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Documents for the 2003 Annual General Meeting of Dalian Refrigeration Co., Ltd.
Documents for the 2003 Annual General Meeting of Dalian Refrigeration Co., Ltd.
Document No. 1 for the 2003 Annual General Meeting
2003 Annual Report on the Work of the Board of Directors
Dear Shareholders:
In 2003, the company withstood the challenges posed by the SARS epidemic and sustained sharp increases in raw material prices, while capitalizing on the national policy of using investment to stimulate economic growth. As a result, the company achieved main business revenue of RMB 104,310 million, up 9.07% year on year; main business profit of RMB 17,507 million, up 22.29% year on year; total profit of RMB 10,076 million, up 2.00% year on year; and net profit of RMB 8,615 million, down 5.28% year on year, primarily due to the recovery of investment income from an associate company in 2003, which led to additional income tax payments.
I. Review of the Company’s Operating Performance in 2003
1. Overview of the Company’s Principal Business Activities
(1) Principal Business
During the reporting period, the company undertook fourteen turnkey projects each valued at over RMB 5 million, including six large-scale turnkey projects each valued at over RMB 10 million.
During the reporting period, sales of the company’s CJZT810C marine refrigeration compressor units surged, increasing from fewer than 100 units in previous years to 340 units.
During the reporting period, the company launched 26 new products, including residential central air-conditioning heating systems, research on alternative refrigerant applications, and a series of semi-hermetic screw compressors.
During the reporting period, the Company achieved new breakthroughs in its joint ventures and collaborations. In the joint venture arena, the Company established Dalian Bingshan Risho Frozen Equipment Co., Ltd. in partnership with Risho Corporation of Japan and Dalian Fuji Bingshan Vending Machine Co., Ltd. in collaboration with Fuji Electric Co., Ltd. of Japan. On the cooperation front, the Company commenced production of plate heat exchangers in partnership with a renowned German enterprise and initiated collaborative research projects with City, University of London on next-generation compressors and alternative refrigerants, among other initiatives.
During the reporting period, the Company effectively controlled costs through internal efficiency improvements, thereby mitigating the adverse impact of substantial price increases in raw materials such as steel, and achieving a steady increase in gross margin. Total expenses for the three categories amounted to RMB 158.03 million, up RMB 34.17 million year on year. Specifically, selling expenses rose by 25.71% due to intensified market development efforts; general and administrative expenses increased by 32.81% owing to provisions for bad debts and depreciation of fixed assets; and financial expenses declined by 15.99% as a result of reduced short-term borrowings.
(2) Joint Venture
At the end of 2003, the total assets of the company’s joint ventures amounted to RMB 289,678 million, representing a year-on-year increase of 4.64%; net assets totaled RMB 149,490 million, up 8.64% from the previous year.
In 2003, the company’s portfolio of joint ventures recorded sales revenue of RMB 276.721 million, up 21.87% year on year, with export sales accounting for RMB 37.450 million, a year-on-year increase of 63.70%. The company also reported investment income of RMB 81.53 million, representing a year-on-year rise of 6.03%.
During the reporting period, four joint ventures accounted for more than 10% of the company’s net profit: Sanyo Air Conditioning, Sanyo Compressor, Sanyo Cold Chain, and Sanyo Refrigeration.
During the reporting period, among the company’s joint ventures, three recorded year-on-year growth of more than 30% in principal business revenue, two reported year-on-year growth of more than 30% in net profit, and five achieved a return on equity of over 15%.
During the reporting period, the expansion of Sanyo’s scroll compressor plant was commissioned three months ahead of schedule; the company took the lead in China in launching scroll compressors powered by the new refrigerants R407C and R410A; and it established the first postdoctoral research station in the Dalian Economic and Technological Development Zone.
During the reporting period, Sanyo Cold Chain completed the absorption merger of Sanyo Food, significantly strengthening its overall capabilities; the third-generation new products, including the HL-series supermarket freezer and refrigerated display cabinets, were officially launched; and the videoconferencing system was formally commissioned, which will substantially reduce the company’s administrative expenses.
During the reporting period, Sanyo Refrigeration’s Type G lithium bromide absorption chiller was selected for the 2003 National Key New Product Program; the GHP gas-fired heat pump was officially put into trial production, making the company the first domestic manufacturer to produce GHP gas-fired heat pumps; and the company became the first in China to achieve integrated certification under the four management systems—ISO 9001, ISO 14001, OHSAS 18001, and CCMS.
