富奥股份(000030)ST盛润Ｂ2004年年度报告摘要（英文版）

GUANGONG SUNRISE HOLDINGS CO.，LTD. 2004 ANNUAL REPORT SUMMARY §1. Important Notes 1.1 Board of Directors of Guangdong Sunrise Holdings 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 2004 annual report summary is abstracted from the full text of annual report; the investors are suggested to read the full text of annual report to understand more details. １.2 10 directors voting at the board meeting 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 The list of directors absented the meeting: Name of directors absented the The reason of absenting the Name of the consignee meeting meeting Chen Zhitao business trip Nobody Bang Wu business trip Ma Hong 1.4 Shenzhen Dahua Tiancheng Certified Public Accountants issued qualified Auditors' Report of clean audit opinion with emphatic events and the Board of Directors and the Supervisory Committee of the Company also presented special explanation on relevant events. The Supervisory Committee of the Company issued explicit opinions. The investors are suggested to read it. 1.5 Chairman of the Board of the Company Mr. Yang Fenbo, Person in charge of Accounting Affairs and concurrently General Manager Mr. Pan Shiming, Person in charge of Accounting Organization Yun Chunhua 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 ST Sunrise A, ST Sunrise B Stock code 000030, 200030 1 Listed stock exchange Shenzhen Stock Exchange Registered address: Tairan Industrial Zone, Chegongmiao, Shenzhen, Guangdong, P. R. China Registered address and office address Office address: 4th Floor East, Block 203, Tairan Industrial Zone, Chegongmiao, Shenzhen Post code of registered address: 518040 Post code Post code of office address: 518040 Internet website http://www.cninfo.com.cn/default.htm E-mail lionda@mailcenter.com.cn 2.2 Contact person and method Representative in charge of securities Secretary of the Board of Directors affairs Name Ao Yingchun Chen Liantan 4th Floor East, Block 203, Tairan 4th Floor East, Block 203, Tairan Contract Industrial Zone, Chegongmiao, Industrial Zone, Chegongmiao, address Shenzhen Shenzhen Tel. (0755)83877511 (0755)83875531 Fax (0755)83875212 (0755)83875212 E-mail lionda@mailcenter.com.cn lionda@mailcenter.com.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease from the 2004 2003 2002 previous year（％） Income from main 142,606,802.22 77,267,774.95 84.56% 6,711,824.10 operations Total profit -47,598,307.34 11,952,274.35 -498.24% -566,485,585.72 Net profit -47,938,995.60 11,391,186.93 -520.84% -566,485,166.06 Net profit after deducting non-recurring gains and -58,441,733.94 -44,254,649.78 -32.06% -272,054,382.58 losses Net cash inflow arising 13,695,335.45 -10,742,755.13 227.48% -1,944,121.53 from operating activities At the end of At the end of Increase/decrease from the At the end of 2004 2003 end of previous year（％） 2002 Total assets 298,458,668.64 378,293,188.86 -21.10% 203,258,077.52 Shareholder’ s equity (excluding minority -1,591,989,994.93 -1,544,474,179.38 -3.08% -1,556,403,680.29 interests) 2 3.2 Major financial indexes Unit: RMB Increase/decrease from the 2004 2003 2002 previous year（％） Earning per share -0.17 0.04 -525.00% -1.96 Earning per share (Note) -0.17 - - - Return on equity - - - - Return on equity as calculated based on net profit - - - - after deducting non-recurring gains and losses Net cash flows per share arising from operating 0.05 -0.04 225.00% -0.01 activities At the end of At the end of Increase/decrease from the At the end of 2004 2003 end of previous year（％） 2002 Net assets per share -5.52 -5.35 -3.18% -5.40 Net assets per share after adjustment -5.78 -5.62 -2.85% -5.40 Note: Earnings per share was calculated based on new share capital if share capital was changed from the end of the report period to disclosure date of the report. Items of non-recurring gains and losses √Applicable □Inapplicable Unit: RMB Item of non-recurring gains and losses Amount Disposing Equity income of the investee 2,582,945.29 Net amount of non-operating income-expenses 7,919,793.05 Total 10,502,738.34 3.3 Difference of Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB CAS IAS Net profit -47,938,995.60 -47,923,000.00 The net profit accounted under IAS was RMB-47923 thousand, and the earnings per share was RMB-0.1661 the diversity was described by the table bellow: Items Loss due to shareholders Explanation on the difference (RMB’000) Financial Report audited by domestic CPA -47,939 Adjusted: write back of amortizable expenses 16 Under International Accounting Standard -47,923 3 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in shares Unit: share Before the Increase / decrease in this After the change time (+, -) change Subtotal I. Unlisted shares 191,400,000 0 191,400,000 1. Sponsors’shares 191,400,000 0 191,400,000 Including: State-owned shares 0 0 0 Domestic legal person’ s share 0 0 0 Foreign legal person’ s share 0 0 0 Others 17,160,000 0 17,160,000 2. Raised legal person’ s shares 0 0 0 3. Inner employees’shares 0 0 0 4. Preference shares or others 208,560,000 0 208,560,000 Total unlisted shares II. Listed shares 40,260,000 0 40,260,000 1. RMB ordinary shares 39,600,000 0 39,600,000 2. Domestically listed foreign shares 0 0 0 3. Overseas listed foreign shares 0 0 0 4. Others 79,860,000 0 79,860,000 Total listed shares 288,420,000 0 288,420,000 III. Total shares The amount of shares offered by funds, inner employees’shares traded in the counter, shares offered by strategic investor and shares offered ordinary juridical person should be disclosed respectively □Applicable √Inapplicable 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulating share Total number of shareholders at the end of report period 17,078 Particulars about shares held by the top ten shareholders Nature of Increase/ Number Holding shareholders decrease in Proportion Type of shares of share shares at the (State -owned Name of Shareholder (Full name) the report in total (Circulating/No pledged year-end shareholder or year shares (%) n-circulating) or frozen (share) Foreign (share) (share) shareholder) Shenzhen Lionda Group Co., Ltd. 0 19,140,000 66.36% Non-circulating 0 Others Shenzhen Colored Metal Financial Co. Ltd. 0 5,280,000 1.83% Non-circulating 0 Others Shenzhen International Trust & Investment Others 0 5,280,000 1.83% Non-circulating 0 Co. 4 Shenzhen Huachengda Investment Holding Others 0 3,960,000 1.37% Non-circulating 0 Co., Ltd. CHINA EVERBRIGHT HOLDINGS CO., B-share -754,971 3,098,555 1.07% Circulating 0 LTD Shenzhen Guoyin Investment Development 0 2,640,000 0.92% Non-circulating 2,640,000 Co., Ltd. Others WU CHING 193,061 584,922 0.20% Circulating 0 B-share Liuzhou Jiali Real-estate Development Co., A-share 0 445,000 0.15% Circulating 0 Ltd. Shao Weiji 0 380,100 0.13% Circulating 0 B-share Cai Zujian 0 310,000 0.11% Circulating 0 B-share Particulars about shares held by the top ten shareholders of circulation share Holding circulating shares at the year-end Type of shares (A-share, B-share, H-share and Shareholders’name (full name) (share) other) CHINA EVERBRIGHT HOLDINGS B shares 3,098,555 CO.LTD WU CHING B shares 584,922 Liuzhou Jiali Real-estate Development Co., A shares 445,000 Ltd. Shao Weiji 445,000 B shares Cai Zujian 310,000 B shares Ma Yinghua 275,100 A shares Deng Shaoping 258,100 B shares Lin Hongbo 246,400 B shares CHINA PINGAN INSURANCE（HK） B shares 221,020 CO.LTD Peng Jinglan 220,506 B shares Shenzhen Lionda Group Co., Ltd. is the controlling shareholder of the Company, and the shares held were sponsor’ s shares, which were not listed and circulated. There exists no associated relationship Explanation on associated relationship between top ten shareholders, and there isn’t any “action in concert” as setout by the Management among the top ten shareholders or consistent Measure of Information Disclosure on Change of Shareholding for Listed Company. The Company is action unknown whether there exists associated relationship among other shareholders with circulating shares, or whether they are applicable under “action in concert” by the Management Measure of Information Disclosure on Change of Shareholding for Listed Company. 4.3 Particulars about holding shareholders and actual controller of the Company 4.3.1 Particulars about change in holding shareholders and actual controller of the Company √Applicable □Inapplicable Name of new controlling shareholder Shenzhen Lionda Group Co., Ltd. Name of new actual controller The Workers’Union of Shenzhen Lionda Group Co., Ltd. 5 Date of change Date of change of new controlling shareholder: Jan. 5, 2004 Date of change of new controller: Mar. 4, 2004 Publication date and newspaper of the Securities Times and Ta Kung Pao dated Jan. 7, 2004 change of controlling shareholder Publication date and newspaper of the Securities Times and Ta Kung Pao dated Dec. 20, 2004 change of new actual controller 4.3.2 Introduction of especial situation for holding shareholder and other actual controller Shenzhen Lionda Group Co., Ltd., the controlling shareholder of the Company, was incorporated in June 1997 with registered capital of RMB586.49 million. Mr. Li Chengyou is the legal representative. The company is involved in investing and starting of business (subject to report individually), domestic commerce, goods supplying (special and monopolized goods not included), international trading (as set by the qualification certification), and developing of land No. T306-0013. For Shenzhen Lionda Group Co., Ltd., the controlling shareholder, was restructured on March 4th 2004. Shenzhen Investment Administration Co., Ltd., the shareholder of the group were replaced by the union of Shenzhen Lionda Group Co., Ltd.