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Documents for the 2002 Annual General Meeting of Dalian Refrigeration Co., Ltd.
Documents for the 2002 Annual General Meeting of Dalian Refrigeration Co., Ltd.
Document No. 1 for the 2002 Annual General Meeting
2002 Annual Report on the Work of the Board of Directors
Dear Shareholders:
The year 2002 marked the second year of the company’s implementation of the Tenth Five-Year Plan and also the first year since China’s formal accession to the World Trade Organization. Through concerted efforts, the company comprehensively achieved all its economic targets, recording main-business revenue of RMB 956.36 million, up 6.01% from 2001; total profit of RMB 95.25 million, up 5.94% from 2001; and net profit of RMB 88.43 million, up 2.60% from 2001.
I. Review of the Company’s Operating Performance in 2002
1. Overview of the Company’s Principal Business Activities
(1) The core business continues to grow, and operating performance is steadily improving.
In 2002, the Company continued to place the market at the core of its operations, with a particular focus on screw compressors and turnkey engineering projects, achieving main business revenue of RMB 956.36 million, a year-on-year increase of 6.01%. Detailed information on the industry and regional distribution of the Company’s main business revenue is provided in Note 5–25 to the financial statements.
During the reporting period, the Company’s “Bingshan” brand was recognized by the Ministry of Foreign Trade and Economic Cooperation as a “key supported and developed renowned export brand”; three of the Company’s products—reciprocating refrigeration compressors, screw-type refrigeration compressors, and complete cold-storage systems—were awarded the title of “Liaoning Provincial Renowned Brand Product”; the Company was presented with the “Liaoning Provincial Quality Management Award”; and Mr. Zhang He, Chairman of the Company, was honored with the inaugural China Entrepreneurial Achievement Award.
During the reporting period, the Company undertook several large-scale turnkey projects each valued at over RMB 10 million, including a mega-sized poultry deep-processing project worth nearly RMB 20 million, thereby fully demonstrating the Company’s comprehensive capabilities in executing large-scale integrated storage solutions.
During the reporting period, the company successfully passed the ISO 9001:2000 certification audit, which will help establish a positive mechanism for continuous improvement and further enhance the company’s process control capabilities for designing and manufacturing conforming products.
During the reporting period, the Company was recognized by the Dalian Municipal Science and Technology Bureau as a “High-tech Enterprise,” which will further promote the Company’s healthy development and enhance its market share and competitiveness both domestically and internationally.
During the reporting period, the company completed the development of 18 new products, including screw compressors, carried out multiple technological upgrades, implemented an ERP system for information-based management, and thereby strengthened its growth momentum and solidified its foundational management.
During the reporting period, accounts receivable increased year on year, indicating that operational quality still needs further improvement.
(2) The cluster of joint ventures places a strong emphasis on sustainable development, further enhancing their overall strength.
At the end of 2002, the total assets of the company’s joint ventures amounted to RMB 276,832,000, with net assets of RMB 137,598,000.
In 2002, the company’s portfolio of joint ventures recorded sales revenue of RMB 227.069 million, up 11.05% year on year; the company also reported investment income of RMB 75.13 million, an increase of 2.20% over the previous year.
In 2002, among the company’s joint ventures, two reported year-on-year growth of more than 30% in principal business revenue, four reported year-on-year growth of more than 30% in net profit, and six achieved a return on equity of 15% or higher.
Sanyo Air Conditioning has completed the development of eight new products, including the “W-ECO-MULTI” compact central air-conditioning system; successfully passed the ISO 9001:2000 certification audit; officially established independent production capabilities for φ7 heat exchangers; and become the sole overseas manufacturing base for Sanyo Electric’s “Kojing” air-conditioning brand in Japan.
Sanyo Cold Chain has developed more than ten new products, including convenience-store display freezers and European-style refrigerated cabinets, and has successfully passed ISO 9001:2000 certification. Its collaboration with global retail giant Walmart is steadily strengthening, with over 50% of Walmart’s stores in China now equipped with Sanyo Cold Chain display units.
