冰山冷热(000530)大冷Ｂ2005年年度报告摘要（英文版）

Stock Code: 000530; 200530 Short Form of the Stock: G-Daleng; Daleng B; No: 2006-005 Dalian Refrigeration Co., Ltd. 2005 Annual Report Summary (For Disclosing Overseas) §1 Important Notes 1.1 The directors and the Board of Directors, the supervisors and the Supervisory Board, and Senior staff members of Dalian Refrigeration Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are not any important omissions, fictitious statements or serious misleading carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completeness of the whole contents. 1.2 All directors attend the meeting of the Board of Directors. 1.3 This summary is extracted from the original of the annual report. For more information, the investors are recommended to refer to the original. 1.4 This report is written respectively in Chinese and in English. In the event of any discrepancy between the two above-mentioned versions, the Chinese version shall prevail. 1.5 Chairman of the Board of Directors of the Company Mr. Zhang He, Financial Majordomo and the head of Accounting Department Ms. Xu Xiaorui hereby confirm that the financial report of the annual report is true and complete. §2 Company Profile 2.1 Basic information Short form of the stock G-DALENG; DALENG-B Stock code 000530; 200530 Listed stock exchange Shenzhen Stock Exchange Registered address and office address 888 Xinan Road, Shahekou District, Dalian Post code 116033 Internet web site of the Company www.daleng.cn E-mail of the Company dlzqb@bingshan.com 2.2 Contact person and method Secretary of the Board of Directors Authorized representative in charge of securities affairs Name Ms. Lv Lianzhen Ms. Ge Yan Contact address Office of Dalian Refrigeration Co., Securities Department of Dalian Ltd. Refrigeration Co., Ltd. Telephone 0086-411-86538100 0086-411-86538131 Fax 0086-411-86641470 0086-411-86654530 E-mail bingzhen@bingshan.com geyan@bingshan.com §3 Summary of Accounting Data and Financial Indexes 3.1 Major accounting data (Unit: In RMB’000) 1 Increase/decrea 2005 2004 se over last 2003 year(%) Revenue 1,486,107 1,258,411 18.09% 1,068,564 Profit before taxation and 163,447 144,820 12.86% 116,453 minority interests Net profit 101,685 108,764 -6.51% 86,634 Net cash generated from 114,681 28,631 300.58% 119,312 operating activities Increase/decrea 2005.12.31 2004.12.31. se over last 2003.12.31 year(%) Total assets 2,150,621 1,935,420 11.12% 1,925,066 Shareholder’s equity(excluding 1,387,686 1,320,646 5.08% 1,246,193 minority interests) 3.2 Major financial indexes (Unit: In RMB) Increase/decrea 2005 2004 se over last 2003 year(%) Earnings per share 0.29 0.31 -6.45% 0.25 Decrease 0.91 Return on equity 7.33% 8.24% percentage 6.95% points Net cash per share generated from 0.328 0.082 300.00% 0.341 operating activities Increase/decrea 2005.12.31 2004.12.31 se over last 2003.12.31 year(%) Net assets per share 3.96 3.77 5.04% 3.56 3.3 Difference in net profit as audited by Chinese Accounting Standards (CAS) and International Financial Reporting Standards (IFRS) (Unit: In RMB’000) √Applicable □Inapplicable CAS IFRS Net profit 100,812 101,685 Explanation on the difference Impact of IFRS adjustment on net profit is as follows: - Accounting for installation service contract 182 - Deferred taxation 520 - Equity accounting of investments (4,970) - Waived liabilities to third parties in capital surplus in statutory account 2,751 - Others 2,389 §4 Changes in Share Capital and Particulars about Shareholders 2 4.1 Statement of changes in share Unit: share Before the Increase/decrease in this After the change change time(+, -) I. Shares unlisted 1、Initiator shares 106,366,750 106,366,750 Including： State-owned shares 106,366,750 106,366,750 Domestic legal person’s shares Foreign legal person’s shares Others 2、Raised legal person’s shares 30,278,000 30,278,000 3、Inner employee’s shares 4、Preference shares or others Total of shares unlisted 136,644,750 136,644,750 II. Shares listed 1、Common shares (in RMB yuan) 98,370,225 98,370,225 2、Domestically listed foreign shares 115,000,000 115,000,000 3、Others Total of shares listed 213,370,225 213,370,225 III. Total shares 350,014,975 350,014,975 4.2 Statement of shares held by the top ten shareholders Total shareholders at the end of report year 59,638 Particulars about shares held by the top ten shareholders（Unit: ’0000 shares） BOY EOY Proportion to Type of Name of shareholder (’0000 shares) (’0000 shares) the total (%) share Dalian Bingshan Group Co., Ltd. (State shares) 10,636.675 10,636.675 30.39 A SANYO ELECTRIC CO., LTD. 3,500.15 3,500.15 10.00 B SSF Portfolio 106 0.00 900.35 2.57 A Jiuzhou Development Co., Jilin Province 315.00 315.00 0.90 A Taiyuan Zhaohe Investment Development Co. 315.00 315.00 0.90 A Shenyin Wanguo Securities Co., Ltd. 283.70 283.70 0.81 A Galaxy Yintai Licaifenhong SIF 0.00 197.74 0.56 A Dalian Huaxin Trust Investment Co., Ltd. 179.50 179.50 0.51 A Dalian Thermal Power Group Co., Ltd. 175.00 175.00 0.50 A GLORY INSIGHT LIMITED 0.00 173.55 0.50 B Particulars about shares held by the top ten negotiable shareholders（Unit: ’0000 shares） EOY Proportion to Type of Name of shareholder (’0000 shares) the total (%) share SANYO ELECTRIC CO., LTD. 3,500.15 10.00 B SSF Portfolio 106 900.35 2.57 A Galaxy Yintai Licaifenhong SIF 197.74 0.56 A GLORY INSIGHT LIMITED 173.55 0.50 B Taihe Securities Investment Fund 150.00 0.43 A Wang Xiaotian 118.45 0.34 B Jiashi Value-added Servicing Industry SIF 118.37 0.34 A ABN AMRO BANK NV 114.53 0.33 B GUOTAI JUNAN SECURITIES HONGKONG LIMITED 107.98 0.31 B DEUTSCHE BANK AG LONDON 106.54 0.30 B 3 Explanation on associated relationship among these There was no associated relationship between the top ten shareholders shareholders of the Company. It is unknown whether there are associated relations between the top ten negotiable shareholders of the Company and between them and the top shareholders of the Company. