小天鹅Ａ(000418)*ST天鹅Ｂ2003年年度报告摘要（英文版）

WUXI LITTLE SWAN COMPANY LIMITED 2003 ANNUAL REPORT SUMMARY §1. Important Notes 1.1 The Board of Directors of Wuxi Little Swan Company Limited (hereinafter refereed to as the Company) and all 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 summary of annual report 2003 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 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 Director Mr. Paul Wolansky was absent from the Board meeting due to busy business, and entrusted Mr. Zhu Dekun, Chairman of the Board, to attend and vote on his behalf. Mr. Peng Zhouhong was absent from the Board meeting due to work reason. 1.4 Jiangsu Gongzheng Certified Public Accountants and PricewaterhouseCoopers Certified Public Accountants Co., Ltd. issued the unqualified Auditors’ Report with the emphatic events paragraph for the Company respectively; and the Board of Directors and the Supervisory Committee of the Company made the corresponding explanations in details for the relevant matters, the investors are suggested to notice the content. 1.5 Mr. Zhu Dekun, Chairman of the Board of the Company, and Mr. Chen Zhimin, Chief Financial Officer hereby confirm that the Financial Report of the Annual Report is true and complete. 1.6 This report was prepared in both Chinese and English. Should there be any difference in interpretation between the two versions, the Chinese version shall prevail. §2. Company Profile 2.1 Basic information Short form of the stock *ST Swan A, *ST Swan B Stock code 000418、200418 Listed stock exchange Shenzhen Stock Exchange Registered address and office address No.1 Hanjiang Road, National High-Tech Industrial Development Zone, Wuxi No. 67, Huiqian Road, Wuxi Jiangsu Post code 214035 Internet web site of the Company http://www.littleswan.com E-mail of the Company info@littleswan.com.cn 2.2 Contact person and method Secretary of the Board of Directors Securities Affairs Representative Name Qiao li Chen Weinong Contact address No. 67, Huiqian Road, Wuxi Jiangsu No. 67, Huiqian Road, Wuxi Jiangsu Telephone 0510-3704003-2192 0510-3704003-2022 Fax 0510-3720879 0510-3720879 E-mail qiaol@littleswan.com.cn chenwn@littleswan.com.cn §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 2,901,320,283.34 2,941,801,551.71 -1.38% 1,953,492,571.37 operations Total profit 62,235,110.63 -636,968,930.75 -- -6,698,279.83 Net profit 35,990,311.11 -564,803,384.45 -- -57,502,056.93 Net profit after deducting non-recurring gains and 10,454,331.18 -565,957,245.61 -- -45,865,124.92 losses Increase/decrease 2003 2002 over the end of 2001 previous year（％） Total assets 3,079,063,440.49 3,175,780,748.53 -3.05% 3,114,942,374.52 Shareholders’ equity (excluding minority 1,106,830,465.42 1,088,684,900.87 1.67% 1,885,176,795.40 interests) Net cash flow arising from 191,451,894.82 86,553,355.26 121.20% 96,441,569.84 operating activities 3.2 Major financial indexes (Calculated according to the IAS) Unit: RMB Increase/decrease 2003 2002 2001 over last year（％） Earnings per share 0.10 -1.55 -- -0.16 Earnings per share (it is calculated based on 0.10 -- -- -- new share capital if share capital was changed) Return on equity 3.25% -51.88% -- -3.05% Return on equity as calculated based on net profit after deducting non-recurring gains and 0.94% -51.99% -- -2.43% looses Net cash flow per share arising from operating 0.52 0.24 121.17% 0.26 activities Increase/decrease 2003 2002 over the end of 2001 previous year（％） Net assets per share 3.03 2.98 1.66% 5.16 Net assets per share after adjustment 2.91 2.85 2.04% 5.02 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 3,599.03 2,696.20 Explanation on the Difference in consolidation scope: -251.80 difference Writing off over-appropriate wage: -651.00 §4. Change in Share Capital and Particulars about Shareholders 4.1 Statement of change in share Unit: share Before the Increase / decrease After the change in this year (+ / -) change I. Unlisted shares 1. Sponsors’ shares 109,622,592 0 109,622,592 Including: State-owned shares 101,628,864 0 101,628,864 Domestic legal person’s shares 7,993,728 0 7,993,728 Foreign legal person’s shares 0 0 Others 0 0 2. Raised legal person’s shares 56,124,000 0 56,124,000 3. Inner employees’ shares 0 0 4. Preference shares or others 0 0 Total unlisted shares 165,746,592 0 165,746,592 II. Listed shares 1. RMB ordinary shares 72,000,000 0 72,000,000 2. Domestically listed foreign shares 127,357,248 0 127,357,248 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total listed shares 199,357,248 0 199,357,248 III. Total shares 365,103,840 0 365,103,840 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulation share Total number of shareholders at the end of report year 68,292 Particulars about shares held by the top ten shareholders Number of Nature of Increase / Shares held Type of shares share shareholders decrease in at the Proportion Full name of Shareholders (Circulating/N pledged/ (State-owned the report year-end (%) on-circulating) frozen shareholder/foreign year (share) (share) (share) shareholder) Jiangsu Little Swan Group 0 101,628,864 27.84 Non-circulating 0 State-owned Co., Ltd. shareholder Greater China Development 0 26,014,349 7.13 Circulating 0 Foreign shareholder Co., Ltd. Wuxi Industry Development 0 16,496,640 4.52 Non-circulating 0 State-owned Fund shareholder Wuxi City and Town 0 7,993,728 2.19 Non-circulating 0 Industrial United Committee China Southern Securities 0 7,570,900 2.07 Non-circulating 7,570,900 Co., Ltd. Xi’an Wanguo Real Estate 0 4,800,000 1.31 Non-circulating 0 Development Co., Ltd. Shenyang Lianya Industrial 0 2,160,000 0.59 Non-circulating 0 Development Co., Ltd. China Construction Bank 0 1,440,000 0.39 Non-circulating 