China Aluminum International Engineering : DISCLOSEABLE TRANSACTION IN RELATION TO THE DISPOSAL OF UNDERLYING ASSETS AND THE ABS SCHEME

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

CHALIECO

中鋁國際工程股份有限公司

China Aluminum International Engineering Corporation Limited

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

(Stock Code: 2068)

DISCLOSEABLE TRANSACTION

IN RELATION TO THE DISPOSAL OF UNDERLYING ASSETS AND

THE ABS SCHEME

The board of directors (the "Board") of China Aluminum International Engineering Corporation Limited (the "Company") announces that, on 23 December 2019, the Company entered into the Underlying Assets Sale and Purchase Agreement with CSC Financial Co., Ltd. ("CSC"), pursuant to which the Company agreed to dispose of the Underlying Assets to CSC at a consideration of RMB1,260,000,000. Meanwhile, the Company has appointed CSC as the scheme manager of the ABS Scheme, who shall issue the asset-backed securities which can be listed and traded on SSE according to the relevant documents of the ABS Scheme.

1. UNDERLYING ASSETS SALE AND PURCHASE AGREEMENT
   The details of principal terms and conditions of the Underlying Assets Sale and Purchase Agreement are set out below:
   Date
   23 December 2019
   Parties
2. 1. The Company as the seller; and
   2. CSC as the purchaser and scheme manager.

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After having made all reasonable enquiries and to the knowledge, information and belief of the Directors of the Company, CSC and its ultimate beneficial owner are third parties independent of the Company and its connected persons.

Assets to be Disposed of

The accounts receivable (excluding retention fund) and their ancillary security interests which are transferred to CSC by the Company on the date of establishment of the special scheme and revolving purchase date, and which the Company is entitled to receive from debtor according to the business contract and accounts receivable transfer contract (the "Underlying Assets"). Such accounts receivable amounted to RMB1,315,891,234.79 in total.

Consideration and Payment Terms

CSC shall pay the purchase price of RMB1,260,000,000 for the initial Underlying Asset to the Company on the date of establishment of ABS Scheme upon fulfillment of the conditions precedent as stipulated in the Underlying Assets Sale and Purchase Agreement.

CSC shall, on the date of establishment of ABS Scheme, instruct the custodian to transfer the entire fund raised from the special scheme at one time to the bank account designated by the Company in writing, and any bank charges related to the transfer shall be borne by the Company. Unless otherwise agreed in the Underlying Assets Sale and Purchase Agreement, there shall be no deduction or offset of any nature, or any restriction or condition and any deduction or offset of tax from or against such amount.

The consideration was arrived at following arm's length negotiations between the Company and CSC.

Revolving Purchase Arrangement:

The ABS Scheme does not set the purchase scale for the revolving purchase plan. CSC has the right to continue to purchase new eligible Underlying Assets with disposable funds under the special scheme account on the revolving purchase date.

On each revolving purchase date in the revolving period (i.e. the corresponding date of 24 natural months from the date of the establishment of ABS Scheme or the date on which early expiry of the revolving purchase period) is occurred, CSC has the right to make revolving purchase of the Underlying Assets from the Company. After the expiration of the revolving period, CSC will no longer purchase new Underlying Assets from the Company.

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Particularly, CSC will no longer purchase Underlying Assets on the revolving purchase date under the following circumstances:

1. the revolving purchase period expires on the first working day before the revolving purchase date;
2. the occurrence of early expiry of the revolving purchase period before the revolving purchase date;
3. on the three working days before the revolving purchase date, CSC is unable to determine the Underlying Assets to be purchased with the Company.

Asset Redemption and Reversal of Asset

During the ABS Scheme period, CSC shall notify the Company immediately when disqualified Underlying Assets are identified. The Company shall, pursuant to the Underlying Assets Sale and Purchase Agreement, redeem the disqualified Underlying Assets from CSC. The redemption price of disqualified Underlying Assets or defaulted Underlying Assets shall be the outstanding balance of accounts receivable corresponding to such Underlying Assets.

During the ABS Scheme period, CSC shall notify the Company immediately when lost Underlying Assets are identified, and the Company shall, pursuant to the Underlying Assets Sale and Purchase Agreement, reverse the lost Underlying Assets from CSC. The reversal price of the lost Underlying Assets shall be the outstanding balance of accounts receivable corresponding to such Underlying Assets. The Company shall not be liable for the lost Underlying Assets after paying the reversal price.

