长虹美菱(000521)皖美菱Ｂ2003年年度报告摘要（英文版）

Hefei Meiling Co., Ltd. Summary of Annual Report 2003 §1. Important Notes 1.1 Board of Directors of Hefei Meiling Co., Ltd. (hereinafter referred to as the Company) and its directors 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 2003 annual report summary is abstracted from the annual report; the investors are suggested to read the full text of annual report to understand more details. 1.2 No director stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. 1.3 All directors attended the Board meeting. 1.4 Huazheng Certified Public Accountants Ltd. produced a standard unqualified Auditors’Report for the Company. 1.5 Chairman of the Board Mr. Gu Chujun, Vice-president Mr. He Jinqi and Secretary of Financial Dept. Mr. Zhong Weiyi hereby confirm that the Financial Report of the Annual Report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock MEILINGDIANQI, WANMEILING-B Stock code 000521, 200521 Listed stock exchange Shenzhen Stock Exchange Registered address and office address No.48, Wuhu Road, Hefei Post code 230001 Internet web site of the Company http://www.meiling.com E-mail of the Company info@meiling.com 2.2 Contact person and method Secretary of the Board of Representative in charge of Directors Securities Affairs Name Xue Hui Qi Dunwei Contact address No.48, Wuhu Road, Hefei No.48, Wuhu Road, Hefei Telephone (86)551-2869394 (86)551-2869394 Fax (86)551-2883122 (86)551-2883122 E-mail wyxuehui@163.com secretary@meiling.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data (Unit: RMB) Increase/decrease 2003 2002 2001 over last year（％） Income from main operations 1,383,809,999.35 1,261,882,198.34 9.66% 1,292,676,068.23 Total profit -197,834,320.80 8,107,604.25 -2540.11% -349,549,858.61 Net profit -194,656,073.42 8,107,604.25 -2500.91% -349,549,858.61 Net profit after deducting -180,929,418.47 6,426,304.50 -2915.45% -275,329,341.90 non-recurring gains and losses Increase/decrease At the end of At the end of At the end of from the end of 2003 2002 2001 previous year（％） Total assets 2,245,189,884.42 2,300,035,010.32 -2.38% 2,257,483,622.77 Shareholder’ s equity (excluding 840,931,946.31 1,035,388,019.73 -18.78% 1,027,960,658.86 minority interests) Net cash flow arising from 94,306,265.23 64,391,468.34 46.46% -25,838,200.11 operating activities 3.2 Major financial indexes (Unit: In RMB) Increase/decrease over 2003 2002 2001 last year（％） Earnings per share -0.47 0.02 -2455.00% 0.85 Earnings per share (calculated based on new 0.47 - - - share capital if share capital was changed) Return on equity -23.15% 0.78% -3067.95% -34.00% Return on equity as calculated based on net profit after deducting non-recurring gains -21.52% 0.62% -3570.97% -26.49% and losses Net cash flow per share arising from 0.23 0.16 46.15% -0.06 operating activities Increase or decrease At the end At the end At the end from the end of of 2003 of 2002 of 2001 previous year（％） Net assets per share 2.03 2.50 -18.78% 2.49 Net assets per share after adjustment 1.30 1.92 -32.53% 2.36 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: In RMB’0000 CAS IAS Net profit -19,465.61 -17,807.30 As restated after IFRS adjustments -178,073.00 IFRS adjustments: Provision for warranty expenses 975.00 Remeasurement of financial assets in according with IAS 39 -23,978.00 Explanation on the difference Depreciation of fixed assets 2,037.00 Provision for slow moving inventories 8,593.00 Other -4,210.00 As report under PRC statutory financial statements -194,656.00 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital (Unit: share) Before the Increase / decrease After the change in this time (+, -) change I. Unlisted Shares 1. Sponsors’shares 126,982,650 0 126,982,650 Including: State-owned share 123,396,375 0 123,396,375 Domestic legal person’ s shares 3,586,275 0 3,586,275 Foreign legal person’ s shares 0 0 Others 0 0 2. Raised legal person’ s shares 22,029,973 0 22,029,973 3. Inner employees’shares 0 0 4. Preference shares or others 0 0 Total unlisted shares 149,012,623 0 149,012,623 II. Listed Shares 1. RMB ordinary shares 151,530,326 0 151,530,326 2.Domestically listed foreign 113,100,000 0 113,100,000 shares 3. Overseas listed foreign 0 0 shares 4. Others 0 0 Total listed shares 264,630,326 0 264,630,326 III. Total shares 413,642,949 0 413,642,949 4.2 Statement of shares held by the top ten shareholders Total number of shareholders at the end of report year 94,242 Particulars about shares held by the top ten shareholders Number Nature of Increase / Holding Type of shares of share shareholders decrease in shares at the Proportion Full name of Shareholders (Circulating/No pledged/ (State-owned the report year-end (%) n-circulating) frozen shareholder/forei year (share) (share) (share) gn shareholder) 0 123,396,375 29.83 Non-circulating State-owned Hefei Meiling (Group) Holdings Co., Ltd. 0 shareholder Yongsheng Industrial Co., Ltd. -149,124 2,080,000 0.50 Circulating Unknown Foreign shareholder XIAO YANMEI -297,949 2,008,000 0.49 Non-circulating Unknown Foreign shareholder Hefei Industrial and Commercial Bank 0 1,707,750 0.41 Non-circulating Unknown Hefei Refrigerator Fittings Factory 0 1,707,750 0.41 Non-circulating Unknown Unknown 1,545,337 0.37 Circulating Unknown Foreign HUANG GUOQIANG shareholder Hefei Agency of Anhui Agricultural Bank 0 1,536,975 0.37 Non-circulating Unknown International Business Dept. of Anhui 0 1,536,975 0.37 Non-circulating Unknown Industrial and Commercial Bank Anhui Province Technology Import & 0 1,536,975 0.37 Non-circulating Unknown Export Corporation China Cinda Assets Management Company 0 1,536,975 0.37 Non-circulating Unknown Explanation on associated relationship The shares