0 Dalian Trust Investment Co., Ltd. Beijing Liancheng Investment 0 1,440,000 0.39 Non-circulating 0 Consulting Co., Ltd. Li Ming Gong Unknown 1,275,646 0.35 Circulating 0 Explanation on associated relationship Among the top ten shareholders as listed above, there exists no associated among the top ten shareholders or relationship or consistent action. consistent action Particulars about shares held by the top ten shareholders of circulation share Name of shareholders (full name) Number of Type (A-share, B-share, circulation shares at H-share or others) the year-end GREATER CHINA DEVELOPMENT CO., LTD. 26,014,349 B-share in circulating LI MING GONG 1,275,646 B-share in circulating CHEN SHAO MING 1,036,200 B-share in circulating ZHANG JIE 719,000 B-share in circulating NAM NGAI 711,023 B-share in circulating SHANGHAI (HK) WANGUO SECURITIES 636,986 B-share in circulating HUANG YING HUI 600,000 B-share in circulating LIANG YU TIAN 435,576 B-share in circulating JIANG XU 430,000 B-share in circulating ZHOU YU FANG 399,400 B-share in circulating Explanation on associated relationship The Company is unknown whether there exists among the top ten shareholders of associated relationship among shareholders of circulation share circulation share. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller The controlling shareholder: Jiangsu Little Swan Group Co., Ltd. Legal representative: Mr. Zhu Dekun Date of foundation: Dec. 1995 Registered capital: RMB 197.07 million Business scope: manufacture and sales of electrical home appliances; production of raw material, subsidiary material, equipment, parts and components; consultation of economy and financing, agency service, technical service of electrical home appliances. In the report period, the controlling shareholder remained unchanged, whereas, the matters concerned (Jiangsu Little Swan Group Co., Ltd. respectively transferred 17% and 48% state-owned equity of Jiangsu Little Swan Group Co., Ltd. to Nanjing SWT Group Co., Ltd. and Xi’an Tongyou Science and Technology Investment Co., Ltd., remained 35% state-owned equity.) of the partial state-owned equity transfer of Jiangsu Little Swan Group Co., Ltd., the controlling shareholder of the Company, has been approved by State-owned Assets Supervision and Administration Commission of the State Council dated Jan. 30, 2004, the relevant matters was made with Public Notice on Proceeding of Reorganization on Mar. 10, 2004, and published on Securities Times, China Securities and Ta Kung Pao dated Mar. 10, 2004 and internet web http://www.cninfo.com.cn. HTU UTH §5. Particulars About Director, Supervisor and Senior Executives 5.1 Directors, supervisors and senior executives Holding shares Holding Reason for Name Title Gender Age Office term at the shares at the change year-begin year-end Jul. 2003- Zhu Dekun Chairman of the Board Male 60 30,000 30,000 Jul. 2006 Jul. 2003- Ou Shiyu Vice Chairman of the Board Male 59 18,000 18,000 Jul. 2006 Jul. 2003- Xu Zhonglun Director Male 59 18,000 18,000 Jul. 2006 Jul. 2003- Paul Wolansky Director Male 49 0 0 Jul. 2006 Li Guodong Director Male 56 Jul. 2003- 0 0 Jul. 2006 Peng Jul. 2003- Director Male 47 0 0 Zhouhong Jul. 2006 Jul. 2003- Lv Wei Independent Director Male 40 0 0 Jul. 2006 Jul. 2003- Yang Jiaye Independent Director Male 68 0 0 Jul. 2006 Jul. 2003- Zhang Aimin Independent Director Male 39 0 0 Jul. 2006 Chairman of the Supervisory Jul. 2003- Jiang Lanzhen Female 54 0 0 Committee Jul. 2006 Zhang Jul. 2003- Supervisor Male 58 24,000 24,000 Zhizheng Jul. 2006 Jul. 2003- Ma Jun Supervisor Male 32 0 0 Jul. 2006 Jul. 2003- Chai Xinjian General Manager Male 41 0 0 Jul. 2006 Jul. 2003- Li Hong Deputy General Manager Male 41 0 0 Jul. 2006 Jul. 2003- Mao Zhiliang Deputy General Manager Male 47 0 0 Jul. 2006 Secretary of the Board of Jul. 2003- Qiao Li Male 44 0 0 Director Jul. 2006 Jul. 2003- Chen Zhimin Chief Financial Officer Male 47 0 0 Jul. 2006 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Title in Shareholding Name Name of Shareholding Company Office term from the Shareholding Company Company (Yes / No) Jiangsu Little Swan Group Co., Ltd. Chairman of the Board and Zhu Dekun Up to May 2004 No concurrently President Xu Zhonglun Jiangsu Little Swan Group Co., Ltd. Vice-president Up to May 2004 No Ou Shiyu Jiangsu Little Swan Group Co., Ltd. Vice-president Up to May 2004 No Greater China Development Co., Paul. Wolansky General Manager 2004 Yes Ltd. South Securities Co., Ltd. General Manager of Peng Zhouhong 2004 Yes Internal Auditing Dept. 5.3 Particulars about the annual payment of directors, supervisors and senior executives Unit: RMB0’000 Total annual payment 487 Total annual payment of the top three directors 233 drawing the highest payment Total annual payment of the top three senior 152 executives drawing the highest payment Allowance of independent director 5.0 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 Company Law. Name of directors and supervisors receiving no Peng Zhouhong, Paul. Wolansky, Li Guodong, Jiang payment or allowance from the Company Lanzhen Payment Number of persons RMB 200,000 to RMB 500,000 7 RMB 500,000 to RMB 800,000 2 RMB 800,000 to RMB 1,350,000 1 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period Year 2003 was a key year when the Company turned deficiency into earnings. According to the achievement enhancement plan of “Increasing income and reducing expenditure and turning deficiency into earnings”, the Company pursued the maximum profit with profitability as the core and with managerial innovation as the motive, which has optimized product structure and has stopped the sales of air-conditioners; associated with international magnate of electric appliance