established in July 2007 and was jointly invested by COSCO SHIPPING and Kawasaki with an initial investment of RMB2.62 billion, and is a second modernized large-scale shipbuilding joint venture, following the success of Nantong. Dalian mainly constructs 20,000 TEU containership, large size bulk carriers, very large crude carrier, very large ore carrier, large size container ships with capacity over 15,000 TEU, pure car carrier, liquefied natural gas carriers and other large-scale high-performance merchant vessels.

Based on the above findings and observation, we concur with the Management’s view that both Nantong and Dalian can be regarded as world-class shipyards in the shipbuilding industry, and are technically capable to produce such larger containerships (i.e. the seven new Vessels of 23,000 TEU per vessel).

3. Reasons for and benefits of for the Shipbuilding Transaction

As mentioned in the ‘‘Letter from the Board’’ of the Circular (the ‘‘Board Letter’’), it is the view of the Directors that the Group should order the Vessels, following the entering of the March Shipbuilding Contracts as part of the Group’s long-term strategic development and growth plan, to build and deploy mega-sized vessels that bring optimal fleet structure and capacity, economy of scale to the Group that would enhance the Group’s cost competitiveness and improve operation efficiency; it would also consolidate the Group’s position at the top echelon in the industry and leading market share position in strategic trades.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the Group’s evaluation on price, technical competency and delivery schedule, Nantong’s and Dalian’s offer is optimal amongst the bidders (including the independent third party shipbuilders) in the tender process in that they meet the above factors.

It is in the commercial interests of and to the corporate benefit for the Group to enter into the Shipbuilding Contracts with the Builders, being builders for the March Vessels, as the Vessels are a repeat of the March Vessels and engaging the same Builders will provide synergy in construction. After being engaged to construct the March Vessels, the Builders have an improved understanding of the Group’s operational and technical requirements and standard for its newbuildings. The Company understands that the Builders have open docks and capacity for new orders of mega-sized vessels such as the Vessels.

The Board (including the Independent Non-Executive Directors after taking into account the advice from us) considers that the terms of the Shipbuilding Contracts are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

According to the Annual Report for FY 2018, the Board was cautiously optimistic about the shipping environment in the future mainly due to the favourable conditions and positive factors that: (1) the growth drivers of China economy remain stable and strong; (2) a more open China provides new driving forces for the development of the global free trade; (3) the Belt and Road Initiative creates significant opportunities for the development of the world economy, and with the construction of the Belt and Road being further deepened worldwide, emerging markets represented by Southeast Asia, Middle East, Central and South America and West Africa could be further developed, thereby driving the global economic growth; and (4) the capacity growth of container shipping tends to slow down, thus may help alleviate the pressure on supply side in the shipping industry.

As disclosed in the Annual Report for FY 2019, in the cautiously optimistic environment of 2019, benefiting from the synergy arising from the ‘‘dual-brand’’ strategy of COSCO SHIPPING Holdings, the Group has expanded its presence into new trade lanes, not only to benefit from the dynamic growth seen in many emerging markets, but also in order to further build up its global coverage. The Group will continue its steady growth, and has decided to implement the ship renewal plan that was made five years ago, by ordering five new vessels, which are the first vessels that have been ordered by the Group since 2015. Not only will these modern, efficient vessels improve the Group’s cost structure, fill the capacity gap caused by the future expiry of chartered-in capacity, and further improve its environmental protection and green operation level, but they will also serve as clear evidence of the Group’s continuing commitment to its very successful dual brand strategy.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Starting from the beginning of 2020, the Board has seen the market becoming increasingly complex under the circumstance of the signing of the first-phase trade agreement between China and the United States of America, and the sudden outbreak of COVID-19 pandemic all over the world. Notwithstanding such challenges, the Group continues to benefit from its co-operation with the wider COSCO SHIPPING Group. The ability to keep costs under control has been a key attribute of the Group’s success. In addition, the Group’s close co-operation has also allowed it to plan multiple adjustments to its network offering, in line with the huge changes seen in expected customer demand. The many synergies achieved through the joint efforts of the Group and COSCO SHIPPING Group are one of the underpinning drivers of the highly successful ‘‘dualbrand’’ strategy.

Looking forward, it is anticipated that the COVID-19 pandemic will have long-lasting effects, and the epidemic prevention and control measures adopted in many countries have become part of daily life. With the tremendous efforts of all parts of society, as well as economic stimulus packages, many economies have re-emerged from lockdowns and have restarted activity. Against the difficult backdrop, China has managed to expand its GDP growth by 3.2% year on year in the second quarter of 2020, a sign that production activity is steadily improving, which gives certain degree of hope for a more widespread recovery. While the COVID-19 pandemic could continue to bring uncertainties in the rest of the year, tensions in global trade relationships or other factors such as oil prices could also have an impact on the Group’s business in the coming months. In this situation, the only rational response is to remain cautious.

Despite the challenges, the Group still remains confident in its long-term future. The Group has placed a shipbuilding order in March 2020 to build five 23,000 TEU vessels, which was a tremendous display of its enduring confidence in container shipping. In fact, the Group is playing a leading role in the digitalisation of the shipping industry, and building on very solid foundations in providing integrated container logistics services, which will help it to respond better to the evolution of its customers’ requirements in the post-epidemic era. The Board believes that the Group is among the best-placed groups to handle whatever difficulties that may be faced by the shipping industry.

In fact, according to the Interim Report, the Group’s operating performance in terms of revenue for the six months ended 30th June 2020 had increased by approximately 3.9% on period-to-period basis; whilst its gross profit had also increased by a larger pace of about 5.5% on period-to-period basis, despite the COVID-19 pandemic widespread all over the world during the first half of 2020.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on our understanding from the Management, it has been the Group’s procurement strategy to build and buy new vessels at the time of relatively sluggish global trade and economic environment, when the Management considers that the Group shall have a stronger position to bargain with shipbuilders for a more reasonable contract price for building new vessels. In evidence, the aggregate of 12 new vessels each with capacity of 23,000 TEU being constructed/to be built pursuant to the March Shipbuilding Contracts and the Shipbuilding Contracts are at lower price of US$155.68 million or US$157.68 million or US$157.709 million per vessel comparing with the price for a smaller one of 20,000 TEU at US$158.6 million incurred in 2015 pursuant to the 2015 Samsung Shipbuilding Contracts (defined below), further details of which are analysed hereinafter. Given the 12 new vessels (being the March Vessels and the Vessels) will take a longer time of almost three years to be built and completed until delivery, whilst the Vessels will be used for operation for over 20 years thereafter, the Board has considered that the temporary cyclical fluctuation in the global economic environment due to the China-U.S. trade friction coupled with the COVID-19 pandemic would not affect the Group’s long-term business planning and development for over 20 years. On such basis, we consider that the entering into the Shipbuilding Contracts at this time in addition to the March Shipbuilding Contracts may be strategically beneficial to, and in the interests of, the Group and the Shareholders as a whole for its long-term business development.

Having considered that entering into the Shipbuilding Contracts in addition to the March Shipbuilding Contracts (i) is in line with the Group’s business development strategy; (ii) can improve its quality of service, operational efficiency and profitability; and (iii) can enhance its competitiveness in the overall route arrangements for wider geographical coverage, we are of the view that the entering into of the Shipbuilding Contracts, in addition to the March Shipbuilding Contracts, is an investing activity ancillary and incidental to the ordinary and usual course of business of the Group, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

4. Principal terms of the Shipbuilding Contracts

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Finance terms

Contract terms

The terms of the Shipbuilding Contracts (including the consideration for each Vessel) were determined on an arm’s length basis and on normal commercial terms (based on price comparable to market price agreed between a willing buyer and a willing seller, payment terms, technical terms and delivery dates that meet the Company’s requirement), pursuant to the tender process as disclosed in details in the Board Letter.

Under each of the Shipbuilding Contracts, the relevant Buyer shall pay the respective consideration of US$157.68 million or US$157.709 million (as the case maybe) in cash in five instalments based on progress intervals on the construction of each Vessel, hence with a smaller proportion of the contract price in 10% for each of the first four instalment and the majority of the 60% payment for the last instalment upon delivery of the Vessel.

The Vessels are expected to be delivered between the third quarter of year 2023 and the third quarter of year 2024 subject to any early delivery or delay in delivery as provided in each of the Shipbuilding Contracts. There is no adjustment mechanism on early delivery of the Vessels, but delay in delivery of Vessels for a prescribed period by the Builders may trigger liquidated damages payable by the Builders to the Buyers up to a maximum of US$9.63 million.

Assessment on the fairness and reasonableness of the Shipbuilding Transaction

As advised by the Management, other than the March Shipbuilding Contracts, the Group had previously entered into similar shipbuilding contracts for construction of an aggregate of 16 new container vessels from an independent third party shipbuilder from the Group (the ‘‘Independent Shipbuilder(s)’’) in 2011 and 2015, which were the most recent internal sample contracts for construction of new container vessels available for our reference.

