*ST舜喆B(200168)雷伊Ｂ2003年年度报告摘要（英文版）

GUANGDONG RIEYS GROUP COMPANY LTD. 2003 ANNUAL REPORT SUMMARY §1. Important Notes 1.1 Board of Directors of Guangdong Rieys Group Company Ltd. and its directors individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The 2003 annual report summary is abstracted from the full text of annual report; the investors are suggested to read the full text of annual report to understand more details. 1.2 No director stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. 1.3 Ms. Fang Meidi, Independent Director, was absent from the Board meeting due to health and entrusted Independent Director Mr. Cai Shaohe to execute the voting right on her behalf. 1.4 Shenzhen Pengcheng Certified Public Accountants audited the financial report of the Company and issued standard unqualified Auditor’s Report for the Company. 1.5 Chairman of the Board Mr. Chen Hongcheng and Chief Financial Supervisor Mr. Li Guoqiang 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 RIEYS-B Stock code 200168 Listed stock exchange Shenzhen Stock Exchange Registered address and office address Registered address: Meixin Industrial Park of Jun Bu Town, Puning, Guangdong Office address: 26th Floor of Jiangsu Bldg., Yitian Road, Futian District, Shenzhen Post code 518000 Internet web site of the Company http://www.rieys.com E-mail of the Company rieys@200168.com 2.2 Contact person and method Secretary of the Board of Representative in charge of Directors Securities Affairs Name Zhou Haolin Xu Wei Contact address Secretariat of the Board of Secretariat of the Board of Directors, 26th Floor of Jiangsu Directors, 26th Floor of Jiangsu Bldg., Yitian Road, Futian District, Bldg., Yitian Road, Futian Shenzhen District, Shenzhen Telephone 0755-82960823 0755-82960823 Fax 0755-82960383 0755-82960383 E-mail zhl@200168.com xu@200168.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2003 2002 2001 over last year（％） Income from main operations 488,288,750.00 476,822,720.00 2.40% 401,930,781.00 Total profit 75,249,621.00 49,278,243.00 52.70% 52,698,787.00 Net profit 47,579,585.00 40,145,854.00 18.52% 33,904,005.00 Net profit after deducting 32,796,908.00 32,772,230.00 0.08% 26,144,396.00 non-recurring gains and losses At the end of At the end of Increase/decrease At the end of 2003 2002 from the end of 2001 - 1 - previous year（％） Total assets 1,117,318,635 958,492,660.00 16.57% 732,757,864.00 Shareholder’s equity (excluding 458,700,621.00 411,121,036.00 11.57% 370,909,443.00 minority interests) Net cash flows arising from 61,272,944.00 98,372,310.00 -37.71% -67,124,879.00 operating activities 3.2 Major financial indexes Unit: RMB Increase/decrease over 2003 2002 2001 last year（％） Earnings per share 0.18 0.23 -20.63% 0.19 Return on equity 10.37% 9.76% 6.25% 9.00% Return on equity as calculated based on net profit after deducting non-recurring gains 7.15% 7.96% -10.18% 7.05% and losses Net cash flows per share arising from 0.23 0.56 -58.62% 0.38 operating activities Increase or decrease At the end At the end from the end of At the end of 2003 of 2002 of 2001 previous year（％） Net assets per share 1.73 2.32 -25.62% 2.10 Net assets per share after adjustment 1.72 2.32 -25.86% 2.09 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB’0000 CAS IAS Net profit 4,757.96 4,758.35 Profit after tax audited by Shenzhen Pengcheng Certified Public 4757.96 Accountants: Adjustment in accordance with IAS: Write off confirmation of trademark right 64.732 Explanation Write off amortization of related with trademark right on Pre-operating expenses -236.83 difference Deferred tax 172.49 4,758.35 Profit after tax audited by Hong Kong Glass Radcliffe Chan Certified Public Accountants: §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital Unit: share Increase / decrease in this time (+, -) After the Before the change change Bonus Capitalization of Subtotal shares public reserve I. Unlisted shares 1. Sponsors’ shares 91,125,000 36,450,000 9,112,500 45,562,500 136,687,500 Including: State-owned share 0 0 Domestic legal person’s shares 91,125,000 36,450,000 9,112,500 45,562,500 136,687,500 Foreign legal person’s shares 0 0 Others 0 0 2. Raised legal person’s shares 0 0 3. Inner employees’ shares 0 0 4. Preference shares or others 0 0 Total unlisted shares 91,125,000 36,450,000 9,112,500 45,562,500 136,687,500 