(account for 90%) and the union of Shenzhen Yili Industrial Co., Ltd. (account for 10%), therefore the practical controller is the union of Shenzhen Lionda Group Co., Ltd. 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: The Workers’Union of Shenzhen Lionda Group Co., Ltd. ↓ Shenzhen Lionda Group Co., Ltd. ↓ Guangdong Sunrise Holdings Co., Ltd. §5. Particulars About Director, Supervisor, Senior Executive 5.1 Particulars about changes in shares held by directors, supervisors and senior executives 6 Shares Shares Reason held Held at Name Title Gender Age Office term of at period- period change beginning -end Yang Chairman of the May 21, 2002-May 20, Male 47 0 0 Fenbo Board 2005 Pan Director, General May 21, 2002-May 20, Male 34 0 0 Shiming Manager 2005 Ao Director, Secretary Mar. 3, 2003-May 20, 2005 Male 36 0 0 Yingchun of the Board Chen Aug. 6, 2003-May 20, 2005 Director Male 37 0 0 Zhitao Yang Yi Director Male 33 Apr. 8, 2004-May 20, 2005 0 0 Fang Director, Deputy Dec. 10, 2003-May 20, Male 41 0 0 Song General Manager 2005 Liu Apr. 8, 2004-May 20, 2005 Director Male 47 0 0 Boyang Guo Independent Apr. 16, 2003-May 20, Male 47 0 0 Shiping director 2005 Wu Independent Apr. 16, 2003-May 20, Male 62 0 0 Zhaolin director 2005 Independent Apr. 16, 2003-May 20, Ma Hong Male 37 0 0 director 2005 Independent Dec. 10, 2003-May 20, Ban Wu Male 59 0 0 director 2005 Chairman of the May 21, 2002-May 20, Li Xin Supervisory Male 44 2005 0 0 Committee Chen Dec. 10, 2003-May 20, Supervisor Male 36 0 0 Laiyun 2005 Yu Apr. 8, 2004-May 20, 2005 Supervisor Male 42 0 0 Zuquan 5.2 Particulars about directors, supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Name of shareholding Title in shareholding Name Office term or allowance Company Company (Yes / No) Shenzhen Loinda Group Co., Deputy manager of financial Apr. 10, Yang Yi Yes Ltd. department 201-now Jul. 15, Shenzhen Loinda Group Co., General manager of Li Xin 2003-Dec. 31, Yes Ltd. property management 2004 Yu Zuquan Shenzhen Loinda Group Co., Manager of Inspection and Mar. 15, 2003- No 7 Ltd. Supervision Dec. 31, 2004 5.3 Particulars about the annual payment of directors, supervisors and senior executives Unit: RMB’0000 Total annual payment 67.40 Total annual payment of the top three directors drawing 43.80 the highest payment Total annual payment of the top three senior executives 43.80 drawing the highest payment Allowance of independent director 30,000 per person/ year Other treatment of Independent Directors No Name of directors and supervisors received no payment Directors, Chen Zhitao and Yang Yi, and Supervisors Li Xin and or allowance from the Company Yu Zuquan Payment Number of persons Over RMB 150,000 1 RMB 150,000 ～ RMB 120,000 3 RMB 100,000 ～ RMB 120,000 1 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report term, the major business of the Company was package material printing and property management and operation. The Company kept concentrating on the works regarding clearing of debts, and recovering of capital operation. Internal management was enhanced and the financial budget was restricted. The Company was basically in normal operation. As of year 2004, the Company has realized the major turnover of RMB142,606,802.22 and business profit of RMB16,392,673.09. Comparing with the previous year, the major turnover and business profit has increased by 84.56% and 24.75% respectively. It was mainly because of the entering of Shenzhen Jianian Industrial Holdings Co., Ltd. into the consolidation range since July 1st 2003. The major business of Jianian Co., is package material printing, and it was in a steady business operation. Tough Jianian Co. contributed a lot to the major business turnover and major business profit, the short-term borrowings was still as much as RMB576 million. Which makes the financial expenses reached up to RMB32,545,506.39. The consolidation also brought increasing of management expenses (RMB40,727,277.91 in the report term). All of these caused the loss in year 2004, the net profit was RMB-47,938,995.60. In the meantime, the Company did great effort in trying to perform restructuring. But the creditors and debt amount were dispersed and caused great difficulties to reach a mutual opinion. This effort remains unfruitful. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Main operations classified according to industries 8 Classified according to Income from Cost of main Gross Increase/decrease Increase/decr Increase/decrea industries or products main operations operations profit in income from ease in cost se in gross ratio (%) main operations of main profit ratio over over the last year operations the last year (%) over the last (%) year (%) Printing 14,260.00 12,605.00 11.61% 100.33% 101.06% 2.01% Other industries 958.00 191.00 80.06% 57.66% 70.53% -1.98% Including: related 0.00 0.00 0.00% transactions Main operations classified according to products Presswork 14,260.00 12,605.00 11.61% 100.33% 101.06% 2.01% Others 958.00 191.00 80.06% 57.66% 70.56% -1.98% Including: related 0.00 0.00 0.00% transactions Pricing rules of related Share equity in custody transactions Necessity and durative For Shenzhen Jianian Industrial Holdings Co., Ltd. was consolidated since July 1st 2003, the share equity entrusting of related transactions agreement (related transaction) has setout the income (proxy commission) is 80% of the dividend practically distributed upon this part of equity. But this income has not been distributed as adopted by the board meeting and shareholders’meeting of Jiannian Company. Therefore the income in year 2004 was zero. Including: total amount of related transactions that the listed company sold products or provided labor service to the controlling shareholder and its subsidiaries was RMB 0.00 in the report period. 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 (%) Northeast area 1,153.00 80.48% Guangdong area 11,415.00 181.99% Others 1,688.00 -44.69% Total 14,260.00 84.56% 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase Proportion in the total 3,496.00 36.98% of the top five suppliers amount of purchase Total amount of sales of the Proportion in the total 7,700.00 54.01% top five sales customers amount of sales 6.5 Operation of share- holding companies (applicable to the situation where investment equity takes over 10% of its net profit) √Applicable □Inapplicable 9 Unit: RMB’0000 Name of share-holding company Shenzhen Jianian Industrial Co., Ltd. Investment earnings contributed in the 117.73 Proportion in net profit of the 0.00% period listed company Share-holding Business scope Printing, packing and property operation and management company Net profit 443.60 Name of share-holding company Shenzhen Lionda Industry and Trade Co., Ltd. Investment earnings contributed in the -112.08 Proportion in net profit of the 0.00% period listed company Share-holding Business scope Property operation and management company Net profit -350.24 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 In 2004, the Company basically had no disposal of assets. Financial expenses and administrative expenses of the Company were a relative big sum of amount, which resulted in losses of the whole year. Whereas in the first half of 2003, the court soldl out equity of Shenri Printing Ink, Kingway Beer, Yingzhu Plastics, which produced certain long-term investment income and realized profit in the whold year for the Company. Analysis to reasons of material changes in the whole financial position than that in the last year √Applicable □Inapplicable In 2004, the Company basically had no disposal of assets. Financial expenses and administrative expenses of the Company were a relative big sum of amount, which resulted in losses of the whole year. Whereas in the first half of 2003, the court soldl out equity of Shenri Printing Ink, Kingway Beer, Yingzhu Plastics, which produced certain long-term investment income and realized profit in the whold year for the Company. 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 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan 10 □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Partic ulars 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 In viewing of the great pressure of short-term debts over the Company, as well as the significant amount of lawsuit events on the Company, it will influence the consistence of the Company’s business if they are not eliminated in a short period of time. Therefore Shenzhen Dahua Tiancheng CPA issued qualified Auditors' Report of clean audit opinion with emphatic events. Whereas the Board of Directors considers that, although the Company is facing a great pressure from the short-term debts, the short-term borrowings has been decreased from RMB629 million of 2003 down to RMB576 million in 2004. Progress has been made in clearing of debts and operating of capital. The Company can still get necessary fund to keep normal business operation. On the other hand, the Company will push forward the debt reconstruction in term of widely accepted commercial principle. Especially the debt reconstruction regarding Shen Zhonghua is still implementing under the Agreement of Framework for Debt Reconstruction of Shen Zhonghua. That will soon relieve the Company’ s obligation of guarantee for the debt of Shen Zhonghua amounted to RMB917 million due to Huarong Co. When that happens, the contingent liabilities of the Company will be decreased significantly.Besides, the Company is holding 26.54% of the capital share of Shenzhen Jianian Industry Holdings Co., Ltd. as the fist shareholder of the company. Since July 1st 2003, the 2nd shareholder of Jiannian Company entrusted the Company to manage the 19.03% of shares it is holding in Jiannian Company. As the matter of fact, the Company became the practical controller of Jianian Company. Jianian Company is involving in printing of packaging materials and management of properties. It has certain profitability. With considering of the above, the Company has the ability to carry forward its business operation. 