CRCC High Tech Equipment : CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE FINANCIAL SERVICES FRAMEWORK AGREEMENT

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

(Stock Code: 1786)

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO

THE FINANCIAL SERVICES FRAMEWORK AGREEMENT

Reference is made to the announcement of the Company dated 28 December 2018 in relation to, among other things, the Previous Financial Services Framework Agreement.

As the Previous Financial Services Framework Agreement is expected to expire on 31 December 2019, the Company entered into the Financial Services Framework Agreement with CRCC Finance on 9 December 2019 to renew the Previous Financial Services Framework Agreement, pursuant to which CRCC Finance agreed to provide deposit services to the Group for the term commencing from 1 January 2020 and ending on 31 December 2020.

CRCC is a controlling Shareholder, which directly and indirectly holds approximately 65% of the total issued share capital of the Company as at the date of this announcement. CRCC Finance is a subsidiary of CRCC, which is owned as to 94% by CRCC as at the date of this announcement, and thus is a connected person of the Company under the Listing Rules. Therefore, the transactions under the Financial Services Framework Agreement constitute continuing connected transactions of the Company.

As the highest applicable percentage ratio (as defined in the Listing Rules) for the transactions contemplated under the Financial Services Agreement exceeds 0.1% but is less than 5%, such transactions are subject to the reporting, announcement and annual review requirements, but exempted from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

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1. BACKGROUND
   Reference is made to the announcement of the Company dated 28 December 2018 in relation to, among other things, the Previous Financial Services Framework Agreement.
   As the Previous Financial Services Framework Agreement is expected to expire on 31 December 2019, the Company entered into the Financial Services Framework Agreement with CRCC Finance on 9 December 2019 to renew the Previous Financial Services Framework Agreement, pursuant to which CRCC Finance agreed to provide deposit services to the Group for the term commencing from 1 January 2020 and ending on 31 December 2020. Other than the above change, all existing terms and conditions of the Previous Financial Services Framework Agreement have remained unchanged.
2. FINANCIAL SERVICES FRAMEWORK AGREEMENT

Details of the Financial Services Framework Agreement are as follows:

Date:	9 December 2019
Parties:	Our Company (as the service recipient); and
	CRCC Finance (as the service provider)
Nature of transactions:	CRCC Finance agreed to provide deposit services to the
	Group.
Term:	The term of the Financial Services Framework Agreement
	will commence from 1 January 2020 and end on 31
	December 2020, subject to early termination by either party
	giving at least three months' prior written notice to the other
	party.
	Parties can extend or renew such terms by mutual
	agreement, provided that the requirements under the relevant
	laws, regulations and the Listing Rules are complied with.
Pricing policy:	Pursuant to the Financial Services Framework Agreement,
	CRCC Finance shall accept deposits from our Group at
	interest rates not lower, and thus no less favorable, than the
	prevailing rates offered by the major PRC commercial banks
	for deposits of similar nature.
Other major terms:	Our Group and CRCC Finance will enter into specific
	agreement to set out specific terms with respect to the
	financial services contemplated under the Financial
	Services Framework Agreement in accordance with the
	aforementioned principles thereunder.

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1. HISTORICAL FIGURES
   The historical maximum daily balance of the deposits (including accrued interest) placed by our Group with CRCC Finance for each of the three years ended 31 December 2018 was approximately RMB468.9 million, RMB973.88 million and RMB926.30 million, respectively.
   The historical maximum daily balance of the deposits (including accrued interest) placed by our Group with CRCC Finance for the two years ended 31 December 2018 increased significantly as compared with that for the year ended 31 December 2016. Such increase was mainly due to that the Company has placed the USD payments received for sales of energy efficiency and safety improvement projects for railways in Western China funded by loans of China Railway Corporation obtained from Asian Development Bank with CRCC Finance.
2. PROPOSED MAXIMUM DAILY BALANCE OF THE DEPOSITS
   The proposed maximum daily balance of the deposits (including accrued interest) to be placed by our Group with CRCC Finance for the year from 1 January 2020 to 31 December
   2020 is as follows:

	12 months ending
	31 December
	2020
	(RMB million)
Maximum daily balance of the deposits to be
placed by our Group with CRCC Finance	75

5. BASIS OF PROPOSED MAXIMUM DAILY BALANCE OF THE DEPOSITS

In arriving at the above proposed maximum daily balance of the deposits, our Company has considered the following factors:

With the continuous implementation of financial industry reform in the PRC, the limit for commercial bank deposit interest rate which used to be agreed on by participants of the industry is now being gradually lifted. In light of this general industry trend, the Company anticipates that it will be more likely to obtain greater interest income for its deposits placed with commercial banks generally. In the meantime, the Company still wants to retain certain flexibility for deposits with CRCC Finance given the clear benefits for cooperation with CRCC Finance as discussed in section 6 below and in case of any changes of financial industry and market conditions, and therefore has set a relatively moderate cap for deposits with CRCC Finance for the upcoming year. Through the stringent internal control measures discussed in section 7 below, the Company will ensure that the interest rates of deposits with CRCC Finance, if to be carried out, be not lower, and thus no less favorable, than the prevailing rates offered by the major PRC commercial banks for deposits of similar nature.

