深赛格(000058)Ｂ2005年年度报告摘要（英文）

Stock code: 000058、200058 Notice No.: 2006--004 Short form of the stock: Shen SEG, Shen SEG-B SHENZHEN SEG CO., LTD. SUMMARY OF ANNUAL REPORT 2005 §1. Important Notice 1.1 The Board of Directors, Supervisory Committee of Shenzhen SEG Co., Ltd. and its directors, supervisors and senior executives individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are neither material omissions nor errors which would render any statement misleading. The summary of 2005 annual report 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, supervisor and senior executive stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of Annual Report 2005 or have objection for this report. 1.3 As audited, domestic Zhongtian Huazheng Certified Public Accountants and overseas Hong Kong Shinewing Certified Public Accountants issued standard unqualified Auditors’ Report for the Company respectively. 1.4 Mr. Zhang Weimin, Chairman of the Board of the Company, Mr. Li Lifu, Deputy General Manager in Charge of Financing affairs and Mr. Zhang Changhai, Head of Financial 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 Shen SEG, Shen SEG-B Stock code 000058, 200058 Listed stock exchange Shenzhen Stock Exchange Registered address: 31/F, Tower A, Stars Plaza, Huaqiang North Road, Shenzhen Registered address and office address Office address: 31/F, Tower A, Stars Plaza, Huaqiang North Road, Shenzhen Post code of registered address: 518026 Post code Post code of office address: 518028 Internet web site of the Company www.segcl.com.cn E-mail of the Company segcl@segcl.com.cn 2.2 Contact person and method 1 Securities Affairs Secretary of the Board Representative Name Zheng Dan Contact address 31/F, Tower A, Stars Plaza, Huaqiang North Road, Shenzhen Telephone (86) 755-83747939 Fax (86) 755-83975237 E-mail segcl1@segcl.com.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease over 2005 2004 2003 last year（％） Income from main operations 1,815,785,190.36 2,587,914,745.43 -29.84% 2,321,697,094.05 Total profit -238,640,892.75 149,642,841.98 -259.47% 205,626,232.64 Net profit -129,130,336.23 101,989,382.04 -226.61% 169,568,523.60 Net profit after deducting -130,042,528.65 99,112,383.08 -231.21% 79,349,682.75 non-recurring gains and losses Net cash flow arising from operating 190,399,922.94 74,671,775.35 154.98% 324,164,868.89 activities Increase/decrease from At the end of 2005 At the end of 2004 the end of previous At the end of 2003 year（％） Total assets 3,458,666,122.04 3,860,604,836.79 -10.41% 3,875,452,356.12 Shareholder’s equity (excluding 1,278,241,158.94 1,404,719,098.30 -9.00% 1,386,693,709.60 minority interests) 3.2 Major financial indexes Unit: RMB Increase/decrease over last 2005 2004 2003 year（％） Earnings per share -0.178 0.1405 -226.69% 0.2335 Earnings per share (note) -0.178 - - - Return on equity -10.10% 7.26% -17.36% 12.23% Return on equity as calculated based on net profit -9.70% 7.06% -16.76% 6.43% after deducting non-recurring gains and losses Net cash flow per share arising from operating 0.262 0.103 154.37% 0.446 activities Increase or decrease from At the end of At the end of At the end of the end of previous year 2005 2004 2003 （％） Net assets per share 1.760 1.934 -9.00% 1.910 Net assets per share after adjustment 1.717 1.776 -3.32% 1.792 Note: Earnings per share were calculated based on new share capital if share capital was 2 changed from the end of the report period to disclosure date of the report. Items of non-recurring gains and losses √Applicable □Inapplicable Unit: RMB Items of non-recurring gains and losses Amount Switching back of bad debts 36,540.06 Non-operating income/expenses -2,753,164.30 Subsidy income 2,711,984.41 Income from short-term investment 387,721.90 Income from share transfer 683,637.24 Impact on income tax -154,526.89 Total 912,192.42 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable CAS IAS Net profit -129,130,336.23 -126,908,336.23 1. Written off of reserve for unrealized loss on investment (withdraw): mainly because net assets of holding company of the Company, Xi’an SEG, was negative, based on domestic accounting standards, parent calculating long-term equity investment depreciation till zero, the rest of losses balance would be calculated in item of unrealized investment losses (gains), Xi’an SEG realized profit in 2005 so reduced this item; while based on overseas accounting standards, whether long-term investment is negative or not it would be totally consolidated into statement, not calculating balance resulting from negative long-term investment through item of unrealized loss on investment. Explanation on the difference 2. Increased equity investment reserve transfer into gains and losses: in 2005 annual report of A-share, items of transaction agio of account payable need not to be paid of associated company, SEG SAMSUNG, which assessed based on equity method by the Company, adjusted into capital reserve, as well as account payable need not to be paid in consolidated scope of SEG COMMINICATION and SEG LOGISTICS. While in 2005 annual report of B shares, calculated these items into gains and losses in the report period. 