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Documents for the 2004 Annual General Meeting of Dalian Refrigeration Co., Ltd.
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Document No. 1 for the 2004 Annual General Meeting
2004 Annual Report on the Work of the Board of Directors Dear Shareholders:In 2004, amid stringent macroeconomic regulation, a sharp rise in raw material prices, and intensifying market competition, the company fully leveraged its initiative and adopted the guiding principle of “preparing in advance, responding proactively, taking the initiative, and safeguarding market share.” As a result, the company achieved main business revenue of RMB 121.681 million, up 16.65% year on year; total profit of RMB 122.38 million, up 21.45% year on year; and net profit of RMB 100.96 million, up 17.19% year on year. I. Review of the Company’s Operating Performance in 2004 1. Overview of the Company’s Principal Business Activities (1) Principal Business During the reporting period, the Company undertook twelve turnkey projects each with a contract value of RMB 5 million or more, including five large-scale turnkey projects valued at RMB 10 million or more and two ultra-large turnkey projects valued at RMB 20 million or more. During the reporting period, the company developed more than 20 new products, including optimized centrifugal chillers, semi-hermetic screw chillers, and petrochemical-specific screw compressor units. Notably, two of these new products—the CJZS812.5CDW marine ultra-low-temperature refrigeration compressor unit and a modular chilled-water system—were awarded the 2004 China Machinery Industry Science and Technology Award. During the reporting period, the company was honored as one of Dalian’s Top Ten Advanced Enterprises in Informatization. The company’s ERP system was fully rolled out, achieving integrated application and networked operations across key functional departments, including the general ledger system, procurement system, inventory management system, sales system, shipping system, and production planning and execution system. This has enabled dynamic management of the Bingshan website and the comprehensive implementation of online office automation. During the reporting period, Zhang He, Chairman of the Company, was awarded one of the first Senior Professional Manager Certificates in China by the All-China Federation of Industry and Commerce. During the reporting period, the company fully leveraged the overall strengths of the BingShan Group and actively pursued group-wide joint procurement. In November, the first such initiative—joint procurement of copper tubing—was successfully completed, with a total procurement value exceeding RMB 50 million and cost savings of more than RMB 1 million. During the reporting period, the Company implemented comprehensive, organization-wide cost-reduction initiatives, which to a certain extent mitigated the adverse impact of substantial price increases in raw materials such as steel. Total expenses for the three major categories amounted to RMB 143.63 million, a year-on-year decrease of RMB 14.40 million, with operating expenses down RMB 3.62 million, administrative expenses down RMB 4.99 million, and financial expenses down RMB 5.79 million, demonstrating effective expense control. (2) Joint Venture At the end of 2004, the total assets of the company’s joint ventures amounted to RMB 33,091.7 million, representing a year-on-year increase of 14.24%; net assets totaled RMB 16,307.7 million, up 9.09% from the previous year. In 2004, the company’s portfolio of joint ventures recorded sales revenue of RMB 35,317.1 million, up 27.63% year on year, including RMB 6,954.2 million in export sales, a year-on-year increase of 85.69%; the company also reported investment income of RMB 950.9 million, up 16.62% year on year. During the reporting period, five joint ventures accounted for more than 10% of the company’s net profit: Sanyo Compressor, Sanyo Air Conditioning, Sanyo Cold Chain, Sanyo Refrigeration, and Dalingwang. During the reporting period, among the company’s joint ventures, six recorded year-on-year growth of more than 30% in principal business revenue, four reported year-on-year growth of more than 30% in net profit, and six achieved a return on equity of over 15%; three had principal business revenue exceeding RMB 500 million, and four posted net profits exceeding RMB 50 million. During the reporting period, Sanyo Compressor was awarded the title of “No. 1 Brand for Product Quality and Customer Satisfaction in China’s Compressor Market” in the inaugural China Market Product Quality and Customer Satisfaction Survey hosted by the Market Information Center of People’s Daily. Following its designation as a global supplier to Fidelity, the company also successfully passed York’s supplier qualification audit. In October, construction officially commenced on a research and development center spanning more than 12,000 square meters; upon completion, it will become Sanyo Electric’s highest-specification R&D facility outside Japan. During the reporting period, Sanyo Cold Chain successfully partnered with major Chinese retail giants such as