Through capital increases and expansion, Sanyo Compressor has increased the production capacity of its B- and C-series scroll compressors by 50% and successfully implemented an ERP management system and established a postdoctoral research station.
Sanyo Refrigeration has successfully developed four new products, including the FG-XM steam-driven absorption chiller and an environmentally friendly gas-fired heat pump, and has been awarded the “Liaoning Provincial Quality Management Award.” In addition, its lithium bromide absorption chiller has once again been recognized as a “Liaoning Provincial Famous Brand Product.”
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 18.18 million in 2002.
(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 52.74 million in 2002.
(3) Dalian Bingshan Air-Conditioning Equipment Co., Ltd. The company has a registered capital of JPY 700 million, with our company holding a 70% equity stake. Its primary business is the manufacturing and sales of air-conditioning terminal units such as fan coil units and air handling units, and it recorded sales revenue of RMB 95.21 million in 2002.
(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 27.13 million in 2002.
3. Information on Major Suppliers and Customers
The company’s total procurement from its top five suppliers amounted to RMB 251.63 million, accounting for 38.18% of the annual total procurement.
The combined sales to the company’s top five customers totaled RMB 73.92 million, accounting for 7.73% of the company’s total sales.
4. Company Investment Status
As of the end of 2002, the company had established the following joint ventures with Japan, Hong Kong, the United States, the United Kingdom, and other entities:
Company Name Registered Address Principal Business Shareholding Ratio
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 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 Manufactures 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: 40% of semi-hermetic and hermetic compressors are manufactured and sold here.
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 Manufactures 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 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%
(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 totaling RMB 108.94936 million, representing 67.6% of the planned investment. During the reporting period, RMB 53.1558 million was invested. By the end of 2002, all new factory buildings had been completed, and a range of world-leading production equipment and machining centers were introduced, significantly enhancing production capacity and efficiency. In 2002, the company recorded main business revenue of RMB 406.36 million, up 7.35% year on year, but net profit fell by 31.74% to RMB 42.76 million, primarily due to exchange losses resulting from the sharp appreciation of the Japanese yen.
② A large-scale screw refrigeration compressor project has been developed, with a cumulative investment of RMB 54.99 million, representing 91.7% of the planned investment. During the reporting period, RMB 16.80 million was invested. Currently, models such as KA315 and KA510 have been launched in mass production and have effectively replaced imported products in industries such as petrochemicals, thereby becoming a new driver of the company’s profitability.
Currently, the company has invested RMB 282.13936 million of the funds raised, representing 83.1% 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 April 25, 2002, Cold King Container Temperature Control (Suzhou) Co., Ltd. was officially established as a joint venture between the Company and Ingersoll Rand (China) Investment Co., Ltd. The company’s registered capital is USD 9 million, with Daling Shares holding a 10% equity stake. Its business scope encompasses marine container temperature control products and components.
On May 21, 2002, Dalian Bingshan Gard Automation Co., Ltd., a joint venture established by our company and UK-based Gard Control International Limited, was officially founded. The company’s total investment amounts to GBP 300,000, with registered capital of GBP 210,000, of which our company holds a 60% equity stake. The company is primarily engaged in the research and development of automatic control technologies for the refrigeration industry and related sectors.
On September 6, 2002, the company entered into an agreement with U.S. H 2 O 3 Dalian Bingshan Water Environment Equipment Co., Ltd. has been officially established as a joint venture funded by Solutions Company. The company’s registered capital is USD 1 million, with Daling Shares holding a 33% equity stake. Its primary product line comprises ozone-based water treatment equipment, which is mainly used for thorough disinfection and oxidation of water in applications such as swimming pool water disinfection, bathing water disinfection and recirculation, and wastewater treatment and discharge.
