中鲁Ｂ(200992)*ST中鲁B2004年年度报告摘要（英文版）

SHANDONG ZHONGLU OCEANIC FISHERIES CO., LTD. SUMMARY OF ANNUAL REPORT 2004 §1. Important Notice 1.1 Board of Directors of Shandong Zhonglu Oceanic Fisheries Co., Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The summary of annual report 2004 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 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 Name of absent directors: Name of absent Name of entrusted Reason for absence director person Shao Shijie Business on trip due to work Li Wenyi 1.4 Hubei Da Xin Certified Public Accountants Ltd. issued an Auditors’Report with reserved opinion and paragraph of emphasis events. The Board of Directors and the Supervisory Committee of the Company made explanations on the relevant matters in details, the investors are suggested to notice the content. 1.5 Liu Changsuo, Chairman of the Board, Zhang Jinqing, CFO of the Company, and Wu Shuxian, Person in Charge of Accounting Organ hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock *ST ZHONGLU B Stock code 200992 Listed stock exchange Shenzhen Stock Exchange Registered address: No. 43, Heping Road, Jinan, Shandong Registered address and office address Office address: No. 43, Heping Road, Jinan, Shandong Post code Post code of registered address: 250014 Post code of office address: 250014 Internet web site of the Company Naught E-mail of the Company zlzqb@163.com 2.2 Contact person and method Representative in charge of Secretary of the Board of Directors Securities Affairs Name Zhou Feng Jiang Peng Contact address No. 43, Heping Road, Jinan, No. 43, Heping Road, Jinan, Shandong Shandong Telephone (86)531-6553278 (86)531-6553276 Fax (86)531-6943084 (86)531-6943084 E-mail zlzqb@163.com zqbjp@163.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data (Unit: RMB) Increase/decrease 2004 2003 2002 over last year（％） Income from main operations 224,089,193.00 318,865,044.00 -29.72% 310,982,756.00 Total profit 4,105,404.00 -215,140,076.00 101.91% -230,549,060.00 Net profit 3,398,218.00 -213,472,451.00 101.59% -225,282,438.00 Net profit after deducting -29,186,637.00 -193,771,219.00 84.94% -182,613,478.00 non-recurring gains and losses Net cash flow arising from 40,447,712.00 -21,817,255.00 285.39% 47,911,169.00 operating activities Increase/decrease At the end of At the end of At the end of from the end of 2004 2003 2002 previous year（％） Total assets 507,835,721.00 562,738,775.00 -9.76% 804,879,214.00 Shareholder’s equity (excluding 76,749,570.00 72,396,580.00 6.01% 277,937,637.00 minority interests) 3.2 Major financial indexes (Unit: RMB) Increase/decrease 2004 2003 2002 over last year（％） Earnings per share 0.01 -0.80 101.25% 310,982,756.00 Earnings per share (Note) 0.01 - - - Return on equity 4.43% -294.87% 299.30% -81.06% Return on equity as calculated based on net profi t after deducting non-recurring -38.03% -113.18% 75.15% -65.70% gains and losses Net cash flow per share arising from 0.15 -0.08 287.50% 0.18 operating activities Increase or decrease At the end At the end At the end of from the end of of 2004 of 2003 2002 previous year（％） Net assets per share 0.29 0.27 7.41% 1.04 Net assets per share after adjustment 0.29 0.25 16.00% 1.02 Note: Earrings per share calculated base on new share capital if share capital was changed from the end of the report period to the disclosure date. Items of non-recurring gains and losses: √Applicable □Inapplicable Unit: RMB Items of non-recurring gains and losses Amount Switching back of reserve for bad debts 24,113,145.00 Switching back of reserve for impairment of fixed assets 1,194,922.00 Non-operating incomes 1,255,100.00 Non-operating expenses -833,312.00 Government subsidy 6,855,000.00 Total 32,584,855.00 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting St andard (IAS) √Applicable □Inapplicable Unit: In RMB’0000 CAS IAS Net profit 3,398,218.00 3,398,218.00 There existed no difference between the two accounting Explanation on the difference standards. §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 Subtotal I. Unlisted shares 1. Sponsor’s shares 128,071,320 0 128,071,320 Including: State-owned share 127,811,320 0 127,811,320 Domestic legal person’s shares 260,000 0 260,000 Foreign legal person’s shares 0 0 0 Others 0 0 0 2. Raised legal person’s shares 0 0 0 3. Inner employees’shares 0 0 0 4. Preference shares or others 0 0 0 Total unlisted shares 128,071,320 0 128,071,320 II. Listed shares 1. RMB ordinary shares 0 0 0 2.Domestically listed foreign shares 138,000,000 0 138,000,000 3. Overseas listed foreign shares 0 0 0 4. Others 0 0 0 Total listed shares 138,000,000 0 138,000,000 III. Total shares 266,071,320 0 266,071,320 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 circulation share Total number of shareholders at the end of report year 18,348 Particulars about shares held by the top ten shareholders Number of Nature of Increase / Shares held Type of shares share shareholders decrease in at the Proportion Full name of Shareholders (Circulating/No pledged/ (State-owned the report year-end (%) n-circulating) frozen shareholder/foreign year (share) (share) (share) shareholder) SHANDONG GROUP CORPORATION State-owned 0 125,731,320 47.25% Non-circulating 125,731,320 OF FISHERY ENTERPRISES shareholder SHANGHAI WANGUO (H.K.) 8,580,948 3.23% Circulating Foreign shareholder SECURITIES COREPACIFIC-YAMAICHI 203,060 6,249,709 2.35% Circulating Foreign shareholder NTERNATIONAL (H.K.) LIMITED GUOTAI JUNAN SECURITIES HONG 2,155,116 0.81% Circulating Foreign shareholder KONG LIMITED CHINA HEAVY AUTOMOBILE GROUP State-owned 0 1,950,000 0.73% Non-circulating JINAN TRUCK COMPANY LIMITED shareholder LIANG YUZHEN 1,887,050 0.71% Circulating Foreign shareholder NIHK-CUS TOMER ’S 1SEGREGA TED 1,100,631 0.41% Circulating Foreign shareholder ACCOUNT YI YING 0 1,078,200 0.41% Circulating Foreign shareholder LIU DAN -506,790 1,498,290 0.37% Circulating Foreign shareholder HUANG JIANWEN 932,769 0.35% Circulating Foreign shareholder Particulars about shares held by the top ten shareholders of circulation share Full name of the shareholders Circulating shares held at the