CHINA NATIONAL BUILDING MATERIAL COMPANY LIMITED

China National Building Material Company Limited

3323

CNE1000002N9

Construction Materials

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China National Building Material : PROPOSED CHANGE OF NON-EXECUTIVE DIRECTOR; MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT AND NOTICE OF THE EGM

October 22, 2019 at 05:10 am EDT

THIS CIRCULAR IS IMPORTANT AND REQUIRES IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed security dealer or other registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China National Building Material Company Limited*, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or the transferee or to the licensed security dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

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

PROPOSED CHANGE OF NON-EXECUTIVE DIRECTOR

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT AND

NOTICE OF THE EGM

Halcyon Capital Limited

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

Capitalized terms used on this cover page shall have the same meanings as those defined in the section headed "Definitions" in this circular.

A letter from the Board is set out on pages 1 to 16 of this circular. A letter from the Independent Board Committee is set out on pages 17 to 18 of this circular. A letter from Halcyon Capital Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders of the Company, is set out on pages 19 to 36 of this circular.

The notice convening the EGM to be held at Tower 2, Guohai Plaza, No.17 Fuxing Road, Haidian District, Beijing, the People's Republic of China at 9:30 a.m. on Monday, 9 December 2019, is contained in this circular. Shareholders are advised to read the notice and to complete and return the enclosed form of proxy for use at the EGM in accordance with the instructions printed thereon.

Whether or not you are able to attend the EGM, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 24 hours before the time appointed for the EGM (i.e. not later than 9:30 a.m. on Sunday, 8 December 2019) or any adjournment thereof (as the case may be).

Completion and return of the form or proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and in such event, the form of proxy shall be deemed to be revoked.

23 October 2019

References to time and dates in this circular are to Hong Kong time and dates.

For identification only

CONTENTS
	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . . .	17
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . . . . .	19
APPENDIX I - FINANCIAL INFORMATION ON THE GROUP . . . . . . . . . . . . . . . . . . . . . . . .	37
APPENDIX II - GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
NOTICE OF THE EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56

- i -

DEFINITIONS

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

"associate"	has the meaning given to it in the Listing Rules
"Board"	the board of Directors of the Company
"BNBMG"	北新建材集團有限公司 (Beijing New Building Material (Group)
	Co., Ltd.)
"Building Materials Academy"	China Building Materials Academy Co., Ltd. (中國建築材料科學
	研究總院有限公司)
"CBIRC"	China Banking and Insurance Regulatory Commission (中國銀行
	保險監督管理委員會)
"Cinda"	China Cinda Asset Management Co., Ltd. (中國信達資產管理股
	份有限公司)
"CNAFC"	China National Association of Finance Companies (中國財務公司
	協會)
"CNBM Trading"	中建材集團進出口有限公司 (China National Building Material
	Import and Export Co., Ltd.)
"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
"connected person"	has the meaning given to it in the Listing Rules
"Deposit Cap(s)"	the proposed maximum daily balance of deposits including
	accrued interests placed by the Group with the Finance Company
	during the term of the Original Financial Services Framework
	Agreement and Financial Services Framework Agreement, as the
	case may be
"Director(s)"	director(s) of the Company

- ii -

	DEFINITIONS

"Domestic Share(s)"	the ordinary shares with a nominal value of RMB1.00 each in the
	registered capital of the Company, which are subscribed for in
	RMB
"EGM"	the extraordinary general meeting of the Company to be held at
	Tower 2, Guohai Plaza, No. 17 Fuxing Road, Haidian District,
	Beijing, the PRC on Monday, 9 December 2019 at 9:30 a.m.
"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
"Financial Services Framework	the framework agreement for the Finance Company's provision
Agreement"	of financial services entered into between the Company and the
	Finance Company dated 30 September 2019
"Forchn International"	Forchn International Co., Limited (富春國際有限公司)
"Group"	the Company and its subsidiaries from time to time
"H Share(s)"	the overseas listed foreign shares with a nominal value of
	RMB1.00 each in the share capital of the Company, which are
	listed on the Stock Exchange and subscribed for and traded in
	HK$
"Halcyon" or "Independent Financial	Halcyon Capital Limited, a licensed corporation under the SFO
Adviser"	(Chapter 571 of the Laws of Hong Kong) to carry on Type 6
	(advising on corporate finance) regulated activities, being the
	independent financial adviser to the Independent Board Committee
	and the Independent Shareholders in respect of the deposit
	services transactions contemplated under the Financial Services
	Framework Agreement and the proposed Deposit Caps
"IFRS"	the International Financial Reporting Standards promulgated by
	the International Accounting Standards Board

- iii -

	DEFINITIONS

"Independent Board Committee"	the committee of independent non-executive Directors, consisting
	of Mr. Sun Yanjun, Mr. Liu Jianwen, Mr. Zhou Fangsheng, Mr.
	Qian Fengsheng and Ms. Xia Xue, which has been formed to
	advise the Independent Shareholders in relation to the Financial
	Services Framework Agreement, the deposit services under the
	Financial Services Framework Agreement and the proposed
	Deposit Caps
"Independent Shareholders"	the shareholders of the Company other than the Parent and its
	associates
"Latest Practicable Date"	18 October 2019, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"Merger of CNBM and Sinoma"	the transaction involving merger by adsorption of Sinoma by the
	Company pursuant to the merger agreement entered into between
	the Company and Sinoma on 8 September 2017
"Parent"	中國建材集團有限公司 (China National Building Material Group
	Co., Ltd.*) (previously known as 中國建築材料集團有限公司
	(China National Building Materials Group Corporation)), a state-
	owned limited liability company incorporated under the laws of
	the PRC and a controlling shareholder of the Company
"Parent Group"	the Parent and its subsidiaries from time to time (excluding the
	Group)
"Original Financial Services	the Financial Services Framework Agreement entered into between
Framework Agreement"	the Company and the Finance Company on 23 March 2018
"PBOC"	People's Bank of China (中國人民銀行)
"PRC"	the People's Republic of China excluding Hong Kong, Macau
	Special Administrative Region of the PRC and Taiwan for the
	purpose of this circular
"RMB"	Renminbi, the lawful currency of the PRC
	- iv -

	DEFINITIONS

"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong) (as revised, supplemented or otherwise modified
	from time to time)
"Share(s)"	ordinary shares of the Company with a nominal value of RMB1.00
	each, comprising the Domestic Shares, Unlisted Foreign Shares
	and H Shares
"Sinoma"	China National Materials Company Limited (中國中材股份有限
	公司), a joint stock company incorporated in the PRC with limited
	liability
"Sinoma Group"	Sinoma and its subsidiaries which were merged with the Group
"Sinoma Parent"	China National Materials Group Corporation Ltd. (中國中材集團
	有限公司), a wholly-owned subsidiary of the Parent
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Supervisor(s)"	the supervisor(s) of the Company
"Taishan Finance"	Taian Taishan Finance Investment Co., Ltd. (泰安市泰山財金投
	資有限公司)
"Taishan Investment"	Taian Taishan Investment Co., Ltd. (泰安市泰山投資有限公司)
"Unlisted Foreign Shares"	the unlisted foreign shares with a nominal value of RMB1.00 each
	in the registered capital of the Company
"%"	Per cent

For identification only

- v -

LETTER FROM THE BOARD

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

Executive Directors:	Registered Office:
Mr. Cao Jianglin (Chairman)	Tower 2 (Building B)
Mr. Peng Shou (President)	Guohai Plaza
Mr. Cui Xingtai (Vice President)	No. 17 Fuxing Road
	Haidian District
Non-executive Directors:	Beijing
Ms. Xu Weibing	The PRC
Mr. Chang Zhangli
Mr. Tao Zheng	Place of business in Hong Kong:
Mr. Chen Yongxin	Level 54, Hopewell Centre
Mr. Shen Yungang	183 Queen's Road East
Ms. Fan Xiaoyan	Hong Kong
Independent Non-executive Directors:
Mr. Sun Yanjun
Mr. Liu Jianwen
Mr. Zhou Fangsheng
Mr. Qian Fengsheng
Ms. Xia Xue
Joint Company Secretaries:
Mr. Yu Kaijun
Ms. Lo Yee Har Susan
	23 October 2019

- 1 -

LETTER FROM THE BOARD

To the shareholders of the Company

Dear Sirs,

PROPOSED CHANGE OF NON-EXECUTIVE DIRECTOR

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT AND

NOTICE OF THE EGM

1 INTRODUCTION

Reference is made to (i) the announcement of the Company dated 14 October 2019 in respect of the proposed change of non-executive director, and (ii) the announcement of the Company dated 30 September 2019 in respect of the Financial Services Framework Agreement entered into between the Company and the Finance Company.

The Board announced that on 30 September 2019, the Company entered into the Financial Services Framework Agreement with the Finance Company to renew the Original Financial Services Framework Agreement. The Original Financial Services Framework Agreement governing such continuing connected transactions will expire on 31 December 2019. The Group intends to continue to conduct such continuing connected transactions for the three years ending 31 December 2022 which will constitute continuing connected transactions with the Finance Company pursuant to the Financial Services Framework Agreement. The Financial Services Framework Agreement has a term of three years ending on 31 December 2022, pursuant to which the Finance Company has agreed to provide the Group with deposit services, loan services and other financial services approved by the CBIRC on a non-exclusive basis subject to the terms and conditions therein.

Details of the arrangements are set out in the section headed "The Financial Services Framework Agreement".

The Parent held directly and indirectly 41.55% of the issued share capital of the Company as at the Latest Practicable Date and is therefore a controlling shareholder of the Company. The Finance Company is a subsidiary of the Parent and is therefore a connected person of the Company for the purpose of the Listing Rules. Accordingly, the transactions contemplated under the Financial Services Framework Agreement constitute continuing connected transactions of the Company under the Listing Rules. As one or more of the applicable percentage ratios as defined in Rule

14.07 of the Listing Rules for the Deposit Caps exceeds 25%, the deposit services to be provided by the Finance Company to the Group are subject to the reporting, announcement and Independent Shareholders' approval requirements of Chapter 14A of the Listing Rules. The deposit services transactions contemplated under the Financial Services Framework Agreement will also constitute a major transaction which is subject to the reporting, announcement and shareholders' approval requirements of Chapter 14 of the Listing Rules.

LETTER FROM THE BOARD

The Independent Board Committee comprising all the independent non-executive Directors (who have no material interest in the Financial Services Framework Agreement) has been established to advise and provide recommendation to the Independent Shareholders on the terms of the Financial Services Framework Agreement in relation to the deposit services transactions contemplated thereunder and the proposed Deposit Caps and to advise the Independent Shareholders on how to vote. Halcyon has been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

The main purposes of this circular are to provide you with (a) details of proposed change of non- executive director, (b) details of the transactions contemplated under the Financial Services Framework Agreement, (c) a letter from the Independent Board Committee, (d) a letter from the Independent Financial Advisor and (e) a notice of the EGM to seek the Shareholders' approval regarding (i) the proposed change of non-executive director, and (ii) the Financial Services Framework Agreement, the deposit services under the Financial Services Framework Agreement and the proposed Deposit Caps.

No Shareholder will be required to abstain from voting on the ordinary resolution for approving the proposed change of non-executive director. Apart from the Parent and its associates, no other Shareholder will be required to abstain from voting on the ordinary resolution for approving the Financial Services Framework Agreement and the deposit services transactions contemplated thereunder at the EGM. As at the Latest Practicable Date, the Parent and its associates directly and indirectly held 3,505,041,707 Shares, representing approximately 41.55% of total issued share capital of the Company.

2 PROPOSED CHANGE OF NON-EXECUTIVE DIRECTOR

Reference is made to the announcement of the Company dated 14 October 2019 in relation to the proposed change of non-executive director. Ms. Xu Weibing has tendered her resignation as non- executive director due to her retirement. The Parent has notified the Company of its proposal to nominate Ms. Zhan Yanjing as a non-executive Director. The proposed appointment of Ms. Zhan Yanjing is subject to the approval of the Shareholders by way of ordinary resolution at the EGM. Ms. Xu Weibing's resignation will take effect from the approval of the proposed appointment of Ms. Zhan Yanjing as a non-executive Director by the Shareholders at the EGM. Ms. Xu Weibing has confirmed that she has no disagreement with the Board and there is no other matter in relation to her resignation that needs to be brought to the attention of the Shareholders.

- 3 -

LETTER FROM THE BOARD

The biographical details of Ms. Zhan Yanjing as required under Rule 13.51(2) of the Listing Rules are set out below:

Ms. Zhan Yanjing, born in January 1963, has over 30 years of experience in financial accounting and capital operation. Ms. Zhan has served as chief accountant of the Parent since August 2019, chairman of board of CNBM Group Finance Co., Ltd. (中國建材集團財務有限公司) since September 2019, director of Sinoma Energy Conservation Ltd. (中材節能股份有限公司) since September 2019 and director of CNBM Industrial Fund Management Co., Ltd. (中建材產業基金管理有限公司) since September 2019. She also served as vice president and chief financial officer of CRRC Corporation Limited (中國中車股份有限公司) from May 2015 to August 2019, vice president and chief financial officer of CSR Corporation Limited (中國南車股份有限公司) from December 2007 to May 2015, chief accountant of China Southern Locomotive & Rolling Stock Industry (Group) Corporation (中國南方機車車輛工業集團公司) from April 2005 to December 2007. Ms. Zhan served various positions in Beijing Foton Motor Co., Ltd. (北京福田汽車股份有限公司) from April 1999 to April 2005, including manager of the finance department, manager of the financial planning department and assistant to general manager. She also served various roles including chief economist, director and deputy general manager of Henan Diesel Engine Plant (河南柴油機廠 ) of China Shipbuilding Industry Corporation (中國船舶工業總公司) from August 1983 to April 1999. Ms. Zhan obtained a bachelor's degree in engineering from Huazhong Institute of Technology in August 1983 and obtained an EMBA degree from Peking University in May 2005. She is a senior accountant.