II. Listed shares 1. RMB ordinary shares 0 0 2. Domestically listed foreign 85,875,000 34,350,000 8,587,500 42,937,500 128,812,500 shares 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total listed shares 85,875,000 34,350,000 8,587,500 42,937,500 128,812,500 III. Total shares 177,000,000 70,800,000 17,700,000 88,500,000 265,500,000 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulating share Total number of shareholders at the end of report year 16,424 Particulars about shares held by the top ten shareholders Number of Nature of Increase / Holding Type of shares share shareholders decrease in shares at Proportion Full name of Shareholders (Circulating/ pledged/ (State-owned the report the year-end (%) Non-circulating) frozen shareholder/foreign year (share) (share) (share) shareholder) Shenzhen Shenghengchang Industrial Co., 32,737,500 98,212,500 36.99 98,212,500 Ltd. Non-circulating Shenzhen Risheng Investment Co., Ltd. 21,600,000 28,350,000 10.68 Non-circulated 28,350,000 CHEN MEI XIANG 7,341,275 24,216,275 9.12 Circulating Unknown Shantou Lianhua Industrial Co., Ltd 3,375,000 10,125,000 3.81 Non-circulating 10,125,000 SKANDIA GLOBAL FUNDS PLC 2,446,922 6,870,568 2.59 Circulating Unknown WANG YING 476,499 639,498 0.24 Circulating Unknown YAO JIN GEN 137,700 413,100 0.16 Circulating Unknown BEST RELIANCE INVESTMENTS LTD 107,550 362,150 0.14 Circulating Unknown TOYO SECURITIES ASIA 255,760 353,260 0.13 Circulating Unknown LIMITED-A/C CLIENT CHENG AI XUE 109,250 309,750 0.12 Circulating Unknown Explanation on associated There existed associated relationship among Shenzhen Shenghengchang Industrial Co., Ltd., relationship among the top ten Ms. Chen Meixiang, Shantou Lianhua Industrial Co., Ltd. and Shenzhen Risheng shareholders or consistent action Investment Co., Ltd., and they belonged to the consistent actor regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Company. Particulars about shares held by the top ten shareholders Full name of Shareholders Holding circulating share at the Type (A-share, B-share, H-share year-end (share) or others) CHEN MEI XIANG 24,216,275 B-share SKANDIA GLOBAL FUNDS PLC 6,870,568 B-share WANG YING 639,498 B-share YAO JIN GEN 413,100 B-share BEST RELIANCE INVESTMENTS LTD 362,150 B-share TOYO SECURITIES ASIA LIMITED 353,260 B-share CHEN AI XUE 309,750 B-share FANG HAN CHANG 300,000 B-share ZHOU XIAOHUA 290,000 B-share LIANG JIA 288,900 B-share Explanation on associated relationship The Company was unknown whether there exists associated among the top ten shareholders of relationship among the top ten shareholders of circulating circulating share share. 4.3 Particulars about holding shareholders and actual controller of the Company 4.3.1 Particulars about change in holding shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for holding shareholder and other actual controller (1) The holding shareholder of the Company is Shenzhen Shenghengchang Industrial Co., Ltd. (“Shenghengchang Industrial’), who holds 98.2125 million shares of the Company, taking 36.99% of the total shares of the Company; its registered capital: RMB 98 million, registered place: 5th Floor, Hubei Baofeng Building, Bao’an South Road, Shenzhen; legal representative: Ding Lihong. Mr. Chen Hongcheng holds 70% share equity of Shenghengchang Industrial, while Mr. Chen Honghai holds 30% share equity of Shenghengchang Industrial. The business scope of Shenghengchang Industrial: sales of hardware, AC parts, building material, electronic products and car fittings. (2) Mr. Cheng Hongcheng is actual controller of Shenghengchang Industrial. Mr. Chen Hongcheng was engaged in operation and management of the enterprise over 20 years. He was ever in charge of Chairman of the Board and concurrently President of Puning Hongxin Weaving and Clothing Co., Ltd., and executive director of Puning Haicheng Industrial Co., Ltd.. Mr. Chen Hongcheng is the standing commissar of political consultative conference of Puning, Guangdong and the deputy to the National People’s Congress of Jieyang, Guangdong. In 1998, Mr. Chen was awarded as the excellent village and township entrepreneur of Guangdong province, the advanced member of Guangdong Industry and Commerce Union, and the advanced member of Guangdong Chamber of Commerce. In 1999, Jieyang municipality People’s Government awarded him as the