深粮控股(000019)深深宝Ｂ2004年年度报告摘要（英文版）

SHENZHEN SHENBAO INDUSTRIAL CO., LTD. SUMMARY OF ANNUAL REPORT 2004 (B-SHARE) §1. Important Notice: 1.1 The Board of Directors of Shenzhen Shenbao Industrial Co., Ltd. (hereinafter referred to as the Company) and its directors individually and collective ly 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. 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 directors stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. 1.3 All directors attended the Board meeting. 1.4 K.C.Oh & Company Certified Public Accountains issued unqualified Auditors’ Report for the Company. 1.5 Mr. Zeng Pai, Chairman of the Board as well as General Manager of the Company and Ms. Zeng Suyan, person in charge of accounting organ (namely head of the Planning and Financing Department) 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 Shenshenbao-A, Shenshenbao-B Stock code 000019, 200019 Listed stock exchange Shenzhen Stock Exchange Registered address and office address Registered address: 28/F, Tower B, C of Bao’an Plaza, No. 1002, Sungang East Road, Shenzhen Office address: 28/F, Tower B, C of Bao’an Plaza, No. 1002, Sungang East Road, Shenzhen Post code Post code of registered address: 518020 Post code of office address: 518020 Internet web site of the Company http://www.sbsy.com.cn E-mail of the Company sbsy@sbsy.com.cn 1 2.2 Contact person and method Secretary of Board of Directors Securities Affairs Representative Name Mr. Liu Xiongjia Contact Address 28/F, Tower B, C of Bao’an Plaza, No. 1002, Sungang East Road, Shenzhen Telephone (86)755-25507480 Fax (86)755-25507480 E-mail a0019@21cn.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB’000 Items Amount Profit before taxation (2,118) Profit attributable to shareholders 4,309 Operating profit （43,457） Other profit 50,401 Net cash flow arising from operating activities (10,531) Net increase in cash and cash equivalents (18,828) 3.2 Major financial indexes Unit: RMB’000 Items 2004 2003 2002 Turnover 64,558 61,787 77,134 Profit attributable to shareholders 4,309 (44,852) (53,394) Total assets 467,229 446,314 455,161 Shareholders’equity 235,599 231,290 276,142 Earnings per share (RMB) 0.0237 (0.2465) (0.2935) Weighted average earnings per share (RMB) 0.0237 (0.2465) (0.2935) Net assets per share (RMB) 1.2950 1.2714 1.518 Return on equity (%) 0.0183 (0.1939) (19.34) 2 3.3 Difference in net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) □Applicable √Inapplicable §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of changes in shares Unit: Share Before the Increase / decrease After the change in this time (+, -) change Subtotal I. Unlisted shares 1. Sponsors’shares 115,838,611 0 115,838,611 Including: State-owned shares 44,090,145 0 44,090,145 Domestic legal person’ s share 71,748,466 0 71,748,466 Foreign legal person’s share 0 0 0 Others 0 0 0 2. Raised legal person’s shares 0 0 0 3. Inner employees’shares 7,681 0 7,681 4. Preference shares or others 0 0 0 Total unlisted shares 115,846,292 0 115,846,292 II. Listed shares 1. RMB ordinary shares 39,940,796 0 39,940,796 2. Domestically listed foreign shares 26,136,000 0 26,136,000 3. Overseas listed foreign shares 0 0 0 4. Others 0 0 0 Total listed shares 66,076,796 0 66,076,796 III. Total shares 181,923,088 0 181,923,088 3 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulation share Total shareholders at the end of report period 29,713 Particulars about shares held by the top ten shareholders Increase / Shares held Share Nature of shareholders Type of shares decrease in at the Proportion pledged (State -owned Name of Shareholders (Circulating/N the report year-end (%) or frozen shareholder or Foreign on-circulating) period (share) (share) shareholder) SHENZHEN AGRICULTURAL 0 61,848,466 34.00% Non-circulating 0 PRODUCTS CO., LTD. SHENZHEN INVESTMENT 0 53,990,145 29.68% Non-circulating 0 State-owned shareholder HOLDING CORPORATION CHEN YONG QUAN 384,299 0.21% Circulating Foreign shareholder XIAO LI ZHU 240,000 0.13% Circulating Foreign shareholder LU XUE 221,900 0.12% Circulating Foreign shareholder ZHOU WEN LI 200,000 0.11% Circulating Foreign shareholder ZENG XIAN BAO 189,700 0.10% Circulating Foreign shareholder KOTO TRANSPORT LTD 183,468 0.10% Circulating Foreign shareholder LU XIAO 180,000 0.09% Circulating Foreign shareholder LIANG HAI YAN 131,500 0.07% Circulating Foreign shareholder Particulars about shares held by the top ten shareholders of circulation share Shareholder’s name (full name) Number of circulation shares held Type (A-share, B-share, H-share at the year-end (share) and other) CHEN YONG QUAN 384,299 B-share XIAO LI ZHU 240,000 B-share LU XUE 221,900 A-share ZHOU WEN LI 200,000 B-share ZENG XIAN BAO 189,700 B-share KOTO TRANSPORT LTD 183,468 B-share LU XIAO 180,000 B-share LIANG HAI YAN 131,500 B-share YU XIU YING 129,566 A-share LIU XIAO CHUAN 125,000 B-share 4 Explanation on 1. On Sep. 25, 2002, Shenzhen Investment Holding Corporation (hereinafter referred to as associated Investment Holding) signed the Agreement for Equity Transfer with Shenzhen Jindazhou relationship Industrial Co., Ltd. (hereinafter referred to as Jindazhou Company), which 53,990,145 shares among the top of the Company held by Investment Holding were transferred to Jindazhou Company (For ten shareholders detail, please refer to Public Notic e published in Securities Times and Ta Kung Pao dated Sep. or consistent 27, 2002.). On Dec. 11, 2003, the Company received Notification on Relieving Agreement for action Equity Transfer of Shenzhen Shenbao Industrial Co., Ltd. from Shenzhen Investment Holding Corporation (for details, please refer to the public notice of the Company in Securities Times and Ta Kung Pao dated Dec. 12, 2003). On Apr. 2, 2004, Investment Holding informed the Company by letter that Jindazhou Company agreed to relieve the agreement for equity transfer (for details, please refer to the public notice published on Securities Times and Hong Kong Ta Kung Pao dated Apr. 6, 2004). 