皇庭国际(000056)深国商Ｂ2003年年度报告摘要（英文版）

SHENZHEN INTERNATIONAL ENTERPRISE CO., LTD 2003 ANNUAL REPORT SUMMARY §1. Important Notes 1.1 Board of Directors of Shenzhen International Enterprise Co., Ltd. (hereinafter referred to as the Company) 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 annual report; the investors are suggested to read the full text of annual report to understand more details. 1.2 No Director stated that he or she could not guarantee for the correctness, accuracy and completeness of the contents of this report and had objections. 1.3 Director Mr. Cai Zhuan didn’ t attend the Board meeting due to business trip, and Independent Director Shen Jinghua was absent from the Board meeting due to work reason and authorized Independent Director Mr. Chen Jiehou to attend and vote on his behalf. 1.4 Reanda Certified Public Accountants Co., Ltd. presented unqualified Auditor ’ s Report for the Company. 1.5 Chairman of the Board of the Company Mr. Li Jinquan, General Manager Ms. Song Shengjun and Person in charge of Accounting Mr. Ding Jingjia 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 SZIEC-A, SZIEC-B Stock code 000056, 200056 Listed stock exchange Shenzhen Stock Exchange Registered address and office address 23rd Floor, Development Center Bldg., Renmin South Road, Shenzhen Post code 518001 Internet web site of the Company http://www.china-ia.com E-mail of the Company szia@szonline.net 2.2 Contact person and method Secretary of the Board of Representative in charge of Directors Securities Affairs Name Xie Wei Zhang Weidong Contact address 23rd Floor, Investment and 23rd Floor, Investment and Management Dept., Development Management Dept., Development Center Bldg., Renmin South Road, Center Bldg., Renmin South Shenzhen Road, Shenzhen Telephone (0755)-82285564, 82281888 (0755)-82285565 Fax (0755)-82285573 (0755)-82285573 E-mail xiewei@china-ia.com xiewei@china-ia.com 1 §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data (Unit: In RMB) 2002 Increase/decrease 2003(this year) 2001 (last year) over last year（％） Income from core business 114,629,436.25 187,832,592.39 -38.97% 301,449,776.02 Total profit -3,126,900.46 -34,676,065.48 -- 29,161,631.67 Net profit 1,254,547.51 -25,706,674.11 -- 5,569,386.66 Net profit after deducting -19,127,942.22 -21,761,556.63 -- -27,390,480.12 non-recurring gains and losses At the end of Increase/decrease At the end of 2001 At the end of 2003 from the end of (last year) 2001 (this year) previous year（％） -2.26% 1,166,350,253.0 Total assets 1,070,623,528.60 1,095,417,472.51 0 Shareholder’s equity (excluding 331,894,960.72 330,640,413.21 0.38% 358,626,630.12 minority interests) Net cash flows arising from 24,059,344.41 8,416,728.47 185.85% -16,756,711.87 operating activities 3.2 Major financial indexes (Unit: In RMB) Increase/decrease 2003 2002 over last year 2001 (this year) (last year) （％） Earnings per share 0.01 -0.12 -- 0.03 Earnings per share (if the share equity changes, accounted on the new share 0.01 -- -- -- equity) Return on equity 0.38% -7.77% -- 1.55% Return on equity as calculated based on net profit after deducting non-recurring gains -5.84% -6.58% -- -2.28% and losses Net cash flows per share arising from 0.11 0.04 186.84% 0.08 operating activities Increase or At the end At the end of decrease from At the end of 2003 2002 the end of of 2001 (this year) (last year) previous year （％） Net assets per share 1.50 1.50 0.33% 1.62 Net assets per share after adjustment 1.46 1.44 1.39% 1.49 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and 2 International Accounting Standard (IAS) √Applicable □Inapplicable Unit: In RMB0’000 CAS IAS Net profit 125.45 -267.40 The explanation on the difference between the auditing results under PRC GAAP and IAS: As audited by Reanda Certified Public Accountants according to PRC GAAP and by BDO International Certified Public Accountants according to IAS promulgated by International Accounting Standard Committee, the Company’ s profit after taxation as of the year 2003 respectively was RMB 1,254,000 and RMB –2,674,000. The adjustment for the differences was as follows: (Unit: In RMB’000) Consolidated statement as Explanation of the year 2003 on the Profit after tax as audited by Reanda