FIRST TRACTOR COMPANY LIMITED 
By 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.
(a joint stock company incorporated in the People's Republic of China with limited liability)
CONNECTED TRANSACTIONS GUARANTEES FOR YTO SPECIAL VEHICLE AND YTO XINNUO GOODS
The Acquisition was completed on 22 January 2013 and since then, YTO Foundry became a wholly-owned subsidiary of the Company.
On 28 March 2012 and 21 August 2012, YTO Foundry entered into YTO Special Vehicle Guarantee Agreement and YTO Xinnuo Goods Guarantee Agreement respectively with Luoyang Bank. At their respective signing dates and before 22 January 2013, the transactions under the Guarantee Agreements did not constitute connected transactions of the Company. Since YTO Foundry became a wholly-owned subsidiary of the Company upon completion of the Acquisition on 22 January 2013 and YTO Special Vehicle and YTO Xinnuo Goods, being the principal debtors under the respective Guarantee Agreements, are wholly-owned subsidiaries of YTO, the transactions under the Guarantee Agreements became connected transactions of the Company as well as financial assistance provided by the Company upon completion of the Acquisition.
Having considered that the principal debtor under each of the Guarantees is an associate of YTO, the transactions contemplated under the Guarantee Agreements should be aggregated under Rule 14A.25 of the Listing Rules.
As the applicable percentage ratio (after aggregation) is more than 0.1% but less than 5%, the Guarantees are exempted from the independent shareholders' approval requirements but subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules.
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INTRODUCTION
Reference is made to the announcement and circular of the Company dated 15 November
2012 and 4 December 2012 respectively in relation to, among other things, the Acquisition of 100% equity interest in YTO Foundry by the Company from YTO, the controller shareholder of the Company.
The Acquisition was completed on 22 January 2013 and since then, YTO Foundry became a wholly-owned subsidiary of the Company.
On 28 March 2012 and 21 August 2012, YTO Foundry entered into YTO Special Vehicle Guarantee Agreement and YTO Xinnuo Goods Guarantee Agreement respectively with Luoyang Bank. At their respective signing dates and before 22 January 2013, the transactions under the Guarantee Agreements did not constitute connected transactions of the Company. Since YTO Foundry became a wholly-owned subsidiary of the Company upon completion of the Acquisition on 22 January 2013 and YTO Special Vehicle and YTO Xinnuo Goods, being the principal debtors under the respective Guarantee Agreements, are wholly-owned subsidiaries of YTO, the transactions under the Guarantee Agreements became connected transactions of the Company as well as financial assistance provided by the Company upon completion of the Acquisition.
Save and except for the signing dates, principal debtors, maximum guarantee amount, coverage period and default payment, other principal terms of the Guarantee Agreements are substantially the same, summary of which is set out below:-
YTO Special Vehicle Guarantee Agreement YTO Xinnuo Goods Guarantee Agreement
Date 28 March 2012 21 August 2012
Parties
(as Guarantor) YTO Foundry YTO Foundry
(as Beneficiary) Luoyang Bank Luoyang Bank
Principal debtor YTO Special Vehicle YTO Xinnuo Goods
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YTO Special Vehicle Guarantee Agreement YTO Xinnuo Goods Guarantee Agreement
Maximum guarantee amount RMB15,000,000 (As at the date of this announcement, the actual guaranteed amount
is RMB11,855,000)
RMB7,000,000 (As at the date of this announcement, the actual guaranteed amount
is RMB500,000)
Coverage period Indebtedness incurred between 28 March 2012 and
27 March 2013
Indebtedness incurred between 21 August 2012 and
20 August 2013
Default payment 0% 10% of the total amount of the guarantee scope
Guarantee The Guarantees were joint liabilities guarantees. The guarantor guarantees the due and punctual payment to Luoyang Bank for all indebtedness in respect of any loans, banker's acceptance bill (being the difference between the face value of the bill and the amount deposited by the principal debtor as security), bill discounting, letters of credit (being the difference between the face value of the letters and the amount deposited by the principal debtor as security) or other banking facilities provided by Luoyang Bank to the principal debtor during the above respective coverage period. Luoyang Bank may set-off any credit balance in any account of the guarantor maintained with Luoyang Bank against any sum payable by the guarantor to Luoyang Bank.