2. Based on State-owned Assets Supervision and Administration Commission of Shenzhen Municipal Government (hereinafter referred to as “Shenzhen GZW”) SGZW [2004] No. 89 document, Shenzhen GZW regard Shenzhen Agricultural Products Co., Ltd. (hereinafter referred to as “Agricultural Company”), the controlling shareholder of the Company, as one of the first batch of enterprises put under directly supervision of Shenzhen GZW and implement its duty of subscribe. Amounting to 88,703,978 shares of state-owned share of Agricultural Company (taking up 22.88% of total shares of the Company) held by Shenzhen Commodity & Trade Investment Holdings Company, the original largest shareholder of Agricultural Company, would be transferred to Shenzhen GZW. The relevant transfer and change registration formalities of share equity are under transaction currently (for details, please refer to the public notice published in Securities Times and Hong Kong Ta Kong Pao dated Nov. 11, 2004). 3. Shenzhen GZW released Decision on establishing Shenzhen Investment Holdings Co., Ltd. (SGZW [2004] No. 223 Document): according to the general arrangement of Shenzhen municipal committee and government on state-owned assets management system adjustment, made decision of merging Shenzhen Investment Holding Corporation, Shenzhen Construction Investment Holdings Company and Shenzhen Commodity & Trade Investment Holdings Company, and establishing Shenzhen Investment Holdings Co., Ltd.. Shenzhen Investment Holdings Co., Ltd. belongs to state-owned sole company limited (for details, please refer to the public notice of the Company published in Securities Times and Hong Kong Ta Kong Pao dated Nov. 4, 2004). 4. Shenzhen Investment Holding Corporation held 8,565,446 shares of Shenzhen Agricultural Products Co., Ltd (“Agricultural Products”), taking 2.21% of total share capital of Agricultural Products. 5. The Company is not aware whether there exists no associated relationship or belongs to consistent actionist regulated by the Management Regulation of Information Disclosure on Change of Shareholding for Listed Companies among the top ten circulation shareholders, or between the top ten circulation shareholders and the top ten shareholders or not. 4.3 Particulars about the controlling shareholders and actual controller of the Company 5 4.3.1 Particulars about change in the controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller 1. Name of controlling shareholder: Shenzhen Agricultural Products Co., Ltd. Legal representative: Mr. Chen Shaoqun Date of foundation: Jan. 14, 1989 Main business scope: the company is engaged in constructing wholesale market of agricultural products; deals in market lease and sale; domestic trading, supply and marketing of materials (excluding monopoly products); and offer auxiliary establishment to market of agricultural products wholesale, for instance, rest house, canteen, restaurant, transportation, load and unload, storage, packing (business license of specific item is to be applied in addition); service of information counseling, and wholesale of sugar, tobacco and drink. Registered capital: RMB 387,663,000 2. The first largest shareholder of the controlling shareholder of the Company: Name: Shenzhen Commodity & Trade Investment Holdings Company Legal representative: Mr. Feng Yulin Date of foundation: Apr. 30, 1997 Main business scope: investment and setting up industry (specific item is to be applied in addition), domestic trading and supply and marketing of materials (excluding monopoly products). Registered capital: RMB 800,000,000 3. State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government established with hanging out their shingle on Aug., 2004, as special entity directly under Shenzhen People ’ s Government, implements its qualification of provider on behalf of our nation and carry out supervision and administration according to law for state-owned assets which authorized to be supervised. 6 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: STATE-OWNED ASSETS SUPERVISION & ADMINISTRATION COMMISSION OF SHENZHEN MUNICIPALITY GOVERNMENT 100% 100% SHENZHEN COMMODITY & TRADE SHENZHEN INVESTMENT HOLDING INVESTMNENT HOLDINGS CORPORATION COMPANY 22.88% 22.88% 2.21% SHENZHEN AGRICULTURE PRODUCTS CO., LTD. 29.68% 34% SHENZHEN SHENBAO INDUSTRIAL CO., LTD. §5. About Directors, Supervisors and Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Shares held at Shares held at Reason for Name Title Sex Age Office term the year-begin the year-end change Zeng Pai Chairman of the Board, Jul. 28, 2003- Male 34 0 0 General Manager Jul. 28, 2006 Tian Yanqun Independent Director Jul. 28, 2003- Male 58 0 0 Jul. 28, 2006 Fan Zhiqing Independent Director Jul. 28, 2003- Male 56 0 0 Jul. 28, 2006 Wu Ying Independent Director Jul. 28, 2003- Female 