Shanghai Agricultural and Industrial Corporation and Dashing Group. It also established a strategic partnership with Carrefour, securing 60% of Carrefour’s annual procurement orders. In the foodservice market, the company continued to enjoy strong growth, maintaining nearly 100% market share in KFC and Dicos outlets. Additionally, Sanyo Cold Chain has set up a joint R&D platform with its Japanese counterparts to co-develop low-temperature medical equipment and a range of refrigerated display cabinets, further solidifying its leading position in the industry. During the reporting period, Sanyo Air Conditioning developed a new series of air-conditioning units using environmentally friendly refrigerants and took the lead in China in initiating the replacement of conventional refrigerants with eco-friendly alternatives. The one-to-three enthalpy-difference test laboratory successfully passed the certification of the Japan Refrigeration Industry Association, laying a solid foundation for large-scale exports of air-conditioning units. The company also successfully penetrated the markets of Japan, Central and North America, the Middle East, Europe, and West Asia with its commercial and residential air-conditioning products. During the reporting period, Sanyo Refrigeration was awarded the “China Environmental Label Excellence Award” by the State Environmental Protection Administration. The GHP gas-fired heat pump has completed pilot production and has been commercialized. In addition, the company successfully passed the ASME on-site certification audit, thereby qualifying to enter international markets. 2. Operating Conditions and Performance of Major Subsidiaries (1) Dalian Bingshan Group Refrigeration and Air-Conditioning Installation Company. The company has a registered capital of RMB 20.04 million, and our company holds 100% equity. Its principal business is the installation and commissioning of complete sets of refrigeration equipment, and it achieved sales revenue of RMB 75.57 million in 2004. (2) Dalian Bingshan Group Sales Co., Ltd. The company’s registered capital is RMB 18 million, of which our company holds a 90% equity interest. Its principal business is the sales of products manufactured by member enterprises of the Dalian Bingshan Group, and it recorded sales revenue of RMB 143.22 million in 2004. (3) Dalian Bingshan Air-Conditioning Equipment Co., Ltd. The company has a registered capital of JPY 700 million, with our company holding a 70% equity stake. Its primary business is the manufacturing and sales of air-conditioning terminal units such as fan coil units and air handling units, and it recorded sales revenue of RMB 115.13 million in 2004. (4) Dalian Bingshan Metal Processing Co., Ltd. The company’s registered capital is USD 2.35 million, of which our company holds a 64.3% equity stake. The company primarily operates as an established joint venture and provides supporting production of sheet metal and stamped parts for our company. In 2004, it achieved sales revenue of RMB 42.81 million. 3. Information on Major Suppliers and Customers The company’s total procurement from its top five suppliers amounted to RMB 325.86 million, accounting for 34.66% of the annual total procurement. The combined sales to the company’s top five customers totaled RMB 113.08 million, representing 9.29% of the company’s total sales. 4. Issues and Challenges Faced in Operations, Along with Their Solutions In 2004, the primary challenges and difficulties faced by the company in its production and operations stemmed from the contradiction between demand and cost arising from national macroeconomic regulation and rising raw-material prices, which to some extent impacted the company’s market-development plans. In response to the aforementioned challenges, the company has intensified its market-development efforts on multiple fronts. First, leaders at all levels have risen to the occasion, conducting in-depth market research and closely monitoring key large-scale projects aligned with national policy priorities, thereby gaining a proactive edge in capturing market share. Second, the company has strengthened centralized and streamlined management to continuously enhance the price competitiveness of its products, ramped up product promotion, deepened engagement with key customers, and fully motivated distributors, design institutes, and other stakeholders. Third, the company has aggressively expanded into international markets by establishing overseas offices, building a robust marketing network, and leveraging the role of distributors. 5. In the Company’s 2004 Annual Financial Budget Report, the following operational targets for 2004 were set: sales revenue of RMB 120,000 million and total profit of RMB 12,000 million. Through diligent efforts, the Company successfully achieved these operational targets. 6. Company Investment Status As of the end of 2004, the company had established the following joint ventures with Japan, Hong Kong, the United States, the United Kingdom, and other regions:
