China Dongxiang (03818) will repurchase a total of 256 million shares at a repurchase price of HK$0.285 per share.

China Dongxiang (03818) announced that in order to resolve the ongoing uncertainty regarding the recoverability of subscription loans, the company is conducting a comprehensive evaluation of available options. Following discussions with the sellers, the company, GSL, and all sellers entered into a settlement agreement on July 24, 2026, to settle the outstanding repayment of the sellers' subscription loans. According to the terms of the settlement agreement, the parties agreed as follows: (i) The company will repurchase a total of 256 million repurchased shares at a repurchase price of HK$0.285 per share, equivalent to approximately 4.34% of the total issued shares of the company as of the announcement date (the share repurchase); (ii) The amount payable to each seller for the share repurchase and any outstanding retained dividend amount will be offset against the corresponding outstanding balance of the seller's subscription loan owed to GSL (the offset); (iii) GSL will waive any remaining balance owed by the sellers on the corresponding subscription loans after the offset (the loan waiver); and (iv) Mr. Zhang will pay HK$20 million to the company as compensation for Mr. Zhang Zhiyong. As for the share repurchase, the company will repurchase a total of 256 million repurchased shares from the sellers at a cost of approximately HK$72.99 million, calculated as the repurchase price of HK$0.285 per share multiplied by the total number of repurchased shares. When deciding on the settlement and determining the terms of the settlement agreement, the board of directors considered the following factors: (i) The company's share incentive arrangements (including subscription loans) are intended to recruit, retain, and incentivize borrowers. These arrangements are not intended to be speculative tools tied to stock prices or independent financing transactions, nor are they meant to penalize borrowers in the event of a stock price decline. As part of the share incentive arrangements, borrowers expect to realize profits by selling pledged shares and repaying subscription loans when stock prices appreciate; (ii) The board's assessment of the increased uncertainty regarding the recoverability of subscription loans, taking into account that (a) the subscription loans will mature within the next two years, (b) potential challenges that borrowers may face in repaying subscription loans, such as liquidating personal assets or depleting savings, leading to financial difficulties; and (c) the depressed value of pledged shares. Based on this assessment, the group recognized impairment losses of approximately RMB 181.7 million on receivables for the fiscal year ended March 31, 2026; (iii) Default by subscription loan borrowers could lead to forced sales of large amounts of shares in a limited timeframe, potentially putting downward pressure on stock prices and adversely affecting shareholder value. Additionally, legal action against defaulting borrowers may involve: (a) adverse consequences, including the possible need for borrowers (who are current or former employees of the company) to sell personal assets or deplete savings, creating financial challenges for them. These outcomes would go against the spirit of the share incentive arrangements and could significantly damage employee morale, trust, and engagement, and could harm the company's reputation; and (b) high legal fees and management time; (iv) Sellers (a) will incur significant losses as a result of the settlement, as 10% of the total subscription price and acquisition cost (if applicable) for their respective pledged shares will be paid from the sellers' own funds and will not be recoverable due to the settlement; and (b) have not received any returns from the pledged shares to date, as dividends received on the pledged shares have been mainly used to pay ongoing interest and partially repay the principal of the subscription loans; (v) Subscription loans have not resulted in any actual cash outflows for the group, as (a) all loan amounts have been directly paid to the company to settle the subscription price; (b) all shares subscribed or purchased by sellers have been pledged and held in a security account controlled by the group; and (c) sellers have not sold any pledged shares since the subscription date; and (vi) It is expected that the share repurchase will also not result in any actual cash outflows for the group, as the amount payable to each seller for the share repurchase will be fully offset against the outstanding balance of the corresponding subscription loan. After a comprehensive evaluation of (a) maintaining the subscription loans for a further period of approximately two years until maturity and (b) the current settlement compared to continuing with the subscription loans until maturity, and taking into account the compensation agreement successfully negotiated with Mr. Zhang, the settlement was deemed a more certain and commercially reasonable approach. The current settlement allows the company to secure a definite and tangible receipt of funds, eliminating the credit, recovery, and enforcement risks that would have persisted over the remaining two-year period, and enabling immediate use of the proceeds from Mr. Zhang's compensation for operational purposes. In contrast, continuing to hold the subscription loans until maturity would involve ongoing uncertainty regarding final repayment without corresponding benefits to justify assuming that risk.