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller Dalian Bingshan Group Co., Ltd. (hereinafter referred to as the Group) held 30.39% of the total shares of the Company by the end of the year. The Group’s legal representative is Zhang He. The Group was established on May 22, 1996 and has the registered capital of 126,540 thousand yuan, being mainly engaged in the manufacture and installation of the complete sets of refrigerators, air conditioners, cold chains and electrical appliances, etc. for industrial and commercial poposes. Its minor businesses include the electronic and household electrical appliances, light industry, chemical industry, import and export trading, etc. The Group is a state-owned solely-funded company subordinate to Dalian Municipal People’s Government State-Owned Assets Supervision & Administration Commission. Dalian Municipal People’s Government State-Owned Assets Supervision & Administration Commission ↓100% Dalian Bingshan Group Co., Ltd. ↓30.39% Dalian Refrigeration Co., Ltd. §5 Particulars about the Directors, Supervisors and Senior Staff Members 5.1 Particulars about changes in shares held by directors, supervisors and senior staff members Term of Shareholding Shareholding Name Position Age duty at BOY at EOY x Directors (9 persons): Zhang He M Chairman 68 04.6—07.6 25,650 25,650 Mu Chuanjiang M Vice chairman 56 04.6—07.6 22,650 22,650 Yang Bin M Director 49 04.6—07.6 0 0 Xu Xiaorui F Director 42 04.6—07.6 3,000 3,000 Shimada Tadao M Director 61 04.6—07.6 0 0 Cheng Geng M Director 38 04.6—07.6 0 0 Lv Zhongli M Independent director 64 04.6—07.6 7,125 7,125 Wang Dong M Independent director 69 04.6—07.6 0 0 Zhang Guile M Independent director 65 04.6—07.6 0 0 Supervisors (3 persons): Yu Fuchun M Chairman 47 04.6—07.6 7,800 7,800 4 Men Yuesheng M Supervisor 53 04.6—07.6 750 750 Chi Feng F Supervisor 34 04.6—07.6 0 0 Senior staff members: Zhang He M General manager 68 04.6—07.6 25,650 25,650 Yang Bin M Standing deputy 49 04.6—07.6 0 0 general manager Zhang Hongzhi M Deputy general 47 04.6—07.6 21,125 21,125 manager Wang Dekun M Deputy general 54 04.6—07.6 14,250 14,250 manager Wang Zhiqiang M Deputy general 44 04.6—07.6 0 0 manager Hu Xitang M Deputy general 38 04.6—07.6 0 0 manager Xu Xiaorui F Financial majordomo 42 04.6—07.6 3,000 3,000 Lv Lianzhen F secretary of BOD 53 04.6—07.6 2,700 2,700 5.2 Particulars about the annual remuneration of directors, supervisors and senior staff members Name Annual remuneration and allowance Zhang He 320,000 Mu Chuanjiang 320,000 Yang Bin 260,000 Xu Xiaorui 240,000 Lv Zhongli 25,000 Wang Dong 25,000 Zhang Guile 25,000 Yu Fuchun 50,000 Men Yuesheng 50,000 Chi Feng 50,000 Zhang Hongzhi 250,000 Wang Dekun 240,000 Wang Zhiqiang 240,000 Hu Xitang 240,000 Lv Lianzhen 50,000 Total 2,385,000 §6 Report of the Board of Directors 6.1 Discussion and analysis on the management A. Review of the Company’s business status in the report period (1) Summary of the Company’s overall business status in the report period The Company is the largest industrial refrigerator producer and the largest exporter of refrigerator packages in China, and owns the famous trademark in Chinese industrial refrigeration industry. The main products of the Company are: reciprocating refrigeration compressors, screw type refrigeration compressors, centrifugal type refrigeration compressors, and pressure vessels, combined storage, gas-conditioned freshness-keeping storage, plate type freezers, tunnel type 5 freezers, block ice makers, flake ice makers and ice particle makers in five series (refrigerating, freezing, air-conditioning, cold storage, and freshness keeping) and six packages (air-conditioning package, civilwork cold storage package, combined cold storage package, ice-making package, special engineering package, and gas-conditioned freshness keeping package). These products can be used in such fields as national defense, scientific research, petroleum, chemical industry, textile, pharmacy, power plants, agriculture, stock raising, fishing and catering service. a. Main business In 2005, the Company established the system of rapid response to market against the adverse factors such as the state’s macro adjustment and control, appreciation of raw materials, appreciation of Renminbi currency and down-adjustment of tariff, brought its advantage as a company group in marketing into full play, effectively utilized the global dealership networks of the joint ventures’ partners, applied the concept of LP in a wide whole range, and attained good performances. The income on main business was 1,486.107 million yuan with a comparable increase of 18.09%. The profit on main business was 253.427 million yuan with a comparable increase of 44.16%. The business profit was 56.339 million yuan with a comparable increase of 40.24%. The total amount of profit was 163.447 million yuan with a comparable increase of 12.86%. The net profit was 101.685 million yuan with a comparable decrease of 6.51%, mainly due to drawing the provision for impairment of long-term equity investment and paying the income tax for the dividend distributed to the associated companies. For package projects, the Company had the good performance in 2005, and successfully completed a number of large package projects with heavy workload, short delivery period and high construction difficulty, such as Maanshan Mengniu and Qingdao Shanfurishui, having won the praise of users and solidified the