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Announcement of Resolutions Adopted at the 10th Meeting of the Third Session of the Board of Directors
The Company and all members of the Board of Directors hereby guarantee the truthfulness, accuracy, and completeness of the contents of this announcement and shall bear joint and several liability for any false records, misleading statements, or material omissions in the announcement.
The 10th Meeting of the Third Session of the Board of Directors of Dalian Refrigeration Co., Ltd. (“the Company”) was held on April 20, 2004, in the Company’s Sixth-Floor Conference Room. All nine directors attended the meeting, thereby satisfying the quorum requirements stipulated by the Company Law and the Company’s Articles of Association. The meeting was chaired by Mr. Zhang He, Chairman of the Board. At this meeting, the following resolutions were reviewed and adopted:
I. Report on the Work of the Board of Directors for the Year 2003;
II. The Company’s 2003 Annual Financial Settlement;
III. Proposed Profit Distribution Plan for the Year 2003
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 a rate of 10%, RMB 8.726 million as statutory public welfare fund at a rate of 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 making statutory surplus reserve, statutory public welfare fund, and provisions for 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 discretionary statutory surplus reserve at a rate of 10%, RMB 35.001 million is allocated for dividend distribution, and the remaining balance of 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 foregoing contingency plans shall be submitted to the Company’s 2003 Annual General Meeting for approval.
IV. Report on the Provision for Impairment of Company Assets for the Year 2003; (For detailed information, please refer to the Detailed Schedule of Asset Impairment Provisions.)
V. Report on Amendments to the Company Charter; (Attachment 1)
VI. The Company’s 2003 Annual Report;
VII. The Company’s First-Quarter 2004 Quarterly Report;
VIII. Report on the Appointment of the 2004 Audit Firm;
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. In accordance with 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.
IX. Report on Increasing Investment in Dalian Bingshan Group Sales Co., Ltd.;
Our company will increase its investment in the said company by RMB 13.5 million.
(1) Overview of Foreign Investment
Dalian Bingshan Group Sales Co., Ltd. was established through joint investment by our company and Dalian Bingshan Group Co., Ltd. As Dalian Bingshan Group Co., Ltd. is the controlling shareholder of our company, this transaction constitutes a related-party transaction.
The Company’s Fifth Meeting of the Second Board of Directors specifically deliberated on this investment. The relevant announcement of the board meeting was published in the China Securities Journal and the Hong Kong Commercial Daily on April 15, 1998.
Due to business development needs, Dalian Bingshan Group Sales Co., Ltd. plans to increase its registered capital from the current RMB 3 million to RMB 18 million, with both investors increasing their contributions in proportion. Our company holds a 90% equity interest in the company and is required to increase its investment by RMB 13.5 million.
The Company’s Third Board of Directors, Tenth Session, held a special deliberation on this matter. This transaction does not require approval by the Shareholders’ Meeting or by the relevant government authorities.
(II) Introduction to the Parties to the Investment Agreement
Dalian Bingshan Group Co., Ltd. currently holds 30.39% of the Company’s shares and is the Company’s controlling shareholder. For detailed information about the company, please refer to the Company’s 2003 Annual Report.
(3) Basic Information on the Investment Target
In this capital increase, both parties to the investment in Dalian Bingshan Group Sales Co., Ltd. will contribute in cash. Our company will contribute using its own funds.
(4) The objectives of overseas investments, the risks involved, and their impact on the Company
This outbound investment represents a significant step for the Company to intensify its market expansion efforts and enhance the efficiency of its use of internal funds. Given that Dalian Bingshan Group Sales Co., Ltd. has been in operation for six years and maintains stable business performance, the additional investment in the company entails no material risks. Following this capital increase, the company is expected to play a proactive role in advancing the Company’s market development initiatives.
(5) This transaction constitutes a related-party transaction. During the board’s vote on this matter, Directors Zhang He and Mu Chuanjiang recused themselves. The company’s independent directors—Mr. Lü Zhongli, Mr. Wang Dong, and Mr. Zhang Guile—issued their respective opinions on this related-party transaction, concluding that it is fair and does not prejudice the interests of the company or its shareholders, particularly small and medium-sized shareholders; furthermore, the voting procedure for this transaction was lawful, with the relevant directors duly recusing themselves. The board of directors believes that this related-party transaction will help improve the efficiency of the company’s capital utilization, strengthen the company’s growth momentum, thereby promoting its sustained, steady, and healthy development and delivering better returns to all shareholders.
X. Report on Candidates for Directors of the Company’s Fourth Board of Directors;
Nominate Zhang He, Mu Chuanjiang, Yang Bin, Xu Xiaorui, Shimada Tadanao, and Chen Geng as candidates for non-independent director positions on the Company’s Fourth Board of Directors, and nominate Lü Zhongli, Wang Dong, and Zhang Guile as candidates for independent director positions on the Company’s Fourth Board of Directors. (Relevant biographical summaries are provided in Attachments 2 and 3.)
The company’s independent directors unanimously approved the aforementioned individuals as candidates for election to the fourth session of the Board of Directors.
XI. Matters Relating to the Convening of the 2003 Annual General Meeting of Shareholders.
Board of Directors, Dalian Refrigeration Co., Ltd.
April 22, 2004
Appendix 1: Report on Amendments to the Company Charter
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 proxy holders) 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.”
Appendix 2: 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 previously served as 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 3: 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.
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