year-end Type of shares (A, B, H or other) SHANGHAI WANGUO (H.K.) 8,580,948 B-share SECURITIES COREPACIFIC-YAMAICHI 6,249,709 B-share NTERNATIONAL (H.K.) LIMITED GUOTAI JUNAN SECURITIES HONG 2,155,116 B-share KONG LIMITED LIANG YUZHEN 1,887,050 B-share NIHK-CUS TOMER ’S 1SEGREGA TED 1,100,631 B-share ACCOUNT YI YING 1,078,200 B-share LIU DAN 991,500 B-share HUANG JIANWEN 932,769 B-share Zou Jinfa 684,800 B-share Liao Qiang 615,000 B-share Explanation on associated relationship Among the top ten circulation shareholders and between the top ten circulation among the top ten shareholders or shareholders and the top ten shareholders, the Company is unknown whether there exists consistent action associated relationship, or whether belong to the consistent actor regulated by the Management Measure of Information Disclosure on Change of Shareholding for 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 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller I. Particulars about the controlling shareholder: Name of the controlling shareholder: Shandong Group Corporation of Fishery Enterprises Legal representative: Liu Changsuo Date of foundation: Nov. 1988 Registered capital: RMB 380,000,000 Nature of Company: state-owned enterprise Structure of equity: the State-owned Assets Supervision and Administration Commission of Shandong Province Government holds 100% equity of Fishery Enterprise Business scope: marine catching, aquiculture, resource development and technical service of aquatic product; sales of aquatic products and fishery resource (excluding special operating products); import and export business with the approval scope; sales of steels and woods; sending of work personnel of the fishery business to overseas. II. The actual controller of the controlling shareholder of the Company Name of the actual controller: the State-owned Assets Supervision and Administration Commission of Shandong Province Government Legal representative: Zeng Zhaoqi Date of foundation: June 18, 2004 Nature of the unit: specific established organization directly under Shandong province government Main business: to implement the responsibility of subscriber, to supervise the inflation proof savings deposits and increment of the supervised state-owned assets 4. 3. 3 Property right and controlling relationships between the actual controller of the Company and the Company is as follows: The State-owned Assets Supervision and Administration Commission of Shandong Province Government 100% Shandong Group Corporation of Fishery Enterprises 47.25% The Company §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Shares held at Share held Reason the at the Name Title Sex Age Office term for year-begin year-end change (share) (share) May 30, 2003 – Liu Changsuo Chairman of the Board Male 54 0 0 Sep. 16, 2005 Sep. 16, 2002 – Wang Zhaoan General Manager Male 54 0 0 Sep. 16, 2005 Sep. 16, 2002 – Li Wenyi Deputy General Manager Male 49 0 0 Sep. 16, 2005 Sep. 16, 2002 – Shao Shijie Director Male 59 0 0 Sep. 16, 2005 Sep. 16, 2002 – Wang Hanmin Independent Director Male 45 0 0 Sep. 16, 2005 May 30, 2003 – Jiang Jin Independent Director Male 36 0 0 Sep. 16, 2005 May 18, 2004 – Jiang Lu Independent Director Male 46 0 0 Sep. 16, 2005 Sep. 16, 2002 – Zhou Feng Secretary of the Board Male 50 0 0 Sep. 16, 2005 July 29, 2003 – Zhang Jinqing Chief Financial Supervisor Male 50 0 0 Sep. 16, 2005 Chairman of the Supervisor Mar. 29, 2004 – Li Ming Male 40 0 0 Committee Sep. 16, 2005 Mar. 29, 2004 – Chi Ming Employee Supervisor Female 41 0 0 Sep. 16, 2005 Supervisor Sep. 16, 2002 – Yin Jixian Male 45 0 0 Sep. 16, 2005 Employee Supervisor Sep. 16, 2002 – Huang Qi Male 32 0 0 Sep. 16, 2005 Shang Employee Supervisor Oct. 29, 2003 – Female 35 0 0 Qinghua Sep. 16, 2005 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Name Shareholding company Title Office term from the Listed Company (Yes / No) Shandong Group Corporation of Chairman of the Board, Liu Changsuo Apr. 6, 2003 till now Yes Fishery Enterprises General Manager General Manager of Shandong Group Corporation of subsidiary company Shao Shijie Jan. 7, 1998 till now No Fishery Enterprises Qingdao Ocean Fisheries Company Shandong Group Corporation of Yin Jixian Sector of HR Sep. 16, 2004 till now No Fishery Enterprises 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 832,000 Total annual payment of the top three directors RMB 345,000 drawing the highest payment Total annual payment of the top three senior RMB 345,000 executives drawing the highest payment Allowance of independent director RMB 30,000 per person/year Other treatment of independent directors The Company paid extra allowance of RMB 300 for based on actual working day to independent directors when they attended the Board meeting and shareholders’ general meeting. The Company reimbursed reasonable expenses that independent directors exercised their functions and powers according to actual situation. Name of directors and supervisors er ceiving no Director Shao Shijie, Supervisor Yin Jixian payment or allowance from the Company Payment Number of persons RMB 90,000 ～ RMB 12,000 5 RMB 30,000 ～ RMB 60,000 4 RMB 20,000 ～ RMB 30,000 5 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period 2004 was the greatest year that the Company adjusted, reformed, and optimized assts and consummated legal person’ s administration structure. 