China National Building Material : CONNECTED TRANSACTION - CAPITAL CONTRIBUTION TO CHINA NATIONAL BUILDING MATERIAL GROUP FINANCE CO., LTD.

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

CONNECTED TRANSACTION

CAPITAL CONTRIBUTION TO CHINA NATIONAL BUILDING MATERIAL GROUP FINANCE CO., LTD.

On 29 November 2019, the shareholders of Finance Company (a subsidiary of Parent), Sinoma Cement (a wholly-owned subsidiary of the Company) and Parent, entered into the Capital Contribution Agreement, pursuant to which they agreed to each make a capital contribution to Finance Company in cash according to their respective shareholding on a pro rata basis. The registered capital of Finance Company will increase from RMB500,000,000 to RMB1,000,000,000. Sinoma Cement and Parent will make a capital contribution of RMB150,000,000 and RMB350,000,000, respectively.

As the Parent has a direct and indirect equity interest of 41.55% in aggregate in the Company, it is a substantial shareholder of the Company. Therefore, pursuant to the Listing Rules, Parent and Finance Company constitute connected persons of the Company, and thus the transaction under the Capital Contribution Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one or more applicable percentage ratios as defined under Rule

14.07 of the Listing Rules are higher than 0.1% but all applicable percentage ratios are less than 5%, according to Rule 14A.76 of the Listing Rules, the transaction is exempt from the circular and shareholders' approval requirements and is only subject to the announcement and reporting requirements under the Listing Rules.

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PRINCIPAL TERMS OF THE CAPITAL CONTRIBUTION AGREEMENT

Date

29 November 2019

Parties

1. Sinoma Cement, a wholly-owned subsidiary of the Company; and
2. Parent

Nature of the Transaction

It is proposed that Finance Company (a company held as to 30% by Sinoma Cement and 70% by Parent) will increase its registered capital. The shareholders of Finance Company, namely, Sinoma Cement and Parent, agreed to each make a capital contribution to Finance Company in cash according to their respective shareholding on a pro rata basis. The equity interest of each of Sinoma Cement and Parent in Finance Company will remain unchanged before and after the said capital contribution.

Upon completion of the capital contribution, the registered capital of Finance Company will increase from RMB500,000,000 to RMB1,000,000,000 (representing an increase of RMB500,000,000 in the registered capital). Sinoma Cement will make a capital contribution of RMB150,000,000 in cash based on its 30% equity interest in Finance Company, and Parent will make a capital contribution of RMB350,000,000 in cash based on its 70% equity interest in Finance Company. The amount of capital contribution shall be fully paid by 31 December 2019 (in the event that CBIRC (Beijing) has not approved the matters relating to the increase of capital by 31 December 2019, within five working days after the date of approval by the CBIRC (Beijing)).

The transactions Contemplated under the Capital Contribution Agreement shall require the approval by the respective competent authority of each party and the approval by CBIRC (Beijing).

Capital structure of Finance Company before the capital contribution:

			Percentage
	Amount of	of registered
Shareholders	contribution	capital
	(RMB)
Sinoma Cement	150,000,000		30%
Parent	350,000,000	70%
Total	500,000,000		100%

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Capital structure of Finance Company after the capital contribution:

			Percentage
	Amount of	of registered
Shareholders	contribution	capital
	(RMB)
Sinoma Cement	300,000,000		30%
Parent	700,000,000	70%
Total	1,000,000,000		100%
INFORMATION ON FINANCE COMPANY

The Finance Company is held as to 30% by the Group (through Sinoma Cement) and 70% by Parent, and is a subsidiary of Parent.

The Finance Company is a limited liability company incorporated under the laws of the PRC. It is licensed and regulated by the CBIRC and is engaged in the provision of financial services which principally include acceptance of deposits, loans, bills acceptance and discounting services and clearing and settlement services.

Based on the audited financial statements of Finance Company prepared in accordance with the generally accepted accounting principles in the PRC, for each of the two years ended 31 December 2017 and 2018, the audited net profit (before tax) of Finance Company was RMB87.119 million and RMB100.2581 million, respectively, and the aggregate audited net profit (after tax) was RMB64.9154 million and RMB75.4372 million, respectively. The aggregate audited net assets of Finance Company as at 31 December 2017 and 2018 was RMB665.1283 million and RMB725.5655 million, respectively.

BASIS FOR DETERMINATION OF AMOUNT OF CONTRIBUTION

The amount of capital contribution was determined by the parties to the agreement with reference to the operation needs and actual circumstances with respect to the Finance Company. As the capital contribution will be made by the shareholders of Finance Company, namely, Sinoma Cement and Parent, on a pro rata basis, Sinoma Cement will contribute RMB150,000,000, representing 30% of the total amount of capital increase. Sinoma Cement will finance its capital contribution by its internal funds.