Company’s predominant position in the field of package projects. In the report period, the Company undertook 21 package projects with the investment over 5 million yuan, including 8 with the investment over 10 million yuan and 2 with the investment over 30 million yuan. In the report period, the Company had the good performance in research and development of the products, such as the vacuum freezing drier, the assembly-type air conditioner for marine use and the seawater heat pump. The screw-type refrigeration air-conditioner set in BINGSHAN brand won the honor of “Chinese famous-brand product”. “Bingshan” products were listed by the State Ministry of Commerce among the famed Chinese brands to be given priority for support and development in the period from 2005 to 2006. In the report period, the Company fully utilized national debts and policy supports for technical transformations such as industrialization and deep-processing of farm produces, and completed the transformation project of the Machining Business Dept., which updated the Company’s machine-building capability. In the report period, Wuhan New World Refrigeration Industries Co., Ltd., one of the Company’s 6 holding subsidiaries, carried out the business strategy of differentiation in technical content and product quality and service at the turning point of shareholding redistribution, and attached importance to the industries of coal mining and water conservancy, which brought a bigger increase of both the sales income and the profit. In the report period, Dalian Bingshan Guardian Automation Co., Ltd., one of the Company’s holding subsidiaries, successfully developed the embedded automation software, the configuration software and the remote network communication technology with its independent intellectual property right, which brought the large package refrigerating-house project and the large petrochemical refrigeration station automated, intelligentized and network-based, and build up the technical core competence of the Company’s products. b. Joint venture companies By the end of 2005, the group of joint venture companies of the Company had the total assets of 4,159.86 million yuan, with a comparable increase of 25.71%; and had the net assets of 1,863.12 million yuan, with a comparable increase of 14.25%. In 2005, the group of joint venture companies of the Company made the sales income of 5,323.13 million yuan, with a comparable increase of 50.72%. The sales income on exported products was 1,780.59 million yuan, with a comparable increase of 156.05%. The Company earned the returns on investment of 10,298 thousand yuan, with a comparable increase of 11.07%. In the report period, there were five joint venture companies that made the returns on investment accounting for 10% or higher of the total net profit of the Company and they are Dalian Sanyo Air Conditioner Co., Ltd., Dalian Sanyo Compressor Co., Ltd., Dalian Sanyo Cold Chain Co., Ltd., Shenzhen Thermo King-Dalian Transport Refrigeration Co., Ltd., and Dalian Sanyo Refrigeration Co., Ltd.. In the report period, five joint venture companies of the Company made the sales income on main business with a comparable increase higher than 30%, three made the net profit with a comparable increase higher than 30%, and five made the net asset income ratio higher than 15%. Among these companies, four made the sales income on main business over 500 million yuan and four made the net profit over 50 million yuan. With the business philosophy “guided by the market, supported by management”, Dalian Sanyo Air-Conditioner timely adjusted its marketing strategy to the market demand, put much effort to development of the domestic potential markets and the international market, and had the income on main business of 1 billion yuan for the first time. With purposeful development of the “one-to-one smart air-conditioner for use of base stations”, the company successfully drove into the telecommunication enterprises such as China Mobile, China Telecommunication and China Unicom. While continuously exporting products to the original countries, the company developed the new American market. In the report period, Sanyo Electric transferred its production of C Series eddy compressor completely to Dalian Sanyo Compressor. Thus Dalian Sanyo Compressor increased its capacity of 7 C Series eddy compressor production by 50%, laying a solid foundation for developing a large-scale eddy compressor production base. Construction of the research & development center was going well, and the research body for compressor technology at the world-advanced level will be built. In the report period, Dalian Sanyo Cold Chain imported the eco-friendly cyclopentane foaming system from Germany with the investment of 18 million yuan, and completed the environment protection transformation of all its products as the first one among the similar enterprises in China. With the marketing strategy of “striving for selling more products to superior customer shops”, the company developed more than one hundred new models such as the large parallel compressor set and the CZR secondary & main boxes, and made the income on main business of 1 billion yuan for the first time with the increase of 30% or higher for three years in succession. However, the industrial competition became more severe, main raw materials such as non-ferrous metals were appreciated and the new product development projects cost more, which prevented from making more net profit. In the report period, Dalian Sanyo Refrigerator built the GHP gas-type heat pump production base, the largest one in China, making a further step towards the comprehensive manufacturer of refrigerators and