安道麦A(000553)沙隆达Ｂ2004年年度报告摘要（英文版）

HUBEI SANONDA CO., LTD. SUMMARY OF ANNUAL REPORT 2004 (B-share) §1. Important Notice 1.1 The Board of Directors of Hubei Sanonda Co., Ltd. (hereinafter referred to as the Company) and its directors hereby confirm that there are no important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and /or joint, for the reality, accuracy and completion of the whole contents. 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. This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. 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 Independent Director Mr. Tan Liwen was absent from the Board meeting due to business trip and entrusted Independent Director Liao Hong to exercise the voting right on his behalf. 1.4 Tin Wha Certified Public Accountants and Ho and Ho & Company Certified Public Accountants issued an unqualified Auditors’Report for the Company. 1.5 Chairman of the Board of the Company Mr. Zhang Maoli, General Manager Mr. Zheng Xianhai and person in charge of Financing Mr. He Xuesong 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 Sanonda A, Sanonda B Stock code 000553, 200553 Listed stock exchange Shenzhen Stock Exchange Registered address and Office address Registered address: No. 93, Beijing East Road, Jingzhou, Hubei Office address: No. 93, Beijing East Road, Jingzhou, Hubei Post code Post code of registered address: 434001 Post code of office address: 434001 Internet web site of the Company http://www.sanonda.com.cn E-mail of the Company sanonda@sanonda.com.cn 2.2 Contact person and method Secretary of the Board Securities Affairs Representative Name Li Zhongxi Hu Haosong, Cao Jin Contact address No. 93, Beijing East Road, No. 93, Beijing East Road, Jingzhou, Jingzhou, Hubei Hubei Telephone 86-716-8208632, 8208232 86-716-8208632, 8208232 Fax 86-716-8208899 86-716-8208899 E-mail li_zhongxi@263.net li_zhongxi@263.net lakerhu@263.net lakerhu@263.net §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB’000 Increase/decrease 2004 2003 2002 over last year（％） Income from main operations 1,134,082 858,705 32.07% 652,210 Total profit 61,738 6,017 926.06% -144,512 Net profit 63,131 8,482 644.29% -156,609 Net cash flow arising from 55,648 34,627 60.71% 48,343.00 operating activities Increase/decrease At the end of At the end of At the end of from the end of last year 2004 year 2003 year 2002 year（％） Total assets 1,541,286 1,516,367 1.64% 1,542,056 Shareholder’s equity 856,856 793,725 7.95% 785,857 (excluding minority interests) 3.2 Major financial indexes Unit: RMB Increase/decrease 2004 2003 2002 over last year（％） Earnings per share 0.21 0.03 644.29% -0.53 Return on equity 7.37% 1.07% 6.30% -19.93% Net cash flow per share arising from 0.19 0.12 60.71% 0.16 operating activities Increase/decrease At the end of At the end At the end of from the end of last year 2004 of year 2003 year 2002 year（％） Net assets per share 2.89 2.67 7.95% 2.65 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 3.3 Difference of net profit as audited by PRC Accounting Rules and Regulations and IFRS √Applicable □Inapplicable 1. Net profit ２００４ ２００３ RMB’000 RMB’000 Net profit (loss) under the PRC Accounting Rules and Regulations 13,863 ７，４０１ Adjustments: Income from short-term treasury bond investment (2,064) － Provision for bad and doubtful debt of receivables written back on disposal of subsidiary 25,712 － Provision for depreciation for fixed assets not ready for use written back on disposal of subsidiary 27,175 － Adjustment of realization on inventories - （２，３３６） Provision for impairment losses for fixed assets written back on disposal of subsidiary 6,156 － Assets of deferred tax written back － Interperiod sales （５，１８９） Amortisation of deferred revenue 160 １６０ Adjustment for unrealised loss on investment (2,351) （９９７） Others (5,535) ９，４４３ Net profit under IFRS 63,116 ８，４８２ 2. Effects of major differences between the PRC Accounting Rules and Regulations and IFRS on shareholders’fund are analyzed as follows: 2004 2003 RMB’000 RMB’000 Shareholders’fund under the PRC Accounting Rules and Regulations 879,072 868,578 Adjustments: Income from short-term treasury bond investment - 2,064 Provision for bad and doubtful debt of receivables written back on disposal of subsidiary (20,911) (46,623) Provision for depreciation for fixed assets not ready for use written back on disposal of subsidiary - (27,175) Provision