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6. REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS UNDER THE FINANCIAL SERVICES FRAMEWORK AGREEMENT

Our Group is expected to benefit from CRCC Finance's familiarity of our industry and our Group's operations. Through years of cooperation, CRCC Finance has become familiar with our Group's capital structure, business operations, funding needs, cash flow pattern, cash management and our overall financial management system, which may enable CRCC Finance to render more expedient, efficient and flexible deposit services to our Group than other commercial banks and independent financial institutions in the PRC. The terms of the Financial Services Framework Agreement were negotiated on an arm's length basis and in the ordinary and usual course of business of our Group.

With respect to deposits placed by our Group with CRCC Finance, our Group will be able to receive interest at rates not lower, and thus no less favorable, than the prevailing rates offered by the major PRC commercial banks for deposits of similar nature.

For the avoidance of doubt, our Group is not prohibited or restricted in any way to use deposit services provided by other commercial banks or independent financial institutions in the open market, and we retain discretion to make our selection according to business needs as well as the fees and quality of such deposit services. Our Group may (but is not obliged to) utilize the deposit services provided by CRCC Finance so as to deploy and manage our financial resources flexibly and efficiently.

The Board (including the independent non-executive Directors) is of the view that: (i) the transactions under the Financial Services Framework Agreement are entered into in the ordinary and usual course of business of the Company, on normal commercial terms, which are fair and reasonable and in the interest of the Company and the Shareholders as a whole; and (ii) the proposed maximum daily balance of the deposits to be placed under the Financial Services Framework Agreement from 1 January 2020 to 31 December 2020 is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

As Mr. Sha Mingyuan, being a non-executive Director of the Company, concurrently holds positions in CRCC, he has abstained from voting on the Board resolution with respect to the transactions. Save as disclosed above, none of the Directors has material interest in the transactions under the Financial Services Framework Agreement and therefore, none of the other Director has abstained from voting on such Board resolution.

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7. INTERNAL CONTROL MEASURES TO ENSURE SAFETY OF THE FUNDS OF OUR GROUP DEPOSITED WITH CRCC FINANCE

Our Company has adopted the following monitoring and internal control measures to ensure that the terms of the Financial Services Framework Agreement are fair and reasonable and such transactions are on normal commercial terms:

1. before our Company or any of our subsidiaries enters into any deposit services with CRCC Finance, our Group will obtain quotes from three other independent financial institutions for similar deposit services for the same duration, namely Bank of China Kunming North Station Branch, China CITIC Bank Kunming Baita Road Branch and Industrial and Commercial Bank of China Kunming Huguo Branch. Such quotes, together with the offer from CRCC Finance, will be reviewed by the finance department and the audit and risk control department of the Company, and the offer from CRCC Finance has to be approved by the heads of these departments in order to pass our internal approval process before it can be accepted;
2. CRCC Finance shall set up and maintain, or procure the setting up and maintenance of, a secured and stable on-line system through which the relevant subsidiary of our Company, which deposits money with them, can view the balance of such deposits at any time on any day;
3. CRCC Finance shall, in taking the deposits from our Group, not affect the normal use of the deposits by our Group; CRCC Finance shall ensure that their deployment of the funds will not inhibit or restrict the ability of our Group from utilizing our deposits, and if the funding needs of our Group do not exceed the total deposits placed by our Group with CRCC Finance, CRCC Finance shall ensure that there will be sufficient funds for our Group's timely withdrawal to meet the funding needs of our Group;
4. CRCC Finance shall facilitate any annual inspection by our Group of the management of the deposits placed by our Group with CRCC Finance, including inspection of records of fund flows, interest rates and payments provided to our deposits, the balance of our deposits placed, and other information and records that may be required by our auditors for the purpose of reporting on the relevant continuing connected transactions;
5. CRCC Finance will provide its annual financial report and other documents and information to our Company at our request; and
6. the auditor of our Company will also conduct an annual review on the pricing policies and annual caps of such agreement, and provide confirmation in our annual report.

