长虹美菱(000521)皖美菱Ｂ2005年年度报告摘要（英文）

Stock code: 000521, 200521 Notice No.: 2006-012 Short form of the stock: MEILINGDIANQI, WANMEILING-B Hefei Meiling Co., Ltd. Summary of Annual Report 2005 §1. Important Notice 1.1 Board of Directors and Supervisory Committee of Hefei Meiling Co., Ltd. (hereinafter referred to as the Company) 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 Annual Report 2005 is abstracted from the 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 the Annual Report 2005 or have objection for this report. 1.3 All directors attended the meeting of the Board. 1.4 Morison Heng Chartered Accountants Certified Public Accountants produced standard unqualified Auditors’ Report for the Company. 1.5 Mr. Zhao Yong, Executive of the Company, Mr. Ye Honglin, person in charge of accounting work, and Mr. Zhong Weiyi, person in charge of accounting organ (chief accountant) hereby confirm that the Financial Report of Annual Report 2005 is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock MEILINGDIANQI, WANMEILING-B Stock code 000521, 200521 Listed stock exchange Shenzhen Stock Exchange Registered address and office address Registered address: No.48, Wuhu Road, Hefei, An’hui Privince Office address: No.48, Wuhu Road, Hefei, An’hui Province Post code Post code of registered address: 230001 Post code of office address: 230001 Internet web site of the Company http://www.meiling.com E-mail of the Company info@meiling.com 2.2 Contact person and method Securities Affairs Secretary of the Board Representative Name Xue Hui Qi Dunwei Contact address No.48, Wuhu Road, Hefei No.48, Wuhu Road, Hefei 1 Telephone 86-551-2869394 86-551-2869394 Fax 86-551-2883122 86-551-2883122 E-mail wyxuehui@163.com secretary@meiling.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2005 2004 2003 over last year（％） Income from main operations 2,022,018,592.24 1,438,633,867.16 40.55% 1,383,809,999.35 Total profit 7,101,086.78 17,161,709.91 -58.62% -197,834,320.80 Net profit 6,658,981.44 16,767,740.47 -60.29% -194,656,073.42 Net profit after deducting -12,604,041.38 11,724,652.97 -207.50% -180,929,418.47 non-recurring gains and losses Net cash flow arising from 63,611,111.57 147,849,150.81 -56.98% 94,306,265.23 operating activities Increase/decrease At the end of At the end of At the end of from the end of 2005 2004 2003 previous year（％） Total assets 2,439,936,423.58 2,357,408,266.18 3.50% 2,245,189,884.42 Shareholder’s equity (excluding 863,654,084.66 856,947,103.22 0.78% 840,931,946.31 minority interests) 3.2 Major financial indexes Unit: RMB Increase/decrease 2005 2004 2003 over last year（％） Earnings per share 0.016 0.04 -60.00% -0.47 Earnings per share (note) 0.00 - - - Return on equity 0.77% 1.96% -1.19% -23.15% Return on equity as calculated based on net profit after deducting -1.46% 1.98% -3.44% -20.75% non-recurring gains and losses Net cash flow per share arising from 0.15 0.36 -58.33% 0.23 operating activities Increase or decrease At the end of At the end of At the end of from the end of 2005 2004 2003 previous year（％） Net assets per share 2.09 2.07 0.97% 2.03 Net assets per share after adjustment 1.63 1.22 33.61% 1.30 Note: Earnings per share were calculated based on new share capital if share capital was changed from the end of the report period to disclosure date of the report. 2 Items of non-recurring gains and losses √Applicable □Inapplicable Unit: RMB Items of non-recurring gains and losses Amount Income form selling of capital 77,300.00 Net income from penalty 69,294.36 Income from subsidy 1,542,400.00 Switching back provision for losses from falling price of inventories of 18,067,365.10 the report period Net losses from disposal of fixed assets 451,815.06 Donation expenditure 40,553.62 Penalty expenditure 967.96 Total 19,263,022.82 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB CAS IAS Net profit 6,658,981.44 4,011,000.00 Provision for maintenance expenses -1,206000.00 Recalculation of financial assets in according with IAS 39 1,588000.00 Explanation on Depreciation of fixed assets -3,084000.00 the difference Other -80000.00 According to International Accounting Standards 3,877000.00 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital Unit: share Increase / decrease Before the change After the change in this time (+, -) Amount Proportion Subtotal Amount Proportion I. Unlisted Shares 149,012,606 36.02% 0 149,012,606 36.02% 1. Sponsors’ shares 44,129,967 10.67% 0 44,129,967 10.67% Including: State-owned 40,543,692 9.80% 0 40,543,692 9.80% share Domestic legal person’s 3,586,275 0.87% 0 3,586,275 0.87% shares Foreign legal person’s 0 0.00% 0 0 0.00% shares Others 0 0.00% 0 0 0.00% 3 2. Raised legal person’s 22,029,956 5.33% 0 22,029,956 5.33% shares 3. Inner employees’ shares 0 0.00% 0 0 0.00% 4. Preference shares or 82,852,683 20.03% 0 82,852,683 20.03% others II. Listed Shares 264,630,343 63.98% 0 264,630,343 63.98% 1. RMB ordinary shares 151,530,343 36.63% 0 151,530,343 36.63% 2.Domestically listed 113,100,000 27.34% 0 113,100,000 27.34% foreign shares 3. Overseas listed foreign 0 0.00% 0 0 0.00% shares 4. Others 0 0.00% 0 0 0.00% III. Total shares 413,642,949 100.00% 0 413,642,949 100.00% 4.2 Statement of shares held by the top ten shareholders Total amount of shareholders 84,388 Particulars about shares held by the top ten shareholders Numbers Proporti Number of Nature of of on of Total of share Full name of Shareholders shareholde