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On 23rd March and 9th May 2011, the Group entered into an aggregate of 10 shipbuilding contracts (the ‘‘2011 Samsung Shipbuilding Contracts’’) with an Independent Shipbuilder, namely Samsung Heavy Industries Co., Ltd. (‘‘Samsung’’), which has been a listed company in South Korea with principal business activities of shipbuilding, offshore facilities construction, wind power facilities construction, engineering and construction. The 2011 Samsung Shipbuilding Contracts were for the construction of 10 new container vessels of 13,000 TEU each at an aggregate contract price of US$1,360 million (i.e. US$136 million each). The terms of the 2011 Samsung Shipbuilding Contracts (including the consideration, payment terms, and delivery dates for each of the 10 container vessels) were determined on an arm’s length basis and on normal commercial terms. The contract price of each of the 10 container vessels was payable in cash in five equal instalments. The first instalment was payable within five business days after signing of the respective 2011 Samsung Shipbuilding Contracts and receipt of the respective refundment guarantees; and the last instalment was payable upon delivery of each of the 10 container vessels, the other instalments are based on progress intervals on the construction of each of the 10 container vessels.

On 31st March 2015, the Group entered into an aggregate of six shipbuilding contracts (the ‘‘2015 Samsung Shipbuilding Contracts’’) with Samsung. The 2015 Samsung Shipbuilding Contracts were for the construction of six new container vessels of 20,000 TEU each at an aggregate contract price of US$951.6 million (i.e. US$158.6 million each). The terms of the 2015 Samsung Shipbuilding Contracts (including the consideration, payment terms, and delivery dates for each of the six container vessels) were determined on an arm’s length basis and on normal commercial terms. The contract price of each of the six container vessels was payable in cash in five equal instalments. The first instalment was payable within five business days after signing of the respective 2015 Samsung Shipbuilding Contracts and receipt of the respective refundment guarantees; and the last instalment was payable upon delivery of each of the six container vessels. The other instalments are based on progress intervals on the construction of each of the six container vessels.

Independent Shareholders should note that the Group’s construction or purchase of new vessels for its operation had not frequently taken place, because which would cause the Group to incur heavy capital expenditure and cash outlay. It has been the Group’s procurement strategy to build or buy new vessels at the time of relatively sluggish global trade/economic environment, when the Management considers that the Group shall have a stronger position to bargain with shipbuilders for a more reasonable contract price for building new vessels. Apart from the March Transaction, the Group did not enter into similar shipbuilding contract(s) with shipbuilders over the recent past four years. However, we would rather consider still meaningful for the Independent Shareholders to make reference to the above 2011 Samsung Shipbuilding Contracts and the 2015 Samsung Shipbuilding Contracts (collectively, the ‘‘Two Samsung Shipbuilding Contracts’’) to understand the Group’s general and industry practices in dealing with typical shipbuilding contractual arrangement(s) with Independent Shipbuilders, in particular of the pricing and payment terms thereof. In fact, the Group has negotiated the principal terms and conditions of the Shipbuilding Contracts with each of Nantong and Dalian, based on the comparable terms and conditions of the 2015 Samsung Shipbuilding Contracts.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Other than the Company’s internal records, we have further researched from public websites to ascertain/understand the usual payment terms in the shipbuilding industry. We have noted from the circular of COSCO SHIPPING Energy Transportation Company Limited (Stock Code: 1138) dated 26th January 2018 (the ‘‘COSCO Energy Circular’’) regarding a discloseable transaction and a connected transaction of construction of new vessels, where the payment terms offered by the vendor, namely Dalian, for constructing two motor oil tankers of 308,000 deadweight tons each under the relevant agreements were payable in five instalments at various stages of construction of the relevant tankers, in the proportion of 5%, 10%, 10%, 10% and 65% of the aggregate price of the relevant agreements.

Based on our independent review of the Two Samsung Shipbuilding Contracts and the COSCO Energy Circular as analysed in details above, we noted that it shall be the general practice in the shipbuilding industry to settle shipbuilding contract price in five instalments depending on the progress on construction thereunder, and the first four instalments generally account for 35% to 80% of the contract price, whilst the last instalment to be paid upon delivery of the vessel(s) usually account for 20% to 65% thereof, irrespective of whether the contracting parties are independent third parties or connected persons. Based on such understanding, we concur with the Management’s view that the payment terms under the Shipbuilding Contracts are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Group and the Shareholders as a whole.

We have reviewed the Company’s feasibility study report for acquiring the seven Vessels, internal control and approval procedures for the procurement of the Vessels from shipbuilders, and noted that there were three shipbuilders with headquarters in South Korea and the PRC (as the case may be) under consideration. These three shipbuilders were approached for closer negotiations of technical requirements and contract terms and then further invited for tenders. The Builders were member companies of COSCO SHIPPING Group whilst the other two were Independent Shipbuilders providing their quotations for consideration, review and approval by different functional departments of the Company during the review process. Following a series of examinations and reviews by the Company in terms of technical expertise, technological capability, experience, industry reputation, quotations, production capacity and quality of services etc., the Builders (being members of the COSCO SHIPPING Group) were finally selected for constructing the seven new Vessels and then entering into the Shipbuilding Contracts, where we also noted that the contract price thereof was the lowest quotation received by the Company for constructing the seven Vessels during the tendering process. Based on the Group’s evaluation on price, technical terms and delivery schedule, Nantong’s (together with Dalian’s) offer is the optimal amongst the bidders.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Regarding the pricing terms for the respective seven new Vessels, we noted that the contract price of US$157.68 million or US$157.709 million for each Vessel under the Shipbuilding Contracts was the lowest of the three quotations obtained by the Company. As advised by the Management, the Company finally selected the lowest price quotation, mainly because, other than the cost concern, the Builders could also fully satisfy the Group’s technical specifications for the respective seven new Vessels; while the highest quotation provided by another Independent Shipbuilder was much higher than the contract price of US$157.68 million or US$157.709 million for each Vessel under the Shipbuilding Contracts.

We have also noted that the contract price of US$157.68 million or US$157.709 million for each Vessel pursuant to the Shipbuilding Contracts is slightly higher than that of US$155.68 million for each March Vessel under the March Transaction entered into in March 2020. As advised by the Management, the slight upward adjustment of the contract price by a maximum of US$2.029 million (i.e. 1.3%) per Vessel between March and October 2020 is mainly due to the increase in steel price transacted in the international market during the past few months. We have independently researched from the Bloomberg data portal, and noted that average international steel price had increased by approximately 43.3% over the past seven months from April to October 2020. Based on such observation and understanding that steel is a key material for constructing container vessels, we consider that the slight increase in the contract price by 1.3% under the Shipbuilding Contracts to reflect Builders’ anticipated increase in construction cost burden is commercially justifiable, and therefore fair and reasonable.

Based on our independent research from public websites, we found two recent transactions in respect of newbuildings of 23,000 TEU containerships in the world. In September 2018, Mediterranean Shipping Company had ordered newbuildings of 11 container vessels with capacity of 23,000 TEU per vessel, Samsung would construct six of the 11 container vessels whilst Daewoo Shipping & Marine Engineering would construct the remaining five of them, the total value of the 11 new container vessels would be around US$1.8 billion with an average of approximately US$163.6 million per vessel of that orders. In August 2019, a Taiwanese shipping company, namely Evergreen Marine Corporation, had ordered newbuildings of 10 container vessels with capacity of 23,000 TEU per vessel, six of which would be built by Samsung in South Korea, while two each would be constructed by two separate shipbuilding yards in Shanghai and Jiangnan, the PRC, with an average of approximately US$160.0 million per vessel of that order.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In respect of the Company’s internal control measures for the pricing basis of the Shipbuilding Transaction, we were advised by the Management that the Group’s relevant designated departments are responsible for, (i) the collection of applicable data and market information (including quotes from independent third parties) and the preparation of draft proposal to the Management; (ii) the review and revision of draft proposal based on, among other things, different types of equipment, facilities and/or services to be provided, and through advice from relevant department(s) and agents; and (iii) the review of contemporaneous prices and other relevant terms offered by at least three independent third parties providing the comparable asset type before the commencement of the relevant transaction in order to ensure the terms offered by the relevant connected persons are fair and reasonable and no less favorable than those offered by independent third parties.

As advised by the Management, it has been the Group’s practice to select shipbuilders in a cost-effective alternative, hence, high vessel quality with reasonable contract price must always be considered. Having considered the contract price offered by the Builders was the lowest quotation received by the Company for constructing the seven Vessels whilst the Builders’ Japanese equity partner, namely Kawasaki, whose management and engineering team have always maintained higher technical level, safety standard and quality services which are particularly more essential for the Vessels operating at ocean with longer operational life of over 20 years than other types of assets of the Group, the Builders’ quotation was finally accepted by the Company. According to the Group’s accounting policy, the Directors attribute the estimated economic useful lives for container vessels with 25 years.