Conditions Precedent:

Completion of the Underlying Assets Sale and Purchase Agreement is conditional upon the completion of the following events, which includes:

1. the Company and CSC have signed and delivered to each other the Underlying Assets Sale and Purchase Agreement and other relevant documents under the ABS Scheme;
2. the Company and CSC have received or obtained all consents, approvals and authorizations required for fulfilling the obligations under the Underlying Assets Sale and Purchase Agreement and other relevant documents under the ABS Scheme;
3. the Company has delivered documents of Underlying Assets to CSC with complete list of the Underlying Assets on or before the date of the establishment of special scheme and the revolving purchase date;
4. CSC has received copies of the Company's latest business license and articles of association;

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1. The Company has received copies of the latest securities business permits, business license and articles of association of CSC;
2. The ABS Scheme is established in accordance with the conditions as agreed under the standard terms;
3. As of the date on which CSC paid the purchase price to the Company, the Company has not been in breach of any representations or warranties made in the Underlying Assets Sale and Purchase Agreement or other documents under the ABS Scheme; and
4. CSC, together with the legal advisor for the ABS Scheme, and the intermediaries such as accountants, have completed due diligence on the relevant assets. After signing the Underlying Assets Sale and Purchase Agreement, the conditions of relevant assets still complies with the agreement.

Default Liability

In the event of the breach of the Underlying Assets Sale and Purchase Agreement by either party, such party shall be deemed to be in default and the defaulting party shall compensate the other party for losses incurred as a result of its breach.

Completion

The Underlying Assets Sale and Purchase Agreement shall be terminated on the date when asset allocation of the ABS Scheme is completed (or the date on which CSC announces the failure of the establishment of the ABS Scheme pursuant to the documents of the ABS Scheme).

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1. OTHER AGREEMENTS RELATED TO THE ABS SCHEME Services Agreement
   On 23 December 2019, CSC, as the manager of the ABS Scheme, entered into the Services Agreement with the Company, pursuant to which CSC engaged the Company as the asset service agency of the ABS Scheme.
   The Company, as the asset service agency, mainly provides the following services: debtor relationship maintenance, fund management of the cash inflow, enquiries and reports of accounts receivable collection under the underlying transaction contracts, identifications and notifications of disqualified Underlying Assets, defaulted Underlying Assets and lost Underlying Assets, and change management, data storage and transfer of the underlying transaction contracts. Pursuant to the Services Agreement, CSC is not required to pay any service fee to the Company.
   Regulatory Agreement
   On 13 December 2019, Beijing Branch, Shanghai Pudong Development Bank Co., Ltd. ("Beijing Branch, SPD Bank" and the "regulatory bank"), CSC (as the manager of the ABS Scheme) and the Company (as the asset service agency/original interest holder) entered into the Regulatory Agreement. Accordingly, the Company and CSC entrusted Beijing Branch, SPD Bank to regulate and manage the regulatory account from the date of the establishment of the ABS Scheme to the termination date of the Regulatory Agreement, and provide account regulatory services according to the Regulatory Agreement. The regulatory fees charged by the regulatory bank under the Regulatory Agreement shall be RMB50,000 per annum.
   After making all reasonable enquiries, to the knowledge, information and belief of the Directors of the Company, Shanghai Pudong Development Bank Co., Ltd. and its ultimate beneficial owners are the third parties independent of the Company and its connected persons.

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Letter of Payment Undertaking for Difference

On 31 October 2019, the Company, as an undertaker for paying the difference, issued the letter of Payment Undertaking for Difference to the manager (on behalf of the holders of the asset-backed securities), pursuant to which the Company hereby irrevocably and unconditionally undertook to the manager (on behalf of the holders of the asset-backed securities) the obligation to cover the difference between the funds of the ABS Scheme and the sum of relevant taxes, expenses payable and the expected yield and the principal payable of the senior asset-backed securities under the ABS Scheme.

The term of the Payment Undertaking for Difference shall commence from the effective date of the letter of Payment Undertaking for Difference (including the effective date) and end on the date when all expected yield and principal payable of the senior asset- backed securities under the ABS Scheme are fully settled. The Company shall make the payment for the difference according to the letter of Payment Undertaking for Difference and shall not charge any undertaking fees.

