神城A退(000018)深中冠Ｂ2003年年度报告摘要（英文版）

Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Summary of 2003 Annual Report of Shenzhen Victor Onward Textile Industrial Co., Ltd. §1 Important notes 1.1 The Board of Directors and the directors of the Company hereby warrant that there are no misstatement, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. The summary of this annual report is selected from the annual report. If investors intend to know the detailed contents, they should read the full text of the annual report. 1.2 No director declares inability to warrant or objection to the authenticity, accuracy and completeness of the content of the annual report. 1.3 Li Zhihua, the vice chairman of the board of directors, did not attend this board meeting on account of duty and authorized director Sun Zhiping to attend the meeting and vote on his behalf. 1.4 Pricewaterhouse Coopers Zhongtian Certified Public Accountants issued unqualified auditors' report with no explanatory notes for the Company. 1.5 Mr. Hu Yongfeng, the board chairman of the Company, Mr. Sun Zhiping, the general manger in charge of accounting, and Ms Sun Yaqin, the person in charge of financial accounting organ represent and warrant the financial report in this annual report is true and complete. §2 Basic Information 2.1 Basic information Stock abbreviation Victor Onward A, Victor Onward B Stock code 000018,200018 Stock exchange Shenzhen Stock Exchange for listing Registered address Flat C, 10/F, Real Estate Building, Renmin Nan Road, Shenzhen, and business 26 Kuipeng Road, Kuiyong Town, Longgang District, Shenzhen, China address Zip code 518001 Website http://www.chinaszvo.com E-mail szvo@chinaszvo.com 2.2 Contact person and contact manner Board secretary Securities affair representative Name Chen Xing Jian Xiujuan Flat C, 10/F, Real Estate Building, Flat C, 10/F, Real Estate Building, Contact address Renmin Nan Road, Shenzhen Renmin Nan Road, Shenzhen Tel 0755-82320942 0755-82325084 Fax 0755-82339100 0755-82339100 E-mail cx@chinaszvo.com jxj@chinaszvo.com §3 Highlights of Accounting Data and Financial Indicators 3.1 Main accounting data Unit: RMB －1－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ 2003 (the report 2002 (the previous Increase/decrease 2001 year) year) (%) Income from key 208,255,352.00 161,738,325.00 28.76% 141,757,227.00 business Total profit 2,390,403.00 1,925,541.00 24.14% 1,254,999.00 Net profit 1,566,030.00 1,347,864.00 16.19% 841,358.00 Net profit after deducting 818,988.00 1,367,615.00 -40.12% 959,605.00 non-recurring gains and losses End of 2003 End of 2002 Increase/decrease End of 2001 (End of report (End of previous (%) year) year) Total assets 390,342,262.00 376,445,241.00 3.69% 388,860,327.00 Shareholders' equity (not 311,140,450.00 308,263,111.00 0.93% 306,915,248.00 including minority interests) Net cash flow from -14,873.420.00 15,985,911.00 -193.04% 6,842,277.00 operating activities 3.2 Main financial indicators Unit: RMB 2003 (the report 2002 (the previous Increase/decrease 2001 year) year) (%) Earnings per share 0.01 0.01 12.50% 0.01 Earnings per share(In case of change of share capital, EPS is to 0.01 -- -- -- be calculated according to new share capital) Return on net 0.51% 0.44% 15.91% 0.27% assets Return on net assets calculated on basis of net profit after 0.26% 0.44% -6.82% -1.71% deducting non-recurring gains and losses Net cash flows per share from -0.09 0.10 -192.63% 0.04 operating activities End of 2003 End of 2002 Increase/decrease End of 2001 (End of report (End of previous (%) year) year) Net assets per 1.84 1.82 0.93% 1.82 share Net assets per share after 1.83 1.81 0.72% 1.80 adjustment 3.3 Difference of domestic and foreign accounting standards √applicable□not applicable Unit: RMB'0000 Domestic accounting standards Overseas accounting standards －2－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Net profit 156.60 212.00 The appraised appreciation of Hong Kong house property written back pursuant to Notes to international accounting standards increased by HKD 457221; difference The difference arising from the disposal of long-term equity investment pursuant to international accounting standards increased by HKD 61288. §4 Particulars about the Changes of Share Capital and Shareholders 4.1 Schedule of the Change of Share Capital Unit: '0000 shares Before this change Increase or decrease this After this change time (+/-) I. Non-negotiable shares 1. Promoter's shares 79,489,253 0 79,489,253 Of which: State-owned 47,359,859 0 47,359,859 shares Domestic corporate 32,129,394 0 32,129,394 shares Overseas corporate 0 0 shares Others 0 0 2. Raised corporate 0 0 shares 3. Staff shares 0 0 4. Preferred shares or 0 0 others Total non-negotiable 79,489,253 0 79,489,253 shares II. Negotiable shares 1. RMB common shares 20,231,200 0 20,231,200 2. Domestically listed 69,421,903 0 69,421,903 foreign-capital shares 