中鲁Ｂ(200992)2001年年度报告（英文版）

SHANDONG ZHONGLU OCEANIC FISHERIES CO., LTD. 2001 ANNUAL REPORT (SUMMARY) March 23, 2002 1 Contents . Company Profile-------------------------------------------------------------------------------------------- . Financial Highlight and Business Highlight----------------------------------------------------------- . Changes in Shares Capital and Particulars about Shareholders--------------------------------- . Particulars about Directors, Supervisors and Senior Executives--------------------------------- . Administrative Structure --------------------------------------------------------------------------------- . Brief Introduction to the Shareholders’ General Meeting----------------------------------------- . Report of the Board of Directors ----------------------------------------------------------------------- . Report of the Supervisory Committee------------------------------------------------------------------ . Significant Events ------------------------------------------------------------------------------------------ . Financial Report----------------------------------------------------------------------------- . Documents for Reference------------------------------------------------------------------ Important: Board of Directors of Shandong Zhonglu Oceanic Fisheries Co., Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The annual report (summary) is abstracted from the annual report, and investors are suggested to read the annual report to understand more details. I. COMPANY PROFILE 1. Name of the Company: In Chinese: 山东省中鲁远洋渔业股份有限公司 In English: Shandong Zhonglu Oceanic Fisheries Company Limited 2. Registered Address: No. 57, Lishan Rd., Jinan, China Office Address: No. 43, Heping Rd., Jinan, China Post Code: 250014 The Company’s E-mail: zlzqb@21cn.com 3. Legal Representative: Wang Aimin 4. Secretary of Board of Directors: Li Wenyi Liaison Address: No. 43, Heping Rd., Jinan, China Tel: (86) 531-6944881 Fax: (86) 531-6955357 E-mail: zlzqb@21cn.com Authorized Representative in charge of Securities affairs: Zhou Feng Liaison Address: No. 43, Heping Rd., Jinan, China Tel: (86) 531-6416949 Fax: (86) 531-6943084 E-mail: zwhl@jn-public.sd.cninfo.net 2 5. Newspapers Chosen for Disclosing the Information of the Company: Securities Times and Ta Kung Pao Internet Web Site Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Securities Department of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: ZHONGLU B Stock Code: 200992 II. FINANCIAL HIGHLIGHT AND BUSINESS HIGHLIGHT 1. Abstract of Accounting Data as of the year 2001 (Unit: In RMB) Items Amount Total Profit 25,630,142 Net Profit 23,835,352 Net profit after deducting non-recurring gains and 23,835,352 losses Profit from main business lines 93,668,030 Profit from other business lines 128,827 Operating profit 25,022,075 Investment income 780,918 Subsidy income 0 Net income/expenditure from non-operating -172,851 activities Net cash flows arising from operating activities 88,595,922 Net increase/decrease in cash and cash equivalents -9,800,696 Notes: Item and amount of deducting non-recurring gains and losses: 0 Net income/expenditure from non-operating activities: -172,851 2. Explanation for the difference in the net profit as audited by Chinese Accounting Standard and International Accounting Standard: In 2001, the net profit of the Company as audited by Andersen·Huaqiang Certified Public Accountants according to Chinese Accounting Standard (CAS) and Arthur Andersen & Co. according to International Accounting Standard (IAS) was RMB 23,835,352 and RMB 23,657,867 respectively. The differences are as follows: In: RMB 2001 Net assets Net profit Amount of consolidation accounting statement as reported under IAS 527,482,458 23,657,867 Dividend distribution after the report period (13,303,566) - Offset of expenditure on foundation 177,485 177,485 3 Amount of consolidation accounting statement as reported under CAS 514,356,377 23,835,352 3. Major accounting data and financial indexes over the past three years ended by the report year Items Unit 2001 2000 1999 Income from main business lines RMB 341,055,565 592,182,400 911,932,320 Net profit RMB 23,835,352 72,418,801 85,473,155 Total assets RMB 1,031,691,311 957,070,574 508,257,264 Shareholders’ equity (excluding RMB 514,356,377 503,813,295 202,679,640 minority shareholders’ equity) Earnings per share RMB/share 0.09 0.27 0.67 Earnings per share after deducting RMB/share 0.09 0.27 0.32 non-recurring gains and losses Net assets per share RMB/share 1.93 1.89 1.58 Net assets per share after adjustment RMB/share 1.93 1.89 1.58 Net cash flows per share arising from RMB/share 0.33 -0.12 -- operating activities Return on net assets % 4.6% 14.4% 18.4% Weighted average earnings per share RMB/share 0.09 0.39 0.67 4. In accordant with Regulations on the Information Disclosure of Companies Publicly Issuing Shares (No. 9) released by China Securities Regulatory Commission, the Company’s return on net assets and earnings per share as of the year 2001 as calculated based on calculating method of fully diluted and weighted average are as follows: Return on net assets (%) Earnings per share (RMB) Profit in the report period Fully Weighted Fully Weighted diluted average diluted average Profit from main business lines 18.2% 18.2% 0.35 0.35 Operating profit 4.9% 4.9% 0.09 0.09 Net profit 4.6% 4.6% 0.09 0.09 Net profit after deducting 4.6% 4.6% 0.09 0.09 non-recurring gains and losses 5. Changes in shareholders’ equity as of the report year (Unit: In RMB) Items Share Capital public Surplus public Statutory public Undistributed Shareholders’ capital reserve reserve welfare funds profit equity Amount at beginning of 266,071,320 186,283,711 18,609,307 6,203,102 32,790,318 503,813,295 report period Increase in the report 3,967,623 1,322,541 6,564,163 10,543,082 period 4 Decrease in the report period Amount at end of the 266,071,320 186,283,711 22,576,930 7,525,643 39,354,481 514,356,377 report period Reason for change Withdrawal in Withdrawal in Realization of profit Realization of the report period the report period and net profit after profit and withdrew surplus distribution of public reserve and dividend statutory welfare fund III. Changes in Shares Capital and Particulars about Shareholders 1. Statement of change in shares Unit: Share Increase/decrease of this time (+, - ) Before the After the Items Share Bonus Capitalization of Additional Others Sub- change change Allotment shares public reserve issuance total I. Unlisted Shares 128071320 128071320 1. Promoters’ shares Including: State-owned shares 127811320 127811320 Domestic juristic person’s shares 260000 260000 Foreign juristic person’s shares Others 2. Raised juristic person’s shares 3. Employees’ shares 4. Preference shares or others Including: Transferred / allotted shares Total Unlisted shares 128071320 128071320 II. Listed Shares 1. RMB ordinary shares 2.Domestically listed foreign shares 138000000 138000000 3. Overseas listed foreign shares 4. Others Total Listed shares 138000000 138000000 III. Total shares 266071320 266071320 2. Particulars about shareholders (1) Ended by the report year, the Company had totally 24,224 shareholders. (2) About shareholders a. Shandong Group Corporation of Fishery Enterprises (“SGCFE”) holds over 5% (including 5%) shares of the Company. There was no change in share in the report year. 5 Amount at beginning of Increase/decrease in the Amount at end of the Shareholder’s name the report period (share) report period (+,-) report period (share) SGCFE 125,731,320 125,731,320 Note: SGCFE is the first largest shareholder of the Company. It held 125,731,320 state-owned shares of unlisted shares of the Company, taking 47.25% of total shares of the Company. Up to now, the share of the Company held by juristic person shareholder was neither frozen nor pledged except that SGCFE had not repaid the guarantee loan on schedule which SGCFE provided to its subsidiary company, Shandong Fishery Material Co. and Shandong Longkou Fishery Comprehensive Co.. 5,000,000 shares and 8,000,000 shares of the Company held by SGCFE were frozen dated June 19, 2001 and Sep. 3, 2001 respectively in Shenzhen Stock Exchange. b. Particulars about the shares held by the top ten shareholders (Ended Dec. 31, 2001): Number of holding shares ended Proportion in the No. Shareholders’ name of the report period (share) total shares (%) 1 Shandong Group Corporation of Fishery Enterprises 125,731,320 47.25 2 China Heavy Automobile Group Jinan Truck Co., Ltd. 1,950,000 0.73 3 ZHOU XIAOHUA 1,200,000 0.45 4 YI YING 1,078,200 0.41 5 CHEN YUAN FENG 855,200 0.32 6 LIAO QIANG 615,000 0.23 7 BEST RELIANCE INVESTMENTS LTD 585,600 0.22 8 LIANG YU ZHEN 553,900 0.21 9 ZHANG SHENG 542,840 0.20 10 LI