2004 was also the key year for the reorganization of the Company. At the beginning of the year, the Board of the Company firmly established objective of “make profits and prevent delisted”, uniting the management and all staff of the Company, overcame layer upon layer difficulties, and tried every method to maintain normal production and operation. In the report period, the Company made profits from losses, resolving delisted risks elementarily, and created significant precondition for reorganization of the Company. Firstly, the Company strengthened enterprise management, sent out every item of economic index, carries out every item of economic index level to level at the beginning of the year, down to the units, departments, and individuals, tamped the basis for realizing profit in the whole year; Secondly, the Company conducted organs reforming and reducing staff for greater efficiency. The headquarters of the Company increased efficiency while decreasing staff with the emphasis on post responsibility system in branch companies and subsidiaries, and reformed thoroughly the organs. The Company decreased 144 employees, with a decrease of 46% through setting organization, posts, staff and taking up jobs by way of competition; meanwhile, the Company changed financial supervisors of branch companies and subsidiaries in turn, which worked well; Thirdly, the Company strengthened adjustment of industry layout and structure. Through efforts of many parties, the Company returned Jinan Trade Branch to SGCFE and cancelled this company, while the Company subleased out “Taiping” Trawler of high costs and expenses, which decreased expenses and increased income; fourthly, through active efforts, the Company obtained interest subsidy of ocean project with the support of relevant departments. Because right methods and ways and right-handed leaders arose enthusiasm of the staff, in 2004, the fishing volume of the whole year was 42654.55 tons. The Company realized income from core business amounting to RMB 224.09 mil and costs from core business amounting to RMB 174.46 mil, the gross profit ratio 22.15%; At the aspect of industrial data: income from ocean fishing amounting to RMB 105.69 mil, costs from ocean fishing amounting to RMB 81.13 mil, and gross profit ratio 23.24%; income from refrigerated transportation vessels lease and management at sea amounting to RMB 34.84 mil, costs refrigerated transportation vessels lease and management at sea amounting to RMB 23.24 mil, and gross profit ratio 33.30%. The above two business contributed much to the gross profit. Gross profit ratio of other business including refrigeration and processing of aquatic products, aquatic products trade etc., were relatively low. Except that Qingdao Refrigeration Branch and headquarters of the Company (management department, undertaking financial expenses) suffered losses, other parts of the Company all made profits. In the report period, the Company realized net profit amounting to RMB 3.4 mil, made the objective of making profit from losses of the Company come true, and established basis for ensure preventing delisted from the market. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Main operations classified according to industries Classified according to Income from Cost of Gross Increase/decrease in Increase/decreas Increase/decrease industries or products main main profit income from main e in cost of main in gross profit ratio operations operations ratio (%) operations over the operations over over the last year last year (%) the last year (%) (%) Fishery 10,569.23 8,113.15 23.24% -17.59% -15.68% -1.73% Other wholesale trade 3,188.99 2,608.14 18.21% -66.51% -71.76% 15.21% Water transportation 3,483.55 2,324.20 33.28% 19.53% 21.16% -0.90% industry Processing of aquatic 5,167.15 4,400.16 14.84% 43.02% 43.03% 0.00% products Including: related 413.88 303.76 26.61% 20.31% -41.58% 22.45% transactions Main operations classified according to products Tunny 9,519.91 7,170.34 24.68% -3.23% -15.24% 10.67% Chengdiao 1,285.78 1,071.95 16.63% Other fish goods 8,451.89 7,412.26 12.30% -8.03% -15.00% 7.19% Including: related transactions Pricing rules for related transactions Negotiation price Necessity and durative of related The above related transactions occurred from normal purchase and sale of goods and transactions extending entrusted operation previously, which was necessary for the Company. 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 4,138,800 mil in the report period. 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main Increase/decrease in income from main operations (RMB) operations over the last year (%) Mainland of China 5,922.18 -61.21% Taiwan of China 7,276.37 8.50% Nigeria 1,767.19 -51.56% Japan 6,269.54 22.54% Argentina 27.14 -88.32% Korea 827.45 928.52% America 319.05 -58.36% Total 22,408.92 -29.72% 6.4 Particulars about the customers of purchase and sales Unit: RMB’ 0000 Total amount of purchase 4,613.17 Proportion in the total 59.00% of the top five suppliers amount of purchase Total amount of sales of the 13,716.75 Proportion in the total 61.00% top five sales customers amount of sales 6.5 Operation of share-holding companies □Applicable √Inapplicable 6.6 Explanation on reasons of material changes in main operations and its structure √Applicable □Inapplicable Income from main operations of the Company in this period decreased by a big margin over the same period of last year with main reasons as follows: (1) In this period, the Company transferred assets and liabilities of its trade branch of Shangdong Zhonglu Oceanic Fisheries Company Limited (hereinafter referred to as “trade branch”) as audited ended May 31, 2004 to SGCFE Sea Breeding Company. Thus trade income form aquatic products decreased by a big margin; (2) The Company transferred subsidiary Double Whale Pharmaceuticals in Sep., 2003. In 2003, the Company consolidated income of Double Whale Pharmaceuticals from Jan.-Sep., 2003; (3) Qingdao fishing branch of the Company leased out “Taiping” trawler, so the fishing kinds and fishing volume decreased by a big margin, which resulted in decrease in income of the period. 