Geely Automobile : DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE YW ACQUISITION

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吉利汽車控股有限公司

GEELY AUTOMOBILE HOLDINGS LIMITED

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 175)

DISCLOSEABLE AND CONNECTED TRANSACTION

IN RELATION TO THE YW ACQUISITION

Financial Adviser to Geely Automobile Holdings Limited

Independent Financial Adviser to the Independent Board Committee

and the Independent Shareholders

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE YW ACQUISITION

On 29 April 2019 (after trading hours), Zhejiang Powertrain, an indirect 99.1% owned subsidiary of the Company, entered into the YW Acquisition Agreement with Yiwu Engines, pursuant to which Zhejiang Powertrain conditionally agreed to acquire, and Yiwu Engines conditionally agreed to sell, the entire registered capital of the YW Target, for a cash consideration of RMB322,205,872.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, Yiwu Engines is wholly owned by Zhejiang Geely. Zhejiang Geely is owned (i) as to 71.05% by Geely Holding, which in turn is ultimately wholly owned by Mr. Li and his associates, and (ii) as to 28.95% by other Mr. Li's interested entities. As such, Yiwu Engines is an associate of Mr. Li and a connected person of the Company. Accordingly, the transaction contemplated under the YW Acquisition constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules.

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One or more of the applicable percentage ratios in respect of the YW Acquisition are more than 0.1% but less than 5%. However, as one or more of the applicable percentage ratios of the YW Acquisition, when aggregated with the previous acquisitions of the Group with the Geely Holding Group within one year pursuant to Rule 14A.81 of the Listing Rules as a whole are over 5%, the YW Acquisition is subject to the reporting, announcement and the Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

Furthermore, as one or more of the applicable percentage ratios of the YW Acquisition, when aggregated with the previous acquisitions of the Group with the Geely Holding Group within one year pursuant to Rule 14.22 of the Listing Rules as a whole are more than 5% but less than 25%, the YW Acquisition also constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

GENERAL

The Independent Board Committee has been formed to advise the Independent Shareholders with respect to the YW Acquisition, and the Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders on whether the terms of the YW Acquisition are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

A circular containing, among other things, (i) further information about the YW Acquisition; (ii) the recommendation of the Independent Board Committee in respect of the YW Acquisition; (iii) the advice of the Independent Financial Adviser on the YW Acquisition; and (iv) other information as required under the Listing Rules together with the notice of the EGM, will be despatched to the Shareholders on or before 22 May 2019.

Completion of the YW Acquisition is subject to the satisfaction of the conditions precedent under the YW Acquisition Agreement, and therefore, may or may not proceed to completion. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE YW ACQUISITION

Principal terms of the YW Acquisition Agreement are set out below:

Date

29 April 2019 (after trading hours)

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Parties
Vendor:	Yiwu Engines
Purchaser:	Zhejiang Powertrain

Zhejiang Powertrain is principally engaged in the research, development, production, marketing and sale of engines and related components in the PRC, and is an indirect 99.1% owned subsidiary of the Company. The remaining 0.9% interests in Zhejiang Powertrain is indirectly held by entities in which Mr. Li is interested as at the date of this announcement.

Yiwu Engines is principally engaged in the preparation and construction of engine manufactory projects. Yiwu Engines is wholly owned by Zhejiang Geely, which in turn is owned as to 71.05% by Geely Holding and as to 28.95% by other Mr. Li's interested entities.

Subject matter

Pursuant to the YW Acquisition Agreement, Zhejiang Powertrain conditionally agreed to acquire, and Yiwu Engines conditionally agreed to sell, the entire registered capital of the YW Target. Details of the YW Target are set out in the section headed "Information on the YW Target" below.

Upon completion of the YW Acquisition, the YW Target will become a wholly owned subsidiary of Zhejiang Powertrain, and the financial results of the YW Target will be consolidated into the financial statements of the Group.

Consideration

The consideration for the YW Acquisition is RMB322,205,872, which will be payable in cash within three months from the date of completion of the YW Acquisition.

The consideration for the YW Acquisition was determined after arm's length negotiations between Zhejiang Powertrain and Yiwu Engines with reference to (i) the net asset value of the YW Target prepared under the HKFRS as at 31 March 2019 of RMB322,033,083; and (ii) the valuation premium of the YW Properties of RMB172,789, being the difference between (a) the YW Property Value of RMB293,000,000; and (b) the carrying value of the YW Properties of approximately RMB292,827,211 as at 31 March 2019.

It is expected that the consideration for the YW Acquisition will be funded by internal resources of the Group.

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Undertaking in respect of the YW Properties

The YW Properties is an industrial complex located in Chi'an Town, Yiwu City, Zhejiang Province, the PRC. According to the Valuation Report, as at 31 March 2019, the YW Properties comprised:

(i)two parcels of land with a total site area of 169,116.54 sq.m.; and

(ii)ten industrial and ancillary buildings with a total gross floor area of 94,083.06 sq.m., the construction of which is expected to be completed in the second quarter of 2019 (the "YW Construction-In-Progress").