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1. IMPLICATIONS UNDER THE LISTING RULES
   CRCC is a controlling Shareholder, which directly and indirectly holds approximately 65% of the total issued share capital of the Company as at the date of this announcement. CRCC Finance is a subsidiary of CRCC, which is owned as to 94% by CRCC as at the date of this announcement, and thus is a connected person of the Company under the Listing Rules. Therefore, the transactions under the Financial Services Framework Agreement constitute continuing connected transactions of the Company.
   Since the highest applicable percentage ratio (as defined in the Listing Rules) for the transactions contemplated under the Financial Services Agreement exceeds 0.1% but is less than 5%, such transactions are subject to the reporting, announcement and annual review requirements, but exempted from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.
2. GENERAL INFORMATION
   The Group is principally engaged in: (i) development, manufacturing and sales of large railway track maintenance machines; (ii) manufacturing, purchase and sales of parts and components of large railway track maintenance machines; (iii) overhaul services; and (iv) railway line maintenance services.
   CRCC Finance is a non-banking financial institution incorporated in the PRC on 28 March
   2012 and is subject to the Administrative Measures on Finance Companies within Group Enterprises 《( 企業集團財務公司管理辦法》) and other relevant regulations promulgated by PBOC and CBIRC. The establishment of such non-banking financial institutions is subject to approval by CBIRC and its operation is subject to the ongoing supervision of CBIRC. Non-banking financial institutions shall comply with applicable regulations relating to interest rates issued by PBOC and CBIRC.
   In the PRC, finance companies within group enterprises are only permitted under applicable PRC laws and regulations to provide financial services to enterprises within the same parent group. Therefore, CRCC Finance only provides financial services to members of the CRCC Group, including our Group.

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10. DEFINITIONS

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

"Board"

"CBIRC"

"China" or "PRC"

"Company"

the board of Directors of the Company

China Banking and Insurance Regulatory Commission (中國 銀行保險監督管理委員會)

the People's Republic of China, excluding, for the purpose of this announcement, Hong Kong, Macau and Taiwan

CRCC High-Tech Equipment Corporation Limited (中國鐵 建高新裝備股份有限公司), a joint stock limited company,

whose H Shares are listed on the Main Board of the Stock Exchange

"connected person(s)"

"CRCC"

"CRCC Finance"

"CRCC Group"

"Director(s)"

"Financial Services Framework Agreement"

"Group"

has the same meaning as ascribed to it under the Listing Rules

China Railway Construction Corporation Limited (中國鐵建 股份有限公司), a joint stock limited company incorporated in the PRC and our controlling Shareholder. Its H shares are listed on the Main Board of the Stock Exchange (stock code: 01186) and its A shares are listed on the Shanghai Stock Exchange (stock code: 601186)

CRCC Finance Company Limited (中國鐵建財務有限公

司), a limited liability company incorporated in the PRC, a subsidiary of CRCC and a connected person of our Company

CRCC and its subsidiaries (excluding our Group)

the director(s) of the Company

a financial services framework agreement entered into between the Company and CRCC Finance on 9 December 2019 to renew the Previous Financial Services Framework Agreement, pursuant to which CRCC Finance agrees to provide deposit services to the Group for the term commencing from 1 January 2020 and ending on 31 December 2020

the Company and its subsidiaries

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"H Share(s)"

"Hong Kong"

"Listing Rules"

"Macau"

"Main Board"

"PBOC"

"Previous Financial Services

Framework Agreement"

overseas listed foreign shares in the share capital of our Company with nominal value of RMB1.00 each, which are listed on the Main Board of the Stock Exchange

the Hong Kong Special Administrative Region of the PRC

the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time)

the Macau Special Administrative Region of the PRC

the stock market (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange

People's Bank of China (中國人民銀行), the central bank of the PRC

a financial services framework agreement entered into between the Company and CRCC Finance on 28 December 2018, pursuant to which CRCC Finance agreed to provide deposit services to the Group for the term commencing from 1 January 2019 and ending on 31 December 2019

"RMB"

"Share(s)"

"Shareholder(s)"

"Stock Exchange"

"%"

Kunming, the PRC, 9 December 2019

Renminbi, the lawful currency of the PRC

ordinary shares in the capital of our Company with a nominal value of RMB1.00 each

the shareholder(s) of the Company

The Stock Exchange of Hong Kong Limited

percent

By Order of the Board

CRCC High-Tech Equipment Corporation Limited

Chairman

Liu Feixiang

As at the date of this announcement, the Board comprises Mr. Liu Feixiang, Mr. Tong Pujiang and Mr. Chen Yongxiang, as executive Directors; Mr. Zhao Hui, Mr. Sha Mingyuan and Mr. Wu Zhixu, as non-executive Directors; and Mr. Sun Linfu, Mr. Yu Jiahe and Mr. Wong Hin Wing, as independent non-executive Directors.

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