HAI CHAO 503,700 0.19 Note: Shandong Group Corporation of Fishery Enterprises is main promoter shareholder of the Company and holds state-owned shares. China Heavy Automobile Group Jinan Truck Co., Ltd. is promoter shareholder of the Company and holds state-owned juristic person’s share. There exist no related transaction among the top ten shareholders. (3) The control shareholder of the Company Name of the control shareholder: Shandong Group Corporation of Fishery Enterprises Legal representative: Wang Aimin Date of foundation: 1988 Registration capital: RMB 380,000,000 Nature of Company: state-owned enterprise Structure of share equity: Shandong State-owned Assets Administration Office holds 100% share equity of Fishery Enterprise Business scope: marine catching, aquiculture, resource development and technical service of aquatic product; sales of aquatic products and fishery resource (excluding 6 special operating products); import and export business with the approval scope; sales of steels and woods; sending of work personnel of the fishery business to overseas. Note: In the report year, there was no change in control shareholder of the Company. (4) The control shareholder of SGCFE Name of the control shareholder: Shandong State-owned Assets Administration Office Legal representative: Han Chengfeng Nature of enterprise: administrative institution Main business: responsible department of provincial government for state-owned assets IV. Particulars about Directors, Supervisors and Senior Executives 1. Directors, supervisors and senior executives Number of holding shares share Name Gender Age Title Office term Amounts at Amounts at beginning of the end of the report period report period Wang Aimin Male 60 Chairman of the Board July, 1999 – July, 2002 0 0 Liu Shijun Male 59 Vice Chairman of the July, 1999 – July, 2002 0 0 Board Wang Zhao’an Male 50 Director, July, 1999 – July, 2002 0 0 General Manager Li Wenyi Male 45 Director, July, 1999 – July, 2002 0 0 Deputy General Manager, Secretary of the Board Xie Meilan Female 51 Director, July, 1999 – July, 2002 0 0 Deputy General Manager, Chief Accountant Liu Qingfeng Male 54 Director, July, 1999 – July, 2002 0 0 Deputy General Manager, Chief Economist Zhang Dongming Male 35 Director Apr., 2001– July, 2002 0 0 Shao Shijie Male 55 Director July, 1999 – July, 2002 0 0 Li Dexin Male 55 Director July, 1999 – July, 2002 0 0 Han Xuesen Male 37 Director July, 1999 – July, 2002 0 0 Chen Xianhua Male 45 Director July, 1999 – July, 2002 0 0 Zheng Guimin Male 58 Chairman of the July, 1999 – July, 2002 0 0 Supervisory Committee Huang Qi Male 28 Supervisor July, 1999 – July, 2002 0 0 Yin Jixian Male 42 Supervisor Apr., 2001– July, 2002 0 0 Xu Jianjun Male 50 Supervisor Apr., 2001– July, 2002 0 0 7 Zhang Lei Male 28 Supervisor Apr., 2001– July, 2002 0 0 2. Particulars about directors or supervisors holding the position in Shareholding Company Name Shareholding company Title Office term Liu Shijun Shandong Group Corporation of Fishery Vice Chairman of the Board Feb., 1993 to this day Enterprises Shao Shijie Qingdao Oceanic Fishery Co. – General Manager Jan., 1998 to this day Subsidiary company of Shandong Group Corporation of Fishery Enterprises Zheng Guimin Shandong Group Corporation of Fishery Secretary of discipline Oct., 1996 to this day Enterprises inspection committee Yin Jixian Shandong Group Corporation of Fishery Deputy director of Sep., 2000 to this day Enterprises supervising office Xu Jianjun Shandong Group Corporation of Fishery Deputy director of auditing Sep., 2000 to this day Enterprises office Note: The aforesaid directors, supervisors and senior executives of the Company have not hold the share of the Company. 3. Particulars about the annual salary of directors, supervisors and senior executives In the report year, directors, supervisors and senior executives received annual salary from the Company according to the relevant regulation and standard released by National Labor Department. Particulars about the total of annual salary (including base payment, reward, welfare, subsidy, housing subsidy and others) drew by directors, supervisors and senior executives of the Company: Name Gender Title Annual Salary Notes (RMB) Wang Aimin Male Chairman of the Board 39,000 To draw from the Company Liu Shijun Male Vice Chairman of the Board 36,000 To receive no pay from the Company Wang Zhao’an Male Director, General Manager 35,000 To draw from the Company Li Wenyi Male Director, Deputy General Manager, 33,000 To draw from the Company Secretary of the Board of Directors Xie Meilan Female Director, Deputy General Manager, 32,000 To draw from the Company Chief Accountant Liu Qingfeng Male Director, Deputy General Manager, 34,000 To draw from the Company Chief Economist Zhang Dongming Male Director 30,000 To draw from the Company Shao Shijie Male Director 17,600 To receive no pay from the Company Li Dexin Male Director 19,600 To draw from the Company Han Xuesen Male Director 19,900 To draw from the Company 8 Chen Xianhua Male Director 7000 To draw from the Company Zheng Guimin Male Chairman of the Supervisory 35,000 To receive no pay from the Committee Company Huang Qi Male Supervisor 21,000 To draw from the Company Yin Jixian Male Supervisor 29,000 To receive no pay from the Company Xu Jianjun Male Supervisor 28,000 To receive no pay from the Company Zhang Lei Male Supervisor 21,000 To draw from the Company Directors, supervisors and senior executives received their annual salary from the Company and were totally amounting to RMB 291,500. The total amount of the top three senior executives was RMB 102,000. There are 16 directors, supervisors or senior executives in the Company. 11 persons drew their annual salary from the Company, the other 5 persons received no pay from the Company, they are Vice Chairman of the Board Liu Shijun, Director Shao Shijie, Chairman of the Supervisory Committee Zheng Guimin and Supervisor Yin Jixian and Xu Jianjun. 2 persons enjoy their annual salary RMB 35,000 to RMB 40,000, 4 persons enjoy RMB 30,000 to RMB 35,000, 4 persons enjoy RMB 15,000 to RMB 30,000, and 1 person enjoys under RMB 15,000. 3. In the report year, particulars about changes in directors, supervisors and senior executives and the reason for changes (1) In the report year, Yang Yimin resigned the post of director and deputy general manager due to work transfer, and Zhang Dongming was engaged to take the post of director of the Company. (2) In the report year, Sun Guo was dismissed from the post of supervisor due to work transfer; Zhang Lihua was dismissed from the post of supervisor due to lawbreaking; Xu Jianjun and Yin Jixian were engaged to take the post of supervisor of the Company; Gong Haibin resigned the post of supervisor due to work transfer and Zhang Lei was engaged to take the post of employee supervisor. (3) In the report year, Liu Qingfeng and Xie Meilan were engaged to take the post of deputy general manager. (4) In the report year, there were no changes in general manager of the Company, person in charge of finance and secretary of board of director. V. ADMINISTRATIVE STRUCTURE 1. Company Administration The Company strictly implements the PRC Company Law, the Securities Law and other relevant laws and regulations stipulated by China Securities Regulatory Commission, continuously improves the legal person administration system, has 9 established modern business system, operates the Company in a standardized way. The Company has prepared the Articles of Association, the Rules of Procedures of Shareholders’ General Meeting, the Work Rules of the Board of Directors, and the Work Rules of the Supervisory Committee. All these rules comply with the requirements of the standardized documents concerning Administration of Listed Companies in the following terms. (1) Shareholders and Shareholders’ General Meeting: The company is able to ensure that all shareholders, especially medium and small shareholders, could enjoy equality and fully conduct their rights. The Articles of Associate has confirmed the authorization to the board of directors. The Company has established the Rules of Procedures of the Shareholders’ General Meeting, called and held shareholders’ general meeting strictly according to the Opinions for Standardizing Shareholders’ General Meeting. Meeting venue was selected as far as possible that more shareholders could attend the meeting. The Company conducted the related transactions in a fair and reasonable way, fully disclosed the basis of pricing. (2) Relationship between control shareholder and public Company: The control shareholders behavior in a standardized way, and has never interfered with the Company’s decision-making and operation. The Company is absolutely independent in