3. Overseas listed 0 0 foreign-capital shares 4. Others 0 0 Total negotiable shares 89,653,103 0 89,653,103 III. Total shares 169,142,356 0 169,142,356 4.2 Table of shareholding of the top ten shareholders Total number of shareholders at the end of 22,414 the report period Particulars about the shareholding of the top ten shareholders Name of shareholder Increase or Number of Proporti Type of Quantity of Nature of (full name) decrease in shares held on (%) share pledged or shareholder the year at the end (Negotiable frozen (state-owne (shares) of year or shares d (shares) non-negotia (shares) shareholder ble) or foreign shareholder ) Shenzhen Union Non-negotia State-owne 0 47,359,859 28.00 0 Holdings Ltd. ble d －3－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ shareholder Non-negotia Foreign Style-Success Ltd. 0 24,466.029 14.46 0 ble shareholder Shenzhen Textile Non-Negoti 0 24,458,231 14.46 12,229,115 Holdings Ltd. able Union Developing Non-negotia 0 7,671,163 4.54 0 Group Ltd. ble Rich Crown Investment (H.K.) 0 6,114,556 3.62 Negotiable 0 Co., Ltd. Shing Ying Chie 0 5,561,729 3.29 Negotiable No Liu Liaoyuan 25,200 2,165,750 1.28 Negotiable No Chen Song 63,500 398,400 0.24 Negotiable No Huo Jinxia 0 278,500 0.16 Negotiable No Wang Zhen 0 278,150 0.16 Negotiable No Notes to the related relationship The controlling shareholder of the above-mentioned largest between the top ten shareholders or shareholder Shenzhen Union Holdings Ltd. and the fifth largest their concerted action shareholder Hong Kong Rich Crown Investment Co., Ltd. is Union Developing Group Ltd. Particulars about the shareholding of the top ten shareholders Name of shareholder (full name) Number of shares held at the end Type（A、B and H shares or of year (shares) other） Style-Success Ltd. 24,466,029 B shares Rich Crown Investment (H.K.) Co., 6,114,566 Ltd. B shares Shing Ying Chie 5,561,729 B shares Liu Liaoyuan 2,165,750 B shares 398,400 Chen Song B shares 278,500 Huo Jinxia B shares 278,150 Wang Zhen B shares Di Suwen 246,672 B shares Huang Weili 205,262 B shares Zhong Yonglai 196,600 B shares Notes to the relation between the top The relation between the top ten shareholders is unknown. ten shareholders holding negotiable shares: 4.3 Introduction of the controlling shareholder and actual controller 4.3.1 Change of the controlling shareholder and actual controller □ applicable √ not applicable 4.3.2 Particulars about the controlling shareholder and other actual controller 1.Shenzhen Union Holdings Ltd. Shares held: 47,359,859 shares, accounting for 28% of the total shares. Legal Representative: Ding Yue －4－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Business scope: Production of and dealing in various fabrics, garments chemical fibers and textile equipment, domestic commerce, material supply and marketing (excluding monopolized commodities), management of self-owned properties, processing with imported materials and designs, internal introduction and foreign cooperation, assembling with imported spare parts and cooperation in compensation trade. Registered capital：RMB 449.555085 million Nature of enterprise: Share-holding system Registered address: Shenzhen Date of establishment: June 17, 1994 2. Introduction to the controlling shareholder of Shenzhen Union Holdings Ltd. Company name: Union Developing Group Co., Ltd. Legal representative：Dong Binggen Date of establishment: August 23, 1983 Company type: An enterprise directly under central government, one of 520 national key enterprises. Registered capital：RMB 90.61 million. Business scope: Import and export of commodities and technologies except the export commodities in which the state organizes unified and joint dealing and the imported commodities in which state-approved companies deal for itself and on commission basis, processing with materials and designs supplied by clients, assembling with imported spare parts and cooperation in compensation trade, processing imported materials, counter trade and entrepot trade (pursuant to (1999) WJMZSHZ No.193 Document), domestic sales of commodities for export, domestic sales of imported and exported commodities, textile technical consulting services, property management, lease service, contracting of overseas textile industry projects and domestic international bidding projects, import and export of the equipment and materials necessary for the said overseas projects, dispatch of labor service personnel for implementing the said overseas projects (pursuant to (98) WJMZSHZ No. 3109 Document), sales of automobiles (not including cars). §5 Directors, Supervisors and Senior Executives 5.1 Change of Shareholdings of Directors, Supervisors and Senior Executives No. of No. of shares held shares at the held at the Reasons of Name Title Sex Age Term of office beginning end of change of year year (shares) (shares) Chairman of Hu the Board of Male 42 