Stock Code: 200771 Stock ID: Hangqilun B Announcement No. 2018-56
Hangzhou Steam Turbine Co., Ltd.
Announcement on abandoning the right of first refusal of Casting
company
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. Overview
Yang Lianrong, a natural person shareholder of Hangzhou Steam Turbine Casting Co., Ltd.-which is a holding subsidiary to the Company, intends to transfer part of his holding shares of the Casting company to the and management team and Key technical staff of the Casting company, and the number of shares to be transferred is 7.7022 million shares, accounting for35.01% of the total share capital of the Casting company, with that the total transfer price is 77.638176 million yuan and the price of per share is 10.08 yuan.
As a pilot enterprise of Zhejiang “Phoenix Project”, the Casting company will continuously improve its shareholding structure and implement the “Employee stock ownership plan” in order to stimulate the development of the company and smoothly promote its publicly listing process. Thereby, Yang Lianrong, a natural person shareholder of the Casting company, is to lessen his shareholding ratio from40% stake of the Casting company to4.99%, and to transfer most of his holding shares to the middle level (backbone) and senior level of the Casting company and other staff who made outstanding contributions. The Casting company submits a request to the Company to waive the preemptive right of purchase the equity of such transfer.
On July 25, 2018, the Company held the
24th
meeting of the
7th
Board of Directors of the Company ended up with 10 votes consent, votes objection and votes abstention, approved the Proposal on abandoning the right of first refusal of Casting company.
The company's waiver of the pre-emptive right to the equity of the Casting company of such share-transfer does not constitute a related transaction. The proposal does not need to be submitted to the company'sshareholders’ meeting. The Company's waiver of the pre-emptive right to the
equity of the Casting company of such share-transfer needs file-recorded approval by the state-owned assets supervision and administration department.
II.Basic Information of the Transferor and the Transferee
1. Transferor in the equity-transfer
The transferor is Yang Lianrong, a natural person shareholder of the Casting company. He currently holds 8.8 million shares of the Casting company, which accounts for40% of the total share capital of the Casting company, and he is the second largest shareholder of the Casting company. Yang Lianrong is currently the chairman of the Casting company.
2. Transferee in the equity-transfer
The transferee of the equity-transfer is the “Employee stock ownership plan” of the Casting company. According to the “employee stock ownership plan” of the Casting company, the objects of the employee stock ownership plan are those who have been qualified by the board of directors of the Casting company to be employed by the Casting company and receive remuneration, specifically referring to the middle level (backbone) and senior level of the Casting company and other staff who made outstanding contributions. The transferee is not a related person to the listed company, and the purchase method by the transferee is cash.
III.Basic information of the underlying company of the equity-transfer
1.Name：Hangzhou Steam Turbine Casting Co., Ltd.
2.Date ofestablishment：March 1 ,2004
3.Place ofregistration：No.2 Road, Tangxi Industry Area,Yuhang District, Hangzhou
4.Legal representative : Yu Junming
5.Registeredcapital：22 million yuan
6.Business scope: Resin sand cast steel , resin sand cast iron, organic fat glass of water glass castings, forgings; Installation, maintenance: casting equipment; sales: Thecompany’s products; import and export goods.
7. Shareholder contribution and shareholding structure:
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|-|-|-|
|Shareholders|Amount（Ten thousandyuan）|Shareholding ratio|
|Hangzhou Steam Turbine Co., Ltd.|1,122|51%|
|Yang Lianrong|880|40%|
|Yu Junming|66|3%|

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|-|-|
|Tong Ziqian|44|
|Xu Wei|44|
|Yu Yifeng|44|

8. Relationship with the Company: It is a holding subsidiary to the Company, and the Company holds51% stake.
9.The past threeyear’s major financial indicators
In RMB
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|-|-|-|-|-|-|-|
|Period|Total assets|Net assets|Total Liabilities|Revenue|Total profit|Net profit|
|2017|489,452,244.02|173,136,786.15|316,315,457.87|357,558,102.11|31,586,127.41|27,727,923.66|
|2016|||||||
|2015|||||||

