Stock Code: 200771 Stock ID: Hangqilun B Announcement No. 2017-62
Hangzhou Steam Turbine Co., Ltd.
Announcement of the company with the controlling
shareholder of related party transaction
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.Summary of related transaction
1. In 2014, the company set up the Gas Turbine Research Institute, built up the R& D team and continued to increase the investment in gas turbine research and development. Due to the difficulty of gas turbine technology research and development, the long cycle and the large capital investment, and in order to effectively control the company's costs, the company actively explored the R& D model innovation and actively sought the support from the controlling shareholder-Hangzhou Steam Turbine Power Group Co., Ltd (hereinafter referred to as: Hangzhou Steam Turbine Group) for the gas turbine business. After the discussion by the board of directors, the company planned to transfer the 50WM power level distributed energy gas turbine research and development project to Hangzhou Steam Turbine Group, and then the Central Research Institute affiliated to Hangzhou Steam Turbine Group shall be responsible for the basic technology research and development of the above-said distributed energy gas turbine. The transaction amount of this R& D project was RMB 61.3129 million. The company shall sign the related transaction agreement with Hangzhou Steam Turbine Group in connection to the above matter.
2. According to the "Listing Rules" of the Shenzhen Stock Exchange, the controlling shareholder-Hangzhou Steam Turbine Group is a related party to the company, thus that shall constitute a related transaction.
3.The 13th meeting of the 7th term of Board was held on August 17, 2017. Director Nie Zhonghai, Yan Jianhua, Yang Yongming, Ye Zhong, and Zheng Bin waived from the voting. As the resolution, the proposal was passed with all 6 votes in favor, 0 objection and 0 waive. The meeting examined the Proposal of the company with the controlling shareholder of related party transaction. The independent directors of the company made the prior approval and expressed the independent opinions in connection to such related transaction. The proposal does not need to be submitted to the company's shareholders' general meeting for deliberation.
4. The transaction neither constitutes a major asset restructuring nor constitutes a backdoor listing according to Measures for the Administration of Major Asset Restructuring of Listed Companies.
II. Introduction of related parties and relationship
2. Nature of the enterprise: State-owned Enterprises
3. Registered address: No. 357 Shiqiao Road Hangzhou City
4. Office address: Block A, 68 Qingchun Road East, Hangzhou
5. Legal representative: Mr. Nie Zhonghai
6. Registered capital: RMB 800 million
7. 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.
8. Association with the company: holds63.64% stake of the company, the associative relationship is shown as the below chart
9. Credit rating:AA+ (Rating Agency: Dagong Global Credit Rating Co., Ltd.)
10. Recent financial information of Steam Turbine Group (on consolidated range)
In RMB
||||||
|-|-|-|-|-|
|Periods|Turnover|Net profit|Gross assets|Net assets|
|June 2017|42,638,415,905.95|78,857,936.23|35,128,554,848.29|10,015,848,594.05|
|2016|72,003,681,905.10|651,160,879.41|34,584,194,181.72|10,584,617,894.02|
|2015|57,011,318,873.16|356,172,459.98|28,676,683,075.59|8,062,853,737.67|

 III. Basic conditions of the subject of the related transaction
Overview of the underlying assets: The company hired Tianjian Certified Public Accountants to carry out the audit on the above-saidR&D project. According to the audit conclusions of the "Special audit report on Hangzhou Steam Turbine Co.,Ltd's up-front cost of research and development of distributed energy gas turbine" (No.7796-2017 Tianjian Audit) issued by Tianjian Certified Public Accountants, from September 1,
2014 to August 11, 2017 only the company's actual up-front investment in the research and development of
distributed energy gas turbine was RMB 61.3129 million (thereinto, the R& D expenses was RMB 42.5479
million, and the expenses of assets purchase, transportation, insurance and others was RMB 18.765 million). IV. Pricing policy and pricing basis of the transaction
The pricing basis of the related transaction: determined in accordance with the Tianjian Certified Public Accountants' audit result of the company's actual up-front investment amount.
V.The main content of the related transaction
1. The transaction price: RMB 61.3129 million;
2. Payment period: paid before the end of September 2017;
3. After the signing of the agreement, the company no longer bears R& D expenditure of the above-mentioned distributed energy gas turbine project;
4. Hangzhou Steam Turbine Group committed not to carry out the business activities of gas turbine manufacturing and sales, and the company still retains the research and development of the gas turbine engineering manufacturing process and service technology;
5. Hangzhou Steam Turbine Group committed that for the technological achievements in the gas turbine development, the company has the priority right of purchase and the priority right of use when the conditions are the same.
VI. Purpose and impact of the transaction
Due to the difficulty of gas turbine technology research and development, the long cycle and the large capital investment, and in order to effectively control the company's costs, the company actively explored the R& D model innovation and actively sought the support from the controlling shareholder-Hangzhou Steam Turbine Power Group Co., Ltd for the gas turbine business, therefore the 50WM power level distributed energy gas turbine research and development project will be transferred to Hangzhou Steam Turbine Group. Such matter of the company will not affect the market development of the gas turbine business. The transaction will increase the company's profits in the current period.
VII.The total amount of all kinds of related transactions occurred with the related party from the beginning of the year to the disclosure date
From the beginning of the year to the date of this disclosure, the total amount of various types of related transactions with this related party was: RMB 269.4318 million, which accounts for3.99% of the audited net assets of the most recent period of the company.
VIII. Consent of independent directors in advance and their opinions
On August 17,2017,The Company held the
13th
meeting of the
7th
term board of directors to examine and approve the "Proposal about related transaction between the company and its controlling shareholder". The related transaction has got the ex-ante approval from the company's independent directors, who agreed to submit the proposal to the Board of directors for deliberation.
The Independent Directors' Opinion: The Company planned to transfer the 50WM power level
distributed energy gas turbine R& D project to Hangzhou Steam Turbine Group, which was mainly for reducing the risk of the original innovation process and meanwhile seeking industrial policy support and social resource investment on a wider scale. When the board of Directors deliberates the related transaction, the related directors avoided the voting, thus the voting procedure of the related transaction was in line with
the laws and rules. The price of the related transaction was determined according to the audit result by the accounting firm, therefore the pricing basis was reasonable. The related party transaction was in line with the interests of the listed company, and there was no situation jeopardizing the interests of the company and the company's small and medium shareholders.
IX. Documents for reference
1. Resolutions of the 13th meeting of the 7th Term of Board;
2. Independent Opinions of Independent Directors;
3.The Related Transaction Agreement signed by the company and Hangzhou Steam Turbine Group; 4.A special report issued by Tianjian Certified Public Accountants;
The Board of Directors of Hangzhou Steam Turbine Co., Ltd.
August 18,2017