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 Operating results improved by a big margin over last year, mainly because of decreasing costs, controlling expenses, selling trawlers with high fixed costs etc.. Analysis to reasons of material changes in the whole financial position than that in the last year √Applicable □Inapplicable It ’ s caused by that the Company transferred assets and liabilities of its trade branch of Shangdong Zhonglu Oceanic Fisheries Company Limited (hereinafter referred to as “trade branch”) as audited ended May 31, 2004 to SGCFE Sea Breeding 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 □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects √Applicable □Inapplicable Unit: RMB’0000 Total amount of raised proceeds 49,624.00 Committed projects Planned Accrued Compliance with Compliance with Change projects Actual amount amount of amount of planned progress estimated earnings or not of input input earnings or not or not Ocean drugs Supplementing and hygiene 0.00 3,320.50 0.00 No No current capital products project Total - 0.00 3,320.50 0.00 - - Explanation on not reaching planned The change of raised proceeds was to supplement current funds with the remaining RMB 33.205 progress and mil of ocean drugs and hygiene products project, original raised proceeds project. The Company earnings (for detail didn’t change actual investment project. project) 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 The Board agreed with accountant’ s auditing opinion and explained the relevant situations as follows: 1. The problems on Reorganization implemented by the Company and capital occupied by the largest shareholder of the Company. In Dec. 2004, Shandong Group Corporatio n of Fishery Enterprises (hereinafter referred to as “SGCFE”) signed the Agreement of Shares Transfer of Shandong Zhonglu Oceanic Fisheries Co., Ltd. and the Supplementary Agreement of Shares Transfer of Shandong Zhonglu Oceanic Fisheries Co., Ltd. with Sh andong Luxin Investment Holding Co., Ltd. (hereinafter referred to as “Luxin Holding”), SGCFE transferred its 33.07% equity of the Company to Luxin Holding. At the same time, Luxin Holding and SGCFE issued together the Plan of Debt Refund and the Supplementary Explanation on Plan of Debt Refund: SGCFE repaid the partial debts to the Company with the funds received from auction after SGCFE auctioned its partial effective assets. After finishing the aforesaid debts paying duties, SGCFE still could not liquidate its debts and guarantee completely, but Luxin Holding could refund and liquidate in cash instead of SGCFE. From the date of purchasing finished, Luxin Holding amortized the relevant debts instead of SGCFE and its affiliated companies to the Company and ensured the amount of capital occupation occurred due to non-operating current of SGCFE and its affiliated companies and the actual amount of debts occurred due to the Company providing guarantee for SGCFE and its affiliated companies has decreased 30% at least in every fiscal year. At the same time, SGCFE promised to refund accounts receivable of RMB 10,006,511 of SGCFE and its affiliated companies received by the Company ended Sep. 30, 2004 completely before finishing assets reorganization by means of the Commitment Letter. The local government gave the greatly support for the implement of further promoting and quickening the aforesaid assets reorganization plan. 2. Financing by every possible means to ensure normal production and operating. The Company conducted financing through various ways, manner and every possible means in order to keep the normal production and operating with all its strength. The Company adopted the measures of the financial help each other and unified adjustment in capital use in order to ensure the normal running in every companies and every links and capital use of ocean work ship in urgent need materials and parts priorit y. The Company actively conducted financing from overseas clients by the channel of business current in order to keep the demand of current capital for the Company’ s production and operating. The Company reduced the expenses through revenue-enhancing and expenditure control measures and promoting control measure of three-expense in order to ensure the normal running of production and operating and achieve profits. The Company strived for the discount capital to oceanic fisheries from t he State finance and Province finance. 3. Strengthening internal management and enhancing profitability of the Company Aiming at the actual status of the Company, the Company will strengthen the internal management in 2005. The Company will adjust some vessels such as the long age of vessel, high costs and low benefit, and will continually advocate catching Liumu fish with purse net vessels. The Company will give the support to subsidiaries having higher profitability and enlarge their production capability, while the Company will reduce production and stop production to subsidiaries having bad operating and losses, and decrease amount of losses. At the same time, the Company will continually push the control measure of cost and three-expense in order to enhance the Company’ s profitability. 4. Communicating with credit bank actively, receiving the support of the bank and defusing debts crisis. In 2005, the Company will actively strengthen the communication with credit bank under the support of the local government, and refund the partial bank loan with funds repaid by the largest shareholder and obtain capital support from the bank through the guarantee of new largest shareholder to defuse the Company’ s debts crisis and relieve the tension of capital shortage. We consider that the Company can obtain the necessary capital support after finishing material reorganization in 2005 and effect ively defuse the Company’ s risk of repaying debts. The aforesaid reform measures can ensure the Company to kept the normal operating activities in 2005 and sustaining operating capability of the Company through the achievement business operations in the future. 