09:40 DONGFANG ELEC<01072> - Announcement (5) shareholders' meeting at which DFEW, beneficial owner of the 220,000,000 State-owned A Shares (representing 48.89% shareholding interests) of the Company which has a material interests in the transactions, and its associates (which has the same meaning as defined in the SEHK Listing Rules) shall abstain from voting in the approval of the Continuing Connected Transactions and the respective cap proposed for the Continuing Connected Transactions. 2004 Connection Transactions Throughout 2004, the Company has executed numerous individual supply contracts of relatively small amounts with the four Connected Persons (the "2004 Connected Transactions"). The actual transacted amount resulting from these numerous individual contracts with the four Connected Persons, 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. Product prices under the 2004 Connected Transactions between the Company and the Connected Persons were determined according to the prevailing market prices. The individual supply contracts for individual orders were negotiated on normal commercial terms no less favourable to the Group than those available from independent third parties. The 2004 Connected Transactions were conducted in the ordinary course of business of the Company with product prices determined according to the prevailing market prices. The 2004 Connected Transactions are beneficial for the Company's steady operation and cost reduction incentive as the costs of raw materials supplied in bulk would be reduced, which is in line with the development strategy and sustainable growth of the Company without causing detriment to the interests of the Company and other shareholders, especially those of the minority shareholders. The Directors also resolved that Independent Shareholders' approval of the 2004 Connected Transactions at the general meeting be proposed and an independent financial adviser be appointed to advise the Independent Board Committee and independent shareholders of the Company, on whether the terms and conditions of the 2004 Connected Transactions were 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 board of directors also proposed that the 2004 Continuing Connected Transactions shall require Independent Shareholders' approval in a shareholders' meeting at which DFEW, beneficial owner of the 220,000,000 State-owned A Share (representing 48.89% shareholding interests) of the Company which has a material interests in the transactions and its associates (which has the same meaning as defined in the SEHK Listing Rules) shall abstain from voting in the approval of the 2004 Connected Transactions. A circular containing details of the 2004 and the Continuing Connected Transactions, a letter from the independent financial adviser, a letter from the independent board committee will be despatched to the Shareholders as soon as practicable. VI. Execution of the 2005 Connected Transaction agreements The Supply Agreements in relation to the above transactions have been signed on 1 January 2005, subject to the approval by the Board of the Company, the approval by the Independent Shareholders and execution of the individual supply contracts. Prices for the agreements were determined according to the prevailing market prices. As agreed by both parties, the transactions shall be settled in Renminbi by using the proceeds from sale of the products of the Company. The relevant Connected Person under an individual supply contract (the "Supplier") shall offer value-added tax invoices to the Company for the products which are inspected and accepted by the Company. In the following month, the Company shall pay the trade receivable to the Supplier by way of money transfer or commercial bills. The term of validity of the Supply Agreements is 1 year. The actual amount for transactions under the Supply Agreements shall be decided under the individual supply contracts. VII. Documents available for inspection 1. Resolutions passed at the 16th meeting of the fourth Board of the Company