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Documents for the 2001 Annual General Meeting of Dalian Refrigeration Co., Ltd.
| Documents for the 2001 Annual General Meeting of Dalian Refrigeration Co., Ltd. |
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Document No. 1 for the 2001 Annual General Meeting
2001 Annual Report on the Work of the Board of Directors
Dear Shareholders:
The year 2001 marked the first year of the company’s implementation of the Tenth Five-Year Plan. Through the concerted efforts of all employees, the company comprehensively achieved all its economic targets, recording main-business revenue of RMB 902.15 million, up 12.67% from 2000; total profit of RMB 92.65 million, up 5.66% from 2000; and net profit of RMB 88.92 million, up 10.59% from 2000.
I. Review of the Company’s Operating Performance in 2001
1. Overview of the Company’s Principal Business Activities
(1) Actively advance the brand-name strategy and steadily expand into the domestic market.
In 2001, the company closely aligned itself with national investment policies and priorities, focusing on securing large-scale projects—particularly key national, provincial, and municipal engineering initiatives—and placing particular emphasis on turnkey projects and screw compressor products. As a result, its main business revenue reached RMB 902.15 million, representing a year-on-year increase of 12.67%.
In 2001, the company further reformed its marketing system, refined its marketing network, strengthened its sales team, and enhanced its after-sales service mechanism. It also boldly launched a pilot program for localizing its sales force, which effectively boosted sales personnel’s motivation, integrated after-sales service more closely into market operations, and earned the company the title of “National Advanced Unit in the User Satisfaction Initiative.”
(2) The “go global” strategy was implemented in an orderly manner, further expanding access to international markets.
In 2001, the company accelerated the implementation of its “going global” strategy by making its first overseas investment to establish a manufacturing facility; establishing overseas representative offices in the Philippines, Indonesia, and Vietnam; launching the “Bingshan International” website; and having the “Bingshan” trademark designated as a key national export brand receiving prioritized support and development. Through these initiatives, the company consolidated its presence in key Southeast Asian markets, opened up emerging markets such as North Korea, Eastern Europe, and Latin America, and stabilized and expanded its processing trade with Japan, the United States, and Australia.
(3) Guided by technological innovation, product structure adjustment and technological upgrading have been progressively deepened.
In 2001, the company launched 12 new products, including freezing equipment for tuna fishing vessels, marine screw compressors, and medical clean-air conditioning systems; upgraded and redesigned its conventional screw compressor units; and pioneered the domestic application of large-scale siphon refrigeration systems. At the same time, the company invested RMB 29.42 million in a series of technological upgrades.
(4) Emphasis on management innovation has further enhanced basic management.
In 2001, the company implemented two new human resource management mechanisms: a competitive selection process for mid-level managerial positions and a qualification assessment system for design and process engineering. It also established a Procurement Bidding Committee to comprehensively promote tender-based procurement, thereby effectively reducing procurement costs. Furthermore, the company successfully passed the annual ISO 9001 surveillance audit, and significant progress was made in the application of computerized information management across marketing, finance, supply, and production functions.
(5) Market expansion and profitability improvement are achieved in tandem, further strengthening the overall competitiveness of the joint venture.
In 2001, among the company’s vibrant portfolio of joint ventures, three reported year-on-year growth of more than 30% in principal business revenue, seven recorded year-on-year growth of more than 30% in net profit, and six achieved a return on equity of over 15%. As a result, the company’s investment income totaled RMB 78.83 million, up 35.26% year on year.
In 2001, Sanyo Refrigeration was awarded the “2001 National Quality Management Award Nomination”; Sanyo Compressor successfully completed its capital increase and expansion project, with high-horsepower refrigeration compressors officially entering mass production; Sanyo Cold Chain undertook a large-scale upgrade and renovation of its production management information system, significantly advancing the company’s digital transformation; and Sanyo Air Conditioning successfully developed a remote self-control system, further enhancing the high-tech content of its products.
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 million, and our company holds 100% equity. Its primary business is the installation and commissioning of complete sets of refrigeration equipment, and it achieved sales revenue of RMB 40.36 million in 2001.
(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. In 2001, it recorded sales revenue of RMB 58.45 million and net profit of RMB 1.44 million.
(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. In 2001, the company recorded sales revenue of RMB 83.04 million and a net profit of RMB 8.33 million.
(4) Dalian Bingshan Metal Processing Co., Ltd. The company’s registered capital is USD 2.35 million, with our company holding 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. In 2001, the company recorded sales revenue of RMB 27.93 million and a net profit of RMB 1.27 million.
3. Company Financial Condition
As of December 31, 2001, the company’s financial position and operating results were as follows:
(1) Total assets amounted to RMB 185,312 million, an increase of RMB 104.73 million compared with the beginning of the year. Specifically: current assets increased by RMB 149.81 million, primarily due to a rise in cash and cash equivalents; fixed assets decreased by RMB 1.90 million, mainly as a result of depreciation; long-term investments decreased by RMB 41.15 million, largely owing to concentrated dividend distributions from joint ventures; and intangible and deferred assets decreased by RMB 2.01 million, primarily due to amortization of intangible assets.
(2) Total liabilities amounted to RMB 689.51 million, an increase of RMB 51.60 million compared with the beginning of the year. Specifically: current liabilities decreased by RMB 27.40 million, primarily due to a reduction in short-term borrowings; long-term liabilities increased by RMB 79.00 million, mainly as a result of an increase in long-term borrowings.
(3) Shareholders’ equity amounted to RMB 11,374.9 million, an increase of RMB 53.92 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 134.83 million, a decrease of RMB 4.68 million year on year, primarily due to higher principal business costs and a decline in the gross profit margin.
(5) Net profit amounted to RMB 88.92 million, an increase of RMB 8.52 million year on year, primarily due to higher investment income from joint ventures.