air-conditioners. In the report period, Dalian Fuji-Bingshan successfully passed the certification of the ISO9001 and ISO14001 quality and environment systems. The company established the offices in three major cities of Beijing, Shanghai and Guangzhou, further expanding the service range. (2) Analysis on the Company’s main business ① Products in main business and their regional distribution The Company’s income on main business all came from the refrigeration and air-conditioner products. The products are produced in two cities of Dalian and Wuhan and sold all over the country without distinct regional distribution. The exported products accounted for about 8% of the income on main business in the same period. For the breakdown of the incomes on main business listed on the basis of industries and geographic distribution, see the Explanatory Note 1 to the Accounting Report. ②Major suppliers and customers The Company purchased goods from the first five suppliers with the total amount of 336.52 million yuan, accounting for 30.71% of the Company's annual total amount of purchase. The Company sold products to the first five customers with the total sales of 143.35 million yuan, accounting for 9.49% of the Company's total sales. (3) Financial status of the Company a. Composition of assets (unit: ’000 yuan) 8 2005 2004 Item Proportion to the Proportion to the Change Amount Amount total assets total assets Receivables 405,345 18.85% 264,561 13.67% +53.21% Inventories 255,188 11.87% 240,439 12.42% +6.13% Long-term equity 700,568 32.58% 695,964 35.96% +0.66% investment Fixed assets 357,575 16.63% 293,752 15.18% +21.73% Short-term loans 44,250 2.06% 131,000 6.77% -66.22% Long-term loans 50,000 2.32% 50,000 2.58% 0.00% Total assets 2,150,621 100% 1,935,420 100% +11.12% Note: ① The receivables and the fixed assets had a bigger comparable change, mainly due to Wuhan New World Refrigeration Industry Co., Ltd. added into the range of consolidated statements. ② The short-term loans had a bigger comparable change, mainly due to the repayment of the long-term loans within one year. b. Expenses and income tax (unit: ’000 yuan) Item 2005 2004 Change Operating expenses 73,069 52,523 +39.12% Management expenses 133,610 92,035 +45.17% Financial expenses 572 1,480 -61.35% Income tax 48,233 32,936 +46.44% Note: ① The operating expenses, the management expenses and the financial expenses had a bigger comparable change, mainly due to Wuhan New World Refrigeration Industry Co., Ltd. added into the range of consolidated statements. ② The income tax had a bigger comparable change, mainly due to drawing the provision for impairment of long-term equity investment and paying the income tax for dividend distributed to the associated companies. c. Composition of cash flow (unit: ’000 yuan) Change Item 2005 2004 (+/-’000 yuan) Net amount of cash flow generated in operating activities 114,681 28,631 +86,050 Net amount of cash flow generated in investment activities 88,359 -39,750 +128,109 Net amount of cash flow generated in fund-raising activities -171,677 -80,921 -90,756 Note: ① The net amount of cash flow generated in operating activities had a bigger comparable change, 9 mainly due to the Company’s collecting more payments for goods. ② The net amount of cash flow generated in investment activities had a bigger comparable change, mainly coming from the new holding company, Wuhan New World Refrigeration Industry Co., Ltd. ③ The net amount of cash flow generated in fund-raising activities had bigger comparable change, mainly due to repayment of the bank loan. (4) Business status and performances of the principal holding subsidiary companies and participating companies a. Main holding subsidiary companies ① Dalian Bingshan Group Refrigerator & Air-conditioner Installation Co. With a registered capital of 20.04 million yuan and 100% of its shares held by the Company, Dalian Bingshan Group Refrigerator & Air-conditioner Installation Co. is engaged mainly in installation and test of complete sets of refrigeration equipment. The company realized the sales of 88.1 million yuan and net profit of 60 thousand yuan in 2005, with total assets of 43.81 million yuan. ② Dalian Bingshan Group Sales Co., Ltd. With a registered capital of 18 million yuan and 90% of its shares held by the Company, Dalian Bingshan Group Sales Co., Ltd. is engaged mainly in selling the products of the member enterprises of Dalian Bingshan Group. The company realized the sales of 110.17 million yuan and net profit of 2,370 thousand yuan in 2005, with total assets of 23.75 million yuan. ③ Dalian Bingshan Air-conditioning Equipment Co., Ltd. With a registered capital of 700 million Japanese yen and 70% of its shares held by the Company, Dalian Bingshan Air-conditioning Equipment Co., Ltd. is engaged mainly in production and sale of the terminal products for air conditioners such as fan coils and air processors. The company realized the sales of125.16 million yuan and net profit of 8,490 thousand yuan in 2005, with total assets of 123.96 million yuan. ④ Dalian Bingshan Ryosetsu Fast Frozen Equipment Co., Ltd. With a registered capital of US$ 1 million and 70% of its shares held by the Company, Dalian Bingshan Ryosetsu Fast Frozen Equipment Co., Ltd. produces and selling fast frozen equipment. The company realized the sales of 21.97 million yuan and net profit of 140 thousand yuan in 2005, with total assets of 11.14 million yuan. ⑤ Dalian Bingshan Metal Processing Co., Ltd. With a registered capital of US$ 2.35 million and 64.3% of its shares held by the Company, Dalian Bingshan Metal Processing Co., Ltd. produces and supplies metal plate works and stampings for the established