held by Hefei Meiling (Group) Holdings Co., Ltd. are the sponsors’shares; among the top ten shareholders or the shares held by other shareholders are circulating B-shares or legal person A-shares. concerted action Among top ten shareholders, there existed no associated relationship among shareholders of non-circulating shares, or between shareholders of non-circulating and circulating shares; they do not belong to the concerted actors as specified in the Measures for Controlling Information Disclosure of Alternation in the Shares Held by Shareholders in Listed Companies; as the Company has no idea on whether there exists any business relationship among the shareholders of circulating shares or they belong to the concerted actors as specified in the Measures for Controlling Information Disclosure of Alternation in the Shares Held by Shareholders in Listed Companies. Number of circulation shares held Type (A-share, B-share, Name of shareholder at the year-end H-share and others) Yongsheng Industrial Co., Ltd. 2,080,000 B XIAO YANMEI 2,008,000 B HUANG GUO QIANG 1,545,337 B LI XOXONG 1,516,732 B FANG JING WEN 1,514,965 B CAO SHENGCHON 1,464,700 B HEFEI MEICHENG ABSORBING 1,305,300 A PLASTIC CO., LTD. LONG QIN FANG 1,239,362 B CHEN YI QING 976,259 B RUIHONG INTERNATIONAL CO., LTD. 859,000 B The Company has no idea on whether there exists any associated Explanation on associated relationship relationship among the shareholders of circulation shares or they among the top ten shareholders of belong to the concerted actors as specified in the Measures for circulation share Controlling Information Disclosure of Alternation in the Shares Held by Shareholders in Listed Companies. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company √Applicable □Inapplicable Name of new controlling shareholder Shunde Greencool Enterprise Development Co., Ltd. Name of new actual controller Shunde Greencool Enterprise Development Co., Ltd. Date of change Feb. 27, 2004 Publication date and newspaper Securities Times and Ta Kung Pao dated Mar. 1, 2004 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller Shunde Greencool Enterprise Development Co., Ltd. is a limited company which jointly invested by Mr. Gu Chujun and Greencool Cryogen (China) Co., Ltd., of them, Mr. Gu Chujun holds 60% equity of Shunde Greencool and Greencool Cryogen (China) Co., Ltd. holds 40% equity of Shunde Greencool. Mr. Gu Chujun, male, 44, Chinese nationality, the founder of Greencool. Gu Chujun graduated from Tianjin University with Engineering Master Degree. Mr. Gu Chujun accumulated a wealth of experience over 15 years in refrigeration engineering and cryogen industry. Before establishment of Greencool, he ever taught at Tianjin University, actively participated in and researched thermodynamics and refrigeration engineering, and is inventor of Gu’ s Cryogen. Mr. Gu has not enjoy the residence power in the other country or area. His vocation and official title within the latest five years: 1988 to now, he took the post of Chairman of the Board of Greencool Group; 2001 to now, he took the post of Chairman of the Board of Kelon Electric Appliance. Greencool Cryogen (China) Co., Ltd. is foreign enterprise, which was invested and established by British Virgin Islands GCT Investment Co., Ltd. according to approval of Tianjin Municipal People’ s Government in Tianjin dated Mar. 3, 1995 (Mr. Gu Chujun owned the absolute controlling share right of British Virgin Islands GCT Investment Co., Ltd.). Registered capital of Greencool Cryogen (China) Co., Ltd. is USD 150 million, and business scopes include: Gu’ s cryogen, various replacers of CFC, new-style cryogen, hot-dynamical medium, hot-circle medium and development, production and sales of raw materials of the said products; auxiliary equipment, application equipment, development, production and sales of the above products. §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Shares held Shares held Change of Name Title Sex Age Office term at at holding period-end period-begin share Chairman of the Gu Chujun Male 45 Jul. 2003-May 2005 0 0 0 Board Vice Chairman of Wang Jiazhang Male 53 May 2002-May 2005 13477 13477 0 the Board Li Shijun President Male 49 Jul. 2003-May 2005 0 0 0 Cheng Executive Male 38 Jul. 2003-May 2005 0 0 0 Xiangzhou director He Jinqi Vice-president Male 41 Jul. 2003-May 2005 0 0 0 Xue Hui Vice-president Male 41 Oct. 2003-May 2005 0 0 0 Lin Ke Director Male 41 Jul. 2003-May 2005 0 0 0 Jiang Jizhi Director Male 57 Aug. 2003-May 2005 0 0 0 Huo Yongxin Director Male 34 Jul. 2003-May 2005 0 0 0 Independent Wei Wei Male 49 May 2002-May 2005 0 0 0 director Independent Zhuo Wenyan Male 66 May 2002-May 2005 0 0 0 director Independent Wu Hanhong Male 47 Aug. 2003-May 2005 0 0 0 director Chairman of the Lu Jianqing Supervisory Male 38 Jul. 2003-May 2005 0 0 0 Committee Jing Xing Supervisor Male 50 Jul. 2003-May 2005 0 0 0 Yong Fengshan Supervisor Male 36 Jul. 2003-May 2005 0 0 0 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Name of Shareholding Title in Shareholding Name Office term from the Shareholding Company Company Company (Yes / No) Shunde Greencool Enterprise Gu Chujun Chairman of the Board Since 1998 No Development Co., Ltd. Hefei Meiling (Group) Wang Jiazhang Chairman of the Board Since 2002 Yes Holdings Co., Ltd. Hefei Meiling (Group) Director, Deputy General Jiang Jizhi Since 2002 Yes Holdings Co., Ltd. Manager Hefei Meiling (Group) Director, Deputy General Yong Fengshan Since 2003 Yes Holdings Co., Ltd. Manager 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual remuneration RMB 1,894,600 Total annual remuneration of the top three RMB 735,900 directors drawing the highest payment