advanced individual of splendor undertaking; Vice Chairman of Costume Association of Guangdong Province; Vice Chairman of Costume Association of Shenzhen City. §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Holding Holding Reason Name Title Gender Age Office term shares at the shares at the for year-begin year-end change Chairman of the Board Chen Hongcheng Male 46 May. 2003– May. 2006 0 0 and concurrently President Vice Chairman of the Male Zheng Yujian 39 May. 2003– May. 2006 0 0 Board Chen Honghai Director Male 50 May. 2003– May. 2006 0 0 Ding Lihong Director Male 33 May. 2003– May. 2006 0 0 Fang Meidi Independent Director Female 57 May. 2003– May. 2006 0 0 Cai Shaohe Independent Director Male 43 May. 2003– May. 2006 0 0 Yang Xinfa Independent Director Male 35 May. 2003– May. 2006 0 0 Chairman of the Male Yan Mingfei 36 May. 2003– May. 2006 0 0 Supervisory Committee Liu Li Supervisor Female 35 May. 2003– May. 2006 0 0 Xu Wei Supervisor Male 26 May. 2003– May. 2006 0 0 Zhang Yongli Vice President Male 45 May. 2003– May. 2006 0 0 Vice President, Secretary Male Zhou Haolin 34 May. 2003– May. 2006 0 0 of the Board Li Guoqiang Chief Financial Supervisor Male 34 May. 2003– May. 2006 0 0 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Name of Shareholding Title in Shareholding Name Office term from the Listed Company Company Company (Yes / No) Shenzhen Shenghengchang Chen Hongcheng Director Three years No Industrial Co., Ltd. Shenzhen Shenghengchang Chen Honghai Director Three years Yes Industrial Co., Ltd. Shenzhen Shenghengchang Ding Lihong Chairman of the Board Three years No Industrial Co., Ltd. 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual remuneration RMB 710,000 Total annual remuneration of the top three RMB 90,000 directors drawing the highest payment Total annual payment of the top three senior RMB 360,000 executives drawing the highest payment Allowance of independent director RMB 30,000 per person/ year Other treatment of independent directors The Company reimbursed the reasonable charges according to the actual situation which independent directors attended the meeting of the Board, shareholders’ general meeting or exercise their functions and powers in accordance with the relevant laws and regulations and Articles of Association. Name of directors and supervisors receiving no Mr. Zheng Yujian, Mr. Cheng Honghai, Mr. Ding Lihong payment or allowance from the Company and Mr. Yan Mingfei Payment Number of persons Over RMB 100,000 1 RMB 50,000 ～ RMB 100,000 4 Under RMB 50,000 5 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, the Company has kept a good development trend and its achievement has increased by a certain margin than that in 2002. In 2003, the Company realized income from main operations, profit from main operations and net profit amounting to RMB 480 million, RMB 158 million and RMB 47.58 million respectively, an increase of 2.5%, 42.3% and 18.5% respectively than those in the same period of last year. In the report period, the Company continued to develop production and sales of garments, main business of the Company largely. In the aspect of garments production, due to the sudden epidemic situation of SARS in the first half year of 2003, the Company’s orders placing was threw into confusion. Under this kind of situation, the Company kept contact with oversea customers through adopting advanced communications and actively turned the disadvantageous status that the production was slowing down caused by SARS. In the second half of the year, the Company reinforced cost control and production through various measures and finally realized garments export amounting to RMB 322,587,469 and gross operating profit amounting to RMB 77,679,221 in 2003. In the aspect of garments sales, the Company continued to commit itself to marketing of those internationally famous brands in the domestic market. The Company has become the general agent of “AXARA”, a French women’s brand, in China through investment increase in Shenzhen Heyiyi Fashion Co., Ltd.. At present, the Company’s subsidiaries have become general agent of such internationally famous brands as men’s brands, namely “SANTA BARBARA POLO & RACQUET CLUB”, “JEEP” and “SIDEOUT”, and women’s brands, namely “AXARA” and “MISSK”, in China. There are about 300 business network spots of the said