6.15 Business plan as of the next year of the Board of Directors (If it has) □Applicable √Inapplicable 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 As audited by Shenzhen Dahua Tiancheng Certified Public Accountants, the Company realized net profit amounting to RMB –47,938,995.60 in 2004, retained 11 profit was RMB –2,385,580,676.55. The Company didn’t distribute profit and convert capital reserve into share capital. The Company did not appropriate share distribution preplan though the Company achieved the profit in the report period □Applicable √Inapplicable §7. Significant Events 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 Sales of assets □ Applicable √ Inapplicable 7.3 Significant guarantee √Applicable □Inapplicable Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Guarantee Name of the Date of happening Complete Amount of Guarantee for related Company (date of signing Guarantee term Implementation guarantee type party (yes or guaranteed agreement) or not not) Shenzhen May 30, 2000 Joint One year No Yes Lionda responsibility 850.00 Bonded Trade guarantee Co., Ltd. Shenzhen Sun Dec. 30, 1993 Joint Pipeline Co., 4,335.00 Responsibility Five years No Yes Ltd. Guarantee Shenzhen Mar. 10, 1994 Joint Gaokeda 50.00 Responsibility One Year No Yes Electron Co., Guarantee Ltd. Shenzhen Yuda Jul. 8, 1998 Joint Import & One year and 480.00 Responsibility No Yes Export Co., an half Guarantee Ltd. Shenzhen Dec. 19, 1995 China Bicycle Joint Company 31,758.22 Responsibility Three years No Yes (Holdings) Guarantee Limited Yueshen Light Dec. 30, 1993 Joint Two years and Industrial & 900.00 No Yes Responsibility an half Trade Guarantee 12 Trade Guarantee Company Guozhou May 2, 1995 Xufeng Joint Enterprise 1,500.00 Responsibility One year No No Group Co., Guarantee Ltd. Shenzhen Jun. 22, 1995 Joint Jinbeisheng 7,760.00 Responsibility One year No No Investment Guarantee Co., Ltd. Shenzhen Dec. 13, 1995 Guoyin Joint Investment 4,030.00 Responsibility Five Years No Yes Group Co., Guarantee Ltd. Shenzhen Apr. 30, 1998 Joint Paina 130.00 Responsibility Nine months No No Garniture Co., Guarantee Ltd. Shenzhen Jun. 30, 1997 Gintian Joint Two years and Industrial 2,675.00 Responsibility No No an half Group Co., Guarantee Ltd. Shenzhen Apr. 30, 1997 Zhongwu Joint Material 1,679.00 Responsibility Two years No No Import & Guarantee Export Co., Ltd. Shenzhen Sep. 25, 1995 Guangyingda Joint Three years and Industrial 8,623.01 Responsibility No Yes an half Development Guarantee Company Shenzhen Aug. 15, 1996 Joint Ligang 723.38 Responsibility One year No No Industrial Guarantee Company Shenzhen Jan. 30, 1995 Joint Maoyuan 856.00 Responsibility One year No No Investment Guarantee 13 Development Co., Ltd. Shenzhen May 1, 1996 Xingda Joint Industry & 40.00 Responsibility Two years No No Trading Co., Guarantee Ltd. Shenzhen Mar. 5, 1997 Joint Chemical & 1,500.00 Responsibility One year No No Plastic Co., Guarantee Ltd. Shenzhen Apr. 7, 1996 Joint Jinhai Electron 350.00 Responsibility One year No No Co., Ltd. Guarantee Shenzhen May 23, 1996 Joint Guanghualin 1,220.00 Responsibility One year No No Investment Guarantee Co., Ltd. Shenzhen Jun. 20, 1995 Joint Tiantai 166.00 Responsibility One year No No Chemical Co., Guarantee Ltd. Shenzhen Mar. 1, 1998 Joint Structure 80.00 Responsibility One year No No Material Guarantee Group Shenzhen Apr. 30, 1997 Jinyuan Joint Industry & 80.00 Responsibility One year No No Trading Guarantee Company Hainan Wanda Aug. 16, 1996 Joint Industry & 3,093.86 Responsibility One year No No Trading Co., Guarantee Ltd. Shenzhen Jun. 10, 1995 Joint One year and Xuena Co., 112.91 Responsibility No No an half Ltd. Guarantee Shenzhen Jul. 31, 1997 Light Industry Joint Two years and Import & 273.00 Responsibility No Yes an half Export Guarantee Company 14 Jilin Lionda Jun. 30, 1996 Joint One year and Company 350.00 Responsibility No Yes an half Guarantee Shenzhen Big Mar. 1, 1996 Joint World 1,402.70 Responsibility One year No No Department Guarantee Store Shenzhen Apr. 25, 1996 Joint Lionda 781.50 Responsibility Three years No Yes Development Guarantee Co., Ltd. Shenzhen Nov. 3, 1996 Lionda Joint Electrical 985.00 Responsibility Three years No Yes Appliance Co., Guarantee Ltd. Shenzhen Mar. 15, 1997 Joint Paper Making 1,790.00 Responsibility Three years No Yes Company Guarantee Shenzhen Sep. 1, 1996 Joint Three years and Lionda Foods 2,940.00 Responsibility No Yes an half Co., Ltd. Guarantee Shenzhen Aug. 13, 1995 Lionda Joint Material 6,566.04 Responsibility Five years No Yes Import & Guarantee Export Co., Ltd. Hunan Lionda Oct. 25, 1997 Joint Company 325.00 Responsibility One year No Yes Guarantee Total amount of guarantee in the report period 0.00 Total balance of guarantee at the end of the report period 88,555.44 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 0.00 Total balance of guarantee for controlling subsidiaries at the end of the report 13,237.54 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 181,455.44 The proportion of the total amount of guarantee in the net assets of the Company － Particulars about the guarantees out of line Total amount of guarantee for other related parties, which the Company or 64,484.93 controlling shareholders held less than 50% 15 The debts guarantee amount provided for the guarantee of which the 64,484.93 assets-liability ratio exceeded 70% Proportion of total amount of guarantee in net assets of the Company exceeded 50% (Yes of No) Yes Total amount of guarantee breaking regulations 64,484.93 7.4 Significant related transactions 7.4.1 Current related purchase and sale √Applicable □Inapplicable 7.4.2 Current related credits and liabilities √Applicable □Inapplicable Unit: RMB’0000 Funds provided to related parties Funds provided by related parties to listed company Related party Amount Balance Amount Balance occurred occurred Shenzhen Paper Making Company -8.39 0.00 0.00 0.00 Shenzhen Lionda Foods Industry Co., Ltd. -46.47 499.87 0.00 0.00 Shenzhen Lionda Development Co., Ltd. 15.38 5,917.13 0.00 0.00 Shenzhen Lionda Material Import & Export 0.00 2,793.53 0.00 0.00 Co., Ltd. Shenzhen China Bicycle Company -70.17 24,578.97 0.00 0.00 (Holdings) Limited Shenzhen Create New Material Co., Ltd. 0.00 21.40 0.00 0.00 Shenzhen Sun Pipeline Co., Ltd. 0.00 2,568.67 0.00 0.00 Shenzhen Jiadeng Trading Co., Ltd. 0.00 100.85 0.00 0.00 Shenzhen Inter Enterprise Co., Ltd. 0.00 47.75 0.00 0.00 Beijing Lionda Investment -50.00 1,798.85 0.00 0.00 Shenzhen Kenda Science and Technology 0.00 1.32 0.00 0.00 Co., Ltd. Shenzhen Guangyingda Industrial Co., Ltd. 0.00 1,418.00 0.00 0.00 Shenzhen Orient Enterprise Co., Ltd. -60.00 2,768.31 0.00 0.00 Total -219.65 42,514.65 0.00 0.00 Including: in the report period, the capital amount the listed company provided to controlling shareholder and its subsidiaries was RMB 0.00 and the balance was RMB 425146500. 7.5 Entrusted financing □ Applicable √ Inapplicable 7.6 Implementation of projects committed □ Applicable √ Inapplicable 7.7 Significant lawsuit and arbitration 16 √ Applicable □ Inapplicable 1. China Orient Asset Management Company Shenzhen Office, the prosecutor, (Bank of China Shenzhen Branch has transferred the creditors’rights to the prosecutor on May 11th 2000) has provided the principal of USD3.15 million as loan to Shenzhen Sun Piping Co., Ltd. on May 10th 1993. The Company undertook the joint liability for guarantee of the loan. For Shenzhen Sun Piping Co., Ltd. and the Company has not fulfilled the responsibility of returning the principal on time, Shenzhen Sun Piping Co., Ltd., Bank of China Shenzhen Branch and China International Finance Company entered a supplementary contract on December 12th 1996 to extend the expiring date of the loan to May 10th 1999.Shenzhen Sun Piping Co., Ltd. failed to return the loan on time again. The Company didn’t paid the loan either. Therefore China Orient Asset Management Company Shenzhen Office sued to Shenzhen Intermediate Court against Shenzhen Sun Piping Co., Ltd. and the Company for:1) Shenzhen Sun Piping Co., Ltd. shall return the principal of USD3.15 million and the interest of USD1,558,579.81; 2) The Company shall take joint liabilities over the above debts; 3) Shenzhen Sun Piping Co., Ltd. and the Company shall take all of the suing expenses. The trial was scheduled on February 9th 2004. Predicted liabilities has been drawn upon this event, therefore the gain/loss account is away from influence.