Based on such review and understanding, we consider that the Group currently has adequate internal control measures and procedures in governing the Shipbuilding Transaction and selecting well-qualified shipbuilders irrespective of whether or not they are Independent Shipbuilders, so the Company and Independent Shareholders’ interests can be properly safeguarded during the term of the Shipbuilding Contracts.

Independent Shareholders should note that (i) the then prevailing economic environment at different time; and (ii) the size, technical requirements and specifications of container vessels may largely affect the contract price of the vessels, the above analyses may only be used to provide a general reference. Taking an example, as mentioned above, the contract price for construction of six new container vessels of 20,000 TEU per vessel was at US$158.6 million per vessel pursuant to the 2015 Samsung Shipbuilding Contracts, whilst this Shipbuilding Transaction for constructing seven new Vessels each with capacity of 23,000 TEU would have a lower cost of US$157.68 million or US$157.709 million each. This shows that the construction cost for a smaller (i.e. 20,000 TEU) container vessel in 2015 was even higher than that for a larger one with 23,000 TEU to be incurred in 2020.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the above observation and analysis, we are of the view that the terms of the Shipbuilding Contracts are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

5. Possible financial effects of the Shipbuilding Transaction on the Group

Earnings

There is no immediate material impact on earnings of the Group by reason only of the Shipbuilding Transaction. The Directors expect that the delivery of the Vessels will considerably enhance the operational efficiency and capability and business development of the Group, and then further contribute to its earnings base in the long run. However, the quantification of such impact will depend on the future operating performance of the Group after delivery of the Vessels between 2023 and 2024, subject to any early delivery or delay in delivery as provided in each of the Shipbuilding Contracts.

Working capital

According to the Interim Report, the Group’s working capital position (i.e. total current assets of approximately US$3,044.8 million, less total current liabilities of approximately US$1,792.1 million) and cash and bank balances as at 30th June 2020 amounted to approximately US$1,252.7 million and US$2,050.3 million, respectively, representing a current ratio of 1.70 times. This position showed that the Group’s working capital position as at 30th June 2020 was healthy, and it shall have sufficient cash resources to settle the aggregate contract price of approximately US$1,882.3 million if, and only if, the Group could not arrange bank financing of not less than 60% of the contract price (i.e. approximately US$1,129.4 million) for the Shipbuilding Transaction and the March Transaction.

According to the current construction and delivery schedules under the Shipbuilding Contracts as well as the March Shipbuilding Contracts, the aggregate consideration for the 12 vessels of approximately US$1,882.3 million shall be payable by the Buyers to the Builders in cash in five instalments depending on the various stages of construction of the vessels during the coming four years from 2020 to 2024. In the meanwhile, the 60% final payment amounted to approximately US$1,129.4 million in aggregate shall only be settled in 2023 for the March Vessels, and between 2023 and 2024 for the seven new Vessels, which is three years after the Latest Practicable Date. Accordingly, the Group shall have sufficient time to arrange funding for the aggregate consideration in the coming years. Therefore, considerable pressure would not be exerted to the working capital of the Group at that time, and the Group’s present working capital position would not be adversely affected.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on our independent review of the Annual Reports, we noted that the Group had generated operating cash inflow before working capital changes of approximately US$550.5 million, US$589.7 million and US$753.4 million for each of the past three FYs from 2017 to 2019, respectively, which had demonstrated that the Group has strong and persistent capability to generate sufficient operating cash inflow to finance its operations and future payment for the total consideration. Subsequent to delivery of the 12 new vessels under the March Transaction and this Shipbuilding Transaction, it is currently anticipated that the Group’s operating capability could be enhanced which could in turn generate meaningful operating cash inflow in the long-term future.

Net asset value

According to the Interim Report, the Group’s total equity amounted to approximately US$4,841.8 million as at 30th June 2020. The increase in the Group’s fixed asset value of approximately US$1,882.3 million attributable to such vessels would be offset by decrease in its current assets of cash and bank balances and increase in some long-term liabilities in amounts of approximately US$752.9 million and approximately US$1,129.4 million, respectively. As such, it is currently anticipated that there will not be any significant impact on the net asset value of the Group following delivery of the 12 new vessels under the March Transaction and this Shipbuilding Transaction. There will also be no material impact on the income statement and reserves of the Group, so it could be inferred that the consolidated net asset value of the Group would not adversely change upon delivery of the 12 new vessels.

Gearing position

As at 30th June 2020, the Group had aggregate interest-bearing borrowings and lease liabilities and total equity of approximately US$3,409.9 million and US$4,841.8 million, respectively, representing a gearing ratio (which is calculated as total interest-bearing borrowings and lease liabilities divided by the total equity of the Group) of approximately 70.4%.

Upon delivery of the 12 new vessels, it is currently anticipated that the Group’s interest-bearing borrowings or liabilities will increase by approximately US$1,129.4 million (i.e. by assuming about 60% of the aggregate contract price of the respective 12 new vessels under the March Transaction and this Shipbuilding Transaction will be financed by external bank borrowings). The total equity will remain unchanged at approximately US$4,841.8 million, representing a gearing ratio of approximately 93.8%. Thus, the Group’s gearing ratio will increase by about 23.4 percentage points. We consider that the increase in the gearing ratio upon the delivery of the 12 new vessels would not materially deteriorate the Group’s overall financial position. Subsequent to delivery of the Vessels, the Group’s operating capability could be enhanced, and it is currently anticipated that such gearing position could gradually decrease in the longer-term future.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Conclusion

In light of the foregoing financial effects of the Shipbuilding Transaction as well as the March Transaction, as the case may be, on the earnings, working capital, net asset value and gearing position of the Group as a whole, we are of the view that the Shipbuilding Transaction would have no material adverse impact on the Group’s financial performance and position. Therefore, we are of the view that the Shipbuilding Transaction is an effective utilisation of its cash resources which is aimed at positioning the Group for a better business growth and development in the future which, in the long run, is expected to benefit the Group and the Shareholders as a whole.

II. PROPOSED REVISED BUNKER CAPS

1. Background of the Proposed Revised Bunker Caps

In this connection, it is anticipated that the Existing Bunker Caps will not be sufficient to meet the relevant expected upsurges in business activities and oil price for the three FYs from 2020 to 2022. The Board has resolved to propose increasing the annual caps for the transactions under the Bunker Master Agreement accordingly and that all the terms of the Bunker Master Agreement will remain unchanged.

2. Principal terms of the Bunker Master Agreement

The Bunker Master Agreement is for a term of three years from 1st January 2020 to 31st December 2022, and is renewable for successive periods of three years subject to mutual agreement of the Company and COSCO SHIPPING.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Company and COSCO SHIPPING have entered into and will enter into one or more agreements setting out details of the transactions contemplated under the agreement(s), including the scope of the services, the duration of the agreement(s) and the fees for the transactions. The service fees charged under the Bunker Master Agreement shall be determined with reference to the prevailing market price, being the price charged by independent third party operators or service providers; operating or providing similar types of services in their ordinary course of business in the same or comparable service type and subject to normal commercial terms, and in accordance with the principle of fairness and reasonableness. OOIL Group has generally asked for quotations/tenders from at least three suppliers, and it will select the most appropriate bunker orders based on price, costs and operational efficiency.

We have reviewed the purchase invoices of bunker, fuel and oil between OOIL Group and (i) COSCO SHIPPING Group under the Bunker Master Agreement; and (ii) independent third party suppliers of the Group (the ‘‘Independent Suppliers’’), on a sampling basis with five invoices from each of the COSCO SHIPPING Group and the Independent Suppliers for each of the past two FYs 2019 and 2020 (i.e. 20 sample invoices in total), and noted that the unit purchase prices of bunker, fuel and oil procured from COSCO SHIPPING Group to the Group at similar timing had been comparable to those procured from the Group’s other Independent Suppliers. We consider such 20 sample invoices to be representative and sufficient for our review as they were transacted in different months across the two FYs in 2019 and 2020. Based on such independent review, we concur with the Management’s view that the pricing principles under the Bunker Master Agreement are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Group and the Shareholders as a whole notwithstanding the connected relationship between the Group and COSCO SHIPPING Group.

According to the Annual Reports and Interim Report, the Group’s respective trade payable balances as at 31st December 2018 and 2019 and 30th June 2020 with ageing within three months accounted for approximately 95.6%, 95.5% and 93.6% thereof, respectively. Based on this observation, we consider that the payment terms on a monthly (i.e. 30 days) basis for the procurement of Non-exempt Bunker Service (as defined below) from COSCO SHIPPING Group pursuant to the Bunker Master Agreement are usual, typical and on normal commercial terms, and therefore are fair and reasonable.

