Hangzhou Steam Turbine Co., Ltd. Routine Related Transactions in 2011 and Projected for 2012

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1 Stock Code: Stock ID: Hangqilun B Announcement No Co., Ltd. Routine Related Transactions in 2011 and Projected for 2012 The members of the Board and the Company acknowledge being responsible for the truthfulness, accuracy, and completeness of the announcement. Not any false record, misleading statement or significant omission carried in this announcement. I. Briefing of the routine related transactions (I) Introduction of the related transaction The 15th meeting of the 5th term of Board was held on March 26, The proposal about routine related transactions occurred in 2011 and project for year 2012 was examined at the meeting. 10 directors presented the meeting and Director Nie Zhonghai, Wang Hongkang, and Zhen Bin waived from the voting. As the resolution, the proposal was passed with 7 votes in favor. It is still subject to the examination by the Shareholders Annual Meeting 2011, on which Power Group Co., Ltd. shall waive from voting for it s the related shareholder. The routine related transactions of the Company are mainly: sales of products, providing of services, and sales agency to the related parties; purchasing of materials, transportation services, infrastructure services, and medical services from the related parties. Related transactions in 2011 were actually RMB million, and it is project to RMB , and the details are as the followings: 1

2 (II) Categories and amounts of the related transactions projected for year 2012 Type of related transaction Purchasing material related party of from Purchasing of fuel and power from the related parties Labor service to related parties Labour & services accepted from the related parties Related parties Hangzhou Hangfa Power Generating Equipment Co., Ltd. Hangzhou Nanfangtongda Gears Co., Ltd. Hangzhou Nanhua Wooden Packaging Co., Ltd. Industrial Co. Subject of the transaction Contract amount projected amount In RMB10 thousand or Occurred last year Amount occurred Percentage in similar business % Generators 12, , Gear boxes , Packaging board 1, , Auxiliary parts Sub-total 15,160 19, Water and Power Group Co., Ltd. power 1, , Sub-total 0 Automobile Sales Service Spare parts Co., Ltd. Sub-total 0 Hangzhou Hangfa Power Industrial Generating Equipment Co., cooperation Ltd HSTG Technology Industrial Association cooperation Sub-total Rent of office Rent of land Dormitory Property admin Education & Power Group Co., Ltd. Industrial Co. HSTG Association Technology Automobile Sales Service Co., Ltd training Canteen Trademark Medical Warehousing Sub-total 1, Medical Technical development fee Coach freight, repairing fee 3,614 4, Sub-total 3,764 4, Power Technologies Co., Ltd. Steam turbine 0 7, Products and merchandises sold Power Group Co., Ltd. Steam turbine 0 2, by related parties as Hangzhou Nanfangtongda agency Gears Co., Ltd. Steam turbine Greensol Co. Steam turbine 9, Subtotal 20, Sales of products on behalf of the related parties Total 21, ,

3 (III) Accumulation of related transactions as described above from the beginning of this year to date of this report The related transactions accumulated from the beginning of report year to the date of this announcement is amounted to RMB million. In RMB 10 thousand No. Related parties Amount occurred 1 Auto Service Co Power Group Co., Ltd Industrial Co Hangzhou Nanhua Wooden Packaging Co., Ltd Hangzhou Generator Group Total 2, II. Introduction of related parties and relationship (I) Power Group Co., Ltd. Registered address: No. 357 Shiqiao Road Hangzhou City Legal representative: Mr. Nie Zhonghai Registered capital: RMB500 million Business Type: State-owned and sole proprietorship company Business scope: Manufacturing and processing: textile machinery, paper-making machinery, pump, casting products, electrical tools, gear box, thermal transmitter, digital controlling device, and spare parts of the above (limited to the subsidiaries); Contracting of domestic and overseas machinery engineering projects, export of above equipments and materials, provide labor services for above overseas projects. Thermal power plant project and equipment engineering; wholesale and retail: products and spare parts manufactured by members of the group, and technical research, consulting, and service of above products; Provide materials, equipments, and spare parts to members of the Group, water and power supply (other than installation and maintaining of power supply equipment); Including the business scope of subsidiaries. Financial position of 2011: Total asset: RMB21,870,410,000; net asset: RMB3,548,250,000; sales income: RMB45,350,820,000; total profit: RMB2,005,880,000; net profit: RMB721,410,000. 4