for impairment losses for fixed assets written back on disposal of subsidiary - (6,156) Amortisation of deferred revenue (1,305) (1,465) Adjustment for unrealised loss on investment - (997) Other - 5,499 Shareholders’fund under IFRS 856,856 793,725 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in shares Unit: share Increase/decrease in this Before the After the Items change change change Subtotal I. Unlisted shares 1. Sponsors’shares 84,729,334 0 84,729,334 Including: State-owned share 84,729,334 0 84,729,334 Domestic legal person’ s shares 0 0 0 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 84,729,334 0 84,729,334 II. Listed shares 1. RMB ordinary shares 97,232,276 0 97,232,276 2. Domestically listed foreign shares 115,000,000 0 115,000,000 3. Overseas listed foreign shares 0 0 0 4. Other 0 0 0 Total listed shares 212,232,276 0 212,232,276 III. Total shares 296,961,610 0 296,961,610 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 period 41,871 Particulars about shares held by the top ten shareholders Increase / Number of Nature of Holding decrease in Type of shares share shareholders shares at the Proportion Full name of Shareholders the report (Circulating/Non- pledged/ (State-owned year-end (%) year circulating) frozen shareholder/foreign (share) (share) (share) shareholder) SANONDA GROUP State-owned 81,726,625 27.52% Non-circulating 57,020,000 CORPORATION shareholder QICHUN COUNTY State-owned STATE-OWNED ASSETS 3,002,709 1.01% Non-circulating 0 shareholder ADMINISTRATION BUREAU WU QUN JUAN Foreign 1,625,450 0.55% Circulating 0 shareholder QU WEI Foreign 1,228,015 0.41% Circulating 0 shareholder ZHANG SHENG Foreign 1,112,020 0.37% Circulating 0 shareholder SHEN YING Foreign 1,020,800 0.34% Circulating 0 shareholder TAIJI INVESTMENT CO., LTD. Foreign 1,000,000 0.33% Circulating 0 shareholder GUANGQI INVESTMENT CO., 1,000,000 0.33% Circulating 0 Foreign LTD. shareholder FINANCIAL CO., LTD. Foreign 864,550 0.29% Circulating 0 shareholder HUBEI ZHONGLIAN YANGZI STATE-OWNED SOIL 835,000 0.28% Circulating 0 Other ECONOMIC DEVELOPMENT COMPANY Particulars about shares held by the top ten shareholders Shareholder’s name (full name) Circulation share held at the Type（A-share, B-share, H-share year-end (share) or others） WU QUN JUAN 162,545 B-share QU WEI 1,228,015 B-share ZHANG SHENG 1,112,020 B-share SHEN YING 1,020,800 B-share TAIJI INVESTMENT CO., LTD. 1,000,000 B-share GUANGQI INVESTMENT CO., LTD. 1,000,000 B-share FINANCIAL CO., LTD. 864,550 B-share HUBEI ZHONGLIAN YANGZI STATE-OWNED SOIL ECONOMIC 835,000 A-share DEVELOPMENT COMPANY ZHANG BIN WU 653,100 B-share ZHAO QUAN SHAN 620,360 A-share Explanation on associated relationship The Company is unknown whether there exists associated relationship among the top ten shareholders or among the top ten shareholders, or whether the shareholders belong to the consistent action consistent actionist regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies. 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 4.3.2 Introduction of especial situation for holding shareholder and other actual controller Name of the holding shareholder: Sanonda Group Corporation (it held 81,720,000 shares of the Company; taking 27.52% of total shares) Legal representative of the holding shareholder: Zhang Maoli Date of foundation: 1994 Registered capital: RMB 311,100,000 Scope of business: Agrochemical, chemical products, pharmaceutical products, mechanical equipments and fittings, import and export of the Company’ s products and the necessary raw and auxiliary material, etc. Sanonda Group Corporation, the holding shareholder of the Company, holds the state-owned shares of the Company, and its actual controller is Jingzhou Municipal State-owned Assets Administration Commission. There was no change in shares held by the holding shareholder in the report period. 