(1) Use of Funds Raised In 1998, the Company raised net proceeds of RMB 360 million from the issuance of B shares, which were allocated to seven investment projects, one of which continued to receive funding during the reporting period. The capital increase and expansion project of Dalian Sanyo Compressor Co., Ltd. has received a total investment of RMB 155.2556 million, equivalent to JPY 2.228 billion, representing 100% of the committed investment. During the reporting period, RMB 46.30624 million was invested. In 2004, the company recorded main business revenue of RMB 706.29 million, a year-on-year increase of 33.93%. Currently, the company has invested RMB 333.4556 million of the funds raised, representing 100% of the total planned investment. (2) Explanation of Non-Fundraising Investment Projects On June 10, 2004, Dalian Fuji–Iceberg Vending Machine Co., Ltd., a joint venture established by the Company using its own funds and Japan’s Fuji Electric Co., Ltd., officially commenced operations. The company’s registered capital is JPY 1.8 billion, with the Company holding a 49% equity stake. Its primary business activities include the research and development, manufacturing, and sales of vending machines. On July 21, 2004, Fuji–Iceberg’s first vending machine rolled off the production line. On November 11, 2004, Dalian Jiale Vending Machine Operation Co., Ltd., a joint venture established with proprietary funds by the Company and Fuji Electric Retail Equipment Systems Co., Ltd. of Japan, officially commenced operations. The company’s registered capital is JPY 500 million, with the Company holding a 50% equity stake. Its primary business activities include the sales, installation, and after-sales service of vending machines, as well as the sale of beverages, food, and other items through these machines. During the reporting period, the Company acquired a 30% equity interest in Wuhan New World Refrigeration Industry Co., Ltd. held by Wuhan Refrigeration Machinery Factory, using its own funds. During the reporting period, the Company acquired, using its own funds, a 40% equity interest in Shenyang Sanyo Air Conditioning Co., Ltd. held by Sanyo Air Conditioning Co., Ltd. of Japan. (3) Explanation of Changes in Invested Projects During the reporting period, Dalian Minghua Electronics Co., Ltd. changed its corporate name to Dalian Sanyo Minghua Electronics Co., Ltd. The Company’s equity interest in the entity remained unchanged at 30%. During the reporting period, Dayang Automotive Air-Conditioning Engineering (Dalian) Co., Ltd. admitted a new shareholder and changed its name to Dayang Showa Automotive Air-Conditioning (Dalian) Co., Ltd. The Company transferred its 5% equity interest in the company to Showa Denko K.K. of Japan for RMB 6.3 million. The current shareholding structure of the company is as follows: Hong Kong Dayang Manufacturing Co., Ltd. holds 40%; Showa Denko K.K. of Japan holds 35%; and the Company holds 25%. 7. Company Financial Condition and Operating Results As of December 31, 2004, the company’s financial position and operating results were as follows: (1) Total assets amounted to RMB 195,994 million, an increase of RMB 4.15 million compared with the beginning of the year. Specifically: current assets decreased by RMB 114.67 million, primarily due to the repayment of loans resulting in a reduction in cash and cash equivalents; fixed assets decreased by RMB 3.10 million, mainly attributable to depreciation of fixed assets; long-term investments increased by RMB 118.71 million, largely driven by profits realized by joint ventures and new investments in such ventures; and intangible and other assets increased by RMB 3.21 million, primarily due to an increase in intangible assets. (2) Total liabilities amounted to RMB 571.26 million, a decrease of RMB 67.36 million from the beginning of the year. Specifically: current liabilities decreased by RMB 38.36 million, primarily due to a reduction in short-term borrowings; long-term liabilities decreased by RMB 29.00 million, attributable to a decline in long-term borrowings. (3) Shareholders’ equity amounted to RMB 13,527.5 million, an increase of RMB 672.8 million compared with the previous year, primarily due to the appropriation of statutory reserve funds and an increase in retained earnings. (4) Operating profit from principal business activities amounted to RMB 170.14 million, a decrease of RMB 4.93 million compared with the previous year, primarily due to substantial increases in the prices of raw materials such as steel, which led to higher company costs. (5) Net profit amounted to RMB 100.96 million, an increase of RMB 14.81 million year on year, primarily due to improved cost control that boosted operating profit and higher investment income from joint ventures. (6) The net decrease in cash and cash equivalents amounted to RMB 92.04 million, primarily due to the repayment of short-term borrowings and capital increases in joint ventures. Net cash flow from operating activities was RMB 28.70 million, a year-on-year decrease of RMB 81.17 million, mainly attributable to a decline in advance receipts and an increase in notes receivable. (7) The asset-to-liability ratio stood at 29.15%, down 3.5 percentage points year on year. The current ratio was 1.67, a decrease of 0.09 from the previous