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 recorded sales revenue of RMB 74.85 million in 2003.
(2) Dalian Bingshan Group Sales Co., Ltd. The company’s registered capital is RMB 3 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 62.75 million in 2003.
(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 involves 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 103.29 million in 2003.
(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. It primarily operates as an established joint venture and provides supporting production of sheet metal and stamped parts for our company, achieving sales revenue of RMB 32.73 million in 2003.
3. Information on Major Suppliers and Customers
The company’s total procurement from its top five suppliers amounted to RMB 295.11 million, accounting for 32.23% of the annual total procurement.
The combined sales to the company’s top five customers totaled RMB 87.41 million, accounting for 8.3% of the company’s total sales.
4. Issues and Challenges Faced in Operations, Along with Their Solutions
In 2003, the company’s primary operational and production challenges were substantial increases in raw material prices and persistently high levels of accounts receivable, which to some extent hindered the company’s efforts to reduce costs and enhance profitability.
In response to the substantial increase in raw material prices, the company has implemented the following key measures: first, strengthening control at the two critical stages of design and manufacturing; second, improving equipment utilization rates; third, curtailing all non-production-related expenditures; and fourth, appropriately and timely increasing raw material inventory levels.
To address the persistently high level of accounts receivable, the company has implemented the following key measures: first, incorporating accounts receivable performance as a critical evaluation metric for sales personnel; second, establishing an accounts receivable early-warning system; and third, intensifying efforts to collect outstanding receivables.
5. In the Company’s 2003 Annual Financial Budget Report, the following operational targets for 2003 were set: sales revenue of RMB 100,000 million and total profit of RMB 97 million. Through diligent efforts, the Company successfully achieved these operational targets.
6. Company Investment Status
As of the end of 2003, the company had established the following joint ventures with Japan, Hong Kong, the United States, the United Kingdom, and other regions:
Company Name Registered Address Principal Business Shareholding Percentage
Cold King Container Temperature Control (Suzhou) Co., Ltd., Suzhou City — Marine Container Temperature Control Products — 10%
Da Leng Wang Transportation Refrigeration Co., Ltd. Shenzhen City Manufactures and sells refrigerated transport vehicles 25%
Dalian Benzhuang Chemical Co., Ltd. Dalian Development Zone Production and sales of 30% lithium bromide solution
Dalian Minghua Electronics Co., Ltd. — Dalian Development Zone — Manufacturing and sales of electronic circuit boards — 30%
Dayang Automotive Air Conditioning Engineering (Dalian) Co., Ltd. Dalian Development Zone Produces and sells automotive air conditioning systems 30%
Dalian Bingshan Water Environment Equipment Co., Ltd. — Dalian City — Manufacturer of Ozone Water Treatment Equipment — 33%
Dalian Sanyo Refrigeration Co., Ltd. Dalian Development Zone Manufactures and sells lithium bromide chillers 40%
Dalian Sanyo Cold Chain Co., Ltd. — Dalian Development Zone — Produces and sells supermarket refrigeration equipment — 40%
Dalian Sanyo Compressor Co., Ltd. — Dalian Development Zone: Produces and sells semi-hermetic and hermetic compressors, accounting for 40% of the market.
Dalian Dayang Transportation Refrigeration Engineering Co., Ltd. Dalian City Assembly and sales of refrigerated mobile equipment 40%
Dalian Sanyo Air-Conditioner Co., Ltd. Dalian Development Zone Manufactures and sells air conditioners 40%
Dalian Sanyo Household Appliances Co., Ltd. Dalian City Manufactures and sells small household appliances 40%
Dalian Fuji Iceberg Vending Machine Co., Ltd. Dalian Development Zone Manufactures and sells vending machines 49%
Dalian Bingshan Security and Leisure Industry Engineering Co., Ltd. Dalian City Design and installation of leisure facilities 50%
Dalian Bingshan JiaDe Automation Co., Ltd. — Dalian City — Automatic Control Technology for Refrigeration and Other Industries — 60%
Dalian Bingshan Metal Processing Co., Ltd. Dalian City Produces sheet metal and stamped parts 64.3%
Dalian Bingshan Air-Conditioning Equipment Co., Ltd. Dalian City Manufactures and sells air-conditioning terminal products 70%
Dalian Bingshan Lingse Quick-Freezing Equipment Co., Ltd. — Dalian Development Zone: Manufactures and sells various quick-freezing equipment — 70%
(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, two of which continued to receive funding during the reporting year.