It is proposed that Ms. Zhan Yanjing, if appointed, will not receive any Director's remuneration from the Company during her term of office.

Save as disclosed above, as at the date of this circular, Ms. Zhan Yanjing has confirmed that she

did not assume other offices in any member of the Group; (ii) was not related to any directors, supervisors, senior management, substantial shareholders or controlling shareholders of the Company or other members of the Group; (iii) did not have any interests in shares of the Company within the meaning of Part XV of the SFO; and (iv) did not hold any other directorships or other major appointments and qualifications in any listed companies in the past three years.

Save as disclosed above, as at the date of this circular, there is no information which is discloseable, nor is the Company aware that Ms. Zhan Yanjing is/was involved in any of the matters required to be disclosed, pursuant to Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules and there is no other matter that needs to be brought to the attention of the Shareholders.

- 4 -

LETTER FROM THE BOARD

3 THE FINANCIAL SERVICES FRAMEWORK AGREEMENT

The Board announced that on 30 September 2019, the Company and the Finance Company entered into the Financial Services Framework Agreement with a term of three years commencing from 1 January 2020, pursuant to which the Finance Company has agreed to provide the Group with deposit services, loan services and other financial services approved by the CBIRC on a non-exclusive basis subject to the terms and conditions therein. The principal terms of the Financial Services Framework Agreement are set out below:

Date

The Financial Services Framework Agreement was entered into on 30 September 2019.

Parties

The Company; and
The Finance Company

Effective period

The Financial Services Framework Agreement will become effective upon: (i) having been signed by legal representatives or authorised representatives of both parties and stamped; (ii) approval of relevant regulatory authorities having been obtained by the Finance Company; and (iii) the completion of all the internal approval procedures of both parties (including but not limited to the approval by the Independent Shareholders). The term of the Financial Services Framework Agreement is from 1 January 2020 to 31 December 2022. Upon expiry of the term and subject to compliance with the requirements of the Stock Exchange, the effective period of the Financial Services Framework Agreement will be extended automatically for three years unless terminated in advance.

Principal terms

Services to be provided

The Finance Company has agreed to provide the Group with deposit services, loan services and other financial services approved by the CBIRC (such as bills acceptance and discounting services, assistance in achieving the collection and payment of the transactional proceeds, clearing and settlement services, financial leasing services, financial advisory services, credit authentication and related consulting and agency services) on a non-exclusive basis.

- 5 -

LETTER FROM THE BOARD

Pricing

When determining the price for any financial services to be provided as specific transactions to be entered into between the Group and the Finance Company pursuant to the Financial Services Framework Agreement, the Group will obtain quotes of interest rate during the same period, fees and terms from at least two general commercial banks in the PRC (mainly PRC state-owned commercial banks, including but not limited to Industrial and Commercial Bank of China Limited, Agricultural Bank of China Limited, Bank of China Limited and China Construction Bank Corporation Limited which currently provide services to the Group) located in the same or adjacent regions. In practice, the Group may select the general commercial banks to obtain quotes based on their market positions and the competitiveness of their terms in past transactions or quotes. The Finance Department of the Company will be in charge of obtaining the quotes. The general commercial banks are generally willing to offer quotes to the Group from time to time for business development purposes.

The Company considers that quotes from two or more general commercial banks will be sufficient and representative for the following reasons:

as disclosed above, the general commercial banks which the Company will obtain quotes from are mainly large PRC stated-owned commercial banks (including but not limited to Industrial and Commercial Bank of China Limited, Agricultural Bank of China Limited, Bank of China Limited and China Construction Bank Corporation Limited) with strong market position and are considered sensitive to the latest PRC government policies and market trend. Based on the terms offered by them in the past, the Company believes that their quotes are credible and representative of the most favourable terms available under the prevailing market conditions; and
the financial services industry in the PRC is subject to regulations and standards imposed by the CBIRC. There is a strong tendency of homogenisation of terms offered by the banks. Based on its experience, the Company believes that two quotes are usually sufficient.
The Group will compare the quotes so obtained with the corresponding terms proposed by the Finance Company and:
1. if the interest rate, fees and terms proposed by the Finance Company are more favourable than those proposed by such PRC general commercial banks, the Group will engage the Finance Company; and

- 6 -

LETTER FROM THE BOARD

as a matter of principle, the Group will give priority to using the services of the Finance Company if the Finance Company and such PRC general commercial banks offer equivalent terms and conditions. The Group has discretion to engage one or more such PRC general commercial banks as its financial service providers as it thinks fit and beneficial to the Group.

In practice, the Finance Department of the Company will be in charge of obtaining the quotes. If such quotes are more favourable to the Group than the price proposed to be charged by the Finance Company, the Finance Department will report such fact to the Finance Director of the Company. Such information will be used by the Group for re-negotiating the price with the Finance Company.

Pursuant to the Financial Services Framework Agreement, the Finance Company has agreed to provide the financial services to the Group in accordance with the following principles:

Deposit services: The interest rate for the Group for its deposits with the Finance Company shall comply with the PBOC's regulations on interest rates for deposits of the same type from time to time, and will not be lower than: (i) the benchmark interest rate specified by the PBOC for deposits of the same category during the same period; (ii) the interest rate paid by the Finance Company for deposits of the same type placed by members of the Parent Group during the same period under the same conditions; and (iii) the interest rate for deposits of the same type offered by PRC general commercial banks to the Group during the same period under the same conditions.
Loan services: The interest rate for loans granted to the Group by the Finance Company shall comply with the PBOC's regulations on interest rates for loans of the same type from time to time, and will not be higher than: (i) the benchmark interest rate specified by the PBOC for loans of the same category during the same period; (ii) the interest rate for similar loans charged by the Finance Company to members of the Parent Group during the same period under the same conditions; and (iii) the interest rate charged by PRC general commercial banks to the Group for similar loans during the same period under the same conditions.
The Finance Company will provide the loan services on normal commercial terms or better and such loans will not be secured by the assets of the Group.

- 7 -

LETTER FROM THE BOARD

Other financial services: During anytime, the terms and conditions for provision of other financial services by the Finance Company to the Group will not be less favourable than: (i) the terms and conditions for provisions of the same type of services by the Finance Company to members of the Parent Group; and (ii) the terms and conditions for provision of financial services of the same type by PRC general commercial banks to the Group. The services fees charged by the Finance Company for provision of other financial services to the Group will be in accordance with the standard of fees set by the PBOC or the CBIRC (if applicable). According to the above principle, such services fees will not be higher than: (i) the fees charged by the Finance Company to members of the Parent Group for providing services of the same type during the same period under the same conditions; and (ii) the fees charged to the Group by PRC general commercial banks in the PRC for services of the same type during the same period under the same conditions. The settlement services provided by the Finance Company to the Group will be free of charge.

The Group has the following internal control mechanism in place to ensure the individual transactions are conducted within the Financial Services Framework Agreement:

The Group employs and maintains separate business, operation and accounting personnel of its own from the Finance Company. There is clear segregation of approval authority and duty between the parties.
The Company's Finance Department will perform quarterly check on transactions entered into under the Financial Services Framework Agreement to ensure compliance with pricing policies and the annual caps are not exceeded.
The annual caps are set based on the estimated transaction amount reported by the members of the Group. While carrying out the specific connected transactions under the Financial Services Framework Agreement, the relevant members of the Group carrying out the specific connected transactions will monitor the actual transaction amount and report to the Company if the actual transaction amount exceeds the estimated transaction amount forming the basis of the annual caps. The Company will monitor at the Group level to confirm that the aggregated transaction amounts are within the annual caps.

- 8 -

LETTER FROM THE BOARD

1. The Company's external auditors will conduct an annual review of the transactions entered into under the Financial Services Framework Agreement to confirm the transaction amounts are within the annual caps and the transactions are entered into in accordance with relevant terms set out in the Financial Services Framework Agreement in all material respects.
2. In accordance with the Listing Rules, the independent non-executive Directors of the Company will also perform an annual review of the terms of continuing connected transactions under the Financial Services Framework Agreement to confirm that the pricing policy and the annual caps remain fair and reasonable and that appropriate internal control procedures are in place, and will confirm so each year in the annual report published by the Company.
Capital Risk Control Measures

Pursuant to the Financial Services Framework Agreement, the Finance Company made the following undertakings to the Group to manage the related capital risks:

the statutory deposit reserve ratio of the Finance Company will not be lower than the minimum permitted by the PBOC at any time;
the Finance Company will not use deposits placed by the Group for any high-risk investments;
a daily report of the Group's deposit balance with the Finance Company for every business day will be delivered by the Finance Company to the Finance Director of the Company before 17:00 on the following business day;
if the Finance Company encounters payment difficulties, the Parent will increase the capital investment in the Finance Company accordingly to meet its actual needs to overcome such difficulties;
the Finance Company will provide a copy of regulatory reports submitted to the CBIRC to the Company; and
a monthly financial statement of the Finance Company will be provided to the Company on or before the seventh business day following the end of each month.

- 9 -

LETTER FROM THE BOARD

Payment

The consideration for the transactions contemplated under the Financial Services Framework Agreement will be paid in accordance with separate agreements for specific transactions.

4 REASONS FOR AND BENEFITS OF ENTERING INTO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT WITH THE FINANCE COMPANY

The interest rates for deposit and fees for other financial services provided by the Finance Company will be equivalent to or more favorable to the Group than those provided by PRC general commercial banks, which avails the Group to a stable source of financial services in its ordinary course of business.
The Financial Services Framework Agreement is non-exclusive and does not limit the Group's choice in engaging any banks or financial institutions to satisfy its need for financial services. The entry into the Financial Services Framework Agreement will simply avail the Group to one more service provider and encourage all financial services providers to offer more competitive terms to the Group.
The Group will be able to use the Finance Company as a medium between the Company and its subsidiaries to more effectively allocate funds among its subsidiaries and manage its existing capital and cash flow.
The Group expects to benefit from the Finance Company's better understanding of the Group's operations. Such understanding will enable the Finance Company to offer more favorable, diversified and flexible financial services than third-party commercial banks.

- 10 -

LETTER FROM THE BOARD

5 PROPOSED ANNUAL CAPS AND BASIS OF DETERMINATION

The Directors have considered and proposed the following annual caps under the Financial Services Framework Agreement:

Proposed Deposit Caps
	For the year ended	For the year ended	For the year ending
	31 December 2017	31 December 2018	31 December 2019
Historical maximum daily
deposit balance (including
accrued interests) (RMB
million)	Not applicable	7,300	4,196.884
			(Historical maximum
			daily deposit balance
			for the first six
			months ended 30 June
			2019)
			7,255.024
			(Estimated maximum
			daily deposit balance
			for the last six months
			ending 31 December
			2019)
Previous Deposit Caps
(maximum daily deposit
balance, including accrued
interests) (RMB million)	Not applicable	14,300	16,500
	For the year ending	For the year ending	For the year ending
	31 December 2020	31 December 2021	31 December 2022
Proposed New Deposit Caps
(maximum daily deposit
balance, including accrued
interests) (RMB million)	16,800	17,800	18,800

- 11 -

LETTER FROM THE BOARD

Basis of determination of the proposed Deposit Caps

In determining the proposed maximum daily deposit balance (including accrued interests) in the Group's account with the Finance Company during the term of the Finance Services Framework Agreement, the Board has considered the following factors: (i) the maximum daily deposit balance of the deposit services provided by the Finance Company to the Group under the Original Financial Services Framework Agreement for the year ended 31 December 2018 and for the first six months ended 30 June 2019 and the estimated maximum daily deposit balance for the last six months ending 31 December 2019; (ii) the business development and financial status of the Group; (iii) the deposit business will be carried out between more members of the Group and the Finance Company along with the internal adjustment after Merger of CNBM and Sinoma; and (iv) the future business development of the Finance Company, including the business qualification for the integrated operation and management of cross-border capital currently being applied by the Finance Company. If the qualification is approved, the Finance Company is able to carry out the pooling, collecting and making payment, loan granting of capital for the Group members outside the PRC. The pooling of overall capital will be effectively improved to better serve the members outside the PRC, and accordingly, the deposits with the Finance Company by the Group will increase.

As Merger of CNBM and Sinoma was officially completed in May 2018, the subsidiaries of the Company before the Merger of CNBM and Sinoma and the Finance Company commenced cooperation in the second half of 2018. As the stringent operation and approval process such as account opening and credit approvals required by the PBOC and the CBIRC took longer time than expected, resulting in delay in the cooperation between the Finance Company and the subsidiaries of the Company before the Merger of CNBM and Sinoma, including deposit and loan services. Therefore, the utilization rate of the Deposit Caps in 2018 and 2019 was impacted.

Currently, Finance Company only cooperates with the Company and its second-tier subsidiaries, but has not cooperated with all of its subsidiaries. As disclosed above, it is expected that more members of the Group will engage in deposit business with the Finance Company in the future following the internal adjustments after Merger of CNBM and Sinoma. In particular, Finance Company is currently in the process of establishing a new capital system, which is expected to be launched in late 2019 or early 2020, allowing the scope of cooperation and services to be extended to third or fourth level subsidiaries of the Company, and the collection rate will be further enhanced accordingly. In addition, as mentioned above, Finance Company is currently in the process of applying for qualification for cross-border fund concentration management business. If approved, the service of which can be extended to overseas members of the Group in the future. At present, the size of funds that may be collected from overseas members of the Group is approximately RMB1.5 billion. The commencement of such business will also increase the size of the Group's deposits in the Finance Company.

