Sinotruk Hong Kong : CONNECTED TRANSACTION - CAPITAL CONTRIBUTION TO THE TARGET COMPANY

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

SINOTRUK (HONG KONG) LIMITED

中 國 重 汽 (香 港) 有 限 公 司

(incorporated in Hong Kong with limited liability)

(Stock Code: 3808)

CONNECTED TRANSACTION

CAPITAL CONTRIBUTION TO THE TARGET COMPANY

CAPITAL CONTRIBUTION TO THE TARGET COMPANY

On 24 December 2019, the Subsidiary entered into the Joint Venture Agreement with Party A and Party B relating to the Capital Contribution to the Target Company and the regulation of the Parties' relationship with each other in the Target Company.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, the Target Company is directly owned as to 49% Participatory Interest by Party B, a non-wholly owned subsidiary of FPFPS, which is a substantial shareholder of the Company. Accordingly, the Target Company is an associate of a connected person of the Company under Chapter 14A of the Listing Rules. The Capital Contribution constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As all of the applicable ratios (except the profits ratio) in respect of the Capital Contribution are more than 0.1% but are less than 5%, the Capital Contribution is subject to the reporting and announcement requirements but is exempted from the circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

Shareholders and potential investors should note that the Capital Contribution, which is subject to a number of conditions precedent, may or may not be completed. Shareholders and potential investors are reminded to exercise caution when dealing in the shares of the Company.

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CAPITAL CONTRIBUTION TO THE TARGET COMPANY

On 24 December 2019, the Subsidiary entered into the Joint Venture Agreement with Party A and Party B relating to the Capital Contribution to the Target Company and the regulation of the Parties' relationship with each other in the Target Company.

As at the date of this announcement, the Target Company is owned as to 51% by Party A and 49% by Party B.

Upon closing of the Capital Contribution, the Target Company will be owned as to 32.89% by the Subsidiary, 34.22% by Party A and 32.89% by Party B. After closing of the Capital Contribution, the charter fund of the Target Company will be increased from 22,000,000 Euro to 32,780,000 Euro. The Participatory Interest ratio of the Parties in the charter fund of the Target Company shall be as follows:

				Approximate percentage of
				the Participatory Interest
	Nominal value	in the Target Company
		(Euro)	(%)
Party A	11,220,000		34.22
Party B	10,780,000		32.89
The Subsidiary	10,780,000			32.89
	32,780,000		100.00

CONDITIONS PRECEDENT TO THE CAPITAL CONTRIBUTION

Closing of the Capital Contribution shall be subject to the fulfillment and/or the waiver of the following conditions:

1. the Capital Contribution is not subject to any governmental approval from any governmental agency of Uzbekistan;
2. the Target Company and Party A jointly undertake to provide to the Subsidiary certain commercial benefits (including but not limited to the "Trade-in" programs and exemption from customs payments for certain types of imported vehicles) as a prerequisite for the Subsidiary's entry into the Target Company;
3. the Target Company, Party A and Party B, to the extent applicable to them, jointly undertake to provide to the Subsidiary the consent of Party B allowing the Target Company to continue using the trademark and name of Party B after closing of the Capital Contribution;

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1. all relevant governmental approvals in China in respect of the Subsidiary's entering into the Target Company as a new participant have been obtained in the form of approvals by the State Administration of the Foreign Exchange of Shandong Province (SAFE), National Development and Reform Commission of Shandong Province (NDRC), and the Department of Commerce of Shandong Province;
2. Party A and the Subsidiary having obtained all necessary administrative, antitrust, corporate and any other mandatory approvals for the Capital Contribution, including for the increase of charter fund of the Target Company from the current value of 22,000,000 Euro to 32,780,000 Euro;
3. Party B having agreed to provide a formal letter confirming (1) that Party B does not have objections with regards to the Capital Contribution; and (2) to allow the Target Company to continue using the trademark and name of Party B in accordance with its related agreements after closing of the Capital Contribution.

The Parties agree that unless waived in part or in whole by all the Parties in writing to the Target Company, each of the foregoing conditions precedent shall be fulfilled on or before the Long Stop Date. Otherwise, any Party has the right to terminate the Joint Venture Agreement unilaterally without assuming any liability to any other Party on its end. The Parties have the right to extend the Long Stop Date by mutual agreement, but such extension shall not be deemed as waiver of any foregoing conditions precedent.

