深赛格(000058)Ｂ2003年年度报告摘要（英文版）

SHENZHEN SEG CO., LTD. SUMMARY OF ANNUAL REPORT 2003 §1. Important Notes 1.1 Board of Directors of Shenzhen SEG Co., Ltd. and its directors individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The summary of 2003 annual report is abstracted from the full text of annual report; the investors are suggested to read the full text of annual report to understand more details. 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 All Director attend the meeting 1.4 Hong Kong Ho and Ho & Company Certified Public Accountants issued an unqualified Auditors’Report for the Company. 1.5 Mr. Zhang Weimin, Chairman of the Board of the Company, Ms. Zhang Liying, General Manager and Mr. Zhang Changhai, Head of Financial Department 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 Shen SEG, Shen SEG-B Stock code 000058、200058 Listed stock exchange Shenzhen Stock Exchange Registered address and office 31/F, Tower A, Star Plaza, Huaqiang North Road, Shenzhen address Post code 518028 Internet web site of the www.segcl.com.cn Company E-mail of the Company seggf@segcl.com.cn 2.2 Contact person and method Secretary of the Board of Directors Name Zheng Dan Contact address 31/F, Tower A, Star Plaza, Huaqiang North Road, Shenzhen Telephone (86) 755-83747939 Fax (86) 755-83975237 E-mail segcl1@segcl.com.cn 1 §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 2,321,697,094.05 2,206,470,817.69 5.22% 1,922,248,352.90 Total profit 228,629,055.44 178,657,224.05 27.97% -395,706,145.75 Net profit 181,754,546.40 100,817,981.43 80.28% -338,760,825.56 Net profit after deducting 79,349,682.75 91,639,607.91 -13.41% -132,158,547.07 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 3,911,243,947.08 3,699,826,113.90 5.71% 3,463,241,817.33 Shareholder’s equity (excluding 1,411,668,500.56 1,228,904,201.06 14.87% 1,124,261,479.32 minority interests) Net cash flow arising from 324,164,868.89 651,830,661.71 -50.27% 288,444,954.47 operating activities 3.2 Major financial indexes (Unit: RMB) Increase/decrease over 2003 2002 2001 last year（％） Earnings per share 0.25 0.14 80.33% -0.47 Earnings per share (it calculated based on new share capital if share capital was 0.25 -- -- -- changed) Return on equity 12.88% 8.20% 57.07% -25.81% Return on equity as calculated based on net profit after deducting non-recurring gains 6.01% 7.78% -22.11% -9.32% and losses Net cash flow per share arising from 0.45 0.90 -50.33% 0.40 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 1.94 1.69 14.89% 1.55 Net assets per share after adjustment 1.81 1.63 11.04% 1.47 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB’0000 CAS IAS Net profit 18,175.45 15,120.20 2 ① Due to insolvency of Xi’an SEG Electronic Market Co., Ltd., the losses formed by the said company in the report period were worked out in item of unrealized loss on investments when the domestic accounting was disposed, while there existed no the said item in international accounting. Thus, the losses were calculated based on losses of Xi’an Market in this period as the statement was consolidated, and the difference formed was RMB 2,370,000 from this. Explanation on the difference ② The difference of RMB 22,659,000 was because the Company withdrew more reserve for doubtful debts in overseas based on International Accounting Standards than domestic accounting disposal. ③ SEG HITACHI Company withdrew less export rebate over the previous year, domestic certified public accountants conducted retroactive disposal, and international certified public accountants took it into the difference of profit as of this period occurred in 2003. §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in shares (Unit: share) Increase / decrease in this Before the After the time (+, -) change change Others Subtotal I. Unlisted shares 1. Sponsors’shares 411,477,898 0 0 411,477,898 Including: State-owned share 367,327,898 -129,968,232 -129,968,232 237,359,666 Domestic legal person’ s shares 44,150,000 129,968,232 129,968,232 174,118,232 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 411,477,898 0 0 411,477,898 II. Listed shares 1. RMB ordinary shares 86,626,238 0 0 86,626,238 2. Domestically listed foreign