特力Ａ(000025)ST特力Ｂ2003年年度报告摘要（英文版）

SHENZHEN TELLUS HOLDING CO., LTD. SUMMARY ANNUAL REPORT 2003 §1. Important Notes 1.1 Board of Directors of Shenzhen Tellus Holding Co., Ltd. (hereinafter referred to as the Company) and its directors individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The 2003 annual report summary is abstracted from the annual report; the investors are suggested to read the full text of annual report to understand more details. 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. 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 Yang Feng asked for leave due to business, Independent Director Zhang Yuan entrusted Independent Director Shi Weihong to attend the meeting and exercise the voting right. 1.4 Moore Stephens (Shenzhen) Certified Public Accountants issued an unqualified Auditors’Report with paragraph of emphatic events for the Company. 1.5 Chairman of the Board of the Company Mr. Zhang Ruili, Chief Financial Officer Mr. Ren Yongjian and Manager of Planning & Financial Department Ms. Li Mingjun hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock ST Tellus-A, ST Tellus-B Stock code 000025, 200025 Listed stock exchange Shenzhen Stock Exchange Registered address and office address 3/F, Tellus Bldg., No. 56 of Shui Bei Er Road, Luohu District, Shenzhen Post code 518020 Internet web site of the Company http://www.sdgtellus.com.cn E-mail of the Company sztljtgf@public.szptt.net.cn 2.2 Contact person and method Authorized Representative in Secretary of the Board of Directors charge of the Securities Affairs Name Ren Yongjian Li Mingjun Contact address 3/F, Tellus Bldg., No. 56 of Shui Bei 3/F, Tellus Bldg., No. 56 of Shui Bei Er Road, Luohu District, Shenzhen Er Road, Luohu District, Shenzhen Telephone (86) 755-25536888-388 (86) 755-25536888-351 Fax (86) 755-25536658 (86) 755-25536658 E-mail szryj@tom.com szlmj@tom.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2003 2002 2001 over last year（％） Income from main operations 1,436,382,877.72 1,289,321,184.23 11.41% 703,244,863.19 Total profit 13,630,669.73 -34,302,617.24 - 4,880,915.00 Net profit 5,175,063.43 -40,980,896.04 - 5,144,050.69 Net profit after deducting -5,157,990.61 -35,020,226.61 - -9,668,602.80 non-recurring gains and losses Increase/decrease At the end of At the end of At the end of from the end of 2003 2002 2001 previous year（％） Total assets 1,274,704,955.23 1,232,230,347.02 3.45% 1,368,433,164.58 Shareholder’s equity (excluding 211,162,165.06 203,523,567.11 3.75% 241,238,794.25 minority interests) Net cash flow arising from 100,750,071.64 120,412,420.24 -16.33% 57,918,274.85 operating activities 3.2 Major financial indexes Unit: RMB Increase/decrease over 2003 2002 2001 last year（％） Earnings per share 0.02 -0.19 - 0.02 Earnings per share (calculated based on new 0.02 - - - share capital if share capital was changed) Return on equity 2.45% -20.14% - 2.13% Return on equity calculated based on net profit after deducting non-recurring gains -2.44% -17.21% - -4.01% and losses Net cash flow per share arising from 0.46 0.55 -16.45% 0.26 operating activities Increase or decrease At the end At the end At the end from the end of of 2003 of 2002 of 2001 previous year（％） Net assets per share 0.96 0.92 3.79% 1.10 Net assets per share after adjustment 0.10 0.04 150.00% 0.17 3.3 Difference in net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB’0000 CAS IAS Net profit 517.51 969.70 The Company’s net profit as of year 2003 was RMB 5,175,000 audited by domestic certified public accountants and RMB 9,697,000 audited by international certified public accountants respectively, which was RMB 4,522,000 more than the former figure. The reasons are as follows: the Explanation on the difference long-term investment evaluation and amortization has increased by RMB 2,327,000, valuation with object investment has decreased by RMB 269,000, switching back excess deficit of subsidiaries has increased by RMB 157,000, expenses for the use of funds due to associated related has increased by RMB 768,000, income from debts reorganization has increased by RMB 1,539,000. §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share (Unit: share) Increase / decrease in this Before the After the time (+, -) change change I. Unlisted Shares 1. Sponsors’shares 159,588,000 0 159,588,000 Including: State-owned share 159,588,000 0 159,588,000 Domestic legal person’ s shares 0 0 Foreign legal person’ s shares 0 0 Others 0 0 2. Raised legal person’ s shares 0 0 3. Inner employees’shares 