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: Jingzhou Municipal State-owned Assets Administration Commission holding 100% Sanonda Group Corporation holding 27.52% Hubei Sanonda Co., Ltd. §5. Particulars about Directors, Supervisors and Senior Executives 5.1 Change in shares held by directors, supervisors and senior executives Holding Holding Reason for Name Title Sex Age Office term shares at the shares at the change year-begin year-end Jun. 1, 2003- Zhang Maoli Chairman of the Board Male 61 11,830 11,830 - Jun. 30, 2006 Vice Chairman of the Dec. 1, 2003- Zheng Xianhai Male 53 0 0 - Board, General Manager Jun. 30, 2006 Jun. 1, 2003- Li Zuorong Director Male 55 3,000 3,000 - Jun. 30, 2006 Jun. 1, 2003- Liu Xingping Director Male 42 2,000 2,000 - Jun. 30, 2006 Director, Deputy General Jun. 1, 2003- Deng Guobin Male 37 2,000 2,000 - Manager Jun. 30, 2006 Jun. 1, 2003- Zhang Jianguo Director Male 52 2,000 2,000 - Jun. 30, 2006 Director, Deputy General Jun. 1, 2003- He Fuchun Male 40 2,000 2,000 - Manager, Chief Engineer Jun. 30, 2006 Jun. 1, 2003- Tan Liwen Independent Director Male 57 0 0 - Jun. 30, 2006 Jun. 1, 2003- Liao Hong Independent Director Male 61 0 0 - Jun. 30, 2006 Jun. 1, 2004- Yu Jingzhong Independent Director Male 40 0 0 - Jun. 30, 2006 Chairman of the Jun. 1, 2003- Wan Zheming Male 56 7,098 7,098 - Supervisory Committee Jun. 30, 2006 Vice Chairman of the Jun. 1, 2003- Chen Changshun Male 57 9,230 9,230 - Supervisory Committee Jun. 30, 2006 Jun. 1, 2003- Sang Maoxiong Supervisor Male 54 0 0 - Jun. 30, 2006 Jun. 1, 2003- Liu Jun Supervisor Female 44 0 0 - Jun. 30, 2006 Jun. 1, 2003- Xu Baojian Supervisor Male 49 0 0 - Jun. 30, 2006 Jun. 1, 2003- Wang Xuewen Deputy General Manager Male 38 0 0 - Jun. 30, 2006 Jun. 1, 2003- He Xuesong Chief Accountant Male 50 0 0 - Jun. 30, 2006 Jun. 1, 2003- Dai Juqing Chief Economist Male 54 0 0 Jun. 30, 2006 Secretary of the Jun. 7, 2003- Li Zhongxi Male 35 0 0 Board Jun. 30, 2006 5.2 Particulars about directors or supervisors holding the position in Shareholding Company √Applicable □Inapplicable Name of Drawing the payment Title in Shareholding Name Shareholding Office term from the Shareholding Company Company Company (Yes / No) Zhang Maoli Sanonda Group Chairman of the Board Jan. 1, 2000 No Corporation to now Zheng Sanonda Group Director Jan. 1, 2000 No Xianhai Corporation to now Li Zuorong Sanonda Group Vice Chairman of the Jan. 1, 2000 No Corporation Board, General Manager to now Liu Xingping Sanonda Group Director, Deputy General Jan. 1, 2000 No Corporation Manager to now 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 700,000 Total annual payment of the top three RMB 180,000 directors drawing the highest payment Total annual payment of the top three senior RMB 150,000 executives drawing the highest payment Allowance of independent director RMB 30,000 per person/ year Other treatment of independent directors The Company reimbursed the reasonable charges according to the actual situation, which independent directors attended the Board meeting, shareholders’ general meeting or exercise their functions and powers in accordance with the relevant laws and regulations and Articles of Association. Name of directors and supervisors receiving Naught no payment or allowance from the Company Payment Number of persons Over RMB 50,000 3 RMB 30,000～RMB 40,000 12 Under RMB 30,000 3 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period The business scope of the Company is production and sales of pesticides and chemical products. In 2004, the Company realized an income from main operations of RMB 1,134,082,000, up 31.27% year-on-year; gross profit of 190,232,000, up 47.53% year-on- year; export exchange of USD 36.5 million, up 87% year-on-year. The Company produced pesticides (converted into integer) of 31,600 tons, an decrease of 19% compared with the same period of last year and caustic soda (converted into integer) of 77,000 tons, an increase of 7% over the same period of last year. 6.2 Statement of main operations classified according to industries or products, main operations of the Company classified according to products are as following: 2004 2003 RMB’000 RMB’000 Sales of pesticides and chemical products 1,106,337 821,120 Sales of property 28,465 37,585 1,134,802 858,705 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main Increase/decrease in income from main operations operations over the last year (%) Domestic 86,501.00 26.91% Overseas 26,906.00 47.59% 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Purchase amount from Proportion in total 7,170.00 5.60% the top five suppliers purchase amount Sale amount to the top Proportion in total 5,008.00 6.82% five customers sale amount 6.5 Operation of share-holding companies √Applicable □Inapplicable Unit: RMB’0000 Name of share-holding company Hubei Sanonda Tianmen Agrochemical Co., Ltd. Investment earnings contributed in Proportion