① The capital increase and expansion project of Dalian Sanyo Compressor Co., Ltd. has seen cumulative investment of RMB 108.94936 million, representing 67.6% of the planned investment. No funds were invested during the reporting period. In 2003, the company recorded main business revenue of RMB 527.37 million, a year-on-year increase of 29.78%.
② A large-scale screw refrigeration compressor project has been developed, with a cumulative investment of RMB 60 million, representing 100% of the planned investment. During the reporting period, RMB 5.01 million was invested. Currently, models such as KA315 and KA510 have been launched in mass production and are performing well in industries such as petrochemicals, effectively replacing imported products and significantly strengthening the company’s overall competitiveness in the screw refrigeration compressor segment.
Currently, the company has invested RMB 287.14936 million of the funds raised, representing 84.6% of the total planned investment.
The RMB 52.31 million of raised funds that have not yet been put to use are currently held in a bank-designated foreign exchange account.
(2) Explanation of Non-Fundraising Investment Projects
On May 6, 2003, Dalian Bingshan Risho Quick-Freezing Equipment Co., Ltd. was formally established as a joint venture between the Company and Japan’s Risho Co., Ltd., with investment from the Company’s own funds. The company’s registered capital is USD 1 million, of which the Company holds a 70% equity interest. The company is primarily engaged in the manufacture and sale of various quick-freezing equipment.
At the end of 2003, Dalian Fuji–Fushan Vending Machine Co., Ltd. was formally established as a joint venture between the Company and Japan’s Fuji Electric Co., Ltd., with the Company contributing its own capital. The company’s registered capital is JPY 1.8 billion, of which the Company holds a 49% equity interest. The company is primarily engaged in the research, development, manufacturing, and sales of vending machines.
7. Company Financial Condition and Operating Results
As of December 31, 2003, the company’s financial position and operating results were as follows:
(1) Total assets amounted to RMB 195,578 million, an increase of RMB 69.68 million compared with the beginning of the year. Specifically: current assets decreased by RMB 26.73 million, primarily due to a reduction in dividends receivable; fixed assets decreased by RMB 2.37 million, mainly as a result of depreciation on fixed assets; long-term investments increased by RMB 99.85 million, largely attributable to profits realized by joint ventures and new investments in such ventures; and intangible and other assets decreased by RMB 1.07 million, primarily due to amortization of intangible assets.
(2) Total liabilities amounted to RMB 638.62 million, an increase of RMB 15.48 million compared with the beginning of the year. Specifically: current liabilities increased by RMB 15.48 million, primarily due to a rise in advance receipts; long-term liabilities remained unchanged.
(3) Shareholders’ equity amounted to RMB 12,854.7 million, an increase of RMB 52.27 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 amounted to RMB 175.07 million, an increase of RMB 31.92 million year on year, primarily attributable to higher principal business revenue and a steady rise in gross margin.
(5) Net profit amounted to RMB 86.15 million, a decrease of RMB 4.80 million compared with the previous year, primarily due to the retroactive payment of income tax on investment income received in 2003 from an associated company.
(6) The net decrease in cash and cash equivalents amounted to RMB 31.18 million, primarily due to the reduction in short-term borrowings. Net cash flow from operating activities totaled RMB 109.87 million, an increase of RMB 5.85 million year on year.
(7) The asset-to-liability ratio stood at 32.65%, up 0.39 percentage points year on year. The current ratio was 1.76, down 0.1 from the same period last year; the quick ratio was 1.18, down 0.19 year on year.
(8) The gross profit margin was 17.25%, an increase of 1.72 percentage points year on year.