brands in the whole state with coverage in all national medium and large cities, which has formed sales and distributing system with comparatively large scale. Depending on this sales system, the Company is communicating with other famous brands in the world on agent issues. While reinforcing the development of production and sales of garments, the Company also tried entering into other fields for development steps by steps. The Company thought the paper products at home have very great potential after many investigations and research. In the report period, The Company newly established Puning Rieys Paper Co., Ltd., which is specially engaged in the production of corrugated papers with high strength. At the present, the Company is actively implementing the construction of this project and is setting about establishing sales network of paper commodities. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Classified according to Income from Cost of Gross Increase/decrease Increase/decreas Increase/decrease industries or products main main profit ratio in income from e in cost of main in gross profit ratio operations operations (%) main operations operations over over the last year over the last year the last year (%) (%) (%) Garments 48,828.88 32,986.97 32.44 2.40 -9.57 41.39 manufacturing 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main operations Increase/decrease in income from main operations over the last year (%) Export garments 32,258.75 -21.69 Garments’ national sales 16,570.13 141.93 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase 10,225.97 Proportion in the total 31.00% of the top five suppliers amount of purchase Total amount of sales of the 24,902.73 Proportion in the total 51.00% top five sales customers amount of sales 6.5 Operation of share-holding companies (applicable to the situation where investment equity takes over 10% of its net profit) □Applicable √Inapplicable 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) than that in the last year √Applicable □Inapplicable The Company’s adjusting the product sales structure and increasing the sales of brand products and garment production with relatively high profit leads to the increase of gross profit ratio in sales. 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year □Applicable √Inapplicable Analysis to reasons of material changes in the whole financial position than that in the last year □Applicable √Inapplicable 6.9 Explanation on the past, current and future important effects of the material changes in production and operation environment, macro-policies and regulations on the Company’s financial position and operating results √Applicable □Inapplicable (I) According to the news in American government’s website, America government has cancelled the provision that China should submit export licenses while applying to American customs in terms of three kinds of textiles (knitting fibers, bra and gown) exported to America from Jan. 23, 2004. The Company’s export products to America are mainly finished garments and sweaters, which do not belong to the said three kinds of textile products stipulated, thus the change in import policies for these three kinds of textiles from American government has no direct and material influence on the Company. (II) Along with the increase in the development of national economy and people’s living level, people’s paper consumption and requirements on quality are increasingly enhancing. In 2002, the consumption of paper and cardboards in China reached 43,320,000; papermaking products imported from foreign countries are approximately 20 million tons, in which foreign currency used reached USD 7 billion. In 2003, the foreign currency used for importing papermaking products from foreign countries reached USD 11 billion and paper industry has become the third largest industry with using of foreign currency just inferior to petroleum and steel products. Viewing both from market content and from industrial development, papermaking industry has very good development prospect. 