in net profit of 513.00 37.01% the period listed company Share-holding Business scope Pesticides company Net profit 604.00 Name of share-holding company Jingzhou Sanonda Real Estate Co., Ltd. Investment earnings contributed in Proportion in net profit of 287.00 20.71% the period listed company Share-holding Business scope Real estate company Net profit 319.00 Name of share-holding company Sanonda Zhengzhou Pesticide Co., Ltd. Investment earnings contributed in Proportion in net profit of 203.00 14.65% the period listed company Share-holding Business scope Pesticides and Chemical Industry company Net profit 289.00 Name of share-holding company Sanonda Foreign Trade Co., Ltd. Investment earnings contributed in Proportion in net profit of 230.00 16.59% the period listed company Share-holding Business scope Import and Export company Net profit 256.00 Name of share-holding company Sanonda Qichun Co., Ltd. Investment earnings contributed in Proportion in net profit of -1072.40 the period listed company Share-holding Business scope Pesticides company Net profit -1,532.00 Name of share-holding company Sanonda (Jingzhou) Pesticide and Chemical Industry Co., Ltd. Investment earnings contributed in Proportion in net profit of -235.38 the period listed company Share-holding Business scope Pesticides company Net profit -269.00 Name of share-holding company Hubei Fengyuan Chemical Industry Co., Ltd. Investment earnings contributed in Proportion in net profit of -897.00 the period listed company Share-holding Business scope Chemical fertilizers company Net profit -1,631.00 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) than that in the last year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year □Applicable √Inapplicable Analysis to reasons of material changes in the whole financial position than that in the last year □Applicable √Inapplicable 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 6.13 Application of the proceeds not raised through shares offering √Applicable □Inapplicable Unit: RMB’0000 Amount of Progress of Earnings of projects Name of projects projects projects Project of Glyphosate 1,900.00 70% 0 Project of Imidacloprid 965.00 100％ 0 Project of Triparbite Evaporating 1,200.00 75% 0 Project of Paraquat 2,051.00 100% 500 Total 6,116.00 - - 6.14 Explanation of the Board of Directors on the “Qualified Opinion”made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors □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 Audited as per Chinese Accounting Standards, the Company realized a net profit of RMB 13,863,343.00 in 2004, after offsetting the losses, and the profit available for distribution to shareholders was RMB -38,583,618.20 in 2004. As per International Accounting Standards, the Company realized a net profit of RMB 63,131,000.00, after offsetting the losses, and the profit available for distribution to shareholders was RMB -68,415,000.00 in 2004. According to the principle of taking the lower, the profit available for distribution was RMB -68,415,000.00. According to the relevant regulations of Company Law and the Articles of Association of the Company, the Board of Directors of the Company decided neither to distribute the profit nor convert public reserve into share capital in 2004. The preplan should be submit to 2004 Annual Shareholders’General Meeting for examination. 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 Unit: RMB’0000 Contribution to net profi Assets Debts and t of the Co ownership Liabilities mpany of th Related Explain Transaction The assets Date of Sale involved in involved in e assets sold transaction principle of parties purchased purchase price the assets the assets from the y or not pricing transferred or transferred ear-beginnin not or not g to the dat e of sale 0.8 times of 90% equity of 90% of net Jingzhou Sanonda assets Sanonda Aug. 31, 669.6 Group 0.68 Yes amounting to Yes Yes Financial 2004 0 Corporation RMB 9.2946 Consultation million after Co., Ltd. evaluating 7.2 Sales of assets √Applicable □Inapplicable Unit: RMB’0000 Contribution to Profit Assets Debts and net profit of the or Related ownership Liabilities Transaction Sale Explain principle The assets sold Date of sale Company of the loss transaction involved involved parties price of pricing assets sold from from or no in the in the the year-begin to sale assets assets the date of sale transferred transferred