0 0 4. Preference shares or others 0 0 Total unlisted shares 159,588,000 0 159,588,000 II. Listed Shares 1. RMB ordinary shares 34,293,600 0 34,293,600 2. Domestically listed foreign shares 26,400,000 0 26,400,000 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total listed shares 60,693,600 0 60,693,600 III. Total shares 220,281,600 0 220,281,600 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 17,120 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/No pledged/ (State -owned the report year-end (%) n-circulating) frozen shareholder/foreign year (share) (share) (share) shareholder) Shenzhen Special Economic Zone 0 159,588,000 72.45 State-owned Non-circulation 0 Development (Group) Company shareholder DBS BICKERS（HONG KONG） Unknown 363,600 0.17 Circulation Unknown Foreign shareholder LTD A/C CLIENTS JIN YAN Unknown 312,200 0.14 Circulation Unknown Foreign shareholder WU SHAO XIAN Unknown 229,070 0.10 Circulation Unknown Foreign shareholder WANG ZI QIANG Unknown 224,000 0.10 Circulation Unknown Foreign shareholder CAI ZU JIAN Unknown 200,000 0.09 Circulation Unknown Foreign shareholder CHENG DONG LU Unknown 190,000 0.09 Circulation Unknown Foreign shareholder CUI JUN MIN Unknown 186,858 0.08 Circulation Unknown Foreign shareholder FU, YA KUANG Unknown 180,000 0.08 Circulation Unknown Foreign shareholder XU HONG BO Unknown 171,550 0.08 Circulation Unknown Foreign shareholder Explanation on associated relationship Among the top ten shareholders as listed above, there exists no associated relationship among the top ten shareholders or between Shenzhen Special Economic Zone Development (Group) Company and other consistent action shareholders, and they do not belong to the consistent actionist regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies. For the shareholders of circulation share, the Company is unknown whether there exists associated relationship or not. Particulars about shares held by the top ten shareholders of circulation share Full name of shareholders Number of circulation shares at Type (A-share, B-share, the year-end (share) H-share and other) DBS BICKERS (HONG 363,600 B-share KONG)LTD A/ JIN YAN 312,200 B-share WU SHAO XIAN 229,070 A-share WANG ZI QIANG 224,000 B-share CAI ZU JIAN 200,000 B-share CHENG DONG LU 190,000 B-share CUI JUN MIN 186,858 B-share FU,YA KWANG 180,000 B-share XU HONG BO 171,550 B-share CHEN JIAN 170,000 B-share Explanation on associated Among the top ten shareholders of circulation share as listed above, relationship among the top ten the Company is unknown whether there exists associated shareholders of circulation share relationship or not. 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 Name of the Company’s controlling shareholder of: Shenzhen Special Economic Zone Development (Group) Company (state-owned shareholder) Legal representative: Hu Ge Date of establishment: In October 1981 Registered capital: RMB 104.85 million Company type: state-owned enterprise of Shenzhen City Business scope: principal business: industry, traffic and transportation, land development, real estate, tourism, finance and trust, issuing securities, information consulting, textile, textile products, general merchandize, grains and oil, other products, hardware, traffic electrical appliances, chemicals. Minor businesses: cultural and office equipment, computer and components, feeds, general parts, steel materials, pig iron, non-ferrous metal, building materials, mineral products, import of raw and auxiliary materials and equipment for self- use, local and animal by-products and fire extinguishing equipment and materials. Equity structure: ended December 31, 2003, particulars about shares held by the shareholder of SDG: Shenzhen Investment Holding Corporation held 100% equity of Shenzhen Special Economic Zone Development (Group) Company. About the actual controller shareholders or the controlling shareholder of the Company’s controlling shareholder: Shareholder name: Shenzhen Investment Holding Corporation Legal representative: Li Heihu Date of foundation: Feb. 10, 1988 Registered capital: RMB 2 billion Company type: state-owned sole corporation Principal businesses and products: 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 taxation and occupying expenses of assets of state enterprise and the other business authorized by municipal government. §5. Particulars About Directors, Supervisors and Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Holding Holding Name Title Gender Age Office term shares at