4. Company Investment Status
As of the end of 2001, the company had established the following joint ventures with Japan, Hong Kong, the United States, and other entities:
Company Name Registered Address Principal Business Shareholding Ratio
Da Leng Wang Transportation Refrigeration Co., Ltd. Shenzhen City Manufactures and sells refrigerated transport vehicles 25%
Dalian Benzhuang Chemical Co., Ltd. Dalian Development Zone Produces and sells 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 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 compressors — 40%
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 — Manufacturing and sales of air conditioners — 40%
Dalian Sanyo Food Equipment Co., Ltd. — Dalian Development Zone — Manufacturing and selling food equipment — 40%
Dalian Sanyo Home Appliances Co., Ltd. Dalian City Produces and sells small household appliances 40%
Dalian Bingshan Security and Leisure Industry Engineering Co., Ltd. Dalian City Design and installation of leisure facilities 50%
Dalian Bingshan Metal Processing Co., Ltd. Dalian City Manufactures sheet metal and stamped parts 64.3%
Dalian Bingshan Air-Conditioning Equipment Co., Ltd. Dalian City Manufactures and sells air-conditioning terminal products 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 already received an investment of RMB 55.79356 million, representing 34.6% of the planned investment. In 2001, the company achieved main business revenue of RMB 378.52 million, a year-on-year increase of 70.5%.
② A large-scale screw refrigeration compressor project has been developed, with an investment of RMB 38.19 million, representing 63.7% of the planned investment. Currently, models such as KA315 and KA510 have been launched in bulk, effectively replacing imported products in industries such as petrochemicals. Sales revenue from the company’s screw-type refrigeration compressors has now surpassed that of its reciprocating refrigeration compressors, marking significant progress in the company’s product mix adjustment.
To date, the company has utilized RMB 212.18356 million of the funds raised, representing 62.5% of the total planned investment.
The raised funds that have not yet been put to use are temporarily held in a foreign-exchange account designated by the bank.
(2) Explanation of Non-Fundraising Investment Projects
On March 18, 2001, Dalian Bingshan Security Leisure Industry Co., Ltd., a joint venture established with proprietary funds by the Company and Hong Kong Security Water Conservancy Engineering (China) Co., Ltd., was officially incorporated. The company’s total investment amounts to US$350,000, with registered capital of US$250,000, and each investor holds a 50% equity stake. The company’s principal business activities include the design of artificial ice rinks and skating venues, the supply of complete sets of equipment, installation, maintenance and related services, as well as the research and development of leisure facilities such as swimming pools, fountains, and fitness centers.
On August 10, 2001, Dalian Bingshan Environmental Protection Equipment Engineering Co., Ltd. was officially established through joint investment by the Company and the Dalian Municipal Environmental Monitoring Center. The company’s initial registered capital is RMB 500,000, with Dalian Cold Storage Co., Ltd. holding a 50% equity stake. The company’s business scope includes the research, development, and innovation of environmental protection technologies for wastewater, exhaust gases, solid waste, and noise, as well as the sale of environmental protection equipment.
In October 2001, the Company entered into a joint venture agreement with Ingersoll Rand (China) Investment Co., Ltd. to jointly invest in the establishment of Cold King Container Temperature Control Co., Ltd. The company has a registered capital of USD 9 million and total investment of USD 22 million, with Daling Shares holding a 10% equity stake. The company’s business scope encompasses marine container temperature-control products and components.
In addition, the company has undertaken a series of technological upgrades using its own funds totaling RMB 29.42 million, primarily to enhance the machining capabilities for semi-hermetic screw compressors and open-type screw compressors, expand the production capacity and product variety of air coolers, and increase the output of export-oriented castings.
5. Details of Board Meetings and Resolutions
(1) The 12th Meeting of the 2nd Board of Directors
On April 14, 2001, the Second Board of Directors of the Company convened its twelfth meeting in the Company’s Sixth-Floor Conference Room. A total of 15 directors attended the meeting, which was chaired by Mr. Zhang He, Chairman of the Board. The meeting reviewed and adopted the following resolutions: the Company’s 2000 Annual Report; the Company’s 2000 Financial Final Accounts and 2001 Financial Budget; the Proposed Profit Distribution Plan for 2000; the Company’s Profit Distribution Policy for 2001; a report on amending the Company’s Articles of Association; the nomination of a list of candidates for the Third Board of Directors; and matters relating to the convening of the 2000 Annual General Meeting of Shareholders.
(2) First Session of the Third Board of Directors
On May 22, 2001, the Third Session of the Company’s Board of Directors held its inaugural meeting in the Company’s conference room. A total of 17 directors attended the meeting, which was chaired by Mr. Zhang He, the former Chairman of the Board. The meeting reviewed and adopted the following resolutions: electing Mr. Zhang He as Chairman of the Company and Mr. Mu Chuanjiang as Vice Chairman; electing Mr. Zhang He, Mr. Mu Chuanjiang, Mr. Zhang Hongzhi, Mr. Wang Dekun, Mr. Yu Shoutao, Mr. Wang Zhiqiang, and Mr. Yang Bin as Executive Directors; appointing Mr. Mu Chuanjiang as General Manager of the Company; appointing Ms. Lü Lianzhen as Secretary of the Board of Directors; appointing Mr. Zhang Hongzhi, Mr. Wang Dekun, Mr. Wang Zhiqiang, Mr. Yang Bin, Mr. Hu Xitang, and Mr. Ding Jie as Deputy General Managers; and appointing Mr. Yu Shoutao as Chief Financial Officer of the Company.
(3) Second Session of the Third Board of Directors
On August 15, 2001, the Third Session of the Company’s Board of Directors held its second meeting in the Company’s Sixth-Floor Conference Room. A total of 12 directors attended the meeting, which was chaired by Mr. Zhang He, Chairman of the Board. The meeting reviewed and adopted the following resolutions: the Company’s 2001 Interim Report and its Summary; the decision not to distribute profits or capitalize the capital reserve for share capital increase in the first half of 2001; and the resolution on amending and supplementing the “Accounting and Treatment of Provisions for Impairment of Company Assets.”
6. Implementation of Resolutions Adopted by the Shareholders’ Meeting by the Board of Directors
The Company’s Board of Directors has diligently implemented all resolutions adopted at the 2000 Annual General Meeting of Shareholders.