4 Power Group Co., Ltd. ( HSTG or the Group ) is holding million state-owned shares account for 63.64% of the capital shares of the Company, and is the holding shareholder of the Company. It is complying with Article (I) of Share Listing Rules of Shenzhen Stock Exchange. HSTG is the related legal person of the Company. The water and power supplies were provided by HSTG; some of the industrial power plant steam turbine products and parts were sold by HSTG; community services and employee education are provided by HSTG; part of the land using rights and office buildings were rented from HSTG; trademark using rights were authorized by HSTG. For the Company and HSTG are in the same castle, the above related transactions will be carried on for a long period of time in viewing of resource sharing. (II) Hangzhou Hangfa Power Generating Equipment Co., Ltd. Registered address: 128 Central Road, Chengxiang, Xiaoshan District, Hangzhou Legal representative: Mr. Zhu Shuilong Registered capital: RMB50 million Business type: state-holding entity Business scope: hydropower station equipment, parts of steam turbine generators, electric motor, power plant and mining equipment, export of its own products and technologies, raw materials, machinery, automatic control parts; import of measuring tools, accessories, and technologies; accepting of outsourced works. Financial position of 2011: Total asset: RMB378,570,000; net asset: RMB105,100,000; sales income: RMB292,500,000; total profit: RMB3,280,000; net profit: RMB2,460,000. It was the former Hangzhou Hangfa Group Co., Ltd. As approved by the government of Hangzhou, it was given to HSTG in May 2004 as a fully owned subsidiary of HSTG. In September 2008, the restructuring plan was approved by document 杭国资综 号, by which Hangfa Group was restructured from solely state-owned entity to a shareholding company with limited liabilities. Since then it was renamed as Hangzhou Hangfa Generator Equipment Co., Ltd. with registered capital of RMB50 million, in which HSTG is holding 85% of share equity. For Hangfa is under the common control with the Company, it is regarded as related legal person according to Article (I) of the Share Listing Rules of Shenzhen Stock Exchange. The major related transactions with Hangzhou Hangfa Generator Equipment Co., Ltd. were purchasing of steam turbine generators. It was to satisfy the demand of 5

5 customers. Some customers require the Company to provide generators along with the steam turbines. Hangfa has been providing products to the Company since long before it was given to HSTG. 4. Total amount of related transactions projected for year 2012 are provided in the (III) Hangzhou Nanfang Tongda Gears Co., Ltd. Registered address: 130 Stadium Road, Xiacheng District, Hangzhou Legal representative: Yan Jinghe Registered capital: RMB6 million Company property: limited liability Business scope: whole selling and retailing of gear boxes, gear speed reducer, steam turbine and parts, steel, electro-mechanism equipment (exclude cars), common machinery, hardware & electric materials. Financial position of 2011: Total asset: RMB70,150,000; net asset: RMB28,470,000; sales income: RMB126,000,000; total profit: RMB11,520,000; net profit: RMB9,610,000. Hangzhou Nanfang Tongda Gears Co., Ltd. was relatively controlled by HSTG. For it is under the common control with the Company, it is regarded as related legal person according to Article (II) of the Share Listing Rules of Shenzhen Stock Exchange. The related transactions with Hangzhou Nanfang Tongda Gears Co., Ltd. was mainly purchasing of gear speed reducers to satisfy the needs of equipment package of industrial steam turbines. Some of the steam turbines are required to use gear speed reducers to limit the rotating speed within a provided range. (IV) Hangzhou Nanhua Wooden Packaging Co., Ltd. Registered address: 62 Xingqiao Road North, Xingqiao, Yuhang, Hangzhou Legal representative: Jiang Yonggen Registered capital: RMB2 million Business type: company with limited liabilities Business scope: manufacturing, processing, and sales of wooden products (wooden packaging material); sales of construction material, decoration material; all legal items not subject to approval of authorities. 6