the shares at the Reason of change year-begin year-end Zhang Ruili Chairman of the Board Male 40 Apr. 18, 2003- 0 0 Apr. 18, 2006 Mao Songbai General Manager Male 48 Apr. 18, 2003- 0 0 Apr. 18, 2006 Guo Dongri Director, Deputy General Male 38 Apr. 18, 2003- 0 0 Manager Apr. 18, 2006 Wang Hailin Director Male 44 Apr. 18, 2003- 0 0 Apr. 18, 2006 Yang Feng Director Male 49 Apr. 18, 2003- 0 0 Apr. 18, 2006 Jiang Qinjian Director Male 41 Apr. 18, 2003- 9,000 9,000 Apr. 18, 2006 Zhou Chengxin Independent Director Male 48 Apr. 18, 2003- 0 0 Apr. 18, 2006 Shi Weihong Independent Director Femal 36 Apr. 18, 2003- 0 0 Apr. 18, 2006 Zhang Yuan Independent Director Male 43 Jun. 19, 2003- 0 0 Apr. 18, 2006 Li Binxue Supervisor, Chairman of Male 45 Apr. 18, 2003- the Supervisory Apr. 18, 2006 0 0 Committee Chen Shuipu Supervisor Male 47 Apr. 18, 2003- 0 0 Apr. 18, 2006 Luo Tao Supervisor Male 42 Apr. 18, 2003- 0 0 Apr. 18, 2006 Hu Xiaomei Supervisor Female 43 Apr. 18, 2003- Shares was sold Apr. 18, 2006 2,000 0 before taking the post of supervisor Ren Yongjian Chief Financial Officer, Male 40 Apr. 18, 2003- Secretary of the Board of Apr. 18, 2006 0 0 Directors Wu Yonggang Deputy General Manager Male 39 Apr. 18, 2003- 0 0 Apr. 18, 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) Shenzhen Special Economic Zone Deputy General Wang Hailin Nov. 2001 to now Ｙｅｓ Development (Group) Company Economist Shenzhen Special Economic Zone Minister of Human Yang Feng Jun. 2000 to now Yes Development (Group) Company Resource Dept. Shenzhen Special Economic Zone Minister of Planing & Jiang Qinjian Mar. 2001 to now Yes Development (Group) Company Financing Dept. Shenzhen Special Economic Zone Minister of the 2nd Dept. Luo Tao Jul. 1996 to now Yes Development (Group) Company of the Group 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 1,028,100 Total annual payment of the top three directors RMB 596,000 drawing the highest payment Total annual payment of the top three senior RMB 616,100 executives drawing the highest payment Allowance of independent director RMB 30,000 per person/ year Other treatment of independent directors Naught Name of directors and supervisors receiving no Wang Hailin, Yang Feng, Jiang Qinjian, Luo Tao, Chen payment or allowance from the Company Shuipu and Hu Xiaomei Payment Number of persons RMB 150,000 ～ RMB 180,000 3 RMB 200,000 ～ RMB 220,000 2 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, under the lead of the Board of Directors, after collective efforts of all staffs, the Company has gained obvious effects in all work and the operation and management has took on good trend. In the whole year of 2003, the Company has accomplished income from main operations and net profit amounting to RMB 1,436.38 million and RMB 5.18 million respectively and has realized the objective of making up the deficits and getting surpluses. In the report period, under the lead of the new Board, the Company reinforced the construction of legal person’ s administrative mechanism, amended a series of systems and enhanced the level of standardized operation of the enterprise, which has founded a solid foundation for the development of the Company. In the report period, with the operation as the core and cash withdrawal as the breakthrough, the Company reinforced the adjustment to assets- liability structure, liquidized the existing assets, actively developed liabilities reorganization and settled liability risks, which has created good operating environment for making up the deficits and getting surpluses in the whole year. In the report period, the Company strengthened the main operations, reinforced the marketing and actively expanded the market. The automobile marketing and service enterprises continued to push the responsibility system of operating objective, thus the income from main operations grew steadily. 