The company’s 2000 dividend distribution plan was fully implemented by the Board of Directors in July 2001.
7. Special Notes (1) The comparative financial figures audited by the certified public accountants in the Company’s 2001 Annual Report differ from the corresponding data in the 2001 Interim Report because the 2001 Annual Financial Report included an impairment provision of RMB 7,223,016.90 for intangible assets, whereas no such provision was made in the 2001 Interim Report.
(2) The Company’s 2001 Annual Financial Budget Report set forth the following operational targets for 2001: sales revenue of RMB 900 million; total profit of RMB 90 million; and foreign exchange earnings from exports of US$6.04 million. Through concerted efforts, the Company successfully achieved these operational targets.
II. 2002 Corporate Business Development Plan
2002 Corporate Business Plan Targets:
Sales revenue: RMB 950 million;
Total profit: RMB 95.5 million;
1. Seize the opportunity presented by market entry to vigorously develop both domestic and international markets.
(1) Continue to implement the market responsibility system under which leaders at all levels and all employees are accountable for market development.
(2) Foster a holistic market-oriented mindset, leverage the national policy of expanding domestic demand and implementing an active fiscal policy, identify markets by tracing capital flows, and thereby increase market share.
(3) Vigorously develop international markets and make every possible effort to expand exports. Accelerate the implementation of the “Going Global” strategy and the market diversification strategy. Seize the opportunity to study and thoroughly master the basic principles and relevant rules of the WTO, and swiftly align with international market standards.
(4) Strengthen all-round management of the marketing system and achieve comprehensive information-based management.
(5) Further enhance all-round product service.
(6) Vigorously pursue the collection of accounts receivable.
(7) Continue to strengthen brand promotion efforts.
2. Accelerate product structure adjustment and intensify technological upgrading.
(1) Aim at the cutting edge of global technological innovation, progressively enhance the enterprise’s capacity and level of technological innovation, and effectively organize targeted research and development efforts to address the key technologies underlying our products.
(2) Emphasize the application of new technologies, new processes, and new materials to achieve standardization, product line development, and modularity in product design.
(3) Break the constraints of the industrial product structure and develop products at a high level and across broad domains.
(4) Further refine innovation and incentive mechanisms, increase investment in technological development, stimulate the enthusiasm of engineering and technical personnel, and accelerate the pace of technological innovation.
(5) Make full use of the treasury bond project policy, focus on product structure adjustment, and employ high and new technologies as well as advanced and applicable technologies to upgrade and enhance traditional products.
3. Vigorously attract investment and diversify business operations.
(1) Existing joint ventures should strengthen their independent R&D capabilities, expand their scale, and increase product variety.
(2) Actively strengthen ties with internationally renowned enterprises, seize the favorable opportunities presented by China’s accession to the WTO, and enhance the effective utilization of foreign investment.
(3) Strengthen the collection and analysis of information on joint ventures and cooperation, and implement a system of leadership responsibility and dedicated personnel accountability.
4. Strictly control product quality and implement a brand-name strategy.
(1) Improve the quality management system in accordance with ISO 9001 to enhance the level of quality management.
(2) Improve the quality responsibility system at all levels, establish and quantify a quality management assessment mechanism, and strengthen the application of the quality veto.
(3) Strictly control the quality of outsourced and purchased components.
5. With the implementation of a talent strategy as the central focus, deepen reforms of the personnel and employment system and the wage distribution system, and further refine the company’s incentive and restraint mechanisms.
6. Vigorously advance the informatization of management, facilitating the transition from qualitative to quantitative management, from static to dynamic management, and from post-event management to proactive control, thereby elevating the company’s management to a new level.
7. Strengthen cost and capital management. Continue to implement the company-wide, end-to-end, all-round cost-reduction strategy, with a particular focus on strengthening control at the two primary sources—design and manufacturing—to comprehensively reduce procurement costs. Further enhance oversight and control of cash flow, reinforce internal budgetary management of corporate funds, reduce inefficient use of capital, accelerate capital turnover, and improve capital utilization efficiency.
8. Strengthen on-site management, as well as safety production and fire prevention management.
9. Use corporate culture as a vehicle to strengthen ideological and political work and leadership team building.
May 22, 2002
Document No. 2 for the 2001 Annual General Meeting
Report on the Work of the Supervisory Board for the Year 2001
Dear Shareholders:
In 2001, the Supervisory Board held three meetings. The ninth meeting of the second term of the Supervisory Board was convened on April 14, 2001, in the company’s sixth-floor conference room, with all three supervisors in attendance. The meeting reviewed and approved the Supervisory Board’s Work Report for the year 2000; the “Supervisory Board Report” included in the company’s 2000 Annual Report; and a list of candidates recommended for election to the third term of the Supervisory Board. The first meeting of the third term of the Supervisory Board was held on May 22, 2001, in the company’s fifth-floor conference room, with all three supervisors in attendance. At this meeting, Mr. Yu Fuchun was elected Chairman of the third-term Supervisory Board. The second meeting of the third term of the Supervisory Board was held on August 15, 2001, in the company’s fifth-floor conference room, with all three supervisors in attendance. The meeting reviewed and approved the company’s 2001 Interim Report and its summary; and resolved that no profit distribution would be made for the 2001 interim period, nor would any capital reserve be capitalized to increase share capital.
The Supervisory Board hereby issues 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 Arthur Andersen 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.
May 22, 2002
Document No. 3 of the 2001 Annual General Meeting
Regarding the Company’s 2001 Financial Final Accounts
Report on the 2002 Fiscal Budget
Dear Shareholders:
We now submit the Company’s 2001 Annual Financial Statements and the 2002 Financial Budget to the Shareholders’ Meeting for your review and approval.
I. 2001 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 2001 are as follows:
(1) Company Asset Status
At the end of 2001, the company’s total assets amounted to RMB 185,312 million, comprising current assets of RMB 113,508 million, fixed assets of RMB 27,356 million, long-term investments of RMB 40,000 million, and intangible and other assets of RMB 4,448 million.