(9) Return on equity was 6.70%, down 0.68 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 7th Meeting of the 3rd Board of Directors
On April 22, 2003, the Third Session of the Company’s Board of Directors held its seventh 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 2002; the Company’s Final Financial Statements for the Year 2002 and the Financial Budget for the Year 2003; the Proposed Profit Distribution Plan for the Year 2002; the Policy on Profit Distribution for the Year 2003 and the Policy on Capitalizing Retained Earnings to Increase Share Capital; the Report on Amendments to the Company’s Articles of Association; the Report on Changes in Board Members; the Report on Changes in the Composition of the Board of Directors; the Report on Candidates for Independent Directors; the Report on the Appointment of Senior Management Personnel; the Report on Making Provisions for Impairment of Assets for the Year 2002; the Report on Writing Off Impairment Provisions for Certain Fixed Assets and Bad Debts; the Report on Engaging an Audit Firm for the Year 2003; the Report on the Company’s Equity Participation in Dalian Bingshan Investment Co., Ltd.; the Company’s Annual Report for the Year 2002; the Company’s Quarterly Report for the First Quarter of the Year 2003; and Matters Relating to the Convening of the 2002 Annual General Meeting of Shareholders.
② Eighth Meeting of the Third Board of Directors
On August 20, 2003, the Third Session of the Company’s Board of Directors held its eighth meeting in the Company’s Sixth-Floor Conference Room. At this meeting, the following resolutions were reviewed and adopted: the Company’s 2003 Semi-Annual Report and its Summary; and the decision not to distribute profits or capitalize the capital reserve for share capital increase in the first half of 2003.
③ Ninth Meeting of the Third Session of the Board of Directors
On October 22, 2003, the Third Session of the Company’s Board of Directors held its ninth meeting in the Company’s Sixth-Floor Conference Room. At this meeting, the following resolutions were reviewed and adopted: the Company’s Third-Quarter Report for 2003; and a resolution regarding the Company’s equity participation in Dalian Fuji Iceberg Automatic Vending Machine Co., Ltd.
(2) The Board of Directors’ Implementation of Resolutions Adopted by the Shareholders’ Meeting
The Company’s Board of Directors has effectively implemented all resolutions adopted at the 2002 Annual General Meeting.
The Company’s 2002 dividend distribution plan was fully implemented by the Board of Directors in July 2003.
With regard to the equity participation in Dalian Bingshan Investment Co., Ltd., the relevant conditions have not yet been met, resulting in the resolution not being implemented during the reporting period. The Company’s Board of Directors will closely monitor the latest developments of this project.
II. Business Plan for the New Fiscal Year
2004 Corporate Business Plan Targets:
Sales revenue: RMB 120,000 million;
Total profit: RMB 120 million;
1. Strive to enhance the company’s international competitiveness. Benchmark against global competitors and, while maintaining a price advantage, promptly narrow the gap in areas such as product technology and other key capabilities.
2. Accelerate the pace of joint ventures and partnerships. By establishing joint ventures and collaborations with major international companies, we will swiftly extend the industrial value chain, enhance the technological sophistication of our products, and increase our market share.
3. Intensify efforts in new product development and technological upgrading. A total of 21 new products were developed, and 29 technological upgrades were completed.
4. Strengthen comprehensive cost-reduction efforts, ensuring a cost reduction of RMB 29 million.
5. Accelerate the company’s digital transformation.
The above report is submitted for your review.
June 3, 2004
Document No. 2 for the 2003 Annual General Meeting
Report on the Work of the Supervisory Board for the Year 2003
Dear Shareholders:
In 2003, the Supervisory Board held three meetings. The seventh meeting of the third session of the Supervisory Board was held on April 22, 2003, in the company’s sixth-floor conference room. At this meeting, the Board reviewed and approved the Supervisory Board’s Work Report for the year 2002 and the “Supervisory Board Report” included in the company’s 2002 Annual Report. The eighth meeting of the third session of the Supervisory Board was held on August 20, 2003, in the company’s fifth-floor conference room. At this meeting, the Board reviewed and approved the company’s 2003 Semi-Annual Report and its summary; it was also resolved that no profit distribution would be made for the first half of 2003, nor would any capital reserve be capitalized to increase share capital. The ninth meeting of the third session of the Supervisory Board was held on October 22, 2003, in the company’s sixth-floor conference room. At this meeting, the Board reviewed and approved the company’s 2003 Third-Quarter Quarterly Report and a resolution regarding the company’s equity participation in Dalian Fuji-Fujisawa Automatic Vending Machine Co., Ltd.
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, or the company’s articles of association, nor have they acted to the detriment of the company’s interests.