The Parties shall use all reasonable endeavours to procure that the foregoing conditions precedent shall be satisfied as soon as practicable (in any event no later than the Long Stop Date) so that the Closing Date is reached as soon as practicable.

CLOSING

Within one month of the date of satisfaction of the foregoing conditions precedent, the occurrence of which will be confirmed by all Parties by signing a closing memorandum, the Parties shall proceed to complete the re-registration of the Target Company and allow its functioning in line with the scope of the Joint Venture Agreement. The Capital Contribution shall be made by the Subsidiary in cash within one month of signing the closing memorandum and before the Closing Date.

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After the completion of such corporate re-registration, the Subsidiary shall legally and officially be the participant of the Target Company. The Target Company will thereafter become an associated company of the Company. Given the Target Company will not be a subsidiary of the Company, its financial results will not be consolidated into the consolidated financial results of the Group.

The amount of the Capital Contribution was determined after arm's length negotiations between the Parties taking into account the funding requirement of the Target Company in the near term, the audited net assets of the Target Company and the Target Company's actual charter fund contributed before the Capital Contribution.

The Subsidiary will finance the Capital Contribution by the Group's internal financial resources.

SUPERVISORY BOARD COMPOSITION

Pursuant to the Joint Venture Agreement, the Target Company shall have a supervisory board (the "Supervisory Board") consisting of seven members, among which three members nominated by Party A, two members nominated by the Subsidiary and two members nominated by Party B. All nominees shall be elected by a general meeting of the Parties for terms of three years. Each member in the Supervisory Board shall be entitled to one vote. All decisions of the Supervisory Board shall require an affirmative vote of a simple majority of the members of the Supervisory Board (except for decisions in relation to amending or restating the charter document, establishing an internal audit service function, or making decisions on other issues referred to the competence of the Supervisory Board which would require a unanimous vote of all members). If there is a tie vote of the Supervisory Board meeting, then a further vote shall take place immediately but not later than seven business days. If the further voting is a tie vote, the vote of the general meeting of the Parties shall be decisive. In a general meeting of the Parties, each Party shall possess a number of votes proportional to its Participatory Interest.

The Target Company shall have a general director (the "General Director") nominated by Party A subject to the approval of the Supervisory Board by unanimous vote. The power of the Supervisory Board shall include (but not limited to) the appointment and dismissal of the General Director, approval of the annual business plan, decision on pledge of the Target Company's property, and decision on issues referred to it by the General Director.

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The General Director will constitute the sole executive body of the Target Company, and shall carry out the direct management of the Target Company and exercise rights and obligations in accordance with the Uzbekistan Law and the charter of the Target Company.

CONDITIONS ON TRANSFER OF PARTICIPATORY INTEREST AND EXIT

RIGHT

Each Party has the right to sell or otherwise transfer all or part of its Participatory Interest to another Party and/or any third party, subject to prior written consent of all Parties. In the event that a Party desires to sell or otherwise transfer all or any part of its Participatory Interest to a third party, the non-transferring Parties shall have the pre-emptive rights to purchase such Participatory Interests at the price offered to any third party in proportion to their respective Participatory Interest. The transferring Party shall first make an offer in writing to sell or otherwise transfer the same to the non-transferring Parties.

INFORMATION ON THE TARGET COMPANY

The Target Company is a limited liability company incorporated in the Republic of Uzbekistan and is principally engaged in the production of trucks of Party B, including assembling of trucks and chassis for trucks, importing and selling trucks and spare parts through authorised dealers in Uzbekistan and Central Asia and providing after-sales services to its customers.

The following table sets out the extract of the audited financial information of the Target Company for the years ended 31 December 2017 and 2018 which were prepared under the International Financial Reporting Standards and converted into RMB at the conversion rate of RMB:UZS = 1:1,352.76:

	For the year ended	For the year ended
	31 December 2017	31 December 2018
	(RMB'000)	(RMB'000)
Net (loss)/profit before tax and
extraordinary items	(40,513)	60,078
Net (loss)/profit after tax and
extraordinary items	(41,111)	59,745

The audited net asset value of the Target Company as at 31 December 2018 according to the International Financial Reporting Standards was RMB142.8 million (converted into RMB at the conversion rate of RMB:UZS = 1:1,352.76).