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LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES
The Parent held directly and indirectly 41.55% of the issued share capital of the Company as at the Latest Practicable Date and is therefore a controlling shareholder of the Company. The Finance Company is a subsidiary of the Parent, and is therefore a connected person of the Company for the purpose of the Listing Rules. Accordingly, the transactions contemplated under the Financial Services Framework Agreement constitute continuing connected transactions of the Company under the Listing Rules.
Deposit services
As one or more of the applicable percentage ratios as defined in Rule 14.07 of the Listing Rules for the Deposit Caps exceeds 25%, the deposit services to be provided by the Finance Company to the Group are subject to the reporting, announcement and Independent Shareholders' approval requirements of Chapter 14A of the Listing Rules. The deposit services transactions contemplated under the Financial Services Framework Agreement will also constitute a major transaction which is subject to the announcement and shareholders' approval requirements of Chapter 14 of the Listing Rules.
Loan services
The loan services to be provided by the Finance Company to the Group are on normal or better commercial terms and are in the interest of the Group. No security over the assets of the Group will be granted to the Finance Company in respect of such loans. Such services will therefore be fully exempted from all reporting, announcement and Independent Shareholders' approval requirements pursuant to Rule 14A.90 of the Listing Rules.
Other financial services
The Company expects that the terms of such services will be on normal commercial terms or better. As one or more of the applicable percentage ratios as defined in Rule 14.07 of the Listing Rules for the caps on the total fees payable by the Group to the Finance Company in respect of such services are more than 0.1% but less than 5%, such services to be provided by Finance Company to the Group are subject to the reporting and announcement requirements but are exempted from Independent Shareholders' approval requirements pursuant to Rule 14A.76 of the Listing Rules.
INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER
The Financial Services Framework Agreement, the deposit services under the Financial Services Framework Agreement and the proposed Deposit Caps will be subject to the Independent Shareholders' approval at the EGM. The Parent and its associates will abstain from voting at the EGM.
- 13 -

LETTER FROM THE BOARD

8 INFORMATION ABOUT THE PARTIES The Company

The Group is a leading building material company in the PRC with significant operations in business segments of the cement, new materials and engineering services businesses.

The Finance Company

The Finance Company, a limited liability company incorporated under the laws of the PRC, was established in the PRC as a non-banking financial institution in April 2013. 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.

The Finance Company has a registered capital of RMB500 million, and is a 70% indirectly held subsidiary of the Parent, while the other 30% is indirectly held by the Company.

The table below compares various financial indicators of the Finance Company as provided by the Finance Company against average levels in finance company industry in the PRC and the relevant regulatory requirements (if any).

		Average levels of
		finance company
	Data of the Finance	industry in the PRC
	Company for the	for the six months
	six months ended 30	ended 30 June 2019	Regulatory
Financial Indicators	June 2019	(Note)	requirements
Non-performing asset ratio	0%	0.74%	No requirements
Capital adequacy ratio	26.58%	20.88%	Not lower than 10%
Return on net asset ratio	14.30%	9.06%	No requirements

Note: Statistics for the six months ended 30 June 2019 are provided by CNAFC.

- 14 -

LETTER FROM THE BOARD

The Parent

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

9 EGM

The EGM of the Company will be held at Tower 2, Guohai Plaza, No.17 Fuxing Road, Haidian District, Beijing, the PRC on Monday, 9 December 2019 at 9:30 a.m. A form of proxy and reply slip for use at the EGM are enclosed with this circular. A notice of the EGM is set out on pages 56 to 59 of this circular.

Pursuant to Rule 13.39(4) of the Listing Rules, all resolutions will be passed by way of poll at the EGM. Any shareholder with a material interest in the Financial Services Framework Agreement and the proposed change of non-executive director, and his close associates will abstain from voting on the ordinary resolutions for approving the Financial Services Framework Agreement and the deposit services transactions contemplated thereunder and the proposed change of non-executive director at the EGM. To the extent that the Company is aware having made all reasonable enquiries, other than the Parent and its associates, no Shareholder will be required under the Listing Rules to abstain from voting on the ordinary resolution for approving the Financial Services Framework Agreement and the deposit services transactions contemplated thereunder at the EGM. As at the Latest Practicable Date, the Parent and its associates directly held 3,505,041,707 Shares, representing approximately 41.55% of total issued share capital of the Company, and controlled or were entitled to control over the voting right in respect of their shares in the Company. To the extent that the Company is aware having made all reasonable enquires, no Shareholder will be required under the Listing Rules to abstain from voting on the ordinary resolution for approving the proposed change of non-executive director at the EGM.

Holders of H Shares of the Company whose names appear on the register of the Company maintained by Tricor Investor Services Limited, the Company's H Share Registrar in Hong Kong, and holders of Domestic Shares and Unlisted Foreign Shares of the Company whose names appear on the register of the Company on Monday, 9 December 2019 shall be entitled to attend the EGM. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 24 hours before the time appointed for the EGM (i.e. not later than 9:30 a.m. on Sunday, 8 December 2019) or any adjournment thereof (as the case may be), and deposit it with Tricor Investor Services Limited, the Company's H Share Registrar in Hong Kong, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong for holders of H Shares; or the office of the Company, at Tower 2, Guohai Plaza, No. 17 Fuxing Road, Haidian District, Beijing, the PRC for holders of Domestic Shares and Unlisted Foreign Shares. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjournment thereof should you so desire.

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LETTER FROM THE BOARD

RECOMMENDATION
The Directors (including independent non-executive Directors, upon considering the opinions of the Independent Financial Adviser) consider that the Financial Services Framework Agreement has been negotiated on arm's length basis and is entered into in the ordinary and usual course of business and on normal commercial terms or better. The terms of the Financial Services Framework Agreement in relation to the deposit services, the deposit services transactions contemplated thereunder and the proposed Deposit Caps are fair and reasonable and are in the interests of the Company and its Shareholders as a whole, thus we recommend the Independent Shareholders to vote in favour of the resolution in relation to the Financial Services Agreement at the EGM. As Mr. Cao Jianglin and Mr. Peng Shou, being executive Directors, and Ms. Xu Weibing, Mr. Chang Zhangli, Mr. Tao Zheng and Mr. Chen Yongxin, being non-executive Directors, hold positions in the Parent and its controlled companies, they are deemed to have a material interest in the Financial Services Framework Agreement. They have abstained from voting on the relevant Board resolution in respect of the Financial Services Framework Agreement. Save as the Directors mentioned above, none of the Directors has a material interest in the transactions contemplated under the Financial Services Framework Agreement or is required to abstain from voting on the relevant Board resolution.
The Directors consider that the proposed change of non-executive director is in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend Shareholders to vote in favour of the relevant resolution set out in the notice of the EGM.
ADDITIONAL INFORMATION
Your attention is drawn to the letter from the Independent Board Committee to the Independent Shareholders set out on pages 17 to 18 of this circular and the letter from Halcyon to the Independent Board Committee and the Independent Shareholders set out on pages 19 to 36 of this circular, and the information set out in the appendices of this circular.

By order of the Board

China National Building Material Company Limited*

Cao Jianglin

Chairman of the Board

Beijing, the PRC

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

23 October 2019

Dear Independent Shareholders,

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT

Reference is made to the circular in relation to the major transaction and continuing connected transactions of China National Building Material Company Limited* (the "Company") dated 23 October 2019 (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board as the members of the Independent Board Committee to give a recommendation to Independent Shareholders on the terms of the renewal of Financial Services Framework Agreement in relation to the deposit services transactions contemplated thereunder and the proposed Deposit Caps and to advise the Independent Shareholders on how to vote. Halcyon has been appointed by the Company as the Independent Financial Adviser to advise us and the Independent Shareholders in this regard.

Having considered the terms of the Financial Services Framework Agreement and taken into account the advice of Halcyon, in particular the factors, reasons and recommendations set out in the letter from the Independent Financial Adviser in the Circular, we are of the view that the terms of the Financial Services Framework Agreement are fair and reasonable so far as the Independent Shareholders are concerned. The Financial Services Framework Agreement is carried out in the ordinary course of business of the Group on normal commercial terms and in the interests of the Company and its shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution in relation to the Financial Services Framework Agreement at the EGM.

- 17 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

We wish to draw the attention of the Independent Shareholders to (1) the letter from the Board set out on pages 1 to 16 of the Circular, (2) the letter from the Independent Financial Adviser set out on pages 19 to 36 of the Circular, and (3) each of the appendices to the Circular.

Yours faithfully,

Independent Board Committee

23 October 2019

Sun Yanjun	Liu Jianwen	Zhou Fangsheng	Qian Fengsheng	Xia Xue
Independent	Independent	Independent	Independent	Independent
non-executive	non-executive	non-executive	non-executive	non-executive
director of the	director of the	director of the	director of the	director of the
Company	Company	Company	Company	Company

- 18 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

HALCYON CAPITAL LIMITED

11TH FLOOR

8 WYNDHAM STREET CENTRAL

HONG KONG

23 October 2019

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

MAJOR TRANSACTION AND

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO FINANCIAL SERVICES FRAMEWORK AGREEMENT

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Financial Services Framework Agreement in relation to the deposit services, the transactions contemplated thereunder and the proposed Deposit caps thereof for each of the three years ending 31 December 2022, details of which are set out in the letter from the Board (the "Letter from the Board") contained in the circular of the Company dated 23 October 2019 (the "Circular"), of which this letter forms part. Unless the context requires otherwise, capitalised terms used in this letter shall have the same meanings as defined in the Circular.

On 30 September 2019, the Company and Finance Company entered into the Financial Services Framework Agreement to renew the Original Financial Service Framework Agreement dated 23 March 2018, pursuant to which Finance Company has agreed to provide the Group with deposit services, loan services and other financial services approved by CBIRC on a non-exclusive basis subject to the terms and conditions therein. Finance Company is a subsidiary of the Parent and the Parent directly and indirectly held an aggregate of approximately 41.55% of the issued share capital of the Company as at the Latest Practicable Date. Therefore, the Finance Company is a connected person of the Company under the Listing Rules and the transactions contemplated under the Financial Services Framework Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As one or more of the applicable percentage ratios as defined in Rule 14.07 of the Listing Rules for the proposed Deposit Caps exceeds 25%, the deposit services to be provided by Finance Company to the Group are subject to the reporting, announcement and Independent Shareholders' approval requirements of Chapter 14A of the Listing Rules. The deposit services transactions contemplated under the Financial Services Framework Agreement (the "Deposit Services") will also constitute a major transaction which is subject to the reporting, announcement and shareholders' approval requirements of Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, the Parent directly and indirectly held an aggregate of approximately 41.55% of the issued share capital of the Company. Given the Finance Company is a subsidiary of the Parent, the Parent and its associates will abstain from voting on the resolution(s) in relation to the Deposit Services and the proposed Deposit Caps under the Financial Services Framework Agreement at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Sun Yanjun, Mr. Liu Jianwen, Mr. Zhou Fangsheng, Mr. Qian Fengsheng and Ms. Xia Xue, has been established to advise the Independent Shareholders as to whether the terms of the Deposit Services and the proposed Deposit Caps are fair and reasonable and on normal commercial terms, and the entering into of the Deposit Services is in the interests of the Company and the Shareholders as a whole and how the Independent Shareholders should vote on the relevant resolution(s) at the EGM.

Our role, as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Deposit Services on (i) whether the terms of the Deposit Services are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the entering into of the Financial Services Framework Agreement in relation to the Deposit Services (including the proposed Deposit Caps) are in the interests of the Company and the Shareholders as a whole and are conducted in the ordinary and usual course of business of the Group; and (iii) whether the Independent Shareholders should vote in respect of the resolution(s) to approve the proposed Deposit Services and the proposed Deposit Caps at the EGM.

OUR INDEPENDENCE

Except for being appointed as the independent financial adviser by the Company and the relevant services rendered in relation to the merger of the Company and Sinoma and the Original Financial Services Framework Agreement (details of which have been set out in various announcements and circular of the Company issued during September 2017 to December 2017), there were no other engagement between the Group and Halcyon Capital in last two years from the date of this letter. Apart from the normal professional fees paid to us in connection with our independent financial advisory appointments under the aforesaid engagement and this engagement, no arrangements exist whereby we had received any fees or benefits from the Company or any other party to the transactions and therefore we consider that such relationship will not affect our independence as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Financial Services Framework Agreement and the transactions contemplated thereunder.

- 20 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

In formulating our advice and recommendation to the Independent Board Committee and the Independent Shareholders, we have relied on the information, financial information and the facts supplied to us and representations expressed by the Directors and/or management of the Group and have assumed that all such information, financial information and facts and any representations made to us, or referred to in the Circular, in all material aspects, are true, accurate and complete as at the time they were made and continue to be so as at the date of the Circular, has been properly extracted from the relevant underlying accounting records (in the case of financial information) and made after due and careful inquiry by the Directors and/or the management of the Group. The management of the Group has confirmed that, after having made all reasonable enquiries and to the best of their knowledge and belief, all relevant information has been supplied to us and that no material facts have been omitted from the information supplied and representations expressed to us. We have also relied on certain information available to the public and have assumed such information to be accurate and reliable. We have no reason to doubt the completeness, truth or accuracy of the information and facts provided and we are not aware of any facts or circumstances which would render such information provided and representations made to us untrue, inaccurate or misleading.

Our review and analysis were based upon, among others, the information provided by the Group including the Original Financial Services Framework Agreement, Finance Service Framework Agreement, the annual report of the Company for the year ended 31 December 2018 (the "2018 Annual Report"), the interim report of the Company for the six months ended 30 June 2019 (the "2019 Interim Report"), the Circular, and certain published information from the public domain.