2. Financial Condition of the Company. Both Dalian Hualian Certified Public Accountants LLP and PwC Zhongtian Certified Public Accountants LLP 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 capital. Of the funds raised from the issuance of B shares in 1998, two projects continued to be funded during the reporting period; the actual expenditures for these projects were consistent with the committed expenditures, and the remaining unutilized proceeds were deposited in a designated foreign-exchange account with the bank.
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 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 2003 was made in accordance with lawful resolution procedures and supported by sufficient supporting evidence.
The above report is submitted for your review.
June 3, 2004
Document No. 3 of the 2003 Annual General Meeting
Regarding the Company’s 2003 Annual Financial Settlement
Report on the 2004 Fiscal Budget
Dear Shareholders:
We hereby submit to the Shareholders’ Meeting the Company’s 2003 Annual Financial Statements and the 2004 Financial Budget for your review and approval.
I. 2003 Fiscal Year Financial Settlement
According to the audit conducted by Dalian Hualian Certified Public Accountants LLP, the company’s asset position and the performance of its key financial and economic indicators for the year 2003 are as follows:
(1) Company Asset Status
At the end of 2003, the company’s total assets amounted to RMB 195,578 million, comprising current assets of RMB 98,486 million, fixed assets of RMB 29,239 million, long-term investments of RMB 63,732 million, and intangible and other assets of RMB 4,121 million.
At the end of 2003, the company’s total liabilities amounted to RMB 638.62 million, comprising RMB 559.62 million in current liabilities and RMB 79.00 million in long-term liabilities.
At the end of 2003, shareholders’ equity totaled RMB 128,547,000, including undistributed profits of RMB 13,785,000.
(II) Status of Achievement of the Company’s Key Financial and Economic Indicators
1. Main business revenue reached RMB 10,431 million, representing a year-on-year increase of 9.07%.
2. Total profit reached RMB 100.76 million, up 2.00% year on year.
3. Net profit reached RMB 86.15 million, a year-on-year decrease of 5.28%, primarily due to the retroactive payment of income tax on investment income from an associate company that was recovered in 2003.
(III) Opinion on the Company’s Profit Distribution
Please refer to “2003 Profit Distribution Plan” (Document No. 4 of the 2003 Annual General Meeting).
II. 2004 Fiscal Budget
The company’s 2004 operating plan targets are as follows:
Sales revenue: RMB 120,000 million;
Total profit: RMB 120 million.
The above report is submitted for your review.
June 3, 2004
Document No. 4 for the 2003 Annual General Meeting
Report on the 2003 Profit Distribution Plan
Dear Shareholders:
The Company’s 2003 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 2003 profits:
According to the audit conducted by Dalian Hualian Certified Public Accountants LLP, the Company recorded a post-tax profit of RMB 86.148 million in 2003. In accordance with relevant state regulations and the Company’s Articles of Association, RMB 8.726 million was appropriated as statutory surplus reserve at 10%, RMB 8.726 million as statutory public welfare fund at 10%, and RMB 1.470 million was set aside as reserves for consolidated subsidiaries, for a total appropriation of RMB 18.922 million. Adding this amount to the undistributed profits from the previous year of RMB 79.345 million, the total profit available for distribution to shareholders amounts to RMB 146.571 million.
According to the audit conducted by PwC Zhongtian Certified Public Accountants LLP, the company recorded a post-tax profit of RMB 86.634 million in 2003. 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 43.260 million, the total profit available for distribution to shareholders amounted to RMB 110.972 million.
In accordance with the relevant provisions of the Company’s Articles of Association and applying the lower-of-the-two principle, the profit available for distribution to shareholders this year amounts to RMB 110.972 million. Of this amount, RMB 8.726 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 67.245 million is carried forward for distribution in the next fiscal year.
Company’s 2003 Dividend Distribution Plan:
Based on the total share capital of 350,014,975 shares as of the end of 2003, a cash dividend of RMB 1.00 is declared for every 10 shares held (inclusive of tax), with the B-share cash dividend converted into Hong Kong dollars for payment.
The Company will not capitalize its capital reserve to increase share capital this year.
The above report is submitted for your review.