At the end of 2001, the company’s total liabilities amounted to RMB 689.51 million, comprising RMB 610.51 million in current liabilities and RMB 79.00 million in long-term liabilities.
At the end of 2001, shareholders’ equity totaled RMB 113,749,000, including undistributed profits of RMB 49.8 million.
(II) Status of Achievement of the Company’s Key Financial and Economic Indicators
1. Main business revenue reached RMB 902.15 million, up 12.67% year on year.
2. Total profit reached RMB 92.65 million, up 5.66% year on year.
3. Net profit reached RMB 88.92 million, up 10.59% year on year.
(3) Opinion on the Company’s Profit Distribution
According to the audit conducted by Dalian Hualian Certified Public Accountants LLP, the Company recorded a post-tax profit of RMB 88.918 million in 2001. In accordance with relevant state regulations and the Company’s Articles of Association, RMB 8.892 million was appropriated as statutory surplus reserve, RMB 8.892 million as statutory public welfare fund, and RMB 8.892 million as discretionary surplus reserve, with an additional RMB 1.296 million set aside as reserves for consolidated subsidiaries, for a total appropriation of RMB 27.972 million. Adding this amount to the undistributed profits from the previous year of RMB 23.855 million, the total profit available for distribution to shareholders amounted to RMB 84.801 million.
According to the audit conducted by Arthur Andersen, an international accounting firm, the company recorded a post-tax profit of RMB 69.502 million in 2001. After appropriating statutory surplus reserves, statutory public welfare funds, and discretionary surplus reserves, and adding the undistributed profits from the previous year amounting to RMB 22.386 million, the total distributable profit available to shareholders amounted to RMB 63.916 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 63.916 million, of which RMB 35.001 million will be distributed as dividends, with the remaining RMB 28.915 million carried forward for distribution in the next fiscal year.
II. 2002 Fiscal Budget
The company’s operating plan targets for 2002 are as follows:
Sales revenue: RMB 950 million;
Total profit: RMB 95.5 million.
May 22, 2002
Document No. 4 of the 2001 Annual General Meeting
Report on the 2001 Profit Distribution Plan
Dear Shareholders:
The Company’s 2001 financial statements have been audited by Dalian Hualian Certified Public Accountants LLP and Arthur Andersen. The following proposal is hereby submitted for the distribution of the Company’s 2001 profits:
According to the audit conducted by Dalian Hualian Certified Public Accountants LLP, the Company recorded a post-tax profit of RMB 88.918 million in 2001. In accordance with relevant state regulations and the Company’s Articles of Association, RMB 8.892 million was appropriated as statutory surplus reserve, RMB 8.892 million as statutory public welfare fund, and RMB 8.892 million as discretionary surplus reserve, with an additional RMB 1.296 million set aside as reserves for consolidated subsidiaries, for a total appropriation of RMB 27.972 million. Adding this amount to the undistributed profits from the previous year of RMB 23.855 million, the total profit available for distribution to shareholders amounted to RMB 84.801 million.
According to the audit conducted by Arthur Andersen, an international accounting firm, the company recorded a post-tax profit of RMB 69.502 million in 2001. After appropriating statutory surplus reserves, statutory public welfare funds, and discretionary surplus reserves, and adding the undistributed profits from the previous year amounting to RMB 22.386 million, the total distributable profit available to shareholders amounted to RMB 63.916 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 63.916 million, of which RMB 35.001 million will be distributed as dividends, with the remaining RMB 28.915 million carried forward for distribution in the next fiscal year.
Company’s 2001 Dividend Distribution Plan:
Based on the total share capital of 350,014,975 shares as of the end of 2001, 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.
May 22, 2002
Document No. 5 of the 2001 Annual General Meeting
Report on Amendments to the Company Charter
Dear Shareholders:
In order to further improve the corporate governance structure, standardize corporate conduct, and better safeguard the legitimate rights and interests of the company, its shareholders, and its creditors—particularly those of minority and small shareholders—this amendment to the Company’s Articles of Association is hereby made in accordance with relevant provisions, including the “Standard Opinions on Shareholders’ Meetings of Listed Companies” (as revised in 2000), the “Guiding Opinions on Establishing an Independent Director System in Listed Companies,” and the “Corporate Governance Code for Listed Companies.”
The specific revisions are attached.
The above report is submitted for your review.
May 22, 2002
Document No. 5 of the 2001 Annual General Meeting
Report on Amendments to the Company Charter
Dear Shareholders:
In order to further improve the corporate governance structure, standardize corporate conduct, and better safeguard the legitimate rights and interests of the company, its shareholders, and its creditors—particularly those of minority and small shareholders—pursuant to relevant provisions such as the “Standard Opinions on Shareholders’ Meetings of Listed Companies” (revised in 2000), the “Guiding Opinions on Establishing an Independent Director System in Listed Companies,” and the “Corporate Governance Code for Listed Companies,” the Company’s Articles of Association are hereby amended as follows:
I. Article 3.3, which originally read: “All of the aforementioned shares are centrally custodied by Shenzhen Securities Registration Co., Ltd.,” is hereby amended to read: “All of the aforementioned shares are centrally custodied by the Shenzhen Branch of China Securities Depository and Clearing Corporation Limited.”
II. Article 4.2, which originally read “the Company’s interim and annual reports,” is hereby amended to read “the Company’s quarterly, interim, and annual reports.”
III. Article 4.4, “Conduct of the Controlling Shareholder,” reads as follows: “Except for the obligations imposed by applicable laws and regulations, by provisions promulgated by the securities regulatory authorities, and by the listing rules of the stock exchange on which the Company’s shares are listed, the Company’s controlling shareholder, in exercising its shareholder rights, shall, with the Company’s best interests as the primary consideration and without prejudice to the interests of all or any shareholders, handle the following matters: 1. the appointment or removal of any director or supervisor; 2. the disposition of the Company’s assets in any form and the pursuit of any business opportunity that is beneficial to the Company; and 3. any personal interests of directors or supervisors.”