We have also discussed with the Directors and/or the management of the Group with respect to the terms of and reasons for the entering into of the Deposit Services and considered that we have reviewed sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted an independent verification or appraisal of the information nor have we conducted any form of in-depth investigation into the businesses, affairs, financial position, profitability or the prospects of the Group, Finance Company, the Parent or any of their respective subsidiaries or associates. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy the shares or any other securities of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation on the terms of the Deposit Services (including the proposed Deposit Caps), we have taken the following principal factors and reasons into consideration:

1. Background of the Company and Finance Company

The Company

The Company is a joint stock company incorporated in the PRC with limited liability, the shares of which are listed on the main board of the Stock Exchange. The Group is mainly engaged in the cement, lightweight building materials, glass fibre, composite materials and engineering services businesses. According to the 2019 Interim Report, in terms of production capacity or contract amount as at 30 June 2019, the Group was (i) the largest cement producer in the world; (ii) the largest commercial concrete producer in the world; (iii) the largest gypsum board producer in the world; (iv) the largest rotor blade producer in the PRC; (v) the largest glass fibre producer in the world; (vi) the largest cement engineering service provider in the world; and (vii) the world's leading glass engineering service provider.

According to the 2018 Annual Report, on 8 September 2017, the Company and Sinoma entered into a merger agreement, pursuant to which, the Company and Sinoma have implemented the Merger subject to the terms and conditions of the merger agreement. On 2 May 2018, the H share exchange and the unlisted share exchange have been completed, and after completion of the Merger, Sinoma was merged into and absorbed by the Company in accordance with the PRC Company Law and other applicable PRC laws. Details of the Merger were set out in the circular of the Company dated 20 October 2017.

Set out below are the consolidated cash and cash equivalents, and pledged bank deposits balances of the Company as extracted from the 2018 Annual Report and 2019 Interim Report:

		As at
	31 December 2017	31 December 2018	30 June 2019
	RMB'billion	RMB'billion	RMB'billion
Cash and cash equivalents	34.8	27.7	26.1
and pledged bank deposits	(Note)
balances

Note: The balance was extracted from the 2018 Annual Report which has been restated and taken into account of the cash and cash equivalents of Sinoma as at 31 December 2017.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Meanwhile, according to the 2019 Interim Report, the Group recorded current assets of approximately RMB166.3 billion which included, among other things, bills receivables of approximately RMB22.1 billion, trade receivables within two months of approximately RMB10.5 billion, investment in listed securities of approximately RMB5.3 billion and structured deposits with maturity dates within three months of approximately RMB1.1 billion.

On the other hand, based on the 2018 Annual Report, the Group generated net cash from operating activities of approximately RMB25.3 billion and RMB48.5 billion for each of the two years ended 31 December 2018, respectively.

Finance Company

Finance Company, a limited liability company incorporated under the laws of the PRC, was established in the PRC as a non-banking financial institution in April 2013. 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.

Finance Company has a registered capital of RMB500 million and is owned as to 70% by the Parent and 30% by the Company, respectively. According to the financial statements of Finance Company as prepared under the generally accepted accounting principles in the PRC provided by the Company, Finance Company recorded operating revenue of approximately RMB185.9 million and RMB228.0 million, operating profit of approximately RMB87.1 million and RMB100.6 million and net profit of approximately RMB64.9 million and RMB75.4 million for the year ended 31 December 2017 and 2018, respectively. The total assets of Finance Company was approximately RMB8.0 billion as at 31 December 2018.

- 23 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The table below, as reproduced from the Letter from the Board and based on the financial statements of Finance Company, information provided by the Company and the statistics as published by CNAFC, compares various financial indicators of Finance Company as provided by Finance Company against average levels in the finance company industry in the PRC and the relevant regulatory requirements (if any):

			Average levels in the
			finance company industry	Regulatory
Financial indicators	Finance Company's data	in the PRC (Note)	requirements
	For the		For the
	financial		financial
	year ended	For the six	year ended	For the six
	31 December	months ended	31 December	months ended
	2018	30 June 2019	2018	30 June 2019
Non-performing asset ratio	0%	0%	0.46%	0.74%	No requirement
Capital adequacy ratio	18.04%	26.58%	20.77%	20.88%	Not lower than 10%
Return on net asset ratio	10.81%	14.3%	9.07%	9.06%	No requirement

Note: Statistics for the year ended 31 December 2018 and six months ended 30 June 2019 were provided by

CNAFC.

2. Principal terms of the Deposit Services

Set out below is the principal terms of the Deposit Services (further details are disclosed in the Letter from the Board):

General

The Financial Service Framework Agreement has a term of three years commencing from 1 January 2020.

We have reviewed and compared the principal terms of the Financial Services Framework Agreement in relation to the Deposit Services to those of the Original Financial Services Framework Agreement and found that the major terms of the two agreements are materially the same.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing

Pursuant to the Financial Services Framework Agreement, Finance Company has agreed to provide the Deposit Services to the Group in accordance with the principles that the interest rate for the Group for its deposits with Finance Company shall comply with the PBOC's regulations on interest rates for deposits of the same type from time to time, and will not be lower than: (i) the benchmark interest rate specified by the PBOC for deposits of the same category during the same period; (ii) the interest rate paid by Finance Company for deposits of the same type placed by members of the Parent Group with Finance Company during the same period under the same conditions; and (iii) the interest rate for deposits of the same type offered by PRC general commercial banks to the Group during the same period under the same conditions.

In assessing the fairness and reasonableness of the pricing terms of the Deposit Services, we have performed the following works:

We noted that (A) Finance Company is a non-banking financial institution licensed and regulated by the CBIRC; (B) we have obtained the relevant financial information of Finance Company and noted that (a) Finance Company has maintained better non-performing asset ratio and return on net asset ratio as compared to the average levels in the finance company industry in the PRC in 2018 with a capital adequacy ratio of approximately 18.04%, as compared to the regulatory requirement of not lower than 10%; and (b) Finance Company has maintained better non-performing asset ratio, capital adequacy ratio and return on net asset ratio as compared to the average levels in the finance company industry in the PRC for the six months ended 30 June 2019; (C) as further undertaken under the Finance Services Framework Agreement, the Parent will increase the capital investment in Finance Company accordingly to meet its actual needs to overcome the payment difficulties encountered, and Finance Company will also implement other capital risk control measures; and (D) the Parent has been named as one of the Fortune Global 500 in the past eight years and ranked top 300 amongst Fortune Global 500 in 2017 and 2018.

- 25 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have obtained and reviewed the Financial Services Framework Agreement and noted that the interest rates or fees provided to the Group by Finance Company will not be less favourable than (A) the benchmark interest rate specified by the PBOC for deposits of a similar type during the same period; (B) the interest rate for deposits of a similar type placed by members of the Parent Group with Finance Company during the same period under the same conditions; and (C) the interest rate for deposits of the same type offered by PRC general commercial banks to the Group during the same period under the same conditions. In addition, as stated in the Letter from the Board and according to the Financial Services Framework Agreement, when determining the price for any financial services to be provided as part of the specific transactions entered into between the Group and Finance Company pursuant to the Financial Services Framework Agreement, the Group will obtain quotes of interest rate, fees and other key terms during the same period from at least two general commercial banks in the PRC (which shall mainly be PRC state-owned commercial banks, including but not limited to Industrial and Commercial Bank of China Limited, Agricultural Bank of China Limited, Bank of China Limited and China Construction Bank Corporation Limited which currently provide services to the Group) located in the same or adjacent regions. In practice, the Group may select the general commercial banks to obtain quotes based on their market positions and the competitiveness of their terms in past transactions or quotes. The finance department of the Company will be in charge of obtaining the quotes. The general commercial banks are generally willing to offer quotes to the Group from time to time for business development purposes.
The Company considers that quotes from two or more general commercial banks will be sufficient and representative for the following reasons:
1. as disclosed above, the general commercial banks which the Company will obtain quotes from are mainly large PRC stated-owned commercial banks (including but not limited to Industrial and Commercial Bank of China Limited, Agricultural Bank of China Limited, Bank of China Limited and China Construction Bank Corporation Limited) with strong market position and are considered sensitive to the latest PRC government policies and market trend. Based on the terms offered by them in the past, the Company believes that their quotes are credible and representative of the most favourable terms available under the prevailing market conditions; and
2. the financial services industry in the PRC is subject to regulations and standards imposed by the CBIRC. There is a strong tendency of homogenisation of terms offered by the banks. Based on its experience, the Company believes that two quotes are usually sufficient.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group will compare the quotes so obtained with the corresponding terms proposed by Finance Company and: (A) if the interest rate, fees and terms proposed by Finance Company are more favourable than those proposed by such PRC general commercial banks, the Group will engage Finance Company; and (B) as a matter of principle and taking into account the fact that the Company has 30% equity interest in the Finance Company, the Group will give priority to using the services of Finance Company if Finance Company and such PRC general commercial banks offer equivalent terms and conditions. The Group has discretion to engage one or more of such PRC general commercial banks as its financial service providers as it thinks fit and beneficial to the Group.

In view of the above, we consider that the credit risk of Finance Company shall not be materially different from PRC general commercial banks, and further taking into account that the Group will obtain quotes of interest rate, fees and other key terms during the same period from at least two general commercial banks in the PRC (mainly PRC state-owned commercial banks which currently provide services to the Group) located in the same or adjacent regions to ascertain whether to engage Finance Company for the Deposit Services, and as stated in the 2018 Annual Report, the auditors of the Company have reviewed the continuing connected transactions of the Group including the continuing connected transactions contemplated under the Original Financial Services Framework Agreement, and reported to the Board that, among other things, nothing has come to their attention that causes them to believe that the transactions involving provision of goods or services were not conducted in accordance with the pricing policy of the Group and nothing has come to their attention that causes them to believe that the transactions were not conducted in accordance with the terms of the agreement governing it, we are of the view that the Deposit Services are on normal commercial terms, and the principal terms of the Deposit Services and the price determination mechanism as set out above are fair and reasonable.

Meanwhile, we have also reviewed the base deposit interest rates for RMB as shown in the web sites of Industrial and Commercial Bank of China Limited, Agricultural Bank of China Limited, Bank of China Limited and China Construction Bank Corporation Limited and we noted that the interest rates are very similar. Based on the aforesaid and having considered Company's reasons in quoting from at least two general commercial banks in the PRC as stated above, we concur with the Company that quoting from at least two general commercial banks in the PRC is adequate.

- 27 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Background of and reasons for the Deposit Services

As advised by the Company, prior to the Merger which completed on 2 May 2018, the Finance Company has been providing financial services, including the deposit service, to Sinoma Group since the incorporation of the Finance Company.

According to the Letter from the Board, the reasons and benefits of the Deposits Services included the following: (i) the interest rates for deposit services and fees for other financial services provided by Finance Company will be equivalent to or more favourable to the Group than those provided by PRC general commercial banks, which avails the Group to a stable source of financial services in its ordinary course of business; (ii) the Financial Services Framework Agreement is non-exclusive and does not limit the Group's choice in engaging any banks or financial institutions to satisfy its need for financial services. The entry into the Financial Services Framework Agreement will simply avail the Group to one more service provider and encourage all financial services providers to offer more competitive terms to the Group; (iii) the Group will be able to use Finance Company as a medium between the Company and its subsidiaries to more effectively allocate funds among its subsidiaries and manage its existing capital and cash flow; and (iv) the Group expects to benefit from Finance Company's better understanding of the Group's operations. Such understanding will enable Finance Company to offer more favourable, diversified and flexible financial services than third-party commercial banks.

As set out in our analysis under the paragraph headed "2. Principal terms of the Deposit Services - Pricing" above, we are of the view that the Deposit Services are on normal commercial terms and the principal terms of the Deposit Services are fair and reasonable. Furthermore, given the Group is not restricted, under the Financial Services Framework Agreement, to engage any other financial service provider based on its business need and preferences, we concur with the Company that the Financial Services Framework Agreement represents an alternative or additional source of financial services to be provided by a financial institution which is licensed and regulated by the CBIRC.

On the other hand, given the settlement services provided by Finance Company to the Group will be on a free of charge basis, and Finance Company has provided financial services to Sinoma Group since 2013, we concur with the Company that the Financial Services Framework Agreement would enable the Group to allocate funds among its subsidiaries and manage its existing capital and cash flow more effectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the Company, the actual maximum daily balance (including accrued interests) for the year ended 31 December 2017 amounted to approximately RMB7.3 billion, as compared to the annual cap on maximum daily balance of deposits placed by members of the Sinoma Group with Finance Company (including accrued interests) of RMB8.0 billion; the actual maximum daily balance (including accrued interests) for the year ended 31 December 2018 amounted to approximately RMB7.3 billion, as compared to the annual cap on maximum daily balance of deposits placed by members of the Group with Finance Company (including accrued interests) of approximately RMB14.3 billion; and the actual maximum daily balance (including accrued interests) for the six months ended 30 June 2019 amounted to approximately RMB4.2 billion and the expected maximum daily balance (including accrued interests) for the six months ending 31 December 2019 would amount to approximately RMB7.3 billion, as compared to the annual cap on maximum daily balance of deposits placed by members of the Group with Finance Company (including accrued interests) of approximately RMB16.5 billion. As further advised by the management of the Company, the historical maximum daily deposit balance of the Group placed with commercial banks and financial institutions for each of the year ended 31 December 2018 and six months ended 30 June 2019 exceeded RMB35 billion, while the Group did not fully utilise the deposit caps under the Original Financial Services Framework Agreement as the Group has the sole discretion in placing deposits with different financial institutions. The Deposit Service merely represented an additional deposit-taking financial institution available to the Group in placing its deposits in additional to the general commercial banks in the PRC.