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds not raised through shares offering (For details, please refer to 7.1 in this report) √Applicable □Inapplicable Unit: RMB’0000 Name of projects Amount of Progress of projects Earnings of projects projects Puning Rieys Paper Co., Ltd. 12,216.54 In organization period Naught Dongguan Jinjing Textile Co., 7,929.60 The corresponding procedure of Naught Ltd. capital examination has not been finished. Shenzhen Heyiyi Fashion Co., 510.00 The corresponding procedure of Naught Ltd. capital examination has not been finished. Shanghai Tongrui Apparel 700.00 In organization period Naught Co., Ltd. Puning Tianye Chemical 18,461.10 The prophase work of the project is Naught Simulation Textile Co., Ltd. in implementation. Beijing Baodewei Apparel 35.00 In organization period Naught Co., Ltd. Total 39,852.24 -- -- 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors (If it has) □Applicable √Inapplicable Profit estimation of the next year (If it has) □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors Based on total number of shares amounting to 265,500,000 shares on Dec. 31st, 2003, the Company allots bonuses of 1 share for every 10 shares by using retained earnings and converts capital public reserve into share capital at 10:1, which totally amounts to allotting 1 bonus share and 1 share converted for every 10 shares. After this project, the Company’s total share capital shall be expanded into 318,600,000 shares. §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets □Applicable √Inapplicable 7.3 Significant guarantees √ Applicable □ Inapplicable Unit: RMB’0000 Date of happening Complete Guarantee for Name of guaranteed Amount of Term of (date of Type of guarantees Implementation related parties or objects guarantees guarantees agreement or not not (yes or no) signing) Hebei Xiabancheng Joint responsibility Sep. 20, 2003- Sep. 20, 2003 3,000.00 No No Knit Wears Co., Ltd. guarantee Sep. 20, 2004 Chengde Dixian Joint responsibility Sep. 20, 2003- Sep. 20, 2003 3,000.00 No No Textile Co., Ltd. guarantee Sep. 20, 2004 Zonglvquan Property Joint responsibility Oct. 11, 2003- Development Oct. 11, 2003 1,800.00 guarantee Apr. 11, 2004 No No (Shenzhen) Co., Ltd. Shenzhen Rieys Joint responsibility Mar. 20, 2003- Mar. 20, 2003 4,500.00 No Yes Industrial Co., Ltd. guarantee Mar. 20, 2004 Puning Tianhe Textile Joint responsibility Nov. 8, 2003- Manufacturing Co., Nov. 8, 2003 5,000.00 guarantee Nov. 8, 2004 No Yes Ltd. Total amount of guarantee 16,050.00 Total balance of guarantee 16,050.00 Including: total balance of related guarantees 8,250.00 Total guarantees provided by the listed company for 8,250.00 controlling subsidiaries Total illegal guarantees 0.00 Proportion of total guarantees in net assets of the 0.35 Company 7.4 Current related credits and liabilities □Applicable √Inapplicable 7.5 Entrusted assets management □Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable 1. The Company and Guangkang (Hong Kong) Co., Ltd. made a joint investment of USD 12,800,000 and established Sino-foreign joint venture Dongguan Jinjing Textile Co., Ltd.. Hereinto, The Company invested USD 9,600,000, taking 75% of the total registered capital. Guangkang (Hong Kong) Co., Ltd. invested USD 3,200,000, taking 25% of the total registered capital. The Company has invested RMB 55,900,000. The corresponding procedure of capital examination has not been finished. 2. The Company and Japan YAMASHITA Commercial Co., Ltd. jointly invested USD 29,800,000 to establish Sino-foreign venture Puning Tianye Chemical Simulation Textile Co., Ltd., among which the Company invested USD 22,350,000, taking 75% equity of the joint venture and Japan YAMASHITA Commercial Co., Ltd. invested USD 7,450,000, taking 25% equity of the joint venture. The prophase work of the project is in implementation. 3. The Company made an agreement with the shareholders of Shenzhen Heyiyi Fashion Co., Ltd., The Company and Mr. Chen Yaoji, the shareholder of Shenzhen Heyiyi Fashion Co., Ltd. will increase the investment in Shenzhen Heyiyi Fashion Co., Ltd. with RMB 5,100,000 and 4,400,000 separately. After the investment increase, the registered capital of Shenzhen Heyiyi Fashion Co., Ltd. was RMB 10 million, the company took 51% equity of this company, Mr. Chen Yaoji took 47%, and another shareholder Mr. Li Min took 2%. The investment increase is still in implementation. 