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 (%) (%) (%) Other social service 10,972.00 7,693.00 29.89 -12.70 -20.80 7.20 Other wholesale and 126,344.00 121,174.00 4.09 14.60 14.30 0.20 retail trade Lease service 6,322.00 1,869.00 70.44 2.70 3.80 -0.30 Including: related 0.00 0.00 - 0.00 transactions Automobile inspection 10,972.00 7,693.00 29.89 -12.70 -20.80 7.20 and maintenance Automobile trade 126,344.00 121,174.00 4.09 14.60 14.30 0.20 Lease service 6,322.00 1,869.00 70.44 2.70 3.80 -0.30 Including: related 0.00 0.00 - transactions Pricing rules for related Naught transactions Necessity and durative Naught 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 (RMB) from main operations over the last year (%) Shenzhen 143,638.00 11.40 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase 110,000.00 Proportion in the total 90.00% of the top five suppliers amount of purchase Total amount of sales of the 500.00 Proportion in the total 0.30% top five sales customers amount of sales 6.5 Operation of share-holding companies (applicable to the situation where investment equity takes over 10% of its net profit) □Applicable √Inapplicable 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) than that in the last year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year The income in the year increased by RMB 146.8617 million over the last year, an increase of 11.39%, which was mainly because that Shenzhen Huari TOYOTA Automobile Sales Service Co., Ltd. started to sell VIOS etc. series TOYOTA car since Nov. 2002, which made the income increase by RMB 140.9367 million. The cost also increased by 11.28% due to the said reason in the year. Profit from other operations increased by RMB 7.0493 million, an increase of 167.04%, which was mainly because that the houses shared by Shenzhen Auto Industrial Trading Corporation, a subsidiary of the Company, in the cooperative house construction, realized sales in the year. Analysis to reasons of material changes in the whole financial position than that in the last year In the year, operating expense increased by RMB 12.0502 million over the last year, which was mainly because that the sales scale of automobile in Shenzhen Biaoyuan Auto Co., Ltd., Shenzhen Steyr Auto Sales Co., Ltd. and Shenzhen Huari TOYOTA Auto Sales Co., Ltd., subsidiaries of the Company, was expanded in 2003. In the year, management expense decreased by RMB 16.5564 million, a decrease of 20.96%, which was mainly because that the Company just consolidated the income statement of Shenzhen Huatong Automobile Co. during Jan.-Sept. in 2003, resulting in the decrease by RMB 7.4944 million, and the Company adopted various measures to control expenses in 2003. The interest expenditure in financial expense decreased by RMB 10.1653 million, a decrease of 33.85%, which was mainly because: 1. In 2003, Shenzhen Automobile Export and Import Company was not listed in the consolidation of the subsidiaries of the Company while its statements during Jan.-Jul. in 2002 was consolidated in 2002, resulting in the decrease by RMB 2.8402 million; 2. Shenzhen Auto Industrial Trading Corporation, a subsidiary of the Company, stopped calculating interests due to debt-to-equity of a loan, resulting in the decrease by RMB 0.9331 million; 3. In 2003, the Company just consolidated the income statement of Shenzhen Huatong Automobile Co. during Jan.-Sept., resulting in the decrease by RMB 0.3446 million; 4. The refund of loans and decrease in interest rate resulted in the decrease by RMB 4.3663 million. Non-operating income decreased by RMB 5.1278 million, a decrease of 49.71%, which was mainly because that Shenzhen Auto Industrial Trading Corporation, a subsidiary of the Company, sold the house called Dongfeng Building from its fixed assets in 2002, thus forming earnings amounting to RMB 7.9154 million. In 2003, the variance income from housing reform was the listing variance account of housing reform received by the Company from its employees. 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 (For details, please refer to 7.1 in this report) □Applicable √Inapplicable 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors (If it has) □Applicable √Inapplicable Profit estimation of the next year (If it has) □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors No distribution or capitalization. §7. Significant Events 7.1 Purchase of assets □Applicable √ Inapplicable 7.2 Sales of assets √Applicable □ Inapplicable The transaction party and sold assets Date of sale Price of Net profit Profit or Related sale contributed to the loss Transaction or Company by those occurred not (If yes, please sold assets from the from sale point out the beginning of the principle of year to date of sale pricing 20% share equity of Shenzhen Space July. 9, 2003 1,012.20 86.44 86.44 No Far-east Industrial Company held by the Company sold to 11 natural person including Mr. Li Ruizheng etc. 19.05% share equity of Shenzhen Dec.5, 2003 863.46 61.19 61.19 No Atlantic Jointing Material Co., Ltd. held by the Company sold to Sichuan Atlantic Jointing Material Co., Ltd. 70% equity of Shenzhen Huatong Oct.1, 2003 4,062.00 -458.81 -458.81 No Automobile Companyheld by the Company sold to Shenzhen Pingtai Investment & Development Co., Ltd. 5% share equity of Big Thermoking Dec.12,2003 1,076.00 981.39 981.39 No Transportation & Refrigeration Co., Ltd. held by the Company sold to Ingersoil-rand. The influence on the consistence of business and stability of management There is no influence on the consistence of business and stability of management. 