personnel, assets, finance, organization and business from its control shareholder. The Board of Directors, the Supervisory Committee and the internal management perform their respective functions in an independent way. (3) Directors and the Board of Directors: The Company has elected directors strictly according to the Articles of Association, actively promoted accumulative voting system and further improved procedures of electing directors according to the Rules of Administration of Listed Companies. The number of supervisors and personnel structure of the Board of Directors are in conformity with laws and regulations. The Board of Directors has established the Rules of Procedures of the Board of Directors. All directors attended the Board meeting and the shareholders’ general meeting seriously and responsibly, and took part in relevant trainings as to familiarize with related laws and regulations and also the rights, obligations and responsibilities as directors. (4) Supervisors and the Supervisory Committee: The number of supervisors and personnel structure of the supervisory committee comply with laws and regulations. The Supervisory Committee has established the Rules of Procedures of the Supervisory Committee. The supervisors have performed seriously their duties, taken responsible attitude to all the shareholders, and supervised the financial affairs, the duties performed by the Company’s directors, managers and other senior executives in terms of compliance with the laws. (5) Performance Valuation, Encouragement and Binding Mechanism: The Company has been positively improving the fair and open performance valuation criteria and encouragement and binding mechanism for directors, supervisors and executives. The engagement of the executives has been done in a fair and open way and in compliance with the laws and regulations. 10 (6) Relations with the Relevant Beneficiaries: The Company has been fully respecting and safeguarding the legal rights and interests of the banks and other creditors, staff, consumers and other parties of related interests to promote sustainable and healthy development with their joint efforts. (7) Information Disclosure and Transparency: The Company has authorized the secretary of the Board of Directors to take charge of disclosing information, receiving visits and inquiries of the shareholders. The Company has been disclosing the relevant information in a real, accurate, timely and complete way strictly according to the Rules of Listing Stocks in Shenzhen Stock Exchange, and ensured all the shareholders to have equal opportunity to obtain the information. The Company has also been disclosing in time the detailed information about the big shareholders or the Company’s actual controller as well as shares change information. Strictly according to the laws and regulations stipulated in the Company Law, the Company has been operating consistently in a standardize way since its establishment. The Company will further perfect its administration structure in its future operation, will, as always, pursue the rules of procedures and requirements of the Rules of Administration of Listed Companies, and will try hard to seek maximum profit and conscientiously safeguard interests of medium and small shareholders. 2. Performance of Independent Directors The Company hasn’t established independent director system during the report period. The Company has supplemented and revised the Articles of Association in accordance with the Guiding Opinions on Establishment of Independent Director System in Listed Companies promulgated by China Securities Regulatory Commission. The Company has determined the candidates of independent directors. Once submitted to the shareholders’ general meeting and passed and certain procedures conducted, these independent directors shall be on duty as soon as possible. The Company will establish independent director system based on related regulations before June 30, 2002. VI. ABOUT THE SHAREHOLDERS’ GENERAL MEETING There were totally two shareholders’ general meetings held in the report year. 1. 2000 Shareholders’ General Meeting The 2000 Shareholders’ General Meeting was held on May 29, 2001, which examined and passed item by item the following resolutions through the means of named voting by ballot: (1) Examined and passed 2000 Work Report of the Board of Directors; (2) Examined and passed 2000 Work Report of the Supervisory Committee; (3) Examined and passed 2000 Financial Settlement Report; (4) Examined and passed 2000 Profit Distribution Preliminary Plan; (5) Examined and passed 2001 Profit Distribution Policies; (6) Examined and passed the Proposal on Reengaging Certified Public Accountants; (7) Examined and passed the Proposal on Changing of Directors; 11 (8) Examined and passed the Proposal on Changing of Supervisors; (9) Examined and passed the Proposal on Adjustment and Change of Partial Investment Projects with the Raised Proceedings; (10) Examined and passed the Proposal on Providing Funds to Establish Zhonglu Far-East Fisheries Co., Ltd; (11) Examined and passed the Proposal on Establishing Shangdong Zhonglu Oceanic (Yantai) Food Co., Ltd; (12) Examined and passed Rules of Procedures of Shareholders’ General Meeting; (13) Examined and passed 2000 Annual Report and its Summary. The lawyers from Shangdong Junyida Law Firm who hold Securities Practice Qualification attended the meeting and provided legal position papers. The public notices on resolutions of this meeting were published on Securities Times, China Securities and Hong Kong Ta Kung Pao dated May 30, 2001. 2. The 1st Extraordinary Shareholders’ General Meeting in 2001 The 1st Extraordinary Shareholders’ General Meeting of 2001 was held on Sep. 10, 2001. The meeting examined and passed item by item the following resolutions through the means of named voting by ballot: (1) Examined and passed the Proposal on Issuing Additional A Shares in 2001 in accordance with the relevant Regulations of China Securities Regulatory Commission (2) Examined and passed the Proposal on Application for Issuing Additional A Shares in 2001 (3) Examined and passed the Proposal on Amount and Purpose of Raised Funds by Issuing Additional A Shares (4) Examined and passed the Proposal on Feasibility of Raised Funds Projects by Issuing Additional A Shares (5) Examined and passed the Proposal on Application for Term of Validity of Additional A Shares to be Issued (6) Examined and passed the Proposal on Authorizing the Board of Directors by the Shareholders’ General Meeting to Deal with Issuing Additional New Shares (7) Examined and passed the Proposal on Distributing Unallocated Profits among Old and New Shareholders after Finishing Issuing Additional Shares (8) Examined and passed the Explanation on Last Usage of Funds Raised through Issuing B Shares (9) Examined and passed the Special Audit Report by Accountant on Last Usage of Funds Raised by Issuing B Shares (10) Examined and passed the Proposal on Revising Part of Provisions in the Articles of Association of the Company (11) Examined and passed the Proposal on Prolonging the Term of the 1st Supervisory Committee to July, 2002 The lawyers from Shangdong Jun Yi Da Lawyers’ Firm who hold Securities Practice Qualification attended the meeting and provided legal position papers. The public notices on the resolutions of this meeting were published on Securities Times, China Securities and Hong Kong Ta Kung Pao dated Sep. 11, 2001. 