non-circul shares shares held pledged/ r ating held frozen shares held Guangdong Greencool Enterprise Other 20.00% 82,852,683 82,852,683 82,852,683 Development Co., Ltd. State-owned Hefei Meiling (Group) Holdings Co., Ltd. 9.80% 40,543,692 40,543,692 0 shareholder Foreign China Everbright Securities (HK) Co., Ltd. 0.99% 4,078,462 0 0 shareholder Foreign Fang Jingwen 0.57% 2,372,400 0 0 shareholder Foreign Yongsheng Industrial Co., Ltd. 0.51% 2,109,000 0 0 shareholder China Merchants Securities (Hong Kong) Co., Foreign 0.45% 1,869,850 0 0 Ltd. shareholder Hefei Refrigerator Fittings Factory Other 0.41% 1,707,750 0 0 Hefei Industrial Bank Other 0.41% 1,707,750 0 0 China Cinda Assets Management Other 0.37% 1,536,975 0 0 Company An’hui Guozhen Group Co., Ltd. Other 0.37% 1,536,975 0 0 Particulars about shares held by the top ten shareholders of circulation shares Shareholders’ name (full name) Number of circulation shares held at the Type of shares 4 year-end China Everbright Securities (HK) Co., Ltd. 4,078,462 Domestically listed foreign share Fang Jingwen 2,372,400 Domestically listed foreign share Yongsheng Industrial Co., Ltd. 2,109,000 Domestically listed foreign share China Merchants Securities (Hong Kong) Co., 1,869,850 Domestically listed foreign share Ltd. Lin Xueling 1,444,500 RMB Common share Huang Guoqiang 1,367,000 Domestically listed foreign share Long qinfang 1,361,762 Domestically listed foreign share CAO SHENGCHON 1,360,600 Domestically listed foreign share LI XOXONG 1,350,000 Domestically listed foreign share Hefei Meicheng Vacuum Forming Co., Ltd. 1,305,300 RMB Common share Among the top ten shareholders, there existed no associated relationship or belong to the concerted actors as specified in the Measures for Controlling Information Disclosure of Alternation in the Shares Held by Shareholders Explanation on associated in Listed Companies; as the Company has no idea on whether there exists relationship among the aforesaid shareholders any business relationship among other shareholders of circulating shares or they belong to the concerted actors as specified in the Measures for Controlling Information Disclosure of Alternation in the Shares Held by Shareholders in Listed Companies. 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 Name of new controlling shareholder Sichuan Changhong Electric Appliance Co., Ltd. Name of new actual controller Date of change Date of change of new controlling shareholder: Nov. 6, 2005 Publication date and newspaper of the China Securities, Securities Times and Ta Kung Pao dated change of controlling shareholder Nov. 9, 2005 Publication date and newspaper of the change of new actual controller 4.3.2 Brief introduction on the controlling shareholder and actual controller Sichuan Changhong Electric Appliance Co., Ltd. Legal representative: Mr. Zhao Yong Registered capital: 2,164,210,000 Registered address: No. 35, Mianxing (E) Road, Hi-tech Zone, Mianyang, Sichuan Business scope: production, sales and road transportation of video products, audiovisual products, air-conditioner products, companion products of buttery, network products, companion products of laser reading and writing, satellite TV & Broadcast ground receiving equipment, video movie, electric medicine products, electrical equipment, Security technology, organization products, digital camera, communication and computer products and chemical industry products; 5 packaging goods and technical service; maintenance and sales of electric products and components; house leasing; transit trade, e-commerce, hi-tech risk investment and other state-permitted business. 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 Mianyang Municipal 100% Sichuan Changhong Electric Group Co., Ltd. 30.70% Sichuan Changhong Electric Appliance Co., Ltd. 20.03% Hefei Meiling Co., Ltd. §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Total Drawing payments payments from Reason Shares held at Shares held at drew from the shareholder Name Title Sex Age Office term for period-begin period-end Company in organ or other change the report related organ or period not Chairman of Feb., 11, 2006- Zhao Yong Male 43 0 0 0.00 Yes the Board May 28, 2008 Wang Vice Chairman May 28, 2005- Male 55 13,477 13,477 46.05 No Jiazhang of the Board May 28, 2008 Feb., 10, 2006- Li Jin Director Male 39 0 0 0.00 Yes May 28, 2008 May 28, 2005- Jiang Jizhi Director Male 59 0 0 28.89 No May 28, 2008 Mar., 3, 2006- Wang Yong President Male 39 0 0 6.39 No May 28, 2008 6 Nov., 13, 2005- Ye Honglin Vice president Male 35 0 0 5.75 No May 28, 2006 Nov., 13, 2005- Li Daijiang Vice president Male 40 0 0 5.75 No May 28, 2008 May 28, 2005- He Jinqi Vice president Male 43 0 0 46.08 No May 28, 2008 May 28, 2005- Xuehui Vice president Male 43 0 0 46.11 No May 28, 2008 Independent May 28, 2005- Wei Wei Male 51 0 0 5.40 No director May 28, 2008 Zhang Independent May 28, 2005- Male 68 0 0 5.40 No Wenyan director May 28, 2008 Wu Independent May 28, 2005- Male 49 0 0 5.40 No Hanhong director May 28, 2008 Chairman of Fei the Feb., 10, 2006- Female 48 0 0 0.00 Yes Minying Supervisory May 28, 2008 Committee Feb., 10, 2006- Yu Xiao Supervisor Male 38 0 0 0.00 Yes May 28, 2008 Feb., 10, 2006- Yang Jun Supervisor Male 36 0 0 0.00 Yes May 28, 2008 Yong May 28, 2005- Supervisor Male 38 0 0 0 5.40 Yes Fengshan May 28, 2008 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period Year 2005 was the important