It is now amended to read: “The controlling shareholder owes a duty of good faith to the Company and other shareholders, shall exercise its rights as a capital contributor in accordance with the law, shall not, by means such as asset restructuring, impair the lawful rights and interests of the Company and other shareholders, and shall not exploit its special position to seek undue benefits.”
1. Strictly adhere to the conditions and procedures stipulated by laws, regulations, and the company’s articles of association when nominating candidates for directors and supervisors;
2. No approval procedures shall be carried out with respect to the resolutions on personnel elections at the Shareholders’ Meeting or on personnel appointments by the Board of Directors;
3. The appointment or removal of the company’s senior management personnel shall not be decided by bypassing the shareholders’ meeting or the board of directors;
4. No direct or indirect interference shall be permitted in the Company’s decision-making or in its lawful production and business operations, so as to avoid harming the interests of the Company and other shareholders.
IV. Article 5.4 is amended by adding the following after the original text “4. When the company’s uncompensated losses reach one-third or more of the total registered capital”: “5. When more than half of the independent directors request the convening of a meeting.”
V. Article 5.4, as originally drafted: “Where the Board of Supervisors or shareholders request the convening of an extraordinary general meeting, the following procedures shall be followed: 1. A written request, in one or more copies of identical form, shall be signed and submitted to the Board of Directors requesting the convening of an extraordinary general meeting, together with a clear statement of the agenda for the meeting. Upon receipt of such written request, the Board of Directors shall issue notice of the convening of the extraordinary general meeting as soon as practicable. 2. If the Board of Directors fails to issue such notice within thirty days of receiving the aforementioned written request, the Board of Supervisors or the shareholders who made the request may, after obtaining the approval of the local securities regulatory authority in the jurisdiction where the listed company is domiciled, convene the extraordinary general meeting on their own within three months from the date the Board of Directors received the request. The procedures for such convening shall, to the greatest extent possible, be the same as those employed by the Board of Directors in convening a general meeting.”
It is now amended to read: “Where the Supervisory Board or the shareholders request the convening of an extraordinary general meeting, the following procedures shall be followed:”
1. Submit a written proposal to the Board of Directors, detailing the agenda and full content of the proposed meeting. The written proposal shall be filed with the local branch of the China Securities Regulatory Commission and the stock exchange where the company is listed. The proposing shareholder or the Supervisory Board shall ensure that the content of the proposal complies with applicable laws, regulations, and the company’s Articles of Association.
2. Upon receipt of a written proposal from the Supervisory Board, the Board of Directors shall issue a notice convening a general meeting of shareholders within fifteen days, and the convening procedures shall comply with the relevant provisions of these Articles of Association.
3. With respect to a written proposal submitted by a proposing shareholder requesting the convening of a general meeting of shareholders, the board of directors shall, in accordance with applicable laws, regulations, and these Articles of Association, decide whether to convene such a meeting. The board’s resolution shall be communicated to the proposing shareholder within fifteen days of receipt of the aforementioned written proposal, and shall also be reported to the local branch of the China Securities Regulatory Commission and the stock exchange.
4. If the Board of Directors agrees to convene a general meeting of shareholders, it shall issue a notice of the meeting; any changes to the original proposal contained in the notice must be approved by the shareholder who proposed the amendment. Once the notice has been issued, the Board of Directors may no longer submit new proposals, nor may it, without the consent of the proposing shareholder, alter or postpone the date of the general meeting.
5. If the Board of Directors determines that a proposal submitted by a proposing shareholder violates applicable laws, regulations, or the Articles of Association, it shall resolve not to convene a general meeting of shareholders and shall notify the proposing shareholder of its decision. The proposing shareholder may, within fifteen days from the date of receipt of such notice, elect to waive the convening of an extraordinary general meeting of shareholders or, alternatively, issue its own notice to convene such a meeting.
Where a proposing shareholder decides to waive the convening of an extraordinary general meeting, it shall report such decision to the local branch of the China Securities Regulatory Commission and the stock exchange.
“If a shareholder proposes to convene an extraordinary general meeting on its own, it shall notify the board of directors in writing and, after filing with the local branch of the China Securities Regulatory Commission and the stock exchange where the company is located, issue a notice convening the extraordinary general meeting. The content of such notice shall not alter the original proposal or add any new proposals, and the meeting shall be held at the company’s registered location.”
VI. Article 5.6 is amended to read as follows: “If the Company, for special reasons, must postpone the convening of the General Meeting of Shareholders, it shall issue a notice of postponement at least five business days prior to the originally scheduled date of the meeting. In such notice of postponement, the Board of Directors shall state the reasons for the postponement and announce the new date for the meeting.”
“Once the notice of the shareholders’ meeting has been issued, the board of directors may no longer submit new proposals on matters not listed in the notice; any amendments to existing proposals must be announced at least fifteen days prior to the convening of the shareholders’ meeting. Otherwise, the date of the meeting shall be postponed to ensure a minimum interval of fifteen days.”
VII. Article 5.9 is amended to read: “The company’s board of directors, independent directors, and shareholders who meet the relevant conditions may solicit voting proxies from the company’s shareholders for use at the general meeting of shareholders. Such solicitation of voting proxies shall be conducted on a non-compensated basis and shall include full disclosure of information to the persons whose proxies are being solicited.”
VIII. Article 5.12 is amended to read: “Annual general meetings and general meetings convened at the request of shareholders or the board of supervisors shall not adopt remote voting.”
9. Article 5.13 is amended to read: “The Company’s Board of Directors, the Supervisory Board, and shareholders who, individually or collectively, hold more than 1% of the Company’s outstanding shares shall have the right to nominate candidates for independent directors.”
X. Article 5.18 is amended to read: “When the largest shareholder submits a new profit distribution proposal, it shall be submitted to the Board of Directors no later than ten days prior to the convening of the Annual General Meeting, and the Board of Directors shall make an announcement thereof. If less than ten days remain, the largest shareholder shall not submit any new profit distribution proposal at this Annual General Meeting.”