shares 228,041,727 0 228,041,727 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total listed shares 314,667,965 0 0 314,667,965 III. Total shares 726,145,863 0 0 726,145,863 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 86,963 Particulars about shares held by the top ten shareholders 3 Nature of Increase / Shares held Number of Type of shares shareholders decrease in at the Proportion share Full name of Shareholders (Circulating/No (State -owned the report year-end (%) pledged/ n-circulating) shareholder/foreign year (share) (share) frozen (share) shareholder) Shenzhen SEG Group Co., Ltd. Unknown 237,359,666 32.69 Non-circulating 118,500,000 State-owned shareholder FODAK Group Guangzhou 129,968,232 129,968,232 17.90 Non-circulating 129,968,232 Domestic legal person’s share Shanghai Zhongnan Investment Unknown 6,300,000 0.87 Non-circulating Unknown Domestic legal person’s Holdings Co., Ltd. share Shanghai Qile Economic and Unknown 6,000,000 0.83 Non-circulating Unknown Domestic legal person’s Trading Co., Ltd. share Shenzhen Shengyi Industrial Unknown 5,000,000 0.69 Non-circulating Unknown Domestic legal person’s Development Co., Ltd. share Shanghai Taili Science and Unknown 4,000,000 0.55 Non-circulating Unknown Domestic legal person’s Technology Development Co., share Ltd. Shanghai Xinyuan Investment Unknown 3,600,000 0.50 Non-circulating Unknown Domestic legal person’s Co., Ltd. share Qinhuangdao Sanyuan Co., Ltd. Unknown 3,100,000 0.43 Non-circulating Unknown Domestic legal person’s share Shanghai Wantong Painting and Unknown 2,450,000 0.34 Non-circulating Unknown Domestic legal person’s Chemical Co., Ltd. share Wuxi Hongyu Department Store Unknown 2,000,000 0.28 Non-circulating Unknown Domestic legal person’s share Explanation on associated Among the top ten shareholders as listed above, there existed no associated relationship among the top relationship between Shenzhen SEG Group Co., Ltd. (hereinafter referred to as ten shareholders or SEG Group) and the other shareholders. The Company consulted the other consistent action shareholders by means of the telecommunication, and confirms that there exists no associated relationship among the No. 2, 6 and 8 shareholders and the other shareholders respectively. Except for these, the Company was unknown whether there exists associated relationship among the other shareholders. Particulars about shares held by the top ten shareholders of circulation share Shareholders’name (full Number of circulation shares Type (A-share, B-share, H-share and other) name) held at the year-end TOK YEK SENG 1,576,000 Domestically listed foreign share (B-share) ZHENG SHAO SHENG 1,400,000 Domestically listed foreign share (B-share) FAGN YI JUN 1,310,492 Domestically listed foreign share (B-share) HOPWAY(H.K.)LIMITED 900,000 Domestically listed foreign share (B-share) XU JIN LIAN 842,075 Domestically listed foreign share (B-share) WONG,CHI HO 810,000 Domestically listed foreign share (B-share) 4 XIE XIONG HUI 800,000 Domestically listed foreign share (B-share) XIANG QING SONG 800,000 Domestically listed foreign share (B-share) ZHANG CHAN CI 760,600 Domestically listed foreign share (B-share) MAXFORM ENTERPRISES 687,395 Domestically listed foreign share (B-share) LTD Explanation on associated Unclear relationship among the top ten shareholders of circulation share 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction to especial situation for controlling shareholder and other actual controller The first largest shareholder of the Company The first largest shareholder of the Company: Shenzhen SEG Group Co., Ltd. Legal representative: Mr. Sun Yulin Date of foundation: Aug. 23, 1986 Business scope: Production and research of electronic products, electrical home appliances, electronic toys and electronics chemical; undertake various electronic system project. (Import and export business and exclusive dealings commodities were conducted according to the regulation). Raise development funds and invest credit; development of technology, information service and maintenance; high- floor sightseeing, supporting food and drink, marketplace and exhibition of SEG Plaza. Registered capital: RMB 1.355 