7.3 Important guarantee √Applicable □Inapplicable Unit:(RMB)’0000 Name of Guarantee Date of Amount of Type of Term of Implemented Guarantee for signing Guarantee Guarantee Guarantee or not Related parties or agreement not (Yes or No) Shenzhen Machinery Mar.11, 1998 192.00 Common Mar.11, 1998- No Yes Export-Import guarantee Dec.10, 1998 Company The total amount of Guarantee The total remaining amount of Guarantee 6,783.00 Including: the total remaining amount of Related 3,600.00 Guarantee The total amount accrued from the Company providing 1,215.00 guarantee to the holding subsidiaries The total amount of irregular guarantee 0.00 The proportion of the total amount of guarantee in the 0.32 net assets of the Company 7.4 Related credits and liabilities transaction √Applicable □Inapplicable Providing capital to the The related parties provided Related Parties related parties capital to the Company Amount Balance Amount Balance occurred occurred SDG -2,133.54 14,928.66 -1,824.22 5,389.74 Shenzhen SD Swan Industrial Company 92.93 2,178.69 0.00 0.00 Shenzhen Machinery Export-Import Company 4.76 481.11 0.00 0.00 Hong Kong Yujia Investment Co., Ltd. -84.43 21.02 0.00 0.00 Shenzhen Telongfa Industrial Co., Ltd. 0.00 55.50 0.00 0.00 Tellus (Jinbian) Development Co., Ltd. 6.18 29.89 0.00 0.00 Shenzhen Tellus Real Estate Yueyang Company 2.48 21.95 0.00 0.00 Shenzhen SD Development Center Construction 0.00 0.00 0.00 600.00 Supervision Co., Ltd. Shenzhen Telongfa Industrial Co., Ltd. 0.00 0.00 0.00 845.05 Shenzhen SD Huatong Package Industrial Co., -461.90 0.00 0.00 0.00 Ltd. Shenzhen Machinery Industry& Trade Co., Ltd. 0.00 0.00 -23.70 0.00 Shenzhen Longgang Tellus Real Estate Company 0.00 0.00 0.00 109.57 Shenzhen Tellus Yangchun Real Estate Company 0.00 0.00 8.65 25.60 Total -2,573.52 17,716.82 -1,839.27 6,969.96 7.5 Entrust financing □Applicable √ Inapplicable 7.6 Implementation of commitment items √ Applicable □ Inapplicable In 1997, the Company transferred equity of Telongfa Company, the subsidiary of the Company, to SDG and other business and it produced credit to the principal shareholder. Related creditors and SDG negotiated to change from credit to share equity to the principal shareholder on the balance of part short-term loan and interest payable. Because the work of debt-to-equity swap is in the process, SDG made commitment not reversible as follows on the debt owed to the Company: SDG takes in charge of dealing with the legal procedure of debt-to-equity swap as soon as possible. If debt-to-equity swap is not implemented due to any reason, SDG will accept the aforesaid bank debts and corresponding interest of the Company to repay the debts SDG owed to the Company. The commitment letter is subject to Chinese law and binds SDG. 7.7 Significant lawsuit and arbitration √ Applicable □ Inapplicable Explanation on the result of original significant lawsuits and arbitrations of the Company was as follows:: 1.The controlling shareholder SDG provided guarantee for the Company to get loan amounting to RMB 21.5 mil from Dongmen branch of China Merchants Bank. The Company didn’t repay past due. China Merchants appealed to Shenzhen Intermediate People’ s Court. The Company published public notice on significant lawsuits in Securities Times and Hong Kong Ta Kung Pao on Apr. 13, 2002. The Company signed agreement on renewing loan with creditor. 2.The Company and the assignee Shenzhen Pingtai Investment & Development Co., Ltd. disputed on the transfer of 70% share equity of its subsidiary Shenzhen Huatong Automobile Company. The Company published public notice about the procedures and the verdict of the court in Securities Times and Hong Kong Ta Kung Pao respectively on Oct. 24, 2003. At present, all procedures of the equity transfer have all accomplished. 3.Shenzhen Development Bank indicted the Company to Shenzhen Intermediate People’ s Court for the Company didn’t repay RMB11.5 mil past due. Shenzhen Intermediate People’s Court held the court and judged the Company paid back the principal and its interests. The Company signed agreement on renewing loan with creditor. 