or not or not Based on the book value 70% equity of of net assets Sanonda Sep. 30, Ni Liang 47.00 -1,532.00 0.00 No of Sanonda Yes No Qichun Co., 2004 Qichun Co., Ltd. Ltd. ended D ec. 31, 2004 7.1, 7.2 Influence on consistence of business and stability of managers caused by the issues interfered in purchase and sale 1. For the equity of Jingzhou Sanonda Financial Consultation Co., Ltd. (Financial Consultation Co.) acquired in this time, taking Aug. 31, 2004 as the base date, Hubei Radar Certified Public Accounting Co., Ltd. evaluated the assets and liabilities of Financial Consultant Co., and issued the Assets Evaluation Report of Jingzhou Sanonda Financial Consultant Co., Ltd. (ERKSPZi [2004] No. 060). Considering the profitability of Financial Consultant Co., the acquisition price was reasonable and fair. 2. After transferring of equity, it is no longer brought the negative influence to the Company in respect of the rise of the whole achievement and the image of listed company due to Qichun Company’ s operating difficulty, bad achievement of and under the long-term losses. 7.3 Significant guarantees √Applicable □Inapplicable Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Date of happening Complete Guarantee for Name of the Company Amount of Guarantee (date of signing Guarantee term Implementation related party guaranteed guarantee type agreement) or not (yes or no) Sanonda Zhengzhou General Feb. 27, 2004- Feb. 14, 2004 900.00 No Yes Pesticide Co., Ltd. Guarantee Feb. 26, 2005 Sanonda Zhengzhou General Jun. 30, 2004- Jun. 30, 2004 700.00 No Yes Pesticide Co., Ltd. Guarantee Jun. 20, 2005 Sanonda Zhengzhou General Jun. 30, 2004- Jun. 30, 2004 1,500.00 No Yes Pesticide Co., Ltd. Guarantee Dec. 31, 2004 Sanonda Zhengzhou General Dec. 22, 2004- Dec. 22, 2004 500.00 No Yes Pesticide Co., Ltd. Guarantee Dec. 31, 2004 Sanonda (Jingzhou) General Jun. 25, 2004 Pesticide and Chemical Jun. 25, 2004 1,127.00 No Yes Guarantee Jun. 23, 2005 Industry Co., Ltd. Total amount of guarantee in the report period 4,727.00 Total balance of guarantee at the end of the report period 4,727.00 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 4,727.00 Total balance of guarantee for controlling subsidiaries at the end of the report 4,727.00 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 4,727.00 The proportion of the total amount of guarantee in the net assets of the 5.38% Company 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 50% (Yes of No) Total amount of illegal guarantee 0.00 7.4 Significant related transactions 7.4.1 Related purchase and sale □Applicable √Inapplicable 7.4.2 Related credits and liabilities current √Applicable □Inapplicable At the balance sheet date, the outstanding balances with the related parties are as follows: 2004 2003 RMB’000 RMB’000 Accounts receivable and advanced payment Due from SGC and its subsidiaries: 19,243 3,062 Due from unconsolidated subsidiaries and associates: 250 778 Minority shareholders 1,248 - Total 20,741 3,840 2004 2003 RMB’000 RMB’000 Accounts payable Trade and other payables to SGC and its subsidiaries 89 542 Trade and other payables to unconsolidated 264 1,180 subsidiaries and associate Minority shareholders 453 - 806 1,722 7.5 Entrusted assets □Applicable √Inapplicable 7.6 Implementation of commitment items □Applicable √Inapplicable 7.7 Significant lawsuit and arbitration □Applicable √Inapplicable 7.8 Particulars about duties performance of Independent Directors Name of Times of attending Presence by Entrusted Absence Notes Independent the Board meeting oneself (Times) presence (Times) Directors in this year (Times) Tai Liwen 10 9 1 0 Liao Hong 10 9 1 0 Yu Jingzhong 6 6 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 √Applicable □Inapplicable The Supervisory Committee considered that the Company operated in line with the laws, and there existed no problems in the Company’s financial status, purchasing and sales of assets and related transactions. §9. Financial Report 9.1 Auditor’s opinions Auditor ’ s opinions : Standard unqualified auditor ’ s opinions 9.2 Financial statement Consolidated income statement for the year ended 31st December 2004 (Expressed in Renminbi Thousand Yuan) Note 2004 2003 RMB’ 000 RMB’ 000 Turnover 3 1,134,082 858,705 Cost of sales (943,850) (729,757) Gross profit 190,232 128,948 Other operating income 16,111 17,766 Distribution expenses (61,894) (43,318) Administrative expenses (87,046) (76,153) Other operating expenses (20,379) (4,001) Profit from operations 4 37,024 23,242 Finance costs, net 5 (20,908) (20,792) Investment income 45,622 3,567 Profit before tax and minority interests 61,738 6,017 Income tax expenses 6 (2,966) (4,589) Profit before minority interests 58,772 1,428 Minority interests 4,359 7,054 Net profit for the year 63,131 8,482 Earnings per share –Basic 8 RMB0.21 RMB0.03 Consolidated balance sheet as at 31st December 2004 (Expressed in Renminbi Thousand Yuan) Note 2004 2003 RMB’ 000 RMB’ 000 Assets Non-current assets Property, plant and equipment 10 452,078 463,391 Land use rights 11 161,489 175,261 Construction in progress 12 28,353 20,806 Investments in unconsolidated subsidiaries 4,268 2,653 Investments in associates 13 5,048 5,048 Investments in non-trading securities 14 28,069 11,931 Intangible assets 15 4,571 5,128 Goodwill 16 1,975 - Negative goodwill 17 (358) (408) Other assets 381 47 Total non-current assets 685,874 683,857 Current assets Inventories 18 255,618 234,931 Properties under development 19 586 22,722 Investments in trading securities 20 19, 543 74,154 Trade and other receivable 276,247 240,365 Income tax recoverable 8,348 8,750 Prepaid expenses and other current assets 47,445 30,978 Cash and cash equivalents 247,625 220,610 Total current assets 855, 412 832,510 Total assets 1,541,286 1,516,367 Consolidated balance sheet as at 31st December 2004 (Expressed in Renminbi Thousand Yuan) Note 2004 2003 RMB’000 RMB’000 Equity and liabilities Shareholders’equity Share capital 22 296,962 296,962 Capital reserve 23 565,633 565,633 Surplus reserves 24 62,676 62,676 Accumulated losses (68,415) (131,546) 856,856 793,725 Minority interests 28,859 32,136 Non-current liabilities Deferred revenue 26 8,662 8,422 Long-term bank borrowings 27 90,000 88,760 Total non-current liabilities 98,662 97,182 Current liabilities Trade and other payable 249,846 268,233 Short-term bank borrowings 276,995 287,838 Current portion of long- term bank 28 30,068 37,253 borrowings Total current liabilities 556,909 593,324 Total liabilities 655,571 690,506 Total equity and liabilities 1,541,286 1,516,367 Consolidated statement of changes in equity for the year ended 31st December 2004 (Expressed in Renminbi Thousand Yuan) Share Capital Surplus Accumulated capital reserve reserves losses Total equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1st January 2003 296,962 565,633 62,676 (139,414) 785,857 Net profit for the year - - - 8,482 8,482 Dividend paid - - - (614) (614) Balance at 31st December 2003 and 1st January 2004 296,962 565,633 62,676 (131,546) 793,725 Net profit for the year - - - 63,131 63,131 Balance at 31st December 2004 296,962 565,633 62,676 (68,415) 856,856 Consolidated cash flow statement for the year ended 31st December 2004 (Expressed in Renminbi Thousand Yuan) 2004 2003 RMB’ 000 RMB’ 000 Profit before tax 61,738 6,017 Adjustments for: Depreciation of property, plant and equipment 62,629 59,559 Amortization of land use rights 3,708 3,226 Amortization of intangible assets 941 1,024 Amortisation of other assets 7,525 68 Negative goodwill released to income (50) (50) Deferred revenue released to income (160) (160) Gain on disposal of fixed assets, investments (84,534) (5,927) Interest expenses 25,235 28,514 Interest income (4,614) (8,052) Operating cash flows before movements in working capital 72,418 96,073 (Increase) decrease in inventories and property for sale (1,449) 53,408 Decrease (increase) in trade accounts receivable 2,664 (56,574) Decrease in trade accounts payable and accruals (18,387) (64,542) Cash generated by operations 55,246 28,365 Decrease in income tax recoverable 402 6,262 Net cash from operating activities 55,648 34,627 Consolidated cash flow statement for the year ended 31st December 2004 (Expressed in Renminbi Thousand Yuan) 2004 2003 RMB’ 000 RMB’ 000 Net cash from operating activities 55,648 34,627 Investing activities Government grants received 400 4,736 Proceeds from disposal of property, plant and equipment, 90 158 intangible assets and other assets Proceeds from disposal of fixed assets and investments 48,136 78,825 Purchase of fixed assets, intangible assets and other assets (97,137) (163,801) Dividends received 66 - Other investing activities expenditure (1,177) - Net cash used in investing activities (49,622) (80,082) Financing