year; the quick ratio was 1.12, down 0.06 year on year. (8) The gross profit margin was 14.41%, a year-on-year decrease of 2.84 percentage points. (9) Return on equity was 7.46%, up 0.76 percentage points year on year. 8. Daily Operations of the Board of Directors (1) Meetings of the Board of Directors and the contents of their resolutions during the reporting period ① The 10th Meeting of the Third Board of Directors On April 20, 2004, the Third Session of the Company’s Board of Directors convened its tenth meeting in the Company’s Sixth-Floor Conference Room. At this meeting, the following resolutions were reviewed and adopted: the Board’s Work Report for the Year 2003; the Company’s Final Financial Statements for the Year 2003 and the Financial Budget for the Year 2004; the Proposed Profit Distribution Plan for the Year 2003; the Report on Making Provisions for Impairment of Assets for the Year 2003; the Report on Amending the Company’s Articles of Association; the Company’s Annual Report for the Year 2003; the Quarterly Report for the First Quarter of the Year 2004; the Report on Engaging an Audit Firm for the Year 2004; the Report on Increasing Investment in Dalian Bingshan Group Sales Co., Ltd.; the Report on Candidates for Directors of the Fourth Session of the Company’s Board of Directors; and Matters Relating to the Convening of the 2003 Annual General Meeting of Shareholders. ② First Meeting of the Fourth Board of Directors The fourth session of the Company’s Board of Directors held its inaugural meeting on June 3, 2004, in the Company’s Sixth-Floor Conference Room. At this meeting, Mr. Zhang He was elected Chairman of the Board, and Mr. Mu Chuanjiang was elected Vice Chairman; Mr. Zhang He was appointed General Manager of the Company; Mr. Yang Bin was appointed Executive Deputy General Manager; Messrs. Zhang Hongzhi, Wang Dekun, Wang Zhiqiang, and Hu Xitang were appointed Deputy General Managers; Ms. Xu Xiaorui was appointed Chief Financial Officer; and Ms. Lü Lianzhen was appointed Secretary of the Board of Directors. ③ Second Session of the Fourth Board of Directors On August 17, 2004, the Company’s Fourth Board of Directors held its second meeting in the Company’s Sixth-Floor Conference Room. At this meeting, the Board reviewed and approved the Company’s 2004 Semi-Annual Report and its Summary. ④ Third Session of the Fourth Board of Directors The Company’s Fourth Board of Directors held its third meeting on October 19, 2004, in the Company’s Sixth-Floor Conference Room. At this meeting, the Board reviewed and approved the Company’s Third-Quarter Report for 2004. (2) The Board of Directors’ Implementation of Resolutions Adopted by the Shareholders’ Meeting The Company’s Board of Directors effectively implemented all resolutions adopted at the 2003 Annual General Meeting. The Company’s 2003 dividend distribution plan was fully executed by the Board in July 2004. II. Business Plan for the New Fiscal Year 2005 Corporate Business Plan Targets: Sales revenue: RMB 150,000 million; Total profit: RMB 140 million. 1. Thoroughly understand and grasp the direction of macro policies and market trends, and firmly seize opportunities in both domestic and international markets. Further leverage the strengths of the company’s five core business segments: complete industrial refrigeration systems, complete food freezing and cold-storage systems, complete central air-conditioning systems, complete deep-processing systems for agricultural products, and complete petrochemical equipment systems. Continue to accelerate the establishment of sales joint ventures nationwide, gradually achieving localization of sales, localization of services, and localization of turnkey installation. 2. Taking product structure adjustment as the main focus, we will intensify efforts in new-product development, technological upgrading, and joint ventures and partnerships to enhance the company’s core competitiveness. Key priorities include the development of new products such as carbon dioxide–ammonia cascade low-temperature units and precision air-conditioning units specially designed for computer rooms; the renovation of the product laboratory and the introduction of horizontal machining centers as part of technological upgrades; and projects such as increasing capital investment in Sanyo compressors and Sanyo Cold Chain. 3. Strengthen innovation in enterprise management and enhance the quality of economic operations. Implement comprehensive cost-reduction measures, gradually transitioning to group-wide centralized procurement for key materials. Attach great importance to curbing the growth of accounts receivable. Focus on improving product quality and procurement quality. Continue to advance ERP-based information management. 