2003.5-2006.5 0 0 Yongfeng Directors Deputy Li Zhihua chairman of Male 47 2003.5-2006.5 0 0 the Board Deputy Song Tao chairman of Male 51 2003.5-2006.5 0 0 the Board －5－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Ding Yue Director Male 46 2003.5-2006.5 0 0 Guan Director Male 57 2003.5-2006.5 0 0 Tongke Sun Zhiping Director Male 38 2003.5-2006.5 0 0 Mai Independent Male 43 2003.5-2006.5 0 0 Jianguang director Independent Li Weiping Male 50 2003.5-2006.5 0 0 director Independent Shu Man Female 39 2003.9-2006.5 0 0 director Convenor of Dong the Male 54 2003.5-2006.5 0 0 Binggen Supervisory Committee Gui Liping Supervisor Female 45 2003.5-2006.5 0 0 Cai Wanqing Supervisor Male 53 2003.5-2006.5 0 0 Chen Deputy GM Male 61 2003.5-2006.5 0 0 Jingqiu Ye Deputy GM Male 49 2003.5-2006.5 0 0 Jianzhong Su Tingfang Deputy GM Male 60 2003.5-2006.5 0 0 Financial Wang Xihui Female 50 2003.5-2004.3 0 0 controller Board Chen Xing Male 31 2003.5-2006.5 0 0 secretary 5.2 Particulars about the directors and supervisors of the Company holding positions at shareholder companies √applicable□not applicable Whether receiving Name Name of shareholder Position Term of office remuneration or subsidy Dong Shenzhen Union Holdings Convener of the 3 years No Binggen Ltd. supervisory committee Secretary of Party Dong Union Developing Group committee, chairman of 3 years Yes Binggen Ltd. board of directors and GM Union Developing Group Ding Yue Vice president 3 years Yes Ltd. Shenzhen Union Holdings Ding Yue Board chairman 3 years No Ltd. Hu Union Developing Group Vice president 3 years Yes Yongfeng Ltd. Hu Shenzhen Union Holdings Deputy chairman of the 3 years No Yongfeng Ltd. Board Guan Shenzhen Textile Holdings Board chairman 3 years Yes Tongke Ltd. Shenzhen Union Holdings Fan Lian General manager 3 years Yes Ltd. Chief accountant and Union Developing Group Gui Liping manager of Finance 3 years Yes Ltd. Dept. 5.3 Annual Remuneration of Directors, Supervisors and Senior Executives Unit: RMB'0000 －6－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Total amount of annual 93.50 remuneration The total amount of the remuneration of the top three directors receiving the 24.00 remuneration of the highest amount The total amount of the remuneration of the top three senior executives receiving 61.00 the remuneration of the highest amount Subsidy of independent RMB 30,000 / person /year directors The traveling expenses of independent directors for attending board meetings and shareholders' general meetings and the expenses from Other benefits of independent exercising powers and functions according to the Articles of As sociation directors of the Company shall be borne by the Company and included in the administration expenses of the Company. Name of directors and supervisors not receiving Dong Binggen, Hu Yongfeng, Li Zhihua,Ding Yue,Guang Tongke, Song remuneration and subsidy Tao and Gui Liping. from the Company Range of remuneration Number of person RMB 0.2 million - 0.30 1 million RMB 0.1 million - 0.19 4 million RMB 30,000 - 100,000 6 §6 Report of the Board of Directors 6.1 Discussion and analysis of the overall operation status in the report period 2003 is unfavourable to textile industry. In the first half year, it met the attack of SARS. In the second half year, the price of cotton soared. Facing unfavourable market environment，all employees of the Company made concerted effort, worked steadily and fulfilled the production and operation task for the year. Its income from main operation and net profit were RMB 204.957 million and RMB 1.566 million, an increase of 26.72% and 16.19% respectively over the previous year. In 2003, the Company's management level, product structure and marketing mode changed much. The change was mainly embodied in the following aspects: With the establishment of ISO9001 quality management system and ISO14001 environment management system and the mature and steady operation of ERP system, the Company's management was improved to a new level and its production efficiency was greatly enhanced while its production cost was further lowered; As for product structure, the Company successfully completed the development of high-class blended fabrics including silk yarn cotton, linen, mondale, man-made cotton, linen and elastic fabrics, formed batch production scale, quickened the development of printed products and promoted the joint growth of dyed and printed products. By the end of 2003, the output of printed products with relatively high －7－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ profit rate increased sharply. The monthly production capacity exceeded 1 million yards. In 2003, the Company produced products of 33 million yards, including dyed products of 21 million yards, printed products of 8.3 million and bleached products of 3.8 million. The proportion of these three kinds of products was 63%, 25% and 12% respectively. The output of printed products in 2003 increased by 30.5% over 2002. The proportion of printed products was enhanced by 25% over 2002. Meanwhile，the Company also innovated marketing means. It gave full play to the marketing advantage of Victor Onward (Hong Kong), fully tapped the marketing potential of Shenzhen Trading Dept., increased operation approaches and developed ocean trade and subcontract business. Preliminary effect has been obtained. Overseas orders increased sharply . 