in strong-to-strong and developed the international business rapidly; improved the internal control system, fully implemented the financial budget and settlement system and reduce the expenses; reinforced the clearing to accounts receivable and daily checking to accounts receivable and avoided new bad debts; sped up the development of new products, optimized product design, reduce the product cost and further enhanced the competitive force of products. In 2003, after consolidation, struggle, aggressiveness and efforts of all staffs of the Company, the Company realized the objective of turning deficiency into earnings. The parent company realized sales income amounting to RMB 1473 million and total profit amounting to RMB 20.1251 million. The sales income and net profit after consolidation was RMB 2901.32 million and RMB 35.99 million respectively. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Classified according to Income from Cost of main Gross Increase/decrease Increase/decreas Increase/decrease industries or products main operations profit in income from e in cost of main in gross profit ratio operations (RMB) ratio (%) main operations operations over over the last year (RMB) over the last year the last year (%) (%) (%) Manufacture of daily 255,302.18 209,163.26 18.07 -3.54 -1.03 -10.31 electric appliances Manufacture of casting 15,288.54 11,303.85 26.06 60.57 105.12 -38.12 Other industries 19,541.31 16,303.03 16.57 -2.17 -5.62 22.53 Including: related 0.00 0.00 - transactions Washers 185,282.32 147,274.54 20.51 5.01 8.03 -9.77 Air-conditioners 34,192.98 32,012.03 6.38 -40.65 -37.44 -42.96 Refrigerators 26,676.42 21,603.92 19.01 28.42 38.13 -23.04 Electric engines 13,804.99 10,927.93 20.84 5.16 13.36 -21.55 Casting 15,288.54 11,303.85 26.06 60.57 105.12 -38.12 Dryers 2,779.24 2,569.80 7.54 -45.47 -39.16 -55.97 Dish-washers 970.10 909.17 6.28 52.16 75.34 -66.36 Water heaters 1,470.50 1,366.31 7.09 -9.62 10.94 -70.85 Induction cookers 3,326.23 2,800.64 15.80 52.22 47.48 20.65 Microcomputer 1,143.83 1,016.45 11.14 controllers Dryers 604.40 626.86 -3.72 95.98 86.80 -57.85 Others 4,592.49 4,358.65 5.09 -32.93 -42.90 -144.36 Including: related 0.00 0.00 - 0.00 transactions Pricing rules for related The related transactions were confirmed as agreed prices, the same as the prices in non-related transactions, transactions no higher or lower than the price in the normal transactions materially. The transactions were all settled by adopting irregular settlement with payment having no appended conditions. Necessity and durative The market and products were complemented mutually, increasing the competitive capability in the market of related transactions of the Company. 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main operations Increase/decrease in income (RMB) from main operations over the last year (%) Mainland of China 254,999.25 -2.72 Overseas 35,132.78 9.59 Total 290,132.03 -1.38 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase 62,385.46 Proportion in the total 32.21% of the top five suppliers amount of purchase Total amount of sales of the 18,081.57 Proportion in the total 6.23% top five sales customers amount of sales 6.5 Operation of share-holding companies (applicable to the situation where investment earnings takes over 10% of its net profit) √Applicable □Inapplicable Name of share-holding company Boxiwei Household Appliance Co., Ltd. Investment earnings contributed in the report 2,325.04 period Proportion in the net profit of listed company 64.60% Share-holding companies Business scope Engaged in the production and sales of washing machines, drying machines, dishwashers and kitchen appliance electric appliance and its accessories and fittings represented by hearth appliance set, hearth set, disinfecting tanks and drawing machines Net profit 5,812.60 Name of share-holding company Jiangsu Little Swan Sanjiang Electric Appliances Manufacture Co., Ltd. Investment earnings contributed in the report 383.13 period Proportion in the net profit of listed company 10.65% Share-holding companies Business scope Production and sales of electric appliances Net profit 751.24 Name of share-holding company Wuxi Little Swan Precision Foundry Co., Ltd. Investment earnings contributed in the report 372.20 period Proportion in the net profit of listed company 10.34% Share-holding companies Business scope Production and sales of cast iron precision casting products with cold compressors and precision casting used in automobiles as the core Net profit 496.27 Name of share-holding company Wuxi Huayin Electric Appliances Co., Ltd. Investment earnings contributed in the report 382.88 period Proportion in the net profit of listed company 10.64% Share-holding companies Business scope Production and sales of electric engines Net profit 510.50 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 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year √Applicable □Inapplicable 1) When the Company responded to the changes of domestic market actively, the Company has got new achievements in international cooperation and made essential progress in the cooperation of the multinational corporation. 2) The Company actively formed and implemented “Achievements Promotion” Plan with the main content “Increasing Revenue, Saving Expenses, Getting Profits from Losses”. The company implemented financial budget and settlement system seriously and controlled effectively the expenses. 3) The Company implemented strictly the rules of administration of listed companies, reinforced preventing operating risks, and standardized operation. Encountered with the weakness of the Company in management and control, the Company engaged specialists to revise and consummate the internal control system with respect to the situation of the Company, implemented timely, got obvious effects, which helped operating achievements to rise in the adjustment. 