Announcement on Resolutions of the 7th Session of the 3rd Board of Directors of Shanghai Worldbest Co.,Ltd
Stock Code:600094 900940 Stock Abbreviation: Worldbest A share Worldbest B Share No. Lin 2004-007
Announcement on Resolutions of the 7th Session of the 3rd Board of Directors of Shanghai Worldbest Co.,Ltd
The Company and all of the members of Board of Directors guarantee the authenticity, precision and integrity of the announcement and will be jointly liable for false record, misleading statement or serious omission of the announcement.
The 7th Session of the 3rd Board of Directors Meeting of Shanghai Worldbest Co.,Ltd was held at the Meeting Room of the Company on Oct 26, 2004. Thirteen Directors (Proxy included. Director Chen Yongming,Wang Fanghua, ZhangWenxian, YangGuisheng asked for leave because of other engagement , Wang Fanghua, ZhangWenxian, YangGuisheng entrusted Chen Yanmo to exercise voting rights on behalf of them;Director Xu Duanfu asked for leave because of illness .)attended the meeting.Members of Board of Supervisors and senior management of the Company attended the Meeting as non-voting delegates, which is in conformity with the stipulations of the “Company Law” and the “Articles of Association.” The Meeting reviewed and approved the following proposals:
1. 2004 Third Quarter Report;
2. The proposal of the sale of 5.35% of equity of Shanghai Worldbest Home Textile (Group) Co.,Ltd by Shanghai Worldbest Greenwich Industrial Co.,Ltd.;The details see the announcement of related party transaction of the Company. Related-party directors Ji Qunli, Yu Chaoyang, Wang Caifu, and Fu Weimin abstained from voting
3. The proposal of the engagement of 2004 annual audit organization.
Since 1996 when it went public till 2003, the Company engaged Ernst & Young Da Hua Certified Public Accountants Co., Ltd. (Briefed as “Ernst &Young Da Hua” ) as the domestic audit organization, and from 1999 to 2003 the Company engaged Ernst & Young Hong Kong.(Briefed as “Ernst & Young”)as overseas audit organization .During the previous years, Ernst & Young Da Hua and Ernst &Young conducted objective and fair audit workings for the Company and provided the reliable annual audit report for the Company.
Since this year, as the business of Ernst & Young Da Hua and Ernst & Young developed very quickly, and the Company wanted to enlarge the service scope of the corporation with the audit organization as well as to reduce the management cost ,the Company planned to engage SHU LUN PAN CERTIFIED PUBLIC ACCOUNTANTS CO.,LTD (Briefed as “SHU LUN PAN”) HORWATH SHANGHAI CPA. CO.,LTD (Briefed as “HORWATH SHANGHAI“) as the 2004 annual domestic and overseas audit organization for the Company. The annual audit fee was RMB 1.75 million (including the travel fee).
4. The proposal of the amendment of some articles of the “Articles of Association” of the Company
In accordance with the change of the situation, the Board of Directors planned to amend some articles of the “Articles of Association” as the followings:
(1) The amendment of Article No.68
The original “Articles No.68 At the shareholders meeting the shareholders vote by open ballot or .vote by show of hands..”
Changed into “No.68 At the shareholders meeting the shareholders vote by open ballots.”
(2) The amendment of Article No. 153
The original “Articles No.153 The Company shall edit the semi-annual financial report of the Company within 60 days after the end of the first 6 months of every fiscal year; edit the annual financial report of the Company within 120 days after the end of every fiscal year. “
Changed into “No.153 The Company shall edit the quarter report within one month after the end of the 1st quarter and the 3rd quarter; the Company shall edit the semi-annual financial report within two months after the end of the first six months of every fiscal year; and edit the annual report within four months after the end of every fiscal year. ”
5. “The rectification report on the problems found during the inspection our by China Securities Regulatory Committee Shanghai Supervision and Management Bureau. ”
The full text see the appendix.
6. The proposal of the adjustment of the members of Board of Directors of the Company.
As work changes, Mr. Yu Chaoyang would be no longer the director of the Company, the Board of Directors express gratitude to him for his contributions for the development of the Company during his tenure of office. As work requries, the
Board of Directors nominates Mrs. Jian Jun as the candidate of the Director of the Board of the Company.
Jian Jun, female, born in Nov 1959,Han nationality, member of CCP, graduate student of Party University of Beijing Municipal Party Committee, major in economic management, senior engineer, at present she served as Chairman of Board of Supervisors of World best (Thailand) Industrial Co.,Ltd.
Chief experience:
1977.12---1992.5 Secretary of League committee of finishing workshop, technician , deputy secretary of League committee, director of air spinning workshop, assistant to the director of Beijing No.2 Cotton Spinning Mill.
1992.5---1997.8 Deputy director, presidium deputy director, director , deputy secretary of Party Committee of Beijing No.2 Cotton Spinning Mill.