6.2 Table of the status of key business in terms of line of business or product Unit: RMB'0000 In terms of Increase/dec Increase/dec Increase/dec line of Income from Cost of key Gross profit rease of rease of rease of cost business or key business business rate (%) gross profit income (%) (%) product rate (%) Other fabrics 20,826.00 17,886.00 14.12 28.55 26.17 1.62 trade Of which: related 0.00 0.00 -- 0.00 0.00 transaction Fabrics bleaching, 20,317.00 17,694.00 12.91 26.03 25.1 0.65 printing and dyeing fabrics trade 509.00 192.00 62.28 540.12 497.95 2.66 Of which： related 0.00 0.00 -- 0.00 0.00 0.00 transaction Principle of pricing of The products sold by the Company to related parties are priced based on related transaction market price. Notes to the necessity and The principle of pricing of the products sold by the Group to related parties continuity of related is based on shareholders' interest, whic h is practiced steadily and for long transactions term. 6.3 The status of key business in terms of areas Unit: RMB'0000 Area Income from key business Increase/decrease of income (%) Mainland China 963.00 31.86 Hong Kong China 19,862.00 28.40 6.4 Particulars about suppliers and customers Unit: RMB'0000 Total of the amount of Proportion of total purchase from the top 3,622.00 20.00% purchase amount five suppliers Total of the amount of Proportion of total sales sales to the top five 9,114.00 44.00% amount customers 6.5 Operation of invested companies (the investment income from whom accounts for over 10% of the net profit of the Company) －8－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ □ applicable√ not applicable 6.6 Reasons for the material change of key business and its structure □ applicable√ not applicable 6.7 Reasons for the material change of the profitability ( gross profit rate) of the key business compared with the previous year □ applicable√ not applicable 6.8 Analysis of the reasons for the material change of operating results and profit structure compared with the previous year □ applicable√ not applicable Analysis of the reasons for the material change of overall financial status compared with the previous year □ applicable√ not applicable 6.9 Notes to the existing, current and future important influence of the material change of production and business environment, macro-policies, laws and regulations on the Company's financial status and operating results. □ applicable√ not applicable 6.10 The fulfillment of profit target □ applicable√ not applicable 6.11 Fulfillment of operation plan □ applicable√ not applicable 6.12 Utilization of raised funds □ applicable√ not applicable Particulars about the change of investment projects □ applicable√ not applicable 6.13 Investment projects not utilizing raised funds □ applicable√ not applicable 6.14 Explanation of the board of directors to the "nonstandard opinions" □ applicable√ not applicable 6.15 Operation plan of the board of directors for the new year √applicable□not applicable In 2004, The overall operation strategy of the Company is to stabilize production capacity, expand marketing, strengthen printing, consolidate dyeing，establish relatively stable gray cloth supply base and subcontract processing base and further enlarge its main operation. Meanwhile, it will moderately participate in the project investment in other fields and enhance the earnings of net assets by making use of its good financing channels. －9－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ According to local industrial and economic policies and direction, the space for developing conventional printing and dyeing industry in Shenzhen has been increasingly small. How to adapt to macro-polic ies, find measures for realizing sustainable development and adjust development direction is an important problem to be considered by the Company. The main countermeasures the Company will take include: 1. To fully tap operation potential，enlarge order source and increase order volume. Maintain the current order volume of Hong Kong， actively develop ocean trade and subcontract business, increase the proportion of ocean order and enhance added value. 2. To develop digital printing and enhance the proportion of printed products. Actively enlarge the publicity of digital printing, provide personalized services，advocate the concept of environmental protection，change traditional operation mode, enhance the quality of printed products, strengthen technology development and strive to make the proportion of printed products exceed 30%. 