development year of the Company. Over the past year, the external macro environment occurred a great change: more keen competition in the market of refrigeration industry, a new turn of mergering and reorganization continued, black and white household applicances blended obviously; the prices of raw materiala like crude oil, copper, iron ore remained in high level; the current fund loans was infulenced by the interruption of Kelon Matters; Changhong became the principal shareholder of Meiling due to the puchasing 20.03% equity of Greencool. Under the said situation such new macro enviroment, the Company carried through the instructions of the Board with a firm hand, and adjusted business strategy and operating mechanism timely, reinforced internal reformation and management, tightly seized the opportunity from the market adjustment and actively used the various policies so as to realize quickening of the development step under adjustment. 1. Rapid introduction of various kinds of new products During the whole year, the Company brought out twenty kinds of medium and advanced refrigerations in the domestic market, such as 2G of extreme-saving , energy-saving, electrical controlling, wind cooling, cooling-mixing, nanoecology, 7 big-sized 460; in the foreign market, the Company completed the development of new products and improved 44 items, the types for export amouted to 120 and exported to 92 countries. 2. Breakthrough of 1,000,000 sets in domestic sales In order to adapt to the stratedy demands of the products of the Comapy, the Company adjusted the domestic market. Under the target of obtaining thegeneral sales, the Company adjusted the sales structure of products, mainly introduced the medium and advanced typs, added the supply amount in profit-gaining products; emphasized to enhance and perfect the plan “Project 300”, established the core network of 1st and 2nd market, promoted and consummate plan “Project 800”; established the star networks of 3rd and 4th market. the proportion in the sales of medium and advanced products in 2005 amounted to 40%. 3. Increasing in foreign market sales The Company mainly consolidated the Europe market, emphasized developing the America market in exporting markets, and obtained the purposes of perfecting the progit-gaining ability and highly increasing speed through adjusting the product structure. 4. The prodcution capability reached in exporting base. The new exporting base with more 600,000 sets was put into production and increase the production capbility. 5. Strengthening on the interior operation The Company intensified the mangement of operation plan and financail budget; extablished the planned running pattern of monthly operation; reasonably adjusted the production,sales and deposits; conducted the mangement system on preregisteration of expenses, controlled scientifically the expenses; reduced the cost of materials through price-increasing and bidding; strengthening the controll of subsidiary material consumption to reduce the consumption amount of subsidiary material of single set. The measures above made the operation of Company obtain rapid development and sold well, and the sales increase 40.55% over the same period, especially in the foreign market with the increasing ratio of 81.46% over the same period of last year . the net profits in the report period reduced over the same period of last year because of the rising in cost and reducing of gross ratio on raw materials such as steels and chemical industry. Problems and difficulties from the operation and their solutions In 2006, household appliance enterprises face much more intense macro environment and market situation. Price of part of raw materials remains high and the negotiation ability of sub-supplier intensifies, the pressure of controlling cost increases; the share of foreign refrigerator in China domestic market of advanced refrigerator increase and competition intensifies; the market share of domestic second-level refrigerator exalts quickly; and the serious shortage of production capability could not meet the rapid increasing demand of market. Aiming at the said existing problems, the Company prepared to adopt the following countermeasures: (1) To adjust structure of products, return high-end of the market and enhance the 8 brand value of “Meiling”; adjust the structure of export products and further improve the profit-gaining ability; emphasize the using of new technology, new material and new techniques, speed up the investment on development and research, grasp the key point of refrigerator freezing technology, adopt the designing cost system of products development, and reduce the cost from the original resources; conduct bidding and purchase with association of Changhong. (2) To utilize the advantages of Changhong Group Ltd to speed up the construction of Meiling Hi-tech Industrial Park to improve the developing potentialities. (3) To strengthen the cost quota management and expense management inside the Company, change the calculation unit into small with benefit as center, build up the operating idea that the function departments all are profit center so as to reach the purpose of revenue-enhancing and expenditure control. Business development plan of the New Year In 2006, with the operating and guiding idea of “closing to the market, improving quality, promoting efficiency, enhancing the market share” as the core, the Company would further change and adjust mind, operating concept and management measures. All the operations of the Company will take market as the leading; organize the structural adjustment, personnel preparation, product development, manufacturing, quality management, cost control, all the activities will set market demand as target; expand the domestic market share; take the efficiency as the guide in international sales, optimize product , customer and resource structure. The Company actively guided the staff to fulfill obligations, improve professional level, management level and operating capabilities, creatively develop various works, and realizes operating objection “Striving for second level with keeping third in domestic market” proposed by the Board of Directors. 