42 0 0 Jul. 28, 2006 Zhao Guorong Director Jul. 28, 2003- Female 54 0 0 Jul. 28, 2006 Chen Xiaohua Director Jul. 28, 2003- Male 39 0 0 Jul. 28, 2006 Zhang Jian Director Jul. 28, 2003- Male 32 0 0 Jul. 28, 2006 Zuo Heping Chairman of the Jul. 28, 2003- Female 55 7,680 7,680 Supervisor Committee Jul. 28, 2006 Peng Ying Supervisor Jul. 28, 2003- Male 44 0 0 Jul. 28, 2006 Li Yiyan Supervisor Jul. 28, 2003- Female 39 0 0 Jul. 28, 2006 Guan Lihua Standing Deputy Jul. 28, 2003- Male 51 0 0 General Manager Jul. 28, 2006 Fang Jianhui Deputy General Jul. 28, 2003- Male 39 0 0 Manager Jul. 28, 2006 Zheng Yuxi Deputy General Jul. 28, 2003- Male 43 0 0 Manager Jul. 28, 2006 Zeng Suyan Director of Planning & Jul. 28, 2003- Female 50 0 0 Financing Dept. Jul. 28, 2006 Liu Xiongjia Secretary of the Board Jul. 28, 2003- Male 33 0 0 of Directors Jul. 28, 2006 7 5.2 Particulars about directors and supervisors holding the position in Shareholding Company √Applicable □Inapplicable Name Name of shareholding Company Title in shareholding Office term Drawing the payment Company from the Company (Yes / No) Zhao Guorong Shenzhen Agricultural Products Director, Chief Jul. 31, 2003- No Co., Ltd. Financial Officer Jul. 31, 2006 Chen Xiaohua Shenzhen Agricultural Products Director, Deputy Jul. 31, 2003- No Co., Ltd. General Manager, Jul. 31, 2006 Secretary of the Board Zhang Jian Shenzhen Agricultural Products Secretary of HR Jul. 1, 2003 to No Co., Ltd. now 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 750,000 Total annual payment of the top three directors RMB 242,000 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 50,000 per person/year Other treatment of Independent Directors According to the relevant regulations of Administration Rules of Listed Companies and the Company’ s actual situation, the Company respectively paid allowance of RMB 50,000 (tax included) to independent directors per year and necessary fees (included but not limited to traffic fees and accommodation etc.), when independent directors attend the Shareholders’ General M eeting and the Board meeting or exercise other authority according to the relevant laws, regulations and Articles of Association of the Company. In the report year, the Company respectively paid RMB 59,000 to Mr. Tian Yanqun, Mr. Fan Zhiqing and Ms. Wu Ying. Name of directors and supervisors received no In the report period, Ms. Zhao Guorong, Mr. Chen Xiaohua, Mr. Zhang payment or allowance from the Company Jian Director of the Company, and Mr. Peng Ying, Supervisor of the Company, received no remuneration from the Company, but drew their remuneration from the controlling shareholder, namely Shenzhen Agricultural Products Co., Ltd., or its shareholding subsidiaries. Payment Number of persons RMB 100,000 ～ RMB 150,000 2 RMB 80,000 ～ RMB 100,000 3 RMB 70,000 ～ RMB 80,000 3 8 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, in active and steady operating principles, based on protecting rights and interests of shareholders, the Company set out from strengthening internal management, kept propelling constructive adjustment of products, cultivated new profit increasing points, overcame operating pressure and financial risks brought from sustainable price-rising of raw materials and auxiliary materials, rising of production costs, fierce competition of soft drinks, and resolving historical residual guarantees and bad assets. In 2004, net profit of the Company was RMB 4,309,000 and the Company realized profit from losses. 1. In the aspect of strengthening internal management, in the report period, every item of internal control system of the Company furthered sounded and consummated; Making use of ISO 9001 of the Company: 2000 reappraisal and application for HACCP Certification, the Company conducted relevant training about ISO, HACCP and GMP system within the Company, strengthened techniques flow management, and innovated internal technology, which cut down the materials consummation level of products, and in some extent, digested cost pressure brought from rising-up of raw materials and auxiliary materials. On the other hand, the Company set out from the point of optimizing human resources arrangement, reformed function divisions and factories, reduced organs and employees, resolved the partial historical problem of surplus staff, so the salary expenses decreased sharply year-on-year, which digested price-rising of partial raw materials and auxiliary materials, and the working efficiency was further improved, which basically attained to the objective of reducing staff for greater efficiency. 2. Continue to optimize and adjust product structure and firmly cultivate new profit increasing points. In the report period, according to the requirements of the market, the Company timely introduced four new products into market, consummated product matrix of flavorings and drinks; the Company established industry development direction with withdrawing tea and natural plants as the core, supported relevant controlling subsidiaries strongly; the core products, instant tea powder and tea extract achieved good sale achievements with sales volume increasing sharply, which successfully entered markets of Japan, Korea and Hong Kong etc.. 3. In the report period, controlling subsidiary, new manufactory of Shenzhen Shenbao Huacheng Food Co., Ltd. (hereinafter referred to as “Shenbao Huacheng Company”) successfully put into production. In R&D and production, new manufactory adopted advanced detect analysis instrument in the world and modernized pipelining production lines, which was at present scale instant tea powder and tea extract manufactory of the largest scale with the most advanced equipments. New manufactory has passed HACCP certification. Both the safety and sanitation of food and product quality control were promoted to a higher level. 