3. Net profit difference: mainly due to withdrawing provision for depreciation of fixed assets in previous year by domestic accountant not by overseas accountant. §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in shares Unit: share 3 Increase/Decrease Before the change After the change in this time（+，-） Amount Proportion Subtotal Amount Proportion I Unlisted shares 411,477,898 56.67% 0 411,477,898 56.67% i Promoters’ shares 411,477,898 56.67% 0 411,477,898 56.67% Including: State-owned 237,359,666 32.69% 0 237,359,666 32.69% shares Domestic legal person’s 174,118,232 23.98% 0 174,118,232 23.98% shares Foreign legal person’s 0 0.00% 0 0 0.00% shares Others 0 0.00% 0 0 0.00% ii Raised legal person’s 0 0.00% 0 0 0.00% shares iii Inner employees’ 0 0.00% 0 0 0.00% shares iv Preference shares or 0 0.00% 0 0 0.00% others II Listed shares 314,667,965 43.33% 0 314,667,965 43.33% i Ordinary RMB shares 86,626,238 11.93% 0 86,626,238 11.93% ii Domestically listed 228,041,727 31.40% 0 228,041,727 31.40% foreign shares iii Overseas listed 0 0.00% 0 0 0.00% foreign shares iv Others 0 0.00% 0 0 0.00% III Total shares 726,145,863 100.00% 0 726,145,863 100.00% 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulation share Unit: Share Total shareholders at the end of report 76,233 Particulars about the top ten shareholders holding shares Full name of Nature of Full name of Nature of Full name of Nature of shareholders shareholder shareholders shareholder shareholders shareholder Shenzhen SEG Group State-owned 32.69% 237,359,666 0 98,500,000 Company Limited shareholder Guangzhou Fodak Group Other 17.90% 129,968,232 0 138,859,666 Co., Ltd. Shanghai Zhongnan Investment Management Other 0.87% 6,300,000 0 0 Co., Ltd. Shanghai Qile Trade Co., Other 0.83% 6,000,000 0 0 Ltd. Shenzhen Shengyi Other 0.69% 5,000,000 0 0 Industrial Co., Ltd. 4 Shanghai Taili Scientific Technology Development Other 0.55% 4,000,000 0 0 Co., Ltd. Shanghai Xinyuan Other 0.50% 3,600,000 0 0 Investment Co., Ltd. Qinhuangdao Sanyuan Other 0.43% 3,100,000 0 0 Co., Ltd. Shanghai Wantong Paint Chemical Industry Co., Other 0.34% 2,450,000 0 0 Ltd. Wuxi Hongyu Department Other 0.30% 2,000,000 0 0 Particulars about the shares held by the top ten shareholders of circulating share: Name of shareholders Name of shareholders Name of shareholders DEUTSCHE BANK AG LONDON 7,257,693 Domestically listed foreign shareholder FANG YI JUN 1,200,492 Domestically listed foreign shareholder LI MEI 1,193,000 Domestically listed foreign shareholder ZHENG SHAO SHENG 1,100,000 Domestically listed foreign shareholder WONG,CHI HO 810,000 Domestically listed foreign shareholder PENG HONG LIAN 744,660 Domestically listed foreign shareholder MAXFORM ENTERPRISES LTD 642,395 Domestically listed foreign shareholder WANG JIAN FENG 621,600 Domestically listed foreign shareholder CHEN YAN YUN 600,000 Domestically listed foreign shareholder WANG YING XIN 600,000 RMB Common share (1) The name list of the aforesaid top ten shareholders and China Securities Registration and Clearing Co., Ltd. Shenzhen Branch provided the name-list of the aforesaid top ten shareholders and situation of shares held by them. (2) Among shareholders as listed above, there existed no associated relationship between Shenzhen SEG Group Co., Ltd. (hereinafter referred to as SEG Group) and the other Explanation of on the above-mentionedshareholders, and did not belong to consistent actionist regulated by the Management associate relationship and accordant actionRegulation of Information Disclosure on Change of Shareholding for Listed Companies. relationship among shareholders The Company consulted the other shareholders by means of the telecommunication, and confirms that there exists no associated relationship or belongs to concerted actor relationship among the No. 2, 4, 5, 6, 9 and 10 shareholders and the other shareholders respectively. Except for these, the Company was unknown whether there exists associated relationship or belongs to concerted actor among the other shareholders. (3) It is unknown whether there exists associated relationship or belongs to concerted actor among the foresaid top ten circulation shareholders. 