In addition, the company has undertaken a series of technology upgrades using its own funds, primarily focusing on the renovation of the heat exchanger production line within the Complete Products Division, the digitalization of production system management, and the enhancement of cybersecurity and management for the technical systems.
5. Company Financial Condition and Operating Results
As of December 31, 2002, the company’s financial position and operating results were as follows:
(1) Total assets amounted to RMB 18,778.8 million, an increase of RMB 27.5 million compared with the beginning of the year. Specifically: current assets decreased by RMB 123.49 million, primarily due to a reduction in inventory; fixed assets increased by RMB 21.20 million, mainly as a result of the acquisition of new fixed assets; long-term investments increased by RMB 131.99 million, largely attributable to profits realized by joint ventures and additional investments in such ventures; and intangible and other assets decreased by RMB 2.20 million, primarily due to the amortization of intangible assets.
(2) Total liabilities amounted to RMB 658.14 million, a decrease of RMB 31.37 million compared with the beginning of the year. Specifically, current liabilities decreased by RMB 31.37 million, primarily due to a reduction in short-term borrowings; long-term liabilities remained unchanged.
(3) Shareholders’ equity amounted to RMB 11,899.8 million, an increase of RMB 55.23 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 143.15 million, an increase of RMB 8.32 million year on year, primarily attributable to higher principal business revenue and stable gross margin.
(5) Net profit amounted to RMB 88.43 million, an increase of RMB 2.25 million year on year, primarily due to higher operating profit.
(6) The asset-to-liability ratio was 35.05%, down 2.21 percentage points year on year.
(7) The gross profit margin was 15.53%, up 0.21 percentage points year on year.
(8) Return on equity was 7.43%, down 0.16 percentage points year on year.
6. Issues and difficulties encountered in operations, along with their solutions
In 2002, although the company achieved certain successes in product operations, it still faced some challenges in capital management, particularly in the efficient utilization of funds. As revealed in the year-end financial report for 2002, the company held more than RMB 400 million in cash and cash equivalents; after deducting the portion of B-share proceeds earmarked for future investment, the amount of freely available funds was no less than RMB 350 million. At the same time, the company’s short-term borrowings exceeded RMB 200 million, resulting in annual interest expenses of several million yuan.
To better control costs, particularly interest expenses, the company has begun gradually reducing its short-term bank borrowings.
7. 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 Third Session of the Third Board of Directors
On April 8, 2002, the Third Session of the Third Board of Directors of the Company was held in the Company’s Sixth-Floor Conference Room. At this meeting, the following resolutions were deliberated and adopted: the Report on the Work of the Board of Directors for the Year 2001; the Report on the Final Financial Statements for the Year 2001 and the Financial Budget for the Year 2002; the Proposed Plan for the Distribution of Profits for the Year 2001; the Policy on the Distribution of Profits for the Year 2002 and the Policy on Capitalizing Retained Earnings to Increase Share Capital; the Report on Amendments to the Articles of Association; the Draft Rules of Procedure for the General Meeting of Shareholders; the Draft Rules of Procedure for the Board of Directors; the Report on Candidates for Independent Directors; the Report on the Standards for Remuneration of Independent Directors; the Report on Changes in the Composition of the Board of Directors; the Report on Changes in Senior Management; the Report on the Reorganization of Dalian Bingshan Group Import-Export Co., Ltd. from a Wholly Owned Subsidiary to an Equity-Participated Company; the Report on Equity Participation in Dalian Bingshan Environmental Protection Equipment Engineering Co., Ltd.; the Report on the Proposed Write-Off of Asset Impairment Provisions; the Report on the Provision for Impairment of Intangible Assets; the Report on the Appointment of the Audit Firm for the Year 2002; the Company’s Annual Report for the Year 2001; and Matters Relating to the Convening of the 2001 Annual General Meeting of Shareholders.
② Fourth Session of the Third Board of Directors
The third session of the Company’s Board of Directors held its fourth meeting on April 22, 2002, in the Company’s sixth-floor conference room. At this meeting, the Company’s quarterly report for the first quarter of 2002 was reviewed and approved.