joint venture companies and the Company. The company realized the sales of 51.72 million yuan and net profit of 2,650 thousand yuan in 2005, with total assets of 38.59 million yuan. ⑥ Dalian Bingshan Guardian Automation Co., Ltd. 10 With a registered capital of GBP 210 thousand and 60% of its shares held by the Company, Dalian Bingshan Guardian Automation Co., Ltd. engaged mainly in supplying automated control technology for refrigeration & other fields. The company realized the sales of 11.26 million yuan and net profit of 940 thousand yuan in 2005, with total assets of 5.33 million yuan. ⑦ Wuhan New World Refrigeration Industry Co., Ltd. With a registered capital of 30 million yuan and 51% of its shares held by the Company, Wuhan New World Refrigeration Industry Co., Ltd. engaged mainly in producing and selling screw type refrigeration compressor. The company realized the sales of 209.75 million yuan and net profit of 18,100 thousand yuan in 2005, with total assets of 240.96 million yuan. b. Main participating companies Sales Net profit Name （thousand yuan） （thousand yuan） Sanyo Air Conditioner 1,202,130 87,440 Sanyo Compressor 727,200 78,660 Sanyo Cold-chain 1,201,860 51,120 Thermo King-Dalian 259,790 60,030 Sanyo Refrigeration 430,900 31,080 B. Development prospect of the Company (1) Trend of the industrial development The Company is in the refrigeration and air-conditioning industry. Refrigerators and air-conditioners are used widely with increasing expansion of the service field. Refrigerators and air-conditioners are indispensable to whether industries, agriculture, construction, commerce, scientific research, national defense, education, culture and public health, or food, clothing, housing and transport in people’s living. Rapid growth of the national economy and comprehensive promotion of the moderately prosperous society provide the refrigeration and air-conditioning industry, which manufactures supporting equipment for all fields of the national economy, with a broader space to develop. As the reform and opening up is being depended and the import tariff is reduced step by step after China’s accession to the WTO, more and more products of the international competitors go into Chinese market, causing higher pressure on Chinese refrigeration and air-conditioning industry. (2) Opportunities and challenges faced by the Company For the more general category, the Company’s products can be regarded as the supporting equipment for both the investment-based industries and the consumption-based industries. It is the comprehensive supporting capability covering the two major fields of the investment-based industries and the consumption-based industries that provides the Company with the higher resistance to cyclicity and the low sensitivity to macro adjustment and control. In comparison with the similar enterprises in China, the Company, as the flagship enterprise in Chinese industrial refrigerator field, has the following advantages: ① the Company raised the 11 funds of more than 700 million yuan from the securities market through direct financing; ② the Company has had 20 joint venture companies excelling the competitors no matter in scale or in business performance; and ③ the Company acquired the controlling shares of Wuhan New World Refrigeration Industries Co., Ltd. merging the enterprise in its industry as the first one and therefore winning the first place in market consolidation. In comparison with the international competitors, there still is a gap between the Company and them mainly on the aspect of technical progress. However, the Company has many comparative advantages, including the nationwide marketing network, after-sale network and resources of customers, and the high cost performance of products. (3) Development plan of the Company With the guiding ideology of “development, reform, innovation, harmony”, and based on the main business of refrigerators and air-conditioners, the Company will put much efforts to research & development of high technical products with energy saving and low consumption in the refrigerating & heating and ecological and environmental protection fields, form the industrial chain and further increase the market shares in domestic and overseas markets, to win honors for Chinese machine-building industry and serve for improving the living conditions of human. (4) Demand for funds and fund source plan It is estimated that in 2006, the Company will need funds of 150 million yuan, mainly from its own funds and debt financing. In the future Eleventh Five-Year Plan period, the Company will invest capitals to the projects of energy saving, environment protection, new energy source and so on. If the market is bearable, we will consider refinancing. (5) Business plan for 2006 The Company’s business targets for 2006: Sales income: 1,600 million yuan Total amount of profit: 150 million yuan ① Keeping close attention to adjustment of the state’s investment structure and the trend of hot point in market demand, paying special attention to the key fields supported by the state, such as agriculture and coal mining, hydroelectric power, petrochemical and refining industries, and making package projects larger and stronger, to solidify and develop the Company’s predominant position in the field of package projects. In 2006, we will promote the large water source heat pump project that provides the central refrigerating and heating for large building groups to the market, and building up the first model project in Dalian. ② With the main line of improving the independent innovation ability, accelerating adjustment of the product mix, technical transmissions and cooperation with foreign