12 VII. REPORT OF THE BOARD OF DIRECTORS (I) Operation 1. Main business scope and operation As a comprehensive enterprise in the ocean fishery industry, the Company is principally engaged in the ocean fishing; letting of trawlers and refrigerated vessels; production and sales of marine pharmaceutical products represented by cod-liver oil and fish oil medicines; import and export, processing and cold-storage of aquatic products, etc. Proceeds raised from the Company’s public offer was mainly invested on the projects of non-deep ocean fishing, R&D of marine pharmaceutical and healthcare products series, international refrigerated vessel transportation and construction of trawl ships, etc. The Company has jointly set up a research institute with Tsinghua University mainly developing hi-tech marine pharmaceutical products series and a pharmaceutical corporation with Ocean University of Qingdao producing anti-aids and anti-tumour marine medicines, etc. In the year 2001, the Company launched several projects, part of which did not render any profit in their initial operation. Therefore, ended Dec. 31, 2001, accumulative profit from main business lines and net profit of the Company amounted to only RMB 93,668,030 and RMB 23,835,352 respectively, a decrease of 17.22% and 67.09% over the same period of the previous year. An analysis concerning income and profit from main business lines by business and geographical segment: Industry Income Profit Ocean fishing 101,947,794 20,759,564 Aquatic products trade 83,896,776 20,037,458 Production of marine pharmaceutical and healthcare products 47,659,169 17,057,592 Letting of fishing ship 33,208,300 13,163,751 Letting and management of refrigerated vessel 30,624,840 11,434,822 Processing, cold-storage of aquatic products and others 43,718,686 11,214,843 Gross Source Income Profit profit rate Ocean fishing 101,947,794 81,188,230 20.36% In: PRC 43,890,371 US 35,133,792 Japan 22,923,631 Aquatic products trade 83,896,776 63,802,640 23.95% In: PRC 83,896,776 Production of marine pharmaceutical and healthcare 47,659,169 30,040,927 36.98% products In: PRC 47,659,169 Letting of fishing ship 33,208,300 20,044,549 39.64% In: Spain 33,208,300 Letting and management of refrigerated vessel 30,624,840 18,627,984 39.17% 13 In: PRC 17,031,346 Spain 13,593,494 Processing, cold-storage of aquatic products and others 43,718,686 31,553,857 27.83% In: PRC 43,718,686 2. Main business lines of the Company and the structure experienced no significant changes in the report period, therefore imposing no practical impact on the Company’s operation achievements. (II) Wholly and Partially Shareholding Subsidiaries Registered Capital Equity Investment Net profit Name capital Business scope (In RMB) held (In RMB) (In RMB) (In RMB) Shandong Zhonglu Aquatic International shipping, productss and Sea 32,139,143 22,505,600 95% 21,380,320 transportation of frozen 2,241,077 Transportation Co., Ltd. aquatic products Qingdao Double Whale Production and processing Pharmaceutical Co., Ltd. 50,196,912 9,341,700 95% 8,874,615 of cod-liver oil medicine 512,041 series Habitat International Self-support cold-storage 20,308,674 12,476,146 100% 12,476,146 3,913,617 Corporation transportation Shandong Zhonglu Oceanic Freezing, cold-storage, Foods (Yantai) Co., Ltd. processing and sales of 42,129,478 42,113,300 76.65% 32,280,000 aquatic products, -231,553 livestock, fruit and vegetables Qingdao Zhonglu Ouqd Production and sales of Aihua Pharmaceutical Co., 98,420,407 72,000,000 59.88% 43,115,300 marine medicine -6,828,392 Ltd. Zhong Far East Co., Ltd. - US$ 3,000 100% US$3,000 Ocean fishing - * June 18, 2001, the Company and Shandong Group Corporation of Fisheries Enterprise (“SGCFE”) jointly incorporated Shandong Zhonglu Oceanic Foods (Yantai) Co., Ltd. (“Yantai Company”), into which the Company injected cash investment in return for 76.65% equity, and SGCFE injected land use rights as investment. Sep. 17, 2001, the Company, SGCFE and Australian Landscape Trading Co., Ltd. (“Landscape Company”), a subsidiary of SGCFE, entered into a agreement stating that Landscape Company would invest US$ 1,780,000 (equivalent to RMB 14,680,000) in Yantai Company. Accordingly, registered capital of Yantai Company would be increased to RMB 56,793,300 and equity held by the Company was decreased to 56.84% of the total. While by the end of the report date, Landscape Company has not implement its investment. * Sep. 28, 2001, the Company and Ocean University of Qingdao (“OUQD”) incorporated Qingdao Zhonglu Aihua Pharmaceutical Co., Ltd. (“Aihua”), in which 14 the Company invested RMB 43,115,300 in forms of cash and OUQD invested RMB 28,884,700 in forms of net assets relevant to pharmaceutical manufacture owned by Huahai Pharmaceutical Co., Ltd., a subsidiary of OUQD. Registered capital of Aihua reached RMB 72,000,000 and the Company held 59.88% equity. * July 5, 2001, the Company established solely Zhonglu Far East Co., Ltd. (“ZFEC”) in Russia. As resolved in the Board meeting, the Company planned to inject two trawlers at the value of US$626,000 as additional investment, which has not been implemented by the end of report date. (III) Particulars about Major Supplier and Customers 1. In the year 2001, top five suppliers of the Company are set out in turn as follows: Ocean Stone Corporation, Japan Daye Co., Ltd., Japan Dayu Fisheries Co., Ltd., Japan Wanhong Co., Ltd. and Basifu Vitamin Co., Ltd. The accumulative amount purchased from the top five suppliers accounts for 40.16% of the Company’s total annul purchase amount. 2. In the year 2001, top five customers of the Company are set out in turn as follows: Shandong Group Corporation of Fisheries Enterprise S.A., Denmark ALIMEX Company, Japan Deng Zhi Ming, De Li Jia Co., Ltd. and Japan Wanhong Co., Ltd. The accumulative amount sold to the top five customers accounts for 27.40% of the Company’s total annual sales volume. (IV) Problems, Difficulties Occurred in the Operation and the Counter-measures Taking all factors home and abroad into consideration, problems and difficulties occurred in the Company’s operation mainly come from: 1. The sluggish international market of aquatic products Demand for the aquatic products was generally influenced by the domestic and international economy, especially by that of Japan and European countries consuming large amount of aquatic products. It is easily understood that when the economy is stable, demand is overwhelming and price is rising and vise versa. So under the macro environment of weak world economy, business of the Company was influenced drastically. To cope with such situation, the Company will adopt swift distributing strategy based on the actual situation of the market. Products are cold-stored during the slack season until the proper timing. Moreover, the Company will make effort to develop new market as well as its productivity on fine-processed commodities; optimize its products mix, so to minimize the negative influence of the market risks. Meanwhile, the Company will continually improve its production efficiency and profitability while reduce the production and management cost, so as to cement its anti-risk ability. 2. Protection policy on fishery resources employed by fish provenance countries For the purpose of long-term development, most fish provenance countries place great importance on the protection of fishery resources and reinforce the supervisory measures including enhancing fishing requirements and setting up limitation to relevant development, etc. Therefore, ocean fishing business of the Company suffered 15 a restriction in short term. With environmental protection criteria improved, oceanic fishery ships are required to obey relevant environmental protection regulations promulgated by both the respective country and the international organization. So operation cost of the Company is increased to certain extend, because of the extra expense for the disposal of pollution generated in the fishing process. Of expenditure on the Company’s main business of ocean fishing, fuel cost is one major factor (10% of total operation cost). So the rising of international fuel price directly increased the Company’s operation cost. In addition, the restriction of fishing certificate and quota impose certain impact on the Company’s fishing business. Under such environments, the Company adopts following measures: firstly, the Company organizes and regulates its fishing activity based on the principal of collective cooperation. Secondly, it prevents itself from being restricted by international fishing administration by strictly implementing relevant regulations issued by both the respective country and the international organization. Thirdly, to discover new economic development point, the Company updates its operation theory and starts to adjust its industrial structure, transferring its main business from the traditional catching and selling fish to fine-processing of ocean aquatic products and R&D of marine pharmaceuticals. 