PUBLIC CENSURE ANNOUNCEMENT in respect of Northeast Electrical Transmission & Transformation Machinery Manufacturing Company Limited (the "Company") and Mr. Xiang Yong Chun Mr. Zuo Chang Lin Mr. Gao Xing Yao Mr. Liu Yong Shun Mr. Li Lian Yi Mr. Lu Ming Lin Ms. Chang Shu Yun Mr. Zhou Ren Lao Mr. Lu Yong Jiu Mr. Li Bin ("the Directors")

The Stock Exchange of Hong Kong Limited (the Exchange) hereby publicly censures the Company and each of the above-named Directors for breaches of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Undertaking with regard to Directors given by him to the Exchange in the form set out in Appendix 5H of the Listing Rules.

On 30 May 2002, the Listing Committee of the Exchange (the "Listing Committee") considered the Company's breach of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Listing Rules") in relation to the connected transactions identified below which the Company or its subsidiaries (collectively referred to as "the Group") entered into between 1997 and 1999.

Breaches of Rules 14.25(1), 14.26 and 14.29 of the Listing Rules in relation to connected transactions

By its press announcement of 26 April 2000 (the "April Announcement"), the Company provided details of its breaches of the Listing Rules in connection with its three sets of connected transactions:

1. Unsettled Retirement Benefits

During the reorganization in preparation for the listing of the shares of the Company in 1995, pursuant to a Reorganization Agreement entered into between parties including the Company and Northeast Electrical Transmission and Transformation Equipment Group Corporation Limited ("NET"), the controlling shareholder of the Company dated 13 June 1995,

1. certain employees of NET and its subsidiaries (the "NET Group") were transferred to the Group as part of the reorganization;
2. certain payment of retirement benefits was payable by the Company in respect of the employees of the NET Group who became part of the Group following the reorganization but who retired prior to 1 January 1995; and
3. NET agreed to reimburse the Company in respect of liabilities discharged by the Company for the payment of retirement benefits referred to in (b) above.

Subsequent to the listing of the shares of the Company, the Company and NET intended that the retirement benefits to be borne by NET was to be settled by way of set off against the dividends of the Company that may be payable to NET; and further that the payment due to the Company by NET in this respect but not reimbursed would be unsecured and non-interest bearing. No written agreement was entered into to record such intentions. Neither were such arrangements disclosed in the prospectus of the Company dated 22 June 1995.

The amount of retirement benefits (the "Unsettled Retirement Benefits") paid by the Company and which NET was obliged but failed to reimburse the Company with during the three years between 1997 and 1999 are as follows:

Since the Company had not distributed any dividends for the three years ended 31 December 1999, there were no dividends to set off the amount comprising the Unsettled Retirement Benefits. NET's non-reimbursement of the Unsettled Retirement Benefits to the Company is a connected transaction under the Listing Rules and was subject to the requirements imposed under the Listing Rules.

The Unsettled Retirement Benefits represented more than 0.03% but less than 3% of the consolidated net tangible assets of the Company for each of the years ended 31 December 1997, 31 December 1998 and 31 December 1999. As stated in the April Announcement and the Company's Circular of 1 June 2000 (the "Circular").

1.

the Directors of the Company, including the independent non-executive Directors, took the view that the arrangements with NET as described above were on normal commercial terms and therefore believed that the Company was required but had failed to comply with Rule 14.25 of the Listing Rules which requires disclosure by way of paid announcement at the time when the Unsettled Retirement Benefits became due but not settled by NET;

2.

however the independent financial advisers have opined that the Unsettled Retirement Benefits were not made on normal commercial terms. As such, the Exchange considers that Rule 14.26 of the Listing Rules applies and the Unsettled Retirement Benefits should have been disclosed by way of press announcement and made subject to prior approval by independent shareholders at the time when the Unsettled Retirement Benefits became due but not reimbursed by NET for each year since the year ended 31 December 1997.

The Company did not make disclosure by way of a press announcement nor did it obtain prior independent shareholders' approval.

Rule 14.29 of the Listing Rules prescribes the requirement for the Company to notify the Exchange as soon as possible after the terms of connected transactions have been agreed and to send circulars to shareholders and the Exchange in relation to the connected transactions and the Company convening a shareholders' meeting to obtain independent shareholders' approval of the connected transactions within 21 days after notification to the Exchange. The Company did not take the steps required under this Rule in relation to the Unsettled Retirement Benefits for the three years ended 31 December 1999.

The Listing Committee is satisfied that in relation to the Unsettled Retirement Benefits which the Company paid but has not been reimbursed by NET for each of the three years until 31^stDecember 1999, Rule 14.26 applies and further the Company has breached Rules 14.26 and 14.29 of the Listing Rules.

It is noted that the continued existence of the Unsettled Retirement Benefits has been approved by independent shareholders' resolution passed at the Company's extraordinary general meeting on 17 July 2000 (the "EGM").

2. Loan Agreement

NET was unable to pay bondholders upon maturity on 10 October 1999 in relation to corporate bonds NET issued to employees of NET and its subsidiaries (including the Group). Pursuant to a loan agreement entered into between the Company and NET on 10 October 1999 (the "Loan Agreement"), the Company paid the amount of the corporate bonds due and payable to the employees of the Group for and on behalf of NET in the sum of RMB12.199 million (equivalent to approximately HK$11.4 million). The loan was unsecured, carried an annual interest rate of 6% and was required to be repaid on 10 October 2000.