investors, to make new breakthrough in improvement of the core competence of the Company. ③ Paying special attention to business management and improving the quality of economic operation. Widely promoting the LP concept in the range of the Company and launching the 12 activity of LP production among all employees. ④ Building the “harmonious Bingshan” to ensure fulfillment of the annual targets. (6) Main risks faced by the Company and countermeasures ① Risks in environment protection and countermeasures China, as the state to the Montreal Protocol, will forbid use of CFCs before 2010 and completely forbid use of HCFCs before 2040 to comply with the stipulations of the Protocol. The refrigerants that are being used by the Company are ammonia and HCFCs, which comply with the environment protection requirements. However, the environment protection has become the predominant current of the world and it is expected that the time of forbidding use of HCFCs may be advanced, which will cause impact onto the Company. Countermeasures against the risks in environment protection: Now, most of the Company’s products use the ammonia refrigerant, which has no damage to the ozonosphere, and therefore there is no risk of being forbidden. There are minority products using HCFCs, which has less damage to the ozonosphere. In order to relieve the risk that the time of forbidding use of HCFCs may be advanced, the Company will take countermeasures on the two aspects. On the one hand, we will make more tracking researches of the substitution medium, and tackle any technical problems in application of the new medium. On the other hand, we will put much effort to development of new energy-saving and eco-friendly products such as water source heat pump sets. ② Risks in the return on investment and countermeasures The Company has the return on investment from the joint venture companies accounting for about 70% of its total amount of profit in the same period and, however, the Company is just in the position of participation, being dubious in return on investment. Any abnormal fluctuation of the return on investment will cause bigger influence on the net profit of the Company. The countermeasures against risks in the return on investment: The Company always conducts discreet investigations of the investment field and market demand before long-term investment, and has basically reached the goal specified for project investment. Meanwhile, in order to ensure realization of the anticipated return on investment, the Company, although it is just in the participating position, sent personnel to hold the positions of core management members, such as general manager, financial manager and marketing manager, in the companies participated by the Company, who are directly concerned with the routine business operation to ensure fulfillment of the annual business targets, avoid abnormal fluctuations and well protect the stable return on investment of the Company. 13 6.2 Statement of core business classified according to industry or product (Unit: RMB’0000) Increase/decr Increase/decr Increase/decr ease of ease of gross Classified ease of cost revenue profit margin according to Gross profit compared Revenue Cost compared compared industry or ratio with the with the with the product previous year previous year previous year (%) (%) (%) Increase 2.78 Refrigeration 151,104.60 125,134.20 17.19% 24.18% 20.16% percentage equipment points 6.3 Particulars about core business classified according to area (Unit: RMB’0000) Increase/decrease of revenue compared with the Area Revenue previous year（％） Northeast 130,504.20 7.25% China area Middle 20,600.40 13.27% China area 6.4 Application of the raised proceeds □Applicable √Inapplicable 6.5 Application of the proceeds not raised through share offering □Applicable √Inapplicable 6.6 Explanation of the “Non-standardized Opinion” of Certified Public Accountants by the Board of Directors □Applicable √Inapplicable 6.7 The preplan of the profit distribution and capitalization of capital public reserve of the Board of Directors As audited by Dalian Hualian Certified Public Accountants, the after-tax profit of the Company in 2005 was 100.812 million yuan. In accordance with the relevant regulations of the state and the Articles of Association of the Company, 10% of the after-tax profit, i. e. 10.081 million yuan, shall be set aside as the legal surplus public reserve, another 10%, i. e. 10.081 million yuan, as legal public welfare fund and 1.69 million yuan as the consolidated reserves for the subsidiary companies. A total of 21.852 million yuan was drawn. The profit available for distribution to shareholders in the reporting year is 78.96 million yuan. With the undistributed profit of 137.283 million yuan carried forward from the previous year, the accumulated profit available for distribution to shareholders is 216.243 million yuan. As audited by Price WaterHouseCoopers Zhongtian Certified Public Accountants, the after-tax profit of the Company in 2005 was 101.685 million yuan. With the remaining after-tax profit after drawing legal surplus public reserve, legal public welfare fund, consolidated reserves for the 14 subsidiary companies, the profit available for distribution to shareholders in the reporting year is 79.833 million yuan. With the undistributed profit of 107.148 million yuan carried forward from the previous year, the accumulated profit available for distribution to shareholders is 186.982 million yuan. In accordance with the Articles of Association of the Company and relevant regulations, the lower of the aforesaid distributable profits shall be distributed. Therefore, the profit available for distribution