Total annual payment of the top three senior RMB 633,600 executives drawing the highest payment Allowance of independent director RMB 60,000 per person/ year since July 2003 Other treatment of independent directors Naught Name of directors and supervisors receiving no Naught payment or allowance from the Company Range of remuneration Number of persons RMB 350,000 to RMB 400,000 2 RMB 150,000 to RMB 200,000 5 RMB 100,000 to RMB 150,000 1 RMB 20,000 to RMB 40,000 6 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In 2003, the household appliance market encountered very severe competition. The selling price kept going down and the price of raw materials kept going up, and other domestic and foreign appliance enterprises entered the refridgerator industry. The whole industry grew slowly with surplus productivity. However, the previous year was the most significant year in the deveopment of the Company. To get better development, the Company successfully conducted reform and Greencool dominated the Company, which brought fresh development air to the Company. Encountered with the operation environment, with the leadership of the Board of the new term, the Company grasped the good developing situation after reconstruction, boosted development by way of reforming, made vigorous efforts to comformity management, adopted a series of correct operating strategies, fenced effectively with all knids of challenges and risks in the process of development, and got better development in the market compeitition. 1. Strenthen the comformity managemnt and set up new enterprise According to the comformity management principle of “Clear Funtions, Condensing and Highly Efficiency, Scientific Procedures, Prior Management”, the Company estalished the new organization structure and redivided the funtions of the departments; the Company adopted open engagement through competition. For the ordinary managerial posts and the posts higher than the executives, the Company will adopted engagement, interview and assessment measures to choose talents to meet the development need of the Company in fair, open and just way; the Company conducted culture comformity in line with the requirements of new value philosophy and formed new enterprise culture. 2. Drived by techinical renovation and Research and develop new products pertinently The Company made efforts in developing new products and optimized the product structure by techinical innovation, and developed products to meet the needs of customers at different levels; Based on strenthening the product development of household refrigerator, the Company explored in deep freezing, semiconductor freezing and magnet freezing areas etc.. 3. Tie up the cooperation with dealers and emphasize on the distribution construction and midseason market The Company stuck to cooperation credo of “ Cooperate by trust and Benefit mutually to Win-Win”; the Company put emphasis on holiday marketing and midseason market; the Company would continue to propel distribution construction and bulit up strong terminal marketing team. 4. Adjust export strategy culture in light of the local distinctions and speed up entering the international market The Company grasped good export opportunity after entering WTO, optimized the business proceedings by arranging the internal management proceedings, obviated the trade risks, actively attended the international market competition, promoted the competitve edge of products of the Company in the international market, tried its best to enlarge the shares of export products. 5. Strenthen the budgeting management in further step and cut down the operating costs The Company strengthened the management of budget and expense control; the Company cut down the purchasing costs in further step; the Company continously used new technology, new techniques, and new materials to reduce designing costs in the process of product design; the Company strenthened to manage the assets and improved the operating efficiency of assets. Due to the efficient measures taken, under the situation of intense compeitition in refrigerator industy, the operation of the Company improved a lot, which simultanously bulit up stick basis to get more improvement of the Company next year. In 2003, the amount of sale in, increased 17.3% than the same period in 2002,of which the export increased 51.3% than the corresponding in 2002; The production of refrigerators(freezers)in 2003 increased 22.7% than the corresponding in 2002. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Classified according to Income from Cost of main Gross Increase/decrease Increase/decreas Increase/decrease industries or products main operations operations profit in income from e in cost of main in gross profit ratio ratio (%) main operations operations over over the last year over the last year the last year (%) (%) (%) Manufacture of daily 128,037.00 107,242.00 16.24 10.44 20.36 41.96 appliances Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Refrigerators 128,037.00 107,242.00 16.24 10.44 20.36 -41.96 Washers 5,933.00 4,686.00 21.02 -18.38 -29.64 150.84 Air-conditioners 4,141.00 3,024.00 26.97 215.87 149.71 253.47 Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Pricing rules of related Conducted as per market price, not existing inside transactions or damaging shareholders’interests. transactions Necessity and durative Since the fitting of refrigerators provided by the related enterprises were conducted according market price with of related transactions certain assurance in quality. At the same time, their distance was relatively small from the Company and relevant transport expenses were relatively little, beneficial for the control of the Company’s expense and cost and in compliance with the Company’s interests. 