XI. Add Article 5.21 “Attorney Witnessing”:
“The company’s board of directors shall engage a lawyer with securities practice qualifications to attend the general meeting of shareholders, issue a legal opinion on relevant matters, and make such opinion public.”
XII. Article 6.2, which originally stated, “Directors shall serve three-year terms and are eligible for re-election,” is now amended to read: “Directors shall serve three-year terms and are eligible for re-election; however, independent directors may not serve more than six consecutive years.”
Thirteen. Article 6.4 is amended to read: “Independent director candidates may be nominated by the Board of Directors, the Supervisory Board, or shareholders who individually or collectively hold more than 1% of the company’s outstanding shares.”
XIV. Article 6.5 in its original form reads: “The Board of Directors shall be composed of an odd number of members, ranging from five to nineteen, and shall be divided into executive directors and non-executive directors. The Board shall have one Chairman, one to two Vice Chairmen, and a number of executive directors. The Chairman, Vice Chairmen, and executive directors shall be appointed from among the directors nominated by the shareholders and shall be elected or removed by a majority of more than half of all directors.”
It is now amended to read: “The Board of Directors shall be composed of an odd number of members, totaling seventeen, and shall include both independent directors and non-independent directors. The Board shall have one Chairman, one to two Vice Chairmen, and two independent directors (at least one of whom shall be an accounting professional). The Chairman and Vice Chairmen shall be elected or removed by a majority of all directors, and shall be nominated by the shareholders from among the directors serving on the Board.”
XV. Article 6.6, which originally stated, “The Board of Directors shall hold at least two meetings each year,” is now amended to read, “The Board of Directors shall hold at least three meetings each year.”
XVI. Article 6.7 shall be amended by adding “5. When proposed by more than one-half of the independent directors” after the original wording “4. Upon request by the company’s Board of Supervisors.”
XVII. Add Article 6.17 “Independent Directors”:
“An independent director is a director who holds no other positions within the company and has no relationships with the company or its major shareholders that could impair the director’s ability to make independent and objective judgments.”
Independent directors owe a duty of good faith and due diligence to the company and all shareholders. In accordance with applicable laws, regulations, and the company’s articles of association, independent directors shall diligently perform their duties, safeguard the overall interests of the company, and, in particular, ensure that the legitimate rights and interests of minority and small shareholders are not infringed.
To serve as an independent director, one must meet the following basic requirements:
1. Shall be qualified to serve as a director of a listed company in accordance with laws, administrative regulations, and other relevant provisions;
2. Possessing independence;
3. Possess basic knowledge of the operation of listed companies and be familiar with relevant laws, administrative regulations, rules, and provisions;
4. Possess more than five years of work experience in law, economics, or other fields necessary for the performance of independent director duties;
5. Other conditions stipulated in the company’s articles of association.
The following persons shall not serve as independent directors:
1. Individuals employed by the Company or its subsidiaries, as well as their immediate family members and principal social connections;
2. Natural person shareholders who directly or indirectly hold more than 1% of the company’s outstanding shares, or who are among the company’s top ten shareholders, together with their immediate family members;
3. Shareholder entities that directly or indirectly hold more than 5% of the company’s outstanding shares, or individuals who serve in any of the company’s top five shareholder entities, as well as their immediate family members;
4. Individuals who, within the past year, have been in any of the first three circumstances listed above;
5. Individuals who provide financial, legal, consulting, or other services to the Company or its subsidiaries;
6. Other persons specified in the company’s articles of association;
7. Other persons as determined by the China Securities Regulatory Commission.
Procedures for the Nomination, Election, and Replacement of Independent Directors:
1. The Board of Directors, the Supervisory Board, and shareholders who individually or collectively hold more than 1% of the company’s outstanding shares may nominate candidates for independent directors, subject to election by the General Meeting of Shareholders.
2. Prior to nomination, the nominator of an independent director shall obtain the nominee’s consent. The nominator shall thoroughly review the nominee’s professional background, educational qualifications, titles, detailed work history, and all concurrent positions, and shall provide an opinion on the nominee’s eligibility and independence to serve as an independent director. The nominee, in turn, shall make a public statement confirming that no relationship exists between the nominee and the company that could impair the nominee’s independent and objective judgment.
3. Prior to the convening of the shareholders’ meeting for the election of independent directors, the company shall simultaneously submit all relevant materials pertaining to the nominees to the China Securities Regulatory Commission, the CSRC branch office in the jurisdiction where the company is located, and the stock exchange on which the company’s shares are listed and traded. If the board of directors has any objections to the nominees’ qualifications, it shall also submit its written opinions thereon. At the shareholders’ meeting for the election of independent directors, the board of directors shall disclose whether any of the candidates has been objected to by the CSRC.
4. The term of office for each independent director shall be the same as that of other directors of the company. Upon expiration of the term, an independent director may be re-elected for successive terms, provided that the total duration of such consecutive terms shall not exceed six years.
5. If an independent director fails to attend three consecutive board meetings in person, the board of directors shall propose to the general meeting of shareholders that the director be removed.
Except in the circumstances set forth above and in any other situations prohibited by the Company Law from serving as a director, an independent director may not be removed from office without just cause prior to the expiration of his or her term. If an independent director is removed before the end of the term, the company shall disclose such removal as a special disclosure item; moreover, if the removed independent director considers the company’s grounds for removal to be improper, he or she may issue a public statement to that effect.
6. Independent directors may resign before the expiration of their term. A resignation letter must be submitted in writing to the Board of Directors, setting forth any matters related to the resignation or any other circumstances that the director deems necessary to bring to the attention of the company’s shareholders and creditors. If, as a result of an independent director’s resignation, the proportion of independent directors on the Board falls below the statutory minimum requirement, such resignation shall take effect only upon the appointment of a successor to fill the vacancy.