4.3 Particulars about the controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in the controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction to especial situation for the controlling shareholder and other actual controller The first largest shareholder of the Company 5 The first largest shareholder of the Company: Shenzhen SEG Group Co., Ltd. Legal representative: Mr. Sun Yulin Date of foundation: Aug. 23, 1986 Business scope: Production and research of electronic products, electrical home appliances, electronic toys, electronic telecom equipments, instrument and meter, motor equipments, computer and its equipments, OA equipments and articles and electronics chemical (the license of production circle conducted additionally); undertake various electronic system project; launch specialized market of electronic communications; manpower training; real estate development (engaging at development in the earth of legally acquiring land use right); real estate broker; cargo agent and logistics & storage; high-floor sightseeing, supporting food and drink, marketplace and exhibition of SEG Plaza; development and maintenance of internet and information engineering technology; business of import and export. Registered capital: RMB 1,355,420,000 The structure of equity: State-owned Assets Supervision and Administration Commission of Shenzhen Municipal Government invested RMB 630,539,000, taking 46.52%; China Huarong Asset Management Corporation invested RMB 400 million, taking 29.51%; China Orient Asset Management Corporation invested RMB 189,514,700, taking 13.98%. China Great Wall Asset Management Corporation invested RMB 135,366,300, taking 9.99%. 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: CHINA HUARONG ASSETS STATE-OWNED MANAGEMENT CO. CHINA ORIENT ASSETS CHINA GW ASSETS ASSETS SUPERVISION MANAGEMENT CO. MANAGEMENT CO. 46.52% 29.51% 13.98% 9.99% SHENZHEN SEG GROUP CO., LTD. 32.69% SHENZHEN SEG CO., LTD. 6 §5. Particulars about Directors, Supervisors and Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Total remuneratDraw the rem Share on drew from tneration from hares held Reason held he Company in other shareho Name Title Sex Age Term office at the of the report peri der units or year-begin change od ssociates or n at the (RMB’0000) ot year-end Zhang Chairman of Dec. 31, 2003 Male 54 0 0 0.00 Yes Weimin the Board till now Guo Dec. 31, 2003 Director Male 40 0 0 0.00 Yes till now Hanbiao General Dec. 31, 2003 Wang Chu Male 47 0 0 39.00 No Manager till now Dec. 31, 2003 Li Lifu Directorr Male 50 0 0 37.30 No till now Dec. 31, 2003 Shi Dechun Director Female 54 0 0 0.00 Yes till now Dec. 31, 2003 Li Caimou Director Female 59 0 0 0.00 Yes till now Xin Independent Dec. 31, 2003 Male 42 0 0 5.00 No Huanping Director till now Independent Dec. 31, 2003 Su Xijia Male 51 0 0 5.00 No Director till now Deng Independent Dec. 31, 2003 Female 37 0 0 5.00 No Er’kang Director till now Dec. 31, 2003 Wang Li Supervisor Male 44 0 0 0.00 Yes till now Xu Dec. 31, 2003 Supervisor Male 57 8,900 8,900 0.00 Yes Changhui till now Dec. 31, 2003 Yang Bo Supervisor Male 34 0 0 0.00 Yes till now Zhao May 20, 2004 Supervisor) Male 51 0 0 32.00 No Xingxue till now May 20, 2004 Tian Jiliang Supervisor Male 39 0 0 21.00 No till now Deputy Dec. 31, 2003 Zheng Dan Female 40 32,400 32,400 37.00 No General till now 7 Manager/Sec retary of the Board Total - - - - 41,300 41,300 - 181.30 - §6. Report of the Board of Directors I. Discussion and analysis to the operation (I) Review to the operations of the Company in the report period 1. General The overall operations of the Company in the report period In 2005, the operations of CPT which is the main business and accounts for 80% of the sales income of the Company entered the low period in recent three years, and resulted in the major economic indexed reduced with a great margin compared with the same period of last year and the operations appeared losses. In the report period, the Company realized sales income amounting to RMB1,815,790,000, down 29.84% compared with the same period of last year; and the total profits amounting to RMB -238,640,000 with the last year of RMB 149,640,000; net profit amounting to RMB -129,130,000 with the last year of RMB 101,990,000. Unit: RMB In the report Same period of last Increase/ Reason period year decrease (%) Income from Decreased in sales price and sale amount in CPT, 1,815,785,190.36 2,587,914,745.43 -29.84 main operations reduced in sales income Profits from Decreased in sales price and sale amount in CPT, 61,624,854.39 344,130,249.63 -82.09 main operations reduced in sales income Reduced in profit of main operations of CPT and the Net profits -129,130,336.23 101,989,382.04 -226.61 profit of glass shell of CPT 2. Main business and operation in the report period The Company is mainly engaged in the business of scientific research, production and operation of hi-tech electronic and information products including CPT, electronic system engineering, network engineering and communications etc., operation of industry of information service, operation of electronic market, operation and management of property, bonded warehousing and foreign transportation etc.. In the aspect of CPT business, in 2005, under the condition that external operating environment was very disadvantageous, SEG Hitachi, whose 54.93% equity is held by the Company indirectly, the sales amount decreased, inventories increased, the average sales price of 21’’Common CPT reduced largely, the sales of big screen CPT was in dilemmas condition; all these made the operations of the Company appear losses. In the aspect of operation of electronic market, Shenzhen SEG Electronic Market, directly