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REASONS FOR AND BENEFITS OF THE TRANSACTIONS

It is expected that contributing capital into Finance Company will improve its structure of assets and liabilities, and decrease its asset-to-liability ratio, as well as support the expansion of the scale of business of Finance Company. While the members of the Group can obtain more financing services from Finance Company, which will in turn be beneficial to lowering the finance costs of the members of the Group, Sinoma Cement (as a shareholder of Finance Company) can also obtain investment return.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Capital Contribution Agreement are fair and reasonable, and the transaction contemplated under the Capital Contribution Agreement is on normal commercial terms or better and in the ordinary and usual course of business of the Group, and is in the interests of the Company and its shareholders as a whole.

As Mr. Cao Jianglin, being executive Director, and Mr. Chang Zhangli, being non-executive Director, hold positions in the Parent, and Ms. Xu Weibing, being non-executive Director, held position in the Parent and was also the chairman of Finance Company when the relevant resolution was proposed to the Board for approval, they are deemed to have a material interest in the Capital Contribution Agreement. They have abstained from voting on the relevant Board resolution in respect of the Capital Contribution Agreement. Save as the Directors mentioned above, none of the Directors has a material interest in the transaction contemplated under the Capital Contribution Agreement or is required to abstain from voting on the relevant Board resolution.

LISTING RULES IMPLICATIONS

As the Parent has a direct and indirect equity interest of 41.55% in aggregate in the Company, it is a substantial shareholder of the Company. Therefore, pursuant to the Listing Rules, Parent and Finance Company constitute connected persons of the Company, and thus the transaction under the Capital Contribution Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As one or more applicable percentage ratios as defined under Rule 14.07 of the Listing Rules are higher than 0.1% but all applicable percentage ratios are less than 5%, according to Rule 14A.76 of the Listing Rules, the transaction is exempt from the circular and shareholders' approval requirements and is only subject to the announcement and reporting requirements under the Listing Rules.

INFORMATION ON THE PARTIES

The Group is a leading building materials company in the PRC with significant operations in the cement, new materials and engineering services businesses. Sinoma Cement is principally engaged in the manufacturing of cement, clinker, cement accessories and cement products.

Parent is a state-owned limited liability company engaged in the business of building materials in the PRC.

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DEFINITIONS
"Board"	the board of Directors
"Capital Contribution	the capital contribution agreement dated 29 November
Agreement"	2019 entered into between Sinoma Cement and Parent in
	relation to the capital contribution to Finance Company
"CBIRC"	China Banking and Insurance Regulatory Commission ( 中
	國 銀 行 保 險 監 督 管 理 委 員 會)
"CBIRC (Beijing)"	China Banking and Insurance Regulatory Commission
	Beijing Bureau ( 中 國 銀 行 保 險 監 督 管 理 委 員 會 北
	京 監 管 局）
"Company"	中 國 建 材 股 份 有 限 公 司(China National Building
	Material Company Limited*), a joint stock limited
	company incorporated under the laws of the PRC, the H
	shares of which are listed on The Stock Exchange of Hong
	Kong Limited
"Directors"	the directors of the Company
"Finance Company"	China National Building Material Group Finance Co., Ltd.
	( 中 國 建 材 集 團 財 務 有 限 公 司), a limited liability
	company incorporated under the laws of the PRC
"Group"	the Company and its subsidiaries from time to time
"Listing Rules"	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
"Parent"	中 國 建 材 集 團 有 限 公 司(China National Building
	Material Group Co., Ltd.*), a state-owned limited liability
	company incorporated under the laws of the PRC and a
	controlling shareholder of the Company
"PRC"	the People's Republic of China, excluding, for the purpose
	of this announcement, Hong Kong, Macau and Taiwan

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"RMB"	Renminbi, the lawful currency of the People's Republic of
	China
"Sinoma Cement"	中 材 水 泥 有 限 責 任 公 司(Sinoma Cement Co., Ltd*),
	a limited liability company incorporated under the laws of
	the PRC
%	per cent
	By order of the Board
	China National Building Material Company Limited*
	Yu Kaijun
	Secretary of the Board
Beijing, the PRC
29 November 2019

As at the date of this announcement, the board of directors of the Company comprises Mr. Cao Jianglin, Mr. Peng Shou and Mr. Cui Xingtai as executive directors, Ms. Xu Weibing, Mr. Chang Zhangli, Mr. Tao Zheng, Mr. Chen Yongxin, Mr. Shen Yungang and Ms. Fan Xiaoyan as non-executive directors and Mr. Sun Yanjun, Mr. Liu Jianwen, Mr. Zhou Fangsheng, Mr. Qian Fengsheng and Ms. Xia Xue as independent non-executive directors.

• For identification purposes only

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