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main operations Increase/decrease in income from main operations over the last year (%) Mainland of China 115,282.00 4.42 International sales 23,099.00 42.50 6.4 Particulars about the customers of purchase and sale Unit: RMB’0000 Total amount of purchase of the 25,612.00 Proportion in the total amount 22.40% top five suppliers of purchase Total amount of sales of the top 11,206.00 Proportion in the total amount 8.14% five sales customers of sales 6.5 Operation of share-holding companies (applicable to the situation where investment earnings takes over 10% of its net profit) √Applicable □Inapplicable Name of the share-holding company Hefei Meiling Packaging Co., Ltd. Investment earnings contributed in the period 200.58 Proportion in net profit of the listed company Share-holding company Business scope Production and sales of corrugated paper Net profit 471.00 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) than that in the last year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year □Applicable √Inapplicable Analysis to reasons of material changes in the whole financial position than that in the last year √Applicable □Inapplicable In 2003, since the competition in household appliance industry, the Company has actively disposed partial old refrigerators. At the same time, in order to further occupy the market, the sales expense’ s increase was relatively rapid and at the same time the managerial expense was due to the relatively great increase in appropriation. 6.9 Explanation on the past, current and future important effects of the material changes in production and operation environment, macro-policies and regulations on the Company’ s financial position and operating results √Applicable □Inapplicable According to circular related to decrease in export drawback rate from the State, the drawback rate of the Company’s main products was adjusted from 17% in 2003 to 13%, which impacted a certain influence on the Company’ s operating results. The Company would adopt pertinent measures so as to reduce the disadvantageous influence from decrease in export drawback rate on the Company’s operating results as much as possible. 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds not raised through shares offering □Applicable √Inapplicable 6.14 Explanation of the Board of Directors on the “Qualified Opinion”made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors (If it has) √Applicable □Inapplicable Year 2004 was a very important year for the development of Meiling Company. The Company would make the brand of Meiling great, special and strong by making use of such advantages as system reorganization, industrial integration and flexible running mechanism etc. and fully expand and innovate in such aspects as marketing, R&D, manufacture and management etc. according to the requirements in operating outline of “Market closed, brand drive, management enhancement and benefits oriented”confirmed by the Board of Directors. 1. Integrating marketing resources and strengthening marketing management function Fully integrate marketing network spots and implement the whole marketing strategy of “Drive in high extreme, benefits assurance in middle extreme and competition in low extreme”; reinforce marketing planning function and realize the transfer from sales tasks oriented to marketing management; standardize the operation of market business, reduce the stock of bad goods and enhance the quality of market running; enhance brand value and increase sales volume of products by making use of advantages of associated advertisement of strong-to-strong brand. 2. Actively expanding international market and enhancing international condition of brand Make operation of international market specialized and marketing strategy of export market systemized; catch beneficial chance in export and increase the export volume to markets in advanced countries by making use of cost advantages; Make use of resources in comparative competition advantages and enhance the famous degree of brand “Meiling”in developing countries. 3. Reinforcing forces in R&D and making product development and technical innovation enhance to a new level rapidly Establish R&D teams with high quality and make material breakthrough in such core technology as deep cooling with new energies (solar energy, fuel, photo voltaic and magnetism etc.); attach importance to research in new technology, new materials and new craftworks and speed up the progress in technical betterment and improvement of products; reinforce the craftwork management in production locale and enhance the craftwork level of productive assembly. 4. Establishing prompt manufacture system and increase productive efficiency so as to shoot at making manufacture system of Meiling as surveyor’ s pole in enterprises of Green Cool Conduct complete and systemic analysis and research to manufacture system and realize the full enhancement of productive efficiency of manufacture system with JIT system as the sample, improvement of productive force as the emphasis, with project team as the core, organizational laundry as the assurance and participation of all staffs as the basis, considering the special rule of production of refrigerators and actual condition of manufacture system of Meiling, adopting means of project management and making use of IE; analyze the factors influencing productive efficiency, optimize the collocation of productive resources, improve running efficiency of equipments and enhance the effective running time so as to improve productive capability of facilities through eliminating facilities malfunction; improve the craftwork of productive technology through technical innovation so as to shorten productive time of work and enhance the productive efficiency. 