4. The Company and Japan New Century Trade Co. Ltd. made a joint investment of USD 29,000,000 and established a Sino-foreign joint venture called Puning Rieys Paper Co., Ltd.. Hereinto, the Company invested USD 14,790,000, taking 51% of the total share capital of this company; Japan New Century Trade Co. Ltd. invested USD 14,210,000, taking 49% of the total share capital. This company has been established upon the approval of Puning Industrial and Commercial Administration Bureau. The Company has invested RMB 122 million. This company is still in organization period, most of the factory construction and main equipments installation has been finished. 7.7 Significant lawsuit and arbitrations □Applicable √Inapplicable 7.8 Particulars about duties performance of Independent Directors According to requirements of provisions in Guidance Opinion on Establishing Independent Directors System in Listed Companies promulgated by CSRC, the Company has elected three independent directors in Shareholders’ General Meeting for 2002, in which one is professional engaged in garment export for several years, one is financial auditing expert and one is lawyer. The number of independent directors of the Company has taken one third in directors. In the report period, the Company’s independent directors actively took part in the Board meeting and Shareholders’ General Meeting, seriously implemented duties of independent directors and expressed opinions on some significant events of the Company. The independent directors have played important roles in such aspects as enhancing independence of the Board, reinforcing strategic management function of the Board, balancing the rights of the Board and caring about the legal interests and rights of small and medium investors etc. and have played active push roles on the Board’s scientific decision-making and the Company’s normative operation, which has further pushed the Company’s normative operation. §8. Report of the Supervisory Committee I. Work of the Supervisory Committee in the report period Except that the supervisors attended the Board meeting as non-voting delegates, the Supervisory Committee totally held three meetings: 1. The first meeting of the 2nd supervisor committee was held on 28th, April 2003 in the 26 F, Tower A, Jiangsu Building, Yitian Road, Futian district, ShenZhen city. The following items were deliberated and made: 1) Approve the supervisory committee working report of 2002 2) Approve the annual report and its summary for 2002 year 3) Approve the first quarter report for 2003 year 4) Approve the nomination of Mr.Yan Mingfei to be the candidate of supervisory committee member 5) Approve the nomination of Mrs. Liu Li to be the candidate of supervisory committee member 6) Approve the independent report from supervisory committee regarding to the operation of the company 2. The first meeting for third term supervisory meeting for 2003 was held on 30th, May 2003 in the meeting hall, Meixin Industrial Park, Junbu town, Puning city. The following items were deliberated and made: Mr. Yan Mingfei was selected to be the chairman of Supervisory Committee 3. The second meeting of third supervisory committee for 2003 was held on 21st, Aug. 2003 in meeting hall, 26 F, Jiangsu Building, Yitian Road, Futian district, ShenZhen city. The following items were deliberated and made: 1) Approve semi-annual report for 2003 and its summary 2) Approve the interim profit arrangement proposal for 2003 II. Independent comments for the company operation from the supervisory committee (I) Company’s operation Within the reporting period, the supervisory committee legally committed its responsibilities of supervising and monitoring. The company operated strictly being under the relevant national regulations and Article of Association. The working procedures and decision-making process of annual general shareholders’ meeting and the board committee were legal. Based on the principle of conservatism for the minimum risks and established a completed inner controlling system. No illegal behavior, abusing, action against company law and company constitution from the directors and senior managers were found. (II) Financial situation Supervisory committee checked the financial management system and the financial situation of the Company with cautions and carefulness. The financial department of the Company commits the completeness of inner management system subject to the relevant national accounting regulation and accounting standard. After the auditing of financial