(For details about this please go to Announcement 2004-002 published on January 7th 2004 issues of Securities Times and Ta Kung Pao.) 2. (1) With regarding the lawsuit raised by Shenzhen Development Bank Futian Branch to Shenzhen Futian Court against Shenzhen Guoyin Investment (Group) Co., Ltd. and the Company (as the guarantor). This case is under inquisition. As the result of intercession by the court, both of the parties accept the conditions as: (a). Shenzhen Guoyin Investment (Group) Co., Ltd. shall repay the principal of RMB4 million and relative interest before June 30th 2004. (b). The Company shall take related liabilities over the commitment. Predicted liabilities has been drawn upon the above responsibilities, and will not influence the current gain/loss account. (2) Bank of China Shenzhen Branch (the prosecutor) has provided a loan of USD380 thousand to the Company on June 27th 1996. Shenzhen Lionda Development Co., Ltd. provided guarantee with related liabilities for this loan. For the Company has failed to payback the principal and interest upon expiration, whereas Shenzhen Lionda Development Co., Ltd. was failed to undertake the related liability, Bank of China sued to Shenzhen Luohu People’ s Court against the Company and Shenzhen Lionda Development Co., Ltd. The trial was scheduled on February 26th 2004. The sentences were reached: (a). The defendant is responsible to return the principal of USD380 thousand and corresponding interests. (b). Shenzhen Lionda Development Co., Ltd. shall take the related liability for the guarantee of the debt. When Shenzhen Lionda Development Co., Ltd. repaid the debt on behalf of the Company, it is empowered to collect the debt from the Company. Financial expenses has been drawn upon this loan and no other influence will happen to the current gain/loss account. (3) With regarding the lawsuit raised by China Orient Asset Management Company Shenzhen Office against Shenzhen Sun Piping Co., Ltd. and the Company, Shenzhen 17 Intermediate Court opened the trial on February 9th 2004 and the followings are the civil sentences: (a). The defendant Sun Piping Company is responsible to return the principal of USD3.15 million and corresponding interests to China Orient Asset Management Co., Ltd. Shenzhen Office within 10 days upon the effective of the sentence. (b). The Company shall take the related liability for the guarantee of the debt. When the Company repaid the debt on behalf of Sun Piping Company, it is empowered to collect the debt from Sun Piping Company. Predicted liabilities have been drawn upon this event and no other influence will happen to the current gain/loss account. (4) As of the lawsuit raised by Shenzhen Investment Management Co. to Shenzhen Intermediate Court against the Company about the loan contract. Under the coordinating of the court, amicable settlement was accepted by both of the parties and the settlement agreement was signed as the followings: (a). The Company recognizes the debt of RMB16579232 due to Shenzhen Investment Management Co., Ltd.; (b). If the Company failed to return the fund on time, Shenzhen Investment Management Co., Ltd. is empowered to dispose the share equity the Company holds in Shenzhen Jianian Printing & Packaging Holdings Co., Ltd. through justice procedure. (c). If the income from disposing of the said equity exceeded RMB16579232, the balance will be returned to the Company. If it is not enough, the Company shall recognize the balance and return as soon as possible. (d). The suing expenses is shared equally by both of the parties. The privies request the Court to recognize the above agreement in term of intercession document. The intercession document was issued on February 11th 2004. This event was just changed the creditor of the Company, but make any influence on the Company’s financial situation. The said agreement has not yet been put into practical action, therefore no influence will be made on the accounting temporarily. Relative accounting treatment will be performed when it has practically happened. (5) As for the lawsuit raised by Bank of China Shenzhen Branch to Shenzhen Intermediate Court against the Company and the guarantor – Shenzhen Petrochemical Industry Group Co., Ltd. The trial was held on February 16th 2004 and the following sentences were drawn: (a) The defendant is responsible to return the principal of HKD24 million and relevant interest to Bank of China Shenzhen Branch within 10 days since the sentences were effective. (b) Shenzhen Petrochemical Industry Group Co., Ltd shall take the related liability for the guarantee of the debt. When the Company repaid the debt on behalf of the Company, it is empowered to collect the debt from the Company. Financial expenses have been drawn upon this event and no further influence will happen to the current gain/loss account. (6) As of the lawsuit raised by China Agriculture Bank Shenzhen Branch to Shenzhen Intermediate Court against Shenzhen Changping Imp. & Exp. Co., Ltd. and the Company (as the guarantor) about the accepted draft amounted to RMB19582170.53 and RMB9855700.67 (as two objects of two petitions), and also the lawsuit raised by China Agriculture Bank Shenzhen Branch against the Company and Shenzhen Petrochemical Industry Group Co., Ltd. of import deposit loan amounted to 18 HKD12109722 and USD989262.70 (as the objects of one petition). The court merged the three petitions into one trial. And drawn civil sentences as the followings: (a). Shenzhen Changping Imp. & Exp. Co., Ltd. is responsible to return the principal of RMB19582170.53 and RMB9855700.67, as well as relevant interests within 15 days upon the effective of the sentences. (b). The Company shall take the related liability for the repaying of debt. The sentences of the 2nd petition (a). The Company is responsible to return the principal of HKD12109722 and USD989262.70, as well as relevant interests to China Agriculture Bank Shenzhen Branch within 15 days upon the effective of the sentences. (b). Shenzhen Petrochemical Industry Group Co., Ltd. shall take the related liability over the repaying of debt by the Company. The Company has already drawn predicted liabilities over the above two events, therefore no influence will occur to the current gain/loss account.The Company has already drawn financial expenses upon the above three lawsuit events, no further influence will occur on the current gain/loss account. (7) Because the plaintiff China Merchants Bank Shenzhen Chinese Overseas Town Sub-branch offered loan RMB 2.4 million to Shenzhen Lionda Electric Apparatus Co., Ltd. on January 14, 2000, the Company, the defendant, bears joint suretyship responsibility for the above loan. After it was due, the plaintiff sent dunning notifications to the two defendants, but no resolution. So the plaintiff has litigated to Shenzhen Nanshan District Court. The claims are as follows: (a)The defendant Shenzhen Lionda Electric Apparatus Co., Ltd. repays the principal sum of RMB 2.4 million and correspondent interests; (b). The defendant our Company bears joint responsibility for the repayment; (c). The defendant bears all expense in litigation of this case. This case is scheduled to be heard on April 26, 2004. The suited items have been regarded as predicted indebtedness, and it will not influence current profit and loss. (8) As for the lawsuit about loan contract dissension between China Everbright Bank Shenzhen Branch and Shenzhen Guanghualin Investment Co., Ltd. and the Company, No. 282 civil award by Shenzhen Intermediate Court has taken legal effect. According to the regulation, Shenzhen Guanghualin Investment Co., Ltd. and the Company should repay the loan principal of RMB 12796807.80 and interest to China Everbright Bank Shenzhen Branch. During the operation of the case, Shenzhen Intermediate Court froze the Company’s holding right of 5 million shares of Beijing Wantong Industrial Holdings, Co., Ltd. Because Shenzhen Guanghualin Investment Co., Ltd. and the Company didn’t fulfill the law writ, Shenzhen Intermediate Court made the following adjudication on March 15, 2004: auctioning the Company’ s holding right of 5 million shares of Beijing Wantong Industrial Holdings, Co., Ltd. The Company’ s investment income decreased because of the lawsuit. Up to now, the auction procedure has not been finished yet. So, it is unable to estimate temporarily the influence of the financial affairs. The financial affairs will be dealt with according to the knock-down price after auctioning finishes. (9) On September 9, 1999, Industrial and Commercial Bank of China Shenzhen Branch Dongmen Sub-branch offered loan of RMB 4 million to Shenzhen Cangping 19 Import & Export Co., Ltd. and the Company was warrantor of the loan. The loan was not repaid when it was due and the Bank had dunned several times, but failed. So the Bank suited to Shenzhen Luohu District Court. The case was heard on June 2, 2004, and the Court made the following adjudication: (a). The defendant Shenzhen Cangping Import & Export Co., Ltd. repays the principal sum of RMB 4 million and correspondent interests with 10 days after the award take legal effect. (b). The defendant the Company bears joint responsibility of repayment. After subrogation, the Company has the right to ask Shenzhen Cangping Import & Export Co., Ltd. for repayment. The lawsuit item has been regarded as accrued liabilities, and it will not influence current profit and loss. (10) As for the lawsuit of bank acceptance bill case of Hainan Wanda Trade Group Co., Ltd. and the Company by China Construction Bank Haikou Branch Longhua Sub-branch, Hainan Supreme Court sent execution notification to Hainan Wanda Trade Group Co., Ltd. and the Company. During execution, Hainan Supreme Court auctioned the Company’ s 7 million domestic corporate shares of “ST Zhonghua ” initiator registered in China Security Registration and Balance Co., Ltd. Shenzhen Branch and 432,000 “ST Shanchanglin” directional domestic corporate shares. The above- mentioned shares were bargained on respectively to Shanghai Buxin Trade Co., Ltd., Shanghai Gaorong Investment Consulting Co., Ltd., Huabao Trust Investment Co., Ltd. and Guangzhou Hengyong Ruanfeng Development Co., Ltd. Hainan Supreme Court made the following adjudication on March 4, 2004: release