5. Improving planning and budget management system and emphasizing on reinforcing control and management to assets and accounts receivable Establish planning and budget management system in profit oriented. In all operating activities, the Company should conduct full research and analysis with economic benefits as the start point and should establish all plans and budgets of the Company in a scientific and objective way, making planning guidance and budget control much more reasonable and effective; improve assets management system and completely check the assets of the enterprise so as to clear assets property; timely dispose such bad assets as rejected and idle equipments etc., optimize assets structure, enhance use efficiency of assets and realize the assurance and increase of assets value so as to ensure the safety and completeness of assets; reinforce such managements as purchase, use and keep and registration of low-cost consumables and reduce the consumption; strictly implement management system of accounts receivable, standardize the credit limit and management on accounts period to customers and strengthen the risk prevention consciousness of accounts receivable. 6. Reinforcing the purchase and invitation of bidding of materials and invitation of bidding of other projects so as to reduce costs maximum Through R&D of products and technical improvement, reduce the predicted amount of material use and reduce the costs of materials; reduce costs maximum through purchase and bidding of materials and purchase and bidding of compound materials. 7. Standardizing operating behavior, optimizing human resources and enhancing the enterprise management level Establish and improve the management system with two-grade system of “The Company’s core system layer and departmental system layer” with strict implementation and operation according to laws; optimize the structure of human resources and enhance the quality of human resources; introducing new culture and building up completely new value concept of Meiling. Profit estimation of the next year (If it has) □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors No distribution or capitalization. §7. Significant Events 7.1 Purchase of assets √ Applicable □ Inapplicable Unit: RMB’0000 Contribution to net profit of the Company of the Related transaction or Transaction parties and Date of Purchase assets purchased not (if yes, explain the the assets purchased purchase price from the date of pricing principle) purchase to the year-end Confirmed based on One land locating in the assessed price of Economic Technology Anhui Diyuan Land Nov. 26, Development Zone of 79,754.19 0.00 Appraisal Co., Ltd. 2003 Hefei Meiling (Group) with land appraisal Holdings Co., Ltd. business certification in the whole country House property and Nov. 26, Yes, confirmed based 4,056.38 0.00 affiliated equipments of 2003 on the assessed value Hefei Meiling of Anhui Guoxin Washing-machine Co., Assets Valuation Co., Ltd. Ltd. 7.2 Sales of assets √ Applicable □ Inapplicable Unit: RMB’0000 Contribution to net profit of the Related transaction Company of the Transaction parties and Date of Gains/losses or not (if yes, Sale price assets purchased the assets sold sale from sale explain the pricing from the principle) year-beginning to the date of sale Assets sold by Hefei Meiling (Group) Holdings Co., Ltd.: Yes, confirmed accounts receivable of based on the RMB 586,980,000, debt Nov. account value and of Group Company 26, 997,274.02 0.00 0.00 the assessed value amounting to RMB 2003 of Anhui Diyuan 101,105,300, debt of Real Estate Washing-machine Appraisal Co., Ltd. Company amounting to RMB 309,184,900 Influence of the events involved by purchase and sale on the consistency of business and stability of management team of the Company After the transaction, the stock company will increase amortization of intangible asset of RMB 16,130,800 and depreciation of RMB 1 million each year that will effect the current gains/losses of the stock company in some degree but will not change the present asset-liability ratio of the stock company. This transaction settled stable base for the further enlargement of the production scale and the improvement of the production efficiency of the Company in accordance with the long-term development layout of the enterprise and meanwhile further optimized the quality of partial asset of the stock company, was convenient for the health and continuable development and protected the interest of the stock company and minority shareholders. This transaction has associated relationship and has no influence on the profit of the stock company except for increasing amortization of intangible asset and depreciation of fixed asset. 