As at the date of this announcement, Yiwu Engines holds two real estate rights certificates, one construction land planning permit, one construction work planning permit and one construction work commencement permit for the YW Properties. According to the legal opinion of the PRC legal adviser to the Company, (i) the above certificates and permits for the YW Properties are true, legal and valid; and (ii) the YW Properties are free from guarantee, pledge and encumbrances, and are not subject to seizure by the court. In light of the time it takes to transfer the relevant certificates and permits for the YW Properties from Yiwu Engines to the YW Target, which is unlikely to be completed before the completion of the YW Acquisition, Yiwu Engines has undertaken to Zhejiang Powertrain in the YW Acquisition Agreement that the legal titles of the YW Properties will be transferred to the YW Target in accordance with the applicable laws in the PRC on or before 31 December 2021, subject to completion of the YW Acquisition.

As stated in the legal opinion of the PRC legal adviser to the Company, (i) the YW Construction-In- Progress is in compliance with the requirements of the relevant laws; (ii) upon completing the general procedures for obtaining real estate rights certificates, including the acceptance for fire safety, acceptance for greening, land acceptance, archive, quality inspection filing, property survey procedures, etc. with the relevant authorities, there are no legal impediments to the obtaining of the title certificates for the YW Construction-In-Progress; and (iii) the use of the YW Properties by the YW Target for production will not be affected even before the completion of the transfer of the legal titles of the YW Properties to the YW Target.

Pursuant to the YW Acquisition Agreement, subject to completion of the YW Acquisition, in the event that the obtaining and transfer of the legal titles of the YW Properties cannot be completed on or before 31 December 2021, Yiwu Engines will (i) indemnify Zhejiang Powertrain for the loss arising therefrom, which will equal to the then valuation of the YW Properties prepared by a third party valuer approved by the parties to the YW Acquisition Agreement (the "YW Indemnification Amount"); and (ii) pay to Zhejiang Powertrain a penalty calculated based on an annual interest rate of 4.35% of the YW Indemnification Amount (the "YW Penalty"), which was determined after arm's length negotiations between the parties to the YW Acquisition Agreement with reference to the prevailing interest rate of 4.35% on short term loan (within one year) offered by the People's Bank of China. The Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the Independent Financial Adviser) consider that the basis for determining the YW Indemnification Amount is fair and reasonable and in the interests of the

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Company and the Shareholders as a whole, given that both the YW Indemnification Amount (that is, the amount payable by Yiwu Engines to Zhejiang Powertrain if the legal titles of the YW Properties cannot be obtained on or before 31 December 2021) and the portion of the consideration attributable to the YW Properties payable by Zhejiang Powertrain to Yiwu Engines under the YW Acquisition are based on the then valuation on the YW Properties prepared by an independent valuer. The Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the Independent Financial Adviser) consider the rate for calculating the YW Penalty of 4.35% per annum is fair and reasonable after taking into account (i) as at the date of this announcement, the Company does not consider there is a better investment opportunity for the funds which, subject to completion of the YW Acquisition, will be used to settle the consideration for the YW Acquisition; and (ii) the weighted average effective interest rate of the bank borrowings of the Group was 3.57% for the year ended 31 December 2018.

In the event that the obtaining and transfer of the legal titles of the YW Properties cannot be completed on or before 31 December 2021, it is the intention of the parties to the YW Acquisition Agreement to appoint an independent valuer as soon as practicable to determine the then valuation of the YW Properties, and the YW Indemnification Amount together with the YW Penalty, which will be calculated with retrospective effect since the date of completion of the YW Acquisition, and will be indemnified and paid in full by Yiwu Engines in cash as soon as practicable but in any event not later than 30 calendar days upon the issuance of the then valuation report on the YW Properties prepared by the independent valuer. In the event that the obtaining and transferring of the legal titles of the YW Properties cannot be completed on or before 31 December 2021, the Company will make further announcement to update the Shareholders on the status of the YW Properties as well as the actual and/or potential impact thereof on the Group.

Notwithstanding the foregoing, Yiwu Engines, being the existing holder of the real estate rights certificates and the relevant permits for the YW Properties, has undertaken to Zhejiang Powertrain and the YW Target that, subject to completion of the YW Acquisition, the YW Target can continue to occupy and use the YW Properties free of charge regardless of whether the obtaining of and/or transfer of the legal titles to the YW Properties can be completed on or before 31 December 2021 or at all. Taking into account the opinion of the PRC legal adviser and the undertakings by Yiwu Engines as abovementioned, the operation of the YW Target is not expected to be affected even if the obtaining of and/or transferring of the legal titles to the YW Properties is not completed by 31 December 2021.

Having considered (i) the basis for determination of the consideration for the YW Acquisition as disclosed above; (ii) the legal opinion from the PRC legal adviser to the Company that (a) the use of the YW Properties by the YW Target for production will not be affected even before the completion of transfer of the legal titles to the YW Properties from Yiwu Engines to the YW Target; and (b) there are no legal impediments to the obtaining of the title certificates for the YW Construction-In- Progress upon completing the general procedures for obtaining real estate rights certificates with the relevant authorities; and (iii) in the event that the obtaining and transferring of the legal titles to the YW Properties cannot be completed on or before 31 December 2021, Yiwu Engines will indemnify Zhejiang Powertrain for the YW Indemnification Amount, and will pay to Zhejiang Powertrain the

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