IV. Reasonableness description of pricing
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|-|
| According to the “Asset Evaluation Report of the Appraisal Project of the Shareholder's|
|Total Equity Value involved in the Planned Capital-increase and Share-expansion of Hangzhou|
|Steam Turbine Casting Co., Ltd.” (Yinxin Evaluation Report Hu No. 0325-2018) issued by Yinxin|
|Assets Appraisal Co., Ltd., at the base date of December 31, 2017, the total book value of the|
|Casting company was 491.3677 million yuan, the total liabilities were 319.5488 million yuan, and|
|the total equity value of shareholders was 171.8189 million yuan, while upon the completed|
|evaluation, the total assets value was 587.7469 million yuan, the total liabilities were 316.2766|
|million yuan, and the total equity value of shareholders was 271.4703 million yuan-which|
|increased by 99.6514 million yuan, with a value-added rate of 58.00%.|

According to the above assets evaluation conclusion, the net assets per share of the Casting company is 12.34 yuan, and after deducting the 2017 dividend distribution ( 25 million yuan, 1.14 yuan per share) by the Casting company, the price per share is 11.20 yuan, and upon giving10% discount on the afore-said price, thus the proposed transfer price is 10.08 yuan / share for this equity-transfer.
V.Statement by the Board of Directors on the waiver of rights
The Casting company was established when the company implemented the “main and auxiliary business separation” system reform at the end of 2003. Through the introduction of social capital, the original operation mode and the management mechanism were transformed, and its efficiency and profits were significantly improved after the reform.
The turbine castings have the characteristics such as high casting difficulty, high technical
requirements and long processing cycle, and those characteristics are also the focus and difficulty
in the steam turbine quality control and product lead-time control. Therefore, maintaining the sustainable and healthy development of the Casting company is an important guarantee for the Company's strategy implementation and strategic development. Through the means of share-transfer of the natural person's equity of the Casting company to make the management team and the technical backbone staff hold shares of the casting and forging company, it will help the Casting company to further strengthen the market incentive mechanism, enhance its market competitiveness, raise its management level and improve its product quality.
This equity transfer is to boost the development vigor of the Casting company, effectively combine the interests of the Casting company and the interests of employees, and lay the foundation for the smooth progress of its listing process. The waiver of the preemptive right is a decision that takes into account the overall development and planning of the Company and the current status of the Casting company, which is in line with the Company's overall development strategy.
VI.Impact of waiving the preemptive right in the equity-transfer on the company
After the equity change, the current business scope, asset attribute, credit and debt relationship and shareholding structure of the Casting company remain unchanged. The company's waiver of the preemptive right in the equity-transfer does not affect the Company's shareholding ratio, does not affect the Company's financial status and operating results, and it also does not affect the company's controlling position to the Casting company.
VII. Independentdirector’s opinion
The company waives the exercise of the pre-emptive right under the same conditions in the transaction of this matter, based on the decision made regarding the current status of the subsidiaries involved. The transfer of the natural person's equity in the Casting company is conducive to the continuous improvement of the shareholding structure of the Casting company and the implementation of the management team and the key personnel of the technical personnel, which helps the Casting company to further strengthen the market incentive mechanism and enhance its market competitiveness. Improve management. The value of the pre-emptive right to be waived is based on an assessment made by a third-party asset. Which is in line with the relevant provisions of relevant laws and regulations, and there is no circumstance of harming the interests of the company or its shareholders. The board of directors of the company has deliberated on this matter, and the procedure for convening the meeting of the board of directors and the voting procedures are in accordance with the relevant laws, regulations and the Articles of Association of Company.
VIII. Documents available for inspection
1.Resolutions of the
24th
Meeting of the seventh Board of Directors
This announcement is hereby made.
The Board of Directors of Hangzhou Steam Turbine Co., Ltd.
July 26, 2018