situation and related reporting, no behaviors against Company Law and Articles of Association were found. The annual report for 2003 honestly reflects the financial situation and the performance of the Company. Shenzhen Pengcheng Certified Public Accountant and Glass Radcliffe Chan audited all the financial reporting with impartial, regulated and non-reserved reporting. (III) In the report period, the Company did not use the raised proceeds. (IV) The purchasing and selling of assets within the reporting period In the report period, the Company’s transaction price of acquisition was reasonable. There was no insider transaction, not harming equity of partial shareholders or making the Company’s assets lost. In the report period, the Company did not sell material assets. (V) Related transactions In the report period, the Company’s transaction with those related parties who have no control relationships with the Company did not damage the interests of the Company and shareholders. §9. Financial Report 9.1 Auditing opinions 9.2 9.3 Compared with the latest annual report, there is no change in accounting policy, accounting estimate and calculation method. 9.4 Compared with the latest annual report, the consolidated scope changes with reasons as follows: Compared with the last year, the companies newly listed into the consolidated accounting statements in the report period include Puning Rieys Paper Co., Ltd., Shanghai Tongrui Apparel Co., Ltd. and Beijing Baodewei Apparel Co., Ltd.. However, the said three companies are all in organization period with no operating income accrued yet. Board of Directors of Guangdong Rieys Group Company Ltd. Mar. 2, 2004 AUDITORS’ REPORT TO THE SHAREHOLDERS OF GUANGDONG RIEYS (GROUP) COMPANY LIMITED: (Formerly known as “GUANGDONG RIEYS COMPANY LIMITED”) (Incorporated in the People’s Republic of China with limited liability) We have audited the accompanying consolidated balance sheets of Guangdong Rieys (Group) Company Limited (the “Company”) and its subsidiaries (the “Group”) as of December 31, 2003, and the related statements of consolidated income, consolidated cash flows and consolidated changes in equity for the years then ended. These financial statements set out on pages 2 to 30 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2003 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. BAKER TILLY HONG KONG LIMITED Certified Public Accountants Hong Kong February 27, 2004 GUANGDONG RIEYS (GROUP) COMPANY LIMITED (FORMERLY KNOWN AS ”GUANGDONG RIEYS COMPANY LIMITED”) CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2003 (Expressed in thousands of Renminbi except for earnings per share) Note 2003 2002 Sales 488,289 476,823 Cost of sales (330,573) (365,158) Gross profit 157,716 111,665 Other operating income, net 4 5,796 784 Distribution costs (35,114) (22,796) General and administrative expenses (39,696) (29,177) Profit from operations 88,702 60,476 Finance costs, net 5 (15,232) (10,448) Share of gain/(loss) of an associate 16 58 (375) Gain on disposals of an associate 16 - 760 Profit before tax 6 73,528 50,413 Income tax (expenses)/refund 7 (450) 310 Profit after tax 73,078 50,723 Minority interests (25,495) (8,811) Net profit for the year 47,583 41,912 Dividends 8 70,800 26,550 As restated Earnings per share - Basic and diluted 9 RMB0.18 RMB0.16 The accompanying notes are an integral part of these financial statements. GUANGDONG RIEYS (GROUP) COMPANY LIMITED (FORMERLY KNOWN AS ”GUANGDONG RIEYS COMPANY LIMITED”) CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2003 (Expressed in thousands of Renminbi) Note 2003 2002 ASSETS Current assets Cash and cash equivalents 24(c) 121,556 237,330 Marketable securities 10 648 1,053 Trade and other receivables, net 11 222,607 184,002 Inventories, net 12 74,648 89,241 Prepayments 1,790 1,183 Advances to suppliers 85,287 132,484 Taxes recoverable 13(a) 57,523 49,490 564,059 694,783 Non-current assets Prepayments for property, plant and equipment 35,237 - Prepayments for long-term investments 14 60,900 - Investments in an associate 16 12,845 12,787 Property, plant and equipment, net 17 407,322 211,023 Land use rights, net 18 12,960 13,263 Deferred tax assets 13(b) 3,562 1,837 Goodwill 19 40,255 45,026 Computer software and other deferred assets 20 1,983 1,526 575,064 285,462 Total assets 1,139,123 980,245 