Furthermore, in assessing the reasonableness of the Deposit Services, we have further taken into account the following:

Finance Company has been providing similar services to Sinoma Group, which has become part of the Group as a result of the Merger, since 2013 and the principal business of Sinoma Group prior to the Merger was similar to the Group. The management of the Company considers that such long-term and stable relationship between the Sinoma Group and Finance Company has facilitated better understanding on the operation and the need of each other, which may potentially enhance the operation efficiency of the Group;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given (A) Finance Company is a non-banking financial institution licensed and regulated by the CBIRC; (B) Finance Company has maintained a better non-performing asset ratio and return on net asset ratio as compared to the average levels in the finance company industry in the PRC in 2018 with a capital adequacy ratio of approximately 18.04%, as compared to the regulatory requirement of not lower than 10%; (C) Finance Company has maintained better non-performing asset ratio, capital adequacy ratio and return on net asset ratio as compared to the average levels in the finance company industry in the PRC for the six months ended 30 June 2019; (D) as further undertaken under the Finance Services Framework Agreement, the Parent will increase the capital investment in Finance Company accordingly to meet its actual needs to overcome the payment difficulties encountered by Finance Company, and Finance Company will also implement other capital risk control measures. Finance Company is regulated by the PBOC and the CBIRC; and (E) the Parent has been named as one of the Fortune Global 500 in the past eight years and top 300 amongst the Fortune Global 500 companies in 2017 and 2018, the risk in depositing with Finance Company should be reasonable and acceptable;
As advised by the management of the Company, the Group will only deposit part of its funds with Finance Company. Based on the information provided by the Company, the actual maximum daily balance of deposits placed by members of the Group with Finance Company (including accrued interests) for 2018 and the first half of 2019 was approximately RMB7.3 billion and RMB4.2 billion, representing approximately 26.4% and 16.1% of the aggregate of cash and cash equivalent and pledged bank deposits balances as at the then year-end or period-end date (as the case may be).

In view of the above, we consider that the entering into the Deposit Service are in the ordinary and usual course of business of the Company, and are in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. The proposed Deposit Caps

Set out below are the details of (i) the historical amounts and annual caps for the Deposit Services for the year ended 31 December 2018 and six months ended 30 June 2019 under the Original Financial Services Framework Agreement; and (ii) the proposed Deposit Caps for the three years ending 31 December 2022 under the Financial Services Framework Agreement, in relation to the transactions that are subject to the annual review, reporting, announcement and independent shareholders' approval requirements under the Listing Rules for the Company:

Historical transaction amount of Deposit Services

Transactions		Year ended 31 December
		2018	2019
		(RMB billion)	(RMB billion)
Deposit Services (maximum daily		7.3	4.2
balance (including accrued interests))			(up to 30 June 2019)
			7.3
			(estimation for the
			six months ending
			31 December 2019)
Annul caps under the Original Financial		14.3	16.5
Services Framework Agreement
	For the year ending 31 December
	2020	2021	2022
(RMB billion)	(RMB billion)	(RMB billion)
Deposit Caps	16.8	17.8	18.8

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the Letter from the Board, the proposed Deposit Caps were determined after considering the following factors: (i) the maximum daily deposit balance of the deposit services provided by the Finance Company to the Group under the Original Financial Services Framework Agreement for the year ended 31 December 2018 and for the six months ended 30 June 2019, and the estimated maximum daily deposit balance for the six months ending 31 December 2019;

the business development and financial status of the Group; (iii) the deposit business will be carried out between more members of the Group and the Finance Company along with the internal adjustment after merger of CNBM and Sinoma; and (iv) the future business development of the Finance Company, including the business qualification for the integrated operation and management of cross-border capital currently being applied by the Finance Company. If the qualification is approved, the Finance Company is able to carry out the pooling, collecting and making payment, loan granting of capital for the Group members outside the PRC. The pooling of overall capital will be effectively improved to better serve the members outside the PRC, and accordingly, the deposits in the Finance Company of the Group will increase.

Furthermore, it was further stated in the Letter from the Board that, among other things, as the Merger was officially completed in May 2018, the subsidiaries of the Company before the Merger and the Finance Company commenced cooperation in the second half of 2018. As the stringent operation and approval process such as account opening and credit approvals required by the PBOC and the CBIRC took longer time than expected, resulting in delay in the cooperation between the Finance Company and the subsidiaries of the Company before the Merger, including deposit and loan services. Therefore, the utilization rate of the Deposit Caps in 2018 and 2019 was impacted. Currently, Finance Company only cooperates with the Company and its second-tier subsidiaries, but has not cooperated with all of its subsidiaries.

In addition to the factors considered by the Company in arriving at the proposed Deposit Caps as set out above and in the Letter from the Board, we have also considered the following in assessing the fair and reasonableness of the proposed Deposit Caps:

we noted that the Group maintained aggregate amount of cash and cash equivalent and pledged bank deposit of approximately RMB27.8 billion, RMB34.0 billion and RMB26.1 billion as at 31 December 2018, 31 March 2019 and 30 June 2019 based on the 2019 Interim Report and the quarterly report of the Company for the three months ended 31 March 2019, while as further advised by the Company, the historical maximum daily deposit balance of the Group placed with commercial banks and financial institutions for each of the year ended 31 December 2018 and six months ended 30 June 2019 exceeded RMB35 billion and the Group recorded net cash generated from operating activities of approximately RMB25.3 billion and RMB48.5 billion for each of the two years ended 31 December 2018, respectively, as compared to the Deposit Caps for each of the three years ending 31 December 2022 of RMB16.8 billion, RMB17.8 billion and RMB18.8 billion, respectively;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the annual caps under the Original Financial Services Framework Agreement for the remaining two years ending 31 December 2019 was RMB14.3 billion and RMB16.7 billion. The proposed Deposit Caps for the year ending 31 December 2020 only represents a slight increase of approximately 1.8% and the growth rate of the proposed Deposit Caps for each of the two years ending 31 December 2022 was only 6.0% and 5.6%, respectively. According to the 2018 Annual Report, the compound annual revenue growth of revenue of the Group from 2016 to 2018 was approximately 20.1%, and the Group experienced a growth rate of approximately 38.6% in operating cash flows before working capital changes from approximately RMB38.5 billion for the year ended 31 December 2017 to approximately RMB53.4 billion for the year ended 31 December 2018; and
Finance Company has obtained the qualification of "Foreign Exchange and Settlement Qualification and Sales" ("結售匯外幣") approved by State Administration of Foreign Exchange on 15 January 2018, which enabled Finance Company to provide foreign exchange and settlement financial services.

Having taken into consideration of the above, in particular, (i) the historical maximum daily deposit balance of the Group placed with commercial banks and financial institutions for each of the year ended 31 December 2018 and six months ended 30 June 2019 exceeded RMB35 billion; (ii) the growth rate of the proposed Deposit Caps for each of the three years ending 31 December 2022 was only approximately 1.8%, 6.0% and 5.6%, respectively; (iii) the Company recorded a relatively strong net cash inflow from operating activities of approximately RMB48.5 billion for the year ended 31 December 2018, as compared to approximately RMB25.3 billion for the year ended 31 December 2017; and (iv) the continuous improvement in financial performance of the Group over the past three years, we are of the view that the bases for determining the proposed Deposit Caps are fair and reasonable.

5. Internal Control Measures

With a view to protect the Shareholders' interests, the Group has adopted certain internal control procedures and corporate governance measures to ensure the individual transactions are conducted within the Financial Services Framework Agreement (including the Deposit Services):

The Group employs and maintains separate business, operation and accounting personnel of its own from Finance Company. There is clear segregation of approval authority and duty between the parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Company's Finance Department will perform quarterly check on transactions entered into under the Financial Services Framework Agreement to ensure compliance with pricing policies and the annual caps are not exceeded.
The annual caps are set based on the estimated transaction amount reported by the members of the Group. While carrying out the specific connected transactions under the Financial Services Framework Agreement, the relevant member of the Group carrying out the specific connected transactions will monitor the actual transaction amounts and report to the Company if the actual transaction amount exceeds the estimated transaction amount forming the basis of the annual caps. The Company will monitor at the Group level to confirm that the aggregated transaction amounts are within the annual caps.
The Company's external auditors will conduct an annual review of the transactions entered into under the Financial Services Framework Agreement to confirm the transaction amounts are within the annual caps and the transactions are entered into in accordance with the terms set out in the Financial Services Framework Agreement in all material respects.
In accordance with the Listing Rules, the independent non-executive Directors and the auditors of the Company will also perform an annual review of the terms of continuing connected transactions under the Financial Services Framework Agreement to confirm that the pricing policy and the annual caps remain fair and reasonable and that appropriate internal control procedures are in place, and will confirm so each year in the annual report published by the Company.

The Company considers that the above internal control procedures and corporate governance measures under the Financial Services Framework Agreement or adopted by the Group (as the case may be) are appropriate and sufficient, and that the procedures and measures give assurance to the Independent Shareholders that the Deposit Services will be appropriately monitored by the Company.

We have further obtained a sample from the Group in relation to the historical saving interest rates offered by Finance Company and other three commercial banks on the same date, and noted that the interest rate offered by Finance Company did not violate the pricing policy as set out under the Original Financial Services Framework Agreement.

- 34 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

MEASURES TO ENSURE COMPLIANCE WITH THE LISTING RULES

In addition, pursuant to Rules 14A.55 to 14A.59 of the Listing Rules, the Deposit Services are subject to the following annual review requirements:

the independent non-executive Directors must review the Deposit Services every year and confirm in the annual report and whether the Deposit Services have been entered into:
1. in the ordinary and usual course of business of the Group;
2. on normal commercial terms or better; and
3. according to the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;
the Company must engage its auditors to report on the Deposit Services every year. The auditors of the Company must provide a letter to the Board (with a copy to be provided to the Stock Exchange at least ten business days before the bulk printing of the Company's annual report) confirming whether anything has come to their attention that causes them to believe that the Deposit Services:
1. have not been approved by the Board;
2. were not, in all material respects, in accordance with the pricing policies of the Group if the Deposit Services involve the provision of goods or services by the Group;
3. were not entered into, in all material respects, in accordance with the relevant agreements governing the Deposit Services; and
4. have exceeded the annual caps;
the Company must allow, and ensure that the counterparties to the Deposit Services allow, the Company's auditors sufficient access to their records for the purpose of the reporting on the Deposit Services as set out in paragraph (b); and
the Company must promptly notify the Stock Exchange and publish an announcement if the independent non-executive Directors and/or auditors of the Company cannot confirm the matters as required.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In light of the annual review and reporting requirements attached to the Deposit Services, in particular,

there are respective person or department in charge for collecting and monitoring the terms and transaction amount of each particular transactions under the Financial Services Framework Agreement;
the restriction of the value of the Deposit Services by way of the proposed annual caps; (iii) the ongoing annual review by the Independent Non-executive Directors and the auditors of the Company of the terms and the annual caps not being exceeded; and (iv) the internal control measures in place to ensure the Company's conformity with the policies under the Deposit Services, we are of the view that there are appropriate measures to govern the Company in conducting the Deposit Services contemplated under the Financial Services Framework Agreement in a view to safeguarding the interests of the Shareholders.

RECOMMENDATION

Having taken into account the principal reasons and factors discussed above, we are of the view that the Deposit Services (including the proposed Deposit Caps) are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and that the Deposit Services is in the ordinary and usual course of business of the Group, and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to, and also recommend the Independent Shareholders to, vote in favour of the relevant ordinary resolutions to be proposed at the EGM for approving the Deposit Services (including the proposed Deposit Caps).

Yours faithfully,

For and on behalf of

Halcyon Capital Limited

April Chan	Barton Lai
Director	Director

Ms. Chan is a licensed person registered with the Securities and Futures Commission and a responsible officer of Halcyon Capital, which is licensed under the SFO to carry out Type 6 (advising on corporate finance) regulated activities. Ms. Chan has participated in the provision of independent financial advisory services for various transactions involving companies listed on the Stock Exchange.

Mr. Lai is a licensed person registered with the Securities and Futures Commission and a responsible officer of Halcyon Capital, which is licensed under the SFO to carry out Type 6 (advising on corporate finance) regulated activities. Mr. Lai has participated in the provision of independent financial advisory services for various transactions involving companies listed on the Stock Exchange.

- 36 -

APPENDIX I	FINANCIAL INFORMATION ON THE GROUP

1. THE GROUP'S FINANCIAL INFORMATION

The audited consolidated financial information of the Company for each of the three years ended 31 December 2016, 2017 and 2018 have been disclosed in the annual reports of the Company for the years ended 31 December 2016, 2017 and 2018 in accordance with International Financial Reporting Standards ("IFRS"), respectively. The unaudited condensed consolidated interim financial information of the Company as of and for the six months ended 30 June 2019 have been disclosed in the interim report of the Company for the six months ended 30 June 2019. Details of the financial statements have been published on the Stock Exchange website (http://www.hkexnews. hk) and the Company's website (http://www.cnbmltd.com/index.jsp):

in respect of the annual report of the Company for the year ended 31 December 2018 published on 3 April 2019 (pages 148 to 338)
in respect of the annual report of the Company for the year ended 31 December 2017 published on 25 April 2018 (pages 148 to 294)
in respect of the annual report of the Company for the year ended 31 December 2016 published on 7 April 2017 (pages 127 to 263)
in respect of the interim report of the Company for the six months ended 30 June 2019 published on 29 August 2019 (pages 82 to 168)

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APPENDIX I	FINANCIAL INFORMATION ON THE GROUP

2. INDEBTEDNESS

Borrowings
At the close of business on 31 August 2019, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had the following outstanding borrowings:

	RMB'000
Borrowings:
- Bank borrowings, secured	3,493,974
- Bank borrowings, guaranteed	65,563,699
- Bank borrowings, unsecured	50,693,403
- Bonds	110,998,114
- Borrowings from other financial institutions, secured	2,152,474

	232,901,664
Lease liabilities	4,383,552
Other borrowings	19,991,172

	257,276,388

Pledge of assets
At the close of business on 31 August 2019, the Group pledged the following assets for securing bank borrowings:

	RMB'000
Property, plant and equipment	5,331,541
Right of use assets	366,629
Financial assets at fair value through profit or loss	472,344
Cash and cash equivalents	6,431,572
Bills receivable	992,718

	13,594,804

- 38 -

APPENDIX I	FINANCIAL INFORMATION ON THE GROUP

Commitment
At the close of business on 31 August 2019, the Group had commitment for acquisition of property, plant and equipment of approximately RMB524,000.
Contingent liabilities
At the close of business on 31 August 2019, the Group did not have any contingent liabilities.
Disclaimers
Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade and other payables in the ordinary course of business, the Group did not have any other loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorised or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding on 31 August 2019.