Certified Public Accountants 1,254 difference Adjustment to conform with IAS: Taxation paid -3,799 Increase of expenses to be apportioned -2,818 Increase of deferred expenses 69 Minority interest 2,674 Profit after tax as audited by BDO International Certified Public Accountants -2,674 Difference in the profit after taxation as audited by Reanda Certified Public Accountants Co., Ltd. under PRC GAAP and by BDO International Certified Public Accountants under IAS is due to the different regulations in PRC GAAP and IAS. §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital Unit: share Before the Increase/decrease of this Items After the change change time (+, - ) Ｉ． Unlisted Shares 1. Promoters’shares 42,035,328 0 42,035,328 Including: State-owned share 42,035,328 0 42,035,328 Domestic legal person’s shares 0 0 Foreign legal person’s shares 0 0 Others 0 0 2. Raised legal person’s shares 51,643,584 0 51,643,584 3. Employees’shares 0 0 4. Preference shares or others 0 0 Total Unlisted shares 93,678,912 0 93,678,912 II. Listed Shares 1. RMB ordinary shares 55,222,272 0 55,222,272 2.Domestically listed foreign 72,000,000 0 72,000,000 shares 3 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total Listed shares 127,222,272 0 127,222,272 ＩＩＩ. Total shares 220,901,184 0 220,901,184 4.2 Statement of shares held by the top ten shareholders Total number of shareholders at the end of report year 40,619 Particulars about shares held by the top ten shareholders Nature of Number of Increase / Type of shares shareholders Holding shares Proportion share Full name of Shareholders decrease in the (Circulating/Non-ci (State-owned at the year-end (%) pledged/ report year rculating) shareholder/foreign frozen shareholder) 0 42,035,328 19.03 42,035,328 State-owned Shenzhen Special Economic Zone Non-circulating legal person Development (Group) Co. shareholder 0 30,264,192 13.70 No Foreign legal Malaysia Foh Chong & Sons SDN.BHD. Circulating person shareholder Shenzhen Taitian Industrial Development 0 19,075,392 8.64 No Legal person Non-circulating Co. shareholder 75,800 8,684,192 3.93 Circulating No Foreign F.C.(ASIA) HOLDINGS SDN.BHD. shareholder 0 3,744,000 1.69 Non-circulating No Foreign Hong Kong Mengxin Industrial Co. shareholder -2,286,320 3,581,892 1.62 Circulating No Foreign LETSCON HOLDINGS SDN.BHD. shareholder 0 2,880,000 1.30 Non-circulating No Foreign Malaysia Uchino United Co. shareholder 0 2,880,000 1.30 No Legal person Dapu Hechang Chemical Co., Ltd. Non-circulating shareholder 0 2,880,000 1.30 Non-circulating No Foreign Hong Kong F.C. International Trade Co. Shareholder CBNY S/A PNC/SKANDIA SELECT -830,000 1,551,420 0.70 Circulating Foreign Unknown FUND/CHINA EQUITY AC Shareholder There exists no associated relationship among the top ten shareholders, and Explanation on associated they do not belong to the consistent actionist regulated by the Management relationship among the top ten Measure of Information Disclosure on Change of Shareholding for Listed shareholders or consistent action Company. Partic ulars about shares held by the top ten circulating shareholders Name of Shareholders Circulating shares held at the Type of Shares year-end 4 Malaysia Foh Chong & Sons 10,080,000 B-Share SDN.BHD. F.C.(ASIA) HOLDINGS SDN.BHD. 8,684,192 B-Share 3,581,892 B-Share LETSCON HOLDINGS SDN.BHD. CBNY S/A PNC/SKANDIA SELECT 1,551,421 B-Share FUND/CHINA EQUITY AC Wei Shi 520,200 B-Share Guomeng Investment Group Co., Ltd. 445,752 B-Share Wang Gonglin 342,000 B-Share Cao Libin 339,872 A-Share SUN HUNG KAI INVESTMENT 253,400 B-Share SERVICES LTD-CUSTOMERS A/C Cai Wanhua 233,880 B-Share Explanation on associated relationship There exists no associated relationship among the top ten among the top ten shareholders or shareholders, and they do not belong to the consistent actionist consistent action regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Company. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller Particulars about the largest shareholder (1)The largest shareholder of the Company is Shenzhen Special Economic Zone Development (Group) Co. (“SDG”), who holds 42,035,330 shares of the Company, taking 19.03% of the total shares of the Company. Its registered capital of SDG is RMB 104.85 million; legal representative is Hu Ge. It registered in Shenzhen of Guangdong. Business scope includes: industrial transportation, tourism, real estate and land development, financial business and commerce and trade, issuance of valuable securities, information consultation, textile products, knitting products, department stores, grains and oils, other foods, metal wares and electrical appliances, chemical products, contracting overseas projects and domestic projects for international bidding. (2)Shenzhen Special Economic Zone Development (Group) Co. is the state wholly owned subsidiary of Shenzhen Investment Holding Corporation (“Investment Holding”). The registered capital of Investment Holding is RMB 2 billion; legal representative is Li Heihu; registered place is Shenzhen of Guangdong. Business scope includes: Management and supervision of enterprise’s state assets, financing and property right; to share all kinds of enterprise and turn over investment, to offer credit and assurance; to impose profit after tax and occupying expenses of assets of state enterprise and the other business authorized by municipal government. §5. Particulars About Directors, Supervisors, Senior Executives 5 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 Li Jinquan Chairman of the Board Male 57 Jan. 2003 –Dec. 2005 144,000 144,000 Song Shengjun Director, General Manager Female 49 Jan. 2003 –Dec. 2005 172,800 172,800 Zhang Jianmin Director Male 45 Jan. 2003 –Dec. 2005 Cai Zhuan Director Male 39 Jan. 2003 –Dec. 2005 Xiao Guangsheng Director Male 56 Jan. 2003 –Dec. 2005 Chen Jiehou Independent director Male 63 Jan. 2003 –Dec. 2005 Fang Yuji Independent director Male 42 Jan. 2003 –Dec. 2005 Shen Jinghua Independent director Male 45 Jan. 2003 –Dec. 2005 Zhou Xiaoxing Chairman of the Female 48 Jan. 2003 –Dec. 2005 Supervisory Committee Zhou Xiaoling Supervisor Female 44 Jan. 2003 –Dec. 2005 Li Mugui Supervisor Male 59 Jan. 2003 –Dec. 2005 89,700 119,900 Increasing additional B-shares Zhong Fenjun Deputy General Manager M ale 40 Jan. 2003 –Dec. 2005 Ding Jingjia Chief Financial Supervisor Male 55 Jan. 2003 –Dec. 2005 144,000 144,000 Xie Wei Secretary of the Board Male 29 Jan. 2003 –Dec. 2005 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Name of Shareholding Title in Shareholding Drawing the payment Name Office term Company Company and allowance(Yes / No) Shenzhen Special Economic Zhang Jianmin Deputy General Manager 2002-2004 No Zone Development (Group) Co. Xiao Malaysia Foh Chong & Sons Director 2001-2005 No Guangsheng SDN.BHD. Shenzhen Taitian Industrial Cai Zhuan General Manager 2001-2005 Yes Development Co. Dapu Foh Chong Chemical Co., Li Mugui Chairman of the Board 2001-2005 Yes Ltd. 5.3 Particulars about the annual payment of directors, supervisors and senior executives Unit:(RMB)0’000 Total annual payment 57.50 6 Total annual payment of the top three directors 19.00 drawing the highest payment Total annual payment of the top three senior 29.50 executives drawing the highest payment Allowance of independent director 3.00 per person/ year Other treatment of independent directors Besides the aforesaid allowance, the Company bears the travel expenses for the directors from other places to Shenzhen to attend the Board meeting and Shareholders’ General Meeting Name of directors and supervisors receiving no Directors and supervisors received no pay from the payment or allowance from the Company Company in 2003: Director Li Jinquan, Director Zhang Jianmin, Director Cai Zhuan, Director Xiao Guangsheng, Independent Director Chen Jiehou, Independent Director Fang Yuji, independent Director Shen Jinghua and Supervisor Li Mugui. Payment Number of persons Over RMB 100,000 1 RMB 60,000 ～ RMB 75,000 6 Under RMB 60,000 6 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period The Company is mainly engaged in the retail business of chain stores and development of real estate and is also involved in other businesses of property management etc.. Facing the strike of SARS epidemic on the economy in the first half of the year, intense competition in all commercial capital and the Company’ s real estate under development period, in the report period, on the one hand, the Company tightly prepared for the construction of such projects as shopping mall in downtown of Shenzhen, on the other hand, the Company reinforced liquidizing assets and recovering accounts receivable, strictly controlled all expenses and expenditures and realized turning losses. In 2003, the Company realized income from main operations, profit from main operations and net profit amounting to RMB 114,629,436.25, RMB 22,933,780.22 and RMB 1,254,547.51 respectively. 