close-down and freezing of the Company’ s 7 million domestic corporate shares of “ST Zhonghua ” initiator registered in China Security Registration and Balance Co., Ltd. Shenzhen Branch and 432,000 “ST Shanchanglin”directional domestic corporate shares. The above- mentioned shares were sold respectively at the price of RMB 0.2916 per share and RMB 0.32 per share. After deduction of the expense of evaluation, auction and owner transfer borne by the Company, the rest sum of RMB 2061441.92 had been transferred to application executants. Since the executed company didn’t have assets to execute, Hainan Supreme Court made the following civil adjudication on April 1, 2004: terminate execution of No. 1 [1999]JJCZi civil adjudication of Hainan Supreme Court; with 10 years after termination of the execution, the application executants can apply for execution again if he finds any executable assets of the executed company. The surety has been predicted indebtedness. The auction price is higher than its accounting price, so it brings investment income of RMB 2061441.92. (11) On June 30, 2001, ICBC Shenzhen Branch offered loan of RMB 17.9 million yuan to Shenzhen Lionda Paper Co., Ltd., and the Company and Shenzhen Guoyin Investment (Group) Co., Ltd. offered surety to the loan. The loan was not repaid when it was due and ICBC Shenzhen Branch had dunned for several times, but failed. Therefore, the Bank suited to intermediate court for the following requests: (a). The defendant Shenzhen Lionda Paper Co., Ltd. repays the principal sum of RMB 16.41 million and correspondent interests; (b). The defendants, our Company and Shenzhen Guoyin Investment (Group) Co., Ltd., bear joint responsibility; (c). The 3 defendants 20 bear the legal cost of the case. The case was scheduled to be heard on July 26, 2004. The suited items have been regarded as predicted indebtedness, and it will not influence current profit and loss. (12) On acceptance of appointment of [2003]YGFZZZi No. 148 appointed executive determinant letter of Guangdong Intermediate Court, according to adjudication writ which had taken legal effect, Guangzhou Railway Transportation Center Intermediate Court docketed a case on December 11, 2003 and executed 18 cases among application executants, namely, Office of ICBC Shenzhen Branch, China Merchants Bank Shenzhen Luohu Branch, Fuji Bank Shenzhen Branch, Bank of Communications Shenzhen Branch, Bank of China Shenzhen Branch, Societe Generale Shenzhen Branch, Agricultural Bank of China Shenzhen Branch Buji Sub-branch Tianbei Office, Agricultural Bank of China Shenzhen Branch Tianbei Sub-branch, Bank of China Shenzhen Branch Longhua Sub-Branch, Shenzhen Nonferrous Metals Finance Co., Ltd., Beijing Craftwork Import & Export Co., Ltd. and merchants Bureau Shekou Holding Co., Ltd., and the executed company, the Company. Because the Company didn’t implement the obligation in the legal writ, Guangzhou Railway Transportation Center Intermediate Court made the following civil adjudication: freeze, close down and detain the Company’ s assets valued totally RMB 600 million. The court also sent notification to the Company on January 4, 2004, saying that Guangzhou Railway Transportation Center Intermediate Court had closed down and frozen the following assets of the Company: (a).11968590 domestic corporate shares of “ST Zhonghua ”initiator, bonus shares and Allotment s held by the Company; (b).95% of shares in Shenzhen Lionda Development Co., Ltd., 70% of Shenzhen Lionda Timing Industrial Co., Ltd., 95% of Shenzhen Lionda Food Industrial Co., Ltd., 95% of Shenzhen Cangping Import & Export Co., Ltd., 80% of Shenzhen Yinkun Light Textile and Chemistry Co., Ltd., 95% of Shenzhen Lionda Electric Apparatus Co., Ltd. and 30% of Shenzhen Guangyingda Industrial Development Co., Ltd. Currently the share right is not in actual dealing process, so it is not influencing the Company’ s finance temporarily. When it actually happens, the Company will do correspondent financial treatment. (13) On acceptance of appointment of Guangdong Supreme Court, Guangzhou Railway Transportation Center Intermediate Court docketed a case and executed L/C contract dissension cases among China Huarong Assets Management Co., Ltd. Shenzhen Office and Shenzhen Zhonghua Bicycle (Group) Co., Ltd., and the Company. During the execution process, the application executants requested to terminate the execution for reasons that they had received USD 7.6 million during the execution of Shenzhen Intermediate Court, which is totally RMB 152425737.95 yuan, and the principal sum of money listed in the application had been reclaimed. Therefore, Guangzhou Railway Transportation Center Intermediate Court made the following civil adjudication: the execution of [1998]SZFJYCZi No. 163, 164, 155, 156, 157, 158, 159, 160, 161, 162 and 163 civil adjudications terminated. All the items above have been done financial treatment in correspondent year and it will not 21 influence the profit and loss of this year. (14) On acceptance of appointment of [2003]YGFZZZi No. 148 appointed executive determinant letter of Guangdong Intermediate Court, according to adjudication writ which had taken legal effect, Guangzhou Railway Transportation Center Intermediate Court docketed a case on December 11, 2003 and executed the cases among application executants, namely, China Huarong Assets Management Co., Ltd. Shenzhen Office, China Merchants Bank Shenzhen Luohu Branch, Fuji Bank Shenzhen Branch, Bank of Communications Shenzhen Branch, China Orient Assets Management Co., Ltd. Shenzhen Office, Angles Bank, Societe Generale Shenzhen Branch, Eat Asia Bank Co., Ltd. Shenzhen Branch, China Great Wall Assets Management Co., Ltd., Bank of China Shenzhen Branch Longhua Sub-Branch, Shenzhen Huali Packing Trade Co., Ltd., Shenzhen Nonferrous Metals Finance Co., Ltd., Shenzhen Guimeng Chains Co., Ltd., Shenzhen Hongguang VP Components Co., Ltd., Shenzhen Xinlong VP Components Co., Ltd., Shenzhen Jiantai Latex Co., Ltd., Guangzhou Yizheng VP Components Co., Ltd. and Dongguan Longyi Bicycle Fittings Co., Ltd., and the executed company, namely, Shenzhen Zhonghua Bicycle (Group) Holding Co., Ltd. During the execution, Guangzhou Railway Transportation Center Intermediate Court closed down and froze the executed companies’house property and shares. According to notification of Guangdong Supreme Court and law and regulations concerned, Guangzhou Railway Transportation Center Intermediate Court made the adjudication of reprieval execution: [2004]GTZFZZi No. 13, 15-17, 19-22, 24, 25 and 30-43 cases would be reprieved for 6 months, which was from April 14, 2004 to October 13, 2004. Currently the share right is not in actual dealing process, so it is not influencing the Company’s finance temporarily. When it actually happens, the Company will do correspondent financial treatment. Please read details of the above- mentioned cases in Security Times of August 27, 2004 and No. 2004-021 announcement in Hong Kong Ta Kung Pao. 3. (1) As for the case of ICBC Shenzhen Branch suiting to Shenzhen Intermediate Court about the loan contract dissension with Shenzhen Lionda Paper Co., Ltd. and the surety companies, Shenzhen Guoyin Investment (Group) Co., Ltd. and the Company, Shenzhen Intermediate Court made the following civil award: (a). The defendant Shenzhen Lionda Paper Co., Ltd. repays the principal sum of 16.41 million and the interest of RMB 1829613.44 to ICBC Shenzhen Branch (b). The defendants, our Company and Shenzhen Guoyin Investment (Group) Co., Ltd., bear compulsory joint responsibility of repayment. The suited items have been regarded as predicted indebtedness, and it will not influence current profit and loss. (2) On acceptance of appointment of Guangdong Supreme Court, Guangzhou Railway Transportation Center Intermediate Court docketed a case and executed the loan contract case among Societe Generale Shenzhen Branch and the executed companies, Shenzhen Zhonghua Bicycle (Group) Holding Co., Ltd. and the Company. During execution, after investigation and verification, the executants, Societe Generale Shenzhen Branch had been canceled at a registry of administrative department for industry and commerce on April 1, 2002, and Bank of China had authorized it to close on November 15, 2002. 