3. FINANCIAL AND TRADING PROSPECTS OF THE COMPANY

In the second half of 2019, the domestic and international economic situation will be complicated and severe with increasing unstable and uncertain factors. China's economy is facing new downward pressure, though, with challenges comes opportunities. From a macro perspective, PRC government will continue to insist on the general principle of seeking progress while maintaining stability, carrying out proactive fiscal initiatives and steady monetary policies, and adhering to the supply- side structural reform as the main theme to promote steady and healthy economic development. From the perspective of the industry, in the first half of 2019, a good operational foundation has been laid. In the second half of the year, supervision and inspection on environmental protection will continue to advance in depth and the treatment effort of environmental protection will continue to strengthen. It is expected to maintain a stable and improving trend. From the perspective of the Company, with the continuous deepening of management improvement and business integration, it will further achieve high quality development.

The Group resolutely implements high-quality development concepts and strategic deployment. With strict compliance to the working guideline of "maintaining steady growth, focusing on the optimization, promoting reforms, and enhancing party building", management principle of "adhere to priority of efficiency and efficacy, adhere to the main highlight of specialization, adhere to the meticulosity, refinement and solidity, insist on the operating ideology of "PCP", adhere to integration and optimization, adhere to the digitalisation" and management measures of "price

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APPENDIX I	FINANCIAL INFORMATION ON THE GROUP

stabilisation, cost reduction, quantity guarantee, inventory control and optimization", the Group will strengthen the construction of its profit platform, focus on the main business, strengthen the main business, improve the quality of the main business development, and enhance its core competitiveness and profitability.

First, the Group will fully promote the supply-side structural reform. The Company will implement the "Three-Year Plan for Defending the Blue Sky", strictly implement the peak shifting production, restricted output for environment protection purpose, promote elimination of outdated production capacity, improve the policy of output reduction and production capacity replacement, insist on placing equal emphasis on the reduction in production capacity and output to maintain a healthy operating environment of the industry.

Second, the Group will, with all its strength, promote transformation and upgrading. Focusing on the three major business landscapes of "cement, new material and engineering", the Group promoted the layout optimization of cement to strengthen the construction of core profit area of commercial concrete and accelerate the development of aggregates. The Group will rapidly promote the development of new materials business, accelerate the transformation of the business into a high-end and intelligent form, and steadily promote globalization to promote "Gypsum Board+" and "Glass fiber+". The Group will consolidate the traditional advantages of the engineering services business and promote "localization and moderate diversification" to develop "Engineering+".

Third, the Group will give great effort to promote the "management of three delicacies". In terms of "improve operating efficiency", the Company will practice the ideology of "PCP", focus on marketing, consolidate traditional markets, develop emerging markets, and dig deep into market segments. In terms of "enhance refined management level", we will improve the level of management digitalization, informationization and intelligence to further reduce costs and expenses, and streamline the management chain. In terms of "streamline the organizational structure", we will focus on the "2422" special project to optimize the balance sheet so as to streamline organization and personnel.

Fourth, the Group will fully promote integration and optimization. In accordance with the principle of refocus, we will promote the integration of the business sector in an orderly manner to realize resource sharing, mutual complement of advantages, and give full play to synergies.

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APPENDIX I	FINANCIAL INFORMATION ON THE GROUP

WORKING CAPITAL
The Directors are of the opinion that, the financial resources available to the Group, including but not limited to the internally generated funds, cash and cash equivalents on hands, available facilities from bank and financial institutions, the working capital available to the Group is sufficient for the Group's requirements for at least 12 months from the date of this circular.
FINANCIAL EFFECT OF THE FINANCIAL SERVICES FRAMEWORK AGREEMENT ON THE EARNINGS, ASSETS AND LIABILITIES OF THE GROUP
The Financial Services Framework Agreement does not and the Group expects that it will not have any material impact on the earnings, net asset value, liabilities and gearing of the Group.
NO MATERIAL ADVERSE CHANGE
As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or operating position of the Group since 31 December 2018, the date to which the latest published audited financial statements of the Group were made up.

- 41 -

APPENDIX II	GENERAL INFORMATION

RESPONSIBILITY STATEMENT
This 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 this 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 this circular misleading.
DISCLOSURE OF INTERESTS IN SHARES
I. Interests and short positions of the Directors, Chief Executive and Supervisors

As at the Latest Practicable Date, so far as the Directors, chief executive or supervisor of the Company are aware, none of the Directors, chief executive or Supervisors of the Company had interests and short positions in the Shares, underlying Shares and/or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code of Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange.

Interests of Shareholders disclosable pursuant to the SFO
As at the Latest Practicable Date, so far as is known to the Directors, chief executive or supervisors of the Company, the following persons (other than a Director, chief executive or supervisor of the Company) had an interest or short position in the Shares or underlying Shares of Company (as the case may be) which would fall to be disclosed to Company and the Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO or which

- 42 -

APPENDIX II	GENERAL INFORMATION

were recorded in the register required to be kept by Company under Section 336 of the SFO or had otherwise notified the Company are as follows:

								Percentage of
		Long/short						the relevant	Percentage of
Name of Substantial		position/			Number of		class of share	total share
Shareholders	Class of Shares	Lending pool	Capacity		Shares held	Notes	capital(%)1	capital(%)1
Parent	Domestic Shares	Long	Beneficial owner	504,991,734
	Domestic Shares	Long	Interest of controlled	2,984,713,973
			corporations

				3,489,705,707	2,3	78.33	41.37
	H Shares	Long	Beneficial owner	8,536,000
	H Shares	Long	Interest of controlled	6,800,000
			corporations

				15,336,000		0.40	0.18
BNBMG	Domestic Shares	Long	Beneficial owner	1,485,566,956
	Domestic Shares	Long	Other	227,719,530	4

				1,713,286,486		2	38.46	20.31
Sinoma Parent	Domestic Shares	Long	Beneficial owner	1,270,254,437		2	28.51	15.06
	H Shares	Long	Interest of controlled	6,800,000			0.18	0.08
			corporations
Cinda	Domestic Shares	Long	Beneficial owner	410,252,200		3	9.21	4.86
Taishan Finance	Domestic Shares	Long	Interest of controlled	263,318,181		5	5.91	3.12
			corporations
Taishan Investment	Domestic Shares	Long	Beneficial owner	263,318,181		5	5.91	3.12
CNBM Trading	Domestic Shares	Long	Beneficial owner	227,719,530		2	5.11	2.70
BlackRock, Inc.	H Shares	Long	Interest of controlled	298,336,130		6	7.71	3.53
			corporations
		Short	Interest of controlled	236,000		6	0.01	0.01
			corporations
Citigroup Inc.	H Shares	Long	Interest of controlled	5,117,417
			corporations
	H Shares	Long	Approved lending	228,197,355
			agent

				233,314,772		7	6.03	2.76
	H Shares	Short	Interest of controlled	1,344,000		7	0.03	0.01
			corporations
	H Shares	Lending Pool	-	228,197,355		7	5.89	2.70
Forchn International	Unlisted Foreign	Long	Beneficial owner	111,174,235			100	1.32
	Shares

- 43 -

APPENDIX II	GENERAL INFORMATION

Notes:

As at the Latest Practicable Date, the Company's total issued share capital comprised 8,434,770,662 shares, including 4,454,898,633 Domestic Shares, 3,868,697,794 H Shares and 111,174,235 Unlisted Foreign Shares.
Of these 3,489,705,707 Shares, 504,991,734 Shares are directly held by the Parent, the remaining 2,984,713,973 Shares are deemed corporate interest indirectly held through BNBMG, Sinoma Parent, CNBM Trading and Building Materials Academy. Sinoma Parent, CNBM Trading and Building Materials Academy are wholly-owned subsidiaries of the Parent. BNBMG is a subsidiary of the Parent which directly and indirectly holds 100% of its equity interests, of which 70.04% is directly held and 29.96% is indirectly held through CNBM Trading. Under the SFO, the Parent is deemed to own the shares directly or indirectly held by BNBMG (1,713,286,486 Shares), directly held by Sinoma Parent (1,270,254,437 Shares), directly held by CNBM Trading (227,719,530 Shares) and directly held by Building Materials Academy (1,173,050 Shares).
Pursuant to a share transfer agreement dated 31 December 2009 entered into between the Parent and Cinda, Cinda agreed to transfer 49,000,000 Domestic Shares of the Company to the Parent ("First Transfer of Shares"). Pursuant to another share transfer agreement dated 15 December 2010 entered into between the Parent and Cinda, Cinda agreed to transfer 12,800,137 Domestic Shares of the Company to the Parent ("Second Transfer of Shares"). As the proposal in relation to bonus issue of shares on the basis of ten bonus shares for every ten shares held by shareholders of the Company was passed at the 2010 annual general meeting of the Company, the Parent and Cinda entered into a supplemental agreement to the aforesaid two share transfer agreements on 31 August 2012, whereby Cinda agreed to adjust the 61,800,137 Domestic Shares of the Company transferred to the Parent to 123,600,274 Domestic Shares. Consequently, under the SFO, the Parent was deemed to own 3,613,305,981 Domestic Shares (representing 81.11% in the domestic share capital and 42.84% in the total share capital) and Cinda was deemed to own 286,651,926 Domestic Shares (representing 6.43% in the domestic share capital and 3.40% in the total share capital). As at the Latest Practicable Date, the formalities in respect of the share transfer registration of the aforementioned transactions of shares with the China Securities Depository and Clearing Corporation Limited had not yet been completed.
BNBMG is taken to have an interest in such Shares as it is entitled to control the exercise of a right conferred by the holding of such Shares.
Taishan Investment is a wholly-owned subsidiary of Taishan Finance. Under the SFO, Taishan Finance is deemed to own 263,318,181 Shares directly held by Taishan Investment.
BlackRock, Inc. was deemed to hold interests in a total of 298,336,130 H Shares (long position) and 236,000 H Shares (short position) in the Company by virtue of its control over the following corporations, which held direct interests in the Company:
6.1 BlackRock Investment Management, LLC held 2,736,536 H Shares (long position) in the Company. BlackRock Investment Management, LLC was an indirect wholly-owned subsidiary of BlackRock, Inc..

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APPENDIX II	GENERAL INFORMATION

BlackRock Financial Management, Inc. held 7,242,000 H Shares (long position) in the Company. BlackRock Financial Management, Inc. was an indirect wholly-owned subsidiary of BlackRock, Inc..
BlackRock Institutional Trust Company, National Association held 56,248,479 H Shares (long position) and 236,000 H Shares (short position) in the Company. BlackRock Institutional Trust Company, National Association was an indirect wholly-owned subsidiary of BlackRock Holdco 6, LLC, which in turn was indirectly held as to 90% by BlackRock, Inc..
BlackRock Fund Advisors held 68,536,850 H Shares (long position) in the Company. BlackRock Fund Advisors was an indirect wholly-owned subsidiary of BlackRock Holdco 6, LLC, which in turn was indirectly held as to 90% by BlackRock, Inc..
BlackRock Advisors, LLC held 92,000 H Shares (long position) in the Company. BlackRock Advisors, LLC was an indirect wholly-owned subsidiary of BlackRock, Inc..
BlackRock Japan Co., Ltd. held 28,511,050 H Shares (long position) in the Company. BlackRock Japan Co., Ltd. was an indirect wholly-owned subsidiary of BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Asset Management Canada Limited held 1,202,000 H Shares (long position) in the Company. BlackRock Asset Management Canada Limited was an indirect wholly-owned subsidiary of BlackRock Canada Holdings LP, which in turn was indirectly owned as to 99.9% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Investment Management (Australia) Limited held 1,035,750 H Shares (long position) in the Company. BlackRock Investment Management (Australia) Limited was an indirect wholly-owned subsidiary of BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Asset Management North Asia Limited held 2,409,669 H Shares (long position) in the Company. BlackRock Asset Management North Asia Limited was an indirect wholly-owned subsidiary of BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock (Netherlands) B.V. held 546,000 H Shares (long position) in the Company. BlackRock (Netherlands) B.V. was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Advisors (UK) Limited held 216,000 H Shares (long position) in the Company. BlackRock Advisors (UK) Limited was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..