6.15 Business plan as of the next year of the Board of Directors □Applicable √Inapplicable Profit estimation of the next year □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors □Applicable √Inapplicable The Company made profits in the report period, but didn’t propose Preplan on Dividend Distribution. √Applicable □Inapplicable The reason why The Company made profits in the report The usage and utilization plan of period, but didn’t propose Preplan on Dividend Distribution retained profit of the Company The Company made profits in the report period, but profit Making up losses available for distribution was RMB –413,338,939, so in this year, the Company didn’t distribute profits and convert public reserve into share capital. §7. Significant Events 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 Sales of assets √ Applicable □ Inapplicable Unit: RMB’0000 Contribution to Assets ownership Debts and net profit of the Profit involved in the Liabilities The Company of the or Related Explain principle assets transferred Transaction Date of Sale involved in assets assets sold from loss transaction of pricing or not parties sale price the assets sold the from or no transferred year-beginning to sale or not the date of sale Zhoushan Taiying Apr. 23, 29.00 -7.00 -7.00 No Market price Yes Yes Dongyi 2004 Shipping Co., Ltd. Zhoushan Market price Yes Yes Dongyi Apr. 23, Taiying 142.00 15.00 15.00 No Shipping 2004 Co., Ltd. 7.1, 7.2 Influence on consistence of business and stability of managers caused by the issues interfered in purchase and sale The purpose of the sale of assets was to decrease bad assets of the Company, cut down operating risks and strengthen profitability of the Company. The accomplishment of the above transactions had no impact on consistence of business and stability of managers, and didn’t influence the profit of the current period to a very small extent. 7.3 Important 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) Qingdao Double Whale 5,000.00 Joint Feb. 1, 2002 To Jul., 2006 No No Pharmaceuticals Responsibility Co., Ltd. Qingdao Haiyu Joint Feb. 4, 1999 1,200.00 To Jul., 2005 No Yes Co., Ltd. Responsibility Qingdao Haiyu Dec. 1, 1998 951.00 To Jul., 2005 No Yes Co., Ltd. Total amount of guarantee in the report period 0.00 Total balance of guarantee at the end of the report period 7,151.00 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 1,850.00 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 9,001.00 The proportion of the total amount of guarantee in the net assets of the Company 117.28% Particulars about the guarantees out of line Total amount of guarantee for other related parties, which the Company or 0.00 controlling shareholders held less than 50% The debts guarantee amount provided for the guarantee of which the 0.00 assets-liability ratio exceeded 70% Proportion of total amount of guarantee in net assets of the Company exceeded No 50% (Yes of No) Total amount of guarantee breaking regulations 0.00 7.4 Significant related transactions 7.4.1 Related purchase and sale √Applicable □Inapplicable Unit: RMB’0000 Selling products and providing Purchasing products and accepting service to related parties service to related parties Transaction Proportion in the Transaction amount Proportion in Related parties amount same kind of the same kind transaction of transaction amount amount Qingdao Ocean fishery 22.03 26.35% 0.00 35.67% Company Prodesur S. A. 27.14 32.47% 1,796.04 64.33% Qingyu Haifeng Shipping 34.42 41.18% 0.00 0.00% Company Shandong Shanhai Fishery 0.00 0.00% 996.00 0.00% Trade Center Total 83.59 100.00% 2,792.04 100.00% 7.4.2 Current related credits and liabilities √Applicable □Inapplicable Unit: RMB’0000 Supply funds to related parties Related parties supplied funds to the Related parties Company Occurred amount Balance Occurred amount Balance Shandong Group Corporation of Fishery Enterprises 0.00 0.03 0.00 0.00 (accounts receivable ) .Qingdao Oceanic Fishery Company (accounts 22.03 28.14 14.11 0.00 receivable ) Qingdao Fishery Aquatic Foods Processing Plant 0.00 9.64 0.00 0.00 (accounts receivable ) Prodesur S.A. (accounts 330.29 561.77 3.72 0.00 receivable ) Qingyu Haifeng Shipping 46.42 47.41 28.36 0.00 Company (accounts receivable ) Shandong Group Corporation of Fishery Enterprises (other 317.61 16,599.22 5,493.70 0.00 receivables) Shandong Longkou Fishery Comprehensive Company 436.27 1,074.57 0.00 0.00 (other receivables) Qingdao Oceanic Fishery 68.08 5,363.25 5.72 0.00 Company (other receivables) SGCFE S. A. (other 0.00 2,236.25 0.00 0.00 receivables) Shandong Shanhai Fishery Trade Center (other 0.00 0.00 486.39 0.00 receivables) Qingdao Anning Shipping Engineering Co., Ltd. (other 66.51 166.62 66.51 0.00 receivables) Qingdao Fishery Aquatic Foods Processing Plant (other 0.00 776.14 0.00 0.00 receivables) Qingdao Meilai Foods Co., 128.53 378.41 67.11 0.00 Ltd. (other receivables) Qingdao Haiyu Fishery Co., 0.14 803.72 0.18 0.00 Ltd. (other receivables) Prodesur S.A. (Argentine) 1,788.03 581.80 0.00 0.00 (other receivables) Longkou Tenglong Aquatic Foods Co., Ltd. (other 0.00 1,405.78 1,294.91 0.00 receivables) Qingdao Animal Pharmaceutical Co., Ltd. 0.00 34.55 0.00 0.00 (other receivables) Qingyu Haifeng Shipping 0.00 50.04 0.00 0.00 Company (other receivables) .Qingdao Lubao Fishery Foods 0.00 40.28 0.00 0.00 Co., Ltd. (other receivables) Qingdao Zhengxin Export &Import Co., Ltd. (other 0.00 0.00 0.00 100.00 receivables) Qingdao Zhengyuan Vessel Fixing and Manufacturing Co., 0.00 0.00 0.00 15.46 Ltd. (other receivables) Total 3,203.91 30,157.62 7,460.71 115.46 Including: In the report period, the amount of capital of the listed company provided for controlling shareholders and its subsidiaries was RMB 32039100, and the balance was RMB 300426200. 7.5 Entrusted assets management □ Applicable √Inapplicable 7.6 Implementation of commitment items √Applicable □Inapplicable In the report period, the holding shareholder of the Company Shandong Fishery Group promised: the receivables amounting to RMB 10,006,511 of the Company from Shandong Fishery Group and its affiliated enterprises would be paid back before Mar. 31, 2005. By the disclosure day of this report, this commitment had still not been performed. 7.7 Significant lawsuit and arbitration √Applicable □Inapplicable 1. As to the No.G20030234 Vessel Business Dispute stated in the previous report period of the Company, its process in the report period was as follows: According to (2004) China MZJCZI No. 1028 Adjudication Order issued by China International Economic and Trade Arbitration Commission, the Company should pay the Japanese party USD 450 thousand in two times, and in the report period, the Company had already paid the Japanese party the initial payment amounting to USD 250 thousand. By the disclosure day of this report, the above-mentioned payment had all been squared. This lawsuit bore great influence on neither the profit of the period, nor profit after the period. 