1. To strengthen the constructions on resources and marketing team, intensify the plans on products and market, establish the enterprises running mechanism with guiding of market and leading of marketing, enhance the brand value, and increase the market shares. To exert the cooperative effects between Changhong and Meiling; realize the joint with management, technology, brand and industry through the unification and integration in purchasing, R&D, logistics, marketing and service, face the pressure and challenge of market in cost control, management level, reaction speed and market influence. To rely on the superiority in the third and fourth market of Changhong, the sales resources of Meiling expand quickly; utmostly exert the cooperative effects between the regions with absolute advantages of Changhong and areas with absolute disadvantages of Meiling, and with selling the refrigerators with the brand of “Changhong-Meiling”. To adapt the development of market to adjust the marketing organized structure, intensify the market force, establish the Marketing Department, adjust the sales institution outside, and promote the planning ability and speed up the construction of team. To increase the resources investment of sales, supporting market development in 9 personnel preparation, sales policy and expenses budgets all around. To strengthen the construction of marketing team, establish marketing team with quick response, enthusiasm and combating spirit through the methods of professional knowledge training, vocation cultivation, optimization of team structure and achievement appraisal. To set the starting point of meeting the demands of customer, optimize the product planning and designing, and create sales methods. To adjust the product structure, promote the sales proportion of medium and advance products, improve the fame of Meiling, enhance the brand value of Meiling, enhance the enterprise competition and profit-gaining ability. 2. To persist in the conception of “ Quality is the life of enterprises”, increase the technological innovations, take unceasingly the various activities on quality management; improve the technological levels, products quality and whole quality of enterprises. To coordinate with the abilities on the leading information household technology and applied innovation of Changhong, and this can provide technological support for the reseach and manufacturing of intelligence and information of Meiling. To conduct deep research on the professional technologies of several domains, such as magnetic refrigeration, semiconductor refrigeration, absorption refrigeration, solar energy and wind refrigeration, etc.; and develop the excessive domains of refrigeration. To speed up the research and using on the technologies of energy-saving, electrical control, frequency conversion, antibacterial and more doors with more temperatures of refrigerator. To conduct the activities of technical fineness of products, pursue sense of accomplishment in technological performance, sculpture of appearance and technical ability of products. To apply the advance tools of quality management and statistical technology, improve the professional management of quality. To obtain the information in design, after service and logistic to strengthen radically the control and management of quality all round. 3. To respond quickly to the market, take the principal of “Speed first, efficiency above all”, improve the efficiency of whole operation, reduce the operation cost and consolidate the comprehensive competition ability of enterprise. To speed up the production and comprehensively improve the working efficiency through labor-hour checking, task analysis and technical optimization. To regulate the flow in production development and trial- production management, take plan of production of trial-manufacture seriously and shorten the period of product development and putting into production. To strengthen the production flexibility, enhance the adaptability to changing and flexibility of the demand of market, improve the reaction ability of production, speed up the production and deliver goods on time. To implement the project of information, establish the consummated platform of information management; realize the integration of logistics, fund flow and information. 