4) The Company organize the specialized staff to implemented the check work of current account between the marketing company and the clients, check work of inventory account and strict control on sales expenses, which standardized the operation of the Company in further step. 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 In 2003, the competition in the industry of household electric appliance was much more intensified, which required higher emergency abilities of the Company; The increase of price of raw materials resulted in the increase of cost of products, which required higher internal management. 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 √Applicable □Inapplicable Unit: RMB’0000 Name of projects Amount of projects Progress of projects Earnings of projects Little Swan Export Product 2,800.00 Under process No earnings in p Processing Base eriod Wuxi Little Swan Mobile 250.00 Under process No earnings in t Communication Co., Ltd. he period Jiangsu Little Swan Sanjiang 2,608.00 Under process No earnings in t Electric Appliances Manufacture he period Co., Ltd. Total 5,658.00 - - 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants √Applicable □Inapplicable The directors of the Company believed that the unqualified auditor’s report with emphasized matters presented by Jiangsu Gongzheng Certified Public Accountants for 2003 annual financial report of the Company was appropriate. The independent directors and the Supervisory Committee of the Company agreed with the explanation of the Board on the above matters. 6.15 Business plan as of the next year of the Board of Directors (If it has) √Applicable □Inapplicable In 2004, on the basis of last year’s getting profit from loss, the Company made efforts to promote operating achievements in further step and worked out all-round achievements promotion plan with the main measures as follows: (1) Diversifying the management, narrowing the cost accounting unit, reducing administration expenses, overhead expenses and costs, and Optimizing the supply channel and decreasing purchasing costs; (2) Grasping the cooperation chance with big international companies, strengthening the research on the product technology basis, realizing the internationalization of product development; (3) Consummating the internal supervision and urge mechanism of the Company; the independent internal auditing department will operate formally on Jan. 1, 2004; (4) Strictly implementing the financial judgment system, financial budgeting and settlement system and internal control standard (5) To fully enhance the quality management level with “6a” as the surveyor’s pole (6) To set up achievements evaluation system of staff, consummate encouragement mechanism and promote the cohesion of the staff. 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 Since the profit available for distribution was still in negative after losses offset in 2003, neither profit distribution nor capitalization of reserve into share capital would be conducted in 2003. §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) Wuxi Little Swan Joint liabilities Nov. 19, 2003 - Presision Casting Co., Nov. 19, 2003 500.00 No Yes guarantee Nov. 17, 2004 Ltd Wuxi Little Swan Joint liabilities Nov. 21, 2003 - Presision Casting Co., Nov. 21, 2003 350.00 No Yes guarantee Oct. 21, 2004 Ltd Wuxi Little Swan Joint liabilities Mar. 17, 2003 - Presision Casting Co., Mar. 17, 2003 2,000.00 No Yes guarantee Mar. 16, 2004 Ltd Wuxi Little Swan Joint liabilities Apr. 14, 2003 - Presision Casting Co., Apr. 14, 2003 300.00 No Yes guarantee Apr. 13, 2004 Ltd Wuxi Little Swan Joint liabilities Aug. 18, 2003 - Presision Casting Co., Aug. 18, 2003 300.00 No Yes guarantee Aug. 10, 2004 Ltd Wuxi Little Swan Joint liabilities Nov. 11, 2003 - Presision Casting Co., Nov. 11, 2003 200.00 No Yes guarantee May 10, 2004 Ltd Wuxi Little Swan Fuji Joint liabilities Mar. 10, 2003 - Clenaing Equipment Mar. 10, 2003 250.00 No Yes guarantee Mar. 7, 2004 Co., Ltd Wuxi Little Swan Fuji Joint liabilities Jan. 24, 2003 - Clenaing Equipment Jan. 24, 2003 150.00 No Yes guarantee Jan. 23, 2004 Co., Ltd Wuxi Little Swan Fuji Joint liabilities Dec. 15, 2003 - Clenaing Equipment Dec. 15, 2003 700.00 No Yes guarantee Mar. 25, 2004 Co., Ltd. Wuxi Little Swan Fuji Joint liabilities Dec. 15, 2003 - Clenaing Equipment Dec. 15, 2003 680.00 No Yes guarantee Mar. 25, 2004 Co., Ltd. Wuxi Little Swan Fuji Joint liabilities Oct. 27, 2003 - Clenaing Equipment Oct. 24, 2003 100.00 No Yes guarantee Oct. 25, 2004 Co., Ltd. Wuxi Little Swan Fuji Joint liabilities Aug. 1, 2003 - Clenaing Equipment Aug. 1, 2003 420.00 No Yes guarantee July 25, 2004 Co., Ltd. Wuxi Little Swan Fuji Joint liabilities May 13, 2003- Clenaing Equipment May 13, 2003 450.00 No Yes guarantee May 13, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Sep. 5, 2003 - Feiling Electronics Sep. 5, 2003 400.00 No Yes guarantee Aug. 27, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Sep. 5, 2003 – Feiling Electronics Sep. 5, 2003 500.00 No Yes guarantee Jul. 30, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Sep. 5, 2003 – Feiling Electronics Sep. 5, 2003 300.00 No Yes guarantee Jun. 25, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Oct. 24, 2003 - Feiling Electronics Oct. 24, 2003 200.00 No Yes guarantee May 28, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Dec. 19, 2003 - Feiling Electronics Dec. 19, 2003 500.00 No Yes guarantee Dec. 18, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Dec. 4, 2003 - Feiling Electronics Dec. 4, 2003 500.00 No Yes guarantee Dec. 3, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Aug. 14, 2003 - Feiling Electronics Aug. 14, 2003 1,000.00 No Yes guarantee Aug. 10, 2004 Co., Ltd Wuxi Little Swan Joint liabilities Sep. 3, 2003 - Feiling Electronics Sep. 30, 2003 500.00 No Yes guarantee Mar. 30, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Aug. 12, 2003 - Feiling Electronics Aug. 12, 2003 500.00 No Yes guarantee Jan. 16, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Aug. 24, 2003 - Feiling Electronics Aug. 24, 2003 256.85 No Yes guarantee Feb. 24, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Jul. 29, 2003 - Feiling Electronics July 29, 2003 150.00 No Yes guarantee Jan. 29, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Nov. 24, 2003 - Feiling Electronics Nov. 24, 2003 350.00 No Yes guarantee Apr. 24, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Dec. 17, 2003 - Feiling Electronics Dec. 17, 2003 350.00 No Yes guarantee May 17, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Sep. 18, 2003 – Import and Export Sep. 18, 2003 400.00 No Yes guarantee Jul. 20, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Nov. 7, 2003 - Import and Export Nov. 7, 2003 1,000.00 No Yes guarantee Aug. 20, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Oct. 27, 2003 - Import and Export Oct. 27, 2003 1,000.00 No Yes guarantee Jan. 15, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Apr. 20, 2003 - Import and Export Apr. 20, 2003 389.00 No Yes guarantee Apr. 20, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Oct. 16, 2003 - Import and Export Oct. 16, 2003 1,000.00 No Yes guarantee Oct. 27, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Sep. 29, 2003 - Import and Export Sep. 29, 2003 500.00 No Yes guarantee Mar. 29, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Sep. 25, 2003 - Import and Export Sep. 25, 2003 2,000.00 No Yes guarantee Mar. 19, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Dec. 5, 2003 – Import and Export Dec. 5, 2003 1,000.00 No Yes guarantee Jun. 5, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Oct. 27, 2003 - Import and Export Oct. 27, 2003 500.00 No Yes guarantee Mar. 27, 2004 Co., Ltd. Wuxi Little Swan Schulthess Joint liabilities Dec. 23, 2003 - Dec. 23, 2003 500.00 No Yes Washing-maching guarantee Apr. 28, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Jun. 5, 2003 - June 5, 2003 700.00 No Yes Washing-maching guarantee May 28, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Nov. 12, 2003 - Nov. 12, 2003 980.00 No Yes Washing-maching guarantee Oct. 25, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Aug. 15, 2003 - Aug. 15, 2003 500.00 No Yes Washing-maching guarantee Aug. 13, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Jun. 30, 2003 - June 30, 2003 500.00 No Yes Washing-maching guarantee Apr. 28, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Jun. 10, 2003 - June 10, 2003 500.00 No Yes Washing-maching guarantee Mar. 10, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Nov. 25, 2003 - Nov. 25, 2003 400.00 No Yes Washing-maching guarantee Aug. 12, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Apr. 7, 2002- Apr. 7, 2002 400.00 No Yes Washing-maching guarantee Apr. 7, 2004 Co., Ltd Wuxi Little Swan Schulthess Joint liabilities Apr. 10, 2003 - Apr. 10, 2003 400.00 No Yes Washing-maching guarantee Apr. 10, 2004 Co., Ltd Wuxi Little Swan Jiangbo Model Joint liabilities Mar. 10, 2003 - Mar. 10, 2003 300.00 No Yes Presision Manufacture guarantee Mar. 9, 2004 Co., Ltd. Wuxi Little Swan Jiangbo Model Joint liabilities May 26, 2003 - May 26, 2003 100.00 No Yes Presision Manufacture guarantee May 25, 2004 Co., Ltd. Wuxi Little Swan Joint liabilities Dec. 9, 2003- Huayin Electric Dec. 9, 2003 300.00 No Yes guarantee Dec. 9, 2004 Appliances Co., Ltd. Wuxi Lifanda Electric Joint liabilities Jun. 30, 2003 – June 30, 2003 100.00 No Yes Appliances Co., Ltd. guarantee Jun. 29, 2004 Wuxi Lifanda Electric Joint liabilities Jun. 30, 2003- June 30, 2003 250.00 No Yes Appliances Co., Ltd. guarantee Jun. 29, 2004 Wuxi Little Swan Joint liabilities Sep. 25, 2003 - Sep. 25, 2003 1,000.00 No Yes Marketing Co., Ltd. guarantee Mar. 25, 2004 Wuxi Little Swan Joint liabilities Sep. 18, 2003 - Sep. 18, 2003 600.00 No Yes Marketing Co. guarantee Mar. 18, 2004 Wuxi Little Swan Joint liabilities Oct. 28, 2003 - Oct. 28, 2003 600.00 No Yes Marketing Co., Ltd. guarantee Apr. 28, 2004 Wuxi Little Swan Joint liabilities Oct. 23, 2003 - Oct. 23, 2003 800.00 No Yes Marketing Co., Ltd. guarantee Apr. 23, 2004 Wuxi Little Swan Joint liabilities July 21, 2003 - July 21, 2003 1,000.00 No Yes Marketing Co., Ltd. guarantee Jan. 21, 2004 Wuxi Little Swan Joint liabilities July 30, 2003 - July 30, 2003 1,200.00 No Yes Marketing Co., Ltd. guarantee Jan. 30, 2004 Wuxi Limin Porcelain Joint liabilities Nov. 1, 1993 - Nov. 1, 1993 700.00 Yes No Factory guarantee June 30, 1998 Jiangsu Little Swan Joint liabilities Dec. 17, 2003 - Dec. 17, 2003 5,000.00 No Yes Group Co., Ltd guarantee June 17, 2004 Jiangsu Little Swan Joint liabilities Dec. 17, 2003 - Sep. 9, 2003 5,000.00 No Yes Group Co., Ltd guarantee June 17, 2004 Jiangsu Little Swan Joint liabilities Dec. 19, 2003 - Dec. 19, 2003 8,000.00 No Yes Group Co., Ltd guarantee June 8, 2004 Jiangsu Little Swan Joint liabilities Dec. 16, 2003 - Dec. 16, 2003 500.00 No Yes Group Co., Ltd. guarantee Oct. 21, 2004 Jiangsu Little Swan Joint liabilities Dec. 23, 2003 - Dec. 23, 2003 480.00 No Yes Group Co., Ltd. guarantee Oct. 21, 2004 Jiangsu Little Swan Joint liabilities Dec. 12, 2003 - Dec. 12, 2003 4,000.00 No Yes Group Co., Ltd. guarantee Apr. 28, 2004 Jiangsu Little Swan 662.40 Joint liabilities Sept. 