4. Strengthen the integration of ideological and political work with production and operations, firmly instill a sense of responsibility, crisis awareness, and urgency, and enhance the ability of leaders at all levels to effectively manage the market and perform their respective duties. The above report is submitted for your review. May 24, 2005 Document No. 2 for the 2004 Annual General MeetingReport on the Work of the Supervisory Board for the Year 2004 Dear Shareholders:In 2004, the Supervisory Board held four meetings. The tenth meeting of the third session of the Supervisory Board was held on April 20, 2004, in the company’s sixth-floor conference room. At this meeting, the Board reviewed and approved the Supervisory Board’s Work Report for 2003, the “Supervisory Board Report” included in the Company’s 2003 Annual Report, and the nomination of candidates for the fourth session of the Supervisory Board. The first meeting of the fourth session of the Supervisory Board was held on June 3, 2004, in the company’s fifth-floor conference room. At this meeting, Mr. Yu Fuchun was elected Chairman of the fourth session of the Supervisory Board. The second meeting of the fourth session of the Supervisory Board was held on August 17, 2004, in the company’s fifth-floor conference room. At this meeting, the Board reviewed and approved the Company’s 2004 Semi-Annual Report and its Summary. The third meeting of the fourth session of the Supervisory Board was held on October 19, 2004, in the company’s fifth-floor conference room. At this meeting, the Board reviewed and approved the Company’s 2004 Third-Quarter Quarterly Report. The Supervisory Board hereby expresses the following independent opinion on the following matters: 1. Compliance with the law in the company’s operations. The company’s decision-making procedures are lawful, and a relatively comprehensive internal control system has been established. During the performance of their duties, the company’s directors and managers have not engaged in any conduct that violates laws, regulations, the company’s articles of association, or that harms the company’s interests. 2. Financial condition of the company: Dalian Hualian Certified Public Accountants LLP and PwC Zhongtian Certified Public Accountants LLP both issued unqualified audit reports. The financial statements faithfully reflect the company’s financial position and operating results. 3. During the reporting period, the Company did not raise any new funds. Of the proceeds from the Company’s 1998 B-share offering, one item of use carried over into the reporting period, and the actual project investment was consistent with the commitments made. 4. During the reporting period, the Company did not engage in any significant asset acquisitions or disposals. 5. During the reporting period, the company’s principal related-party transactions consisted of purchases of goods from affiliated companies. Such related-party transactions were conducted on arm’s-length terms and did not prejudice the company’s interests. 6. The company’s provision for asset impairment for the year 2004 was made in accordance with lawful resolution procedures and supported by sufficient supporting evidence. The above report is submitted for your review and approval. May 24, 2005 Document No. 3 of the 2004 Annual General Meeting
Regarding the Company’s 2004 Annual Financial Settlement We hereby submit the Company’s 2004 annual financial statements and the 2005 budget for your consideration at the General Meeting of Shareholders. I. The 2004 financial statements have been audited by Dalian Hualian Certified Public Accountants LLP. The company’s asset position and the status of its key financial and economic indicators for 2004 are as follows: (1) Company Asset Status At the end of 2004, the company’s total assets amounted to RMB 195,994 million, comprising current assets of RMB 87,019 million, fixed assets of RMB 28,929 million, long-term investments of RMB 75,604 million, and intangible and other assets of RMB 4,442 million. At the end of 2004, the company’s total liabilities amounted to RMB 571.26 million, comprising RMB 521.26 million in current liabilities and RMB 50 million in long-term liabilities. At the end of 2004, shareholders’ equity totaled RMB 135,275 million, including undistributed profits of RMB 17,228 million. (II) Status of Achievement of the Company’s Key Financial and Economic Indicators 1. Main business revenue reached RMB 12,168.1 million, representing a year-on-year increase of 16.65%. 2. Total profit reached RMB 122.38 million, up 21.45% year on year. 3. Net profit reached RMB 100.96 million, up 17.19% year on year. (3) Opinion on the Company’s Profit Distribution Please refer to the “2004 Profit Distribution Plan” (Document No. 4 of the 2004 Annual General Meeting). II. 2005 Fiscal Budget The company’s 2005 business plan targets are as follows: Sales revenue: RMB 150,000 million; Total profit: RMB 140 million. The above report is submitted for your review. May 24, 2005 Document No. 4 for the 2004 Annual General MeetingReport on the 2004 Profit Distribution Plan Dear Shareholders:The Company’s 2004 annual financial statements have been audited by Dalian Hualian Certified Public Accountants LLP and PwC Zhongtian Certified Public Accountants LLP. The following proposal is hereby submitted for the distribution of the Company’s 2004 profits: According to the audit conducted by Dalian Hualian Certified Public Accountants LLP, the Company recorded a post-tax profit of RMB 100.955 million in 2004. In accordance with relevant state regulations and