10 To simplify the business management flow; perfect and regulate the management systems of information transferring and report; shorten the reaction time; and improve the policy-making efficiency and the working efficiency. To take the demand of sales as the goal; coordinate the relationships between the sales, production, supply and research; perfect the management system of planning budget with the direction of market to make the operation plan close to the market and the whole operations of the Company work efficiently. To optimize the supplier structure; improve the supply chain; adopt the management of dynamic purchasing price in accordance with price fluctuation of the raw material market coordinated with bidding and purchasing with Changhong; reduce the cost of purchasing. To optimize the structural design, technological design, the using design of material of the products to reduce the design cost of products. 4. To adopt advance management method, increase the management innovation, improve the management of enterprise, and promote the professional ability and fighting of team work of employee. To adapt to the adjustment of sales structure and demand of market development; conduct decision-making of sales plans forward and risks are controlled by the headquarters; implement the running mechanism of simulated subsidiary with taking sales branch as the unit; improve the overall marketing ability and operation management with the measuring standard of putting into and output of production. To carry out the budget management method of export orders, take the regional market as the units, check the achievement of regional export, realize the development pattern of export with the target of profit gaining. To carry out the checking pattern of production line, groups; take the putting-in and output as the standard of checking the achievement of production; fully mobilize the enthusiasm on management and checking of whole employees. To encourage the departments to overcome difficulties, create conditions, increase and reduce expenses, realize the minimum of cost and expense. To implement the method of positive driven; carry out activities of small change, small reform, small invention and small creation; activate the enterprise innovation; and establish the vigorous running mechanism of enterprises. To unify the trainings of vacation and professions, strengthen the training of medium cadre, leader of group, reserved cadre; consummate and implement the plan of worker and technicians to optimize the employee; improve the professional ability and vocation abilities of the employees. 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 Gross in income from Classified according to Income from Cost of main e in cost of main in gross profit ratio profit main operations industries or products main operations operations operations over over the last year ratio (%) over the last year the last year (%) (%) (%) 11 Manufacture of daily 202,201.86 167,282.82 17.29% 40.55% 45.45% -2.78% appliances Main operations classified according to products Refrigerators (deep 202,201.86 167,282.82 17.29% 40.55% 45.45% -2.78% freezer) 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main Increase/decrease in income from main operations operations over the last year (%) Domestic 139,537.56 27.63% Overseas 62,664.30 81.46% 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 RMB’0000 Names of projects Amount of projects Progress of projects Earnings of projects Investment of fixed assets 7,255.00 Completed --- Construction in progress 1,265.00 85% --- Total 8,520.00 - - 6.6 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.7 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 Usage and plan of distribution preplan though the Company achieved the profit in undistributed profit the report period Since there incurred a loss in the operation in 2001 and 2003, at Offsetting losses present the accumulative retained profit was RMB –406,695,891.57 Thus, the Company decided neither to distribute profits nor convert reserve into share capital in 2005. The profit distribution plan would be carried out after losses offsetting. 12 §7. Significant Events 7.1 Purchase of assets √ Applicable □ Inapplicable Unit: RMB’0000 Contribution to net Assets Debts and profit of the Company ownership Liabilities Related Explain The assets Date of Purchase of the assets purchased involved in the involved in Transaction parties transaction principle of purchased purchase price from the assets the assets or not pricing year-beginning to the transferred or transferred or date of purchase not not Hefei Meiling Confirmed Yes No Land use Feb. 10, Group Holdings 10,110.53 0.00 Yes based on right 2006 Co., Ltd. evaluation price Hefei Meiling Confirmed Yes No Land use Feb. 10, Group Holdings 7,509.75 0.00 Yes based on right 2006 Co., Ltd. evaluation price Property Confirmed Yes Yes Hefei Meiling and Feb. 10, based on Washing Machine 4,000.00 0.00 Yes affiliated 2006 evaluation price Co., Ltd. equipment 7.2 Sales of assets □Applicable √ Inapplicable 7.1, 7.2 Influence on consistence of business and stability of managers caused by the issues interfered in purchase and sale After the transaction, production scale of the Company would be further enlarged, which solidified basis for improving production efficiency of enterprise, complied with long-term development planning, and meanwhile quality of partial assets of the Company would be further optimized to realize health and sustainable development of enterprise and protect interest of the Company and middle and small shareholders. 