25, 2003- Group Co., Ltd. (USD Sept. 25, 2003 guarantee Sept. 25, 2004 No Yes 800,000) Total amount of guarantee 64,818.25 Total balance of guarantee 55,168.25 Including: total balance of related guarantees 54,468.25 Total guarantees provided by the listed company for 40,125.85 controlling subsidiaries Total illegal guarantees 50,818.25 Proportion of total guarantees in net assets of the 49.84 Company 7.4 Current related credits and liabilities √Applicable □Inapplicable Unit: RMB’0000 Related Parties Provided capital to the related parties The related parties provided capital to listed companies Amount Balance Amount Balance Jiangsu Little Swan Group Co., Ltd. 1,094.06 2,175.19 0.00 0.00 Jiangsu Little Swan Marketing Co., 21,445.02 42,044.95 0.00 0.00 Ltd. Little Swan (Jinzhou) Sanjin 0.00 0.00 486.56 3,756.31 Electrical Appliance Co., Ltd. Wuxi Little Swan Tianai Co., Ltd. 12.92 2,317.42 0.00 0.00 Wuxi Little Swan Pottery China 8.66 1,225.44 0.00 0.00 Co., Ltd. Wuhan Little Swan Washing 1,748.15 1,854.74 0.00 0.00 Machine Co., Ltd. Wuxi Little Swan Jiake Electronics 0.00 0.00 -3,876.39 0.00 Co., Ltd. Wuxi Feilin Electrical Co., Ltd. 421.29 421.29 0.00 0.00 Wuxi Little Swan Dryer Co., Ltd. 40.57 1,136.73 0.00 0.00 Wuxi Little Swan Central 31.48 67.60 0.00 0.00 Air-conditioner Co., Ltd. Wuxi Little Swan Jiangbo Mould 0.00 0.00 -234.94 444.09 Precision Manufacture Co., Ltd. Wuxi Little Swan Huayin Electrical 0.00 0.00 -1,687.30 9.17 Appliance Co., Ltd. Jiangsu Little Swan Sanjiang 914.49 1,539.70 0.00 0.00 Electrical Appliance Co., Ltd Wuxi Little Swan Import and 865.17 6,263.63 0.00 0.00 Export Co., Ltd. Wuxi Little Swan Fuji Cleaning 294.20 420.93 0.00 0.00 Equipment Co., Ltd. Wuxi Little Swan Sutai Washing 66.39 239.39 0.00 0.00 Machinery Co., Ltd. Wuxi Little Swan Merlonic 255.87 9,612.16 0.00 0.00 Dish-washer Co., Ltd. Wuxi Little Swan Real Estate Construction Development Co., -791.07 217.39 0.00 0.00 Ltd. Boxiway Household Electrical 120.00 2,455.88 0.00 0.00 Appliance Co., Ltd. Wuxi Lifanda Electrical Appliance 158.89 633.40 0.00 0.00 Co., Ltd. Wuxi Little Swan Marketing Co., -221.46 37.89 0.00 0.00 Ltd. Wuxi Little Swan Refrigeration 1,200.00 4,435.22 0.00 0.00 Electrical Appliance Co., Ltd. Wuxi Little Swan Hubin Washing -184.00 0.00 0.00 0.00 Co., Ltd. Wuxi Little Swan Washing 184.00 187.09 0.00 0.00 Investment Management Co., Ltd. Toshiba Washing Machine (Wuxi) 238.14 238.14 0.00 0.00 Co., Ltd. Haikou Little Swan Trade Co., Ltd. 0.00 364.32 0.00 0.00 Wuxi Little Swan Precision Casting 434.24 520.07 0.00 0.00 Co., Ltd. Wuxi Little Swan Advertisement 0.00 0.00 0.00 202.51 Company Wuxi Little Swan Transportation 27.49 10.56 0.00 0.00 Co., Ltd. Wuxi Aerxi Plastics Co., Ltd. 0.00 0.00 57.73 0.00 Little Swan Palaima Industrial Co., 0.00 584.74 0.00 0.00 Ltd. Midaqi Swan Industrial Co., Ltd. 0.00 367.24 0.00 0.00 Total 28,364.50 79,371.11 -5,254.34 4,412.08 7.5 Entrusted assets management □Applicable √Inapplicable 7.6 Implementation of commitments □Applicable √Inapplicable 7.7 Significant lawsuits and arbitrations □Applicable √Inapplicable 7.8 Particulars about duties performance of Independent Directors According to Guidelines Opinion on Establishing Independent Director System in Listed Companies, at the Shareholders’ General Meeting held on Jul. 19, 2003, the Company elected 3 independent directors, which accounted for 1/3 on the expiration and election of the Board. For one year, independent directors attended the Board of the Company, fulfilled the duties of independent directors seriously, and protected the middle and small shareholders’ rights and interests obviously in the supervision on principal shareholders and related transactions of the Company. The independent directors have conducted examination and have issued opinion of independent directors on such significant events as Related Transactions in 2003 and Report to All Shareholders on Issue Concerned About Equity of the Company’s Controlling Shareholder Purchased by Nanjing SVT Group Co., Ltd. etc.. §8. Report of the Supervisory Committee In the report period, according to the provisions in Company Law of the P.R.C. and the Articles of Association of the Company, all members in the Supervisory Committee of the Company have implemented their supervision duties and functions devotedly in the operating activities of the Company and have formed the following opinions through a series of supervision and examination activities: 1. Operation of the Company: The Board of Directors of the Company has seriously implemented the resolutions passed by the Shareholders’ General Meeting with the decision-making procedures fully in compliance with the state laws and regulations and the Articles of Association of the Company. The Management of the Company has seriously implemented all resolutions of the Board of Directors and has established improved internal control system. The Company’s directors and managers cleaved to their positions while implementing their duties, not disobeying the laws and regulations and the Articles of Association or damaging the interests of the Company. 2. Finance of the Company: The auditing opinion in 2003 issued by certified public accounts was objective and true. The Company’s financial report has reflected the financial position and operating results of the Company in an objective and true way. 3. All transactions of the Company’s related enterprises were conducted according to ordinary and fair commercial clauses. In 2003, the Company has never damaged the interests of the listed company in the related transactions. 