operated by the Company, made operations and expanding development gain outstanding achievements through perfecting the flows, consummating the systems, regulating the management, strengthening the implementations and establishing the market honor system. The first and second phase of Shenzhen SEG Electronic Market continuously flourished 8 and the supply of bunks cannot meet the demands. In the report period, the Company realized income amounting to RMB 98,440,000 with a increase of 10% over last year; the total profit amounting to RMB 37,290,000 with a increase of 4.9% over last year. As the newly experimental operation of Electronic Market, storage, logistics distribution, C2C Supporting System ran well, the lease rate of storage center was 100%. In addition, the external electronic market, the expansion further developed. In the aspect of foreign transportation and bonded storage business, SEG Storage, whose 95% equity is held by the Company in the report period, faced with the decrease in prices of transportation and storage, increase of the operation cost, the adjustment of RMB exchange rate, the Company always persisted with core of CUSTOMER, made businesses of storage and transportation equally develop, and the lease rate of storage business remained above 95%. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Main operations classified according to industries Increase/decrease Increase/decreas Increase/decrease Income from Gross in income from Classified according to Cost of e in cost of main in gross profit ratio main main profit ratio main operations industries or products operations operations over over the last year operations (%) over the last year the last year (%) (%) (%) other electronic 159,031.59 160,233.22 -0.76% -31.15% -22.00% -11.83% apparatus Other transportation and 6,345.57 4,719.07 25.63% 10.72% 30.54% -11.30% storage business Other industries 16,201.36 10,463.74 35.41% -26.59% -31.80% -11.63% Main operations classified according to products CPT 159,031.59 160,233.22 -0.76% -31.15% -22.00% -11.83% Foreign transport and 6,345.57 4,719.07 25.63% 10.72% 30.54% -11.30% bonded storage Operation of electronic market and property 11,404.39 6,543.39 42.62% 6.05% 9.67% -1.90% lease communications 3,452.24 2,697.50 21.86% 4.72% 48.47% -23.03% products Trade of commerce 1,344.73 1,222.85 9.06% -83.23% -83.83% 3.35% products 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 (%) Domestics 91,651.43 -31.81% Overseas 89,927.09 -27.70% 9 6.4 Application of the raised proceeds □ Applicable √Inapplicable Particulars about the changed projects □ Applicable √Inapplicable 6.5 Application of the proceeds not raised through shares offering √ Applicable □Inapplicable Unit: RMB’0000 Name of projects Amount Proceeding of Project Profit from the project Shenzhen SEG Electronic On January 24, 2006, the company Management Co., Ltd(Located obtained the formal business license It still had proceeds 210.00 in Longgang District of from Shenzhen Administration in the report period. Shenzhen) Bureau of Industry and Commerce. The Company suggested to cease the project and sent letters to related party in Shenyang. At the same time, the report on ceasing the project was submitted to the relevant departments such as Shenzhen Shenyang SEG Electronic State-owned Assets Supervision and -- Market Administration Commission, etc. After the ceasing matters on the project were approved by Board of Directors and will be submitted to Shareholders’ General Meeting of the Company. Got business license from Suzhou Suzhou SEG Electronic Market is Suzhou SEG Electronic 135.00Administration Bureau of Industry still in the preparation for Management Co., Ltd and Commerce on Nov. 21, 2005. establishment. Total 335.00 - - 6.6 Explanation of the Board of Directors on the “Qualified Opinion” made by the CPAs □Applicable √Inapplicable 6.7 The preplan of profit distribution and capitalization of capital public reserve of the Board of Directors √Applicable □Inapplicable Audited by Zhongtian Huazheng Certified Public Accountants according to Chinese Accounting Standards, the Company’s net profit was RMB -129,130,336.23 in 2005, with the undistributed profits in year-begin amounting to RMB 181,480,772.62 and the undistributed profits in year-end amounting to RMB 52,350,436.39. According to the relevant provisions in Company Law of the P.R.C. and the Articles of Association of the Company, the Company did not conduct cash bonus and convert profits into bonus share. With the suggestions from the non-circulating shareholders of the Company, the Company 10 planned to convert capital public reserve directionally increasing into share capital with the amount of RMB 47,925,627.00. Calculated on the total share of 726,145,863, it was equal to increase 0.66 shares for each 10 share. Calculated on the total B-share of 228,041,727 and increasing 0.66 shares for each 10 share, the total capital conversion amounted to 15,050,754 shares; calculated on the total A-share(Including