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APPENDIX II	GENERAL INFORMATION

BlackRock International Limited held 780,000 H Shares (long position) in the Company. BlackRock International Limited was a direct wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Asset Management Ireland Limited held 23,941,727 H Shares (long position) in the Company. BlackRock Asset Management Ireland Limited was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BLACKROCK (Luxembourg) S.A. held 11,972,350 H Shares (long position) in the Company. BLACKROCK (Luxembourg) S.A. was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Investment Management (UK) Limited held 25,534,037 H Shares (long position) in the Company. BlackRock Investment Management (UK) Limited was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Fund Managers Limited held 54,444,615 H Shares (long position) in the Company. BlackRock Fund Managers Limited was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Life Limited held 12,171,067 H Shares (long position) in the Company. BlackRock Life Limited was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock (Singapore) Limited held 684,000 H Shares (long position) in the Company. BlackRock (Singapore) Limited was an indirect wholly owned subsidiary of BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..
BlackRock Asset Management (Schweiz) AG held 32,000 H Shares (long position) in the Company. BlackRock Asset Management (Schweiz) AG was an indirect wholly-owned subsidiary of BlackRock Group Limited, which in turn was indirectly held as to 90% by BR Jersey International Holdings L.P., which in turn was indirectly held as to 86% by BlackRock, Inc..

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APPENDIX II	GENERAL INFORMATION

The 236,000 H Shares (short position) of BlackRock, Inc. in the Company were held through derivatives as follows:

236,000 H Shares (short position) - through cash settled unlisted derivatives

7. Citigroup Inc. was deemed to hold interests in a total of 233,314,772 H Shares (long position) and 1,344,000 H Shares (short position) in the Company by virtue of its control over the following corporations, which held direct interests in the Company:

Citibank, N.A. held 228,651,355 H Shares (long position) and 454,000 H Shares (short position) in the Company. Citibank, N.A. was an indirect wholly-owned subsidiary of Citigroup Inc..
Citigroup Global Markets Hong Kong Limited held 368,000 H Shares (long position) and 228,800 H Shares (short position) in the Company. Citigroup Global Markets Hong Kong Limited was an indirect wholly-owned subsidiary of Citigroup Inc..
Citigroup Global Markets Inc. held 750 H Shares (long position) in the Company. Citigroup Global Markets Inc. was an indirect wholly-owned subsidiary of Citigroup Inc..
Citigroup Global Markets Limited held 4,294,667 H Shares (long position) and 661,200 H Shares (short position) in the Company. Citigroup Global Markets Limited was a direct wholly-owned subsidiary of Citigroup Global Markets Holdings Bahamas Limited, which in turn was directly held as to 90% by Citigroup Financial Products Inc., which in turn was indirectly wholly-owned by Citigroup, Inc..

The entire interest and short position of Citigroup Inc. in the Company included a lending pool of 228,197,355 H Shares. Besides, 838,750 H Shares (long position) and 1,186,000 H Shares (short position) of Citigroup Inc. in the Company were held through derivatives as follows:

750 H Shares (long position)	-	through physically settled listed derivatives
822,000 H Shares (long position)	-	through physically settled unlisted derivatives
and 682,800 H Shares (short
position)
16,000 H Shares (long position) and -	through cash settled unlisted derivatives
503,200 H Shares (short position)

Save as disclosed above, as at the Latest Practicable Date, the Company has not been notified by any persons who have interests or short positions in the Shares or 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, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

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APPENDIX II	GENERAL INFORMATION

3. D I R E C T O R S' A N D S U P E R V I S O R S' E M P L O Y M E N T W I T H S U B S T A N T I A L SHAREHOLDERS

The followings are the particulars of Directors' and Supervisors' employment with substantial shareholders as at the Latest Practicable Date:

		Position held in the
Name	Position in the Company	substantial shareholder
Cao Jianglin	Chairman and executive Director of	Director and general manager of the
	the Company	Parent
Chang Zhangli	Non-executive Director of the	Deputy general manager of the Parent
	Company
Tao Zheng	Non-executive Director of the	Director and general manager of
	Company	BNBMG
Shen Yungang	Non-executive Director of the	Deputy general manager of the No. 1
	Company	strategic client department of Cinda
Fan Xiaoyan	Non-executive Director of the	Director and general manager of
	Company	Taishan Finance
Chen Yongxin	Non-executive Director of the	Director and general manager of CNBM
	Company	Trading
Li Xinhua	Supervisor of the Company	Vice Chairman of the Parent
Zhou Guoping	Supervisor of the Company	Chief economist of the Parent and
		Chairman of CNBM Trading

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APPENDIX II	GENERAL INFORMATION

4. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business) have been entered into by the Group within the two years up to and including the Latest Practicable Date which are or may be material:

Zhejiang South Cement Company Limited (the "Zhejiang South Cement", an indirect subsidiary of the Company) and Zhejiang Sanshi Group Limited Company (the "Sanshi Group", a 100% indirectly-held subsidiary of the Parent), being shareholders of Zhejiang Sanshi South New Material Limited Company* (the "Sanshi South", a company 50% indirectly held by the Company and 50% indirectly held by the Parent and whose accounts are consolidated with the Parent), entered into a capital contribution agreement dated 11 April 2018 (the "Capital Contribution Agreement"), pursuant to which Zhejiang South Cement has agreed to make a capital contribution to Sanshi South in cash. Upon completion of the capital contribution, Sanshi South's equity interest was held as to 90% by the Company through Zhejiang South Cement and 10% by the Parent through Sanshi Group and became a subsidiary of the Company, and the registered capital of Sanshi South increased from RMB160 million to RMB800 million.
Zhejiang South Cement Company Limited and Jinhua South Cement Company Limited (both indirect subsidiaries of the Company, the "Sellers") and Sanshi South New Material Limited Company* (the "Sanshi South", a 90% indirectly-held subsidiary of the Company) entered into an equity transfer agreement dated 12 June 2018, pursuant to which the Sellers has agreed to transfer their respective equity interests in 25 indirect subsidiaries of the Company in the Zhejiang Province (comprising 24 companies engaging in commercial concrete businesses and one mineral company) to Sanshi South (the "Transfer") at a consideration of RMB1,316,005,900.
The Company, Zhonghai Trust Co., Ltd* (the"Zhonghai Trust") and Southwest Cement Company Limited* (the "Southwest Cement") entered into an equity transfer agreement dated 20 June 2018, pursuant to which the Company has agreed to purchase, and Zhonghai Trust has agreed to sell, the 18.70% equity interest in Southwest Cement, with a total consideration of RMB1,917,746,479.45.

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APPENDIX II	GENERAL INFORMATION

Xinjiang Tianshan Cement Co., Ltd.* (the "Tianshan Cement", a subsidiary of the Company), Xinjiang Tianshan Building Materials (Group) Real Estate Development Company Limited* (the"Tianshan Real Estate", a subsidiary of the Parent) and Xinjiang Tianshan Building Materials (Group) Company Limited* (the "Tianshan Group Company", a subsidiary of the Parent and the 100% holding company of Tianshan Real Estate) entered into the Supplemental Agreement dated 27 July 2018, pursuant to which the payment schedule for the outstanding amount of RMB578,233,672.90 under the Relocation Compensation Agreement entered into between Tianshan Cement and Tianshan Real Estate on 4 April 2014 was adjusted.
China Triumph Bengbu Engineering and Technology Company Limited* (the "Bengbu Triumph", a 91% indirectly-held subsidiary of the Company) and (CNBM) Bengbu Design & Research Institute for Glass Industry Co., Ltd. * (the "Bengbu Institute", a 100% indirectly-held subsidiary of the Parent) entered into an equity transfer agreement dated 28 December 2018, pursuant to which Bengbu Triumph has agreed to purchase, and Bengbu Institute has agreed to sell, the 100% equity interest in Bengbu Chemical Machinery Manufacturing Co., Ltd. * (the "Bengbu Chemical Machinery") with a total consideration of RMB82,288,400.
China National Building Material Assets Management Corporation* (the "CNBM Assets Management", a wholly-owned subsidiary of the Parent) and Sinoma Science & Technology Co., Ltd.* (the "Sinoma Science & Technology", a direct non-wholly owned subsidiary of the Company) entered into an equity transfer agreement dated 31 July 2019, pursuant to which Sinoma Science & Technology has agreed to purchase, and CNBM Assets Management has agreed to sell, the 100% equity interest in Beijing FRP Research and Design Institute Co., Ltd.* (the "Beijing FRP Institute") with a total consideration of RMB83,028,300.
China United Cement Corporation* (the "China United Cement", a wholly-owned subsidiary of the Company), entered into a Shareholders Agreement dated 27 September 2019 with Henan Investment Group Co., Ltd.* (the "Henan Investment Group"), pursuant to which the parties agreed to establish a Joint Venture in the PRC. The registered capital of the Joint Venture is RMB9,225.3358 million, of which RMB5,535.2015 million (representing 60% of the registered capital of the Joint Venture) will be contributed by China United Cement in cash and RMB3,690.1343 million (representing 40% of the registered capital of the Joint Venture) will be contributed by Henan Investment Group by way of injecting the Injected Assets (i.e. 10 subsidiaries of Henan Investment Group and trademarks under the "Tongli" series owned by Henan Investment Group).

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APPENDIX II	GENERAL INFORMATION

5. MATERIAL LITIGATION

As at the Latest Practicable Date, save as disclosed below, none of the members of the Group was engaged in any litigation of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against any member of the Group:

References are made to the overseas regulatory announcement of the Company dated 30 May 2010 in respect of an announcement released by BNBM, the information on subsequent development of the gypsum board litigation in the US set out in the announcements dated 18 July 2014, 20 August 2014, 13 February 2015, and 13 March 2015, the 2014 annual report, the 2015 interim report, the 2015 third-quarterly report and the 2015 annual report, the 2016 interim report, the 2016 annual report, the announcement dated 22 June 2017, the 2017 interim report, the announcement dated 22 March 2018, the 2017 annual report, the announcement dated 22 August 2018, the 2018 interim report, the announcement dated 19 March 2019, the 2018 annual report and the announcement dated 30 July 2019 of the Company.

Having considered integrated factors including costs of litigation and potential impact on other gypsum board litigations to which BNBM, Taishan Gypsum and/or Taian Taishan Plasterboard Co., Ltd.* (泰安市紙面石膏板有限公司) (a wholly-owned subsidiary of Taishan Gypsum, together with Taishan Gypsum, "Taishan") are parties, in March 2019, Taishan reached settlement with no more than 498 plaintiffs (the "Plaintiffs") from the cases remanded to the Southern District Court of Florida for trial in the Amorin Case (as defined in the announcement of the Company dated 13 February 2015) and has entered into a settlement and liability exemption agreement (the "Amorin Settlement Agreement") with the Plaintiffs. The maximum aggregate settlement amount payable by Taishan under the Amorin Settlement Agreement (and its amendment agreement) is US$27,857,893.97 (subject to upward adjustment in the event of, in summary, Taishan entering into any further settlement agreement "on or before 11:59 pm EDT on 31 March 2021 with any other plaintiffs in the Amorin Case within the State of Florida who are not party or subject to the Amorin Settlement Agreement in respect of cases bearing similar characteristics (in relation to product markings) as the cases relating to the Plaintiffs" on terms significantly more favourable to the plaintiffs than the Amorin Settlement Agreement (the "Possible Adjustment")). According to the terms of the Amorin Settlement Agreement, each Plaintiff shall irrevocably and unconditionally discharge and release any and all claims against Taishan and certain of its related parties upon receiving the settlement amount in full.

- 51 -

APPENDIX II	GENERAL INFORMATION

Taishan intended to enter in to a collective settlement agreement (the "Settlement Agreement") with the lawyer on behalf of the settlement class. Pursuant to the Settlement Agreement, the settlement class agrees to waive and exempt completely, ultimately and permanently any and all exempted claims against Taishan and other exempted parties from the effective date of the Settlement Agreement, and undertakes not to press charges for any and all exempted claims against Taishan and other exempted parties (the "Settlement"). "Exempted claims" refers to the claims and other losses in relation to the involved Chinese gypsum boards raised by the class members against Taishan and other exempted parties. "Other exempted parties" include, but are not limited to, the Company and BNBM. Taishan intended to agree to pay a total of US$248 million (including attorney fee for the plaintiff's litigator and the postage, but excluding the fee for publishing the class action notice for unknown class members) as stipulated in the Settlement Agreement as the consideration for the Settlement.

Since the involvement in the gypsum board litigation in the United States, the Company, BNBM and Taishan have invested a great deal of manpower and material resources. The Settlement will free them from the above class action, resolve material litigation risks, and help to significantly reduce litigation costs, save manpower and material resources as well as time and energy, which allow the Company, BNBM and Taishan to focus on their production and operating activities. The Company does not believe that the payment of the settlement amount will have any material adverse impact on the normal operation of the Company, BNBM and Taishan.

As the Settlement triggered the Possible Adjustment term in the Amorin Settlement Agreement executed by Taishan in March 2019 involving the settled plaintiff of the Amorin Case, Taishan is required to pay the settled plaintiff of the Amorin Case a sum of difference as stipulated in the Amorin Settlement Agreement, the amount of which was further reduced, due to the amendment agreements reaching not more than US$12,866,528.89. The payment of the first installment shall be no later than 21 October 2019.

Pursuant to the Settlement Agreement and the amended agreements of the Amorin Settlement Agreement, the settlement amount to be paid by Taishan will be reflected as a single amount of estimated liabilities in the financial statements of Taishan Gypsum for the six months ended 30 June 2019 in a one-off manner in accordance with relevant provisions of the applicable accounting standards, although it shall be paid in installments. Such payment is expected to exert adverse impact on net profits of Taishan Gypsum and BNBM for the six-month financial period in the consolidated financial statements of BNBM in the amount of approximately RMB1,794.3694 million.

The case of The Mitchell Co., Inc. v. Knauf Gips KG and any litigation against a class member who may choose to exercise his right of withdrawal under the Settlement Agreement in the future will proceed. The Company will continue to follow up on the progress of the gypsum board litigation in the United States, and make further announcements when necessary or in due course.