billion The structure of equity: Shenzhen Investment Holding Corporation holds 46.52% equity of SEG Group, China Huarong Asset Management Corporation holds 29.51% equity of SEG Group, China Orient Asset Management Corporation holds 13.98% equity of SEG Group and China Great Wall Asset Management Corporation holds 9.99% equity of SEG Group. The controlling shareholder of the first largest shareholder The controlling shareholder of the first largest shareholder: Shenzhen Investment Holding Corporation Legal representative: Li Heihu Date of foundation: Feb. 10, 1988 Main Business scope: 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-owned enterprise and the other businesses authorized by municipal government. Registered capital: RMB 2 billion The structure of equity: Shenzhen Municipal People’ s Government held its 100% 5 equity. §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Shares held Shares held Name Title Sex Age Office term at the at the Reason of change year-begin year-end Dec. 31, 2003- Zhang Weimin Chairman of the Board Male 52 0 0 Dec. 31, 2006 Vice Chairman of the Dec. 31, 2003- Guo Hanbiao Male 38 0 0 Board Dec. 31, 2006 Dec. 31, 2003- Zhang Liying Director/General Manager Female 50 0 0 Dec. 31, 2006 Director/ Deputy General Dec. 31, 2003- Li Lifu Male 48 0 0 Manger Dec. 31, 2006 Dec. 31, 2003- Shi Dechun Director Female 52 0 0 Dec. 31, 2006 Dec. 31, 2003- Li Caimou Director Female 57 0 0 Dec. 31, 2006 Dec. 31, 2003- Xin Huanping Independent director Male 40 0 0 Dec. 31, 2006 Dec. 31, 2003- Su Xijia Independent director Male 49 0 0 Dec. 31, 2006 Dec. 31, 2003- Deng Erkang Independent director Female 35 0 0 Dec. 31, 2006 Dec. 31, 2003- Wang Li Supervisor Male 42 0 0 Dec. 31, 2006 He additionally Dec. 31, 2003- held in secondary Xu Changhui Supervisor Male 55 0 8,900 Dec. 31, 2006 market, the said shares were frozen Dec. 31, 2003- Yang Bo Supervisor Male 32 0 0 Dec. 31, 2006 Deputy General Manger / Dec. 31, 2003- Zheng Dan concurrently Secretary of Female 38 0 0 Dec. 31, 2006 the Board 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable 6 Drawing the Name of Shareholding Title in Shareholding payment or Name Office term Company Company allowance (Yes / No) Zhang Weimin Shenzhen SEG Group Co., Ltd. Chief Economist Since May 2000 No Guo Hanbiao FODAK Group Guangzhou Vice-president Since Apr. 2003 No Shi Dechun Shenzhen SEG Group Co., Ltd. Director of Auditing Dept. Since 2003 No General Manager of Asset Li Caimou FODAK Group Guangzhou Since 2003 No Business Center Shenzhen SEG Hi-Tech Wang Li President Since 2003 No Investment Co., Ltd. Vice Secretary of the Party Xu Changhui Shenzhen SEG Group Co., Ltd. Committee and concurrently Since Oct. 2000 No Chairman of Labor Union Yang Bo FODAK Group Guangzhou CFO Since Jun. 2002 No 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 925000 Total annual payment of the top three directors RMB 637000 drawing the highest payment Total annual payment of the top three senior RMB 925000 executives drawing the highest payment Allowance of independent director RMB 50,000 per person/ year Other treatment of independent directors The Company reimbursed the reasonable charges (including allowances for a business trip and accommodation allowances) according to the actual situation which independent directors attended the meeting of the Board, shareholders’general meeting or exercise their functions and powers in accordance with Articles of Association of the Company. Name of directors and supervisors receiving no Zhang Weimin, Guo Hanbiao, Shi Dechun, Li Caimou, payment or allowance from the Company Wang Li, Xu Changhui and Yang Bo Payment Number of persons RMB 250,000 ～ RMB 300,000 2 RMB 300,000 1 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In 2003, the Company completely pushed management innovation with cost engineering as the main contents and operating innovation with development engineering as the main contents. Facing the intense competition in the market, the Company reinforced the operating management, reduced the cost, continued to 7 enhance the product quality and accomplished the operating task in the whole year completely. In the report period, the Company realized sales income and total profit amounting to RMB 2,313.05 million and RMB 228.06 million respectively, an increase of 4.83% and 27.65% respectively over the same period of last year. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Classified according to Income from Cost of Gross Increase/decrease Increase/decreas Increase/decrease industries or products main main profit ratio in income from e in cost of main in gross profit ratio operations operation (%) main operations operations over over the last year s over the last year the last year (%) (%) (%) Manufacture of 203,517.98 176,173.53 13.44 4.94 8.48 -17.34 electronic apparatus Storage 5,020.83 3,513.26 30.03 19.72 41.18 -26.14 Other industries 23,630.90 15,667.30 33.70 4.94 -5.60 28.14 Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions CPT 203,517.98 176,173.53 13.44 4.94 8.48 -17.34 Foreign transport and 5,020.83 3,513.26 30.03 19.72 41.18 -26.14 bonded storage Operation of electronic 10,602.19 4,827.80 54.46 14.19 2.67 10.33 market Commerce and trade 10,268.01 9,639.13 6.12 -13.88 -13.61 -4.67 Manufacture of communications 2,760.71 1,200.38 56.52 110.75 63.00 29.10 products Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Pricing rules for related Market fair price transactions Necessity and durative In the report period, according to the principle of market fairness, SEG Hitachi purchased glass shell from of related transactions SEG Samsung at fair price with accumulative purchase amount amounting to RMB 13.81 million, taking 0.5% of its purchase amount of glass shell in the period. This related transaction belonged to continuously related transaction and was settled with commercial drafts. 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main operations Increase/decrease in income from main operations over the last year (%) National sales 132,930.00 0.83 Oversea sales 99,240.00 11.75 8 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase 792,181.00 Proportion in the total 53.00% of the top five suppliers amount of purchase Total amount of sales of the 104,873.90 Proportion in the total 51.00% top five sales customers amount of sales 6.5 Operation of share- holding companies (applicable to the situation where investment equity takes over 10% of its net profit) √Applicable □Inapplicable Name of the share-holding company Shenzhen SEG Samsung Co., Ltd. Investment earnings contributed in the 4,048.97 period Proportion in net profit of the listed 22.28% company Share-holding Operating scope Production and sales of glass shell of CPT company Net profit 18,947.00 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 The Company’s profit increased in the period with reasons as follows: ① The Company relieved the loan guarantee provided for SEG Samsung Industrial, which made the profit increase by RMB 83.88 million; ② The transfer-back of impairment losses of fixed assets made the profit increase by RMB 24 million. Analysis to reasons of material changes in the whole financial position than that in the last year □Applicable √Inapplicable 6.9 Explanation on the past, current and future important effects of the material changes in production and operation environment, macro-policies and regulations on the Company’ s financial position and operating results √Applicable □Inapplicable The cancellation of tax preferential policies for products produced and sold locally in Shenzhe n resulted in the decrease in the Company’ s profit by RMB 20.57 million. 6.10 Completion of the profit estimation 9 □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 In 2004, the Company shall put emphasis on the research and settlement the cultivation, maintenance and improvement of competitive force under the intense competition, slight profit, continuous dispute of international trade, quickening of course of entering into WTO and challenge of living. Seriously researching the industrial development trend of the Company and striving for catching the economic situation and market trend correctly. Starting with such aspects as development and reserve of technical resources, development and reserve of human resources, development and reserve of market resources, development