the non-circulating A share and circulating A share) of 411,477,898 and increasing 0.66 shares for each 10 share, the total capital conversion amounted to 32,874,873. The total capital conversions of 27,157,541 obtained from non-circulating A-share shareholders were all used for directional capital conversion to circulating A shareholders. If the plan on Share Merger Reform did not get approval from the relevant shareholders’ meeting of A-share, thus the proposal on Directional Capitalization of Capital Reserve would not be implemented. The preplan should be submitted to the 2005 Annual Shareholders’ General Meeting of the Company. The preplan on the profit that has not been appropriated for cash profit distribution □Applicable √Inapplicable §7 Significant Events 7.1 Purchase of assets √Applicable □Inapplicable Unit: RMB’0000 Assets Credit rights and Net profit Related concerned liability contributed to the The other party Assets Price of transacti Explanation on transferre concern Date of purchasing Company from of transaction purchased purchasing on or price setting d ed purchasing date to not ownershi shifted this year end p fully or fully or not not 8,317,500 Dichain Storage shares of Service Shenzhen SEG Jan. 21,2005 1,097.91 216.00 No Agreement price Yes Yes (Shenzhen) Co., GPS Scientific Ltd Navigations Co., Ltd. 7.2 Sales of assets √Applicable □Inapplicable Unit: RMB’000 The other Net profit Gains and Related Explanation Assets Credit Assets sold Sales date Sales price party of contributed losses rising transacti on price rights and 11 transaction to the from sales on or setting concerned liability Company not transferredconcerned from this ownership shifted year-begin to fully or fully or sales date not not The Company held 98.33% equity of Shenzhen SEG Commercial Machinery Co., Ltd.; Zhao Shisun the controlling Agreement and Zhu company of the April 14, 2005 237.95 0 0 No Yes Yes price Xiaoliang Company, Shenzhen SEG Industry Investment Co., Ltd held 1.67% equity of SEG Commercial Machinery Co., Ltd. 7.1 & 7.2 items concerned resulting in influence on the continuity of the Company’s business and the stability of the managers 1. After transferring the aforesaid equity, the proportion of Shenzhen SEG GPS Scientific Navigations Co., Ltd held by the Company increased from 21.137% to 35%, thus became the first largest shareholder of SEG GPS Scientific Navigations Co., Ltd. 2. According to the relevant regulations of China Accounting System for Business Enterprises promulgated by Ministry of Commerce, SEG Shangyong will not be brought into the financial statement of the Company since 2005. 7.3 Significant guarantees √ Applicable □Inapplicable Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Guarantee Date of happening Complete Name of the Company Amount of Guarantee Guarantee for related (date of signing Implementation guaranteed guarantee type term party (yes agreement) or not or not) Total amount of guarantee in the report period 0.00 Total balance of guarantee at the end of the report period 0.00 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 12,080.00 Total balance of guarantee for controlling subsidiaries at the end of the report 15,607.17 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) 12 Total amount of guarantee 15,607.17 The proportion of the total amount of guarantee in the net assets of the Company 12.21% Including: Amount of guarantee for shareholders, actual controller and its related parties 0.00 The debts guarantee amount provided for the guarantee of which the 607.17 assets-liability ratio exceeded 70% directly or indirectly Proportion of total amount of guarantee in net assets of the Company exceeded 0.00 50% Total amount of the aforesaid three guarantees 607.17 7.4 Significant related transaction 7.4.1 Related transaction connected to operations √Applicable □Inapplicable Unit: RMB’0000 Selling products and providing service to related Purchasing products and accepting service to related parties parties Related parties Proportion in the same kind of Proportion in the same kind of Transaction amount Transaction amount transaction amount transaction amount Shenzhen SEG Samsung Glass Co., 7175 6.5% 0 0 Ltd. Total 7175 6.5% 0 0 Including: In the report period, the amount of related transaction on sales of products or providing labor force from the listed companies amounted to RMB0.00. 