6.2 Stateme nt 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 operations profit in income from e in cost of main in gross profit ratio ratio (%) main operations operations over over the last year over the last year the last year (%) (%) (%) Retail business 8,516.10 7,001.02 17.79 -32.07 -31.97 -0.68 Development and 1,399.24 1,209.99 13.53 -73.83 -69.24 -48.85 7 operation of real estate Other industries 1,547.61 749.89 51.55 71.99 54.60 11.83 Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Pricing rules of related The transaction between the Company and its related parties are in accordance with independent calculation transactions principle with the transaction price being confirmed based on market price or agreed price. Necessity and durative The Company had no purchase or sales activities with its related parties. of related transactions 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 y ear (%) Shenzhen 1,145.84 -39.00 Hefei 4.53 100.00 6.4 Particulars about the customers of purchase and sale Unit: RMB’0000 Total amount of purchase 2,404.00 Proportion in the total 24.89% of the top five suppliers amount of purchase Total amount of sales of the 496.00 Proportion in the total 4.33% 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 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 Analysis to reasons of material changes in the whole financial position than that in the last year □Applicable √Inapplicable 8 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 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 Shopping mall in downtown of 60,000.00 Such prophase work as Still not constructed and Shenzhen design and investment the predicted earnings attraction of project is being were relatively conducted. considerable. Total 60,000.00 - - 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 In 2004, the retail business at home would be opened completely to foreign investment with cancellation of limits in regions, equity and quantity. Moreover, the State would also further tighten money. Thus the Company faced new challenge from operating environment, however, the Company would also face significant development chance at the same time. Therefore, the Company as a whole must strengthen and develop such consciousnesses as paramountcy consciousness, opportunity consciousness, hardship consciousness, innovation consciousness and trial and struggle consciousness and ensure the great increase in economic benefits within year 2004 with “Development and Benefits”as the guide policy in the whole year. In order to realize the said objective, the Company planned to set about in the following several aspects: 1. Catch the historical chance in equity reform of state-owned enterprises in local of Shenzhen, deepen system reform, continue to improve the Company’ s legal person’ s administrative structure and probe into implementing equity encouragement plan so as 9 to keep and introduce into talents and establish one “Learning oriented team”. 2. For retail business, change the operating strategy and tightly catch three large transfers: transfer from traditional retail business to new and modern department store with integration of shopping, leisure and entertainment, transfer from operating type to service type and transfer from extensive type to intensive type; with global investment attraction as the cut- in point, introduce into strategic cooperative partners and introduce into great brand, capital, talents and management in the 1st line in total and full directions; constructing shopping mall in downtown of Shenzhen into the commercial building occupying the top in Shenzhen in 21st century; at the same time, catching the good chance of start of Shenzhen Metro at the end of the year, construct Jiabin International Emporium into a refined store in the 1st class in Luohu. 