to the shareholders for this year is 186.982 million yuan, 10% of which, i. e. 10.081 million yuan, will be drawn as the optional surplus public reserve, and 52.502 million yuan for payment of the dividends. The balance of 124.399 million yuan will be carried forward to the next year for distribution. The profit distribution preplan of the Company for 2005: With 350,014,975 shares in total by the end of 2005, cash dividend of one and a half yuan (including tax) for each ten shares will be paid. The cash dividends for B-shares will be converted into HK$ for payment. No capital public reserve is to be converted into additional shares in this year. This preplan should be presented to and reviewed and adopted at the 2005 shareholder general meeting. §7 Significant Events 7.1 Purchase of assets √Applicable □Inapplicable In the report period, the Company acquired 21% of Wuhan New World Refrigeration Industry Co., Ltd.’s shares with its own fund of 8.75 million yuan from Dalian Bingshan Group Co., Ltd. while the Company has held its share of 30%, so that the Company acquired the controlling share right. For the bulletin on this acquisition, see the “Associated Transaction Bulletin” published on China Securities Daily and Ta Kung Pao dated of April 21, 2005. The associate transaction is an important step of the company in horizontal acquisition and merger and also an important act in perfecting the development strategies. Wuhan New World Refrigeration Industry Co., Ltd. has a strong core competitive power in screw type refrigeration compressor. Through the associate transaction, the company will further strengthen the superiorities in market, technology and price in terms of screw type refrigeration compressor. 7.2 Sales of assets □Applicable √Inapplicable 7.3 Important guarantee □Applicable √Inapplicable 7.4 Important matters concerning associated transactions 7.4.1 associated transactions taking place in purchase of goods (Unit: RMB’0000) √Applicable □Inapplicable 15 purchasing auxiliary products for selling auxiliary spare parts to package projects from associate associate parties parties Associated party Proportion to the Proportion to the Amount similar amount similar transactions transactions Dalian Bingshan Group 6,069.00 4.02% 4,608.00 4.21% Import&Export Co., Ltd. BAC Dalian Co., Ltd. 390.00 0.26% 6,652.00 6.07% Total 6,459.00 4.28% 11,260.00 10.28% 7.4.2 associated debts and claims √Applicable □Inapplicable For details of the associated debts and claims, see the Special Audit Opinion on Dalian Refrigeration Co., Ltd.’s Using the Funds of Its Holding Shareholders and other Associated Parties issued by Dalian Hualian Certified Public Accountants Co., Ltd. 7.5 Entrusted financing □Applicable √Inapplicable 7.6 Undertaking matters for trial sales of state shares and implementation √Applicable □Inapplicable Bingshan Group undertook that the Dalian Refrigeration Co., Ltd.’s state shares held by it would not be listed for trading or assigned within 12 months from the date when their being allowed to be listed for trading in the A-share market; that the shares would not be listed for trading within 48 months after expiry of the aforementioned undertaking; that it would submit the dividend distribution proposal for the annual dividend from 2005 to 2007 not lower than 50% of the distributable profit of Dalian Refrigeration Co., Ltd. for respective years, and ensure that it votes for that proposal at the general meeting; and that after this trial sales of state shares is completed, it would authorize the Board of Directors of Dalian Refrigeration Co., Ltd. to work out and apply as soon as possible the management incentive and restriction system with share options according to the state’s policies, laws and regulations. Implementation of the undertaking: Bingshan Group submitted the dividend distribution proposal for the annual dividend for 2005 not lower than 50% of the distributable profit of the Company for that year at the seventh meeting of the fourth Board of Directors of Dalian Refrigeration Co., Ltd.; and it has authorized the Board of Directors of Dalian Refrigeration Co., Ltd. to work out and apply as soon as possible the management incentive and restriction system with share options according to the state’s policies, laws and regulations. 7.7 Significant lawsuit and arbitration □Applicable √Inapplicable §8 Report of the Supervisory Committee □Applicable √Inapplicable §9 Financial Report 9.1 Auditor’s Report: The financial report has been audited by Price WaterHouseCoopers Zhongtian Certified Public 16 Accountants who has presented unqualified opinion audit report. 9.2 Accounting statement (attached hereunder) 9.3 Changes in accounting estimates According to the Notification for Issuing the “Regulations on Payment of Business Income Tax on a Consolidated Basis for the Year 2005” of Dalian Local Taxation Bureau, Dalian Local Taxation Bureau’s document No. 138 of DA DI SHUI HAN [2005] dated of Dec. 15, 2005, the fixed assets purchased after Jan. 1, 2005 by the parent company are subject to 5% of residual value. This caused reduction of the Company’s profit by 11,855.36 yuan. 9.4 Major accounting errors □ Applicable √ Inapplicable 9.5 Explanation on change of consolidation scope in the report period compared with the latest annual report In the report period, the ratio of the Company’s investment to Wuhan New World Refrigeration Industry Co., Ltd. amounted to 51% and therefore that company was added into the range of consolidated statements. Board of Directors of Dalian Refrigeration Co., Ltd. April 27,2006 17 DALIAN REFRIGERATION COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 (All amounts in