the Company’s Articles of Association, RMB 9.985 million was appropriated as statutory surplus reserve at a rate of 10%, RMB 9.985 million as statutory public welfare fund at a rate of 10%, and RMB 1.561 million was set aside as reserves for consolidated subsidiaries, for a total appropriation of RMB 21.531 million. Adding this amount to the undistributed profits from the previous year of RMB 102.845 million, the total profit available for distribution to shareholders amounts to RMB 182.269 million. According to the audit conducted by PwC Zhongtian Certified Public Accountants LLP, the company recorded a post-tax profit of RMB 108.764 million in 2004. After setting aside the statutory surplus reserve, the statutory public welfare fund, and reserves for consolidated subsidiaries, and adding the undistributed profits from the previous year of RMB 67.387 million, the total profit available for distribution to shareholders amounted to RMB 152.124 million. In accordance with the relevant provisions of the Company’s Articles of Association and applying the lower-of-the-two principle, the distributable profits for the current year amount to RMB 152.124 million, of which RMB 9.985 million is appropriated as statutory surplus reserve at a rate of 10%, RMB 35.001 million is allocated for dividend distribution, and the remaining RMB 107.138 million is carried forward for distribution in the next fiscal year. The Company’s 2004 dividend distribution plan is as follows: based on the total share capital of 350,014,975 shares as of the end of 2004, a cash dividend of RMB 1.00 will be distributed for every 10 shares held (inclusive of tax), with the cash dividend for B shares converted into Hong Kong dollars for payment. This year, the company will not capitalize its capital reserve to increase share capital. The above report is submitted for your review. May 24, 2005 Document No. 5 of the 2004 Annual General MeetingReport on Amendments to the Company Charter Dear Shareholders:In accordance with the requirements of the China Securities Regulatory Commission’s “Several Provisions on Strengthening the Protection of the Rights and Interests of Public Shareholders” and the “Shenzhen Stock Exchange Rules for the Listing of Stocks (Revised in 2004),” and taking into account the Company’s actual circumstances, the Articles of Association are hereby amended as follows: 1. Article 3.3 of the Company Charter, “Types and Composition of Registered Capital,” originally stipulated that, “The company’s shareholding structure is as follows:”
It is now amended to, “The company’s shareholding structure is as follows:”
2. Article 4.4 of the Company Charter, “Conduct of the Controlling Shareholder,” originally provided that, It is now amended to read: “The controlling shareholder and the actual controller of the Company owe a fiduciary duty to the Company and to the shareholders of the Company’s public shares. The controlling shareholder shall strictly exercise its rights as a capital contributor in accordance with the law; it shall not, by means of related-party transactions, profit distribution, asset restructuring, external investments, misappropriation of funds, loan guarantees, or other such practices, impair the lawful rights and interests of the Company and the shareholders of the Company’s public shares; nor shall it, by virtue of its controlling position, harm the interests of the Company and the shareholders of the Company’s public shares.” 3. Add the following provision to Article 5.6, “Convening of the Shareholders’ Meeting,” of the Company Charter: “Following the issuance of a notice convening a general meeting on matters requiring approval by public shareholders, a further announcement of the notice shall be made within three days after the record date.” 4. Add the following provision to Article 5.12, “Voting Procedures,” of the Company Charter: “When the Company convenes a shareholders’ meeting to deliberate on material matters specified in Article 5.15 of the Articles of Association that are subject to the voting regime for public shareholders, it shall provide shareholders with an online voting platform. The implementation of online voting at the Company’s shareholders’ meetings shall be conducted in accordance with the relevant implementation measures.” 5. Article 5.13 of the Company Charter, “Election of Directors and Supervisors,” previously stipulated that when the controlling shareholder’s equity stake in the company is 30% or more, the shareholders’ meeting shall adopt a cumulative voting system for voting on proposals to elect directors. It is now amended to read as follows: “When the controlling shareholder of the Company holds a controlling interest of 30% or more, the shareholders’ meeting shall adopt a cumulative voting system for the表决 of proposals to elect directors and supervisors. Specifically, when the shareholders’ meeting elects two or more directors or supervisors, each share held by shareholders (including proxy holders) shall carry a number of votes equal to the total number of directors or supervisors to be elected. Shareholders (including proxy holders) may either concentrate all their voting rights on a single candidate or distribute them among several candidates. The Board of Directors shall, in accordance with the provisions of these Articles of Association, formulate detailed rules for implementing the cumulative voting system for the election of directors and supervisors, submit such rules to the shareholders’ meeting for approval, and implement them upon approval.” 