June 3, 2004
Document No. 5 of the 2003 Annual General Meeting
Report on Amendments to the Company Charter
Dear Shareholders:
In accordance with the Requirements of the Corporate Governance Guidelines for Listed Companies and the Notice on Regulating Funds Transfers between Listed Companies and Their Affiliates as well as Certain Issues Related to External Guarantees Provided by Listed Companies (CSRC Document No. [2003]56), and taking into account the Company’s actual circumstances, the Articles of Association are hereby amended as follows:
1. In Chapter 1, “General Provisions,” of the Company Charter, the following provision is added as Article 1.8, “External Guarantees”:
“The Company shall not provide guarantees for its controlling shareholder, other related parties in which the Company holds less than 50% of the equity, or any unincorporated entities or individuals. The aggregate amount of the Company’s external guarantees shall not exceed 50% of the net assets as reported in the consolidated financial statements for the most recent fiscal year.”
Approval Procedures for the Company’s External Guarantees: Any external guarantee undertaken by the Company must be approved by the Company’s Shareholders’ Meeting or Board of Directors. For external guarantees where the guarantee amount does not exceed 10% of the Company’s most recently audited net assets, such guarantees shall be approved by the Board of Directors upon the affirmative vote of more than two-thirds of all directors. For external guarantees where the guarantee amount equals or exceeds 10% of the Company’s most recently audited net assets, such guarantees shall be approved by the Company’s Shareholders’ Meeting.
Creditworthiness criteria for the guaranteed party: the bank’s credit rating shall be no lower than AA; the asset-to-liability ratio shall not exceed 70%.
Original Article 1.8, “Term of Operation,” and Article 1.9, “Legal Effect of the Articles of Association,” shall be renumbered as Article 1.9 and Article 1.10, respectively.
2. The provision in Article 2.2 of the Company Charter, “Scope of Business,” which previously included “cargo transportation,” is hereby deleted.
3. Article 5.12 of the Company Charter, entitled “Voting Procedures,” originally provided: “At shareholders’ meetings, each shareholder (including proxy holders) shall exercise voting rights in proportion to the number of voting shares represented; each ordinary share entitles the holder to one vote.”
It is now amended to read: “At shareholder meetings, each shareholder (including the shareholder’s proxy) shall exercise voting rights in proportion to the number of voting shares represented; except as otherwise provided in Article 5.13 of these Articles of Association regarding the use of a cumulative voting system for the election of directors, each ordinary share shall carry one vote.”
4. Article 5.13 of the Company Charter, “Election of Directors and Supervisors,” is hereby amended to include the following provision: “When the controlling shareholder’s equity interest in the Company reaches or exceeds 30%, the shareholders’ meeting shall adopt a cumulative voting system for the consideration and表决 of proposals for the election of directors. Specifically, when the shareholders’ meeting elects two or more directors, each share held by shareholders (including proxy holders) shall carry a number of votes equal to the total number of directors 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 submit such rules to the shareholders’ meeting for approval prior to their implementation.”
The above report is submitted for your review.
June 3, 2004
Document No. 6 of the 2003 Annual General Meeting
Report on the Appointment of the 2004 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 such auditing firms shall be proposed by the Board of Directors and subject to approval by the Shareholders’ Meeting; the term of appointment shall be one year, with the possibility of renewal.
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 2004, and to re-engage PwC Zhongtian Certified Public Accountants LLP as the Company’s overseas audit firm for the year 2004. 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.
June 3, 2004
Document No. 7 of the 2003 Annual General Meeting
Report on the Election of New Directors
Dear Shareholders:
The term of the Company’s Third Board of Directors is about to expire, necessitating the election of a new board. Following careful deliberation, the following list of candidates is hereby proposed:
Nominate Zhang He, Mu Chuanjiang, Yang Bin, Xu Xiaorui, Tadao Shimada, Chen Geng, and four others as candidates for non-independent directors on the Company’s Fourth Board of Directors; and nominate Lü Zhongli, Wang Dong, and Zhang Guile, among others, as candidates for independent directors on the Company’s Fourth Board of Directors.
In addition, in order to fully reflect the views of minority and small shareholders in the election of the company’s board of directors and to safeguard their legitimate rights and interests in accordance with the law, and pursuant to the relevant provisions of the Corporate Governance Code for Listed Companies, it is proposed that a cumulative voting system be adopted for this round of director elections. Under the cumulative voting system, when more than two directors are elected at a general meeting of shareholders, each share held by a shareholder (including proxy holders) carries a number of votes equal to the total number of directors to be elected; shareholders (including proxy holders) may either concentrate all their votes on a single candidate or distribute them among several candidates.