2. As to the USD 500 Thousand Loan Contract Dispute of Qingdao Branch, which had been stated in the previous report period, its process in this report period was as follows: On Jan. 18, 2004, Qingdao Intermediate People’ s Court of Shangdong Province ruled according to (2003) QMSCZI No. 378 Civil Judgment: ① Qingdao Fishing Branch of the Company repay the plaintiff Pingcheng Trading Co., Ltd. the loan amounting to USD 500 thousand; ② Qingdao Fishing Branch of the Company pay the overdue interests (calculated from Mar. 25, 2001 to the day demanded by the plaintiff, that is Sep. 24, 2003, according to the USD overdue loan interest rate of the same period set by the People’ s Bank of China) arising in the deterred period to Pingcheng Trading Co., Ltd.; ③ The Company shoulder joint-payment responsibility for the aforesaid two articles; ④ The application of prosecution against Shandong Fishery Group by the plaintiff Pingcheng Trading Co., Ltd. be turned down; ⑤ The application of prosecution against the Company by Pingcheng Trading Co., Ltd. be turned down. Of the litigation fee amounting to RMB 36.1 thousand, RMB 1,729 be paid by the plaintiff, while the remaining RMB 34,371 be paid by the defendant Fishing Branch. Qingdao Fishing Branch of the Company did not think the aforesaid judgment fair, and appealed to High People’ s Court of Shandong Province (Provincial High Court). After accepting the case, Provincial High Court formed collegial panel, and publicly heard the case. The inquisition had finished at present. On Dec. 16, 2004, Provincial High Court ruled according to (2004) QMSCZI No. 41 Civil Judgment: 1. Item 1, 3, 4 and 5 in (2003) QMSCZI No. 378 Civil Judgment issued by Qingdao Intermediate People’ s Court of Shandong Province be preserved; 2. Item 2 in (2003) QMSCZI No. 378 Civil Judgment issued by Qingdao Intermediate People’ s Court of Shandong Province be cancelled; 3. The Fishing Branch pay the loan interest amounting to USD 100 thousand to Pingcheng Trading within ten days from the day when the judgment takes effect. The litigation fee for the second instance amounted to RMB 36.1 thousand, and was paid by the Fishing Branch. By the disclosure day of this report, the Company had repaid USD 300 thousand to Pingcheng Trading Co., Ltd.. This lawsuit bore significant influence on neither the profit of the period, nor the profit after the period. 3. In the report period, due to the loan contract dispute between the Company and Jinan Branch of Bank of China, the bank deposit of the Company amounting to RMB 20 million would be frozen, or property with equivalent value would be sealed up and distrained according to (2004) JMSCZI No. 171 Civil Order issued by Jinan Intermediate People’ s Court. 4. In the report period, due to the loan contract dispute between the Company and Jinan Branch of Bank of China, the bank deposits amounting to RMB 50 million of the Company and Shandong Airlines Co., Ltd. would be frozen, or property with equivalent value would be sealed up and distrained according to (2004) JMSCZI No. 172 Civil Order issued by Jinan Intermediate People’ s Court. 5. In the report period, due to the loan contract dispute between the Company and Jinan Pearl Spring Subbranch of China Construction Bank (Construction Bank) and according to (2004) JMSCZI No. 175 Civil Judgment issued by Jinan Intermediate People’ s Court on Jan. 10, 2005, the Company should pay up the loan principal amounting to RMB 28 million and the interest RMB 539,069.24 to Construction Bank within 10 days from the day when the judgment takes effect. The litigation fee of the case totaling RMB 152,855 and the cost of property preservation amounting to RMB 143,215 should be paid jointly by the Company and Shandong Fishery Group. 6. In the report period, due to the loan contract dispute between the Company and Jinan Branch of Bank of China, the bank deposits amounting to RMB 30 million of the Company and Shandong Aquatic Products and Sea Transportation Co., Ltd. would be frozen, or property with equivalent value would be sealed up and distrained according to (2004) JMSCZI No. 178 Civil Order issued by Jinan Intermediate People’ s Court. 7. In the report period, due to the loan contract dispute between the Company and Qingdao Zhongshan Road Subbranch of China Construction Bank and according to (2004) NMCZI No. 21272 Civil Judgment issued by Shinanqu People’ s Court of Qingdao City, Qingdao Refrigeration Branch of the Company should repay the loan principal of RMB 3.6 million and the interest, arising before Nov. 21, 2004, of RMB 46,494, to the plaintiff Qingdao Zhongshan Road Subbranch of China Construction Bank within 10 days from the day when the judgment takes effect. The Company and Qingdao Double Whale Pharmaceutical Co., Ltd. should shoulder joint payment. The litigation fee of the case totaling RMB 28.01 thousand and the cost of property preservation amounting to RMB 19.02 should be paid by Qingdao Refrigeration Branch of the Company. 8. In the report period, due to the loan contract dispute between the Jinan Trading Branch of the Company (This branch had been cancelled according to a resolution made by the Board of the Company.) and Jinan Branch of Bank of China, and according to (2004) JMSCZI No. 87 Civil Judgment issued by Jinan Intermediate People’ s Court, the Company should repay the loan principal of RMB 4 million, the interest of RMB 182,613.42 and a economic loss compensation amounting to RMB 20 thousand to the plaintiff Jinan Branch of Bank of China within 10 days from the day when the judgment takes effect. The aforesaid lawsuits had all exerted significant influence on the profit of the period and the profit after the period. 