22 Being unable to confirm who the grantee of the rights and obligations was, Guangzhou Railway Transportation Center Intermediate Court made the following civil award: (1999) SZFJECZi No. 36 civil adjudication writs terminated. The suited items have been regarded as predicted indebtedness, and it will not influence current profit and loss. (2) In November 1999, Shenzhen Zhongwu Resources Import & Export Co., Ltd. (hereinafter short as “Zhongwu Resources”) applied to Agric ultural Bank of China Shenzhen Futian Branch for the highest credit loan of RMB 21 million and the Company signed Credit Agreement of Highest Sum Guarantee for this loan. Till May 20, 2000, Zhongwu Resources owed Agricultural Bank of China Shenzhen Futian Branch the principal sum of RMB 16792914.75. After dunned for several times, Zhongwu Resources didn’t fulfill the obligation of repayment and the Company didn’t fulfill the responsibility of guarantee, either. The creditor's rights were transferred from Agricultural Bank of China Shenzhen Futian Branch to China Great Wall Assets Management Co., Ltd. Shenzhen Branch. On October 16, 2002, Zhongwu Resources was declared bankruptcy by Shenzhen Intermediate Court according to law. Through liquidation, the compensation which China Great Wall Assets Management Co., Ltd. Shenzhen Branch got is 0. Therefore, China Great Wall Assets Management Co., Ltd. Shenzhen Branch brought the civil action to the Company to Shenzhen Intermediate Court, and the case was schedule to be heard on November 3, 2004. The suited items have been regarded as predicted indebtedness, and it will not influence current profit and loss. Please read details of 3 cases mentioned above in Security Times of December 29, 2004 and No. 2004-028 announcement in Hong Kong Ta Kung Pao. 7.8 Particulars about the performance of obligations of Independent Directors Particulars about the independent directors attending the Board Name of This year times Presence Entrusted Absence Notes Independent of attending the in person presence (Times) Directors Board meeting (times) Ma Hong Including 5 5 0 0 communication voting Guo Shiping Including 5 3 1 1 communication voting Wu Zhaolin Including 5 4 0 1 communication voting Ban Wu Including 5 5 0 0 communication voting Particulars about the independent directors proposed different opinions about the 23 relevant matters of the Company □Applicable √Inapplicable §8.Report of the Supervisory Committee √ Applicable □ Inapplicable I.Supervisory Committee’s independent opinion on the relative issues of year 2004 1. Operation According to the Law In the report term, basing on the relevant national laws and legislations, the Supervisory Committee, carried out superintendence on the holding procedures of shareholders’general meeting and board meetings, resolution events, implementation of resolutions of shareholders’ general meetings by the Board of Directors, performance of duties of senior executives as well as the Company’ s administration system etc.. It believed that in 2004, the Board of Directors strictly complied with the Company Law, Securities Law, Rules for Stock Listing, Article of Association and other relevant systems, operated in a standardized manner, worked conscientiously, conducted business and made decisions in a scientific and reasonable way, and further improved internal administrative and controlling system; The directors and managers haven’t violated any of the law, legislation, the Articles of Association nor harmed the interests of the Company as well as the shareholders when performing duties. 2. Financial Inspection The Supervisory Committee carried out serious and careful inspection on the Company’ s financial status, and believed that the Financial Report 2004 frankly reflected its financial status and business performance. The auditors’opinion issued by Shenzhen Dahua Tiancheng CPA and Hong Kong K.C.Oh & Company CPA and their assessment on relevant events are objective and fair. 3. In the report term, the Company didn’t involved in any of acquisition or selling of assets, no inside trading or behaviors harming the interests of the shareholders or causing losing of assets occurred. 4. There was no material related transactions or utilizing of raised capital in the report term. 5. Execution of the resolutions of shareholders’general meeting by the Board The supervisors observed the board meetings and the shareholders’general meetings. The Supervisory Committee monitored the execution of the resolutions of the shareholders’meeting, and acknowledges that the Board has executed the resolutions adopted by the Shareholders’General Meeting properly. II.Statement of the supervisors on qualified Auditors' Report of clean audit opinion with emphatic events In viewing of the great pressure of short-term debts over the Company, as well as the significant amount of lawsuit events on the Company, it will influence the consistence of the Company’s business if they are not eliminated in a short period of time. Therefore Shenzhen Dahua Tiancheng CPA issued qualified Auditors' Report of clean audit opinion with emphatic events The Board of Directors has made their statement on the consistency of the Company’ s business operation. 24 The Supervisory Committee acknowledges that the statement of the Board of Directors on qualified Auditors' Report of clean audit opinion with emphatic events. §9. Financial Report 9.1Auditingopinions :qualifiedAuditors' Report of clean audit opinion with emphatic e vents According to requests, qualified Auditors’Report has been furnished, and Auditors’ Report, Accounting Statement and statement of the matters qualified opinions have mentioned are as follows: (1) The complete Auditors’Report is as follows: Auditors’Report SHENHUA (2005) GSZI No. 37 All shareholders of Guangdong Sunrise Holdings Co., Ltd., We have audited the Consolidation and Balance Sheet of Dec. 31, 2004, as well as the 2004 Consolidation and Profit and Profit Appropriation Statement and the 2004 Consolidation and Statement of Cash Flow of Guangdong Sunrise Holdings Co., Ltd. (herein after referred to as the Company). While the compilation of these accounting statements were the responsibility of the administrative team of the Company, our responsibility is to give opinions on these accounting statements based upon the performance of our auditing work. We have arranged and performed the auditing work according to the independent auditing rules of the Chinese CPAs, to reasonably ensure whether or not there is no significant misstatement in these accounting statements. The auditing work includes the examination of the evidences supporting the sums in the accounting statements and disclosure based upon random inspection, the comment about the accounting policies taken by the administrative team during the accounting statement compiling work and the important accounting estimation they have made, as well as the comment on the overall reflection of these accounting statements. We believe that our auditing work has provided reasonable base for us to express opinions. We considered that the aforesaid accounting statements of the Company were in compliance with the regulations of Accounting Standards for Business Enterprise and Accounting System for Business Enterprise promulgated by the State, which reflected the financial position of the Company as at December 31, 2004 and the results of its operations and its cash flows for the year then ended fairly in all material respects. Moreover, we reminded persons using the accounting statement to pay an attention: as listed in note 5, 13 and 7 to the financial statements, the Company has significant financial burdens on short-term repayment obligations and there are a large amounts of liabilities from court action in relation to the guarantees given by the Company; if these events could not be cleared in short-term, which directly impacted on the going concern of the Company. The Company has disclosed the improvement measures adopted in note 10 to the financial statement, but the sustaining operations capability of the Company still existed the significant indetermination. The content of this paragraph could not impact the Auditors’opinion issued. 25 Shenzhen Dahua Tiancheng Certified Public Accountants Ａｐｒ． １９， ２００５ (2) As to the accounting statements, please refer to Item 9.2. (3) Statements of the matters mentioned in the qualified opinions are as follows: Annotation 5. Note. 13. Short-term loans 2. Amount at the end of the 3. Amount at the beginning of 1. Loan year the year type Original Exchange Translated Original Exchange Translate into currency rate into RMB currency rate RMB Bank loan Including: pledge* RMB 4,000,000.00 --- 4,000,000.00 10,000,000.00 --- 10,000,000.00 HKD 15,000,000.00 1.06 15,900,000.00 14,500,000.00 1.062 15,398,500.00 Guarantee RMB 184,883,500.00 --- 184,883,500.00 221,013,500.00 --- 221,013,500.00 HKD 75,960,002.00 1.07 81,277,202.14 75,960,002.00 1.07 81,277,202.14 USD 17,573,262.70 8.30 145,858,080.41 17,573,262.70 8.30 145,858,080.41 Credit USD --- --- --- Subtotal 431,918,782.55 473,547,282.55 5. Amount at the end of the Amount at the beginning of the year 4. Loan year type Origi nal Exchange Translated Original Exchange Translated currency rate into RMB currency rate into RMB Loans from other units RMB 137,550,000.00 137,550,000.00 112,550,000.00 --- 112,550,000.00 HKD --- 35,000,000.00 1.07 37,450,000.00 USD 740,000.00 8.30 6,142,000.00 740,000.00 8.30 6,142,000.00 Subtotal 143,692,000.00 156,142,000.00 Total 575,610,782.55 629,689,282.55 *Shenzhen Jianian Industrial Co., Ltd., a subsidiary of the Company, has borrowed RMB 4 million and HKD 15 million from the bank with its buildings as pledge. Particulars about the overdue loans are as follows: Reason 6. Loan 8. Translated into Loan Use of the 7. Loan amount for being unit RMB interest loan funds overdue Floating Circulating Shenshen Branch of Financial HKD 32,000,000.00 34,240,000.00 interest fund Bank of China difficulties rate turnover 26 Floating Circulating Shenshen Branch of Financial HKD 24,000,000.00 25,680,000.00 interest fund Bank of China difficulties rate turnover Circulating Shenshen Branch of Financial USD 380,000.00 3,154,000.00 8.775% fund Bank of China difficulties turnover Circulating Longhua Sub-branch Financial RMB 12,850,000.00 12,850,000.00 --- fund of Bank of China difficulties turnover Great Wall Circulating Financial Sub-branch of China RMB 2,500,000.00 2,500,000.00 9.828% fund difficulties Construction Bank turnover Chengdong Circulating Financial Sub-branch of China RMB 17,975,500.00 17,975,500.00 8.712% fund difficulties Construction Bank turnover Shangbu Sub-branch Circulating Financial of China RMB 3,000,000.00 3,000,000.00 9.828% fund difficulties Construction Bank turnover Real Estate Circulating Financial Sub-branch of China RMB 18,000,000.00 18,000,000.00 9.504% fund difficulties Construction Bank turnover Branch Office of