7.3 Important guarantee √ Applicable □ Inapplicable Unit: RMB’0000 Name of the Date of Amount Complete Guarantee Guarantee Guarantee Company happening of Implementation for related type term guaranteed (date of guarantee or not party or not signing (yes or no) agreement) May 16, Anhui Anhong Common May 16, 2003 450.00 2003-May No Yes Plastic Co., Ltd. guarantee 16, 2004 Zhongke Meiling Mar. 5, Cryogenic Common Mar. 5, 2004 2,000.00 2004-Mar. No Yes Technology Co., guarantee 5, 2006 Ltd. Total amount of guarantee 2,450.00 Total balance of guarantee 2,450.00 Including: Total balance of related guarantee 2,450.00 Total amount of guarantee the listed company provided for the 2,450.00 share-controlling subsidiaries Total amount of guarantee breaking regulations 0.00 Proportion of total amount of guarantee in net assets of the 2.37 Company 7.4 Current related credits and liabilities □ Applicable √ Inapplicable 7.5 Entrusted financing □ Applicable √ Inapplicable 7.6 Implementation of projects committed √ Applicable □ Inapplicable As of December 31, 2002, the debt of Hefei Meiling (Group) Holdings Co., Ltd. was RMB101,105,322.12. The reason of debt is mainly because the Group Company acquired the assets of the air-conditioner plant of the Company, equity of the Washing Machine Company and relevant fund occupation fee it undertook. The 19th meeting of the 3rd Board of Directors of the Company reviewed and passed the plan to resolve the debt of the Group Company, i.e. for the total debt of RMB367,813,045.81 as of June 30, 2001, 8% will be withdrawn in 2001; 20% in 2002; 30% in 2003, 30% in 2004 and 12% in 2005. In 2002, the Company acquired some land usage right and exclusive use right of “Meiling”trademark from Hefei Meiling (Group) Holdings Co., Ltd., with a total amount of RMB253,011,300.00. The 14th meeting of the 4th Board of Directors of the Company put forward to replacing the land use right with 934,984.67 sq.m. locating in Economic Technology Development Zone, Hefei, Anhui held by Meiling Group and the houses and affiliated equipments of Washing-machine Company in the account receivable totaling RMB427,250,900, the debts amounting to RMB101,105,300 of Hefei Meiling (Group) Holdings Co., Ltd. owed to the Company, the debts amounting to RMB309,184,900 of Hefei Meiling Washing-machine Co., Ltd. owed to the Company. If the proposal on this significant asset exchange is authorized by CSRC and the provisional Shareholders’General Meeting of the stock company, Hefei Meiling (Group) Holdings Co., Ltd. will complete the clear plan originally made. 7.7 Significant lawsuit and arbitration □ Applicable √ Inapplicable 7.8 Particulars about the performance of obligations of Independent Directors According to the relevant provisions of the Guiding Opinions on the Establishment of Independent Director System in Listed Companies promulgated by China Securities Regulatory Commission, with approval by the Shareholders’General Meeting held on Aug. 8, 2003, Mr. Wu Hanhong was additionally elected independent director of the 4th Board of Directors, which makes the numbers of independent directors attain to 1/3 of the Board, and the Company has also worked out the Independent Director System. The independent directors earnestly implemented their duties. The independent directors made independent and objective judgment in decision-making, without being affected by the Company and its principal shareholders. The independent directors respectively expressed independent opinions on material natters of the Company and safeguarded the Company’s overall interests, specially the minority shareholders’legal rights and interests. §8. Report of the Supervisory Committee In the report period, the Supervisory Committee earnestly implemented powers and obligations of supervisors according to the PRC Company Law, the Articles of Association of the Company and relevant laws and regulations and in compliance with the Rules of Procedures for the Supervisory Committee, fully exercised the supervision over the Board of Directors and its members and the senior executives, and plaid a good role in the standardized operation and sustainable development of the Company. I. Meetings of the Supervisory Committee in the report period In the report period, the members of the Supervisory Committee not only attended 2002 Shareholders’ General Meeting and all the Board meetings as non-voting delegates, but also held six meetings with the main content as follows: (1) The 4th meeting of the 4th Supervisory Committee was held in the meeting room on 4F of the Company on Apr. 22, 2003. 3 supervisors were expected to attend the meeting and all of them were actually present. The meeting was held in compliance with the relevant provisions of the PRC Company Law and Articles of Association of the Company. Through patient research, the present supervisors examined and approved Annual Report for 2002, Summary of Annual Report for 2002, Work Report of the Supervisory Committee for 2002, the 1st Quarterly Report in 2003 and Proposal on Holding Annual Shareholders’General Meeting for 2002. (2) The 5th meeting of the 4th Supervisory Committee was held in the meeting room on 4F of the Company on June 3, 2003. 3 supervisors were expected to attend the meeting and all of them were actually present. The meeting was held in compliance with the relevant provisions of the PRC Company Law and Articles of Association of the Company. Through patient research, the meeting examined and approved Proposal on Agreeing Mr. Wang Jiyin, Mr. Weng Jialin and Ms. Qiu Yi to Assign Supervisor and Proposal on Commending Lu Jianqing, Jing Xing and Yong Fengshan as Supervisors of the 4th Supervisory Committee. (3) The 6th meeting of the 4th Supervisory Committee was held in the meeting room on 3F of Meiling Building on July 5, 2003. 3 supervisors were expected to attend the meeting and all of them were actually present. The meeting was held in compliance with the relevant provisions of the PRC Company Law and Articles of Association of the Company. Through patient research, the meeting examined and approved Proposal on Commending Lu Jianqing as Chairman of the Supervisory Committee of the Company and Relevant Proposal on Holding the 2nd Provisional Shareholders’ General Meeting in 2003. (4) The 7th meeting of the 4th Supervisory Committee was held in the meeting room on 4F of the Company on Aug. 20, 2003. 