9 6.2 Statement of main operations classified according to industries or products Unit: RMB’000 Main operations classified according to industries Classified according to Income from Cost of Gross Increase/decreas Increase/decreas Increase/decrease industries or products main main profit e in income e in cost of main in gross profit operations operations ratio (%) from main operations over ratio over the last (RMB) (RMB) operations over the last year (%) year (%) the last year (%) Manufacture of condiments 20,442 13,047 36.17 -9.54 -2.89 -4.38 Manufacture of soft drinks 26,059 25,318 2.85 6.60 9.19 -2.29 Manufacture of teas 17,355 12,952 25.37 25.36 30.48 -2.93 Leasing service 702 0.00 100.00 -21.92 Including: related transactions Main operations classified according to products “San Jing” brand condiments 20,442 13,047 36.17 -9.54 -2.89 -4.38 Lactobacillus milk series 5,629 5,404 4.00 -6.28 -4.63 -1.66 Soft packing drinks 20,430 19,914 2.53 10.80 13.65 -2.44 Tea powder and tea juice 17,355 12,952 25.37 25.36 30.48 -2.93 series Including: related transactions Pricing principle of related transaction Naught Explanation on necessity and consistency of Naught related transaction 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’000 Areas Income from main operations Gross profit South China 35,966 -7.79 North China 6,334 28.04 East China 19,810 16.95 Export 2,448 6.4 Particulars about the customers of purchase and sales Unit: RMB’000 Total amount of purchase of the 10,133 Proportion in the total 17.71% top five suppliers amount of purchase Total amount of sales of the top 27,254 Proportion in the total 42.09% five sales customers amount of sales 10 6.5 Operation of share-holding companies √Applicable □Inapplicable Unit: RMB’000 Name of share-holding company Shenzhen Pepsi Cola Beverage Co., Ltd. Investment earnings contributed 50,318 Proportion in net profit of 1,167.68% in the period listed company Share-holding Business scope Production and sales of carbonic acid drinks represented by company Pepsi in the areas of Shenzhen, Huizhou, Shantou and Meizhou etc. Net profit 125,794 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) compared with the previous year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year √Applicable □Inapplicable The Company’ s net profit for 2004 was RMB 4,309,189.63, an increase of 109.61% over the net profit of RMB -44,851,697.69 in the last year, which was mainly because the Company suffered losses by SARS epidemic and resolving guarantee problem left from history in 2003, and periodical expenses for 2004 decreased and investment income increased by a relative big margin over the same period of last year. 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 In the report period, sustainable rising-up price of petroleum, petrochemicals, and agricultural and sideline products resulted in sharp rising in costs of partial raw and auxiliary materials in need of production of main products of the Company, and increasing of power costs. It’s estimated in 2005 the Company still encounted pressure brought from rising of productive costs. 11 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 Unit: RMB’000 Total amount of raised proceeds 175,014 Total amount of raised used in the report year 73,993 proceeds Total amount of raised proceeds 46,358 used accumulatively Committed projects Compliance Compliance Planned Change Actual Accrued with planned with estimated amount of projects amount of amount of progress or earnings or input or not input earnings not not Project of Henggang new plant of Shenzhen Pepsi Cola 29,000 No 15,606 17,569 No Yes Beverage Co., Ltd. Project of Shenbao Industrial 58,000 No 30,752 0.00 No No City Total 87,000 - 46,358 17,569 - - Explanation on not reaching The project of Henggang new plant of Shenzhen Pepsi: the project of Henggang planned progress and new plant of Shenzhen Pepsi is under the operating management of Shenzhen earnings Pepsi and its situation of earnings is reflected in the whole achievements of Shenzhen Pepsi. The part of not invested shall be dicided according to the resolutions of the Board of Directors of Shenzhen Pepsi depending on the expansion situation of Shenzhen Pepsi in the market of East Guangdong and Dongguan. The project of Shenbao Industrial City: in compliance with the principle of cautious investment, based on adjusting the design of relevant engineering accordingly after adjusting product structure according to the changes in the market, the Company invested RMB 175,014,000 into the said project in the report period. The part that was still not invested would be invested gradually by stages according to the progress of the said project. In the report period, the said project hasn’t produce income. Explanation on reasons and Naught procedures of change Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds non-raised through shares offering □Applicable √Inapplicable 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the 