Renminbi (“RMB”) thousands, except for earnings per share) Year ended 31 December Notes 2005 2004 Sales, net 4,25(a) 1,486,107 1,258,411 Cost of sales 25(a) (1,232,680) (1,082,621) Gross profit 253,427 175,790 Distribution costs (73,069) (52,523) Administrative expenses (133,610) (92,035) Other income, net 5 9,591 8,941 Profit from operations 56,339 40,173 Finance costs, net 6 (572) (1,480) Share of profit of associates and joint ventures 104,189 105,474 before tax Dividend income from available-for-sale 3,491 653 investments Profit before tax and minority interests 7 163,447 144,820 Income tax expense 8 (48,233) (32,936) Profit before minority interests 115,214 111,884 Equity holders of the Company 101,685 108,764 Minority interests (13,529) (3,120) Net profit 115,214 111,884 Earnings per share - Basic 9 RMB 0.29 RMB 0.31 - Diluted Not applicable Not applicable The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 18 DALIAN REFRIGERATION COMPANY LIMITED CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2005 (All amounts in RMB thousands) As of 31 December Notes 2005 2004 ASSETS Non-current assets Leasehold land 10 38,439 39,869 Property, plant and equipment 11 357,575 293,752 Investments in associates and joint ventures 12 700,568 695,964 Available-for-sale investments 13 34,706 41,133 1,131,288 1,070,718 Current assets Inventories 14 255,188 240,439 Gross amount due from customers for 15 4,340 46,401 contract work Divedends receivable 19,058 9,262 Trade and other receivables 16 405,345 264,561 Cash and cash equivalents 24(b) 335,402 304,039 1,019,333 864,702 Total assets 2,150,621 1,935,420 19 DALIAN REFRIGERATION COMPANY LIMITED CONSOLIDATED BALANCE SHEET (CONTINUED) AS OF 31 DECEMBER 2005 (All amounts in RMB thousands) As of 31 December Notes 2005 2004 EQUITY AND LIABILITIES Equity Share capital 17 350,015 350,015 Other reserves 18 850,689 818,619 Retain earnings 19 186,982 152,012 1,387,686 1,320,646 Minority interests 66,636 35,621 LIABILITIES Non-current liabilities Long-term bank borrowings 23(b) 50,000 50,000 Deferred tax liabilities 8(iii) 12,147 12,667 62,147 62,667 Current liabilities Gross amount due to customers for contract 20 18,052 5,037 work Deferred income 21 4,800 - Dividends payable 2,799 3,000 Trade and other payables 22 564,252 377,449 Short-term bank borrowings 23(a) 44,250 131,000 634,153 516,486 Total equity and liabilities 2,150,621 1,935,420 The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 20 DALIAN REFRIGERATION COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2005 (All amounts in RMB thousands) Note Attributable to equity holders of the Minority Total equity Company interest Share Other Retain capital reserves earnings (Note 17) (Note 18) (Note 19) Balance at 1 January 2004 350,015 785,206 110,972 30,992 1,277,185 Appropriations to discretionary surplus reserve fund relating to 2004 - 9,548 (9,548) - - Dividends declared in 2004 - - (35,001) (2,007) (37,008) Capital contribution from Minority shareholders - - - 3,516 3,516 Profit for the year - - 108,764 3,120 111,884 Appropriations to statutory reserves: - statutory surplus reserve fund - 10,808 (10,808) - - - statutory public welfare fund - 10,806 (10,806) - - Profit appropriations to statutory - reserves by subsidiaries - 1,561 (1,561) - - Other 18(a) - 690 - 690 Balance at 31 December 2004 350,015 818,619 152,012 35,621 1,356,267 Balance at 1 January 2005 350,015 818,619 152,012 35,621 1,356,267 Appropriations to discretionary surplus reserve fund relating to 2005 18(a) - 9,863 (9,863) - - Dividends declared in 2005 - - (35,001) (2,652) (37,653) Profit for the year - - 101,685 13,529 115,214 Profit appropriations to statutory reserves: - statutory surplus reserve fund - 10,081 (10,081) - - - statutory public welfare fund - 10,081 (10,081) - - Profit appropriations to statutory reserves by subsidiaries 19(b) - 1,689 (1,689) - - Acquisition of a subsidiary - - - 20,137 20,137 Other 18(a) - 356 - - 356 Balance at 31 December 2005 350,015 850,689 186,982 66,635 1,454,321 The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 21 DALIAN REFRIGERATION COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 (All amounts in RMB thousands) Year ended 31 December Notes 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations 24(a) 139,706 43,911 Interest income received 2,177 1,777 Income tax paid (27,202) (17,057) Net cash generated from operating activities 114,681 28,631 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiaries, net of cash acquired 59,634 - Increase in investments in associates and joint ventures (96,692) Proceeds from transfer of shares in associates 15 6,285 Proceeds from disposal of available-for-sale 698 168 investments Purchase of leasehold land and property, plant and (41,228) (28,894) equipment Proceeds from disposals of property, plant and 2,059 2,142 equipment Dividends received from associates and joint 66,382 76,126 ventures Dividends received from available-for-sale 799 1,115 investments Net cash used in investing activities 88,359 (39,750) CASH FLOWS FROM FINANCING ACTIVITIES: Net decrease in short-term bank borrowings (133,250) (46,000) Interest expense paid (572) (1,480) Capital contributions from minority shareholders - 3,516 Dividends paid (35,203) (34,950) Dividends paid to minority shareholders (2,652) (2,007) Net cash used in financing activities (171,677) (80,921) Net decrease in cash and cash equivalents 31,363 (92,040) Cash and cash equivalents at beginning of year 24(b) 304,039 396,079 Cash and cash equivalents at end of year 24(b) 335,402 304,039 The accompanying accounting policies and notes form an integral part of these consolidated financial statements. 22