In addition to the powers and duties conferred upon directors by the Company Law and other relevant laws and regulations, independent directors also possess the following special powers:
1. Material related-party transactions (defined as transactions that the Company proposes to enter into with a related party and whose aggregate amount exceeds RMB 3 million or 5% of the Company’s most recent audited net asset value) shall, upon approval by the independent directors, be submitted to the Board of Directors for deliberation;
Prior to making a determination, independent directors may engage an intermediary institution to issue an independent financial advisory report as the basis for their judgment.
2. Propose to the Board of Directors the engagement or dismissal of an accounting firm;
3. Propose to the Board of Directors the convening of an extraordinary general meeting;
4. Propose the convening of a board meeting;
5. Independently engage external auditing and consulting firms;
6. It is permissible to publicly solicit voting proxies from shareholders prior to the convening of the general meeting of shareholders.
The exercise of the aforementioned special powers by independent directors shall require the approval of more than half of all independent directors. If the aforementioned proposals are not adopted or the aforementioned powers cannot be exercised properly, the company shall disclose the relevant circumstances.
Independent directors shall express independent opinions to the Board of Directors or the Shareholders’ Meeting on the following matters:
1. Nominating and appointing or removing directors;
2. Appointing or dismissing senior management personnel;
3. Remuneration of the company’s directors and senior management;
4. Whether the company’s shareholders, ultimate controllers, and their affiliated enterprises have engaged in borrowings or other fund transactions with the company that exceed RMB 3 million in aggregate or 5% of the company’s most recently audited net asset value, and whether the company has implemented effective measures to recover outstanding receivables;
5. Matters that the independent directors believe may harm the rights and interests of minority shareholders;
6. Other matters stipulated in the company’s articles of association.
To ensure that independent directors can effectively exercise their duties, the Company provides the following necessary conditions:
1. The Company shall ensure that independent directors enjoy the same right to information as other directors. For any matter requiring Board decision, the Company must provide advance notice to the independent directors in accordance with statutory timeframes and simultaneously furnish sufficient supporting materials. If the independent directors deem the materials insufficient, they may request their supplementation. When two or more independent directors consider the materials insufficient or the underlying arguments unclear, they may jointly submit a written request to the Board to postpone the convening of the Board meeting or to defer consideration of the matter, and the Board shall accede to such request.
2. The Company shall provide the independent directors with the working conditions necessary for the performance of their duties. The Secretary of the Board shall actively assist the independent directors in the discharge of their duties. Where any independent opinions, proposals, or written statements issued by the independent directors are required to be disclosed, the Secretary of the Board shall promptly arrange for such disclosure.
3. When independent directors exercise their powers and duties, relevant company personnel shall actively cooperate and shall not refuse, obstruct, or conceal information, nor shall they interfere with the independent exercise of such powers and duties.
4. The expenses incurred in engaging intermediary agencies for the independent directors, as well as other expenses necessary for the exercise of their duties, shall be borne by the Company.
5. The Company shall provide appropriate remuneration to independent directors. The remuneration standards shall be proposed by the Board of Directors, approved by the Shareholders’ Meeting, and disclosed in the Company’s annual report.
6. The company may establish a necessary independent director liability insurance scheme to mitigate the risks that may arise from the independent directors’ proper performance of their duties.
XVIII. Article 7.6, which originally read, “The Supervisory Board shall hold at least two meetings each year,” is now amended to read, “The Supervisory Board shall hold at least three meetings each year.”
XIX. Article 10.1, which originally read “Prepare interim financial reports and annual financial reports,” is now amended to read “Prepare quarterly financial reports, interim financial reports, and annual financial reports.”
Article 10.6: “The Company’s interim financial reports and annual financial reports shall be prepared in accordance with the relevant laws and regulations. The interim financial report shall be prepared within sixty days after the end of the first six months of each fiscal year, and the annual financial report shall be prepared within one hundred and twenty days after the end of each fiscal year.”
It is now amended to read: “The Company’s quarterly financial reports, interim financial reports, and annual financial reports shall be prepared in accordance with the relevant laws and regulations. The quarterly financial report shall be prepared within thirty days after the end of the third month and the ninth month of each fiscal year, respectively; the interim financial report shall be prepared within sixty days after the end of the first six months of each fiscal year; and the annual financial report shall be prepared within one hundred and twenty days after the end of each fiscal year.”
Article 21: Article 14.4, which originally read “including the announcement of interim and annual reports to shareholders,” is now amended to read “including the announcement of quarterly, interim, and annual reports to shareholders.”
The above report is submitted for your review.
May 22, 2002
Document No. 6 of the 2001 Annual General Meeting
Report on the Rules of Procedure for the Shareholders’ Meeting
Dear Shareholders:
In order to safeguard the lawful rights and interests of Dalian Refrigeration Co., Ltd. and its shareholders, to clearly define the duties and powers of the General Meeting of Shareholders, to ensure that the General Meeting exercises its powers in accordance with the law, and to comply with the requirements set forth in relevant regulations such as the “Guiding Opinions on the Standardization of General Meetings of Listed Companies” (revised in 2000), the “Guiding Opinions on the Establishment of an Independent Director System in Listed Companies,” and the “Corporate Governance Code for Listed Companies,” these Rules are hereby formulated in accordance with the Company Law of the People’s Republic of China, the Articles of Association of Dalian Refrigeration Co., Ltd., and other applicable national laws and regulations.
The Rules of Procedure for the Shareholders’ Meeting are attached hereto.
The above report is submitted for your review.
May 22, 2002
Document No. 7 of the 2001 Annual General Meeting
Report on the Rules of Procedure for Board Meetings and Governance Guidelines
Dear Shareholders:
In order to standardize the procedures for board meetings of Dalian Refrigeration Co., Ltd., enhance the efficiency of board operations and the quality of decision-making, and ensure compliance with the relevant provisions set forth in the “Guiding Opinions on the Standardization of Shareholders’ Meetings of Listed Companies” (revised in 2000), the “Guiding Opinions on the Establishment of an Independent Director System in Listed Companies,” and the “Corporate Governance Code for Listed Companies,” this set of Rules is hereby formulated in accordance with the Company Law of the People’s Republic of China, the Articles of Association of Dalian Refrigeration Co., Ltd., and other applicable national laws and regulations.
