Sany Heavy Equipment International : DISCLOSEABLE TRANSACTION SUBSCRIPTION OF STRUCTURED DEPOSIT AND FINANCIAL PRODUCTS

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SANY HEAVY EQUIPMENT INTERNATIONAL

HOLDINGS COMPANY LIMITED 三 一 重 裝 國 際 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 631)

DISCLOSEABLE TRANSACTION

SUBSCRIPTION OF STRUCTURED DEPOSIT AND FINANCIAL PRODUCTS

SUBSCRIPTION OF STRUCTURED DEPOSIT AND FINANCIAL PRODUCTS

Sany Heavy Equipment, a wholly-owned subsidiary of the Company, entered into four subscriptions agreements with Huaxia Bank on 22 January 2019, 24 June 2019, 25 November 2019 and 26 November 2019, respectively, pursuant to which Sany Heavy Equipment agreed to subscribe for four structured deposit products in total from Huaxia Bank, with a principal amount of RMB200 million, RMB200 million, RMB320 million and RMB100 million, respectively.

On 30 October 2019, Hunan Port Machinery, a wholly-owned subsidiary of the Company, entered into a subscription agreement with Huaxia Bank, pursuant to which Hunan Port Machinery subscribed for a tranche of financial product from Huaxia Bank, with a principal amount of RMB100 million.

IMPLICATION UNDER THE LISTING RULES

Since the Subscription Agreements were entered into between the Group and Huaxia Bank within 12 months after the signing date of the initial subscription agreement on 22 January 2019, and all the structured deposit products and the financial product under the Subscription Agreements were outstanding as at the date of the last subscription agreement on 26 November 2019, the transactions under the Subscription Agreements shall be aggregated pursuant to Rule 14.22 and 14.23 of the Listing Rules. As all of the applicable percentage ratios in relation to the Subscription Agreements, on an aggregated basis, pursuant to Rule 14.07 of the Listing Rules exceed 5%, but all the applicable percentage ratios are less than 25%, the transactions under the Subscription Agreements, on an aggregated basis, would constitute a discloseable transaction of the Company under Chapter 14 of the Listing Rules and hence is subject to the notification and announcement requirements set out under Rule 14.34 of the Listing Rules.

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THE SUBSCRIPTION AGREEMENTS

Sany Heavy Equipment, a wholly-owned subsidiary of the Company, entered into four subscriptions agreements with Huaxia Bank on 22 January 2019, 24 June 2019, 25 November 2019 and 26 November 2019, respectively, pursuant to which Sany Heavy Equipment agreed to subscribe for four structured deposit products in total from Huaxia Bank, with a principal amount of RMB200 million, RMB200 million, RMB320 million and RMB100 million, respectively.

On 30 October 2019, Hunan Port Machinery, a wholly-owned subsidiary of the Company, entered into a subscription agreement with Huaxia Bank, pursuant to which Hunan Port Machinery subscribed for a tranche of financial product from Huaxia Bank, with a principal amount of RMB100 million.

The major terms of the Subscription Agreements are set out as follows:

As at the date of this announcement, two of the four structured deposit products subscribed on 22 January 2019 and 24 June 2019, and the financial product subscribed on 30 October 2019, had matured. Accordingly, the company had received the principal together with the interests. The remaining two structured deposit products subscribed on 25 November 2019 and 26 November 2019 remain outstanding.

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REASONS FOR AND BENEFITS OF THE TRANSACTION

The transactions contemplated under the Subscription Agreements enable the Group to enjoy higher return than demand deposits generally offered by PRC commercial banks. The Directors are of the view that (i) the transactions contemplated under the Subscription Agreements provide the Group with a better return than demand deposits generally offered by PRC commercial banks; (ii) the transactions contemplated under the Subscription Agreements were funded from the Group's temporarily idle funds, which would not affect the working capital or the operation of the Group; and (iii) the investment returns in connection with the transactions contemplated under the Subscription Agreements increase the Group's earnings. Accordingly, the Directors (including the independent non- executive Directors) believe that the transactions contemplated under the Subscription Agreements are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

DELAY IN COMPLIANCE WITH CHAPTER 14 REQUIREMENTS

At the time of entering into the Subscription Agreements, as the structured products were short-term in nature and principal-guaranteed, which were akin to time deposits placed with banks, the Company was of the view that the subscription for the structured deposit products were not "transactions" under Chapter 14 of the Listing Rules. The Company has recently re-visited this position and realised that as the contractual cash flows associated with these structured products were not fixed under the Subscription Agreements, these products should have been classified as investments, and thus were "transactions" under Chapter 14 of the Listing Rules.

The Company acknowledges that the notification and announcement in respect of the Subscription Agreements had been delayed due to a misinterpretation of the Listing Rules implication based on the nature of the structured deposits. To prevent similar incidents from occurring in the future, the Company has taken the following measures and actions:

1. the Company has set up a dedicated reporting team who monitors all transactions with financial institutions;
2. prior to subscribing any financial products, the reporting team shall communicate internally based on the agreements to ascertain the nature of the transaction, and assess the Listing Rules implications for each subscription. The reporting team will consult professional advisers as and when necessary; and
3. the reporting team shall also seek advice from its finance team and external auditors to determine the accounting treatment of the financial products prior to subscription.

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IMPLICATION UNDER THE LISTING RULES

Since the Subscription Agreements were entered into between the Group and Huaxia Bank within 12 months after the signing date of the initial subscription agreement on 22 January 2019, and all the structured deposit products and the financial product under the Subscription Agreements were outstanding as at the date of the last subscription agreement on 26 November 2019, the transactions under the Subscription Agreements shall be aggregated pursuant to Rule 14.22 and 14.23 of the Listing Rules. As all of the applicable percentage ratios in relation to the Subscription Agreements, on an aggregated basis, pursuant to Rule 14.07 of the Listing Rules exceed 5%, but all the applicable percentage ratios are less than 25%, the transactions under the Subscription Agreements, on an aggregated basis, would constitute a discloseable transaction of the Company under Chapter 14 of the Listing Rules and hence is subject to the notification and announcement requirements set out under Rule 14.34 of the Listing Rules.

INFORMATION ON THE GROUP, SANY HEAVY EQUIPMENT AND HUNAN PORT MACHINERY

The Company is an investment holding company and its subsidiaries are principally engaged in the design, manufacturing and sales of roadheader, combined coal mining unit, mining transportation vehicles, port machinery and marine heavy equipment products. Sany Heavy Equipment and Hunan Port Machinery are wholly-owned subsidiaries of the Company.

INFORMATION ON HUAXIA BANK

Huaxia Bank is a licensed bank established under the laws of the PRC, which is principally engaged in the provision of corporate and personal banking and other financial services in the PRC, shares of which are listed on the Shanghai Stock Exchange (Stock Code: 600015).

To the best of the Directors' knowledge, information and belief having made all reasonable enquiry and based on the public information available to the Company, Huaxia Bank and its ultimate beneficial owners are third parties independent of each of the Company and its connected persons.

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DEFINITIONS

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

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As at the date of this announcement, the executive Directors are Mr. Liang Zaizhong, Mr. Qi Jian, Mr. Fu Weizhong and Mr. Zhang Zhihong, the non-executive Directors are Mr. Tang Xiuguo and Mr. Xiang Wenbo, and the independent non-executive Directors are Mr. Ng Yuk Keung, Mr. Poon Chiu Kwok and Mr. Hu Jiquan.

• for identification purpose only

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