Circulating Letter of Financial China Construction HKD 3,850,280.00 4,119,799.60 fund credit difficulties Bank turnover Branch Office of Circulating Letter of Financial China Construction USD 2,059,600.00 17,094,680.00 fund credit difficulties Bank turnover International Office Circulating Letter of Financial of China USD 2,444,400.00 20,288,520.00 fund credit difficulties Construction Bank turnover Shatoujiao Circulating Sub-branch of Financial RMB 2,600,000.00 2,600,000.00 9.504% fund Agricultural Bank of difficulties turnover China Renmin North Road Circulating Sub-branch of Financial RMB 2,678,000.00 2,678,000.00 7.599% fund Agricultural Bank of difficulties turnover China Shenzhen Branch Circulating Office of Financial HKD 12,109,722.00 12,957,402.54 --- fund Agricultural Bank of difficulties turnover China Shenzhen Branch Circulating Financial USD 989,262.70 8,210,880.41 --- Office of fund difficulties 27 Agricultural Bank of turnover China Futian Sub-branch of Circulating Industrial and Financial RMB 5,430,000.00 5,430,000.00 6.732% fund Commercial Bank of difficulties turnover China Futian Sub-branch of Circulating Industrial and Financial RMB 8,000,000.00 8,000,000.00 6.732% fund Commercial Bank of difficulties turnover China Futian Sub-branch of Circulating Industrial and Financial RMB 3,600,000.00 3,600,000.00 6.732% fund Commercial Bank of difficulties turnover China Futian Sub-branch of Circulating Industrial and Financial RMB 8,000,000.00 8,000,000.00 6.732% fund Commercial Bank of difficulties turnover China Futian Sub-branch of Circulating Industrial and Financial RMB 6,000,000.00 6,000,000.00 6.732% fund Commercial Bank of difficulties turnover China Shen East Sub-branch of Circulating Financial Industrial and RMB 19,000,000.00 19,000,000.00 5.58% fund difficulties Commercial Bank of turnover China Futian Sub-branch of Circulating Industrial and Financial USD 2,000,000.00 16,600,000.00 7.25% fund Commercial Bank of difficulties turnover China Shatoujiao Sub-branch of Circulating Financial Shenzhen RMB 8,000,000.00 8,000,000.00 7.587% fund difficulties Development Bank turnover Co., Ltd. Nantou Sub-branch Circulating of Shenzhen Financial HKD 4,000,000.00 4,280,000.00 9.90% fund Development Bank difficulties turnover Co., Ltd. Renmin Bridge Circulating Sub-branch of Seasonal Financial USD 1,000,000.00 8,300,000.00 fund Shenzhen floating difficulties turnover Development Bank 28 Co., Ltd. Futian Sub-branch of Circulating Shenzhen Financial USD 1,700,000.00 14,110,000.00 8.775% fund Development Bank difficulties turnover Co., Ltd. Shenzhen Branch of Circulating Financial China Everbright RMB 5,600,000.00 5,600,000.00 5.8575% fund difficulties Bank turnover Luohu Sub-branch of Circulating Financial CITIC Industrial RMB 15,000,000.00 15,000,000.00 7.029% fund difficulties Bank turnover Luohu Sub-branch of Circulating Financial CITIC Industrial RMB 13,000,000.00 13,000,000.00 7.029% fund difficulties Bank turnover Reason 9. Loan 11. Translated into Loan Use of the 10. Loan amount for being unit RMB interest loan funds overdue Shangbu Sub-branch Circulating Financial of China Merchants’ RMB 4,000,000.00 4,000,000.00 7.23% fund difficulties Bank turnover Shangbu Sub-branch Circulating Financial of China Merchants’ USD 7,000,000.00 58,100,000.00 8.625% fund difficulties Bank turnover Shekou Sub-branch Circulating Financial of the cooperative RMB 4,500,000.00 4,500,000.00 --- fund difficulties bank turnover Nanyuan Road Circulating Financial Office of Guangdong RMB 8,580,000.00 8,580,000.00 5.841% fund difficulties Development Bank turnover China Non-Ferrous Circulating Financial Metal (Shenzhen) RMB 28,000,000.00 28,000,000.00 21.6% fund difficulties Finance Co., Ltd. turnover China Non-Ferrous Circulating Financial Metal (Shenzhen) USD 740,000.00 6,142,000.00 16.19% fund difficulties Finance Co., Ltd. turnover Shenzhen Office of Circulating China Orient Asset Financial RMB 38,500,000.00 38,500,000.00 7.029% fund Management difficulties turnover Corporation Shenzhen Office of Circulating China Orient Asset Financial RMB 40,000,000.00 40,000,000.00 7.029% fund Management difficulties turnover Corporation China Cinda Asset RMB 25,000,000.00 25,000,000.00 7.587% Circulating Financial 29 Management fund difficulties Corporation turnover Accounting Department of Circulating Financial Shenzhen Trade and RMB 6,050,000.00 6,050,000.00 --- fund difficulties Development turnover Council Total 539,140,782.55 Amounts of short-term loans of the Company are as follows: 13. Amount at the end of the 14. Amount at the beginning of 12. Loan year the year type Original Exchange Translated Original Exchange Translate into currency rate into RMB currency rate RMB Bank loan Including: pledge RMB --- --- --- --- --- --- HKD --- --- --- --- --- --- Guarantee RMB 168,313,500.00 --- 168,313,500.00 193,313,500.00 --- 193,313,500.00 HKD 75,960,002.00 1.07 81,277,202.14 75,960,002.00 1.07 81,277,202.14 USD 17,573,262.70 8.30 145,858,080.41 17,573,262.70 8.30 145,858,080.41 Credit USD Subtotal 395,448,782.55 420,448,782.55 Loans from other units RMB 137,550,000.00 137,550,000.00 112,550,000.00 --- 112,550,000.00 HKD 35,000,000.00 1.07 37,450,000.00 USD 740,000.00 8.30 6,142,000.00 740,000.00 8.30 6,142,000.00 Subtotal 143,692,000.00 156,142,000.00 Total 539,140,782.55 576,590,782.55 Annotation 7. Contingences Amount involved (a) Item (b) Note USD HKD RMB External guarantee Overdue Shenzhen Lionda Bonded --- --- 8,500,000.00 Overdue Trade Co., Ltd. Shenzhen Sun Pipeline 4,500,000.00 --- 6,000,000.00 Overdue Co., Ltd. Shenzhen Gaokeda --- --- 500,000.00 Overdue Electronics Co., Ltd. 30 Excluding the guarantee for the loan Shen China Shenzhen Yuda Company --- --- 4,800,000.00 obtained from Huarong Company Shenzhen China Bicycle Company (Holdings) 21,683,400.00 8,000,000.00 129,050,000.00 Overdue and prosecuted Limited Yueshen Light Industrial --- --- 9,000,000.00 Overdue and prosecuted & Trade Company Guangzhou Xufeng Enterprise Group Co., --- --- 15,000,000.00 Overdue and prosecuted Ltd. Shenzhen Jinbeisheng --- --- 77,600,000.00 Overdue and prosecuted Investment Co., Ltd. Shenzhen Guoyin Investment Group Co., --- --- 40,300,000.00 Overdue and prosecuted Ltd. Shenzhen Paina Garment --- --- 1,300,000.00 Overdue and prosecuted Co., Ltd. Shenzhen Jintian --- 25,000,000.00 --- Overdue and prosecuted Industrial Group Co., Ltd. Shenzhen Zhongwu Material Import & Export 2,022,900.00 --- --- Overdue and prosecuted Co., Ltd. Shenzhen Guangyingda Industrial Development 9,210,860.00 --- 9,780,000.00 Overdue and prosecuted Company Shenzhen Ligang 660,700.00 --- 1,750,000.00 Overdue and prosecuted Industrial Company Shenzhen Maoyuan Investment Development --- 8,000,000.00 --- Overdue and prosecuted Co., Ltd. Shenzhen Xingda Industry & Trading Co., --- --- 400,000.00 Overdue and prosecuted Ltd. Shenzhen Chemical & --- --- 15,000,000.00 Overdue and prosecuted Plastic Co., Ltd. Shenzhen Jinhai --- --- 3,500,000.00 Overdue and prosecuted Electronics Co., Ltd. Shenzhen Guanghualin --- --- 12,200,000.00 Overdue and prosecuted Investment Co., Ltd. I. Amount involved Item Note II. USD III. HKD IV. RMB Shenzhen Tiantai 200,000.00 --- --- Overdue and prosecuted 31 Chemical and Industrial Co., Ltd. Shenzhen Construction --- --- 800,000.00 Overdue and prosecuted Materials Group Shenzhen Jingyuan Industry & Trading --- --- 800,000.00 Overdue and prosecuted Company Shenzhen Wanda Industry & Trading Co., --- --- 30,938,600.00 Overdue and prosecuted Ltd. Shenzhen Xuena Co., --- 1,055,200.00 --- Overdue and prosecuted Ltd. Shenzhen Light Industry Import & Export 100,000.00 --- 1,900,000.00 Overdue and prosecuted Company Jilin Lionda Company --- --- 3,500,000.00 Overdue and prosecuted Shenzhen Big World 1,690,000.00 --- --- Overdue and prosecuted Department Store Shenzhen Lionda --- 5,900,000.00 3,000,000.00 Overdue and prosecuted Development Co., Ltd. Shenzhen Lionda Electrical Appliance Co., --- --- 9,850,000.00 Overdue and prosecuted Ltd. Shenzhen Paper Making --- --- 17,900,000.00 Overdue and prosecuted Company Shenzhen Lionda Foods --- --- 29,400,000.00 Overdue and prosecuted Co., Ltd. Shenzhen Lionda Material Import & Export --- 11,850,000.00 52,980,959.49 Overdue and prosecuted Co., Ltd. Hunan Lionda Company --- --- 3,250,000.00 Overdue and prosecuted Total of external 40,067,860.00 59,805,200.00 488,999,559.49 Overdue and prosecuted guarantees Lawsuits Shenzhen Light Industry Debt guarantee overdue 100,000.00 --- 1,900,000.00 Import & Export and prosecuted Shenzhen Paina Garment Debt guarantee overdue --- --- 1,300,000.00 Co., Ltd. and prosecuted Debt guarantee overdue Hunan Lionda Company --- --- 3,250,000.00 and prosecuted Shenzhen Jinhai Debt guarantee overdue --- --- 3,500,000.00 Electronics Co., Ltd. and prosecuted Shenzhen Guanghualin Debt guarantee overdue --- --- 12,200,000.00 Company and prosecuted 32 Shenzhen Tiantai Debt guarantee overdue Chemical and Industrial 200,000.00 --- --- and prosecuted Co., Ltd. Shenzhen Construction Debt guarantee overdue --- --- 800,000.00 Materials Group and prosecuted Shenzhen Yueshen Light Debt guarantee overdue Industry Import & Export --- --- 9,000,000.00 and prosecuted Co., Ltd. Guangzhou Xufeng Debt guarantee overdue --- --- 15,000,000.00 Industrial Co., Ltd. and prosecuted Shenzhen Jingyuan Debt guarantee overdue Industrial & Trading Co., --- --- 800,000.00 and prosecuted Ltd. Shenzhen Jinbeisheng Debt guarantee overdue --- --- 77,600,000.00 Investment Company and prosecuted Shenzhen Xuena Debt guarantee overdue --- 1,055,200.00 --- Company and prosecuted Shatoujiao Sub-branch