09:38     DONGFANG ELEC<01072> - Announcement (1)                             

    The Stock Exchange of Hong Kong Limited takes no responsibility for       
    the contents of this announcement, makes no representation as to its      
    accuracy or completeness and expressly disclaims any liability            
    whatsoever for any loss howsoever arising from or in reliance upon the    
    whole or any part of the contents of this announcement.                   
                                                                              
    DongFang Electrical machinery Company Limited                             
    (A joint stock limited company incorporated in the People's Republic      
    of China)                                                                 
                                                                              
    (Stock Code: 1072)                                                        
                                                                              
    CONTINUING CONNECTED TRANSACTIONS                                         
                                                                              
    The Company is under the disclosure obligation to make this               
    announcement pursuant to Rules Governing the Listing of Securities on     
    the Stock Exchange of Hong Kong Limited (the "SEHK Listing Rules") and    
    the Rules Governing the Listing of Securities on Shanghai Securities      
    Exchange (the "SSE Listing Rules")                                        
                                                                              
    Conditional upon the approval at the board meeting to be held on 21       
    March 2005 and compliance with the requirements under the SEHK Listing    
    Rules and the SSE Listing Rules, the Company has entered into four        
    agreements with four respective subsidiaries of its holding company in    
    relation to the general supply of raw materials to the Company for the    
    year 2005 (the "Supply Agreements"). Detailed terms of the                
    transactions will be set out in the individual supply contracts to be     
    signed by the parties.                                                    
                                                                              
    The transactions with the four subsidiaries of its holding company        
    constitute continuing connected transactions under the SEHK Listing       
    Rules and the SSE Listing Rules and the transactions under the Supply     
    Agreements (the "Continuing Connected Transactions") shall be subject     
    to the approval by the Company's Independent Shareholders at a            
    shareholders' meeting and other disclosure requirement. The Company       
    will appoint an independent financial adviser to advise the               
    independent board committee comprising the independent directors of       
    the Company (the "Independent Board Committee") and the independent       
    shareholders of the Company on whether the terms and conditions of the    
    Continuing Connected Transactions are fair and reasonable so far as       
    the Independent Shareholders are concerned and whether the connected      
    transactions are in the interests of the Company and the shareholders     
    as a whole. The independent financial adviser will also advise on         
    whether the relevant caps set for the Continuing Connected                
    Transactions are fair and reasonable.                                     
                                                                              
    Throughout 2004, the Company has executed numerous individual supply      
    contracts with the four subsidiaries (the "2004 Connected                 
    Transactions"). The actual transacted amount was reported to have         
    accumulated to RMB88,910,000 at the end of 2004 as disclosed in its       
    audited financial statements for the period ended 31 December 2004.       
    The accumulated amount for the year 2004 has exceeded 2.5% of the         
    relevant percentage ratios at the relevant time and should be subject     
    to the announcement, reporting and shareholder approval requirements      
    under the SEHK Listing Rules. The Company should have sought              
    shareholders' approval when the aggregates of the individual contracts    
    exceeded the threshold and the board of directors proposed to obtain      
    shareholders' approval of the 2004 Connected Transactions at the          
    general meeting, the SEHK has expressed that they reserve the rights      
    to make enquiry into the compliance of 2004 Connected Transactions and    
    purchase of raw materials from those connected persons prior to 2004      
    with the SEHK Listing Rules.                                              
                                                                              
    In the shareholder's meeting, the DFEW, controlling shareholder of the    
    Company, and its associates will abstain from voting on the resolution    
    to be proposed to approve the 2004 Connected Transactions and the         
    Continuing Connected Transactions. A circular containing details of       
    the 2004 Connected Transactions, and the Continuing Connected             
    Transactions, a letter from the independent financial adviser, and a      
    letter from the Independent Board Committee will be despatched to the     
    Shareholders as soon as practicable.                                      
                                                                              
    The Company and the members of the Board of Directors hereby confirm      
    the truthfulness, accuracy and completeness of the contents of this       
    announcement and jointly accept full responsibility for any false         
    representation, misleading statement or material omission herein          
    contained.                                                                
                                                                              
    I. Basic information on the anticipated continuing connected              
    transactions