LIABILITIES AND EQUITY Current liabilities Trade payables 131,305 130,656 Accruals and other payables 25,825 25,803 Short-term bank loans 21 383,300 321,800 Long-term bank loans due within one year - 60,000 Taxes payable 13(c) 2,331 1,529 542,761 539,788 Minority interests 24(b) 136,468 28,146 Equity Share capital 22 265,500 177,000 Reserves 23 150,108 150,671 Retained earnings 44,286 84,640 459,894 412,311 Total liabilities and equity 1,139,123 980,245 The accompanying notes are an integral part of these financial statements. - 14 - GUANGDONG RIEYS (GROUP) COMPANY LIMITED (FORMERLY KNOWN AS ”GUANGDONG RIEYS COMPANY LIMITED”) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2003 (Expressed in thousands of Renminbi) Reserves Statutory Share Share revenue Discretionary Retained Note capital premium reserves reserve earnings Total Balances at January 1, 2002 177,000 92,787 24,795 15,000 87,300 396,882 Net profit for the year - - - - 41,912 41,912 Dividends 8 - - - - (26,550) (26,550) Surplus of capital contribution made by a minority shareholder of a subsidiary - 67 - - - 67 Appropriation from retained earnings - statutory revenue reserves 23 - - 6,022 - (6,022) - - discretionary reserve 23 - - - 12,000 (12,000) - Balances at December 31, 2002 177,000 92,854 30,817 27,000 84,640 412,311 Net profit for the year - - - - 47,583 47,583 Dividends 8, 22 70,800 - - - (70,800) - Issue of shares 22 17,700 (17,700) - - - - Appropriation from retained earnings - statutory revenue reserves 23 - - 7,137 - (7,137) - - discretionary reserve 23 - - - 10,000 (10,000) - Balances at December 31, 2003 265,500 75,154 37,954 37,000 44,286 459,894 The accompanying notes are an integral part of these financial statements. - 15 - GUANGDONG RIEYS (GROUP) COMPANY LIMITED (FORMERLY KNOWN AS ”GUANGDONG RIEYS COMPANY LIMITED”) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2003 (Expressed in thousands of Renminbi) Note 2003 2002 CASH FLOWS GENERATED FROM(USED IN) OPERATING ACTIVITIES: Cash flows generated from operations 24(a) 139,090 77,655 Interest paid (18,828) (19,277) Taxes paid (9,406) (30,983) Net cash flows generated from operating activities 110,856 27,395 CASH FLOWS USED IN INVESTING ACTIVITIES: Purchases of property, plant and equipment (155,423) (11,052) Increase in land use rights - (2,757) Decrease (Increase) in marketable securities 430 (1,182) Increase in investment in an associate - (9,000) Increase in investment in subsidiary - (309) Increase in prepayments for property, plant and equipment (35,237) - Increase in prepayments for long-term investment (60,900) - Net proceeds from disposals of an associate - 5,000 Interest received 4,598 9,570 Net proceeds from disposals of fixed assets 15,055 - Increase (Decrease) in other deferred assets (1,072) 106 Net cash flows used in investing activities (235,549) (9,624) CASH FLOWS GENERATED FROM FINANCING ACTIVITIES: 24(b) Increase in short-term bank loans 61,500 123,100 Decrease in long-term bank loan (60,000) - Contribution from minority shareholders 4,419 17,442 Dividends paid - (26,550) Net cash flows generated from financing activities 5,919 113,992 Net (decrease) increase in cash and cash equivalents (115,774) 131,763 Cash and cash equivalents, beginning of year 237,330 105,567 Cash and cash equivalents, end of year 24(c) 121,556 237,330 (FORMERLY KNOWN AS ”GUANGDONG RIEYS COMPANY LIMITED”) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 (Expressed in Renminbi (“RMB”) unless otherwise stated) 1. ORGANIZATION AND OPERATIONS Guangdong Rieys (Group) Company Limited (the “Company”) is formerly known as Guangdong Rieys Company Limited, which was incorporated as a joint stock limited company in the People’s Republic of China (the “PRC”) on November 17, 1997. The change of the Company’s name has been approved by the Guangdong Industrial and Commercial Administrative Bureau on February 11, 2004. Pursuant to the approval document No. [2000] 133 issued by the China Securities Regulatory Commission on September 29, 2000, the Company issued 69,000,000 domestically listed foreign shares (“B shares”) with a par value of RMB1 each and these shares were listed on the Shenzhen Stock Exchange on October 17, 2000. The Company and its subsidiaries (hereinafter referred to as the “Group”) are principally engaged in the production and sale of clothes.