12 Certified Pub lic Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors □Applicable √Inapplicable Profit estimation of the new report 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 did not appropriate share distribution preplan though the Company achieved the profit in the report period √Applicable □Inapplicable The reasons why the Company did not appropriate share distribution Usage and plan of preplan though the Company achieved the profit in the report period undistributed profit Audited by Shenzhen Dahua Tiancheng Certified Public Accountants under Chinese Accounting Standards, the Company’s net profit was RMB 4,309,000 in 2004; audited by K.C.Oh & Company Certified Public Accountants under International Accounting Standards, the Company’s net profit was RMB 4,309,000 in 2004. According to the relevant provisions in Company Law of the P.R.C. and the Articles of Association of the Company, based on the net profit of the Company amounting to RMB 4,309,000 audited by Shenzhen Dahua Tiancheng Offset the Certified Public Accountants in 2004, the retained earnings of the Company’s Company amounted to RMB -44,695,000 in 2004. accumulative losses According to the relevant provisions in Company Law of the P.R.C. and Standardized Interlocution No. 3 of Information Disclosure on Publicly Issuing Securities – Origin, Procedures and Information Disclosure of Losses Offsetting released by CSRC, before the Company’s accumulative losses being offset at full amount, it was forbidden to distribute dividends to shareholders or convert capital reserve into share capital. In 2004, the Board of the Company decided to neither distribute profits nor convert capital reserve into share capital. 13 §7. Significant Events 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 sales of assets □ Applicable √ Inapplicable 7.3 Important guarantee √ Applicable □ Inapplicable Unit: RMB’000 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) Guangdong Joint Jun. 10, 2003- Sunrise Holdings Feb. 6, 2004 8,580 Responsibility No No Jan. 10, 2004 Co., Ltd. Guarantee Guangdong Joint Feb. 6, 2004- Sunrise Holdings Jun. 10, 2003 4,264 Responsibility No No Feb. 6, 2005 Co., Ltd. Guarantee Guangdong Joint Dec. 31, 1998- Sunrise Holdings Dec. 31, 1998 34,115 Responsibility No No Oct. 31, 1999 Co., Ltd. Guarantee Total amount of guarantee in the report period 8,580 Total balance of guarantee at the end of the report period 46,959 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 125,000 Total balance of guarantee for controlling subsidiaries at the end of the 95,000 report period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 141,959 The proportion of the total amount of guarantee in the net assets of the 60.75% Company Particulars about the guarantees out of line Total amount of guarantee for other related parties, which the Company 0.00 or 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 No exceeded 50% (Yes of No) Total amount of guarantee breaking regulations 0.00 14 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 7.5 Entrusted assets □ Applicable √Inapplicable 7.6 Implementation of commitment items □Applicable √Inapplicable 7.7 Significant lawsuit and arbitration √Applicable □ Inapplicable I. Significant lawsuits occurred in the report period 1. The case concerning the joint- liability loan guarantee amounting to RMB 7 million the Company provided for Shenzhen China Bicycle Company (Holdings) Limited (hereinafter referred to as “Shen China”) from China Construction Bank Shenzhen Branch (hereinafter referred to as “Construction Bank ”) has been closed with reconciliation. In 2003, the Company and Construction Bank reached the Agreement on Interest Reduction and Exemption, and according to the agreement, the Company had already paid back the RMB 7 million in two stages for Shen China and fulfilled its guarantee responsibilities (For details, please refer to Annual Report 2003 of the Company.); as verdict by (1999) YFJYZZI No. 26 Civil Judgment Document made by Guangdong High People’ s Court on the case concerning the joint- liability guarantee the Company provided for the Letter of Credit amounting to USD 800 thousand applied for opening by Shen China at Shenzhen Branch of Bank of China, the Company undertook joint repayment responsibility. Ended the first half year of 2004, the Company had repaid RMB 6.632 million (translated into USD 800 thousand) for Shen China and fulfilled the guarantee responsibility (For details, please referred to Semi- Annual Report 2004 of the Company.). To safeguard the rights and interests of the Company, the Company sued Shen China to Shenzhen Intermediate People ’ s Court, and requested for a verdict to order Shen China to repay the sum of money, which the Company had paid in advance, as well as to compensate relevant loss arising from the capital occupancy. Shenzhen Intermediate People’ s Court judged and ordered Shen China to repay the RMB 7 million the Company had paid in advance, and the interest arising during the period of capital occupancy [(2004) SZFMECZI No. 448]. Since Shen China had not fulfilled its repayment duty according to the time and contents stipulated in the judgment document, the Company applied to Shenzhen Intermediate People’ s Court on Nov. 20, 2004 for compulsory enforcement. Shenzhen Intermediate People’ s Court sent (2004) SZFZZI No. 1382 Civil Judgment and Mandamus