③ Fifth Session of the Third Board of Directors
On August 20, 2002, the Third Session of the Company’s Board of Directors held its fifth meeting in the Company’s Sixth-Floor Conference Room. At this meeting, the following resolutions were reviewed and adopted: the Company’s 2002 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 2002.
④ Sixth Meeting of the Third Board of Directors
The Company’s Third Board of Directors held its sixth meeting on October 23, 2002, in the Company’s Sixth-Floor Conference Room. At this meeting, the Company’s third-quarter report for 2002 was reviewed and approved.
(2) The Board of Directors’ implementation of resolutions passed by the Shareholders’ Meeting
The Company’s Board of Directors has diligently implemented all resolutions adopted at the 2001 Annual General Meeting of Shareholders.
The Company’s 2001 dividend distribution plan was fully implemented by the Board of Directors in June 2002.
II. 2003 Corporate Business Development Plan
2003 Corporate Business Plan Targets:
Sales revenue: RMB 100,000 million;
Total profit: RMB 97 million;
1. Foster a mindset of embracing the broader market and globalization, vigorously expand into new markets, proactively capture market share, and further increase our market penetration.
2. Seize the opportunity presented by joint ventures and cooperative partnerships to optimize product mix and accelerate integration with global capital. Prioritize and effectively implement joint venture and cooperation projects in areas such as vending machines, quick-freezing equipment, and plate heat exchangers.
3. Fully advance ERP-based information management. Information management should be integrated throughout the entire process—product development, production organization and management, sales systems, and customer service—to achieve the unified optimization of logistics, information flow, and value stream.
4. Focus on accounts receivable and comprehensively strengthen financial management and cost-reduction efforts. It is necessary to establish and refine an accounts-receivable early-warning system for real-time analysis and effective control.
5. Integrate with production and operations, leverage exemplary models to set a benchmark, and strengthen corporate culture development and ideological and political work.
The above report is submitted for your review.
May 28, 2003
Document No. 2 for the 2002 Annual General Meeting
Report on the Work of the Supervisory Board for the Year 2002
Dear Shareholders:
In 2002, the Supervisory Board held four meetings. The third session of the third term of the Supervisory Board was held on April 8, 2002, 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 2001; the “Supervisory Board Report” included in the company’s 2001 Annual Report; and the Draft Rules of Procedure for Meetings of the Supervisory Board. The fourth session of the third term of the Supervisory Board was held on April 22, 2002, in the company’s sixth-floor conference room. At this meeting, the Board reviewed and approved the company’s Quarterly Report for the first quarter of 2002. The fifth session of the third term of the Supervisory Board was held on August 20, 2002, in the company’s fifth-floor conference room. At this meeting, the Board reviewed and approved the company’s Semi-Annual Report for 2002 and its summary; it also resolved that no profit distribution would be made for the first half of 2002, nor would any capital reserve be capitalized to increase share capital. The sixth session of the third term of the Supervisory Board was held on October 23, 2002, in the company’s sixth-floor conference room. At this meeting, the Board reviewed and approved the company’s Quarterly Report for the third quarter of 2002.
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 2002 was made in accordance with lawful resolution procedures and supported by sufficient supporting evidence.
7. The Company proposes to write off impairment provisions for certain fixed assets and bad debts, and the resolution procedure is lawful and based on sufficient grounds.
The above report is submitted for your review.
May 28, 2003
Document No. 3 of the 2002 Annual General Meeting
Regarding the Company’s 2002 Financial Final Accounts
Report on the 2003 Fiscal Budget
Dear Shareholders:
We now submit the Company’s 2002 annual financial statements and the 2003 budget for your consideration at the General Meeting of Shareholders.
I. 2002 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 2002 are as follows:
(1) Company Asset Status
At the end of 2002, the company’s total assets amounted to RMB 187,788 million, comprising current assets of RMB 101,159 million, fixed assets of RMB 29,476 million, long-term investments of RMB 52,925 million, and intangible and other assets of RMB 4,228 million.