7.4.2 Related credits and liabilities current √Applicable □Inapplicable Unit: RMB’0000 Related parties supplied funds to the Supply funds to related parties Related parties Company Occurred amount Balance Occurred amount Balance SEG (Hongkong) Co., Ltd. 42.00 296.00 0.00 0.00 Shenzhen SEG Group Co., -141.00 11,903.00 0.00 0.00 Ltd. Total -99.00 12,100.00 0.00 0.00 Including: in the report period, the occuring amount the listed company provided to controlling shareholder and its subsidiaries was RMB-990,000 and the balance was RMB 121 million. Use of funds and plan on paying off the debt √Applicable □Inapplicable According to the Notification for Current Fund between the Listed Company and Related Company and the External Guarantee of Listed Company promulgated by CSRC and requirement of relevant documents, in order to solve the occupied fund of large shareholder, the Company held the 10th 13 meeting of 3rd Board of Directors on April 26, 2006, in which examined and approved the Proposal on Offsetting the Debts of the Company owed by Shenzhen SEG Group Co., Ltd with Using its Equity of Shareholding Shenzhen SEG Samsung Glass Co., Ltd, agreed the Agreement of Offsetting Debts with Asset signing between the Company and SEG Group, that was to say, 46,343,111 shares of SEG Samsung held by SEG Group were used for Offsetting the debts amounting to RMB 121,001,862.58 of the Company(with the base day of Nov. 30, 2005). The said matters were examined and approved in 10th meeting of the 3rd Board of Director of the Company and published on China Securities, Securities Times and Hong Kong Wen Wei Po dated on April 29, 2006. (1) Ended as Nov. 30, 2005, the total principal and interest SEG Group and related parties occupying the non-operating fund of the listed company amounted to RMB 121,001,862.58. SEG Group made commitment to finish its work of offsetting debts before Oct. 31, 2006; the repayment method is appraisal valuation RMB 2.611 per share SEG Group made according to SEG Samsung, offsetting the debts amounting to RMB 121,001,862.58 by using the 46,343,111 shares of SEG Samsung. (2) SEG Group released the incomplete part of disposition of SEG Samsung held by it to guarantee transferring with offsetting debts with assets and SEG Samsung holding by SEG Group had the corresponding disposition. (3) In view of the incomplete 4,541,879 shares in disposition of the offset equity, SEG Group made committees to complete releasing shares before June 30, 2006. If ended as June 30, 2006, 4,541,879 shares were in conditions of incomplete disposition; SEG Group made commitment to repay the debts amounting to RMB 11,858,846.07 in incomplete disposition in cash before July 10, 2006. (4) Agreement of Offsetting Debts with Asset was confirmed and agreed between two parties, they did not conduct adding interest to fund, since the base day (Nov. 30, 2005) on special auditing the occupied fund of the Company by SEG Group to the day that transferring the shares for offsetting the debts to the Company. (5) After the approval of the said matters on offsetting debts with equity, it should submit to State-owned Assets Supervision and Administration Commission, CSRC and Ministry of Commerce for application, and held the Shareholders’ General Meeting of the Company for examination after obtaining the letter with no objection from CSRC. The plan could be settled down use of funds before the end of 2006 totally or not □Yes □No √Inapplicable 7.5 Entrusted assets management □ Applicable √Inapplicable 7.6 Implementation of commitments 7.6.1 Commitment on Share Merger Reform According to Guiding Opinion on Share-trading Reform of Listed Companies and the Measures for the Administration of the Share-trading Reform of Listed Companies. The largest shareholder SEG Group and the 2nd large shareholder Fodak Guanghzhou jointly presented Share Merger Reform Motion (SEG Group and FODAK Guangzhou consolidated its shares of the Company 367,327,898, accounting for 89.27% of total non-current A shares, which in accordance with requirements), and entrusted Board of Directors of the Company to deal with relevant events of Share Merger Reform based on requirements of related laws, regulations and modified documents in written form, 14 including but not only convening A-share market shareholders’ general meeting to carry out examination for Share Merger Reform of the Company, and deal with procedure of suspension and recovering listing, share enquiry and changing registration during Share Merger Reform. According to related regulations of Share-trading Reform, in the report period, SEG Group and FODAK Guangzhou has engaged recommendation organ so as to assist making out plan for reform and produce letter of recommendation; engaged law firms to examine and assess its regulative of relevant issues of share merger reform and would issue law opinion. Share Merger Reform plan of Company has been disclosed with the 2005 annual report in disclosing date. Detailed progress for share merger reform refers to relevant public notice of Board of Directors of the Company. Board of Director of the Company receives the entrustment in written form from the non-circulating A-shareholders, with the cooperation between the sponsoring organization and law firm, the Company will actively conduct the initial stage work of Share Merger Reform, and release the notice on the specific arrangement of Share Merger Reform of the Company. 