to Shen China, as well as (2005) SZFZZI No. 208 Civil Judgement and Mandamus on Jan. 4, 2005, and ruled that the property of Shen China (RMB 14.132 million as the limit) should be sealed up and frozen, and that Shen China should fulfill the duties stipulated in effective legal papers or regulated by law within five days from the day the Mandamus arrived. Should Shen China defaulted beyond the time limit, Shenzhen Intermediate People ’ s Court would make compulsory enforcement according to law (For details, please refer to notifications of the Company published in Securities Times and Hong Kong Ta Kung Pao dated Jul. 30, 2004, Nov. 20, 2004, Dec. 16, 2004, Dec. 29, 2004 and Jan. 18, 2005.). II. Other lawsuits 1. The case concerning the joint- liability loan guarantee amounting to RMB 30 million the 15 Company provided for Shenzhen Nanfang Tongfa Industrial Company (hereinafter referred to as “Nanfang Tongfa ”) has been closed through mediation on Jan. 11, 2002 (For details, please refer to public notices of the Company published in Securities Times and Hong Kong Ta Kung Pao dated Mar. 13, 2002.). Ended 2003, the Company had repaid in advance the principal, interest, as well as the legal fare for the trial of first instance and the preservation cost for Nanfang Tongfa, amounting to RMB 38.003 million, and fulfilled the guarantee liability, according to the requirements of Civil Mediation Agreement. The Company had applied to Shenzhen Intermediate People’ s Court to compulsorily enforce the assets of Nanfang Tongfa. In January 2005, Shenzhen Intermediate People ’ s Court issued the (2004) SZFZZI No. 115 Civil Judgement and ruled that, since Nanfang Tongfa had no executable assets, (2001) YGFJEZZI No. 111 Civil Mediation Agreement sent by Guangdong High People’ s Court should be suspended, and that, after the case of execution suspension disappeared, the Company can applied to Shenzhen Intermediate People’ s Court for resumption of execution (For details, please refer to notifications of the Company published in Securities Times and Hong Kong Ta Kung Pao dated Jan. 22, 2005.). 2. In December 2002, the case concerning the joint- liability loan guarantee amounting to the HKD 3 million the Company provided for Guangdong Sunrise Holdings Co., Ltd. (the former Shenzhen Lionda Holdings Co., Ltd., hereinafter referred to as “Sunrise Company” for short) from Shenzhen Branch of Industrial and Commercial Bank of China has been closed through mediation. On Jan. 13, 2003, the Company repaid in advance for Sunrise Company, the principal, HKD 3 million as well as the interest amounting to HKD 100 thousand, while surplus interest was exempted. The Company would exercise relevant rights through legitimate means. 3. The case concerning the joint- liability loan guarantee amounting to HKD 6 million the Company provided for Sunrise Company from Nantou sub-branch of Shenzhen Development Bank Co., Ltd. has been closed with a reconciliation. Ended the year 2003, the Company had repaid a sum of principal HKD 2 million and the interest arising in advance for Sunrise Company. The remaining principal of HKD 4 million was made on- lending, and the Company would continue to provide guarantee (For details, please refer to notifications of the Company published in Securities Times and Hong Kong Ta Kung Pao dated May 13, 2003.) Sunrise Company had not repaid this loan by the expiration day of the loan in the report period. 4. The case concerning the joint- liability loan guarantee amounting to RMB 8 million the Company provided for Sunrise Company from Shenzhen Nanyuan sub-branch of Guangdong Development Bank Co., Ltd. (formerly Nanyuan Sub-branch of she nzhen branch of Guangdong Development Bank Co., Ltd.) has been closed with a reconciliation. Ended the year 2003, the Company had repaid a sum of interest amounting to RMB 1.939 million in advance for Sunrise Company, while the remaining principal and interest amounting to RMB 8.58 million would continue to be provided as a loan to Sunrise Company, and the Company would continue to provide join- liability guarantee for it. The guarantee term was from Feb. 6, 2004 to Feb. 6. 2005. 5. The case about the joint- liability loan guarantee amounting to RMB 5.28 million the Company provided for Shenzhen Tellus Holdings Co., Ltd. (hereinafter referred to as “Shen Tellus”for short) from Shenzhen International Trust & Investment Company has been closed with a reconciliation. In March 2002, the Company repaid RMB 5.28 million in advance for Shen Tellus. Ended March 2004, the Company had recovered the whole principal amounting to RMB 5.28 million that had been repaid in advance for Shen Tellus, as well as compensation fund amounting to RMB 200 thousand. 