4. Jiangsu Gongzheng Certified Public Accountants presented unqualified auditor’s report with emphasized matters on 2003 annual financial report of the Company. The Supervisory Committee agreed the explanation of the Board on the above matters. §9. Financial Report 9.1 Auditors’ Report To the Shareholders of Wuxi Little Swan Company Limited AUDITORS’ REPORT We have audited the accompanying consolidated balance sheet of Wuxi Little Swan Company Limited (“the Company”) and its subsidiaries (“the Group”) as of 31 December 2003 and 31 December 2002 and the related consolidated statements of income, changes in shareholders’ equity and cash flow for the year then ended. These consolidated financial statements set out are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 accompanying consolidated financial statements mentioned above present fairly in all material respects, the financial position of the Group as of 31 December 2003 and 31 December 2002 and of the results of its operations and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards. Otherwise, we suggest attention when using the accompanying consolidated financial statements that as we mentioned in the auditors’ report on 24 Apr 2003, owing to the incompleteness of the Group’s accounting records and lack of enough reliable evidence to support the accuracy and completeness of the balance of account receivable and advance from client and the properness of the bad debt provision provided as of 31 Dec 2002 and 2001, and also we were unable to assess the accuracy and completeness of the retrospective adjustment of selling expense of year 2001, year 2000, which impact retain earning as at Jan.1, 2002, we did not express an audit opinion on those consolidated financial statements in year 2002 and 2001. As disclosed in Note 26, in 2003, the Group reconciled the balance of account receivable with the customer, checked the accuracy and completeness of the selling expenses, retrospectively adjusted the relative figures of year 2002 and year 2001, and restated the consolidated financial statement of year 2002. We test the restated consolidated financial statements and then express our opinion on the accompanying consolidated financial statements of 2002 on this reasonable basis. This paragraph has no impact on the auditors’ opinion we expressed this year. PricewaterhouseCoopers China Limited Shanghai, the People’s Republic of China Prior year adjustments In May 2003, the Group reconciled the balance of account receivable with the customer and adjusted the ending balance of account receivable, bad-debt provision, current tax liabilities, account payable, advance from client, inventory, and other liabilities as at 2001 and 2002 retrospectively. Due to these adjustments, the accumulated losses as of 1 January 2003 and 2002 were increased by approximately RMB 43,319,000 and RMB 102,297,000 respectively. In year 2003, the Group checked the selling expense of year 2002, year 2001 and previous years, and retrospectively adjusted the selling expense of year 2002, year 2001 and previous years according to the result. Due to these adjustments, the accumulated losses as of 1 January 2002 were increased by approximately RMB 43,894,000. The Group restated the comparative figures of 2002. 9.2 Accounting Statements WUXI LITTLE SWAN COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 20013 and 2002 S S (All amounts in Renminbi (“RMB”) thousands, except for profit/(loss) per share) 2003 2002 (Restated Note 26) Sales, net 1,22 2,901,200 2,996,469 Cost of sales (2,283,487) (2,395,109) Gross profit 617,713 601,360 Distribution costs (390,638) (584,670) Administrative expenses (114,826) (186,072) Provision for bad and doubtful 3 debts (12,252) (306,530) Provision for inventory 3 obsolescence (38,466) (103,045) Impairment provision for property, plant and equipment 3 - (41,872) Other operating expenses, net (36,795) (38,542) Gain on sale of discontinuing 2 operation 6,413 - Profit/(loss) from operations 3 31,149 (659,371) Finance costs, net 4 (23,770) (38,304) Share of results of associates 12 46,957 22,155 Profit/(loss) before tax 54,336 (675,520) Income tax expense 6 (15,807) (14,441) Group profit/(loss) before minority interests 38,529 (689,961) Minority interests 20 (11,567) 7,259 Net profit/(loss) 26,962 (682,702) Profit/(loss) per share – Basic 7 RMB 0.07 RMB (1.87) Not – Diluted 7 applicable Not applicable WUXI LITTLE SWAN COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2003 and 2002 (All amounts in RMB thousands) Dec 31, 2002 Dec 31, (Restated, Note 26) Notes 2003 ASSETS Non-current assets Leasehold land 9 66,511 42,592 Property, plant and equipment 10 675,903 727,299 Intangible assets 11 16,269 21,476 Investments in associates 12 194,050 164,416 Available-for-sale investments 13 47,924 50,336 1,000,657 1,006,119 Current assets Inventories 14 362,298 628,033 Receivables, advance to suppliers and other current assets 15 735,055 900,144 Cash and cash equivalents 16 954,190 694,953 2,051,543 2,223,130 Total assets 3,052,200 3,229,249 SHAREHOLDERS’ EQUITY Share capital 19 365,104 365,104 Reserves 19 700,086 718,139 1,065,190 1,083,243 Minority interests 20 76,834 79,819 LIABILITIES Current liabilities Trade and other payables 17 1,226,607 1,428,352 Current tax liabilities 29,826 -40,402 Borrowings 18 635,690 696,290 Total liabilities 1,892,123 2,084,240 Total equity and liabilities 3,052,200 3,299,249 WUXI LITTLE SWAN COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 and 2002 (All amounts in RMB thousands) Reserves Statutory Discretionary Statutory Accumulated Share Capital common common public losses/ capital surplus reserve reserve welfare retained Total funds funds funds earnings Note 19(a) Note 19(b) Note 19(c) Note 19(d) Note 19(e) Note 19(f) (Restated) Balance at 1 January 2002 -As previously reported 