Having considered the above due diligence work done on the pricing and payment terms under the Bunker Master Agreement, we concur with the Board’s view that the Bunker Master Agreement is on normal commercial terms, the transactions contemplated thereunder (including the Proposed Revised Bunker Caps) have been and will be conducted in the ordinary and usual course of business of the Group, and are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The historical transaction amounts, the Existing Bunker Caps and the Proposed Revised Bunker Caps

Historical transaction amounts

The table below sets out the historical transaction amounts incurred by the OOIL Group in relation to the purchase of bunker, fuel and oil from COSCO SHIPPING Group pursuant to the Bunker Master Agreement during the periods indicated below:

				For the FYs
			Increase/		Increase/		Increase/
			(decrease)		(decrease)		(decrease)
	2017	2018	from 2017	2019	from 2018	2020	from 2019
	US$’000	US$’000	%	US$’000	%	US$’000	%
Existing Bunker Caps	N/A	250,000	N/A	280,000	12.0	120,000	(57.1)
	(Note 1)
Actual transaction amounts	149,154	234,077	56.9	230,280	(1.6)	90,753	(60.6)
						(Note 2)
Utilisation rate of the
Existing Bunker Caps	N/A	93.6%		82.2%		75.6%

Notes:

Prior to the completion of the acquisition in July 2018 (the ‘‘Acquisition’’) as referred to in the Company’s composite document dated 6th July 2018, COSCO SHIPPING Group was not regarded as a connected person of the Group, so there were no existing annual caps for the FY 2017.
The historical transaction amount of purchase of bunker, fuel and oil from the COSCO SHIPPING Group was approximately US$90,753,000 for the nine months ended 30th September 2020, which has not been annualized on a full FY basis for comparison.

4. Comparison of the Existing Bunker Caps with the Proposed Revised Bunker Caps

As disclosed in the Board Letter, the Existing Bunker Caps for the Bunker Master Agreement are US$120 million for each of the three FYs from 2020 to 2022.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below summaries the Existing Bunker Caps and the Proposed Revised Bunker Caps for each of the three FYs from 2020 to 2022 under the Bunker Master Agreement proposed by the Board:

			For the FYs
			Increase		Increase
			from		from
	2020	2021	2020	2022	2021
	US$’000	US$’000	%	US$’000	%
Existing Bunker Caps	120,000	120,000	0.0	120,000	0.0
Proposed Revised Bunker Caps	135,000	370,000	174.1	410,000	10.8
Increase in cap amounts from the
Existing Bunker Caps	12.5%	208.3%		241.7%

5. Basis of determination of the Proposed Revised Bunker Caps

As mentioned in the Board Letter, the Proposed Revised Bunker Caps for the three FYs from 2020 to 2022 are determined by reference to the following factors:

(i) the existing scale and operations of OOIL Group’s business and the business plan of OOIL Group, and the resumption of purchase of Low Sulphur Fuel from COSCO SHIPPING Group in the FYs 2021 and 2022 when compared with 2020, as explained in the Board Letter;
(ii) the anticipated growth and development of OOIL Group under COSCO SHIPPING Group;
(iii) the anticipated achievement in synergies and better operational efficiency growth from efficient bunkering facilities of COSCO SHIPPING Group at various ports in the PRC that complement the Group’s trades and services to China; and
(iv) anticipated increase in energy costs and interest costs when the global economy resumes and normalizes after absorbing the impacts of COVID-19, and the global environment in the industry; against historical amounts of similar transactions under the previous bunker master agreement dated 24th July 2018 and the Bunker Master Agreement for the periods set out above from 1st July 2018 to 30th September 2020.

6. Assessment on the Proposed Revised Bunker Caps

The Existing Bunker Caps for the bunker service to be provided by COSCO SHIPPING Group to OOIL Group under the Bunker Master Agreement (the ‘‘Non-exempt Bunker Service’’) for the three FYs from 2020 to 2022 are proposed to be revised to US$135 million, US$370 million and US$410 million, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed the breakdown of calculation of the Proposed Revised Bunker Caps, which have taken into account, among other factors, (i) the expected increase in transaction amount by approximately 15% with various members of the COSCO SHIPPING Group mainly arisen from the anticipated business growth and synergy effect following the Acquisition; and (ii) a reasonable buffer for possible upsurge of international crude oil price by about 40% in the coming years, in particular of probable stronger economic recovery when the COVID-19 pandemic widespread globally could be under control by governments. We have reviewed the Annual Reports and noted that the OOIL Group’s usual consumption of Non-exempt Bunker Service would be around US$240 million each year and had been stable over the past two FYs 2018 and 2019 at approximately US$234.1 million and US$230.3 million respectively. Starting from 1st January 2020, when the use of Low Sulphur Fuel became mandatory, the Group deployed a bunker supply plan that had switched significant volume from China to Singapore, until the Group is assured of the quality and quantity of Low Sulphur Fuel from China. Over the course of 2020, it has been established that China’s quality is good, and supply of Low Sulphur Fuel is steady and the Group has been offered at competitive price. This allowed the Group to revert to previous supply pattern which is consistent with its vessels deployment in China. Following the Management’s recent review of its bunker requirement and operation environment, and taking into consideration that COSCO SHIPPING Group has met the Group’s requirements on both the quality and quantity of Low Sulphur Fuel which was offered at competitive cost for the Non-exempt Bunker Service to the Group than other Independent Suppliers, the Management has decided to increase the Existing Bunker Caps in pursuit of the Group’s operation needs and strategy.

Based on our independent research from the Bloomberg data portal, we have noted that the international crude oil price on per barrel basis as quoted at New York Mercantile Commodity Exchange has been fluctuating within a range of a negative quoted price of US$-37.63 and positive of US$76.41 with an average of US$54.29 over the past two years and ten months from 1st January 2018 to 30th October 2020, and at around US$35.79 as at 30th October 2020. As such, we consider that it shall not be unrealistic or unjustifiable for the OOIL Group to provide a reasonable buffer of around 40% to accommodate any probable increase in international crude oil price in the coming two FYs 2021 and 2022.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have noted that (i) the historical transaction amounts of the Non-exempt Bunker Service increased from approximately US$149.2 million for FY 2017 to US$234.1 million and US$230.3 million for each of the two FYs 2018 and 2019 respectively; (ii) the historical transaction amount for the nine months ended 30th September 2020 of approximately US$90.8 million and, if on an annualised basis, such amount would be aggregated to approximately US$121.0 million (i.e. US$90.8 million x 12/9 months = US$121.0 million) for the full FY 2020; (iii) the Proposed Revised Bunker Caps therefor for the FY 2021 of US$370 million as compared to the historical transaction amounts thereof in approximately US$230.3 million for the FY 2019, would be resulting in a growth rate of about 60.7%; (iv) the Proposed Revised Bunker Caps for the Nonexempt Bunker Service for each of the two FYs 2021 and 2022 represent an annual growth rate of merely 10.8%, which the Management currently anticipates that the transaction amounts there between would increase considerably in FY 2021 when there shall be a more obvious global economic recovery following the COVID-19 pandemic to be under control so as leading to greater demand for shipping services, and in turn consumption of bunker, fuel and oil; and (v) the Proposed Revised Bunker Caps for the Non-exempt Bunker Service for each of the coming two FYs 2021 and 2022 would be maintained at relatively stable level at US$370 million and US$410 million, respectively.

Based on our review of the historical transaction amounts in respect of the Non-exempt Bunker Service for the past three FYs from 2017 and 2019 and the nine months ended 30th September 2020, we noted that the OOIL Group’s consumption of bunker, fuel and oil in aggregate (including but not limited to the Non-exempt Bunker Service provided by COSCO SHIPPING Group to OOIL Group under the Bunker Master Agreement) amounted to approximately US$657.9 million, US$844.4 million, US$839.1 million and US$532.8 million, respectively. Based on our understanding from the Management, OOIL Group has procured bunker, fuel and oil from a number of Independent Suppliers over the years of operation depending on its business requirements from time to time in different locations all over the world, while it does not have particular preference in selection of a particular supplier. However, following the Acquisition in July 2018, OOIL Group is currently anticipating that there will be many more co-operation opportunities with COSCO SHIPPING Group in the foreseeable future. In particular, under the consideration of the expansion of business coverage with new trade lanes or markets to Africa and Latin America, OOIL Group anticipates to purchase more bunker, fuel and oil from COSCO SHIPPING Group provided that the price charged by it must be comparable/ not less favorable to OOIL Group when compared to that offered by other Independent Suppliers, and the principles of fairness and reasonableness must always be observed from time to time throughout the term of the Bunker Master Agreement. In view of the above, the Proposed Revised Bunker Caps of US$370 million and US$410 million for each of the coming two FYs 2021 and 2022 will only account for approximately 44.1% and 48.9% of the OOIL Group’s total bunker consumption amount of approximately US$839.1 million for the full FY 2019, which we consider to be realistic and prudent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given (i) the historical transaction amounts of the Non-exempt Bunker Service for the latest two full FYs 2018 and 2019 were even much larger than the Proposed Revised Bunker Cap of US$135 million for FY 2020; (ii) the OOIL Group’s usual consumption of Non-exempt Bunker Service shall be US$240 million; (iii) the expected continuous business development of OOIL Group as well as the closer cooperation between OOIL Group and COSCO SHIPPING Group in the coming years; (iv) OOIL Group’s recent procurement cost of Non-exempt Bunker Service from COSCO SHIPPING Group in China is lower than that of other Independent Suppliers; and (v) the potential fluctuation in transaction amounts resulting from the probable upsurge in international crude oil price following the currently anticipated global economic recovery in 2021, we consider that the Proposed Revised Bunker Caps for the three FYs from 2020 to 2022 are justifiable, and therefore fair and reasonable.

