09:39 DONGFANG ELEC<01072> - Announcement (3) wire and cable; generating equipment; repair accessory processing, spare parts of power station, technologic services of and maintenance of equipment electric power technology high and low voltage insulation and high-voltage for power stations; design, consultancy and services, distribution equipment, test; production, installation, manufacturing and sale of machinery processing, cooler, heat exchanger, maintenance, sale of electric sliding axletree for electrical wholesale and retail of common machines, electric machines and equipment; machinery, valve, electrical machinery and electric machines and equipment. insulating technology equipment and appliance, products, and manufacturing, consulting service. general equipment, ordinary processing and sale of machinery and special machinery products and equipment for industrial structural parts. use; design of environmental treatment and craftwork; manufacturing and sale of environmental equipment; processing and sale of standard parts, punching parts, metal structural parts, forging and heat treatment parts; recycling and sale of scrap metals. 2. Description of connected relationships with the Company The aforesaid four companies (the "Connected Persons") are subsidiaries of * Dongfang Electrical Machinery Works ("DFEW") which holds 220,000,000 State-owned A Shares of the Company, representing 48.89% of the Company's total share capital and is the controlling shareholder of the Company. Shareholding interests of DFEW in the aforesaid four companies are as follows: Metal Ancillary Insulation General Name Company Company Company Company Total share capital (RMB'000) 17,540 12,000 4,000 16,000 Shares held by DFEW 17,050,000 11,800,000 3,800,000 14,500,000 As a percentage in total share capital (%) 97.2 98.3 95 90.6 Pursuant to the SEHK Listing Rules and the SSE Listing Rules, the aforesaid four companies are connected persons of the Company. 3. Analysis of performance capability of the connected persons Currently, the Metal Company, the Ancillary Company, the Insulation Company and the General Company are in smooth production and operation with sound performance capability. 4. Total anticipated continuing connected transactions in the year 2005 Connected Persons Estimated amount for Amount in Amount in 2005 (RMB'000) 2004 (RMB'000) 2003 (RMB'000) Metal Company: 45,000-50,000 16,060 21,175 Ancillary Company 44,000 -50,000 37,440 - Insulation Company 30,000-35,000 21,500 - General Company 28,000-33,000 13,910 7,479 Total 147,000-168,000 88,910 28,654 The aggregate amount of the connected transactions between the Company and the Connected Persons, comprising numerous individual contracts, were reported to be RMB88,910,000 for the period ended 31 December 2004. Due to the increased number and size of orders in hands, the actual procurement costs for raw materials actually increased significantly over the last two years. The Company anticipated that a maximum amount of RMB168,000,000 for 2005 shall be reasonable in order to meet the production demand. The Company therefore considered the cap for such connected transactions shall be set at RMB168,000,000 in 2005. The above caps were considered as appropriate with reference to the number of forthcoming orders and the anticipated growing demand for the Company's products. III. Pricing basis The Supply Agreements are general agreements setting out the intention of the parties in the sale and purchase of the raw materials in the year 2005 and the price determination basis without fixing any actual prices. The prices for the raw materials and other terms of the actual transactions will be determined according to the prevailing market prices when the individual supply contracts for single orders are to be executed. In accordance with the terms of the Supply Agreements, the individual supply contracts for individual orders will be