16 7.8 Particulars about the performance of obligations of Independent Directors Particulars about the independent directors attending the Board Name of Independent This year times Presence in Entrusted Absence Notes Directors of attending the person presence (Times) Board meeting (times) Tian Yanqun 5 5 0 0 Fan Zhiqing 5 5 0 0 Wu Ying 5 5 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 I. Particular about work of the Supervisory Committee in the report period In the report period, the Supervisory Committee has held two meetings: (I) The 2nd meeting of the 5th Supervisory Committee was held on Apr. 8, 2004. The following resolutions were examined and approved at the Meeting: (1) 2003 Report of the Supervisory Committee; (2) 2003 Financial Settlement Report; (3) Annual Report 2003 and its Summary (A-share and B-share respectively); (4) 2003 Profit Distribution Preplan; (5) Opinion of the Supervisory Committee on the Relevant Issues of Withdrawal of Reserve for Devaluation of Investment and Estimated Liabilities. The public notice on the aforesaid resolutions of the meeting was published in Securities Times and Hong Kong Ta Kung Pao respectively dated Apr.10, 2004. (II) The 3rd meeting of the 5th Supervisory Committee was held on Aug. 5, 2004. The following resolutions were examined and approved at the Meeting: (1) 2004 Semi-annual Report and its Summary (A-share and B-share respectively). The public notice on the aforesaid resolutions was published in Securities Times and Hong Kong Ta Kung Pao respectively dated Aug. 6, 2004. 17 II. Independent opinion of the Supervisory Committee on relevant issues (I) Operation according to the laws In the report period, the Supervisory Committee conducted supervision over the procedures of holding Board meetings and Shareholders’General Meeting, resolutio ns, implementation of the resolutions of the Shareholders’General Meeting by the Board of Directors, status of the senior executives in implementing their duties and the Company’s management system according to the relevant laws and regulations of the State. In our opinion, in 2004, the Board of Directors carried out the operation in a standardized way strictly according to the PRC Company Law, the Securities Law, the Listing Rules, the Articles of Association and other relevant regulations. The Company’ s directors and managers worked carefully and responsibly; the Company’ s decision- making was religious and solid; the Company has established the relative perfect internal control system. We have found no directors or senior executives ever involved in any actions against the law, rules and regulations, or the Articles of Association or harmful to the interest of the Company and the shareholders in the process of implementation of their duties. (II) Financial Inspection The Supervisory Committee has made careful and serious inspection on the Company’ s financial system and financial position. In our opinion, 2004 Financial Report of the Company has truly reflected the Company’ s financial position and operation achievements. The auditors’report and the auditors’opinion on the relevant issues produced by Shenzhen Dahua Tiancheng Certified Public Accountants and Hong Kong K.C. Oh & Company Certified Public Accountants are objective and fair. (III). The actual investment project funded by the latest proceedings si the same as the commitment. (IV) In the report period, there has existed no insider transaction or action harmful to the part shareholders’right and interest or in connection with loss of the Company’s assets. (V) In the report period, the Company had no significant related transactions and no actions harmful to the interest of the Company. 18 9. Financial Report 9.1 Auditing opinions Report of the auditors to the members of Shenzhen Shenbao Industrial Co., Ltd. (Incorporated in the People’ s Republic of China with limited liability by shares) We have audited the accompanying balance sheet of Shenzhen Shenbao Industrial Co., Ltd. as of December 31, 2004 and the related statements of income, cash flows and changes in equity for the year then ended. These financial statements are the responsibility of the Group ’ s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2004 and the results of its operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards. K. C. Oh & Company Certified Public Accountants Hong Kong : April 11 , 2005 19 9.2 Financial Statements Shenzhen Shenbao Industrial Co., Ltd. Consolidated income statement for the year ended December 31, 2004 2004 2003 Note RMB’000 RMB’000 Turnover (5) 64,558 61,787 Cost of sales ( 51,318 ) ( 46,551 ) Gross profit 13,240 15,236 Other revenue (6) 46 1,351 13,286 16,587 Distribution costs ( 22,973 ) ( 27,372 ) Administrative expenses ( 33,667 ) ( 39,365 ) Other operating expenses ( 103 ) ( 136 ) Operating loss ( 43,457 ) ( 50,286 ) Finance costs ( 6,912 ) ( 4,368 ) Operating loss before exce ptional items ( 50,369 ) ( 54,654 ) Exceptional items (7) ( 2,150 ) ( 26,226 ) Loss after exceptional items ( 52,519 ) ( 80,880 ) Share of profit from associates 50,401 32,157 Loss before taxation (8) ( 2,118 ) ( 48,723 ) Taxation (9) 380 ( 499 ) Loss before minority interests ( 1,738 ) ( 49,222 ) Minority interests 6,047 4,370 Profit/(loss) attributable to shareholders 4,309 ( 44,852 ) Accumulated loss brought forward ( 45,004 ) ( 47,881 ) Loss before set off ( 40,695 ) ( 92,733 ) Loss set off - 47,729 Accumulated loss carried forward ( 40,695 ) ( 45,004 ) Profit/(loss) per share –basic (10) RMB0.0237 RMB(0.2465) 20 Shenzhen Shenbao Industrial Co., Ltd. Consolidated balance sheet as at December 31, 2004 2004 2003 Note RMB’000 RMB’000 Non-current assets Fixed assets (11) 103,954 68,969 Intangible assets (12) 37,598 39,156 Interests in associates (13) 169,443 148,572 Other investments (14) 22,006 37,745 333,001 294,442 Current assets Tax recoverable 2,046 1,512 Inventories (15) 19,429 16,126 Accounts receivable (16) 21,818 23,382 Prepayments, deposits and others receivable (17) 56,276 57,365 Cash and bank balances 34,659 53,487 134,228 151,872 Current