3. China’s entrance of WTO WTO Agricultural Agreement roused significant changed in China in respects of price of fishery products, market openness, international trade volume and structure, etc. In addition, lower of tariff and cancellation of export subsidy for agricultural products will gradually reduce the Company’s advantages in tax exemption. Facing such challenges, the Company consistently works hard on adjusting its productions mix, industrializing the fishery business, improving the organization of the industry, and continually optimize the quality and structure of the industry. Also, it carries out the strategy of “developing by technology”, promoting the technical innovation, fishery applicable technology, R&D and usage of marine pharmaceutical and healthcare products. Furthermore, it actively participates in the development of foreign fishery resources as well as international fishing cooperation; makes great efforts to develop far sea fishing and overseas processing and trade. (V) The Company disclosed no annual profit prediction publicly. (VI) Financial Highlights 1. Financial data Unit: In RMB Changes Rate Item 2001 2000 (+/-) (+/-) Total assets 1,031,691,311 957,070,574 74,620,737 7.80% Long-term liabilities 31,000,000 16,070,000 14,930,000 92.91% Shareholders’ equity 514,356,377 503,813,295 10,543,082 2.09% Profit from main business lines 93,668,030 113,149,206 -19,481,176 -17.22% 16 Net profit 23,835,352 72,418,801 -48,583,449 -67.09% 2. Causes of the changes Item Causes of the changes Total assets Increase in production and profit Long-term liabilities Working capital for new projects Shareholders’ equity Profit as of the period, dividend distribution Profit from main Due to consistent sluggish economy in Japan, Japanese total business lines national consuming volume made the lowest record and the Japanese currency depreciated. As a result, price of the Company’s products exported to Japan reduced and profit lessened. In addition, avenue generated by Tai An Ship, operating in Argentina, suffered a depression due to the turbulent political environment. Net profit As above (VII) Investment 1. Application of previously raised proceeds The proceeds raised through the previous share offering have been used in the projects strictly according to the Prospectus with the details summarized as follows: In RMB ’000 Accumulative Actual Promised Adjusted Projects investment ended Investment Progress Investment investment Dec. 31, 2001 in 2001 1. Project of ultra-low temperature tuna 43,430 43,430 21,580 44,740 Completed long-line fishing in South Pacific 2. Project of marine pharmaceutical and 47,830 47,830 10,660 11,065 In progress healthcare products series 3. Project of purse seine for tuna fishing 41,000 41,000 41,020 41,020 Completed in Indian Ocean 4. Project of hooks and poles for tuna 49,910 - - - Adjusted fishing in Guinea Bay 5. Project of incorporating Aihua - 43,200 43,200 43,200 Completed Company with OUQD 6.Project of importing large cold-storage 39,840 12,400 12,400 12,400 Completed boat 7. Project of incorporating Yantai - 34,150 32,280 32,280 Completed Company with SGCFE 8. Project of building refrigeration dory 49,290 49,290 21,610 23,410 In progress trawlers 9. Total 271,300 271,300 182,750 208,115 Proceeds raised from share offering 255,340 255,340 182,750 208,115 Self-raised proceeds 15,960 15,960 - - 2. Return on investment Particulars about profit-earning projects funded with proceeds raised from B-share offering In RMB ’000 Net profit Net profit Accumulati Project as of 2000 as of 2001 ve net profit 1. Project of ultra-low temperature tuna long-line fishing in South Pacific 2,140 -4,270 -2,130 2. Project of purse seine for tuna fishing in Indian Ocean - -200 -200 3.Project of importing large cold-storage boat 330 3,620 3,950 17 Total 2,470 -850 1,620 3. Notes to application of previously raised proceeds (1) Ended Dec. 31, 2001, the Company has invested RMB 208.115 million in the committed projects as disclosed, 81.5% of total proceeds RMB 255.34 million raised from previous B-share offering, or 76.7% of total committed investment as disclosed. The balance of RMB 47.225 million, 18.5% of total raised proceeds, will be injected in the committed investments as scheduled and based on actual progress. (2) The committed investment for the project of ultra-low temperature tuna long-line fishing in South Pacific amounted to RMB 43.43 million while the actual investment reached RMB 44.74 million. The project has been completed and gone into operation. By the end of Dec. 31, 2001, the project suffered an accumulative net deficit of RMB 2.13 million. (3) The committed investment for project of marine pharmaceutical and healthcare products series amounted to RMB 47.83 million and the accumulative investment ended Dec. 31, 2001 totaled RMB 11.065 million, completing the land requisition and preparatory work, and prophase equipments purchase. It is estimated the balance investment of RMB 41.59 million to be injected within 2002. (4) The committed investment for the project of purse seine for tuna fishing in Indian Ocean amounted to RMB 41 million while the actual investment reached RMB 41.02 million. The project has been completed and gone into operation. By the end of Dec. 31, 2001, the project suffered an accumulative net deficit of RMB 0.2 million. (5) For the purpose of utilizing proceeds effectively, the Company prolonged its project of hooks and poles for tuna fishing in Guinea Bay as examined and approved in the Company’s 2000 Shareholders’ General Meeting, and changed the investment orientation of RMB 43.2 million proceeds to incorporate Aihua Company with OUQD, 60% of total registered capital of RMB 72 million. Capital including RMB 6.71 million balance proceeds for this project and RMB 27.44 million balance proceeds for the project of importing large cold-storage boat was applied to establish Yantai Company, which was registered on June 18, 2001 with total capital of RMB 42.1133 million. Total registered capital of Yantai Company comprised RMB 32.28 million in cash from the Company, 76.65% of the total, and RMB 9.8333 million in forms of land use rights from SGCFE, 23.35% of the total. The balance proceeds were used for investment shortage in other projects. The above adjustment on proceeds application has been approved in both the Company’s Board meeting and the Shareholders’ General Meeting 2000 and published in Securities Times, China Securities and Ta Kung Pao dated April 14, 2001 and May 30, 2001 respectively. (6) The committed investment for the project of incorporating Aihua Company with OUQD amounted to RMB 43.2 million. The newly established enterprise was registered on Sep. 28, 2001 with total capital of RMB 72 million, including RMB 43.2 million cash from the Company, taking 60% of the total. (7) The committed investment for the project of incorporating Yantai Company with SGCFE amounted to RMB 34.15 million while actual investment reached RMB 32.28 million. The newly established enterprise was registered on June 18, 2001 with total capital of RMB 42.1133 million. Total registered capital of Yantai Company comprised RMB 32.28 million in cash from the Company, 76.65% of the total, and RMB 9.8333 million in forms of land use rights from SGCFE, 23.35% of the total. The balance proceeds were used for making up the investment shortage in other projects. 18 (8) The committed investment for the project of importing large cold-storage boat amounted to RMB 39.84 million while actual investment reached RMB 12.4 million. Ended Dec. 31, 2001, the project realized a net profit of RMB 3.95 million. Capital including RMB 27.44 million balance proceeds for the project million and RMB 6.71 million balance proceeds for the project of hooks and poles for tuna fishing in Guinea Bay was used to incorporate Yantai Company. The above adjustment on proceeds application has been approved in both the Company’s Board meeting and the Shareholders’ General Meeting 2000 and published in Securities Times, China Securities and Ta Kung Pao dated April 14, 2001 and May 30, 2001 respectively. (9) The committed investment for the project of building refrigeration dory trawlers amounted to RMB 49.29 million and the accumulative investment ended Dec. 31, 2001 reached RMB 23.41 million. Two trawlers has passed the test and gone into operation and the other two were under construction in smooth progress. It is estimated the balance investment of RMB 25.88 million to be injected within 2002. 