3. For real estate business, tightly catch the strategic positioning of commercial real estate with refined building as the emphasis; in 2004, reinforce all preparations for the construction of Shenzhen downtown shopping mall and Longgang Central District, ensure the working start in the second half of year 2004 and try hard to cultivate new growth point of profit; plan the development and preparation of the land in Bantian amounting to 100,000 sq. m.; at the same time, increase land reserve in Longgang, Guangzhou and etc. so as to found a solid foundation for the Company’s sustainable development in the future. 4. Enlarge the Company’ s financing and expand the financing channels so as to really reduce the Company’ s financial expense. 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 Ended Dec.31, 2003, the profit after taxation was RMB 1,254,000 and RMB –2,674,000 respectively audited by Reanda Certified Public Accountants as per Domestic Accounting Standards and BDO Certified Public Accountants as per International Accounting Standards. According to the principle of taking the lower amount for profit distribution, calculated as per International Accounting Standards, the profit after taxation in 2003 was RMB –2,674,000, after appropriating the statutory surplus public reserve of RMB 50,230.24 and statutory public welfare fund of RMB 25,115.12, adding the undistributed profit carried down from the end of 2002 amounting to RMB -65,541,985.40, the total profit available for distribution to shareholders was RMB -64,362,783.25. The profit distribution preplan of 2003 was: neither to distribute profit nor to convert public reserve into share capital. This distribution preplan is planned to implement after the examination and approval of Shareholders’General Meeting. §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 10 7.2 Sales of assets □Applicable √Inapplicable 7.3 Important guarantee √Applicable □Inapplicable Unit: RMB’0000 Guarantee Name of the Date of happening Complete Amount of Guarantee for related Company (date of signing Guarantee term Implementation guarantee type party (yes or guaranteed agreement) or not not) Shenzhen Joint May 6, 2003- International May 6, 2003 400.00 liabilities No No May 6, 2006 Emporium guarantee Shenzhen Longgang Joint May 6, 2003- International May 6, 2003 200.00 liabilities No No May 6, 2006 Emporium Co., guarantee Ltd. Shenzhen Joint Oct. 31, 2003- International Oct. 31, 2003 1,000.00 liabilities No No Oct. 31, 2006 Emporium guarantee Shenzhen Joint Rongfa June 30, 2003- June 30, 2003 900.00 liabilities No No Investment Co., June 30, 2006 guarantee Ltd. Total amount of guarantee 2,500.00 Total balance of guarantee 2,500.00 Including: total balance of related guarantee 0.00 Total amount of guarantee the listed company provided for its share-controlling 2,500.00 subsidiaries Total amount of guarantee breaking regulations 0.00 Proportion of total amount of guarantee in net assets of the Company 7.53 7.4 Related credits and liabilities current □Applicable √Inapplicable 7.5 Entrusted assets □Applicable √Inapplicable 7.6 Implementation of commitment items □Applicable √Inapplicable 7.7 Significant lawsuit and arbitration √Applicable □Inapplicable There was no new significant lawsuit or arbitration in the report year. The progress of the significant lawsuit or arbitration in previous years is as follows: 2. The Company took proceedings against Shenzhen Shen Fa Enterprise Co., Ltd. for dispute of debts. The mediate has come into effect through (1997) SLFJTZ No. 34 issued by Shenzhen Luohu People’ s Court, which confirmed the debts of RMB 8 million that Shen Fa Enterprise Co., Ltd owed to the Company ended January 31, 11 1997. The Company made application to the Court for implementing the case according to law. Shen Fa Enterprise Co., Ltd. offset the debts with the No. II-7 resident district of Yantai Development Zone with area of 18388.44 M2 amounting to RMB 4,989,400 in land assessment value, which was priced for the 70% equity rights of Yantai Tong Fa Real Estate Co., Ltd as owned by Shen Fa. Shenzhen Luohu People’ s Court resealed up two houses of Shen Fa Enterprise Co., Ltd. locating in Taoyuan New Village, Taoyuan Road, Nanshan District in Nov. 2003 and the left debt was in the process of further execution. 