Announcement on Related Party Transactions
I. Overview of the Related Transaction
Pursuant to the rules and regulations of the Company Law, the Administrative Measures for the Related Party Transactions between Commercial Banks and their Insiders or Shareholders and the Articles of Association of the Company, if the credit line of the aforementioned related party transaction is between 1-10% of the Company’s net capital at the end of previous quarter, the said transaction should be deemed as a material related party transaction, and should be reviewed for its rationality and impartiality by the Audit and Related Party Transaction Control Committee before being submitted to the Board of Directors for approval.
The 12th meeting of the Audit and Related Party Transaction Control Committee of the Sixth Board of Directors was held on March 1, 2010. The meeting reviewed and agreed to submit the aforementioned transaction proposal to the Board of Directors for review and deliberation. On March 2, 2010, the aforementioned transaction proposal was approved in the 21st meeting of the sixth Board of Directors.
II. Introduction to the Related Parties
1. Hang Seng Bank Limited; registered capital of HKD 11 billion; legal address: NO. 83, Des Voeux Road Central, Hong Kong. Hang Seng Bank is the second largest shareholder in the Company, holding a stake of 12.78%. It is a related party of the Company. As a major member of HSBC group, the Hang Seng Bank Limited is Hong Kong’s largest listed bank in terms of market capitalization, and is among the top 30 banks globally in terms of market value. Hang Seng Bank (China) Ltd. was established in Shanghai on May 28, 2007 as a wholly owned subsidiary with registered capital of RMB 4.5 billion. It is also a related party of the Company.
2. COFCO purchased stock in the Company in November, 2005, and was the fourth largest shareholder with a 2.96% stake as at the end of 2009. COFCO and its subsidiary company COFCO Finance Corporation Limited are engaged in a number of business collaborations with the Company.
COFCO is a solely-owned state enterprise, and the tier one state-owned enterprise directly affiliated to the State-owed Assets Supervision and Administration Commission of the State Council. It is engaged in the import and export of grain, oils and foodstuffs, with powerful business operations underpinned by diverse and rich networks and clients. Following years of business structure reform, COFCO has gradually become a multiple–operation industrial company instead of just a traditional trading company. Its operations have spread to the production and processing of grain and oil stuffs. Now, the company boasts a number of famous brands, and the company itself has become a renowned domestic food enterprise. COFCO Finance Corporation Limited was established in September, 2002 as a subsidiary company of COFCO, providing finance services for COFCO. Ms. Wu Xiaohui, its legal representative, acts as a supervisor of the Company.
III. Main content and pricing policy of the related transactions
The credit granting conditions for the aforementioned related party transactions are neither more preferential than the conditions for other borrowers applying for similar credit, nor lower than the conditions by which the related party company applies for credit in other banks. The Company conducts the credit granting with aforementioned related parties according to regular business transaction conditions, and charges interest at the fair and reasonable market interest rate.
V. Purpose of the related transactions and their influence on the listed company
The related party transactions are regular credit granting operation of the Company, and have no significant impact on the normal operation and financial position of the Company.
VI. Opinion of independent directors
Mr. Wang Guogang, Mr. Ba Shusong, Mr. Deng Liping, Mr. Xu Bin and Mr. Lim Peng Khoon, independent directors of the Company, expressed the following independent opinion on the related party transactions:
1. Fairness: The said related party transactions are priced in line with the principles of equal value compensation and fair pricing. There has been no breach of the principles of openness, equality and fairness, nor has there been any behavior infringing the interests of the Company or its small and medium shareholders.
2. Procedure. On March 1, 2010, the 12th meeting of the Audit and Related Party Transaction Control Committee of the sixth Board of Directors agreed to submit the following proposals to the Board of Directors for review and deliberation: Proposal on Granting A Basic Credit Line to COFCO and the COFCO Finance Corporation Limited and Proposal on Granting A Basic Internal Credit Line to the Hang Seng Bank (Including Hang Seng Bank (China) Limited). On March 2, 2010, the aforementioned major related transactions were approved in the 21st meeting of the sixth Board of Directors. The procedure for review and approval of the above major related transactions complied with applicable laws, rules and regulations as well as the Articles of Association of the Company.
VII. List of documents for future reference
1. Resolution of the Audit and Related Party Transaction Control Committee of the Board of Directors
2. Resolution of the Board of Directors
3. Independent opinion signed and confirmed by independent directors.
Board of Directors
Industrial Bank Co., Ltd.
March 4, 2010