and reserve of capital operating resources and etc. to settle the problems of development tactic and strategy. (1) Reinforcing the technology development and extrusion of new products; (2) Reinforcing the innovation and enhancing the additional value of products and additional value of services; (3) Innovating the operating mode of electronic market in proper time for proper need. In the current course of “Channel reform”, giving up “burden”, innovating operating thought, understanding the truth of “Catching the channel is catching the market”and bravely probing to walk out the road of pure and large mall operation. Catching this chance, challenging this reform and catching the change trend and providing services through cooperating with suppliers and large agents in the upper river and cooperating with information network in the lower river so as to construct the channel platform into the compound channel platform with the combination of transaction in the network and outside the network, combination of transaction inside and outside the ground, combination of direct sales and agent sales and combination of transaction and service, which makes SEG Electronic Market “consolidates and reinforces the foundation” and continues to keep the leading position in the evolvement of restructuring the layout and rewriting the domain. (4) Fully exerting the experience in long and good cooperation between the Company and large transnational companies in the world and continuing to expand the deep cooperation with international strategic partners. 10 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors Audited by Zhongtian Huazheng Certified Public Accountants and Ho and Ho & Company Certified Public Accountants according to Chinese Accounting Standards and International Accounting Standards respectively, the Company’ s net profit was RMB 181.76 million and RMB 151.20 million respectively in 2003. According to the relevant provisions in Company Law of the P.R.C. and the Articles of Association of the Company, based on the net profit audited by Zhongtian Huazheng Certified Public Accountants, in 2003, the Company appropriated 10% of the net profit as statutory surplus reserve amounting to RMB 18,175,454.64 and appropriated 5% of the net profit as statutory welfare amounting to RMB 9,087,727.32, adding the retained earnings at the beginning of the year and unconfirmed investment loss formed in the previous years and written off in the year amounting to RMB 15,258,114.11, the profit available for distribution to shareholders was RMB 200,697,997.77. The distributable profit for the shareholders audited by Hong Kong Ho and Ho & Company Certified Public Accountants under international accounting rule is RMB 163,619,000. According to the regulation of taking the lower between Chinese accounting rule and international accounting rule as the most limit amount of distribution, the distributable profit for the shareholders is RMB 163,619,000. It is suggested appropriating dividend fund for distributing cash dividend amounting to RMB 1.12 (including tax) for every ten shares based on the total share capital, namely appropriating bonus dividend amounting to RMB 81,328,336.66 and the left is carried forward into next year. The preplan should be submitted to the Shareholders’ General Meeting of the Company for consideration and approval before its implementation. §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets □Applicable √Inapplicable 7.3 Important guarantee √Applicable □Inapplicable Unit: RMB’0000 Guarantee Name of Date of Complete for the happening (date Amount of Guarantee Guarantee implementation related Company of signing guarantee type term or not party (yes guaranteed agreement) or not) 11 Shenzhen Joint SEG Sep. 25, 2003- Dec. 25, 2003 1,000 liabilities No Yes Dasheng Mar. 25, 2004 guarantee Co., Ltd. Shenzhen Joint SEG Feb,7,2002-feb Feb 7,2002 700 liabilities YES NO Dasheng 6,2003 guarantee Co. Shenzhen Joint FEB SEG FEB 10,2003 700 liabilities 10,2003-Aug YES NO Dasheng guarantee 9,2003 Co. Shenzhen Joint Dec SEG Dec 23,2002 1000 liabilities 23,2002-July Yes No Dasheng guarantee 23,2003 Co. Shenzhen Pledged Jan SEG as Jan 