4. The Company did not invested in any material project with non-raised proceeds. (VIII) Significant Impact on the Company’s Future Development by Macro Environment and Changes in Policies and Regulations After enlarging operation scale of the Company, changes will take place in respects of both production and sales; income and profit from main business lines will also make large margin progress. However, cancellation of 18% income tax return will impose great impact on the Company’s net profit. (IX) Operation Plan for the Year 2002 1. Development plan Export-oriented economy is confronting with both opportunities and challenges in the year 2002, the first year after China’s WTO entrance. As a key factor in China’s export-oriented economy development, the oceanic fishery industry undoubtedly will enjoy encouraging policies, laws and regulations as well as favorable financing support from the government. Based on this, the Company sets up its general work principal as follows: aiming at the profitability improvement and focusing on the far sea fishery development, the Company will reinforce its industrial restructure, actively promote the technology advance, cement its internal management, improve the industry and enterprise quality, do a good job in additional issuance, so as to promote the Company in a higher step. Centering the general work principal, the Company will adopt following measures in the year 2002: Firstly to enthusiastically promote the oceanic fishery development in various methods: the Company will carefully arrange the fishing filed and equipments apportion. Moreover, it will take active research for advanced fishing technology while reinforcing the technique of purse seine fishing and ultra-low temperature long-line fishing. Furthermore, it will make full advantages of present foreign bases and meanwhile expand the fishing field toward west and south of Pacific Ocean, Indian Ocean and east of Atlantic Ocean. Thus, a balanced development structure of oceanic fishery in scale with advanced technique will be formed. Secondly to improve the fishery industry quality by expediting the technical innovation: first of all, the Company will strengthen its cooperation with Tsinghua University and OUQD for the R&D of new products, so to improve the Company’s technology content and competitiveness. Secondly, the Company will introduce advanced technology and experience from fishery-well-developed countries in terms of ships and equipments, seine facilities and personnel training, etc. and meanwhile improve self-research ability for export. At last, the Company will work hard on the fine processing of aquatic products to increase the product’s technology content, 19 applicable rate and added value, so to realize the full and effective utilization of resources, restructure of oceanic fishery economy and the Company’s long-term development. Thirdly to emphasize the comprehensive development: with the speedy industrial restructure, sections relevant to the oceanic fishery also need a quick development. So the Company will strive for a integrated industrial lines composing of haul, transportation, process and sales in short time and improve its profitability based on both domestic and international market. Fourthly to continue the enterprise reform and reinforce the management: the macro environment requires the Company to continue its reform and develop its management based on the operation principal of “personnel is the basis and management is the profit”. Fifthly to fulfill the task of additional stock issuance: availing the public company’s advantages in financing, the Company will issue additional shares when appropriate within the year 2002. As entrusted by the shareholders’ general meeting, the Board will continually focus on the promotion and implementation of additional stock issuance. 2. Operation targets The Company set its operation targets in 2002 as fishing output increasing by 20% over the previous year, income from main business lines increasing by 20% over the previous year, expenditures decreasing by 10% over the previous year and net profit increasing by 20% over the previous year. To realize above targets, the Company set the detailed seasonal profit aim for its branches and subsidiaries, and adopt the competitive and encourage organism, binding salary and bonus with performance, to mobilize all staff, details as follows: (1) To realize the scale economy, the Company planned to increase two or three team boats in the tuna fishing with purse seine technique. Also, the Company will further stabilize its business of tuna processing under ultra-low temperature while expanding fishing field for tuna based on the balance apportion in Pacific and Atlantic. Moreover, the Company will try to made practical breakthrough in the hooks and poles development. (2) Regarding the business of seafood fine-processing as the key economic development point, the Company will place great emphasis on the project of Yantai ultra-low temperature storage and processing and the project of Qingdao tuna can processing, based on the Project of Longkou export processing base. (3) In order to upgrade the Company with hi-tech, the Company will continue its cooperation with Tsinghua University and OUQD, and expedite the construction of research institute. Furthermore, it will attach great effort on the project of Qingdao Double Whale Industrial Park and the Aihua Pharmaceutical project. In the year 2002, the Company will unit to accomplish all tasks and targets overcoming any difficulties for its long-term development, so to repay the shareholders with excellent operation achievements. (X) Profit Distribution Preplan for 2001 As audited by Arthur Andersen & Co. under IAS and by Andersen Huaqiang Certified Public Accountants under CAS, net profit of the Company realized in 2001 is RMB 23,657,867 and RMB 23,835,352 respectively. According to the relevant provisions of the Implementation Rules for Domestically Listed Foreign Shares of Listed Company with Limited Liabilities and Articles of Association of the Company, for listed company with B shares, attributable profit after taxation should be decided based on the Principle of Lower of the two results: 20 attributable profit after taxation in the financial statement prepared under IAS after audited by Certified Public Accountants and accumulative attributable profit after taxation after adjustment to confirm to the IAS or accounting standard of the place of issuance. So RMB 23,657,867 should be taken as the basis of attributable profit after taxation in 2001, 10% of which was withdrew as statutory public reserve amounting to RMB 2,645,082; and 5% of which was withdrew as statutory welfare fund amounting to RMB 1,322,541. Therefore, in addition to the retained profit at the beginning of the year, RMB 32,790,318, profit attributable to all shareholders as of 2001 amounted to RMB 52,480,562. Profit distribution preplan for 2001 is as follows: based on the total share capital of 266,071,320 shares ended Dec. 31, 2001, the Company is to distribute dividends totaling RMB 13,303,566 at the rate of cash RMB 0.50 for every 10 shares (including tax) to the whole shareholder. The remaining profit, RMB 39,176,996 shall be carried down to the next year. Dividends for overseas investors will be converted into HK Dollars at the interim rate quoted by the People’s Bank of China on the first business day after the resolution date of the Shareholders’ General Meeting. The Company will conduct no public reserve transferring into share capital. VIII. REPORT OF THE SUPERVISORY COMMITTEE 1. Meetings held in the report year In the report year, the Supervisory Committee had held three meetings with the details as follows: 1) The 4th meeting of the 1st Supervisory Committee was held on April 12, 2001. The meeting examined and passed the following resolutions. A. Examined and passed 2000 Annual Report and its Summary; B. Examined and passed 2000 Work Report of the Supervisory Committee; C. Examined and passed 2000 Financial Settlement Report; D. Examined and passed 2000 Proposal of Profit Distribution and Transfer of Public Funds to Share Capital; E. Examined and passed 2001 Profit Distribution Policy; F. Examined and passed the Proposal on Reengaging Certified Public Accountants; G. Examined and passed the Proposal on Changing of Supervisors; H. Examined and passed the Proposal on Adjustment and Change of Partial Investment Projects with Raised Proceedings; I. Examined and passed the Rules of Procedures of the Supervisory Committee. The public notices about the aforesaid resolutions of the meeting were published on China Securities, Securities Times and Hong Kong Ta Kung Pao respectively dated April 14, 2001. 2) The 5th meeting of the 1st Supervisory Committee was held on Aug. 2, 2001. The meeting examined and passed the proposal on changing the term of the Supervisory Committee to 3 years and on prolonging the term of the first Supervisory Committee 21 to July 2002. The public notice of the resolution made in this meeting was published on China Securities, Securities Times and Hong Kong Ta Kung Pao. 3) The 6th meeting of the 1st Supervisory Committee was held on Aug. 16, 2001, which examined and passed the following items: A. Examined and passed the Main body of 2001 Interim Report; B. Examined and passed the Summary of 2001 Interim Report; C. Examined and passed 2001 Interim Profit Distribution Preliminary Plan; D. Examined and passed the Supervisory Committee conscientiously inspected the running condition and performance of directors, managers and senior management personnel in the first half of year 2001. The public notices on resolutions of this session were published on China Securities, Securities Times and Hong Kong Ta Kung Pao respectively dated Aug. 18, 2001. XI. SIGNIFICANT EVENTS (I) The Company was not involved in any material lawsuit or arbitration in the report period. (II) Particulars about purchase and sales of assets, merger and collocation 1. As resolved in the Company’s 12th Meeting of the 1st Board of Directors dated June 28, 2001, the Company purchased the use rights for the land (totally 31,447.9 square meters), rented by Zhonglu Qingdao Refrigeration Branch and Zhonglu Longkou Branch from SGCFE, at the price of RMB 22,684,710 in return for offsetting the due accounts owned by SGCFE. The purchase complies with the principal of “Three Separation” between public company and its control shareholder and benefits the Company’s long-term development, putting an end to the last land rent from SGCFE and reducing the related transaction of the Company. 