7. Internal control measures to govern the Proposed Revised Bunker Caps

As disclosed in the Board Letter, the Company has established appropriate and adequate internal control measures to govern the implementation of the continuing connected transactions, which are then subject to annual review requirements as stipulated under the Listing Rules. Please refer to the Board Letter for more details.

We have independently reviewed the internal control procedural manual of OOIL Group, and have discussed with the Management regarding the actual implementation from time to time to govern the continuing connected transactions, we consider the established internal control procedures are adequate for safeguarding the interests of the Company and the Shareholders as a whole.

Regarding OOIL Group’s internal control on monitoring the utilisation of approved annual caps for the continuing connected transactions not to be exceeded, the Company has in place an information technology platform which is specialized for the identification, capturing, reporting and monitoring of the connected transactions conducted between OOIL Group and COSCO SHIPPING Group. A monthly report with respect to the connected transactions will be issued by the Company’s financial control department to its legal and secretarial department for cross-controlling purpose. Such report will contain, among other things, the aggregate utilization rate (%) with respect to each annual cap relating to each of the New Master Agreements (as defined in the November Circular). We have reviewed an example of such an internal report, and consider it to be an effective internal control measures. Based on such review and understanding, we consider that OOIL Group currently has adequate internal control measures and procedures in governing the continuing connected transactions over the past years and in at least the coming three FYs, so the Independent Shareholders’ interests can be properly safeguarded during the term of the New Master Agreements.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the Annual Report for FY 2019, the Independent Non-Executive Directors have confirmed that they have reviewed the continuing connected transactions and confirmed that the continuing connected transactions conducted in the FY 2019 have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

In addition, the Company’s auditors had reviewed the continuing connected transactions for FY 2019 and confirmed to the Board that nothing has come to their attention that causes them to believe that the then disclosed continuing connected transactions in the Annual Report for FY 2019: (i) have not been approved by the Board; (ii) which involve provision of goods or services by OOIL Group, were not entered into, in all material respects, in accordance with the pricing policies of OOIL Group; (iii) were not entered into, in all material respects, in accordance with the relevant agreements governing the transactions; and (iv) have exceeded the maximum aggregate annual caps in respect of each of the then disclosed continuing connected transactions.

RECOMMENDATION

Having taken into account the above principal factors and reasons, we are of the view that (i) the Shipbuilding Transaction is an investing activity ancillary and incidental to the ordinary and usual course of business of the Group for improving its operational efficiency and capability and competitiveness in its overall route arrangements for long-term business development whilst (ii) the Proposed Revised Bunker Caps under the Bunker Master Agreement are conducted in the ordinary and usual course of business of the Group; while the Shipbuilding Contracts and the Bunker Master Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, and the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the ordinary resolutions to approve the Shipbuilding Transaction, the Proposed Revised Bunker Caps and the transactions contemplated thereunder at the SGM.

Yours faithfully, For and on behalf of First Shanghai Capital Limited Nicholas Cheng Director

Note:

Mr. Nicholas Cheng has been the Responsible Officer of Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), and has extensive experience in corporate finance industry. He has been participating in the provision of independent financial advisory services for, and completed, numerous connected transactions involving listed companies in Hong Kong.

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DETAILS OF DIRECTOR PROPOSED TO BE RE-ELECTED

APPENDIX I

The following are the particulars of the Director proposed to be re-elected at the SGM.

Mr. Huang Xiaowen, aged 58, has been an Executive Director and the Chief Executive Officer of the Company, a member of the Executive Committee and the chairman of the Inside Information Committee and the Risk Committee of the Company since 10th August 2020. Mr. Huang had been in the same positions from 3rd August 2018 to 18th September 2019. Mr. Huang holds an executive master degree in Business Administration from China Europe International Business School and is a senior engineer. He is currently the executive vice president and a Party Committee member of COSCO SHIPPING.

Mr. Huang started his career in 1981 and had been the section chief of the container shipping section of Guangzhou Ocean Shipping Company Limited, the general manager of container transportation department of China Ocean Shipping Company Limited, the container business advisor of Shanghai Haixing Shipping Co., Ltd., the executive deputy general manager, the managing director, an executive director, the vice chairman and the Deputy Party Secretary of COSCO SHIPPING Development Co., Ltd., the chairman of China Shipping Haisheng Co., Ltd., the deputy general manager and a Party Committee member of China Shipping Group Company Limited, an executive director and the vice chairman of the board of COSCO SHIPPING Holdings Co., Ltd. (a company listed in both Shanghai and Hong Kong), a non-executive director and the chairman of the board of COSCO SHIPPING Ports Limited (a company listed in Hong Kong) and an executive director and the chairman of the board of COSCO SHIPPING Energy Transportation Co., Ltd. (a company listed in both Shanghai and Hong Kong). He was the chairman of the board of COSCO SHIPPING Lines Co., Ltd. and the chairman of the board of COSCO SHIPPING Bulk Co., Ltd. and a director of certain subsidiaries of COSCO SHIPPING. Mr. Huang has more than 30 years of experience in the shipping industry.

Save as disclosed above, Mr. Huang (i) does not, and did not in the last three years, hold any other directorships in public companies the securities of which are listed on any securities market in Hong Kong or overseas; (ii) does not hold any other position with the Company and other members of the Group; and (iii) does not have any relationship with any Director, senior management or substantial or controlling Shareholder of the Company.

As at the Latest Practicable Date, Mr. Huang did not have any interest in the ordinary shares of the Company within the meaning of Part XV of the SFO.

Mr. Huang has a letter of appointment with the Company as an Executive Director for a term of three years with effect from 10th August 2020 unless either party gives six months written notice to the other to terminate the letter of appointment before expiry of the existing term, and is subject to retirement by rotation and re-election in accordance with the Bye-Laws.

I-1

DETAILS OF DIRECTOR PROPOSED TO BE RE-ELECTED

APPENDIX I

Mr. Huang as an Executive Director and the Chief Executive Officer of the Company, a member of the Executive Committee and the chairman of the Inside Information Committee and the Risk Committee of the Company, is not entitled to any emolument from the Company for his directorship in the Company, but the expenses incurred in connection with the discharge of his duties as a Director are borne by the Company. Mr. Huang does not have a service contract with the Company.

Save as disclosed above, there is no other information relating to Mr. Huang required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules nor are there any other matters that need to be brought to the attention of the Shareholders.

I-2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Company for each of the years ended 31st December 2017, 2018 and 2019, and for the six months ended 30th June 2020 are disclosed in the below documents which have been published on the websites of both the Stock Exchange (http://www.hkex.com.hk) and the Company (https://www.ooilgroup.com):

The interim financial information of the Group for the six months ended 30th June 2020 has been set out in the Company’s 2020 interim report published on 17th September 2020 from page 16 to page 38
(https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0916/2020091600615.pdf)
The audited consolidated financial statements of the Group for the year ended 31st December 2019 have been set out in the Company’s 2019 annual report published on 22nd April 2020 from page 108 to page 199
(https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0421/2020042100347.pdf)
The audited consolidated financial statements of the Group for the year ended 31st December 2018 have been set out in the Company’s 2018 annual report published on 25th April 2019 from page 105 to page 183
(https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0424/ltn20190424458.pdf)
The audited consolidated financial statements of the Group for the year ended 31st December 2017 have been set out in the Company’s 2017 annual report published on 9th April 2018 from page 95 to page 159
(https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0406/ltn20180406585.pdf)

2. STATEMENT OF INDEBTEDNESS

Borrowings and Indebtedness

As at the close of business of 30th September 2020, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of the Circular, the Group had outstanding borrowings and indebtedness of approximately US$3,337.99 million (equivalent to approximately HK$26,036.32 million), comprising secured bank loans of approximately US$866.70 million (equivalent to approximately HK$6,760.26 million), unsecured bank loans of approximately US$224.88 million (equivalent to approximately HK$1,754.06 million), and lease liabilities of approximately US$2,246.41 million (equivalent to approximately HK$17,522.00 million).

Contingent Liabilities

As at the close of business of 30th September 2020, the Group had no material contingent liability.

II-1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Pledges of Assets

The Group’s general banking facilities and the above outstanding secured borrowings of approximately US$866.70 million (equivalent to approximately HK$6,760.26 million) were secured by the Group’s property, plant and equipment with net book value of approximately US$1,674.28 million (equivalent to approximately HK$13,059.38 million) and certain bank deposits.