3 supervisors were expected to attend the meeting and all of them were actually present. The meeting was held in compliance with the relevant provisions of the PRC Company Law and Articles of Association of the Company. Through patient research, the meeting examined and approved Semiannual Report for 2003 and Proposal on Deposing Partial Senior Executives. (5) The 8th meeting of the 4th Supervisory Committee was held in the meeting room on 4F of the Company on Oct. 23, 2003. 3 supervisors were expected to attend the meeting and all of them were actually present. The meeting was held in compliance with the relevant provisions of the PRC Company Law and Articles of Association of the Company. Through patient research, the meeting examined and approved the 3rd Quarterly Report of 2003. (6) The 9th meeting of the 4th Supervisory Committee was held in the meeting room on 4F of the Company on Nov. 26, 2003. 3 supervisors were expected to attend the meeting and all of them were actually present. The meeting was held in compliance with the relevant provisions of the PRC Company Law and Articles of Association of the Company. The meeting examined and approved Proposal on Replacing Partial Land Use Right of Hefei Meiling (Group) Holdings Co., Ltd. in Partial Accounts Receivable of Hefei Meiling Co., Ltd., Proposal on Hefei Meiling Co., Ltd.’ s Accepting Partial Land of Hefei Meiling (Group) Holdings Co., Ltd. to Offset the Debt Owed to the Company, Proposal on Hefei Meiling Co., Ltd.’ s Accepting Partial Land of Hefei Meiling (Group) Holdings Co., Ltd. to Offset the Debt of Washing-machine Co., Ltd. Owed to the Company and Proposal on Hefei Meiling Co., Ltd.’ s Accepting Houses and Affiliated Equipments of Hefei Meiling Washing-machine Co., Ltd. to Offset the Debt of Washing-machine Co., Ltd. Owed to the Company. II. Independent opinion of the Supervisory Committee on the relevant events in 2003 1. Operation according to the laws In the report period, the Board of Directors conducted operation in a standardized way and seriously implemented various resolutions and authorizations of the Shareholders’ General Meeting strictly according to the PRC Company Law, Securities Law, Administration Rule for Listed Company, Articles of Association of the Company, and other laws and regulations. The decision-making procedures were scientific and legal. The Supervisory Committee supervised over and checked the procedure of holding, resolutions of the Shareholders’General Meeting and the Board of Directors, implementation of the resolutions of the Shareholders’General Meeting by the Board of Directors, performance of duties of the directors, managers and other senior executives and implementation of the internal management system of the Company and there found no behaviors of breaking laws, regulations and Articles of Association of the Company. The decision-making and operation of related transaction of the significant investment of the Company was disposed in the classified authorization scope through legal decision-making procedure and did not damage the interest of the Company and the shareholders of the Company, especially the minority shareholders. 2. Financial inspection In the report period, the Supervisory Committee conducted earnest and careful inspection over the Company’s financial position. In the opinion of the Supervisory Committee, the Company maintained good financial position, operated the funds with high efficiency, conducted standardized financial management and kept healthy internal system. Hua Zheng Certified Public Accountants and Morison Heng Certified Public Accountants respectively issued standard unqualified auditor’s report for the Company’s financial report of 2003, which truly, accurately and completely reflected the Company’ s financial position and operation result. 3. Purchase and sale of assets and related transactions As checked, the Supervisory Committee believes that the related transaction of the significant assets replacement between the Company and Hefei Meiling (Group) Holdings Co., Ltd. in the report period was disposed under the principle of fairness and obtained the independent opinion issued by relevant agency institutions. The related transactions existed no inside transaction and did not damage the interest of partial shareholders and caused run-off assets of the Company. §9. Financial Report 9.1 Auditor’ s opinion REPORT OF THE AUDITORS TO THE MEMBERS OF HEFEI MEILING COMPANY LIMITED ? ? ? ? ? ? ? ? ? ? (Incorporated in the People’s Republic of China with limited liability) We have audited the consolidated financial statements on pages 2 to 25 which have been prepared in accordance with International Financial Reporting Standards. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Company’s directors are responsible for preparation of financial statements which give a true and fair view. In preparing financial statements, which give a true and fair view, it is fundamental that that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to report solely to you. BASIS OF OPINION We conducted our audit in accordance with International Standards on Auditing. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’ s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. In forming our opinion, we have considered the adequacy of the disclosures made in the financial statements concerning the following event: As fully described in note 16 & 17, the Company had executed agreements with HMHC and Heifei Meiling Washing Machine Co. Ltd. (“Washing Machine Co.”) to transfer its trade receivables of approximately RMB427,290,900, the amount due from HMHC and the amount due from Washing Machine Co. in exchange for land use rights as well as building and production facilities with valuation of RMB797,541,900 and RMB40,563,800 respectively. OPINION In our opinion the financial statements give a true and fair view of the state of the Group’ s affairs as at December 31, 2003 and of its loss and cash flows for the year then ended. Morison Heng Chartered Accountants Certified Public Accountants Hong Kong: April 20, 2004 9.2 Accounting statement CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2003 Notes 2003 2002 RMB’000 RMB’000 Turnover 3 1,393,196 1,236,938 Cost of sales (1,157,593) (976,667) Gross profit 235,603 260,271 Other revenues 4 6,297 22,631 Distribution costs (144,294) (184,985) Administrative expenses (129,600) (55,506) Other operating expenses (112,473) (552) (Loss)/Profit from operations 5 (144,467) 41,859 Finance costs 7 (38,740) (34,963) Share of profit of associates 2,408 454 (Loss)/Profit before taxation (180,799) 7,350 Income tax 8 (402) (117) (Loss)/Profit after taxation (187,201) 7,233 Minority interests 24 3,128 655 Net (loss)/profit for the year (178,073) 7,888 Earnings per share Basic 9 (0.43) 0.02 Diluted 9 (0.43) 0.02 CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2003 Notes 2003 2002 RMB’000 RMB’000 ASSETS Non-currents assets Land use rights 10 124,216 127,550 Fixed assets 11 494,232 545,022 Construction in progress 12 7,685 4,768 Intangible assets 13 134,460 150,193 Investments in associates 14 28,004 27,944 Available-for-sale investments 15 30,690 30,690 Amount due from controlling shareholder 16 85,221 140,225 Amount due from a related company 17 160,508 128,292 1,065,016 1,154,684 Current assets Inventories 18 188,607 268,700 Receivables and prepayments 19 518,186 524,962 Cash and cash equivalents 20 255,290 176,163 962,083 969,825 Current liabilities Trade and other payables 21 733,249 677,249 Borrowings 22 626,059 621,575 Dividend payable - 2,478 Provision 23 14,975 14,000 1,374,283 1,315,302 Net current liabilities (412,200 ) (345,477 ) Total assets less current liabilities 652,816 809,207 Non-current liabilities Borrowings 22 67,910 43,300 Minority interests 24 16,298 19,426 NET ASSETS 586,608 746,481 CAPITAL AND RESERVES Issued capital 25 413,643 413,643 Reserves 26 857,410 857,210 Accumulated losses (702,445) (524,372) 568,608 746,481 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2003 Statutory Statutory Discretionary Share Capital common public common Accumulated capital reserve reserve fund welfare fund reserve fund losses Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at December 31, 2001 413,643 571,429 65,426 65,643 153,820 (532,260 ) 737,701 Share of capital reserve of an associate - 892 - - - - 892 Net profit for the year - - - - - 7,888 7,888 Balance at December 31, 2002 413,643 572,321 65,426 65,643 153,820 (524,372 ) 746,481 Transfer from waiver of short term loan - 200 - - - - 200 Net loss for the year - - - - - (178,073 ) (178,07 ) 3 Balance at December 31, 2003 413,643 572,521 65,426 65,643 153,820 (702,445 ) 568,608 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2003 Notes 2003 2002 RMB’000 RMB’000 Cash flows from operating activities (Loss)/ Profit before taxation (180,799 ) 7,350 Adjustment for: Write-back of provision for inventories - (6,114) Provision for inventories 36,743 - Provision for warranty expenses 975 - Provision for impairment loss of amount due from associates 1,660 - Provision for impairment loss of amount due from controlling shareholder 2,339 - Provision for impairment of receivables 38,186 15,631 Depreciation 45,951 46,240 Amortisation of land use rights 3,334 1,511 Amortisation of intangible assets 17,064 5,375 Loss on disposal of fixed assets 10,359 169 Interest income (851 ) (1,224) Interest expense 39,651 36,179 Share of profit of associates (2,408 ) (454) Operating profit before working capital changes 12,204 104,663 Decrease in inventories 43,350 32,137 Increase in receivables and prepayments (31,410 ) (22,614) Decrease/ (Increase) in trade and other payables 56,000 (67,931) Cash generated from operations 80,144 46,255 Interest paid (39,651) (36,179) Net cash generated from operating activities 40,493 10,076 Cash flows from investing activities Proceeds from disposal of fixed assets 4,691 1,732 Investment in an associate 286 (25,055 ) Payment for land use rights 0 (150 ) Purchase of fixed assets (5,490 ) (44,619 ) Payment for construction in progress (7,638 ) (7,678 ) Purchase of intangible assets (1,331 ) (7,568 ) Decrease in amount due from a related company (32,216 ) 17,503 Increase in amount due from controlling shareholder 52,665 (4,461 ) Interest received 851 1,224 Purchase of available-for-sale investments - (18,960 ) Net cash used in investing activities 11,818 (88,032) Cash flows from financing activities Bank loans 29,294 128,015 Dividends paid (2,478 ) (322) (Increase)/ Decrease in pledged bank deposits (34,500 ) 33,878 Net cash (used in)/ generated from financing activities (7,684 ) 161,571 Net increase in cash and cash equivalents 44,627 83,615 Cash and cash equivalents at the beginning of the year 152,163 68,548 Cash and cash equivalents at the end of the year 20 196,790 152,163 9.3 Accounting policy, accounting assessment and settlement method has no change compared with the latest annual report. 9.4 Explanation on change of consolidation scope compared with the latest annual report. The share-controlling subsidiary of the Company, Zhongke Meiling Cryogenic Technology Co., Ltd. formally transferred into production and operation from the establishment preparation period of 2002 in this year, so the accounting statement is listed into the consolidated accounting statement in this year. Board of Directors of Hefei Meiling Co., Ltd. Apr. 26, 2004