3. To develop inland production bases, increase partners and enlarge business scale. Actively increase partners, develop domestic trade, greatly enlarge its operation scale and obtain more scale benefits on existing basis. 4. To establish advanced test center and adopt international standards. In 2004, the Company plans to invest RMB 1.5 million in establishing a large test center in its factory in Shenzhen and its test standards will comply with the regulations of U.S.A. AATCC, European Union and Japan on the test of textile products for the purpose of satisfying the test demands of products for ocean trade and opening a green channel for its products to enter international market. 5. Reform remuneration distribution system and establish effective incentive system. The existing remuneration distribution method is a nonstandard distribution system formed in over 20 years, which is unreasonable in many aspects. The lack of relevant incentive system has resulted in the failure to bring into full play employees' initiative and restricted the innovation development of the Company. Establishing a plan of remuneration distribution that is linked with output and quality and can bring into full play all employees' production initiative is a focal point of personnel administration in the next stage. Forecast of profit for the new year(if any). □ applicable√ not applicable 6.16 The preplan of the board of directors for profit distribution or capitalization of capital common reserve fund As audited by Pricewaterhouse Coopers Zhongtian Certified Public Accountants, the total profit and after-tax net profit of the Company for the year 2003 were RMB 2,390,403 and RMB 1,566,030 respectively. 10% of the after-tax profit, i.e., RMB 1,56,603, and 5% thereof, i.e., RMB 78,302, are to be set aside as statutory surplus reserve and statutory public welfare fund respectively. The year-end distributable profit is RMB 1,331,125. With the year-beginning undistributed profit of RMB 4,993,584 being added, the total distributable profit is RMB 6,324,709. As the Company will demand large amount of funds for investment and equipment renovation in the future, it decided neither to distribute the profit for 2003 nor capitalize common reserve fund. －10－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ §7 Important Events 7.1 Asset acquisition □ applicable√ not applicable 7.2 Disposal of assets □ applicable√ not applicable 7.3 Material guarantee √applicable□not applicable Unit: RMB'0000 Name of Date of Amount Type of Guarantee period Whethe Whether guarantee guarantee of guarantee r guarantee d guarantee termina for related company ted party Shenzhen Guarantee Nanhua with joint October 31, 2003 - October Printing October 22, 800.00 and 30, 2004 No Yes and 2003 several Dyeing liability: Co., Ltd. Total amount of guarantee 800.00 Total balance of guarantee 800.00 Of which ： Total of balance of 800.00 guarantee for related party Total amount of guarantee provided by the Company to its controlled 0.00 subsidiaries: Total amount of regulation-violating 0.00 guarantee The proportion of total amount of 2.57 guarantee to the Company's net assets 7.4 Related creditor's rights and debts √applicable□not applicable Unit: RMB million Financing to related party Financing of related party to the Company Related party Transaction Balance Transaction Balance amount amount Huaguanli 6.13 6.98 0.00 0.00 Lianchang Printing and -0.49 0.60 0.00 0.00 Dyeing Union Investment 0.00 0.75 0.00 0.00 Union Developing 0.11 0.11 0.00 0.00 Union Trade -0.63 0.00 0.00 0.00 Nanhua Printing and -0.33 0.00 0.00 0.00 Dyeing Nanhua Xingye -0.22 0.00 0.00 0.00 Total 4.57 8.44 0.00 0.00 7.5 Entrusted asset management －11－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ □ applicable√ not applicable 7.6 Performance of commitments √applicable□not applicable (I) Capital commitments: The following are the capital expenditure commitments that were authorized on the date of balance sheet but need not be recognized in financ ial statements: 1) On February 8, 2001, Hong Kong Victor Onward and Union Holdings sign the Letter of Investment Intent for Establishment of Ningbo Union New Material Technology Co., Ltd. ("Ningbo Union") in the Form of Joint Venture. According to this letter of intent, the registered capital of Ningbo Union is RMB 700 million. The amount of capital contribution of Hong Kong Victor Onward is RMB 175 million, accounting for 25% of the registered capital. The amount of capital contribution of Union Holdings is RMB 525 million, accounting for 75% of the registered capital. The proposal concerning this investment project has been examined and adopted at 2000 shareholders' general meeting of the Company held on June 30, 2001. As of the date of this report, both parties to the joint venture had not signed official joint venture contract in respect of the above investment intention. 