At the end of 2002, the company’s total liabilities amounted to RMB 658.14 million, comprising RMB 579.14 million in current liabilities and RMB 79.00 million in long-term liabilities.
At the end of 2002, shareholders’ equity totaled RMB 118,998,000, including undistributed profits of RMB 73.59 million.
(II) Status of Achievement of the Company’s Key Financial and Economic Indicators
1. Main business revenue reached RMB 956.36 million, representing a year-on-year increase of 6.01%.
2. Total profit reached RMB 95.25 million, up 5.94% year on year.
3. Net profit reached RMB 88.43 million, up 2.60% year on year.
(III) Opinion on the Company’s Profit Distribution
Please refer to the “2002 Profit Distribution Plan” (Document No. 4 of the Shareholders’ Meeting).
II. 2003 Fiscal Budget
The company’s 2003 operating plan targets are as follows:
Sales revenue: RMB 100,000 million;
Total profit: RMB 97 million.
The above report is submitted for your review.
May 28, 2003
Document No. 4 of the 2002 Annual General Meeting
Report on the 2002 Profit Distribution Plan
Dear Shareholders:
The Company’s 2002 annual financial statements have been audited by Dalian Hualian Certified Public Accountants LLP and PwC Zhongtian Certified Public Accountants LLP. The following proposal is hereby submitted for the distribution of the Company’s 2002 profits:
According to the audit conducted by Dalian Hualian Certified Public Accountants LLP, the Company recorded a post-tax profit of RMB 88.426 million in 2002. In accordance with relevant state regulations and the Company’s Articles of Association, RMB 8.843 million was appropriated as statutory surplus reserve at 10%, RMB 8.843 million as statutory public welfare fund at 10%, and RMB 1.189 million was set aside as reserves for consolidated subsidiaries, for a total appropriation of RMB 18.875 million. Adding this amount to the undistributed profits from the previous year of RMB 47.884 million, the total profit available for distribution to shareholders amounted to RMB 117.435 million.
According to the audit conducted by PwC Zhongtian Certified Public Accountants LLP, the company recorded a post-tax profit of RMB 70.524 million in 2002. 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 34.908 million, the total profit available for distribution to shareholders amounted to RMB 87.104 million.
In accordance with the relevant provisions of the Company’s Articles of Association and applying the lower-of-the-two principle, the distributable profits for the current year amount to RMB 87.104 million, of which RMB 8.843 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 RMB 43.260 million is carried forward for distribution in the next fiscal year.
Company’s 2002 Dividend Distribution Plan:
Based on the total share capital of 350,014,975 shares as of the end of 2002, 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 28, 2003
Document No. 5 of the 2002 Annual General Meeting
Report on Amendments to the Company Charter
Dear Shareholders:
To enhance the decision-making and operational efficiency of the Company’s Board of Directors and in light of the Company’s actual circumstances, it is proposed to make a significant change to the composition of the Board, reducing the number of directors from the current seventeen to nine. Accordingly, the Company’s Articles of Association are hereby amended as follows:
Article 6.5 of the Company Charter, entitled “Composition of the Board of Directors,” originally provided as follows: “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 appointed from among the directors nominated by the shareholders.”
It is now amended to read: “The Board of Directors shall be composed of an odd number of members, totaling nine, and shall include both independent directors and non-independent directors. The Board shall have one Chairman, one Vice-Chairman, and three independent directors (at least one of whom shall be an accounting professional). The Chairman and Vice-Chairman shall be elected or removed by a majority of all directors, and shall be nominated by the shareholders from among the directors on the Board.”
The above report is submitted for your review.
May 28, 2003
Document No. 6 of the 2002 Annual General Meeting
Report on Director Changes
Dear Shareholders:
Due to corporate and personnel changes at Sanyo Electric Co., Ltd., former directors Akira Yoshida and Takafumi Kobayashi have stepped down from their positions. Mr. Tadao Shimada is hereby nominated as a director of the Company.