The above report is submitted for your review.
June 3, 2004
Appendix 1: Biographical Sketches of Non-Independent Director Candidates for the Company’s Fourth Board of Directors
(1) Zhang He, male, 66 years old, former Chairman of the Board, holds a university degree and is a professor-level senior engineer. He has successively held the positions of Deputy Chief Engineer, Plant Director, General Manager of the company, and Chairman of the Board.
(2) Mu Chuanjiang, male, 54 years old, former Vice Chairman of the Board, holds a university degree and is a Senior Engineer. He has previously served as Deputy Factory Director, Deputy General Manager of the company, and General Manager of the company.
(3) Yang Bin, male, 47 years old, former director, holds a bachelor’s degree and a master’s degree in Business Administration. Currently serves as the company’s Executive Deputy General Manager. Previously held positions including Director of the Design Department, Head of the Business Planning Department, Assistant to the General Manager, and Deputy General Manager.
(4) Xu Xiaorui, female, 40 years old, former director, holds a bachelor’s degree and a master’s degree in Business Administration. Currently serves as the company’s Chief Financial Officer. Previously held the positions of Deputy Director, Director, and Deputy Chief Accountant of the Finance Department.
(5) Tadao Shimada, male, 59 years old, former director. Currently serves as Executive Director and Head of the Business Strategy Division of the Commercial Enterprises Group at Sanyo Electric Co., Ltd., as well as Representative Director and President of Sanyo Electric Air Conditioning Co., Ltd.
(6) Chen Geng, male, 36 years old, holds a doctoral degree and is an economist. He has previously served as General Manager of the Listing Department at the Shenzhen Stock Exchange, Assistant to the President and General Manager of the Investment Banking Department, as well as Vice President at Junan Securities Co., Ltd. He currently holds the position of Vice President at Guotai Junan Securities Co., Ltd.
Appendix 2: Biographical Sketches of Independent Director Candidates for the Company’s Fourth Board of Directors
(1) Lü Zhongli, male, 62 years old, former independent director, senior economist, and certified public accountant. He has previously held the positions of Director of the Industrial Department, Assistant President, and Chief Inspector at the Dalian Branch of the Industrial and Commercial Bank of China.
(2) Wang Dong, male, 67 years old, former independent director. Currently a professor at the School of Business Administration of Northeastern University of Finance and Economics. Major academic achievements: He has successively completed three research projects funded by the Ministry of Finance, the Science and Technology Commission of Liaoning Province, and the Dalian Municipal Government; published five monographs and textbooks as author or chief editor, and co-authored 15 others; and authored more than ten academic papers.
(3) Zhang Guile, male, 63 years old, former independent director. Currently a professor and doctoral supervisor at Northeastern University of Finance and Economics. He has previously held the positions of lecturer, associate professor, professor, head of department, member of the University Party Committee, member of the University Academic Committee, and head of the University’s Economics Discipline Group.
Document No. 8 of the 2003 Annual General Meeting
Report on the Election of New Supervisors
Dear Shareholders:
The term of the Company’s Third Supervisory Board is about to expire, necessitating the election of a new board. Following careful deliberation, the following list of candidates is hereby proposed: Yu Fuchun (shareholder representative), Men Yuesheng (shareholder representative), and Chi Feng (employee representative). Notably, Chi Feng has already been elected as a supervisor by the Company’s Employee Congress and will therefore no longer be subject to election by the Shareholders’ Meeting.
The above report is submitted for your review.
June 3, 2004
Attachment: Resumes of Candidates for the Fourth Session of the Company’s Supervisory Board
1. Yu Fuchun, male, 45 years old, former Chairman of the Supervisory Board, holds a junior college degree and is a political work specialist. Currently serves as the Vice Chairman of the company’s Trade Union.
2. Men Yue Sheng, male, 51 years old, former supervisor, holds an associate degree and is a certified auditor. Currently serves as the Director of the Company’s Audit and Supervision Department and the Price Control Department.
3. Chi Feng, female, 32 years old, holds a master’s degree, is a certified public accountant and an economist. Currently serves as Deputy Director of the Company’s Asset Management Department.
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