6. The following provision is added to Article 5.15, “Voting on Special Resolutions,” of the Company Charter: “The following material matters shall be subject to a voting system for public shareholders: such matters shall be deemed approved only if they are passed by a special resolution at the general meeting of shareholders and further approved by more than half of the voting rights held by the public shareholders who participate in the vote.” (1) The Company shall issue new shares to the general public (including the issuance of foreign-invested shares listed overseas or other equity-based warrants), issue convertible corporate bonds, and offer shares to existing shareholders for subscription (except where shareholders with de facto control have committed prior to the convening of the meeting to subscribe in full in cash); (2) In the event of a major asset restructuring of the company, where the aggregate purchase price of the acquired assets exceeds the audited book net value of such assets by 20% or more; (3) Shareholders shall repay their outstanding debts to the company by using the company equity they hold; (4) The overseas listing of subsidiaries that have a material impact on the company; (5) Matters that have a significant impact on the interests of public shareholders in the course of the company’s development. 7. The following provision is added to Chapter 14, “Information Disclosure,” of the Company Charter: Article 14.6 Investor Relations Management “The Company is proactively establishing and improving its investor relations management system, and actively enhancing communication and engagement with shareholders, particularly with public shareholders, through a variety of channels. The Company’s Board Secretary is specifically responsible for investor relations management.” The above report is submitted for your review. May 24, 2005 Document No. 6 of the 2004 Annual General MeetingReport on the Appointment of the 2005 Audit Firm Dear Shareholders:In accordance with the Company’s Articles of Association, the annual financial statements shall be audited by a Chinese-registered accounting firm qualified to engage in securities-related business, and concurrently reviewed or audited by a renowned foreign accounting firm in accordance with International Accounting Standards. The appointment of the aforementioned auditing firms shall be proposed by the Board of Directors and subject to approval by the Shareholders’ Meeting; the term of engagement shall be one year, with the possibility of reappointment. In light of the aforementioned provisions and in consideration of the Company’s actual circumstances, it is proposed to re-engage Dalian Hualian Certified Public Accountants LLP as the Company’s domestic audit firm for the year 2005, and to re-engage PwC Zhongtian Certified Public Accountants LLP as the Company’s overseas audit firm for the year 2005. Based on the specific requirements of the audit engagement, it is proposed to pay Dalian Hualian Certified Public Accountants LLP an annual audit fee of RMB 250,000, with all related audit expenses to be borne by the firm; and to pay PwC Zhongtian Certified Public Accountants LLP an annual audit fee of RMB 680,000, with all related audit expenses to be borne by the firm. The above report is submitted for your review. May 24, 2005 Document No. 7 of the 2004 Annual General MeetingReport on the Company’s Routine Related-Party Transactions for the Year 2005 Dear Shareholders:In accordance with the relevant provisions of the Shenzhen Stock Exchange Rules for the Listing of Stocks, a listed company shall, no later than the date of disclosure of its annual report for the preceding year, make a reasonable estimate of the total amount of similar routine related-party transactions incurred throughout the year, based on the relevant underlying items, and shall, in accordance with the estimated result, comply with the applicable disclosure and deliberation procedures. The company’s routine related-party transactions in 2004 were as follows: the total amount was RMB 519.44 million, of which RMB 381.92 million was spent on the procurement of complete-set ancillary products from related parties, and RMB 137.52 million was generated from the sale of ancillary components to related parties. Based on the 2004 routine related-party transactions, the Company expects the total amount of such transactions for the full year 2005 to be approximately RMB 550 million, of which about RMB 400 million will be spent on procuring complete sets of project-supporting products from related parties and about RMB 150 million will be generated from sales of supporting components to related parties. The above report is submitted for your review and approval. May 24, 2005 |
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