2. Pursuant to a Ship Assignment Agreement, the Company acquired one ultra-low temperature tuna long-line clipper from Long Island Oceanic Fishery Co., Ltd. at the price of RMB 7.1 million on Aug. 13, 2001 to increase its tuna long-line fishing ability. 3. Pursuant to a Ship Purchase Agreement, the Company purchased one cold-storage vessel with capacity of 3829 tons from Shicheng Ocean Transportation Co., Ltd. at the price of USD 0.75 million on Sep. 12, 2001. The vessel has been put into operation from Oct. 2001. (III) Related Transaction 1. Sales to related parties Accumulative Name Transaction Proportion Pricing turnover in 2001 SGCFE Seafood purchase 6,171,125 2.51% Market price SSSC Seafood purchase 13,630,333 5.56% Market price Tenglong Seafood purchase 10,729,391 4.37% Market price LSPC Seafood purchase 2,355,462 0.96% Market price Tenglong Seafood sales 17,025,405 4.99% Market price LSPC Seafood sales 448,798 0.13% Market price 2. Letting income of vessels from related parties: 22 Accumulative Name Transaction turnover in Proportion Pricing 2001 SGCFE S.A. Letting income 33,208,300 100% Market price SGCFE Letting of crews 10,458,000 37% Market price SGCFE Letting of crews 5,971,000 63% Market price 3. Interest income charged on amount due from related party Accumulative Name Transaction turnover in Proportion Pricing 2001 SGCFE Interest income 2,850,236 32.61% Market price QMFC Interest income 2,025,115 23.17% Market price SGCFE S.A. Interest income 1,998,145 22.86% Market price SSSC Interest income 514,344 5.88% Market price Prodesur S.A. Interest income 462,730 5.29% Market price LSPC Interest income 372,322 4.26% Market price APPP Interest income 269,138 3.08% Market price Haiyu Interest income 248,794 2.85% Market price 4. Other purchase Accumulative Name Transaction Proportion Pricing turnover in 2001 SGCFE Purchase of land use rights 22,684,710 100% Market price (IV) Other Material Related Transaction Pursuant to relevant resolution adopted in the 11th meeting of the 1st Board of Directors dated May 17, 2001, the Company and SGCFE jointly incorporated Yantai Company, into which the Company injected RMB 32.28 million in cash in return for 76.65% equity, and SGCFE injected use rights for land covering a area of 33,333.3 square meters (appraised value: RMB 9.8333 million) in return for 23.35% equity. Sep. 17, 2001, the Company, SGCFE and Landscape Company, a wholly owned overseas subsidiary of SGCFE, entered into a agreement stating that Landscape Company would invest US$ 1,780,000 in cash in return for 25.85% equity in Yantai Company. Accordingly, registered capital of Yantai Company would be increased to RMB 56,793,300 while by the end of the report date, Landscape Company has not implement its investment and the nature of Yantai Company was not changed into joint venture. (V) Implementation of Material Contract 1. Entrustment, contract and lease (1) The Company has leased from SGCFE certain office building (1000 square meters) with expired on Dec. 31, 2001, at the annual rental of RMB 150,000. (2) The Company leased from SGCFE certain office building (2340 square meters) with effect from Jan. 1, 2002 for ten years, at an annual rental of RMB 2.5623 million. 23 (3) According to series of Contract Agreements, the Company leased six self-owed drawlers and eight trawlers leased from SGCFE to Shandong Group Corporation of Fisheries Enterprise S.A. (“SGCFE S.A.”) with expired on April 1, 2002. In Jan. and Mar. 2002, the Company again signed series of Contract Agreements with SGCFE S.A. to lease three self-owned drawlers and six drawlers leased from SGCFE to it for a period of one year till April 1, 2003. (4) According to a Contract Agreement with effect from Jan. 1, 1999 for ten years, the Company leased its Taian Ship to Prodesur S.A. at a rental of 70% of its fishing avenue. 2. The Company offered no significant guarantee for others in the report period. 3. Pursuant to an agreement entered into by the Company and Southern China Securities Co., Ltd., the Company deposited RMB 50 million into the securities company for a fixed return of RMB 2 million on March 1, 2001, the expiration date of the agreement. The deposit can only be sued for the trading of deventure issued by the PRC Government. Besides this issue, the Company conducted no material financial entrustment in the report period. 4. Other material contract and the implementation in the report period (1) The Company mortgaged four vessels in names of “Taihe” “Taiping” “Taixing” “Taining” to a bank as security for a bank borrowing of RMB 58 million bearing a annual interest rate of 6.14%-6.54%. (2) Dec. 31, 2001, the Company mortgaged its time deposit of USD 5 million to a bank as security for a short-term bank borrowing. (3) By the end of Dec. 31, 2001, the Company mortgaged 30 million shares of Southern Securities Co., Ltd. to a bank as a security for a short-term bank borrowing of RMB 20 million. (4) According to an agreement signed with SGCFE, the Company charges a annual interest rate of 6.95% for non-operation accounts owned by SGCFE and its subsidiaries including QMFC, Haiyu, SSSC, LSPC, APPP, SGCFE S.A. and Prodesur S.A. to the Company. The interest totaling RMB 8,740,824 was paid as agreed. (5) According to an agreement signed with SGCFE, the Company purchased the land use rights for the plant of the Qingdao Refrigeration Branch and Longkou Branch of the Company at the price of RMB 22,684,710 from SGCFE for forty-seven and a half year. (6) Aihua Company, a subsidiary of the Company, signed a contract with OUQD to purchase the trademark, ingredient and production license for four kinds of prescription medicine at the price of RMB 15,340,505. (7) Aihua Company planed to purchase 12-year use rights of two kinds of new medicine (national A class) under research from OUQD at the price of RMB 28.5 million. (VI) Neither the Company nor its shareholder with over 5% shares of the Company made any commitment in designated newspapers or internet website in the report period. (VII) The Company reengaged Arthur Andersen & Co. and Andersen·Huaqiang 24 Certified Public Accountants as the Company’s overseas and domestic auditors for the report period. The Company paid the two Certified Public Accountants in recent two years as follows: 2001 2000 Financial Auditing Fee HKD 1.58 million HKD 0.7 million Other charges RMB 82,388 RMB 139,548 Other charges comprised travel expenses and so on, which did not influenced the independent opinion. (VIII) In 2001, neither the Company, the Board, nor the directors, senior executives was checked, penalized or criticized by CSRC or SSE. (IX) Before Dec. 31, 2001, the Company paid the income tax at the rate of 33% in the first half-year and received return at 18% in the second half year. The latest regulation from the Ministry of Finance and the State Bureau of Tax cancelled such preference policy. Such changes in tax policy will no bring material impact on the Company’s future operation from Jan. 1, 2002. (X) China’s WTO entrance influences directly the Company’s processing and international trade of aquatic products In aspect of oceanic fishery: China’s present import tariff rate for aquatic products is 20% in average while the rate charged by western countries is generally lower than 10% (4-5% in EU, 0 in US). In case of drastic tariff rate lowering in line with other WTO members, the Company will lose its advantages in self-fishing, which enjoys the tax exemption policy. The international aquatic products at low price will no doubt compete with the Company’s self-fished products. In aspect of processing and international trade of aquatic products: WTO has set a series of high quality criteria for food, which gives the Company heaven pressure to improve the quality of its exported products. All this will influence the Company’s exploration for new markets and maintenance of traditional markets. X. FINANCIAL REPORT I. Financial Report To the shareholders of Shandong Zhonglu Oceanic Fisheries Company Limited: We have audited the accompanying consolidated balance sheet of Shandong Zhonglu Oceanic Fisheries Company Limited (the “Company”) and its subsidiaries (the “Group”) as of December 31, 