4.Shenzhen Development Bank indicted Zhonghao Company and the Company for Zhonghao Company didn’t repay RMB5 mil past due and the Company provided guarantee for the loan. Guangdong Highest People ’ s Court verdict for second trial to keep the original judgment: Zhonghao Company paid back the principal and interests and the Company held joint clearing responsibility. Shenzhen Intermediate People’ s Court auctioned 2.9 mil shares of China Merchants held by the Company to pay back the loan. 5.CITIC Industrial Bank indicted Gintian Industry (Group) Co., Ltd. and the Company for Gintian Industry (Group) Co., Ltd. didn’t pay back the loan amounting to RMB3 mil past due and the Company provided guarantee for the loan. Shenzhen Intermediate People’ s Court verdict that Gintian Industry (Group) Co., Ltd. should pay back the principal and the interests and the Company should hold joint clearing responsibility. The Company paid off the loan. 6.Shenzhen Development Bank indicted Gintian Industry (Group) Co., Ltd. and the Company for Gintian Industry (Group) Co., Ltd. didn’t pay back the loan amounting to USD 2 mil past due and the Company provided guarantee for the loan. Shenzhen Intermediate People’ s Court froze 95% equity share of Xinyongtong Industrial Company held by the Company and part of share equity and assets of Gintian Industry (Group) Co., Ltd. in Guangzhou and Shenzhen. 7. Tellus Real Estate Company indicted Shenzhen Jinlu Industry & Trade Company (hereinafter referred to as”Jinlu Company”) for disputes on cooperation agreement of building up houses. Shenzhen Intermediate People ’ s Court heard the case again and denied the motion of Tellus Real Estate Company and admitted the validity of cooperation agreement of building up houses. Both parties should fulfill the obligations in the agreement. §8.Report of the Supervisory Committee The Supervisory Committee totally held seven entire meetings in the report period and the main content: approved the resolution on election at expiration of office terms of the Supervisory Committee; examined and approved proposal on amendment of Articles of Association of the Company, Rules for Procedure of the Shareholders’General Meeting, Detailed Rules for Work of General Manager, Management Regulation of Classification Authorization and Manageme nt System of Investor ’ s Relationship; examined and approved proposal on equity transfer of Shenzhen Atlantic Ocean Welding Material Co., Ltd., Shenzhen Spaceflight Far East Industrial Co., Ltd., and Thermo King Dalian Transport Refrigeration Co., Ltd.; examined and approved the proposal on equity change of the relevant enterprises and proposal on application of cancellation after verification of bad assets; patiently examined the work report of the Board of Directors, business report of management team and quarterly financial report and annual financial report of the Company and proposal on profit distribution; approved work report of the Supervisory Committee in 2003 and formed resolutions. According to the duty scope stated in relevant laws, regulations and Articles of Association of the Company, the Supervisory Committee of the Company supervised over and checked the operation according to law of the Company, work and behavior of the members of the Board of Directors and other senior executives through attending the meeting of the Board as non-voting delegates and other approaches this year. The Supervisory Committee expressed the following independent opinion on relevant events of the Company in 2003: 1. Opinion on the Company’ s operation according to law According to Company Law, Securities Law, Articles of Association of the Company and other relevant laws and regulations, the Supervisory Committee supervised over the procedure of holding and resolutions of the Shareholders’General Meeting and the Board of Directors, implementation of resolutions of the Shareholders’General Meeting by the Board of Directors, implementation of duties of senior executives of the Company and the Company’ s management system. The Supervisory Committee believes that every decision- making procedure of the Company was in accordance with laws, regulations and Articles of Association of the Company, the internal control system of the Company was perfect and there found no actions of breaking laws, regulations and Articles of Association of the Company and damaging the interest of the Company when the directors and senior executives of the Company implemented their duties of the Company. 