2. As the plaintiff in the debt dispute, Shenzhen Economic Zone Development (Group) took proceedings against the Company. According to (2000) YFJYZZ No. 170 civil verdict issued by Guangdong Superior People’ s Court, the Company should repay RMB 7,112,950, USD 1 million and corresponding interests. The two sides came into Reconciliation Agreement on February 4, 2002. The implementation of the agreement has been disclosed in Annual Report 2002 and there was no other progress in the report period. 3. Concerning the lawsuit that Guangdong International Trust Development Co., Ltd. Shenzhen Branch indicted the Company to default rent and management fee, Shenzhen Intermediate People’ s Court made civil judgement that judged the Company to repay RMB 4,696,048.34 rent and RMB 118,149.92 management fee. The two parties reached pacification agreement on July 11, 2002. But the pacification agreement has not implemented by the two parties and at present, the case is in the process of further active negotiation and resolving. 4. The Company provided guarantee for bank loan of RMB 10 million of Shenzhen SZ-HK Industry Trade Import & Export Company and the loan bank, Shenzhen Development Bank Shennan East Road Sub-branch as accuser indicted to Shenzhen Intermediate People’ s Court and required the Company to undertake joint repayment liability. Under the arbitration, the Company reached the pacification agreement with the bank. Ended as at Mar. 20, 2004, the Company has paid RMB 5,048,681.39 in place of Shenzhen SZ-HK Industry Trade Import & Export Company and applied to execute SZ-HK Industry Trade Import & Export Company to Shenzhen Intermediate People’ s Court on Mar. 27, 2003. The case is in process of further execution. 7.8 Particulars about the performance of obligations of Independent Directors According to the regulations of Guideline on Establishing Independent Director System of Listed Companies promulgated by CSRC, the Company supplemented an Independent Director, thus the number of Independent Directors attained to three, including two specialists in real estate and one specialist in fiancéand auditing, which helped the number of independent directors surpassed 1/3 of the Board. In the report period, independent directors attended the Board meetings and Shareholders’General Meetings actively, fulfilled the duties of Independent Directors seriously and expressed independent opinions on the significant matters of the Company. Independent directors played an important role in strengthening the independence of the Board, reinforcing strategic management function of the Board of the Company, balancing the rights of the Board and concerning the legal rights and interests of the middle and minor investors. The independent directors propelled the 12 scientific decision of the Board and normative operation of the Company and promoted the normative operation of the Company in further step. §8.Report of the Supervisory Committee I. Particulars on the work of the Supervisory Committee in the report year The Supervisory Committee held 3 meetings in the report year besides attending the Board meetings as non- voting delegates: 1. The 1st Meeting of the 3rd Supervisory Committee of 2003 was held in the Company’ s meeting room on Mar. 3, 2003. 3 supervisors should attend the meeting and all of them were all present. The meeting examined and approved the following resolutions: (1) The resolution of the shareholder’s representative, Li Mugui and Zhou Xiaoling as the candidates of the supervisors of the 4th Supervisory Committee. The candidate of the supervisor of the 4th Supervisory Committee elected by the shareholder ’ s representative was Zhou Xiaoxing; (2) The meeting approved the resolution of reengagement of domestic CPAs and change of foreign CPAs. The public notice on resolution of this meeting was published on Securities Times and Ta Kung Pao dated Mar. 5, 2003. 2. The 1st Meeting of the 4th Supervisory Committee of 2003 was held in the Company’ s meeting room on Apr. 18, 2003. 