365,104 1,087,895 210,837 204,224 110,818 (79,684) 1,899,194 -Cumulative effects of prior year adjustments (Note 26) - - - - - (146,191) (146,191) -As restated 365,104 1,087,895 210,837 204,224 110,818 (225,875) 1,753,003 Dividend relating to 2001(Note 8) - - - - - (5,111) (5,111) Net profit -As previously reported - - - - - (872,212) (872,212) -Cumulative effects of prior year adjustments (Note 26) - - - - - 189,510 189,510 -As restated - - - - - (682,702) (682,702) Appropriations for the year -As previously reported - - 7,729 - 209 (7,938) - -As restated - - 7,729 - 209 (7,938) - Balance at 1 January 2003 -As previously reported 365,104 1,087,895 218,566 204,224 111,027 (964,945) 1,021,871 -Cumulative effects of prior year adjustments (Note 26) - - - - - 43,319 43,319 -As restated 365,104 1,087,895 218,566 204,224 111,027 (921,626) 1,065,190 -Termination of subsidiaries (Note 2) - - (5,939) - (2,970) - (8,909) -Net profit for the year - - - - - 26,962 26,962 -Reserve to offset loss(No 19(f)) - (299,218) (169,285) (204,224) - 672,727 - -Appropriations for the year - - (669) - (356) 1,025 - Balance at 31 December 2003 365,104 788,677 42,673 - 107,701 (220,912) 1,083,243 WUXI LITTLE SWAN COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 and 2002 (All amounts in RMB thousands) 2002 (Restated, 2003 Note 26) Cash flows from operating activities Cash generated from operations 21 517,424 265,760 Interest paid (40,263) (52,199) Tax paid (77,387) (89,507) Net cash from operating activities 399,774 124,054 Cash flows from investing activities Purchase of property, plant, equipment, intangible assets and lease hold improvement (82,369) (69,739) Acquisition of available-for-sale investments and Investments in associates 12 (5,604) - Receipts of dividend from associates 12 19,603 1,499 Interest received 16,073 13,543 Disposal of available-for-sale investments and Investments in associates 2,644 3,000 Disposal of property, plant and equipment 10 21,601 313 Disposal of subsidiary, net of cash disposed 2 4,483 - Net cash used in investing activities (23,569) (51,384) Cash flows from financing activities Proceeds from borrowings (956,090) (1,056,600) Repayments of borrowings 895,490 1,143,990 Dividends paid to group shareholders (8,993) (149,509) Dividends paid to minority interests 20 (7,678) (6,921) Increase in minority interest 20 7,303 9,262 Net cash from (used in) financing activities (69,968) (59,778) Net increase in cash and cash equivalents 306,237 12,892 Cash and cash equivalents at the beginning of year 626,453 613,561 Cash and cash equivalents at the end of year 16 932,690 626,453 9.3 Compared with the latest annual report, the explanations of change in accounting policy, accounting estimate and calculation method are as follows: 1. Accounting policy remained unchanged. 2. Special explanation on the change of accounting estimate: 1) According to the resolutions of 17th meeting of the 3rd Board of Directors of the P P P P Company, the Company changed the accounting estimate to the withdrawal proportion of reserve for bad debts of accounts receivable since Jan. 1, 2003. The withdrawal proportion of reserve for bad debts of accounts receivable with aging of 2 to 3 years was changed as 25% from 20%; the withdrawal proportion of reserve for bad debts of accounts receivable with aging of 3 to 5 years was changed as 60% from 40%. The change of the aforesaid accounting estimate adopted future applicable method. The above change on accounting estimate affected the net profit of this year, with a decrease of RMB 1,896,700. 2) In the Auditor’s Report on Apr. 24, 2003, Jiangsu Gongzheng Certified Public Accountants was unable to form an opinion on 2002 annual financial reports of the Company. In 2003, the Company conducted investigation on the accounts receivable and marketing expenses and retroactive adjustment on the accounting errors according to the regulations of enterprise accounting principles promulgated by the state and enterprise accounting system, and compiled 2002 financial reports again. Due to the effects of the above accounting errors, the Company adjusted 2002 net profit with an increase of RMB 70,229,700, and retained profit in 2002 year-begin with a decrease of RMB 176,086,500. 3) The business of the Company’s core product washing machine suffered loss in 2002 and 2003. However, the Company didn’t adjust correspondingly the pricing method of selling washing machines of Jiangsu Little Swan Marketing Co., Ltd., the holding subsidiary of the Company in the consolidated statements, according to the market changes, so Jiangsu Little Swan Marketing Co., Ltd. suffered great loss. On Apr. 23, 2004, the Board of the Company resolved that the principal shareholder bore the negative of accumulated net assets of Jiangsu Little Swan Marketing Co., Ltd.. In compiling accounting statements this time, the Company corrected the accounting error. Due to the effects of the accounting errors, the Company adjusted 2002 net profit with a decrease of RMB 216,603,500. The above changes on accounting estimate and correction on accounting errors were examined and confirmed by Jiangsu Gongzheng Certified Public Accountants. The above changes on accounting estimate and correction on accounting errors were appropriate. The independent directors of the Company believed that the above changes on accounting estimate and correction on accounting errors were appropriate. The Supervisory Committee agreed with the explanation of the Board on the above matters. 3. Calculation measure remained unchanged. 9.4 Compared with the latest annual report, the consolidation scope remained unchanged. Board of Directors of Wuxi Little Swan Company Limited Apr. 27, 2004