1. ABS SCHEME
   The Company has engaged CSC, as the manager of the ABS Scheme, to establish the ABS Scheme that can be listed and traded on SSE.
   Asset-backed securities consist of senior and subordinate asset-backed securities. Holders of senior asset-backed securities have priority over holders of subordinated asset-backed securities in the distribution of benefits under the special scheme. There are two types of senior asset-backed securities, namely senior A-levelasset-backed securities and senior B-levelasset-backed securities. Senior A-levelasset-backed securities have priority over senior B-levelasset-backed securities in the distribution of benefits under the special scheme. The senior asset-backed securities calculate interests at determined rate in accordance with book-building process, while the subordinated asset-backed securities distribute gains in an agreed manner. The aggregate principal of the senior asset-backed securities is RMB1,197,000,000, which shall be subscribed by no more than 200 Chinese qualified investors.

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The principal of the subordinated asset-backed securities is RMB63,000,000, which shall be subscribed by no more than 200 Chinese qualified investors, among which, the Company will subscribe 189,000 subordinated asset-backed securities, and the total subscription price amounted to RMB18,900,000. Details are set out in the table below:

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IV. REASONS AND BENEFITS FOR THE ISSUANCE OF ASSET-BACKED SECURITIES AND DISPOSAL OF UNDERLYING ASSETS

The issuance of asset-backed securities by CSC and the disposal of Underlying Assets by the Company is beneficial to the Company since it provides the Company with the expected business development funds, which enables the Company to meet the liquidity development needs, and diversifies the sources of the capital of the Company. It is also beneficial to optimize the asset structure, improve capital efficiency and enhance operation capacity. After comprehensive consideration, the Company believes that it is beneficial to the Company and the shareholders as a whole to appoint CSC to issue asset-backed securities and dispose of Underlying Assets.

The impact of the issuance of asset-backed securities and the disposal on the profit and loss of Company for the current period: for the assets in asset pool in the assets securitization, their original value amounts to RMB1.316 billion, the impairment provisions which have been made to them amount to RMB73 million, and their net amount is RMB1.243 billion. They have raised funds of RMB1.26 billion and have affected the profit and loss for the current period to the amount of RMB17 million.

The Company intends to use the net proceeds from the disposal of Underlying Assets for replenishment of working capital and adjustment of debt structure.

1. GENERAL INFORMATION Information about the Company
   The Company is a leading technology, engineering service and equipment provider in the non-ferrous metals industry in the PRC, capable of providing full business-chain integrated engineering solutions throughout various stages of the non-ferrous metals industry chain. The Group is primarily engaged in engineering design and consultancy, engineering and construction contracting, equipment manufacturing and trading.
   Information about CSC
   CSC is a joint stock company incorporated in the PRC with limited liability. Its principal activities include securities underwriting and sponsoring, securities brokerage, financial advisory relating to securities trading and securities investment activities, securities investment consultation, proprietary trading and investment of securities, securities asset management, agency sale of securities investment funds, introducing brokerage for futures companies, margin financing and securities lending services, agency sale of financial products, market-making of stock options, custodian services for securities investment funds, sale of precious metal products, and other businesses approved by the regulatory authority.
   Information about Beijing Branch, Shanghai Pudong Development Bank Co., Ltd.
   Beijing Branch, Shanghai Pudong Development Bank Co., Ltd. is a branch of national joint-stock commercial bank incorporated in the PRC.

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VI. LISTING RULES IMPLICATIONS

As the applicable percentage ratio in relation to the disposal of Underlying Assets exceeds 5% but less than 25%, the disposal of Underlying Assets constitutes a discloseable transaction of the Company according to Chapter 14 of the Listing Rules and shall be subject to reporting and announcement requirements under Chapter 14 of the Listing Rules but is exempted from the independent shareholders' approval requirements.

VII. CONFIRMATION FROM DIRECTORS

Directors (including independent non-executive Directors) are of the view that the terms of the Underlying Assets Sale and Purchase Agreement and the disposal of Underlying Assets were entered into on normal commercial terms, which are fair and reasonable and are in the interests of the Company and its shareholders as a whole. None of the Directors has any material interests in the Underlying Assets Sale and Purchase Agreement and the disposal of Underlying Assets.

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By Order of the Board

China Aluminum International Engineering Corporation Limited

ZHANG Jian

Joint Company Secretary

Beijing, the PRC, 23 December 2019

As at the date of this announcement, the non-executive Directors are Mr. WANG Jun and Mr. LI Yihua; the executive Directors are Mr. WU Jianqiang, Mr. ZONG Xiaoping, Mr. WU Zhigang and Mr. ZHANG Jian; and the independent non-executive Directors are Mr. GUI Weihua, Mr. CHEUNG Hung Kwong and Mr. FU Jun.

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