7.3 Important guarantee √ Applicable □ Inapplicable Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Guarantee Name of the Date of happening Complete Amount of Guarantee for related Company (date of signing Guarantee term Implementation guarantee type party (yes or guaranteed agreement) or not not) --- 0.00 0 0 Total amount of guarantee in the report period 0.00 13 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 4,000.00 Total balance of guarantee for controlling subsidiaries at the end of the report 4,000.00 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 4,000.00 The proportion of the total amount of guarantee in the net assets of the 4.63% Company Including: Amount of guarantee for shareholder, actual controller and related parties 0.00 The debts guarantee amount provided for the guarantee of which the 0.00 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 said three guarantees 0.00 7.4 Significant related transactions 7.4.1 Current related purchase and sale √Applicable □Inapplicable Unit: RMB’0000 Selling products and providing service to Purchasing products and accepting service related parties to related parties Related parties Transaction Proportion in the same kind Transaction Proportion in the same kind amount of transaction amount amount of transaction amount Hefei Meiling Packaging Co., Ltd. 0.00 0.00% 7,119.51 3.71% Anhui Anhong Plastics Co., Ltd. 0.00 0.00% 5,285.04 2.76% Total 0.00 0.00% 12,404.55 6.47% Including: The capital of related transactions the listed company selling products or supplying labors to its subsidiaries amounted to RMB 0.00. 7.4.2 Current related credits and liabilities √Applicable □Inapplicable Unit: RMB’0000 Related parties supplied funds to Supply funds to related parties Related parties the Company Occurred amount Balance Occurred amount Balance Hefei Meiling Group Holding Co., Ltd. 0.00 0.00 10,110.53 0.00 Hefei Meiling Washing Machine Co., Ltd. 0.00 0.00 11,509.25 19,408.74 Total 0.00 0.00 21,619.78 19,408.74 Including: in the report period, the capital amount the listed company provided to controlling shareholder and its subsidiaries was RMB 0.00 and the balance was RMB 0.00. The occupied capital and its payoff scheme √Applicable □Inapplicable 14 At present, the municipal government agreed to change the land for industry which was located on No. 33, Wuhu Road of 72500 square meters and No.2, Wufu Road of 46900 square meters into land for commercial dwelling houses; and agreed to utilize the municipal income in the process of transferring the aforesaid land purpose to repay the debts of the Company Washing Machine Company owed, and predicted to liquidate the debts of Washing Machine Company before the end of 2006. The payoff scheme can ensure problem of occupied capital to be settled or not before the end of 2006 √ Yes □ No □Inapplicable 7.5 Entrusted assets management □Applicable √Inapplicable 7.6 Implementation of commitments 7.6.1 Schedule of Share Merger Reform The equity of the first major shareholder of the Company, Greencool Enterprises Development Co., Ltd, was judicially frozen and it was not convenient to operate. The Company is consulting positively with others to strive for relieving the freezing of equity early, so as to start the Share Merger Reform. 7.6.2 Other commitment √Applicable □Inapplicable In 2005, Hefei Meiling (Group) Holding Co., Ltd planed to repay the debts amounted to RMB 101,105,300 of the Company by the Land Use Right in Hefei Economic Development Zone totaled 206,568.36 square meters; meanwhile, it repaid part of debts of the Company Hefei Meiling Washing Machine Co.,Ltd owed and the balance was amounting to RMB 194,087,400. According to the requirement of Regulation on the Cash Flow between Listed Company and the Related Party and External Guarantee of Listed Company, the shareholding company will continue to expand the liquidation of debts; at the same time, Hefei Meiling (Group) Holding Co., Ltd and Washing Machine Company commit to repay all the debts as soon as possible. It is estimated that all debts would be cleaned up before the end of 2006. 7.7 Significant lawsuit and arbitration □ Applicable √ Inapplicable §8. Report of the Supervisory Committee √Applicable □Inapplicable I. Meetings of the Supervisory Committee in the report period In the report period, besides attending the Shareholders’ General Meeting 2004 and each meeting in 2005 of the Board of Directors of the Company as non-voting delegates, and the main contents as follows: 1. On Apr. 18, 2005, the 16th meeting of the 4th Supervisory Committee was held in 15 the meeting room on the 4th floor of the Company. 3 supervisors should have attended the meeting, and actually 3 supervisors had attended, which conformed to the regulations of the Company Law and Articles of Association of the Company. With voting by open ballots, the following were approved: Work Report 2004 of the Supervisory Committee, Annual Report 2004 and Summary of Annual Report 2004, Financial Budget Report 2004, Proposal on Election of Changing the Supervisory Committee, Proposal on Renewal of Engaging 2005 Certified Public Accountants and its Remunerations, the 1st Quarterly Report of 2005, Proposal on Revising the Articles of Association, and Proposal on Holding the 2004 Annual General Shareholders’ Meeting. 2. On May 28, 2005, the 1st meeting of the 5th Supervisory Committee was held in the meeting room on the 3rd floor of Meiling Hotel. 