23,2003 1000 23,2003-july YES NO Dasheng equivalent 22,2003 Co. HK Shenzhen Jun SEG 28,2002— dec Pledged Dasheng 28,2002(the as Co. Jun 28,2002 1000 actual removal Yes No equivalent date of the HK guarantee was jan 23,2003) Joint Sep Sansung Sep 27,2002 5400 liabilities 27,2002-sep Yes Yes industry guarantee 27,2003 Joint Dec Sansung Dec 31,2002 3000 liabilities 31,2002— oct Yes Yes industry guarantee 31,2003 Joint April Shen April 30,2002 4000 liabilities 30,2002— april Yes` No Nanguang guarantee 30,2003 Total amount of guarantee 67,199.45 Total balance of guarantee 24,699.45 Including: total balance of related guarantee 23,581.50 Total amount of guarantee the listed company provided for its 23,581.50 share-controlling subsidiaries Total amount of guarantee breaking regulations 3,781.50 Proportion of total amount of guarantee in net assets of the 26% Company 12 7.4 Related credits and liabilities current √Applicable □Inapplicable Unit: RMB’0000 Supply funds to related parties Related parties supplied funds to the Related parties Company Occurred amount Balance Occurred amount Balance Shenzhen SEG Group Co., 63.00 12,961.00 0.00 0.00 Ltd. SEG (Hong Kong) Co., Ltd. 0.00 296.38 0.00 0.00 Shenzhen SEG Plaza Inv. & 0.00 0.00 555.50 7.54 Dev. Co., Ltd. Total amount 63.00 13,257.38 555.50 7.54 7.5 Entrusted assets □Applicable √Inapplicable 7.6 Implementation of commitment items □Applicable √Inapplicable 7.7 Significant lawsuit and arbitration √Applicable □Inapplicable Ended as at Dec. 31, 2003, RMB 76,470,000 in the account receivable of the indirect share-controlling company of the Company, Shenzhen SEG Hitachi Color Display Devices Co., Ltd. (hereinafter referred to as SEG Hitachi) has been indicated to People’ s Court, among it, RMB 27,030,000 has been judged to recover and provision for doubtful debts amounting to RMB 10,630,000 has been appropriated aiming for the above account receivables. 7.8 Particulars about the performance of obligations of Independent Directors The independent directors of the Company executed their duties by law, acquainted themselves with the operation of the Company actively, examined every proposal of meetings seriously, expressed the independent opinions actively and brought the role of the independent director into full play In the report period, the two independent directors of 2nd Board, namely, Mr. Su Xijia and Mr. Xin Huanping actively attended the Board meeting of the Company, carefully read the relevant information provided by the Company, knew the operating situation of the Company actively, seriously examined all proposals, actively expressed the independent opinion and brought the role of the independent director into full play according to the relevant requirements of Articles of Association of the Company and Working Rules of Independent Director. On Dec.31, 2003, Mr. Su Xijia, Mr. Xin Huanping and Mrs. Deng Erkang were elected as the independent directors of the 3rd Board of the Company through the election of 2003 2nd Extraordinary Shareholder’ s General Meeting. The aforesaid independent directors began to fulfil the duties of the independent directors from the election date. The independent directors of the 3rd Board of the Company, Mr. Su Xijia, Mr. Xin Huanping and Mrs. Deng Erkang, expressed the independent opinions on the election of Chairman of the Board and Vice Chairman of the Board and engagement of 13 Secretary of the Board. §8.Report of the Supervisory Committee 1. Operation according to Law According to relevant stipulations of national laws, regulations and Articles of Association, the Company has established and improved the legal administrative structure, established a rather perfect internal control system, and well kept away risks of administration and finance; the Company’s decision- making procedures were legitimate. In the report year, the Board of Directors and management team seriously implemented each resolution of the Shareholders’General Meeting in a diligent and conscientious manner, and didn’t violate laws, regulations and Articles of Association or damage the Company’s interests when performing duties and obligations. 