2. Opinion on inspection of the Company’ s financing The Supervisory Committee inspected patiently and carefully the financial system and financial status of the Company and believed that 2003 Financial Report of the Company could reflect truly the financial status and operation result of the Company. Shenzhen Nanfang Minhe Certified Public Accountants and Moore Stephens (Shenzhen) Certified Public Accountants has issued the unqualified auditor’s report. 3. Opinion on invested projects of raised capital of the Company In the report period, the Company had no raised capital. 4. Opinion on purchase and sale of assets of the Company In this accounting year, as researched and decided by the Board of Directors of the Company and authorized by the relevant superior departments, the Company transferred 19.05% equity of Shenzhen Atlantic Ocean Welding Material Co., Ltd., 20% equity of Shenzhen Spaceflight Far East Industrial Co., Ltd. and 5% equity of Thermo King Dalian Transport Refrigeration Co., Ltd. held by the Company. Before every transfer, it was evaluated by assets appraisal company with qualification and the result was examined and confirmed by Shenzhen State-owned Assets Management Office and was finished corresponding procedures in Shenzhen Assets and Equity Exchange according to the stated procedures. The procedures of the above four equity transfer were legal and there was no inside transaction. 5. Opinion on related transaction In the report period, the Company has not occurred significant related transactions. §9. Financial Report 9.1 Auditor’ s opinion 9.2 Balance Sheet, Income Statement and Cash Flow Statement (Attachment) 9.3 Explanation on the change in accounting policy, policy, accounting assessment and accounting settlement method compared with the latest annual report. 1. Detail explanation on the change of accounting policy According to Financing Department CK [2003] No.12 Document on Printing and Distributing the Notification on Enterprise Accounting Rule- Items after the Date of Balance Sheet, which stipulated enterprise executing the principle should adjust retroactive ly the items involving cash dividend distribution (or profit distributed to the investors) in comparing the periods of financial statements when the enterprise worked out 2003 annual report, the Company listed cash dividend separately in Shareholders’ equity of balance sheet from the date of comparing periodical balance sheet of statements to the approved date of financial report compiled with the above requirements in the process of making out 2003 financial report. The above change in accounting policy would not affect the profit of the Company in the previous years, but affected the net assets and weighted net assets of the Company in the period-end, thus affected the return on equity indexes of the Company of the previous years accounted based on net assets and weighted net assets of the Company in the period-end. Because the Company didn’t distribute cash dividend in 2001 and 2002, the above change on accounting policy didn’t affect the return on equity indexes of the Company in 2002 and 2003. 2. There was no change on accounting assessment. 3. There was no change on accounting settlement. 9.4 Explanation on the change in the consolidated scope in the report period compared with the latest annual report. On Mar. 5, 2002, the Company and Shenzhen Pingtai Investment & Development Co., Ltd.(hereinafter referred to as “Pingtai Company”) signed agreement of equity transfer, in which 70% share equity of Shenzhen Huatong Automobile Company( hereinafter referred to as “Huatong Company”) held by the Company was transferred to Pingtai Company. However, the two parties didn’t fulfill the obligation in the agreement. In 2003, Pingtai Company appealed to Shenzhen Intermediate People ’ s Court. On Sep.2, 2003, Shenzhen Intermediate People’s Court verdict the Company to implement the share equity transfers agreement. In the lawsuit, the two parties agreed to confirm the transfer price based on 70% of net assets amounting to RMB 54,028,391.85 of Huatong Company on Dec.31, 2002. On Sep.30, 2003, the Company conveyed the rights of operation and management of Huatong Company to Pingtai Company on Sep.30, 2003. Thus, the Company confirmed the date of selling share equity was Oct. 1, 2003. In 2003, only 2003 Jan-Sep Income Statement and Cash Inflow Statement of Huatong were listed into the consolidated scope. Board of Directors of ShenZhen Tellus Holding Co., Ltd. Apr. 19, 2004