5 supervisors should have attended the meeting, and actually 5 supervisors had attended, which conformed to the regulations of the Company Law and Articles of Association of the Company. With voting by open ballots, the following were approved: Proposal on Electing Mr. Li Weimin Chairman of the 5th Supervisory Committee, Proposal on Loan of Mortgage from China Industrial and Commercial Bank, Proposal on Supplying Guarantee for the Current Funds Loan of Zhongke Meiling Low Temperature Technology Co., Ltd. 3. On Aug. 16, 2005, the 2nd meeting of the 5th Supervisory Committee was held in the meeting room on the 4th floor of the Company. 5 supervisors should have attended the meeting, actually 4 supervisors had attended, and Supervisor Mr. Chen Qilin did not attend the meeting due to be on business, which conformed to the regulations of the Company Law and Articles of Association of the Company. With voting by open ballots, the following were approved: 2005 Semi-Annual Report, Summary of Semi- Annual Report 2005, and Operation Plan for the Second Half of 2005. 4. On Feb. 11, 2006, the 5th meeting of the 5th Supervisory Committee was held in the A16 meeting room on the trade centre of Changhong. 5 supervisors should have attended the meeting, and actually 5 supervisors had attended, which conformed to the regulations of the Company Law and Articles of Association of the Company. With voting by open ballots, the following were approved: Electing Ms. Fei Minying the Chairman of the 5th Supervisory Committee, Proposal on Sale Agency of Meiling’s Refrigerator by Changhong. II. Independent opinions of the Supervisory Committee on the relevant events of 2005 1. Operation according to the laws In the report period, the Board of Directors conducted operation in a standardized way and seriously implemented various resolutions and authorizations of the Shareholders’ General Meeting strictly according to the PRC Company Law, Securities Law, Code of Corporate Governance for Listed Company in China, Articles of Association of the Company, and other laws and regulations. The decision-making procedures were scientific and legal. The Supervisory Committee supervised over and checked the procedure of holding, resolutions of the Shareholders’ General Meeting and the Board of Directors, implementation of the resolutions of the Shareholders’ General Meeting by the Board of Directors, performance of duties of the directors, managers and other senior executives and implementation of the internal management system of the Company and there found no behaviors of breaking laws, regulations and Articles of Association of the Company. The decision-making and operation of related transactions of the significant investment of the Company was disposed in the 16 classified authorization scope through legal decision-making procedure and had not done any harm to the interests of the Company or the shareholders of the Company, especially the minority shareholders. 2. Inspection of the financial status of the Company In the report period, the Supervisory Committee conducted earnest and careful inspection over the Company’s financial position. In the opinion of the Supervisory Committee, the Company had maintained good financial position, operated the funds with high efficiency, conducted standardized financial management and kept healthy internal system. Shenzhen Pengcheng Certified Public Accountants and Morison Heng Certified Public Accountants had respectively issued standard unqualified Auditors’ Report for the Company’s Financial Report of 2005, which had truly, accurately and completely reflected the Company’s financial position and operation result. 3. Purchases and sales of assets and related transactions As checked, the Supervisory Committee believed that the related transactions of the significant assets replacement between the Company and Hefei Meiling (Group) Holdings Co., Ltd. in the report period was conducted according to the principle of fairness and obtained the independent opinion issued by relevant agencies. The related transactions had no inside dealings and had not done harm to the interest of any part of the shareholders or caused any loss to the assets of the Company. §9. Financial Report 9.1 Auditor’s opinion Auditor’s opinions: Standard unqualified auditor’s opinions 9.2 Financial statement 17 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005 Notes 2005 2004 RMB’000 RMB’000 Turnover 5 2,028,938 1,438,884 Cost of sales (1,679,136) (1,148,782) Gross profit 349,802 290,102 Other operating income 6 5,183 11,085 Distribution costs (200,267) (152,833) Administrative expenses (100,846) (78,897) Other operating expenses (7,882) (1,719) Profit from operations 7 45,990 67,738 Finance costs 9 (41,857 ) (38,924 ) Share of results of associates 182 (214) Profit before taxation 4,315 28,600 Income tax 10 (18 ) - Profit for the year 4,297 28,600 Attributable to: Equity holders of the parent 3,877 28,432 Minority interests 28 420 168 4,297 28,600 Earnings per share Basic 11 0.0093 0.07 18 CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2005 Notes 2005 2004 RMB’000 RMB’000 ASSETS Non-currents assets Prepaid lease payments 12 644,781 473,452 Property, plant and equipment 13 500,664 479,586 Construction in progress 14 5,933 11,088 Intangible assets 15 113,945 117,480 Interests in associated companies 16 26,399 26,218 Available-for-sale investments 17 30,690 30,690 Amount due from a shareholder 18 - 70,374 Amount due from a related company 19 42,300 159,437 1,364,712 1,368,325 Current assets Inventories 