2001, and the related consolidated statements of income, changes in equity, and cash flows for the year then ended. These financial statements set out on pages 2 to 42 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable 25 assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements, in all material respects, give a true and fair view of the financial position of the Group as of December 31, 2001 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as published by the International Accounting Standards Board. Arthur Andersen & Co. Hong Kong, the People’s Republic of China March 21, 2002 SHANDONG ZHONGLU OCEANIC FISHERIES COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000 (Expressed in thousands of Renminbi) Note 2001 2000 ASSETS Non-current assets Property, plant and equipment 3 382,596 189,937 Intangible assets 4 17,314 2,378 Long-term investments 5 33,266 33,301 Due from related parties, non-current portion 20(d) 206 161,071 433,382 386,687 Current assets Inventories, net 6 73,479 54,915 Due from related parties 20(d) 196,310 153,814 Prepayments and other receivables 25,805 15,578 Trade receivables, net 7 72,948 56,753 Short-term investments 8 80 50,067 Pledged bank time deposits 19(a) 41,383 177,151 Cash and cash equivalents 19(a) 188,073 62,106 26 598,078 570,384 Total assets 1,031,460 957,071 EQUITY AND LIABILITIES Capital and reserves Share capital 9 266,071 266,071 Reserves 10 261,411 264,350 22 527,482 530,421 Minority interests 38,257 2,016 Non-current liabilities Long-term bank borrowings 12 31,000 16,070 Current liabilities Accruals and other current liabilities 13 32,382 31,557 Due to related parties 20(e) 2,834 16,860 Income tax payable 16(a) 10,945 10,156 Other taxes payable 16(b) 4,706 2,659 Advance from customers 7,202 33,008 Trade payables 21,086 13,060 Short-term borrowings 11 347,496 297,264 Current portion of long-term bank borrowings 12 8,070 4,000 434,721 408,564 Total equity and liabilities 1,031,460 957,071 The accompanying notes are an integral part of these consolidated financial statements. SHANDONG ZHONGLU OCEANIC FISHERIES COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (Expressed in thousands of Renminbi (“RMB”), except for earnings per share) Note 2001 2000 Revenue 14 341,055 592,182 27 Cost of sales (249,474) (470,192) Gross profit 91,581 121,990 Other operating income 151 1,965 Distribution costs (25,911) (29,547) Administrative expenses (38,277) (17,997) Other operating expenses (1,859) (880) Profit from operations 25,685 75,531 Finance (cost) income, net (1,067) 5,673 Gain on disposal of short-term Investment 781 1,483 Profit before taxation and minority interests 15 25,399 82,687 Income tax expense 16 (4,395) (9,903) Profit after taxation but before minority interests 21,004 72,784 Minority interests 2,654 (365) Net profit for the year 22 23,658 72,419 Dividends 17 26,608 31,665 Earnings per share 18 - Basic RMB 0.089 RMB 0.390 - Diluted Not applicable Not applicable The accompanying notes are an integral part of these consolidated financial statements. SHANDONG ZHONGLU OCEANIC FISHERIES COMPANY LIMITED AND SUBSIDIARIES 28 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (Expressed in thousands of Renminbi) Reserves Statutory Statutory Share Translation Capital surplus public Unappro-pri capital reserve reserve reserve fund welfare fund ated profit Total Total equity (Note 9) (Note 10(a)) (Note 10(b)) (Note 10(b)) Balance at January 1, 2000 128,071 59 68,962 4,470 2,235 30,548 106,274 234,345 Issuance of share capital 138,000 - 117,322 - - - 117,322 255,322 Net profit for the year - - - - - 72,419 72,419 72,419 Profit appropriations - Statutory surplus reserve fund - - - 7,242 - (7,242) - - - Statutory public welfare fund - - - - 3,620 (3,620) - - - Appropriations to reserves by subsidiaries - - - 694 348 (1,042) - - - Dividends (Note 17(c)) - - - - - (31,665) (31,665) (31,665) Balance at December 31, 2000 266,071 59 186,284 12,406 6,203 59,398 264,350 530,421 Currency translation difference - 11 - - - - 11 11 Net profit for the year - - - - - 23,658 23,658 23,658 Profit appropriations - Statutory surplus reserve fund - - - 2,384 - (2,384) - - - Statutory public welfare fund - - - - 1,192 (1,192) - - - Appropriations to reserves by subsidiaries - - - 261 131 (392) - - - Dividends (Note 17(c)) - - - - - (26,608) (26,608) (26,608) Balance at December 31, 266,071 70 186,284 15,051 7,526 52,480 261,411 527,482 29 2001 The accompanying notes are an integral part of these consolidated financial statements. SHANDONG ZHONGLU OCEANIC FISHERIES COMPANY LIMITED AND SUBSIDIAIRES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (Expressed in thousands of Renminbi) Note 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Profit before taxation and minority interests 25,399 82,687 Adjustments for: Provision for (write-back) for doubtful debts 5,903 (876) Provision for (write-back) of provision for inventory obsolescence 860 (5,329) Loss on disposal of machinery 140 12 Depreciation of property, plant and equipment 20,044 14,393 Amortization of intangible assets 723 309 Interest income (16,218) (15,358) Interest expense 17,285 9,685 Investment income (781) (1,483) Operating profit before working capital changes 53,355 84,040 (Increase) decrease in inventories (13,636) 41,838 Increase in trade and other receivables (33,475) (19,228) Decrease (increase) in due from related parties 118,369 (104,300) Decrease in trade and other payables (36,240) (32,280) Decrease in due to related parties (14,026) (2,488) Cash generated from (used in) operations 74,347 (32,418) Income tax paid (5,706) - Interest paid (17,003) (9,685) 30 Interest received 19,724 875 Net cash generated from (used in) operating activities 71,362 (41,228) CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for short-term investments (13) (50,000) Cash paid for long-term investments - (33,067) Purchase of property, plant and equipment (161,350) (40,105) Purchase of intangible assets (9) (34) Proceeds from disposal of investment in debentures 50,035 87 Debenture interest received 2,000 150 Proceeds from disposal of property, plant and equipment 451 - Cash receipts from other investing activities 114 - Net cash used in investing activities (108,772) (122,969) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of share capital - 255,322 Net proceeds from short-term borrowings 25,332 108,419 Proceeds from long-term bank borrowings 20,000 8,000 Repayment of long-term bank borrowings (4,000) (4,000) Dividends paid 19(b)(i) (14,103) - Decrease (increase) in bank time deposits pledged for borrowings 135,768 (177,151) Proceeds from other financing activities 19(b)(ii) 369 - Net cash generated from financing activities 163,366 190,590 Currency translation difference 11 - Net increase in cash and cash equivalents 125,967 26,393 Cash and cash equivalents at beginning of year 62,106 35,713 Cash and cash equivalents at end of year 19(a) 188,073 62,106 The accompanying notes are an integral part of these consolidated financial statements. 31 II. Notes to Financial Report 1. Changes in accounting policy Pursuant to Circular on Printing Enterprise Accounting Policy released by the Ministry of Finance on Dec. 29, 2000, the Company started to implement the Enterprise Accounting Policy from Jan. 1, 2001. Neither the Company nor its subsidiaries need to make material adjustments on their accounting statements as of the previous years implementing the new accounting policy. 2. Notes to Changes in Consolidation Scope The Company includes its subsidiaries, whose 50% equity assets are held by the Company, into its consolidation scope. In 2001, the Company participated in the incorporation of three new companies, namely, Shandong Zhonglu Oceanic Foods (Yantai) Co., Ltd., Qingdao Zhonglu Ouqd Aihua Marine Pharmaceutical Co., Ltd. and Zhonglu Far East Co., Ltd., holding 76.65% 59.88% and 100% equity respectively. So the aforesaid three companies were included in the Company’s consolidation scope. XI. DOCUMENTS AVAILABLE FOR REFERENCE 1. Accounting Statement carried with the personnel signature and seal of legal representative, person in charge of the financial affairs and person in change of the handing accounting affairs; 2.Original of Auditor’s Report with signature and seal of Certified Public Accountants as well as personal signatures and seal of and the certified public accountants; 3. Originals of all documents as disclosed in public on the newspapers as designated by China Securities Regulatory Commission as well as the original manuscripts of the public notices published in the report period. 4. Annual Report disclosed in other Stock Exchange. Chairman of the Board: Mr. Wang Aimin Shandong Zhonglu Oceanic Fisheries Company Limited March 23, 2002 32