2) On December 28, 2003, Hong Kong Victor Onward, the wholly-owned subsidiary of the Company, Shanghai Huashun Investment Management Co., Ltd., China Textile Holdings (Hong Kong) Ltd. and Chuangjie Development Co., Ltd. signed the Letter of Intent for Capital Contribution and planned to jointly invest USD 29.90 in establishing a joint venture company in Hangzhou City, Zhejiang Province, China. Hong Kong Victor Onward will own 25% equity of the joint venture company. This intent was approved by the board of directors of the Company on March 9, 2004 and is to be submitted to provisional shareholders' general meeting for voting. 3) On November 3, 2003, Hong Kong Victor Onward and the Bankruptcy Liquidation Group of Changzhou Dieqiu Textile Printing and Dyeing Group Company ("Liquidation Group") signed agreement. The Liquidation Group transferred 1.6% equity of Nanhua Printing and Dyeing held by Changzhou Dieqiu Textile Printing and Dyeing Group Company to Hong Kong Victor Onward at the price of RMB 0.268 million. This transfer was approved by Shenzhen Foreign Trade and Economic －12－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Cooperation Bureau on January 8, 2004. As of the date of this report, Nanhua Printing and Dyeing had completed the change of industrial and commercial registration. (II） Commitments concerning operating lease According to the signed irrevocable contract for operating lease, the lowest rent to be paid in the future is as follows: Unit: HKD December 31, 2003 December 31, 2002 Within 1 year - 22,400 The said reduction of the commitment of operating lease is due to the expiration of the tenancy contract for the warehouse in Hong Kong in 2003 and no renewal. Commitments in respect of operating lease According to the signed irrevocable contract for operating lease, the lowest rent to be paid in the future is as follows: December 31, 200 December 31, 2002 Within 1 year 22,400 The said reduction of the commitment of operating lease is due to the Company's early termination of the tenancy contract for the warehouse in Hong Kong in 2003. 7.7 Material lawsuits and arbitration □ applicable√ not applicable 7.8 Particulars about duty performance of independent directors The Company has perfected independent director system in the Articles of Association of the Company according to Guiding Opinions on the Establishment of Independent Director System at Listed Companies issued by CSRC. The board of directors of the Company now has Three independent directors. These Three independent directors have consciously performed their duties according to the principles of good faith and diligence since they came into office. They were able to attend board meetings of the Company in person, give full play to their own work experience and expertise and express their opinions during examing proposals and seriously perform their duties. They have played important role in ensuring the reasonableness of the Company's decisions and protecting the interests of shareholders. §8 Report of the Supervisory Committee In 2003, the supervisory committee of the Company did its duties and actively carry out its work with the attitude of being responsible to all shareholders according to the provisions of the Company Law, relevant laws and regulations and the Articles of －13－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ Association of the Company. I. Work of the Supervisory Committee In the report period, the supervisory committee of the Company legally exercised its function of supervision according to the Company Law, the Articles of Association of the Company and other laws and regulations. The supervisors attended the first provisional shareholders' general meeting in 2003, 2002 annual shareholders' general meeting and all board meetings of the Company held in the report period as nonvoting delegates and the supervisory committee held 4 meetings: 1. The 11th meeting of the third supervisory committee of the Company was held in the meeting room on the 16/F of Shenzhen Union Building in the morning of April 4, 2003. The meeting examined and voted through the following resolutions: (1) 2002 Work Report of the Company; (2) 2002 Auditor's Report of the Company for A shares and B shares (3) Profit Distribution Preplan for 2002 and Profit Distribution Policy for 2003 of the Company (4) 2002 Annual Report and 2002 Annual Report (Summary) of the Company (including the Report of the Supervisory Committee); (5) Adopting the proposal for the reelection of the supervisory committee. The announcement of the resolutions of this meeting was published on Securities Times and Hong Kong Commercial Daily on April 8, 2003. 