7.8 Particulars about the performance of obligations of Independent Directors Particulars about the independent directors attending the Board Name of Indepe This year times Presence in Entrusted Absence Notes ndent Directors of attending the person presence (Times) Board meeting (times) Wang Hanmin 5 5 0 0 Jiang Jin 5 4 1 0 Jiang Lu 3 3 0 0 Particulars about the independent directors proposed different opinions about the relevant matters of the Company □Applicable √Inapplicable §8. Report of the Supervisory Committee I Meetings by the Supervisory Committee in the report period In the report period, the Supervisory Committee of the Company held totally two meetings: 1. On Mar. 29, 2004, the Company held the 9th meeting of the 2nd Supervisory Committee. The topics of the meeting were as follows: (1) Election of Mr. Li Ming Chairman as the Supervisory Committee (2) Proposal on the withdrawal of bad debt reserve and assets depreciation reserve (3) Financial Final Report 2003 (4) Profit Distribution Preplan 2003 (5)Work Report of the Supervisory Committee 2003 (6)Text of the Annual Report 2003 and Summary (7)Proposal on the engagement of financial auditing institutions for 2004 2. On Aug. 6, 2004, the Company held the 9th meeting of the 2nd Supervisory Committee. The topic of the meeting was the examination and deliberation about the text of Semi-Annual Report 2004 and Summary. II The Supervisory Committee had expressed independent opinions on the following issues. 1. The Company’ s operation according to law In the report period, the Supervisory Committee supervised the holding procedures, resolutions of the Board of Directors of the Company, as well as the Board’ s implementation of the resolutions made by the Shareholders’General Meeting, and believed that the Board of the Company had normally operated strictly according to the Company Law, Securities Law, Stock Listing Rules of Shenzhen Stock Exchange, Administrative Rules of Listed Company and Articles of Association, as well as other relevant laws and regulations, and that the Company had also further perfected the inner control system, and carefully carried out resolutions of the Shareholders’ General Meeting. The decision-making procedure of the Board was legal. In the harsh production and operation environment of the Company, the Company had withstood pressure, overcome difficulties, strived to maintain the normal performance of the production and operation of the Company, and realized the operation objects set at the beginning of the year. Directors, supervisors and other senior administrative personnel of the Company had been able to stay clean, honest and diligent, and maintain self-discipline when performing their duties. No deeds that were against laws, regulations, or systems, or had done harm to the interests of the Company, had ever been discovered. 2. Inspection of the financial status of the Company After the inspection of the accounting statements, auditors’ reports and other accounting materials, the Supervisory Committee held that the financial accounts of the Company had been clear, and accounting calculation and financial management had conformed to relevant regulations. Moreover, the Company had paid attention to the financial work, improved consistently the quality of the financial personnel and consummated the financial management and control systems. Daxin Certified Public Accountants Co., Ltd. had audited the Financial Report 2004 of the Company and furnished Auditors’Report with emphasized matters but no qualified opinions. The Supervisory Committee believed that the Auditors’Report had truly reflected the financial status and operation achievements of the Company in 2004. To the Auditors’ Report with unqualified opinion and emphasized matters furnished by CPAs from the cautious point of view, the Supervisory Committee had no objections. The Supervisory Committee would actively cooperate with as well as supervise the Board in taking effective measures to deal with the emphasized matters, so as to dissolve the operation risks as quick as possible. 3. The use of raised proceeds of the Company In the report period, the Company had not changed the investment direction of the raised proceeds. 4. Related transactions In the report period, the related transactions the Company had involved in were mainly normal purchases and sales of goods, advance money for another and the continuance of former management on a commission basis. We believed that the above-mentioned transactions had abided by the principle of being fair and square, and no deeds that would do harm to the interests of the Company had ever been discovered. However, the historically left problems of huge amounts of capital of the Listed Company occupied by large shareholders had still not been finally resolved. 5. Purchases and sales of assets As to the sales of assets of the Company occurred in the report period, it was believed that the resolutions had been reasonable and the transactions fair. No insider dealings had ever been discovered; no harm had ever been done to the shareholders’rights or interests; no loss had occurred to the assets. 6. The Board of the Company had made special explanations on the issues mentioned in the auditors’opinions furnished by CPAs, and had also drawn up corresponding solutions. We agreed with the explanations of the Board, and would supervise and urge the Board to actively implement relevant measures, so as to safeguard the interests of the Company and all shareholders to the largest extent possible. §9. Financial Report 9.1 Report of Auditors Auditor’ s opinions: an unqualified opinion with emphasized matters To the shareholders of Shandong Zhonglu Oceanic Fisheries Co., Ltd., We were engaged to audit the accompanying consolidated balance sheet of Shandong Zhonglu Oceanic Fisheries Co., Ltd. (the “Company”) and its subsidiaries (the “Group”) as of 31 December 2004 and the related consolidated income statement, statement of changes in shareholders’equity and cash flow statement for the year then ended, prepared in accordance with International Financial Reporting Standards. These consolidated financial statements are the responsibility of the Company’ s management. We conducted our audits of these statements in accordance with auditing standards generally accepted in China, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial stat ement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2004, the result of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board. We