6 Financial position of 2011: Total asset: RMB16,870,000; net asset: RMB16,190,000; sales income: RMB15,280,000; total profit: RMB3,070,000; net profit: RMB2,370,000. Hangzhou Nanhua Wooden Packaging Co., Ltd. was relatively controlled by HSTG. For it is under the common control with the Company, it is regarded as related legal person according to Article (II) of the Share Listing Rules of Shenzhen Stock Exchange. Related transactions with Hangzhou Nanhua Wooden Packaging Co., Ltd. were mainly purchasing of wooden packaging material which were necessary for shipping of the products. (V) Industrial Co., Ltd. Registered address: No. 357 Shiqiao Road Hangzhou City Legal representatives: Qiu Jingyong Registered capital: RMB2.5 million Business type: company with limited liability Business scope: manufacturing and processing of: steam turbine parts, electronic tool parts, mining equipment parts; wholesaling and retailing of: home electric appliances, grocery, food, agriculture products (other than those under national control), stationery; service: restaurant, out-campus education and training programs, residential services. All legal items not subject to approval of authorities. Financial position of 2011: Total asset: RMB115,443,655,600; net asset: RMB86,526,147,000; sales income: RMB33,972,805,900; total profit: RMB18,058,297,100; net profit: RMB16,022,575,300. Industrial Co., Ltd. was partially invested by HSTG. For it is under the common control with the Company, it is regarded as related legal person according to Article (II) of the Share Listing Rules of Shenzhen Stock Exchange. Industrial Co., Ltd. was reconstructed from infrastructure departments of HSTG. The related transactions with it are mainly supporting services and medical services which are necessary for the Company doesn t have these departments. 7

7 (VI) Automobile Sales & Service Co., Ltd. Registered address: No. 357 Shiqiao Road Hangzhou City Legal representative: Yao Binglin Registered capital: RMB5 million Business type: company with limited liability Business scope: wholesaling and retailing of: automobiles (except for sedan cars) and parts, metal material, construction material, electronic machine and instruments. Service: cargo transportation, automobile repairing (class B), all legal items not subject to approval of authorities. Financial position of 2011: Total asset: RMB35,610,000; net asset: RMB18,440,000; sales income: RMB107,580,000; total profit: RMB11,770,000; net profit: RMB9,090,000. Automobile Sales Service Co., Ltd. was relatively controlled by HSTG. For it is under the common control with the Company, it is regarded as related legal person according to Article (II) of the Share Listing Rules of Shenzhen Stock Exchange. Related transactions with Automobile Sales Service Co., Ltd. are mainly employee transportation, product shipping, and automobile maintaining services, which are necessary for the Company doesn t have these departments. III. Purposes of the related transactions and influences on the PLC Above related transactions are essential to the normal operation of the Company. All of the above related parties are in good business and financial situation, and are capable to carry out the contracts engaged with the Company. Thus no risks exist with fulfilling of the contracts. The above related transactions are conducted through legal examining procedures and satisfying the needs of normal business operation of the Company. Pricing was on fair basis and no interests of the Company or the mid-small shareholders were impaired. IV. Comments of the independent directors The above related transactions are complying with the Company Law, the Articles of Association, and related laws and regulations. They were conducted through legal examining procedures and satisfying the needs of normal business operation of the Company. Pricing was on fair basis and no interests of the Company or the mid-small shareholders were impaired. 8

8 V. Documents for Reference 1. Trade agreements with related parties on the related transactions; 2. Resolutions of the 15th meeting of the 5th term of Board; 3. Opinions of the independent directors on the routine related transactions. The Board of Directors of Co., Ltd. March 26,