The Company stated in the April Announcement and the preliminary annual results announcement dated 28 April 2000 that the Loan Agreement was not made on normal commercial terms. It was however subsequently stated in the Circular that (i) the Directors of the Company, including the independent non-executive Directors, took the view that the Loan Agreement as described above were on normal commercial terms as the annual interest rate of 6% per annum was set with reference to the average banking lending rate of the People's Bank of China to financial institutions from December 1998 to June 1999; and (ii) on this basis, the Directors believed that the Company was required but has failed to comply with Rule 14.25 of the Listing Rules which requires disclosure by way of paid announcement at the time when the Loan Agreement was entered into.

The independent financial advisers have opined that the Loan Agreement was not made on normal commercial terms. As such, the Exchange considers that Rule 14.26 of the Listing Rules applies and the Loan Agreement should have been disclosed by way of press announcement and made subject to prior approval by independent shareholders at the time when the Loan Agreement was entered into. The Company did not make disclosure by way of a press announcement nor did it obtain prior independent shareholders' approval.

Rule 14.29 of the Listing Rules requires the Company to notify the Exchange as soon as possible after the terms of connected transactions have been agreed and to send circulars to shareholders and the Exchange in relation to the connected transaction and the Company convening a shareholders' meeting to obtain independent shareholders' approval of connected transactions within 21 days after notification to the Exchange. The Company did not take the steps required under this Rule in relation to the Loan Agreement at the time when the Company entered into the Loan Agreement.

The Listing Committee is satisfied that in relation to the Loan Agreement, Rule 14.26 applies and the Company has breached Rules 14.26 and 14.29 of the Listing Rules.

It is noted that at the EGM, the shareholders did not resolve to approve the continued existence of the Loan Agreement. The Company has since indicated that it is taking measures to actively recover the amount outstanding under the Loan Agreement and that further announcement would be made on the progress and measures taken as and when appropriate.

3. The Lease Arrangement

Since 1 April 1997, Shengyang Hua Kang Restaurant and Entertainment Limited, a 60% subsidiary of the Company, leased from Northeast Electrical Transmission and Transformation Equipment Corporation Property Development Company, a wholly owned subsidiary of NET, a property at the basement of the 25-storey building located at No.1, 189 Taiyuan South Street, Heping District, Shenyang, Liaoning Province, the PRC and the 1st Floor of Block 5, Kingdom area, No. 94-1 Tianjin South Street, Heping District, Shenyang, Liaoning Province, the PRC (the "Property") at an annual rental of RMB1.4 million (equivalent to approximately HK$1.3 million) (the "Lease Arrangement"). No written agreement was signed until 12 August 1999 when the Lease Agreement was signed by the parties to formalize the arrangement. The Lease Agreement provides for a three-year lease at an annual rent of RMB1.4 million commencing 1 April 1997.

The Lease Arrangement since 1 April 1997 was a connected transaction under the Listing Rules. Pursuant to Rules 14.24(1) and 14.25(1) of the Listing Rules, at the time when the amount paid under the Lease Arrangement since 1 April 1997 exceeds the higher of 0.03% of the net tangible assets of the Company and HK$1 million, the Lease Arrangement was required to be disclosed by way of a paid announcement and in the Company's published annual report and accounts for the relevant years. The Company did not give disclosure of the Lease Arrangement by any press announcement until the April Announcement nor did it include the requisite details of the same in its annual reports and accounts of the Company for the two years ended 31 December 1997 and 31 December 1998.

The Listing Committee is satisfied that the Company has breached Rule 14.25(1) of the Listing Rules in relation to the Lease Arrangement.

The Listing Committee is satisfied that, in respect of the Company's breaches of Rules 14.25(1), 14.26 and 14.29 of the Listing Rules in relation to the three sets of connected transactions as identified above, the Directors, being all Executive Directors who were in office during the period when the relevant breaches occurred were in breach of their Undertaking whereby each of them undertook to use his or her best endeavours to cause the Company to comply with the Listing Rules.

Accordingly,

I.	The Company is publicly censured by the Listing Committee for

1.	its breach of Rules 14.26 and 14.29 of the Listing Rules in respect of the Unsettled Retirement Benefits for the years ended 1997, 1998 and 1999 and the Loan Agreement; and

2.	its breach of Rule 14.25(1) of the Listing Rules in respect of the Lease Arrangement.

II.	The Directors listed at 1, 2, 3, 4, 5, 6, 7, 8 are publicly censured by the Listing Committee for their breach of their Undertakings in respect of all of the Company's breaches of Rules 14.25, 14.26 and 14.29 of the Listing Rules as set out in (I) above.
III.	The Director listed at 9 is publicly censured by the Listing Committee for his breach of his Undertaking in respect of

1.	the Company's breach of Rule 14.26 and 14.29 of the Listing Rules in respect of the Unsettled Retirement Benefits paid in the year ended 31 December 1997; and

2.	the Company's breach of Rule 14.25(1) of the Listing Rules in respect of the Lease Arrangement.

IV.	The Director listed at 10 is publicly censured by the Listing Committee for his breach of his Undertaking in respect of

1.	the Company's breach of Rule 14.26 and 14.29 in respect of the Unsettled Retirement Benefits paid in the two years ended 31 December 1998 and 31 December 1999 and the Loan Agreement; and

2.	the Company's breach of Rule 14.25(1) of the Listing Rules in respect of the Lease Arrangement.

For the avoidance of doubt, the Exchange confirms that it is not in relation to this matter publicly censuring any other past or present directors of the Company save for those named herein.