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REASONS AND BENEFITS FOR THE CAPITAL CONTRIBUTION

Pursuant to the Joint Venture Agreement, the main object of the Target Company shall be the establishment and development of production of trucks and buses of the Group and Party B in Uzbekistan for sales in the territory of the Republic of Uzbekistan and other countries. In accordance with the Joint Venture Agreement, Party A undertakes to assist in daily management of the Target Company. The Subsidiary and Party B each shall use their best endeavours to promote, support and develop the production and assembly of trucks, buses and truck-chassis, importation and sales of vehicles and components of the Group and Party B, rendering of customer services on such vehicles, importation, sales of spare parts and maintenance of commercial vehicles in Uzbekistan. In consideration for the Group providing certain technical assistance and support for the production of vehicles, product quality control and consultancy services on after-sales services, it was agreed in the Joint Venture Agreement that the Subsidiary or its affiliates of the Group shall enter into certain agreements for product licensing, trademark licensing, importer (distributor) and after-sales with the Target Company after the Closing Date. The entry into such agreements shall constitute continuing connected transactions under Chapter 14A of the Company, and the Company will make a further announcement as and when appropriate.

The Target Company is located in a key country in the Belt and Road Initiative. The Capital Contribution enables the Group to directly participate in the local production and development of trucks and buses business in the Belt and Road Initiative region and promote vehicles export business to Central Asia countries. In addition, the Target Company can also provide comprehensive and efficient after-sales services. Given there will be expected increases in the taxation of exporting vehicles by the Group to Uzbekistan, the strategic cooperation between the Parties in the production of trucks, buses and vehicles locally in Uzbekistan and the importation and sales of vehicles and components of Party B and the Group will help reduce the possible taxation burden on the Group.

In view of the above, the Board (including the independent non-executive Directors but excluding MAN Interested Directors) is of the view that the terms of the Joint Venture Agreement and the transactions contemplated thereunder are fair and reasonable, are on normal commercial terms and in the ordinary and usual course of business of the Group and are in the interests of the Company and the Shareholders as a whole. Save for the MAN Interested Directors, none of the Directors has any material interest in the Capital Contribution or is required to abstain from voting on the relevant resolutions of the Board.

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INFORMATION ON THE COMPANY AND THE SUBSIDIARY

The Company is principally engaged in investment holding. The Group is principally engaged in the research, development and manufacturing of heavy duty trucks, medium-heavy duty trucks, light duty trucks, buses and related key parts and components including engines, cabins, axles, steel frames and gearbox, and the provision of finance services.

The Subsidiary is a direct wholly-owned subsidiary of the Company, and is principally engaged in investment holding.

INFORMATION ON PARTY A AND PARTY B

Party A is principally engaged in the production of total spectrum of light vehicles and commercial techniques on the territory of Central Asia. Party A is ultimately beneficially wholly-owned by State-owned Assets Supervision and Administration Commission of Uzbekistan government. To the best of the Directors' knowledge, information and belief having made all reasonable enquires, Party A and its ultimate beneficial owner(s) are independent of the Company and its connected persons.

Party B is principally engaged in the commercial vehicles business. Party B is ultimately beneficially owned by FPFPS which is a family trust investment fund and its group comprises Volkswagen Group and is one of the world's leading automobile manufacturers in commercial vehicles and passenger cars.

IMPLICATIONS UNDER THE LISTING RULES

As at the date of this announcement, the Target Company is directly owned as to 49% Participatory Interest by Party B, a non-wholly owned subsidiary of FPFPS, which is a substantial shareholder of the Company. Accordingly, the Target Company is an associate of a connected person of the Company under Chapter 14A of the Listing Rules. The Capital Contribution constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

As all of the applicable ratios (except the profits ratio) in respect of the Capital Contribution are more than 0.1% but are less than 5%, the Capital Contribution is subject to the reporting and announcement requirements but is exempted from the circular and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