Save as disclosed above and apart from intra-group liabilities and normal accounts payable in the ordinary course of business of the Group, the Group did not have any outstanding indebtedness in respect of any mortgage, charge and debenture, loan capital, bank loan and overdraft, loan, debt security or other similar indebtedness, liability under acceptance (other than normal trade bills) or acceptance credit or hire purchase commitment, guarantee or other material contingent liabilities as at the close of business on 30th September 2020.

The Directors have confirmed that there has not been any material change in the indebtedness or contingent liabilities of the Group since 30th September 2020.

3. WORKING CAPITAL

Taking into account the Group’s business prospects, the expected payment schedules of the Vessels and the financial resources of the Group (including internal resources and available banking facilities), the Directors are of the opinion that the Group has sufficient working capital for its present requirement, that is, for at least the next 12 months from the date of publication of the Circular.

4. FINANCIAL AND TRADING PROSPECTS

In 2019, the global economy produced mixed results, with overall growth at only 2.9%, the lowest level in 2008-2009. Uncertainty over issues such as the on-going US China trade negotiations limited more positive sentiment, notwithstanding the resilient performance of some of the major global economies. In this environment, global demand growth in container shipping was only 2.6%. However, supply side growth slowed down for a number of reasons, with the net effect that the container freight market for much of the year was in relative equilibrium. The result of this, at the beginning of 2020 was a cautiously optimistic outlook, especially when combined with some of efficiency gains and synergistic savings that the Group has been able to achieve since entering into the ownership of COSCO SHIPPING Holdings.

In 2019, OOCL, the Group’s core operating company, recorded liftings of 7.0 million TEU and revenue of US$6.28 billion (equivalent to approximately HK$48.98 billion). These figures represent a 3.8% and a 5.2% increase respectively over the previous year. Average revenue per TEU increased by 1.3% year on year.

II-2

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The Group as a whole recorded net profit attributable to the Shareholders for 2019 of US$1,348.79 million (equivalent to approximately HK$10,520.56 million) (2018: US$108.17 million (equivalent to approximately HK$843.73 million)). This result includes a gain from the sale of our interests in the Long Beach Container Terminal of US$1,153.63 million (equivalent to approximately HK$8,998.31 million). However, even setting aside this one-off gain, our underlying performance was pleasing, with profit for the year of US$195.16 million (equivalent to approximately HK$1,522.25 million) (2018: US$108.17 million (equivalent to approximately HK$843.73 million)).

In 2020 so far, the outbreak of COVID-19 has created a tremendous amount of uncertainty. Expectations for demand levels were reduced significantly when lockdowns started to spread around the world. This led the Group to recalibrate our service offering in line with customer demand, as part of measures to manage costs in potentially difficult economic times. As the second quarter of 2020 progressed, it started to become clear that customer demand was not falling to the much lower levels feared, and that in fact it was starting to improve back towards more normal proportions.

Demand being better than expected, combined with a lower fuel cost and interest rate environment, drove the Group to produce good results for the first half of 2020. The Group’s profit after tax for the first six months of the year 2020 was US$102.17 million (equivalent to approximately HK$796.93 million), which is more than half of the total achieved during 2019 (excluding profit on the sale of our interests in the Long Beach Container Terminal).

Looking forward, the outlook for the third quarter of 2020 so far appears to be much better than expected on many of our trade lanes, especially the transpacific trade. Capacity levels on the transpacific trade are higher than at this time last year, which suggests that demand in the United States is currently quite strong. We see similar strength on some other, though not all, trade lanes.

Nevertheless, in spite of this better-than-expected outcome so far, we remain cautious about the prospects for the coming months. It cannot be known where further lockdowns may occur, nor can it be known how long they might last or how severe their conditions might be. That being said, we continue to expect that the governments of many countries and regions may launch more stimulus packages to alleviate any sign of downward pressure on the global economy. We firmly believe that China’s economy will continue to maintain stable growth in the medium and long term, and will continue to be an important stabilizer for the global economic growth, thereby supporting global trade demand and the development of shipping industry.

The current situation of the industry is uncertain, even if the predictions for the impact of COVID-19 on our sector were excessively pessimistic. Nevertheless, with its solid operating performance and robust balance sheet, we can say that the Group is well prepared to resist any potential headwind, and has a good track record of adapting quickly to changes in demand and in the operating environment.

II-3

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

The Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the 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 the Circular misleading.

2. DISCLOSURE OF INTERESTS

(A) Directors’ and Chief Executive’s interests and short positions in Shares, underlying Shares and debentures

As at the Latest Practicable Date, save as disclosed below, so far as is known to the Directors, none of the Directors or the chief executive of the Company had any interests or short positions in the Shares, underlying Shares and the debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required to be (a) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) entered in the register kept by the Company pursuant to Section 352 of the SFO; or (c) notified to the Company and the Stock Exchange pursuant to the Model Code contained in the Listing Rules:

(i) Directors’ and Chief Executive’s interests and short positions in the Shares, underlying Shares and debentures of the Company

Nil.

III-1

GENERAL INFORMATION

APPENDIX III

(ii) Directors’ and Chief Executive’s interests and short positions in the shares of associated corporations of the Company

					Approximate
					percentage of
					total issued
			Number of		share capital
			ordinary		of relevant
			shares held as	Total number	class of shares
Name of associated	Name of		personal	of shares	of associated
corporation	Director	Capacity	interest	interested	corporation
COSCO SHIPPING	YANG Zhijian	Beneficial owner	100,000	100,000	0.00388%
Holdings Co., Ltd.			(H Shares)	(H Shares)	(Note 1)
COSCO SHIPPING	YANG Zhijian	Beneficial owner	400,000	400,000	0.01088%
Development Co., Ltd.			(H Shares)	(H Shares)	(Note 2)
	FENG Boming	Beneficial owner	29,100	29,100	0.00037%
			(A Shares)	(A Shares)	(Note 2)
COSCO SHIPPING Ports	FENG Boming	Beneficial owner	32,379	32,379	0.00098%
Limited					(Note 3)

(iii) Directors’ and Chief Executive’s interests and short positions in the underlying shares and debentures of associated corporation of the Company

							Approximate
							percentage of
							total issued
							share capital of
					Number of		relevant class
					outstanding		of shares of
Name of				Exercise	share options	Total number	associated
associated	Name of		Date of	price per A	granted	of shares	corporation
corporation	Director	Capacity	grant	share	(Note 4)	interested	(Note 1)
COSCO	YANG	Beneficial	29th May	RMB3.50	936,000	936,000	0.00967%
SHIPPING	Zhijian	owner	2020
Holdings
Co., Ltd.	FENG	Beneficial	29th May	RMB3.50	936,000	1,466,000	0.01515%
(A Shares)	Boming	owner	2020
		Interest of	3rd June	RMB4.10	530,000
		spouse	2019

Notes:

(1) The shareholding percentage in COSCO SHIPPING Holdings was calculated on the basis of 2,580,600,000 H shares of COSCO SHIPPING Holdings in issue and 9,678,929,227 A shares of COSCO SHIPPING Holdings in issue as at the Latest Practicable Date (as the case may be).

III-2

GENERAL INFORMATION

APPENDIX III

(2) The shareholding percentage in COSCO SHIPPING Development Co., Ltd. (‘‘COSCO SHIPPING Development’’) was calculated on the basis of 3,676,000,000 H shares of COSCO SHIPPING Development in issue and 7,932,125,000 A shares of COSCO SHIPPING Development in issue as at the Latest Practicable Date (as the case may be).
(3) The shareholding percentage in COSCO SHIPPING Ports was calculated on the basis of 3,315,296,374 shares of COSCO SHIPPING Ports in issue as at the Latest Practicable Date.
(4) According to the terms of the Share Option Incentive Scheme of COSCO SHIPPING Holdings (the ‘‘Scheme’’) and its amendments approved on 18th May 2020, the Scheme is valid for 10 years from 30th May 2019 and the share options shall be vested 24 months after the date of grant (the ‘‘Vesting Period’’). Subject to the fulfilment of the relevant conditions of exercise, these share options shall be exercisable in three batches after the expiry of the Vesting Period, i.e. (a) the exercise period of 33% of the share options will commence on the first trading day after expiration of the 24-month period from the date of grant and ending on the last trading day of the 36-month period from the date of grant; (b) the exercise period of 33% of the share options will commence on the first trading day after expiration of the 36-month period from the date of grant and ending on the last trading day of the 48-month period from the date of grant; and (c) the exercise period of 34% of the share options will commence on the first trading day after expiration of the 48-month period from the date of grant and ending on the last trading day of the 84-month period from the date of grant. Details of the Scheme are set out in the announcements dated 3rd June 2019 and 30th March 2020 of COSCO SHIPPING Holdings (A shares). No consideration was paid by the grantees for acceptance of the share options.