- 52 -

APPENDIX II	GENERAL INFORMATION

SERVICE CONTRACTS
None of the Directors or Supervisors has entered into a service contract with any member of the Group (excluding contracts expiring or determinable within one year without payment of compensation (other than statutory compensation)).
OTHER INTERESTS OF THE DIRECTORS AND SUPERVISORS
As at the Latest Practicable Date:
1. none of the Directors or Supervisors had any direct or indirect interest in any assets which have been, since 31 December 2018, the date of the latest published audited accounts of the Company, acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group;
2. none of the Directors or Supervisors was materially interested in any contract or arrangement entered into by any member of the Group which is subsisting as at the date of this circular and which is significant in relation to the business of the Group; and
3. none of the Directors and their close associates had any competing interest, in a business which competes or is likely to compete either directly or indirectly, with the business of the Group.
EXPERT

The name and qualification of the expert who has given their opinion, letter or advice contained in this circular are as follows:

Name	Qualification
Halcyon Capital Limited	a licensed corporation under the SFO, licensed for Type 6
	(advising on corporate finance) regulated activity

As at the Latest Practicable Date, Halcyon did not have:

any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up; and

- 53 -

APPENDIX II	GENERAL INFORMATION

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.

Halcyon has given and has not withdrawn its written consent to the issue of this circular with its letter and reference to its name included in the form and context in which it is included.

OTHER INFORMATION
1. The Company has joint company secretaries, namely Mr. Yu Kaijun and Ms. Lo Yee Har Susan.
  Mr. Yu Kaijun is the vice president of the Company and the secretary of the Board. Mr. Yu has over 35 years' experience in financial management and enterprise management.
  Ms. Lo is an executive director of Corporate Services Department of Tricor Services Limited and a fellow member of both the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries. Ms. Lo has over 20 years of experience in the company secretarial area. She has served in a number of companies listed on the Stock Exchange. She is currently the joint company secretary of several companies listed on the Stock Exchange.
2. The address of the registered office and principal place of business of the Company is located at Tower 2 (Building B), Guohai Plaza, No. 17 Fuxing Road, Haidian District, Beijing, the PRC. The address of the Company's place of business in Hong Kong is at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong.
3. In case of inconsistency, the English version of this circular shall prevail over the Chinese version.
DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents are available for inspection from the date of this circular until the date of the EGM (both days inclusive) at the place of business in Hong Kong of the Company at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong during normal business hours (i.e. from 9:30 a.m. to 5:30 p.m. on any weekday, except public holidays).
1. the Financial Services Framework Agreement;
2. the Original Financial Services Framework Agreement;

- 54 -

APPENDIX II	GENERAL INFORMATION

the articles of association of the Company;
the published annual reports of the Company including the audited accounts for the financial years ended 31 December 2017 and 2018;
the letter from the Board, the full text of which is set out in this circular from pages 1 to 16;
the letter from the Independent Board Committee, the full text of which is set out in this circular from pages 17 to 18;
the letter from the Independent Financial Adviser, the full text of which is set out in this circular from pages 19 to 36;
the letter of consent from Halcyon;
the material contracts referred to in the paragraph headed "Material Contracts" in this Appendix; and
this circular.

- 55 -

NOTICE OF THE EGM

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

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting ("EGM") of China National Building Material Company Limited (the "Company") will be held at 9:30 a.m. on Monday, 9 December 2019 at Tower 2, Guohai Plaza, No. 17 Fuxing Road, Haidian District, Beijing, the People's Republic of China (the "PRC") for the purposes of considering and, if thought fit, passing the following resolutions. Unless otherwise indicated, capitalised terms used herein shall have the same meaning as those defined in the circular of the Company dated 23 October 2019 (the "Circular").

AS ORDINARY RESOLUTIONS

To consider and approve the appointment of Ms. Zhan Yanjing as a non-executive director of the Company in replacement of Ms. Xu Weibing to hold office with effect from the date on which this resolution is approved and the term of office will be the same as the current session of the Board, and to consider and approve the remuneration of Ms. Zhan Yanjing, as set out in the Circular.
To consider and approve the financial services framework agreement dated 30 September 2019 (the "Financial Services Framework Agreement") entered into between the Company and China National Building Material Group Finance Co., Ltd. (the "Finance Company"), the provision of deposit services and the caps of the deposit services contemplated thereunder and all other matters of and incidental thereto or in connection therewith:
"THAT
1. the Financial Services Framework Agreement entered into between the Company and the Finance Company, a copy of the Financial Services Framework Agreement has been produced to the meeting marked "A" and signed by the chairman of the meeting for identification purpose, and the provision of deposit services contemplated under the Financial Services Framework Agreement and all other matters of and incidental thereto or in connection therewith be and are hereby approved and confirmed;

- 56 -

NOTICE OF THE EGM

the caps of the deposit services contemplated under the Financial Services Framework Agreement, being the maximum daily balance of deposits including accrued interests placed by the Company and its subsidiaries from time to time with the Finance Company during the term of the Financial Services Framework Agreement as more particularly set out in the Circular (a copy of which has been produced to the meeting marked "B" and has been initialled by the chairman of the meeting for the purpose of identification), be and are hereby approved and confirmed; and
any one executive director of the Company be and is hereby authorised for and on behalf of the Company, amongst other matters, to sign, seal, stamp, execute, perfect, deliver, do or to authorise signing, executing, perfecting and delivering and doing all such documents, deeds, acts, matters and things as he/she may in his/her discretion consider necessary, expedient or desirable to give effect to and implement the terms of the Financial Services Framework Agreement and to make and agree such variations of a non-material nature in or to the terms of the Financial Services Framework Agreement as he/she may in his discretion consider to be desirable and in the interests of the Company."

By order of the Board

China National Building Material Company Limited*

Cao Jianglin

Chairman of the Board

Beijing, the PRC

23 October 2019

Notes:

All resolutions at the meeting will be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands pursuant to the Listing Rules. The chairman of the meeting will therefore demand a poll for every resolution put to vote at the EGM in accordance with the Articles of Association. An announcement on the poll vote results will be made by the Company after the EGM in the manner prescribed under Listing Rule 13.39(5). The results of the poll will be published on the websites of Hong Kong Exchanges and Clearing Limited and the Company in accordance with the Listing Rules.
For determining the entitlement to attend and vote at the above meeting, the register of members of the Company will be closed from Saturday, 9 November 2019 to Monday, 9 December 2019, both dates inclusive, during which period no transfer of Shares will be registered. In order to be eligible to attend and vote at the EGM, holders of the H Shares whose transfers have not been registered shall deposit all transfer documents accompanied by the relevant share certificates at the Company's H Share Registrar in Hong Kong, Tricor Investor Services Limited for registration not later than 4:30 p.m. on Friday, 8 November 2019.

- 57 -

NOTICE OF THE EGM

A Shareholder entitled to attend and vote at the EGM may appoint one or more proxies to attend and vote on his behalf. A proxy need not be a Shareholder of the Company. Where a Shareholder appoints more than one proxy, his proxies can only vote on a poll.
The instrument appointing a proxy must be in writing under the hand of a Shareholder or his attorney duly authorised. If the Shareholder is a corporation, that instrument must be either under its common seal or under the hand of its director(s) or duly authorised attorney(s). If that instrument is signed by an attorney of Shareholder of the Company, the power of attorney authorising that attorney to sign or other authorisation document must be notarised.
In order to be valid, the form of proxy together with the power of attorney or other authorisation document (if any) must be deposited at the Secretariat of the Board at the Company's principal place of business in the PRC for holders of the Domestic Shares and the Unlisted Foreign Shares and at the Company's H Share Registrar in Hong Kong, Tricor Investor Services Limited, for holders of the H Shares not less than 24 hours before the time appointed for the EGM (i.e. not later than 9:30 a.m. on Sunday, 8 December 2019) or any adjournment thereof (as the case may be).
A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the death or loss of capacity of the appointer, or the revocation of the proxy or of the authority under which the proxy was executed, or the transfer of shares in respect of which the proxy is given, provided that no notice in writing of these matters shall have been received by the Company prior to the commencement of the EGM.
Shareholders who intend to attend the EGM in person or by proxy should return the reply slip, for information purposes, to the Secretariat of the Board at the Company's principal place of business in the PRC for holders of the Domestic Shares and the Unlisted Foreign Shares and to the Company's H Share Registrar in Hong Kong, Tricor Investor Services Limited, for holders of the H Shares on or before Monday, 18 November 2019 by hand, by post or by fax.
The address and contact details of the Company's H Share Registrar in Hong Kong, Tricor Investor Services Limited, are as follows:
Level 54, Hopewell Centre 183 Queen's Road East Hong Kong
Telephone No.: (+852) 2980 1333
Facsimile No.: (+852) 2810 8185
The address and contact details of the Company's principal place of business in the PRC are as follows:
Tower 2, Guohai Plaza No. 17 Fuxing Road Haidian District Beijing, the PRC
Telephone No.: (+86) 10 6813 8300
Facsimile No.: (+86) 10 6813 8388

- 58 -

NOTICE OF THE EGM

In accordance with the Company's Articles of Association, where two or more persons are registered as the joint holders of any share, only the person whose name appears first in the register of members shall be entitled to receive this notice, to attend and exercise all the voting powers attached to such share at the EGM, and this notice shall be deemed to be given to all joint holders of such share.
The EGM is expected to be concluded within half a day. Shareholders (in person or by proxy) attending the EGM are responsible for their own transportation and accommodation expenses. Shareholders of the Company or their proxies attending the EGM shall produce identity documents.
References to time and dates in this notice are to Hong Kong time and dates.

For identification only

- 59 -

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CNBM - China National Building Material Co. Ltd. published this content on 22 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 October 2019 09:09:06 UTC

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CNBM's 2023 Profit to Drop 65%	Jan. 29	MT
China National Building Material Company Limited Provides Earnings Guidance for the Twelve Months Ended December 31, 2023	Jan. 26	CI
Beijing New Building Materials' Deal to Buy Carpoly Values Target at 6 Billion Yuan	Jan. 09	MT
Beijing New Building Materials to Buy 78% of Carpoly Chemical Group for Over 4 Billion Yuan	Jan. 02	MT
China National Building Material Subsidiary to Inject Capital into Sinoma Cement	Dec. 05	MT
China National Building Material Company Limited Reports Earnings Results for the Nine Months Ended September 30, 2023	23-10-30	CI
China National Building Material Company Limited Announces Re-Designation of Xiao Jiaxiang from an Executive Director to a Non-Executive Director	23-10-27	CI
China National Building Material Expects 70% Decline in January-September Profit	23-10-16	MT
China National Building Material Company Limited Provides Earnings Guidance for the Nine Months Ended 30 September 2023	23-10-16	CI
CNBM Unit to Potentially Buy Coatings Firm	23-09-21	MT
China National Building Material Names Vice President as Chief Compliance Officer	23-08-28	MT
China National Building Material Company Limited Announces Appointment of Wang Bing as Chief Compliance Officer	23-08-25	CI
China National Building Material Company Limited Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-25	CI
Zhejiang Tianneng New Materials Co., Ltd. announced that it has received CNY 1 billion in funding from Zhejiang Puhua Tianqin Equity Investment Management Co., Ltd., CICC Capital Management Co., Ltd., Zhejiang Fu Zhe Capital Management Co., Ltd., China National Building Material Company Limited	23-08-16	CI
Zhejiang Tianneng New Material Co., Ltd announced that it has received CNY 100 million in funding from CICC Investment Group Company Limited, Zhejiang Puhua Tianqin Equity Investment Management Co., Ltd., China National Building Material Company Limited, Zhejiang Fu Zhe Capital Management Co., Ltd.	23-08-16	CI
China National Building Material Expects First-Half Attributable Profit to Decline 80%	23-07-12	MT

Chart China National Building Material Company Limited

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Company Profile

China National Building Material Company Limited is an investment holding company. The Company operates its business through four segments. The Cement segment is mainly engaged in the production and sale New Suspension Preheater (NSP) cement and commercial concrete. The Lightweight Building Materials segment is mainly engaged in the production and sale of dry wall and ceiling system. The Glass Fiber and Composite Materials segment is engaged in the production and sale of rotor blades, glass fiber and composite materials. The Engineering Services segment is engaged in the provision of engineering services to glass and cement manufacturers, as well as equipment procurement business.

Sector

Construction Materials

Calendar

2024-04-25 - Q1 2024 Earnings Release (Projected)

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Ratings for China National Building Material Company Limited

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Analysts' Consensus

Sell

Buy

Mean consensus

BUY

Number of Analysts

Last Close Price

2.607 CNY

Average target price

4.394 CNY

Spread / Average Target

+68.51%

Consensus

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Quarterly earnings - Rate of surprise

Company calendar

Sector Other Construction Materials

	1st Jan change	Capi.
CHINA NATIONAL BUILDING MATERIAL COMPANY LIMITED	-14.07%	3.04B
CRH PLC	+11.41%	54.01B
MARTIN MARIETTA MATERIALS, INC.	+19.14%	36.68B
VULCAN MATERIALS COMPANY	+14.24%	34.29B
ULTRATECH CEMENT LIMITED	-8.35%	33B
GRASIM INDUSTRIES LIMITED	+11.11%	19.31B
AMBUJA CEMENTS	+23.36%	18.82B
HEIDELBERG MATERIALS AG	+15.81%	18.26B
CEMEX, S.A.B. DE C.V.	+6.20%	11.96B
SUMMIT MATERIALS, INC.	+2.89%	6.94B

Other Construction Materials

China National Building Material Company Limited

Equities

3323

CNE1000002N9

Construction Materials

China National Building Material : PROPOSED CHANGE OF NON-EXECUTIVE DIRECTOR; MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT AND NOTICE OF THE EGM

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