7.6.2 Other Commitments √Applicable □Inapplicable Article 5 of the Equity Transfer Agreement which the Company had signed with SEG Group at the time of the Company’s listing stipulated: SEG Group permits the Company, as well as subsidiaries of the Company and affiliated companies to use the 8 registered trademarks that SEG Group has presently registered at the State Trademark Office; it also permits the Company to take the aforesaid trademarks and symbols that are similar to these marks as the symbol of the Company, as well as to use the aforesaid symbols or symbols that are similar to these symbols during the operation process; the Company doesn’t have to pay SEG Group any fee for the use of the aforesaid trademarks or symbols. In the report period, this commitment was still executed according to the agreement. 7.7 Significant lawsuit and arbitrations √Applicable □Inapplicable 1. Lawsuit about the guarantee exceeding the time limit that the Company had provided Shenzhen SEG Dasheng Co., Ltd. (hereinafter referred to as Shendasheng) from Shenzhen Development Bank Co., Ltd amounting to RMB 10 million: The Company won the lawsuit judged by Shenzhen Intermediate People’s Court. On Jan. 12, 2005, the Company applied to Shenzhen Intermediate People’s Court for compulsory enforcement; and requested the legal shares of 40,206,226 of Defendant Shendasheng held by Guangzhou Borong Investment Co., Ltd, which were all mortgaged to Shenzhen Caitian Branch of Bank of Communications. The said matter was disclosed in 2005 Annual Report of the Company. It is estimated that the auction will be finished in the first half year of 2006. 2. Lawsuit about the guarantee exceeding the time limit that the Company had provided Shenzhen SEG Dasheng Co., Ltd. (hereinafter referred to as Shendasheng) from Guangdong Development Bank Co., Ltd amounting to RMB 8.9 million: The Company won the lawsuit judged by Shenzhen Futian People’s Court. Shendasheng could not accept the judge and appealed to Shenzhen Intermediate People’s Court. The said lawsuit was 15 disclosed in 2005 Annual Report. However, in the report period, Shendasheng did not pay the court fees within the stipulated deadline, the Court considered to withdraw the accusation by Shendasheng. At present, Futian People’s Court has entrusted Asset Appraisal Company to conduct valuation appraisal on the legal shares of the three listed companies ( 1,100,000 legals shares of Changchun Eurasia Group Co., Ltd with its stock code of 600697, 3,801,600 legal shares of Jiangsu Sihuan Bioengineering Co., Ltd with its stock code of 000518 and 30,000 legal shares of Shanghai Kaikai Industry Co., Ltd, and properties held by Shendasheng before the auction. 3. Ended as Dec. 31, 2005, SEG-Hitachi indirectly held by the Company appealed to Court and won the case on its account receivable amounting to RMB 58,240,000, but the company did not take back the amount before Dec. 31, 2005. SEG-Hitachi has withdrawn the provision for bad debts amounting to RMB 21,530,000 at the end of 2004, canceled the provision for bad debts after verification amounting to RMB 4,200,000, additional provision for bad debts amounting to RMB 40,910,000. §8.Report of the Supervisory Committee √Applicable □Inapplicable Independent opinion on operation of the Company in 2005 issued by the Supervisory Committee 1. Operation according to Law According to relevant stipulations of national laws, regulations and Articles of Association, the Company has established and improved the legal administrative structure, established a rather perfect internal control system, and well kept away risks of administration and finance; the Company’s decision-making procedures were legitimate. In the report year, the Board of Directors and management team seriously implemented each resolution of the Shareholders’ General Meeting in a diligent and conscientious manner, and didn’t violate laws, regulations and Articles of Association or damage the Company’s interests when performing duties and obligations. 2. Financial inspection The Supervisory Committee made serious and careful inspection on the Company’s financial system and financial status, and believed 2005 financial report could truly reflect the Company’s financial status and business results. Zhongtian Huazheng Certified Public Accountants and Shinewing Certified Public Accountants audited 2005 financial report of the Company according to Independent Auditing Standards of Chinese Certified Public Accountant and International Auditing Standards and issued respectively auditor’s reports with non-reservation opinion and non-explanation which truly reflected the Company’s financial status and business results. 3. In the report period, there has no use of raised capital. 4. Purchase or sales of assets In the report period, the Company had no purchase and sales of assets. In the report period, the Company had no purchase of assets. The trade price of the assets sold by the Company was reasonable, no inside trading was found, and the transactions hadn’t damaged the rights and interests of shareholders or resulted in runoff of assets. 