III-3

GENERAL INFORMATION

APPENDIX III

(B) Directors’ interest as a director or employee of a company which has a discloseable interest or short position in the Shares and underlying Shares of the Company

As at the Latest Practicable Date, save as disclosed below, so far as is known to the Directors, no Director was a director or employee of a company which has an interest or short position in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Position held by the Director in Name of company Name of Director such company China COSCO SHIPPING Mr. Xu Lirong Chairman of the board and the Corporation Limited Party Secretary Mr. Huang Xiaowen Executive Vice President and the Party Committee member Mr. Yang Zhijian Employee Representative Director Dr. Chung Shui Ming External Director* Timpson COSCO SHIPPING Mr. Xu Lirong Executive Director and Chairman of Holdings Co., Ltd. the board Mr. Yang Zhijian General Manager, Executive Director and the Deputy Party Secretary Mr. Feng Boming Executive Director Mr. Yang Liang Yee Independent Non-Executive Director Philip Shanghai International Port Mr. Yan Jun Director, President and Deputy (Group) Co., Ltd. Party Secretary Silk Road Fund Co., Ltd. Ms. Wang Dan Executive Vice President

Note: The Company understands that the role and nature of an ‘‘External Director’’ in COSCO SHIPPING is similar to that of an independent non-executive director.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had or proposed to enter into a service contract with the Company or any of its subsidiaries which is not determinable by the employing company within one year without payment of compensation, other than statutory compensation.

III-4

GENERAL INFORMATION

APPENDIX III

4. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation or arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

5. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

COSCO SHIPPING, an indirect controlling Shareholder of the Company, its subsidiaries or its associates are engaged in the same business of container shipping, management and operation of container terminals and/or logistics services (the ‘‘Competing Companies’’) as the Group. As at the Latest Practicable Date, Mr. Xu Lirong, Mr. Huang Xiaowen, Mr. Yang Zhijian and Mr. Feng Boming, the Executive Directors of the Company, were holding directorships and/or senior management positions in COSCO SHIPPING, its subsidiaries or its associates; Dr. Chung Shui Ming Timpson, the Independent Non-Executive Director of the Company, was an external director of COSCO SHIPPING; Mr. Yang Liang Yee Philip, the Independent Non-Executive Director of the Company, was an independent non-executive director of COSCO SHIPPING Holdings and COSCO SHIPPING Ports; and Ms. Chen Ying, the Independent Non-Executive Director of the Company, was an external director of COSCO SHIPPING Lines.

As the Board of the Company is independent of the board of directors of the Competing Companies, the Directors of the Company are of the view that the Group is capable of carrying on its business independently of, and at arm’s length from the businesses of the Competing Companies.

Save as disclosed above, at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective close associates (as defined in the Listing Rules) had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6. MATERIAL CONTRACTS

Save for the following contracts, the Group has not entered into any material contract (not being contracts entered into in the ordinary course of business of the Group) within the two years immediately preceding the date of the Circular:

(a) Sale and Purchase Agreement dated 29th April 2019 entered into among OOCL LLC, Long Beach Container Terminal, Inc (both as sellers), OOCL (Assets) Holdings Inc. and Olivia Holdings, LLC (as purchaser) in respect of the sale of Long Beach terminal business at the Port of Long Beach, California, United States, known as the Long Beach Container Terminal, for a consideration of US$1.78 billion (subject to adjustments) (the ‘‘Long Beach Agreement’’);

III-5

GENERAL INFORMATION

APPENDIX III

(b) Five shipbuilding contracts all dated 10th March 2020, each of which relates to one March Vessel and contains substantially the same terms for a consideration of US$155.68 million for each March Vessel: (i) three shipbuilding contracts entered into by Nantong with each of Newcontainer No.108 (Marshall Islands) Shipping Inc., Newcontainer No.109 (Marshall Islands) Shipping Inc., and Newcontainer No.110 (Marshall Islands) Shipping Inc., in respect of the three related March Vessels; and (ii) two shipbuilding contracts entered into by Dalian with each of Newcontainer No.111 (Marshall Islands) Shipping Inc. and Newcontainer No.112 (Marshall Islands) Shipping Inc. respectively, in respect of the two related March Vessels; and
(c) Shipbuilding Contracts.

7. DIRECTORS’ INTERESTS IN CONTRACTS

There are no contracts or arrangements of significance in relation to the Group’s business to which the Company or any of its subsidiaries was a party, and in which a Director had a material interest, subsisted as at the date of the Circular.

8. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which has been, since 31st December 2019, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or is proposed to be acquired or disposed of by or leased to any member of the Group.

9. NO MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31st December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up.

10. EXPERT AND CONSENT

The following is the qualification of the expert who has given an opinion or advice, which is contained or referred to in the Circular:

Name	Qualification
First Shanghai Capital Limited	A licensed corporation to carry out Type 6 (advising
	on corporate finance) regulated activity under the
	SFO

III-6

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, First Shanghai Capital Limited did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, First Shanghai Capital Limited did not have any direct or indirect interest in any asset which has been, since 31st December 2019, being the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or is proposed to be acquired or disposed of by or leased to any member of the Group.

First Shanghai Capital Limited has given and has not withdrawn its written consent to the issue of the Circular, with the inclusion herein of their letter dated 11th November 2020 in connection with their advice to the Independent Board Committee and the Independent Shareholders, and/or references to their name and logo in the form and context in which they appear.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection by the Shareholders during normal business hours at the principal office of the Company in Hong Kong at 31st Floor, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong on weekdays other than Saturdays and public holidays from the date of the Circular up to and including the date of SGM:

(a) the Memorandum of Association and Bye-laws of the Company;
(b) the letter from the Independent Board Committee, the text of which is set out in the section headed ‘‘Letter from the Independent Board Committee’’ of the Circular;
(c) the letter from the Independent Financial Adviser in respect of their advice to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed ‘‘Letter from the Independent Financial Adviser’’ of the Circular;
(d) the written consent from the Independent Financial Adviser as referred to in the above paragraph 10 headed ‘‘Expert and Consent’’ in this Appendix;
(e) the material contracts as referred to in the above paragraph 6 headed ‘‘Material Contracts’’ in this Appendix;
(f) the Bunker Master Agreement;
(g) the annual reports of the Company for the financial years ended 31st December 2018 and 2019 respectively;
(h) the interim report of the Company for the six months ended 30th June 2020;

III-7

GENERAL INFORMATION

APPENDIX III

(i) the circular of the Company dated 9th April 2020 in relation to the proposals for general mandates to issue and to repurchase securities and re-election of directors and major and connected transaction regarding construction of five vessels and notice of annual general meeting; and
(j) this Circular.

The Company has applied for, and the Stock Exchange has granted, a waiver from strict compliance with Rule 14.66(10) and paragraph 43(2)(b) of Appendix 1B of the Listing Rules, such that certain commercially sensitive information (including the minimum volume commitment, the vessel and rail tariffs, excess rebates and the deficiency payment calculation) will be redacted from the Long Beach Agreement to be made available for inspection, on the grounds that such commercially sensitive information is not material information for the Shareholders’ assessment of the Shipbuilding Contracts, which is not connected with the Long Beach Agreement. For details of the sale of the Long Beach terminal business, please refer to the circular of the Company dated 31st July 2019.

12. MISCELLANEOUS

(a) The Company Secretary of the Company is Mr. Xiao Junguang who is Chartered Secretary.
(b) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and the principal office of the Company is located at 31st Floor, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong.
(c) The principal registrar of the Company is MUFG Fund Services (Bermuda) Limited at 4th Floor, North Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda and the branch registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(d) The English text of the Circular shall prevail over the Chinese text.

III-8

NOTICE OF SPECIAL GENERAL MEETING

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

(Incorporated in Bermuda with members’ limited liability)

(Stock Code: 316)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE is hereby given that the Special General Meeting of ORIENT OVERSEAS (INTERNATIONAL) LIMITED (the ‘‘Company’’) will be held on Monday, 30th November 2020 at 2:30 p.m. at Dynasty Room, 7th Floor, The Dynasty Club, South West Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong to transact the following business:

‘‘THAT the transaction contemplated under the Shipbuilding Contracts (as defined in the circular of the Company dated 11th November 2020 (the ‘‘Circular’’) of which this notice forms part) be and is hereby approved and confirmed and that any Director of the Company be and is hereby authorized to do all such further acts and things, to execute such further documents and to take all such steps which in their opinion may be necessary, desirable or expedient to implement and/or give effect to the terms of such agreements.’’
‘‘THAT the proposed revised annual caps for each of the three years ending 31st December 2020, 2021 and 2022 (details of which have been set out in the Circular) in respect of the Bunker Master Agreement dated 30th October 2019 entered into between the Company and China COSCO SHIPPING Corporation Limited be and are hereby approved and confirmed and that any Director of the Company be and is hereby authorized to do all such further acts and things, to execute such further documents and to take all such steps which in their opinion may be necessary, desirable or expedient to implement and/or give effect to the proposed revised annual caps.’’
(a) To re-elect Mr. Huang Xiaowen as an Executive Director of the Company.
(b) To authorize the Board of Directors to fix the Director’s remuneration.