20 363,696 237,529 Trade receivables 21 25,468 34,645 Bills receivable 62,464 75,599 Other receivables and prepayments 22 62,681 106,679 Tax recoverable 37,577 - Amounts due from related companies 23 25,073 445 Pledged or guaranteed deposits 24 72,225 89,476 Bank balances and cash 24 234,229 226,175 883,413 770,548 Total assets 2,248,125 2,138,873 19 CONSOLIDATED BALANCE SHEET – (continued) AT DECEMBER 31, 2005 Notes 2005 2004 RMB’000 RMB’000 Equity and liabilities Capital and reserves Registered capital 29 413,643 413,643 Reserves 30 856,707 856,658 Accumulated losses (670,136) (674,013) Equity attributable to equity holders of the parent 600,214 596,288 Minority interests 28 16,826 16,406 Total equity 617,040 612,694 Non-current liabilities Borrowings 27 13,300 23,300 Current liabilities Trade payables 417,433 369,307 Bills payable 285,700 272,106 Other payables and accruals 132,032 110,376 Receipts in advance 64,592 88,737 Amount due to a shareholder 28,392 - Amounts due to related companies 25 9,374 1,274 Amounts due to associated companies 25 10,576 18,813 Provision for warranty 26 13,282 12,076 Borrowings 27 656,404 630,190 1,617,785 1,502,879 Total liabilities 1,631,085 1,526,179 Total equity and liabilities 2,248,125 2,138,873 Approved by the Board of Directors on DIRECTOR DIRECTOR 20 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2005 Attributable to equity holders of the parent Statutory Statutory Discretionary Share Capital common public common Accum capital reserve reserve funds welfare funds reserve funds lo RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RM Balance at December 31, 2003 413,643 572,521 65,426 65,643 153,820 (70 Share of capital reserve of an associate - (892) - - - Share of capital reserve of a subsidiary - 140 - - - Net profit for the year - - - - - 2 Share of results of subsidiaries - - - - - Balance at December 31, 2004 413,643 571,769 65,426 65,643 153,820 (67 Increase for the year - 49 - - - Net profit for the year - - - - - Share of results of subsidiaries - - - - - Balance at December 31, 2005 413,643 571,818 65,426 65,643 153,820 (67 21 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005 2005 2004 RMB’000 RMB’000 Cash flows from operating activities Profit before taxation 4,315 28,600 Adjustments for: Amortisation of intangible assets 4,134 16,980 Amortisation of prepaid lease payments 10,513 3,334 Construction in progress written off - 1,523 Dividend income (768) (380) Depreciation 46,317 43,423 Loss on disposal of property, plant and equipment 5,233 17 Loss on disposal of available-for-sale investments - 30 Minority interest - (60) Interest paid 41,659 38,924 Interest income (2,219) (2,000) Impairment loss on amount due from a shareholder - 705 Impairment loss on receivables 1,432 690 Share of results of associated companies - 214 Write-back of provision for warranty expenses - (2,899) Write-back of provision for receivables - (4,623) Operating profit before working capital changes 110,616 124,478 Increase in inventories (126,167) (48,922) Decrease/(Increase) in trade receivables 7,745 (68,995) Decrease in bills receivable 13,135 62,462 Decrease/(Increase) in other receivables and prepayments 43,998 (47,815) (Increase)/Decrease in amounts due from related companies (24,628) 6,529 Increase in trade payables 48,126 73,122 Increase in bills payable 13,594 68,106 Increase in other payables and accruals 21,656 10,758 Decrease in receipts in advance (24,145) (15,583) Increase/(Decrease) in amounts due to related companies 8,100 (27,852) Increase in amount due to a shareholder 28,392 - (Decrease)/Increase in amounts due to associated companies (8,237) 18,813 Increase in provision for warranty 1,206 - Cash generated from operations 113,391 155,101 Interest paid (41,659) (38,924) Overseas income tax paid (37,595) - Net cash from operating activities 34,137 116,177 22 CONSOLIDATED CASH FLOW STATEMENT – (continued) FOR THE YEAR ENDED DECEMBER 31, 2005 2005 2004 RMB’000 RMB’000 Cash flows from investing activities Interest received 2,219 2,000 Dividend received 768 380 Payments for prepaid lease payments (181,842) - Proceeds on disposal of property, plant and equipment 10,053 1,329 Proceeds on disposal of available-for-sale investments - 70 Purchases of property, plant and equipment (65,961) (20,572) Purchases of intangible assets (599) - Purchase of available-for-sale investments - (100) Payments for construction in progress (11,565) (14,477) Acquisition of interests in associated companies (181) 1,572 Decrease in amount due from shareholder 70,374 14,142 Decrease in amount due from a related company 117,137 1,071 Net cash used in investing activities (59,597) (14,585) Cash flows from financing activities Decrease/(Increase) in deposits used as collaterals 17,251 (30,976) Proceeds from issue of capital reserve 49 140 Payment on capital reserve - (892) New borrowings raised 509,333 600,690 Repayments of borrowings (493,119) (641,169) Net cash from/(used in) financing activities 33,514 (72,207) Net increase in cash and cash equivalents 8,054 29,385 Cash and cash equivalents at the beginning of the year 226,175 196,790 Cash and cash equivalents at the end of the year 234,229 226,175 Analysis of cash and cash equivalents at the end of the year Bank balances and cash 234,229 226,175 23 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 Board of Directors of Hefei Meiling Co., Ltd. Apr. 12, 2006 24