3 supervisors should attend the meeting and 2 of them were all present. The meeting examined and approved the following resolutions: (1) 2002 Work Report of the Supervisory Committee (2) 2002 Annual Report and Summary (3) 2002 Profit Distribution Preplan (4) Electing Supervisor Zhou Xiaoxing as Chairman of the Supervisory Committee of the Company with the office term of three years. The public notice on resolution of this meeting was published on Securities Times and Ta Kung Pao dated Apr. 22, 2003. 3. The 2nd Meeting of the 4th Supervisory Committee of 2003 was held in the Company’ s meeting room on Aug. 25, 2003. 3 supervisors should attend the meeting and all of them were all present. The meeting examined and approved Semiannual Report 2003 and its Summary. The public notice on resolution of this meeting was published on Securities Times and Ta Kung Pao dated Aug. 26, 2003. II. Independent opinions of the Supervisory Committee on the Company’ s operation 1. Operation according to law In the report period, the Supervisory Committee supervised over the Company’ s operation according to laws and believed that the Company could legally operate strictly according to Company Law and relevant laws and regulations, patiently implement the guideline of Le gal System, Supervision, Self-discipline and Standardization promulgated by CSRC, disclose relevant information of the Company 13 completely and in time and did not occur phenomenon breaking regulations. The decision- making procedure was in conformity with la ws and regulations and the internal control system was basically perfect. The directors, general manager and other senior executives worked in a diligent and responsible way and strictly executed every resolutions of the Shareholders’General Meeting in the report period and had not no actions breading laws, regulations and Articles of Association or damaging the interest of the Company and the right and interest of the shareholders when they performed their duties. 2. Financial status Lianda Xinlong Certified Public Accountants and Dehao International Certified Public Accountants issued standard unqualified auditors’reports for 2003, which truly reflected the Company’ s financial status and operation results. 3. In the report year, the Company had no use of raised funds. 4. Purchase and sale of assets in the report year. In the report period, the Company had no significant purchase and sale of assets. The purchase and sale of assets occurred was the need of the normal operation business. The trading price of purchase and sale of assets was reasonable. There existed no internal transactions and the transactions did not damage the right and interest of part shareholders or cause assets run off. 5. Correlative transaction in the report year In the report year, the Company’ s correlative transactions belonged to allowable commercial behavior, were fair and reasonable and did not damage the interest of the Company. §9. Financial Report 9.1 Auditor’ s opinion 9.2 9.3 Accounting policy, accounting assessment and settlement method has no change compared with the latest annual report. 9.4 Consolidation scope has no change compared with the latest annual report. Board of Directors of Shenzhen International Enterprise Co., Ltd. Apr. 23, 2004 14 AUDITORS’REPORT TO THE SHAREHOLDERS OF SHENZHEN INTERNATIONAL ENTERPRISE CO., LTD. (incorporated in the People’s Republic of China with limited liability) We have audited the financial statements of Shenzhen International Enterprise Co., Ltd. (“the Company”) and its subsidiaries (collectively “the Group”) for the year ended 31 December 2003 and 2002 on pages 2 to 18 which have been prepared in accordance with International Accounting Standards. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Directors of the Company are responsible for the preparation of financial statements, which give a true and fair view. In preparing financial statements, which give a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with International Standards on Auditing issued by the International Federation of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’ s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations, which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. OPINION In our opinion, the financial statements give a true and fair view, in all mater ial respects, of the state of affairs of the Group as at 31 December 2003 and 2002 and of its profit and cash flows for the year then ended. BDO Reanda Certified Public Accountants Beijing, China, 20 April 2004 15 SHENZHEN INTERNATINAL ENTERPRISE CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002 Notes 2003 2002 RMB'000 RMB'000 Turnover 3&4 114,629 187,832 Cost of sales (93,110) (150,804) Gross profit 21,519 37,028 Other revenue less other expenses (10,366) (46,834) 11,153 (9,806) Net finance costs 5 (16,953) (22,902) Profit before taxation 6 (5,800) (32,708) Taxation 7 (4,930) (539) Profit after taxation (10,730) (33,247) Minority interests (8,083) 9,508 Profit attributable to shareholders (2,647) (23,739) Basic earnings per share RMB(0.01) RMB(0.11) Fully diluted earnings per share RMB(0.01) RMB(0.11) 16 SHENZHENG INTERNATIONAL ENTERPRISE CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 AND 2002 Notes 2003 2002 RMB'000 RMB'000 ASSETS Non-current assets Fixed assets 9 351,537 362,679 Construction in progress - - Intangible assets 10 3,687 4,139 Deferred expenditures 11 6,973 5,861 Long term investment 12 16,570 16,570 Goodwill 13 3,920 4,448 382,687 393,697 Current assets Inventories 14 431,701 368,490 Accounts receivables 9,411 23,955 Prepayments and other receivables 77,268 139,606 Deferred expenses 59 476 Cash and cash equivalents 15 152,077 154,521 670,516 687,048 Current liabilities Bank loans 16 562,280 560,846 Bills payable 5,000 7,000 Amounts due to a shareholder 27,536 20,113 Accounts payables 28,666 24,812 Receipts in advance and other payables 47,332 72,294 Dividends payable 5,128 5,271 Taxes payable 2,568 3,310 Accruals 16,952 18,628 695,462 712,274 Net current assets/(liabilities) (24,946) (25,226) Non-current liabilities 17 2,700 2,700 Minority interests 14,892 22,975 Total net assets 340,149 342,796 Representing: Share capital 18 220,901 220,901 Reserves 19 175,357 175,623 Accumulated losses 19 (56,109) (53,728) Total shareholders’funds 340,149 342,796 17 SHENZHEN INTERNATIONAL ENTERPRISE CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002 Notes 2003 2002 RMB'000 RMB'000 Net cash inflow/(outflow) from operating activities 20(a) 17,697 50,496 Returns on investments and servicing of finance: Interest paid (12,068) (32,889) Interest received - 3,421 Dividend paid (144) - Dividend received 219 100 Net cash outflow from returns on investment and servicing of finance (11,993) (29,368) Taxation: Tax paid (14,216) (45,507) Net cash outflow from taxation (14,216) (45,507) Investment activities: Proceeds on disposal of fixed assets 9,328 98 Proceeds from disposal of a jointly controlled entity - 6,000 Acquisition of fixed assets (2,208) (3,188) Acquisition of construction in progress - (888) Additions of other deferred expenses (2,486) (3,099) Net cash outflow from investment activities 4,634 (1,077) Net cash outflow before financing (3,878) (25,456) Financing: Bank loans 20(b) 1,434 26,406 Net cash inflow from financing activities 1,434 26,406 (Decrease)/Increase in cash and cash equivalents (2,444) 950 (Increase)/Decrease in bank balances pledged as securities to 8,307 597 loans Cash and cash equivalents at the beginning of the year 45,471 43,924 Cash and cash equivalents at the end of the year 20(c) 51,334 45,471 18 SHENZHEN INTERNATIONAL ENTERPRISE CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 AND 2002 Share Accumulated Reserves Total Capital losses RMB'000 RMB'000 RMB'000 RMB'000 Balance at 1 January 2002 220,901 175,316 (29,682) 366,535 Net loss for 2002 - - (23,739) (23,739) Profit appropriation - 307 (307) - Balance at 31 December 2002 220,901 175,623 (53,728) 342,796 Net loss for 2003 - - (2,647) (2,647) Profit appropriation - 75 (75) - Transfer - (341) 341 - Balance at 31 December 2003 220,901 175,357 (56,109) 340,149 The reason for the transfer made in the year 2003 is the adjustment of the fundamental error of the taxation for the year 2000. The company adjusts its statutory surplus reserve of RMB 341,931.42 as at the beginning of the year 2003 subject to accounting errors. On the basis of IAS, the Group adjusts its surplus of RMB 341,931.42 according to related proportion of ownership in this year. 19