liabilities Dividends payable ( 218 ) ( 218 ) Amount due to a related company (18) ( 6,201 ) ( 6,201 ) Accounts payable ( 12,994 ) ( 11,564 ) Receipts in advance ( 4,500 ) ( 14,040 ) Others payable and accrued expenses ( 42,936 ) ( 19,557 ) Anticipated liabilities ( 19,782 ) ( 23,298 ) Short-term bank loans (19) ( 140,000 ) ( 130,000 ) ( 226,631 ) ( 204,878 ) Net current liabilities ( 92,403 ) ( 53,006 ) Assets less liabilities 240,598 241,436 Minority interests ( 4,999 ) ( 10,146 ) Net assets employed 235,599 231,290 Financed by : Share capital (20) 181,923 181,923 Reserves 53,676 49,367 Shareholders’equity 235,599 231,290 21 Shenzhen Shenbao Industrial Co., Ltd. Consolidated statement of changes in equity for the year ended December 31, 2004 Retained Share Capital Surplus earnings/ capital reserves reserves (loss) Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 As at January 1, 2003 181,923 108,490 33,610 ( 47,881 ) 276,142 Loss for the year of 2003 - - - ( 44,852 ) ( 44,852 ) Accumulated loss set off - ( 27,486 ) ( 20,243 ) 47,729 - As at December 31, 2003 181,923 81,004 13,367 ( 45,004 ) 231,290 As at January 1, 2004 181,923 81,004 13,367 ( 45,004 ) 231,290 Profit for the year of 2004 - - - 4,309 4,309 As at December 31, 2004 181,923 81,004 13,367 ( 40,695 ) 235,599 According to the corporation law and relevant regulations of a joint stock limited company, the Company’ s specified profit should be classified as capital reserves, which include share premium, surplus on revaluation of assets and other investments, etc. Capital reserves are normally used for issue of new shares, or for write-off or other-than-temporary provision when other investments are revalued downwards. Surplus reserves comprise statutory reserve, statutory public welfare fund and discretionary surplus reserve. The Company is required to transfer an amount of not less than 10% of the profit after making up the accumulated loss to statutory reserve until it is up to 50% of the registered share capital. Statutory reserve can be used to cover current year loss or for issue of ne w shares. The amount of statutory reserve to be utilized for issue of new shares should not exceed an amount such that the balance of the reserve will fall below 25% of the registered share capital after the issue of new shares. The Company is also required to transfer 5% of the profit after making up the accumulated loss to statutory public welfare fund. Statutory public welfare fund shall only be applied for the collective welfare of the Company’ s employees. Discretionary surplus reserve is applied in accordance with the shareholders’resolutions passed in the annual general meeting and can be used to cover current year loss or for issue of new shares. 22 Shenzhen Shenbao Industrial Co., Ltd. Consolidated cash flow statement for the year ended December 31, 2004 2004 2003 RMB’000 RMB’000 Cash flow from operating activities Operating loss before taxation ( 2,118 ) ( 48,723 ) Adjustment items : (Profit)/loss on disposal of fixed assets ( 182 ) 582 Depreciation 6,545 6,426 Amortization of intangible assets 1,558 1,558 Provision for impairment loss of other investments 1,257 4,630 Loss from guarantees 554 21,257 Reversal of impairment loss of assets ( 573 ) ( 385 ) Share of profit from associates ( 50,401 ) ( 32,157 ) Amortization of premium in associates 339 339 Profit from disposal of other investments - ( 750 ) Interest income ( 484 ) ( 881 ) Interest expense 7,421 5,266 Operating cash flows before movements in working capital ( 36,084 ) ( 42,838 ) (Increase)/decrease in inventories ( 3,303 ) 3,218 Decrease in accounts receivable 1,488 4,915 Decrease in prepayments, deposits and others receivable 2,180 3,572 Increase in accounts payable 1,430 1,413 Increase in receipts in advance 4,500 14,040 Increase/(decrease) in others payable and accrued expenses 23,328 ( 1,858 ) Decrease in anticipated liabilities ( 4,070 ) ( 24,477 ) Cash outflow from operating activities before interest and tax payments ( 10,531 ) ( 42,015 ) Interest paid ( 7,843 ) ( 5,378 ) Income tax paid ( 154 ) ( 610 ) Net cash outflow from operating activities c/f ( 18,528 ) ( 48,003 ) (to be cont’d) 23 Shenzhen Shenbao Industrial Co., Ltd. Consolidated cash flow statement for the year ended December 31, 2004 (cont’d) 2004 2003 RMB’000 RMB’000 Net cash outflow from operating activities b/f ( 18,528 ) ( 48,003 ) Investing activities Interest received 484 881 Proceeds from disposal of fixed assets 4,773 404 Purchases of fixed assets ( 45,648 ) ( 27,761 ) Dividends received from associates 29,191 18,730 Proceeds from disposal of other investments - 933 Net cash outflow from investing activities ( 11,200 ) ( 6,813 ) Net cash outflow before financing activities ( 29,728 ) ( 54,816 ) Financing activities Increase in short-term bank loans 10,000 30,000 Minority interests 900 - Net cash inflow from financing activities 10,900 30,000 Decrease in cash and cash equivalents ( 18,828 ) ( 24,816 ) Cash and cash equivalents as at beginning of year 53,487 78,303 Bank deposits - pledged ( 30,000 ) - Cash and cash equivalents as at end of year 4,659 53,487 Analysis of cash and cash equivalents Cash and bank balances 34,659 53,487 Bank deposits - pledged ( 30,000 ) - Cash and cash equivalents 4,659 53,487 24 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 Shenzhen Shenbao Industrial Co., Ltd. Chairman of the Board: Apr. 11, 2005 25