16 5. Related transactions of the Company The correlative transactions interfered in 2005 by the Company were all in accordance with the principle of equity and fairness as checked by the Supervisory Committee. No inside trading was found, and the transactions hadn’t damaged the interests of the Company as well as rights and interests of other shareholders or resulted in runoff of assets. §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, 2005 2005 2004 NOTES RMB’000 RMB’000 17 Revenue 5 1,830,188 2,599,743 Cost of sales (1,754,160) (2,256,573) ) ) Gross profit 76,028 343,170 Other operating income 7 19,285 35,102 Distribution costs (49,844) (72,098) ) ) Administrative expenses (237,543) (199,432) ) Finance costs 8 (47,221) (41,120) Share of results of associates 2,164 63,096 (Loss) / profit before taxation 9 (237,131) 128,718 Taxation 10 (4,657) (6,872) (Loss) / profit for the year (241,788) 121,846 Attributable to: Equity holders of the parent (126,908) 98,187 Minority interests (114,880) 23,659 (241,788) 121,846 (Loss) / earnings per share 11 (RMB 0.175) RMB 0.135 CONSOLIDATED BALANCE SHEET AS AT 31ST DECEMBER, 2005 2005 2004 RMB’000 RMB’000 18 ASSETS Non-current assets Investment properties 12 38,918 39,872 Property, plant and equipment 13 1,496,676 1,535,084 Construction in progress 14 406 4,224 Interests in associates 16 472,753 480,488 Available-for-sale investments 17 14,270 14,270 Other asset 33,363 35,215 2,056,386 2,109,153 Current assets Inventories 18 145,456 248,695 Investments held for trading 19 2,809 4,233 Accounts receivable, deposits and prepayments 801,120 842,908 Pledged deposits 21 - 63,515 Cash and bank balances 476,895 616,100 1,426,280 1,775,451 Total assets 3,482,666 3,884,604 EQUITY AND LIABILITIES Capital and reserves Share capital 22 726,146 726,146 Reserves 23 576,095 702,573 Equity attributable to equity holders of the parent 1,302,241 1,428,719 Minority interests 380,061 495,716 1,682,302 1,924,435 Non-current liability Loans - due after one year 24(a) 70,934 439,440 Current liabilities Loans - due within one year 24(a) 756,851 655,433 Accounts payable, deposits received and accruals 970,492 852,678 Dividend payable 1,114 2,801 Tax payable 973 9,817 1,729,430 1,520,729 Total equity and liabilities 3,482,666 3,884,604 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 19 FOR THE YEAR ENDED 31ST DECEMBER, 2005 Attributable to equity holders of the parent Statutory Statutory Share Capital surplus public Exchange Accumulated Minority capital reserve reserve welfare fund reserve profits Total interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1st January, 2004 726,146 402,273 49,246 70,090 295 163,619 1,411,669 481,478 1,893,147 Profit for the year - - - - - 98,187 98,187 23,659 121,846 Effect of change in consolidation - - - - - - - 1,499 1,499 Transfer of reserves - - 7,361 3,680 - (11,041) - - - Provision for unrealised gain on interests in associates - 191 - - - 191 - 191 Dividends paid to minority shareholders - - - - - - - (10,920) (10,920) Dividends paid for 2003 - - - - - (81,328) (81,328) - (81,328) At 31st December, 2004 and 1st January, 2005 726,146 402,464 56,607 73,770 295 169,437 1,428,719 495,716 1,924,435 Loss for the year - - - - - (126,908) (126,908) (114,880) (241,788) Capital contribution by minority shareholders - - - - - - - 900 900 Dividends paid to minority shareholders - - - - - - - (1,675) (1,675) Exchange difference arising on translation of foreign operations - - - - 430 - 430 - 430 At 31st December, 2005 726,146 402,464 56,607 73,770 725 42,529 1,302,241 380,061 1,682,302 20 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER, 2005 NOTES 2005 2004 RMB’000 RMB’000 OPERATING ACTIVITIES Cash generated from operations 25 205,146 5,365 Interest paid (47,221) (41,120) Income tax paid (13,501) (4,469) NET CASH FROM / (USED IN) OPERATING ACTIVITIES 144,424 (40,224) INVESTING ACTIVITIES Interest received 10,004 22,503 Purchase of property, plant and equipment (50,086) (53,032) Payment for construction in progress (49,428) (88,888) Increase in investment in associates (11,926) - Proceeds from disposal of property, plant and equipment 163 10,220 Net cash inflow from acquisition of a subsidiary 26(b) - 1,500 Proceeds from disposal of available-for-sale investments 21,825 - Decrease in investments held for trading 1,424 2,212 Decrease in pledged deposits 63,515 66,523 NET CASH USED IN INVESTING ACTIVITIES (14,509) (38,962) FINANCING ACTIVITIES Dividends paid (1,687) (78,601) Dividends paid to minority shareholders (1,675) (10,920) Cash generated from contribution by minority shareholders 900 - New bank and other loans raised 635,400 1,328,576 Repayment of bank and other loans (902,488) (1,192,400) NET CASH (USED IN) / FROM FINANCING ACTIVITIES (269,550) 46,655 NET DECREASE IN CASH AND CASH EQUIVALENTS (139,635) (32,531) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 616,100 648,631 EFFECT OF FOREIGN EXCHANGE RATE CHANGES 430 - CASH AND CASH EQUIVALENTS AT END OF THE YEAR Cash and bank balances 476,895 616,100 21 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 22