The Rules of Procedure for Board Meetings and the Governance Guidelines are attached hereto.
The above report is submitted for your review.
May 22, 2002
Document No. 8 of the 2001 Annual General Meeting
Report on the Rules of Procedure for the Supervisory Board
Dear Shareholders:
In order to standardize the procedures for meetings of the Supervisory Board of Dalian Refrigeration Co., Ltd., enhance the efficiency of the Supervisory Board’s work and the quality of its decision-making, and ensure compliance with the relevant provisions of the “Guiding Opinions on the General Meetings of Listed Companies” (revised in 2000) and the “Corporate Governance Code for Listed Companies,” among others, these Rules are hereby formulated in accordance with the Company Law of the People’s Republic of China, the Articles of Association of Dalian Refrigeration Co., Ltd., and other applicable national laws and regulations.
The Rules of Procedure for the Supervisory Board are attached hereto.
The above report is submitted for your review.
May 22, 2002
Document No. 9 of the 2001 Annual General Meeting
Report on the Election of Independent Directors
Dear Shareholders:
In accordance with the China Securities Regulatory Commission’s “Guiding Opinions on Establishing an Independent Director System in Listed Companies,” and in order to enhance the company’s corporate governance structure, following careful evaluation and deliberation and with the consent of the nominees themselves, it is proposed to appoint Messrs. Wang Dong and Lü Zhongli as independent directors of the company.
The China Securities Regulatory Commission has reviewed the qualifications and independence of the aforementioned two independent director candidates and has raised no objections.
The above report is submitted for your review.
May 22, 2002
Attachment: Resumes of Independent Director Candidates
I. Biography of Mr. Wang Dong
Wang Dong, male, born in February 1936 in Beijing, is currently a professor at the School of Business Administration of Northeastern University of Finance and Economics.
Major Academic Achievements: 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; has publicly published five monographs and textbooks that he either authored or served as chief editor, and co-authored another fifteen; and has published more than ten academic papers. Representative works include: “Management of Socialist Enterprises,” published by Liaoning People’s Publishing House; “Labor Management in Industrial Enterprises,” also published by Liaoning People’s Publishing House; “On-Site Management in Enterprises,” published by Dalian University of Technology Press; “Labor Economics and Management,” published by Dalian Publishing House; “Introduction to Standardization,” published by Renmin University of China Press; and “Modern Standardization in Industrial Enterprises,” published by China Standards Press.
II. Biography of Mr. Lü Zhongli
Lü Zhongli, male, born in December 1942, is a senior economist and holds a Certified Public Accountant qualification. From 1964 to 1990, he served in various positions, including section chief and deputy director, at the People’s Bank of China and the Lüshun Branch of the Industrial and Commercial Bank of China. From 1984 to 1985, he pursued advanced studies at the Northeastern University of Finance and Economics. From 1990 to 2000, he held several posts at the Dalian Branch of the Industrial and Commercial Bank of China, including director of a division, assistant to the branch president, and chief inspector. Since 2001, he has served as a research officer at the deputy branch level.
Document No. 10 of the 2001 Annual General Meeting
Report on the Standards for Independent Director Allowances
Dear Shareholders:
To ensure that independent directors can effectively exercise their duties and powers, the China Securities Regulatory Commission’s “Guiding Opinions on Establishing an Independent Director System in Listed Companies” stipulates that listed companies shall provide appropriate remuneration to independent directors. The standards for such remuneration shall be proposed by the board of directors and subject to approval by the shareholders’ meeting.
In accordance with the foregoing requirements and in light of the Company’s actual circumstances, the following independent director remuneration standards are hereby proposed:
Each independent director shall receive an annual allowance of RMB 25,000.
The above report is submitted for your review.
May 22, 2002
Document No. 11 of the 2001 Annual General Meeting
Report on Director Changes
Dear Shareholders:
In accordance with the China Securities Regulatory Commission’s “Guiding Opinions on Establishing an Independent Director System in Listed Companies” and the relevant provisions of the Company’s Articles of Association regarding the composition of the Board of Directors, and following the Board’s nomination of two candidates for independent director positions, corresponding adjustments have been made to the composition of the Board: Mr. Lü Zhongli, formerly a director, has been reassigned as an independent director; and Mr. Wang Guotong, formerly a director, is no longer serving as a director of the Company.
In addition, due to business needs, Ms. Bai Lin, formerly a director of the Company, will no longer serve as a director. Following a nomination by the Company’s shareholder, Huaxia Securities Co., Ltd., Mr. Zhang Xinfan is proposed to be appointed as a director of the Company.
The above report is submitted for your review.
May 22, 2002
Attachment: Biography of Mr. Zhang Xinfan
Zhang Xinfan, male, born in December 1968, holds a master’s degree and is a senior economist. He graduated from Northeastern University of Finance and Economics in August 1991. He has previously worked at the Tianjin Street Savings Office of the Dalian Branch of the Industrial and Commercial Bank of China, the Zhongshan Square Sub-branch of the Dalian Branch of the Industrial and Commercial Bank of China, and the Securities Department of the Trust and Investment Company of the Dalian Branch of the Industrial and Commercial Bank of China. He currently serves as the Party Branch Secretary and General Manager of the Dalian Branch of Huaxia Securities.
Document No. 12 of the 2001 Annual General Meeting
Report on the Appointment of the 2002 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 auditor for the year 2002. Given that Arthur Andersen’s operations in Hong Kong and Mainland China will be formally merged into PricewaterhouseCoopers Zhongtian Certified Public Accountants LLP effective July 1, 2002, it is further proposed to engage PricewaterhouseCoopers Zhongtian Certified Public Accountants LLP as the Company’s overseas auditor for the year 2002. 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 180,000, with all related audit expenses to be borne by such firm; and to pay PricewaterhouseCoopers Zhongtian Certified Public Accountants LLP an annual audit fee of RMB 680,000, with all related audit expenses to be borne by such firm.
The above report is submitted for your review.
May 22, 2002
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