Scope Indebtedness includes loan principal, its interest (including compound interest and default interest), damages, compensation and any expenses incurred in connection with the enforcement of the indebtedness (including but not limited to legal, litigation, arbitration, assets preservation, travelling, enforcement, valuation and auction expenses).
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REASONS FOR ENTERING INTO THE GUARANTEE AGREEMENTS
The Guarantee Agreements were entered into before the signing of the YTO Foundry equity transfer agreement in respect of the Acquisition ("YTO Foundry Equity Transfer Agreement") dated 15 November 2012 between the Company and YTO. The entering into of the Guarantee Agreements was for the purpose of facilitating YTO Special Vehicle and YTO Xinnuo Goods to obtain funds or loans from Luoyang Bank. The terms of the Guarantee Agreements were determined after arm's length negotiations between the relevant parties. Pursuant to the YTO Foundry Equity Transfer Agreement, YTO has agreed to assume all contingent liabilities (including the above guarantee amount) under the Guarantee Agreements.
The Directors (including the independent non-executive Directors) are of the view that the Guarantee Agreements were entered into on normal commercial terms and the terms of the Guarantee Agreements are fair and reasonable. The Company has mentioned the Guarantees when announcing the YTO Foundry Equity Transfer Agreement. As mentioned above, YTO has agreed to assume all contingent liabilities under the Guarantee Agreements, therefore the Guarantees do not prejudice the interests of the Group and the Shareholders as a whole. As the Guarantee Agreements have been signed and implemented before the Acquisition, the Company is not required to convene Board meeting especially for discussion and approval of the Guarantee Agreements.
The Group is principally engaged in production and sale of agricultural machineries and power machineries. The principal products include tractors of hi-powered, mid-powered and low-powered, diesel engines and other accessories of tractors, forklifts and mining trucks, etc.
YTO is the controlling shareholder of the Company, holding 44.574% equity interest in the Company, and is principally engaged in production of transporting machineries, casting parts, vehicles products and components.
YTO Foundry is principally engaged in the processing and sale of casting blank and semi-finished products. It was established in September 2003 and has a relatively strong processing and manufacturing capacity. YTO Foundry is currently a wholly-owned subsidiary of the Company.
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YTO Special Vehicle is principally engaged in the production, sale, research and development and maintenance of garbage and special-purpose vehicles, semi-trailers, engineering machineries products and their components. YTO Special Vehicle is currently a wholly-owned subsidiary of YTO.
YTO Xinnuo Goods is principally engaged in the sale of agricultural machineries, engineering machineries, vehicle machine tools and their components, steel, iron, non- ferrous metals, iron alloys, mineral products (excluding coal), lubricating oil, coke, construction materials, industrial chemical goods, rubber, steel scrap and iron scrap, etc. YTO Xinnuo Goods is currently a wholly-owned subsidiary of YTO.
Luoyang Bank is a financial institution incorporated in the PRC and is principally engaged in the financial and banking services. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, Luoyang Bank and its ultimate beneficial owner are third parties independent of the Company and connected persons of the Company.
As mentioned above, YTO is the controlling shareholder of the Company. Both YTO Special Vehicle and YTO Xinnuo Goods are wholly-owned subsidiaries of YTO, and are therefore associates of YTO. Accordingly, YTO Special Vehicle and YTO Xinnuo Goods are regarded as connected persons of the Company pursuant to the Listing Rules. Since the Acquisition was completed and YTO Foundry became a wholly-owned subsidiary of the Company on 22 January 2013, the transactions under the Guarantee Agreements (with YTO Special Vehicle and YTO Xinnuo Goods being the respective principal debtors of the Guarantees) became connected transactions of the Company as well as financial assistance provided by the Company.
Having considered that the principal debtor under each of the Guarantees is an associate of
YTO, the transactions under the Guarantee Agreements should be aggregated under Rule
14A.25 of the Listing Rules.
As the applicable percentage ratio (after aggregation) is more than 0.1% but less than 5%, the Guarantees are exempted from the independent shareholders' approval requirements but subject to the reporting and announcement requirements under Chapter 14A of the Listing Rules.
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DEFINITIONS
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:
"Acquisition" the acquisition of the 100% equity interest in YTO Foundry by the Company from YTO pursuant to an equity transfer agreement dated 15 November 2012
"associate(s)" has the same meaning as ascribed to this term under the
Listing Rules
"Board" the board of Directors
"Company" First Tractor Company Limited* (