2. The 1st meeting of the fourth supervisory committee of the Company was held in the meeting room on the 16/F of Shenzhen Union Building in the morning of May 16, 2003. The meeting elected Mr. Dong Bingen as the convener of the fourth supervisory committee of the Company. The announcement of the resolution of this meeting was published on Securities Times and Hong Kong Commercial Daily on May 17, 2003. 3. The 2nd meeting of the fourth supervisory committee of the Company was held in the meeting room on the 16/F of Shenzhen Union Building in the morning of August 12, 2003. The meeting examined and voted through the following resolutions: (1) 2003 Semiannual Report and Summary of 2003 Semiannual Report of the Company; (2) The semiannual profit distribution plan for 2003: The Company is neither to －14－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ distribute profit for the first half of 2003 nor capitalize common reserve fund. The announcement of the resolution of this meeting was published on Securities Times and Hong Kong Commercial Daily on August 13, 2003. 4. The 3rd meeting of the fourth supervisory committee of the Company was held in the meeting room on the 16/F of Shenzhen Union Building in the morning of October 27, 2003. The meeting examined and unanimously voted through the Report of the Company for the Third Quarter of 2003. The announcement of the resolution of this meeting was pub lished on Securities Times and Hong Kong Commercial Daily on October 28, 2003. II. In the report period，the supervisory committee seriously performed its duties and expressed independent opinions in respect of the following matters: 1. The operation of the Company according to law. In the report period, the Company operated strictly according to Company Law, Securities law and the Articles of Association of the Company and other relevant laws and regulations. The Company's procedure of decision was legal and its internal control system was sound. The directors and managers of the Company all did their duties during their work and none of their acts were found to violate the laws, regulations and the Articles of Association or harm the Company's interests. 2. Inspection of the financial status of the Company. The Supervisory Committee carefully checked and examined the financial data of the Company including the financial report of the Company for 2003 audited by Pricewaterhouse Coopers Zhongtian Certified Public Accountants and held the opinion that its financial status was good and its financial structure was reasonable in 2003. The unqualified auditors' report for 2003 issued by Pricewaterhouse Coopers Zhongtian Certified Public 2.Accountants for the Company was true and truly reflected the financial position and operating results of the Company. 3 The Company did not raise funds in the report period. The funds last raised after listing were invested in such projects as promised in Prospectus. 4. Neither insider trading nor act that caused harm to the rights and interests of part of shareholders or the loss of the Company's assets was found in respect of the transaction price of the assets purchased or sold by the Company. 5.The related transactions between the Company and associated enterprises (companies) were conducted in a fair manner and at market prices. －15－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ 6. The certified public accountants issued unqualified Auditor's Report for the year 2003 without explanatory notes. §9 Financial Report 9.1 Audit opinions Auditor's Report Pricewaterhouse Coopers Zhongtian SZ (2004) No. 1508 To all shareholders of Shenzhen Victor Onward Textile Industrial Co., Ltd.: We audited the hereinafter attached balance sheet of Shenzhen Victor Onward Textile Industrial Co., Ltd. ("the Company") and the consolidated balance sheet of the Company and its subsidiaries ("the Group") as at December 31, 2003 and the profit statement of the Company and the consolidated profit statement of the Group, the profit distribution statement of the Company and the consolidated profit distribution statement, the cash flow statement of the Company and the consolidated cash flow statement of the Group for the year then ended. The management of the Company is responsible for the preparation of these financial statements on page 2 to page 44. It is our responsibility for express opinions on these financial statements based on our audit. We planned and conducted our audit in accordance with independent audit standards for Chinese C.P.A. so as to reasonably determine whether the financial statements are free of material misstatements. The aud it included the examination, on a spot test basis, of the evidences relevant to the amounts and disclosure in financial statements and an assessment of the accounting policies and significant accounting estimates adopted by the management at the time of preparing financial statements as well as of the overall reflection of the financial statements. We believe our audit provides reasonable basis for our opinions. In our opinion, the above financial statements of the Group and the Company comply with the provisions of Accounting Standards for Business Enterprises and Accounting Regulations for Business Enterprises promulgated by the People's Republic of China and give fair view, in all material aspects, of the financial position of the Group and the Company as at December 31, 2003 and their operating results and cash flow for the year then ended. Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. C.P.A.: Xu Lizhou April 16, 2004 C.P.A.: Kong Yu －16－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ SHENZHEN VICTOR ONWARD TEXTILE INDUSTRIAL COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Notes 2003 2002 HKD’000 HKD’000 Sales 4 195,931 152,411 Cost of sales (168,272) (133,366) Gross profit 27,659 19,045 Other operating income 2,480 2,681 Distribution costs (7,213) (6,033) Administrative expenses (18,133) (9,741) Other operating expenses (1,243) (1,249) Profit from operations 3,550 4,703 Finance costs – net 7 (1,811) (1,457) Share of results of associates before tax (721) 160 Other income/(expenses), net 1,929 (923) Profit before tax 5 2,947 2,483 Income tax expense 8 (989) (826) Group profit before minority interest 1,958 1,657 Minority interest 24 34 131 Net profit 1,992 1,788 Earnings per share (expressed in Hong Kong dollar per share) – basic and diluted 9 0.01 0.01 The accompanying notes form an integral part of this consolidated financial statement. －17－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ SHENZHEN VICTOR ONWARD TEXTILE INDUSTRIAL COMPANY LIMITED CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2003 Notes 2003 2002 HKD’000 HKD’000 ASSETS Non-current assets Property, plant and equipment 11 103,285 110,488 Investment properties 12 26,422 27,636 Investments in associates 13 28,166 29,104 Available-for-sale investments 14 29,449 29,859 Intangible assets 410 - 187,732 197,087 Current assets Inventories 15 67,933 58,589 Receivables and prepayments 16 82,978 60,951 Due from related parties 27 6,563 1,904 Trading investments 17 51 2,382 Cash and cash equivalents 18 32,969 36,086 190,494 159,912 Total assets 378,226 356,999 Shareholders’equity Share capital 21 207,871 207,871 Reserves 22 51,120 50,899 Retained earnings 21,374 19,603 280,365 278,373 Minority interest 23 335 369 LIABILITIES Non-current liabilities Due to original shareholders 1 14,754 14,754 14,754 14,754 Current liabilities Trade and other payables 19 29,298 21,291 Current tax liabilities 1,865 1,769 Short-term borrowings 20 51,609 40,443 82,772 63,503 Total liabilities 97,526 78,257 Total equity and liabilities 378,226 356,999 The accompanying notes form an integral part of this consolidated financial statement. －18－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ SHENZHEN VICTOR ONWARD TEXTILE INDUSTRIAL COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 Reserves Share Other Retained Share capital premium reserves earnings Total HKD’ 000 HKD’ 000 HKD’ 000 HKD’ 000 HKD’ 000 (Note 22) Balances at 1 January 2002 207,871 11,826 38,883 18,005 276,585 Net profit for the year - - - 1,788 1,788 Transfer to statutory reserves - - 190 (190) - Balances at 31 December 2002 207,871 11,826 39,073 19,603 278,373 Balances at 1 January 2003 207,871 11,826 39,073 19,603 278,373 Net profit for the year - - - 1,992 1,992 Transfer to statutory reserves - - 221 (221) - Balances at 31 December 2003 207,871 11,826 39,294 21,374 280,365 The accompanying notes form an integral part of this consolidated financial statement. －19－ Ｓｕｍｍａｒｙ ｏｆ ２００２ Ａｎｎｕａｌ Ｒｅｐｏｒｔ SHENZHEN VICTOR ONWARD TEXTILE INDUSTRIAL COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Notes 2003 2002 HKD’000 HKD’000 Cash flows from operating activities Cash (used in)/generated from operations 26 (13,396) 15,437 Interest paid (2,102) (1,896) Tax paid (713) (355) Net cash (used in)/generated from operating activities (16,211) 13,186 Cash flows from investing activities Purchase of property, plant and equipment (3,998) (5,351) Purchase of intangible assets (410) - Proceeds from disposal of property, plant and equipment 1,647 - Proceeds from disposal of trading investments 2,858 - Interest received 276 685 Dividend received 1,555 - Net cash generated from /(used in) investing activities 1,928 (4,666) Cash flows from financing activities Proceeds from borrowings 107,910 47,982 Repayments of borrowings (96,744) (53,994) Increase of pledged bank deposits - (3,000) Injection from a minority shareholder - 500 Net cash generated from/(used in) financing activities 11,166 (8,512) Net (decrease)/increase in cash and cash equivalents (3,117) 8 Cash and cash equivalents at beginning of year 30,086 30,078 Cash and cash equivalents at end of year 18 26,969 30,086 The accompanying notes form an integral part of this consolidated financial statement. －20－