1997.8---2001.5 Director, general manager of Beijing JingMian Textile Group Co.,Ltd.
2001.5---2002.2 General manager of Beijing Zhongshang Century Nanometer Textile Technology Development Co.,Ltd.
2002.2.---2004.6 Presidium deputy general manager, general manager of China High Tech Investment and Development Co.,Ltd.
2004.6---now Chairman of Board of supervisors of Worldbest (Thailand) Industrial Co.,Ltd.
7. The. Proposal of convening the 2004 1st Extraordinary Shareholder’s Meeting.
The announcement of convening the meeting will be informed otherwise .
The aforesaid proposal No.3, 4 and 6 will be submitted to 2004 1st Extraordinary Shareholders’ Meeting by Board of Directors for review.
Hereby announced !
Board of Directors of
Shanghhai Worldbest Co.,Ltd.
Oct.26,2004
Appendix:
The Rectification Report of Shanghai Worldbest Co.,Ltd. on the problems found during the inspection tour by China Securities Regulatory Committee Shanghai Supervision and Management Bureau
China Securities Regulatory Committee Shanghai Supervision and Management Bureau:
In accordance with “The Law of Securities of the People’s Republic of China” and “Inspection Measures of Listed Company”, China Securities Regulatory Committee Shanghai Supervision and Management Bureau organized the inspection team for the inspection tour to the Company from Sept.16 to Sept 23,2004 . On Oct.15th,2004. ,the Company received the “Rectification notice within limited period of time ” (No.HuZhengJian GongSi Zi [2004] 77 )The Board of Directors, Board of Supervisor and the management of the Company attached much importance to the problems noted in the notice, and in accordance with the relative securities regulations ,it worked out and implemented the rectification measures items by items to form the rectification report. On Oct.26,2004, the Board of Directors and the Board of Supervisors convened the 7th Session of the 3rd Board of Directors and the 4th Session of the 3rd Board of Supervisors to review the rectification report. Now the Company announced the rectification measure report as follows:
1 The regulation of the operation of the Company
1) In the 6th Session of the 3rd Board of Directors, the independent director entrusted the non-independent director to attend the meeting and vote on his behalf. In accordance with the regulations, when vote for the issues which require independent directors to express independent opinions ,the independent directors must entrust other independent directors to express the opinions and to vote
Rectification Measure: From the 7th Session of the 3rd Board of Directors of the Company on Oct.26,2004, when there is the vote which requires independent directors to express independent opinions and vote, the independent directors shall entrust other independent directors to express opinions and to vote.
2) The Article No.8 of “The Rules of Procedure of Board of Supervisors” of the Company stipulated that “the convening of the Meeting of Board of Supervisors shall be informed 15 days earlier”, which is not in consistent with “inform 10 days ahead” that stipulated in the Articles of Association and how actually the Company operated. Besides, Article No13 of the “Rules of Procedures” also stipulated “the Chairman of the Board of Supervisors have the right for one more vote in the voting”, which is not in conformity with the relative stipulations of “The Guide of the Articles of Association of the Listed Company.”
Rectification measure: The 4th Session of the 3rd Board of Supervisors on Oct,26,2004 changed the relative articles of “The Rules of Procedures of Board of Supervisors” into:” The convening of regular meetings ,working meetings or special subject meetings shall inform all the supervisors in written notice 10 days earlier of the meeting”, and eliminate :”When the assenting votes and dissenting votes equal to each other, the Chairman of the Board of Supervisors has the right for one more vote. “
2. The violation of Document No.56
1. Until June 30,2004, the external guarantee accounted for 127% of the net assets of the Company. ,which is not in conformity with the stipulations of the Article 2 Term2 of the Securities Regulatory Committee Document No.56 “The total amount of the external guarantee shall not exceed 50% of the net assets of consolidated financial report of the latest fiscal year of the Company.
The explanation of the situation: Before the issue of China Securities Regulatory Committee Document No.56, the Company didn’t understand very well the meaning of “external guarantee” ,it believed the guarantee for the controlled subsidiaries which are included in the scope of the consolidated financial report shall not be included in the external guarantee ,and believed that the total amount of the actual external guarantee was not more than 50% of the net assets of the Company. Until June 30,2004, the external guarantee of the Company were RMB 467.5 million, USD 6.51 million(converted to RMB 53.88 million) ,totally accounting for 33.29% of the net asset of the Company at the end of 2003. Meanwhile, the guarantee for 15 controlled subsidiaries was RMB 777.25 million, USD 83.61 million(converted to RMB 692.01 million), totally accounting for 93.81% of the net asset of the Company at the end of 2003. The aforesaid two kinds of guarantee accounted for 127.06% of the net assets of the Company at the end of 2003 .The huge amount of guarantee for the 15 controlled subsidiaries was accumulated in a long period of time, of which many subsidiaries operated with debts especially the import and export trading companies, whose debt asset rate was higher and the demand of guarantee was huge. Besides, in order to control the risk the Company didn’t allowed the controlled subsidiaries to conduct the external guarantee while the assets for mortgage was limited , all of which caused the guarantee for the controlled subsidiaries can only be made by the parent company.