of Shenzhen Development --- --- 8,000,000.00 Loan overdue Bank Co., Ltd. Nantou Sub-branch of Shenzhen Development --- 4,000,000.00 --- Loan overdue Bank Co., Ltd. Shenzhen Everbright --- --- 5,600,000.00 Loan overdue Bank Shenzhen Non-Ferrous 740,000.00 --- 28,000,000.00 Loan overdue Metal Finance Company Shatoujiao Sub-branch of Agricultural Bank of --- --- 2,600,000.00 Loan overdue China Renmin North Sub-branch of --- --- 2,678,000.00 Loan overdue Agricultural Bank of China Shenzhen China Bicycle Debt guarantee overdue Company (Holdings) 17,310,000.00 8,000,000.00 114,162,000.00 and prosecuted Limited Shenzhen Ligang Debt guarantee overdue 660,700.00 --- 1,750,000.00 Industrial Company and prosecuted Maoyuan Investment and Debt guarantee overdue --- 8,000,000.00 --- Development Company and prosecuted Shenzhen Xingda Debt guarantee overdue Industry & Trading Co., --- --- 400,000.00 and prosecuted Ltd. 33 Debt guarantee overdue Hainan Wanda Co., Ltd. --- --- 30,938,600.00 and prosecuted Shenzhen Guoyin Debt guarantee overdue Investment Group Co., --- --- 40,300,000.00 and prosecuted Ltd. Shenzhen Jintian Debt guarantee overdue --- 25,000,000.00 --- Industrial Co., Ltd. and prosecuted Shenzhen Zhongwu Debt guarantee overdue Material Import and 2,022,900.00 --- --- and prosecuted Export Company Shenzhen Guangyingda Debt guarantee overdue Industrial Development 8,886,100.00 --- 5,280,000.00 and prosecuted Company Shenzhen Xinhuayu Debt guarantee overdue --- --- 3,000,000.00 Company and prosecuted Shenzhen Chemical and Debt guarantee overdue --- --- 15,000,000.00 Plastic Co., Ltd. and prosecuted Shenzhen Branch of Agricultural Bank of 989,262.70 12,109,722.00 --- Loan overdue China Amount involved 15. Item (c) Note 16. USD HKD RMB Futian Sub-branch of Shenzhen Industrial and 2,000,000.00 --- 31,030,000.00 Loan overdue Commercial Bank of China Shendong Sub-branch of Shenzhen Industrial and --- --- 19,000,000.00 Loan overdue Commercial Bank of China Shenzhen Lionda Debt guarantee overdue Material Import & Export --- --- 12,000,000.00 and prosecuted Co., Ltd. Shenzhen Lionda Foods Debt guarantee overdue --- --- 3,000,000.00 Co., Ltd. and prosecuted Shenzhen Lionda Debt guarantee overdue --- 1,400,000.00 1,000,000.00 Development Co., Ltd. and prosecuted Total 32,908,962.70 59,564,922.00 449,088,600.00 Note 10. Explanation of going concern basis The Company has significant financial burdens on short-term repayment obligations and there are large amounts of liabilities from court action in relation to the guarantees given by the Company; if these events could not be cleared in short-term, which directly impacted on the going concern of the Company. Furthermore, the 34 significant indetermination existed in the sustaining operations possibly caused the Company unable realize assets and discharge liabilities in course of normal operations. Therefore, the Company will adopt the following measures in order to keep its sustaining operations capability: 1. The Company will enhance the liquidation work of arrearage; 2. The Company will actively advance the work of debts reorganization and strive for implementation of debts reorganization based on commercial principle; 3. The Company holds 26.54% equity of Shenzhen Jianian Industrial Co., Ltd. and is the first largest shareholder of Shenzhen Jianian Industrial Co., Ltd.; the second largest shareholder entrusted the Company to manage its 19.03% equity of Shenzhen Jianian Industrial Co., Ltd., thus, the Company holds the actual control right to of Shenzhen Jianian Industrial Co., Ltd.. This company has the certain profitability. Through the above measures adopted, the Company considered that the Company still has the sustaining operations capability in 2005. 9.2 Financial statement Guangdong Sunrise Holdings Company Limited Consolidated income statement for the year ended December 31, 2004 2004 2003 Note RMB’000 RMB’000 Turnover 5 142,607 77,268 Cost of sales ( 126,214 ) ( 64,127 ) Gross profit 16,393 13,141 Other incomes 7,879 3,206 Distribution costs ( 6,487 ) ( 3,677 ) Administrative costs ( 40,710 ) ( 26,802 ) Operating loss ( 22,925 ) ( 14,132 ) Finance costs ( 32,545 ) ( 32,192 ) Exceptional items 6 7,829 57,616 Share of results from associates 59 1,265 Profit/(loss) before taxation 7 ( 47,582 ) 12,557 Taxation 8 536 ( 59 ) Profit/(loss) after taxation ( 47,046 ) 12,498 Minority interests ( 877 ) ( 554 ) Profit/(loss) for the year ( 47,923 ) 11,944 Earnings/(loss) per share RMB(0.166) RMB0.041 35 The calculation of the basic earnings/(loss) per share is based on the current year’ s loss of RMB47,923,000 (2003 - profit of RMB11,944,000) attributable to the shareholders and on the existing number of 288,420,000 shares in issue during the year. Guangdong Sunrise Holdings Company Limited Consolidated balance sheet as at December 31, 2004 2004 2003 Note RMB’000 RMB’000 Non-current assets Property, plant and equipment 9 120,077 130,737 Construction in progress 10 1,702 1,811 Interests in unconsolidated subsidiaries 11 ( 1,019 ) ( 5,169 ) Interests in associates 12 7,108 9,466 Long-term investments 13 11,112 11,112 138,980 147,957 Current assets Inventories 14 29,205 31,168 Account receivables 15 49,007 37,291 Other receivables and prepayments 16 62,821 128,264 Tax recoverable 275 458 Note receivables 189 630 Short-term investments 44 44 Cash and bank balances 17,227 27,414 158,768 225,269 Total assets 297,748 373,226 Capital and reserves Share capital 17 288,420 288,420 Reserves ( 1,880,376 ) ( 1,832,876 ) ( 1,591,956 ) ( 1,544,456 ) Minority interests 77,851 77,698 Current liabilities Bank and other loans 18 575,611 629,689 Account payables 27,209 29,865 Other payables and accrued charges 19 1,209,033 1,177,550 Note payables - 2,880 1,811,853 1,839,984 Total equity and liabilities 297,748 373,226 36 Guangdong Sunrise Holdings Company Limited Consolidated cash flow statement for the year ended December 31, 2004 2004 2003 Note RMB’000 RMB’000 Cash flow from operating activities Profit/(loss) before taxation ( 47,582 ) 12,557 Adjustment items : Interest income ( 78 ) ( 65 ) Dividend income ( 2) ( 2,932 ) Interest expense 32,357 32,266 Depreciation 12,445 7,824 Impairment loss provision/(reversal) on property, plant ,and equipment 961 ( 1,130 ) Profit on disposal of property, plant and equipment ( 2,636 ) ( 10,923 ) Impairment loss provision on unconsolidated ,subsidiaries - 1,595 Profit on disposal of an unconsolidated subsidiary - ( 20,000 ) Impairment loss provision on interests in associates 2,690 - Loss on disposal of associates - 3,082 Share of results from associates ( 59 ) ( 1,265 ) Profit on disposal of long-term investments ( 2,061 ) ( 18,637 ) Reversal for inventory obsolescence ( 3,469 ) - Provision/(reversal) for doubtful debts on account ,receivables ( 3,755 ) 3,645 Provision for doubtful debts on other receivables 22,365 - Bad debts written off for other receivables 8,695 - Reversal for loss on guarantees ( 6,781 ) ( 8,671 ) Net operating cash inflow/(outflow) before movements in working capital 13,090 ( 2,654 ) Increase/(decrease) in amounts due to unconsolidated subsidiaries ( 4,150 ) 1,263 Increase/(decrease) in amounts due to associates ( 373 ) 373 (Increase)/decrease in inventories 5,432 ( 13,387 ) (Increase)/decrease in account receivables ( 7,961 ) 2,651 (Increase)/decrease in other receivables and prepayments 34,806 ( 104,481 ) (Increase)/decrease in note receivables 441 ( 630 ) Increase/(decrease) in account payables ( 2,656 ) 9,798 Increase in other payables and accrued charges 6,731 70,474 Decrease in note payables ( 2,880 ) ( 120 ) Cash inflow/(outflow) from operating activities before interest and tax payments 42,480 ( 36,713 ) (to be cont’ d) 37 Guangdong Sunrise Holdings Company Limited Consolidated cash flow statement for the year ended December 31, 2004 (cont’d) 2004 2003 Note RMB’000 RMB’000 Cash inflow/(outflow) from operating activities before interest and tax payments 42,480 ( 36,713 ) Interest paid ( 724 ) ( 751 ) Corporate and profits tax refunded/(paid) 719 ( 467 ) Net cash inflow/(outflow) from operating activities 42,475 ( 37,931 ) Investing activities Interest received 78 65 Dividend received 2 2,932 Purchases of property, plant and equipment ( 5,860 ) ( 2,614 ) Proceeds from disposal of property, plant and equipment 10,971 27,581 Increase in construction in progress ( 5,112 ) ( 4,607 ) Net cash inflow from consolidating nominated companies 20 - 24,669 Proceeds from disposal of an unconsolidated subsidiary - 20,000 Net cash outflow from subsidiaries not consolidated 21 - ( 1,269 ) Proceeds from disposal of investments in associates - 5,507 Proceeds from disposal of long-term investments 2,061 54,639 Net cash inflow from investing activities 2,140 126,903 Financing activities Dividend paid to minority shareholders 22 ( 724 ) ( 902 ) Bank and other loans repaid 22 ( 54,078 ) ( 62,514 ) Net cash outflow from financing activities ( 54,802 ) ( 63,416 ) Increase/(decrease) in cash and cash equivalents ( 10,187 ) 25,556 Cash and cash equivalents as at be ginning of the year 27,414 1,858 Cash and cash equivalents as at end of the year 17,227 27,414 9.3 Explanation on changes of accounting policy, accounting estimation and settlement compared with the latest annual report □Applicable √Inapplicable 9.4 Contents, correct amount, reason and its influence of significant accounting errors □Applicable √Inapplicable 9.5 Explanation on change of consolidated scope compared with the latest annual report 38 □Applicable √Inapplicable Guangdong Sunrise Holdings Co., Ltd. Chairman of the Board: Yang Fenbo Apr. 19, 2005 39