By Order of the Board

Orient Overseas (International) Limited XIAO Junguang Company Secretary

Hong Kong, 11th November 2020

(i)

NOTICE OF SPECIAL GENERAL MEETING

Notes:

(i) Any shareholder of the Company entitled to attend and vote at the SGM (or at any adjournment thereof) is entitled to appoint a proxy or proxies to attend and vote on his/her behalf in accordance with the Bye-laws of the Company. A proxy need not be a shareholder of the Company.
(ii) Where there are joint registered holders of any share, any one of such persons may vote at the SGM (or at any adjournment thereof), either personally or by proxy, in respect of such share as if he/she were solely entitled thereto; but if more than one of such joint holders shall be present at the SGM personally or by proxy, that one of the holders so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
(iii) The proxy form must be deposited at the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited (the ‘‘Branch Share Registrar’’), at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong together with the power of attorney or other authority (if any) under which it is signed (or a certified copy thereof) as soon as possible but in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof.
(iv) The register of members of the Company will be closed from 25th November 2020 to 30th November 2020, both days inclusive, to ascertain the shareholders entitled to attend and vote at the SGM. During this period, no transfer of shares will be registered. To be eligible to attend and vote at the SGM, all share transfer documents must be accompanied with the relevant share certificates and lodged with the Branch Share Registrar at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration not later than 4:30 p.m. on 24th November 2020.
(v) With regard to the ordinary resolution in item 3 of this notice, Mr. HUANG Xiaowen will retire at the SGM and, being eligible, will offer himself for re-election at the SGM. Details of the above retiring Director seeking re-election are set out in Appendix I of the circular dated 11th November 2020.
(vi) If a typhoon signal No.8 (or above) is hoisted or extreme conditions and/or a black rainstorm warning signal are in force at any time between 6:00 a.m. and 10:00 a.m. on the date of the SGM, the SGM may be adjourned to a later date and/or time as determined by the Company.

The Company will publish an announcement on the websites of both the Stock Exchange (http://www.hkex.com.hk) and the Company (https://www.ooilgroup.com) to notify the shareholders that the SGM has been adjourned (however, a failure to publish such a notice shall not affect the adjournment of such meeting). Shareholders may also contact the Branch Share Registrar (telephone: 852 2862 8555) for enquiries.

The Company will publish a further announcement on the websites of the Stock Exchange and the Company to notify the shareholders of the date, time and location of the adjourned SGM.

Shareholders should in any event exercise due care and caution when deciding to attend the SGM in adverse weather conditions.

(vii) In the event of any regulation imposed by the Hong Kong Government due to COVID-19 requiring change of the date or place of the SGM, the shareholders of the Company will be notified of the revised arrangements in the same manner as provided in note (vi) above.
(viii) If any shareholder of the Company has any particular access request or special needs for participating in the SGM, please contact the Branch Share Registrar (telephone: 852 2862 8555) on or before 26th November 2020.
(ix) The Chinese translation of this notice is for reference only. In case of any inconsistency, the English version shall prevail.
For identification purpose only

website: http://www.ooilgroup.com

(ii)

PRECAUTIONARY MEASURES FOR SPECIAL GENERAL MEETING

The health of the Shareholders, staff and stakeholders of the Company is of paramount importance to us. In view of the ongoing COVID-19 pandemic, the Company will implement the following at the SGM as part of the control measures to safeguard the health and safety of our attending Shareholders, staff and stakeholders of the Company:

(i) compulsory body temperature checks will be conducted for every attending Shareholder, proxy or other attendee at the entrance of the SGM venue. Any person with a body temperature of over 37.5 degrees Celsius or who has any flu-like symptoms or is otherwise apparently unwell will be denied entry into the SGM venue or be required to leave the SGM venue;
(ii) each attendee will be asked to complete a health declaration form. Anyone who responds positively to any of these questions in the heath declaration form will be denied entry into the SGM venue or be required to leave the SGM venue;
(iii) each attendee would be required to wear a surgical face mask throughout the SGM and inside the SGM venue;
(iv) any person who does not comply with the precautionary measures to be taken at the SGM, or is subject to any Hong Kong Government prescribed quarantine will be denied entry into the SGM venue or be required to leave the SGM venue;
(v) attendees will be split into different groups and will be arranged to sit in the main room and a separate room with video and audio link facilities. Seating at the SGM venue will be arranged so as to allow for appropriate social distancing. Accordingly, for compliance reason, there will be limited capacity for Shareholders to attend SGM; and
(vi) no refreshments and beverages will be served.

In addition, the Company would like to remind all attending Shareholders that physical attendance in person at the SGM is not necessary for the purpose of exercising voting rights. The Company encourages the Shareholders to consider appointing the chairman of the SGM as their proxy to vote as instructed by the Shareholders on the relevant resolutions at the SGM, instead of attending the SGM in person.

If any Shareholder not attending the SGM in person has any question about the resolutions proposed to be passed at the SGM or about the Company, or has any matter for communication with the Board, he/she is welcome to send such question or matter in writing to the Company’s registered office at 31st Floor, Harbour Centre, 25 Harbour Road, Wanchai, Hong Kong (Attention: Company Secretary) or to the Company’s email at [email protected].

(iii)

PRECAUTIONARY MEASURES FOR SPECIAL GENERAL MEETING

In the event of any regulation imposed by the Hong Kong Government due to COVID-19 requiring change of the date or place of the SGM, the Shareholders will be notified of the revised arrangements in the same manner as provided in note (vi) in the Notice of SGM.

If any Shareholder has any question relating to the SGM, please contact the Branch Share Registrar as follows:

Computershare Hong Kong Investor Services Limited 17M Floor, Hopewell Centre 183 Queen’s Road East, Wan Chai, Hong Kong Email: [email protected] Tel: 2862 8555 Fax: 2865 0990

(iv)

AI assistant

L.K. Technology Holdings Limited — Proxy Solicitation & Information Statement 2020

49296_rns_2020-11-10_be6185db-c5a1-4fb0-adc5-5084ba8e723c.pdf

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS

AND

REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT AND

RE-ELECTION OF DIRECTOR AND

NOTICE OF SPECIAL GENERAL MEETING

First Shanghai Capital Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS AND

REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT AND RE-ELECTION OF DIRECTOR AND NOTICE OF SPECIAL GENERAL MEETING

1. INTRODUCTION

LETTER FROM THE BOARD

2. SHIPBUILDING TRANSACTION

a) Finance Terms

b) Contract Terms

LETTER FROM THE BOARD

c) Reasons for and Benefits of the Shipbuilding Transaction

d) Listing Rules Implications

LETTER FROM THE BOARD

3. PROPOSED REVISED BUNKER CAPS

a) Historical Transaction Amounts and Proposed Revised Bunker Caps

LETTER FROM THE BOARD

b) Reasons for and Benefits of the Proposed Revised Bunker Caps

LETTER FROM THE BOARD

c) Listing Rules Implications

d) Internal Control Procedures

LETTER FROM THE BOARD

4. THE PROPOSED REVISED BUNKER CAPS AND THE SHIPBUILDING TRANSACTION

LETTER FROM THE BOARD

5. INFORMATION ON RELEVANT PARTIES

6. RE-ELECTION OF DIRECTOR

LETTER FROM THE BOARD

7. SPECIAL GENERAL MEETING

8. VOTING BY POLL

9. RECOMMENDATION

LETTER FROM THE BOARD

10. ADDITIONAL INFORMATION

ORIENT OVERSEAS (INTERNATIONAL) LIMITED 東方海外( 國際) 有限公司 *

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS AND REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully,

For and on behalf of

THE INDEPENDENT BOARD COMMITTEE

MAJOR AND CONNECTED TRANSACTION REGARDING CONSTRUCTION OF SEVEN VESSELS AND REVISED ANNUAL CAPS FOR CONTINUING CONNECTED TRANSACTIONS UNDER THE BUNKER MASTER AGREEMENT

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LISTING RULES IMPLICATIONS

Shipbuilding Transaction

Proposed Revised Bunker Caps

THE INDEPENDENT BOARD COMMITTEE

OUR INDEPENDENCE

BASIS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. SHIPBUILDING TRANSACTION

1. Information of the Group

2. Information of COSCO SHIPPING Group

COSCO SHIPPING

Nantong

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Dalian

3. Reasons for and benefits of for the Shipbuilding Transaction

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Principal terms of the Shipbuilding Contracts

Finance terms

Contract terms

Assessment on the fairness and reasonableness of the Shipbuilding Transaction

5. Possible financial effects of the Shipbuilding Transaction on the Group

Earnings

Working capital

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Net asset value

L.K. Technology Holdings Limited Proxy Solicitation & Information Statement 2020