Rectification measure: (1) Strictly control the whole banking loan scale of the Company, try to keep the increase of the loan scale lower than the increase of the net asset. , effectively control the guarantee scale and enable the proportion of the total amount of guarantee accounting for the net assets decrease year after year; (2) enhance the control of guarantee, strictly conduct the measures and application principles of the Company’s guarantee management, strictly conduct the examination and improvement procedures of guarantee, monitoring the situation of guarantee, and strengthen the guard of risk of guarantee;(3) To counter the historical problem of large amount of guarantee, the Company try to gradually solve the problem through the development. During the asset restructuring and the procedure of strategic changing, the company shall attach importance to the adjustment of asset liability structure. To sum up, the Company will conduct in accordance with the spirit of China Securities Regulatory Committee Document No.56, really strengthen the control of guarantee, conduct the long term management ,try to spend 3 to 5 years, gradually solve the historically formed problem of large amount of guarantee, and try to minimize the financial risk caused thereof.
2. The Company guaranteed for An Hui Worldbest Biochemical Pharmaceuticals Co.,Ltd.etc five controlled subsidiaries whose debt asset rate exceed 70%, totally RMB 270 million, USD 11.51 million, which is not in conformity with the stipulations that “the Company cannot directly or indirectly provide the liability guarantee for the company whose debt asset rate exceed 70%. “ stated in Article 3 Term. 2 of Document No.56.
The explanation of the situation: Among the five controlled subsidiaries whose debt asset rate exceed 70%, three were import and export trading company. The debt asset rate of trading company generally is high and it is not unusual for the debt asset rate more than 70%.The another two companies were manufacturing companies whose high debt asset rate have been formed before they join the Company.
Rectification measure (1) The Company shall strictly control the banking liabilities of the above companies, principally not increase the new amount , try best to reduce the existed amount, effectively control and reduce the amount of guarantee;(2) Through the internal asset reconstruction of the Company, it shall gradually increase the capital and expanding the shares for the high debt asset rate companies, enable its debt asset rate below 70% by increase its net asset.
3. Some of the newly purchased subsidiaries, before they join the company they provided the guarantee without risk control measures such as back guarantee for the non-related enterprise totally RMB 4 million, which is not in conformity with he stipulations that” The external guarantee of the listed companies must ask the guaranteed company to provide back guarantee , and the provider shall have the actual ability to undertake the responsibility.”. stated in Article 4 Term 2 of the Document No.56.
The explanation of the situation: Those guarantee were the balance of the guarantee made by the newly merged companies before they join the company, so there was no back guarantee.
Rectification measure: The Company forbid the subsidiaries to provide mutual guarantee for external enterprises. When the term of the RMB 4 million guarantee expired it will not be continued.
4.In July,2003, the Company transferred its share equity of Suzhou Worldbest Agro-Biochemical Products Co.,Ltd. and Shanghai Worldbest Life Science Research and Development Co.,Ltd. to Worldbest Group., but the money advanced for the two companies RMB 5.52 million was not returned timely, and the Company continued to provide the guarantee RMB 32.10 million for them, actually caused the fact that the controlling shareholder took the capital of related party and the Company provided the guarantee for the controlling shareholder , which was not in conformity with the relative stipulations of Article 1 Term 2 and Term 1 of Document No.56.
The explanation of the situation: In April 2004, the Company has mailed to China Worldbest Life Industry Co.,Ltd. which is controlled by China Worldbest Group Co.,Ltd and asked it to solve the above issues as soon as possible. Up till now, the advanced money RMB 5.52 million has not been paid back yet, the guarantee provide has been relieved and the balance of gurantee was RMB 2.5mlion, as the bank didn’t agree to change the guarantee party ,so it could not be relieved.
Rectification measure: The Company has submitted the written report to China Worldbest Group Co.,Ltd. to ask for the coordination to solve the problems after the restructuring , the measure to solve the advanced money issue shall be made within the end of the year and the balance of the guarantee shall be relieved due expiration.
The Company believed that the inspection tour to the Company by China Securities Regulatory Committee Shanghai Supervision and Management Bureau is a systematic inspection and site guiding of the authenticity, precision and integrity of the information disclosure of the Company, the regulation of the management structure, the independency of the company, the standard of financial management and accounting calculation; the use of raised fund , the safety of capital management; the and the application of China Securities Regulatory Committee Document no.56.It surely will be positive in promoting the standard operation, improving the management standard and the internal control system .
Board of Directors of Shanghai Worldbest Co.,Ltd.
Oct.26,2004
04/02/2005
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