The above report is submitted for your review.
May 28, 2003
Attachment: Biography of Tadao Shimada
Tadao Shimada, male, born February 13, 1944, is a graduate of Osaka University. He 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.
Document No. 7 of the 2002 Annual General Meeting
Report on Changes to the Composition of the Board of Directors
Dear Shareholders:
In accordance with the China Securities Regulatory Commission’s “Guiding Opinions on Establishing an Independent Director System in Listed Companies,” by June 30, 2003, at least one-third of the members of a listed company’s board of directors must be independent directors. Daling Shares currently has 17 directors; to meet the one-third requirement, it would need six independent directors. However, the company will find it difficult to achieve this target by the end of June 2003.
In light of the Company’s actual circumstances and with a view to enhancing the efficiency of Board decision-making and operations, it has been decided to adjust the composition of the Board of Directors of Daling Shares Co., Ltd., reducing the number of directors from the original 17 to 9, including 3 independent directors. The adjusted nine directors are: Zhang He, Mu Chuanjiang, Yang Bin, Xu Xiaorui, Shimada Tadanao, Li Mei, Lü Zhongli (independent director), Wang Dong (independent director), and Zhang Guile (independent director).
The above report is submitted for your review.
May 28, 2003
Document No. 8 of the 2002 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,” by June 30, 2003, at least one-third of the members of a listed company’s board of directors shall be independent directors. Following careful evaluation and deliberation, and with the consent of the nominee, the company’s board of directors proposes to elect Mr. Zhang Guile as an independent director of the company.
The China Securities Regulatory Commission has reviewed Mr. Zhang Guile’s qualifications for office and his independence and has raised no objections.
The above report is submitted for your review.
May 28, 2003
Attachment: Biography of Independent Director Mr. Zhang Guile
Zhang Guile, male, born in December 1940 in Dandong City, Liaoning Province, is currently a professor and doctoral supervisor at Northeastern University of Finance and Economics. He has held various positions, including 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. 9 of the 2002 Annual General Meeting
Report on the Appointment of the 2003 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 reappointment.
In light of the aforementioned provisions and in consideration of the Company’s actual circumstances, it is proposed to re-engage Dalian Hualian Certified Public Accountants LLP as the Company’s domestic auditing firm for the year 2003, and to re-engage PwC Zhongtian Certified Public Accountants LLP as the Company’s overseas auditing firm for the year 2003. 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 230,000, with all related audit expenses to be borne by the firm; and to pay PwC Zhongtian Certified Public Accountants LLP an annual audit fee of RMB 680,000, with all related audit expenses to be borne by the firm.
The above report is submitted for your review.
May 28, 2003
Document No. 10 of the 2002 Annual General Meeting
Report on Equity Participation in Dalian Bingshan Investment Co., Ltd.
Dear Shareholders:
To enhance the efficiency of the company’s capital utilization and strengthen its growth momentum, the company proposes to jointly establish Dalian Bingshan Investment Co., Ltd. with Dalian Bingshan Rubber & Plastics Co., Ltd. The registered capital of the new company will be RMB 100 million, with each investor contributing RMB 50 million in cash, thereby holding a 50% equity interest. The company’s business scope will include investment, consulting, and other related activities.
Since Dalian Bingshan Rubber & Plastics Co., Ltd. is an affiliated legal entity of our company, this transaction constitutes a related-party transaction. In accordance with the relevant regulations, any director who has a material interest in a related party shall recuse himself or herself from voting on the matter at the board meeting. To this end, Directors Mu Chuanjiang, Zhang Hongzhi, Yu Shoutao, and Liu Menghua have duly recused themselves from the vote.
Related parties with a vested interest in this related-party transaction shall waive their voting rights on the proposal at the shareholders’ meeting.
The above report is submitted for your review.
May 28, 2003
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