would mention the investors who may use these consolidated financial statements to notice that the consolidated financial statements are prepared on the basis of going concern assumption. As set forth in the section II, “GOING CONCERN ASSUMPTION”, at the end of 2004, the accumulated deficit was RMB 413,339 thousand. On Dec. 31, 2004, the Group’s current liabilities exceeded its current assets RMB 171,053 thousand. In addition, the holding shareholders and related parties keep occupying the company’s capital for long time, and the amount was RMB 301,576 thousand. By Dec. 31, 2004, the company’s overdue bank loans had been amounting to RMB 207,148 thousand, and part of the fixed assets have been mortgaged. Although the group has disclosed intended improvement measures in the section “GOING CONCERN ASSUMPTION”, it still exist uncertainty for the Group’s ability to continue as a going concern. However, this section does not influence the audit opinion stated above. HORWATH CHINA (HUBEI) Certified Public Accountants April, 2005 9.2 Financial statement CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 31 DECEMBER 2004 (All amounts in RMB thousands) Note 2004 2003 ASSETS Non-current assets Leasehold lands 8 9,079 9,315 Property, plant and equipment 9 277,133 303,181 Intangible assets 10 93 73 Long-term investments 11 3,300 23,207 289,605 335,776 Current assets Inventories, net 12 43,613 75,060 Due from related parties, net 23(c) 83,459 76,869 Prepayments and other current assets 4,858 3,242 Other receivables, net 13 34,922 34,896 Trade receivables, net 14 29,369 20,065 Trading investments 15 45 56 Restricted bank deposits 22(b) Cash and cash equivalents 22(b) 21,977 16,788 218,243 226,976 Total Assets 507,848 562,752 EQUITY AND LIABILITIES Shareholders’equity Share capital 19 266,071 266,071 Reserves 20 (189,321) (193,673) 76,750 72,398 Minority interests 21 16,983 16,568 LIABILITIES Non-current liabilities Long-term bank borrowings, non-current portion 18 24,830 37,245 Long-term payables 24,830 37,245 Current liabilities Current portion of long-term bank borrowings 18 23,794 12,415 Taxes payable 2,092 9,693 Due to related parties 23(c) 1,155 1,155 Other payables and accruals 16 96,813 83,560 Dividends payable 7 459 459 Advances from customers 305 5,323 Trade payables 24,498 25,176 Short-term borrowings 17 240,169 298,760 389,285 436,541 Total liabilities 414,115 473,786 Total Equity and Liabilities 507,848 562,752 Approved by the Board of Directors on 13 April 2005 Liu Chang Suo Zhang Jin Qing Director & General Manager Director & Finance Controller The accompanying notes are an integral part of the financial statements. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 (All amounts in RMB thousands, except for (losses) earnings per share) Note 2004 2003 Sales, net 2 222,831 317,230 Cost of sales 174,456 258,887 Gross profit 48,375 58,343 Other operating income 1,255 1,244 Distribution costs 10,277 29,269 Administrative expenses 23(c) 23,464 216,952 Other operating expenses 364 10,044 (Loss) profit from operations 15,525 (196,678) Finance cost, net 3 11,424 17,075 Investment income from trading and long-term 4 6 investments Gain on disposal of investment in a subsidiary 0 1,350 Subsidy income 0 0 (Loss) profit before tax and minority interests 4 4,105 (212,397) Income tax expense 5 292 1,654 (Loss) profit before minority interests 3,813 (214,051) Minority interests 21 (415) 4,653 Net (loss) profit 3,398 (209,398) (Losses) earnings per share - Basic 6 RMB0.01 RMB(0.79) - Diluted CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004 (All amounts in RMB thousands) Reserves Unappro-priated Statutory Total Translation Capital Statutory public profits Total Share capital surplus shareholders’ reserve reserve welfare reserve (accumulated reserves reserve equity losses) (Note19) Note(20(a)) Note(20(b)) Note(20(b)) Balance as of 1 January 2004 - As previously reported 266,071.00 59.00 201,162.00 14,542.00 7,271.00 -416,707.00 -193,673.00 72,398.00 - As reported 266,071.00 59.00 201,162.00 14,542.00 7,271.00 -416,707.00 -193,673.00 72,398.00 Currency translation difference Net profit for 2004 3,398.00 3,398.00 3,398.00 Pricing difference associated with related party transactions Profit appropriations - Appropriations to reserves by subsidiaries 954.00 6.00 3.00 -9.00 954.00 954.00 - Dividends (Note 7) Balance as of 31 December 2004 266,071.00 59.00 202,116.00 14,548.00 7,274.00 -413,318.00 -189,321.00 76,750.00 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 (All amounts in RMB thousands) Note 2004 2003 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations 22(a) 47,977 (19,047) Income taxes paid (8,198) (1,291) Interest expenses paid (10,810) (18,345) Net cash generated from operating activities 28,969 (38,683) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (1,941) (37,447) Purchase of intangible assets (48) (65) Cash paid for trading investments (6) (4) Proceeds from disposal of subsidiary, net of cash disposed (839) (1,364) Proceeds from investment income of trading investments Proceeds from investment income of long-term investments 4 1 Proceeds from disposal of trading investments 1 7 Proceeds from disposal of property, plant and equipment 2,302 18,050 Interest income received 668 1,479 Net cash used in investing activities 141 (19,343) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid 50 Net (decrease) increase in borrowings (23,724) 22,514 Proceeds from capital injection of minority shareholder Proceeds from acquisition of a subsidiary others (1,900) Net cash generated from financing activities (23,724) 20,664 Currency translation difference (197) 20 Net decrease in cash and cash equivalents 5,189 (37,342) Cash and cash equivalents, beginning of year 16,788 54,131 Cash and cash equivalents, end of year 22(b) 21,977 16,789 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 √Applicable □Inapplicable In the report period, the Company transferred trade branch of the Company, which disappeared in the consolidation scope. Board of Directors of Shandong Zhonglu Oceanic Fisheries Co., Ltd. Apr. 16, 2005