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DEFINITIONS

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

"associate"	has the meaning ascribed to it under Chapter 14A
	of the Listing Rules;
"Board"	the board of directors of the Company;
"Capital Contribution"	the proposed capital contribution in the amount of
	10,780,000 Euro to be made by the Subsidiary into
	the charter fund of the Target Company pursuant to
	the Joint Venture Agreement;
"Company"	Sinotruk (Hong Kong) Limited, a company
	incorporated in Hong Kong with limited liability,
	the shares of which are listed on the main board of
	the Stock Exchange (stock code: 3808);
"connected person"	has the meaning ascribed to it under the Listing
	Rules;
"Director(s)"	the director(s) of the Company;
"Closing Date"	the date of the corporate re-registration of the
	Target Company with the competent registration
	authority located in Samarkand, Uzbekistan
"Euro"	Euro, the lawful currency of the European Union;
"FPFPS"	Ferdinand Porsche Familien-Privatstiftung, an
	Austrian private foundation (Privatstifung) (trust)
"Group"	the Company and its subsidiaries;
"Hong Kong"	the Hong Kong Special Administrative Region of
	the PRC;
"Joint Venture Agreement"	the joint venture agreement dated 24 December
	2019 entered into by and among the Subsidiary,
	Party A and Party B;
"Listing Rules"	the Rules Governing the Listing of Securities on
	the Stock Exchange;

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"Long Stop Date"	the date falling on the last day of the two months
	after the date of signing the Joint Venture
	Agreement;
"MAN Interested Directors"	including (i) Mr. Richard von Braunschweig, an
	executive Director, who is also the head of
	cooperations, M&A in MAN Truck & Bus SE
	(formerly MAN Truck & Bus AG); (ii) Mr. Andreas
	Hermann Renschler, a non-executive Director, who
	is also a member of the board of management of
	Volkswagen AG, responsible for the commercial
	vehicle group, the chief executive officer of
	TRATON SE (formerly Volkswagen Truck & Bus
	GmbH) and a member of the board of directors of
	Navistar International Corporation; (iii) Mr.
	Joachim Gerhard Drees, a non-executive Director,
	who is also a member of the executive board of
	TRATON SE, the chief executive officer of MAN
	SE and the chief executive officer of MAN Truck &
	Bus SE; (iv) Ms. Annette Danielski, a
	non-executive Director, who is the head of group
	finance in TRATON SE and a member of the
	supervisory board of MAN SE and MAN Truck &
	Bus SE;
"Parties"	Party A, Party B and the Subsidiary;
"Participatory Interest"	a portion of the charter fund of the Target Company
	that is held by a participant of the Target Company
	pro rata to such participant's equity contribution to
	the charter fund;
"Party A"	UZAVTOSANOAT, a joint stock company
	incorporated in the Republic of Uzbekistan;
"Party B"	MAN Truck & Bus SE, a company incorporated in
	Germany;
"PRC"	the People's Republic of China, for the purpose in
	this announcement, excluding Hong Kong, Macau
	Special Administrative Region and Taiwan;
"RMB"	Renminbi, the lawful currency of the PRC;
"Shareholder(s)"	shareholder(s) of the Company;
"Stock Exchange"	The Stock Exchange of Hong Kong Limited;

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"Subsidiary"	Sinotruk (Hong Kong) International Investment
	Limited, a company incorporated in Hong Kong
	with limited liability and a direct wholly-owned
	subsidiary of the Company as at the date of this
	announcement;
"substantial shareholder"	has the meanings ascribed to it under the Listing
	Rules;
"Target Company"	JV MAN AUTO-Uzbekistan (which will be
	renamed as UZ Truck and Bus Motors LLC after
	the Closing Date), a limited liability company
	incorporated in the Republic of Uzbekistan;
"UZS"	Uzbekistani Som, the lawful currency of the
	Republic of Uzbekistan; and
"%"	per cent.
	By order of the Board
	Sinotruk (Hong Kong) Limited
	Cai Dong
	Chairman of the Board and President

Ji'nan, PRC, 24 December 2019

As at the date of this announcement, the board of the Company consists of seven executive directors of the Company including Mr. Cai Dong, Mr. Wang Shanpo, Mr. Liu Wei, Mr. Liu Peimin, Mr. Dai Lixin, Mr. Sun Chenglong and Mr. Richard von Braunschweig; four non-executive directors of the Company including Mr. Andreas Hermann Renschler, Mr. Joachim Gerhard Drees, Mr. Jiang Kui and Ms. Annette Danielski; and six independent non-executive directors of the Company including Dr. Lin Zhijun, Mr. Yang Weicheng, Dr. Wang Dengfeng, Mr. Zhao Hang, Mr. Liang Qing and Mr. Lyu Shousheng.

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