activities Interest paid (29,485) (29,266) Interest received 4,614 8,052 Dividend paid - (614) New bank loans raised 352,245 477,873 Repayments of bank loans (306,385) (395,218) Net cash from financing activities 20,989 60,827 Net increase in cash and cash equivalents 27,015 15,372 Cash and cash equivalents at beginning of year 220,610 205,238 Cash and cash equivalents at end of year Bank balances and cash 247,625 220,610 9.3 Explanation on changes of accounting policy, accounting estimation and settlement compared with the latest annual report √Applicable □Inapplicable VAT 1) According to the Circular on Tax Policy of Pesticide (CS [2003] No. 186 released dated Sep. 23, 2003) promulgated by the Ministry of Finance, General Administration of Customs and State Taxation Administration: the 3rd items of the Article 1 “Policy on Free of VAT in the Production Chain for the homemade Pesticide”in the Circular on Imposing and Free of VAT Policy for Several Agricultural Production Materials Issued by the Ministry of Finance and State Taxation Administration since Jan. 1, 2004. From Jan. 1, 2004, the pesticides produced by the Company were calculated VAT received based on 13% of tax rate; these products includes: methamidophos, 95% of raw powder of Glyphosate, Imidacloprid, pyridaben, trichlorphon, deltamethrin and acephate and so on. 2) The Company changed the export products into agency export since Jan. 1, 2004, the calculation method of VAT of export goods was changed into method of “tax free, tax-offset and tax-rebate”, namely, the tax free refe rs to free of VAT in the Production and sales Chain of the said enterprise for the export self-production goods of production enterprise; the tax-offset refers that VAT payable on domestic sales offset against VAT on purchase for withholdings on VAT should be send back included by raw materials, parts and components, fuel and power used by the production enterprises when they export their self-production goods; the tax-rebate refers to the parties unoffset are rebated when withholdings on VAT of self-production goods exported by the productions enterprises should be offset in current month is bigger than VAT payable. 3) The chemical industry products produced by the Company were calculated VAT received based on 17% of tax rate; these products includes: liquid chlorine, hydrochloric acid, liquid hydroxide, sodium hydroxide and Spermine, etc.. 9.4 Contents, correct amount, reason and its influence of significant accounting errors □Applicable √Inapplicable 甲胺磷(METHAMIDOPHOS) 9.5 Explanation on change of consolidated scope compared with the latest annual report √Applicable □Inapplicable The company’ s consolidated scope of statement occurred the following changes in this period: 1) In according to resolutions of the 14th meeting of the 4th Board of Directors and the st 1st Extraordinary Shareholders’General Meeting for 2004, the Company transferred its 70% equity of Sanonda Qichun Co., Ltd. with net assets of Sanonda Qichun Co., Ltd. after auditing ended Sep. 30, 2004. The said transaction has been completed in the report period. In this period, the Company only consolidated the income statement and cash flow statement from Jan. to Sep. 2004 of Sanonda Qichun Co., Ltd.. 2) The Company signed the Equity Transfer Agreement in Jingzhou City of Hubei Province on Sep. 24, 2004 with Sanonda Group Corporation (hereinafter referred to as the Group Corporation). And approved by the resolution of the 12th meeting of the 4th Board of Directors, the Company purchased 90% equity of Jingzhou Sanonda Financial Consultation Co., Ltd. (hereinafter referred to as Financial Consultation Co.) held by the Group Corporation. The base date of this transaction was Aug. 31, 2004. In this period, the Company consolidated the balance sheet as at Dec. 31, 2004 and the income statement and cash flow statement from Sep. to Dec. 2004 of Financial Consultation Co.. 3) In the report period, the Company invested RMB 3.25 million to set up Jingzhou Longhua Petroleum Chemical Industry Co., Ltd. (hereinafter referred to as Longhua Chemical Industry) with a natural person Chen Tai Ping, and the Company took 65% of registered capital of Longhua Chemical Industry. In this period, the Company consolidated its balance sheet and income statement and cash flow statement. Board of Directors of Hubei Sanonda Co., Ltd. Apr. 18, 2005