2. Financial inspection The Supervisory Committee made serious and careful inspection on the Company’ s financial system and financial status, and believed 2003 financial report could truly reflect the Company’ s financial status and business results. Zhongtian Huazheng Certified Public Accountants and Hong Kong Ho and Ho & Company Certified Public Accountants audited 2003 financial report of the Company according to Independent Auditing Standards of Chinese Certified Public Accountant and International Auditing Standards and issued respectively auditor’ s reports with non-reservation opinion and non-explanation which truly reflected the Company’ s financial status and business results. 3.In the report period, there has no use of raised capital. 4. Purchase or sales of assets In the report period, the Company occurred no purchase of assets. The trade price of the assets sold by the Company was reasonable, no inside trading was found, and the transactions hadn’t damaged the rights and interests of shareholders or resulted in runoff of assets. 5.About correlative transactions of the Company The correlative transactions interfered in 2003 by the Company were all in accordance with the principle of equity and fairness as checked by the Supervisory Committee. No inside trading was found, and the transactions hadn’t damaged the interests of the Company as well as rights and interests of other shareholders or resulted in runoff of assets. §9. Financial Report 9.1 Auditor’ s opinion 9.2 14 SHENZHEN SEG CO., LIMITED CONSOLIDATED BALANCE SHEET AS AT 31ST DECEMBER, 2003 2003 2002 RMB'000 RMB'000 ASSETS Non-current assets Property, plant and equipment 1,588,809 1,322,567 Construction in progress 4,081 4,438 Interests in associates 418,261 382,432 Other investments 14,270 16,058 Other assets 37,467 39,719 2,062,888 1,765,214 Current assets Inventories 196,517 146,774 Investments in securities 6,445 7,473 Accounts receivable, deposits and prepayments 866,725 894,599 Pledged deposits 130,038 88,657 Cash and bank balances 648,631 880,562 1,848,356 2,018,065 Total assets 3,911,244 3,783,279 EQUITY AND LIABILITIES Capital and reserves 726,146 726,146 Share capital 685,523 530,941 Reserves 1,411,669 1,257,087 Minority interests 481,478 447,841 Non-current liabilities Loans 226,030 169,826 Current liabilities Loans - due within one year 732,667 943,670 Accounts payable, deposits received and accruals 1,051,986 948,391 Tax payable 7,414 16,464 1,792,067 1,908,525 15 Total equity and liabilities 3,911,244 3,783,279 SHENZHEN SEG CO., LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER, 2003 2003 2002 RMB'000 RMB'000 Revenue 2,321,697 2,206,471 Cost of sales -1,970,817 -1,814,946 Gross profit 350,880 391,525 Other operating income 20,614 64,525 Decrease in impairment loss on property, plant and equipment 24,000 - Distribution costs -71,138 -63,654 Administrative expenses -186,307 -205,201 Profit from operations 138,049 187,195 Finance costs -56,431 -70,844 Decrease in provision for contingent loss 83,881 - Share of results of associates 32,385 51,874 Profit before taxation 197,884 168,225 Taxation -11,974 -26,649 Profit before minority interests 185,910 141,576 Minority interests -34,708 -29,626 Net profit for the year 151,202 111,950 16 Dividends 81,328 - Earnings per share RMB 0.208 RMB 0.154 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER, 2003 2003 2002 RMB’000 RMB’000 OPERATING ACTIVITIES Cash generated from operations 401,935 716,320 Interest paid -56,431 -70,844 Income tax paid -18,237 -18,789 NET CASH FROM OPERATING ACTIVITIES 327,267 626,687 INVESTING ACTIVITIES Interest received 8,955 12,786 Purchase of property, plant and equipment -121,122 -167,551 Expenditure on construction in progress -258,418 -35,720 Proceeds from disposal of property, plant and equipment 12,880 40,565 Increase in investments in associates -8,100 - Net cash inflow from disposal of a subsidiary 1,147 - Net cash inflow from acquisition of a subsidiary 1,050 - Purchase of other investments -267 -1,950 17 Proceeds from disposal of other investments 1,950 - Decrease in investments in securities 1,028 24,027 Increase in pledged deposits -41,381 -26,061 NET CASH USED IN INVESTING ACTIVITIES -402,278 -153,904 FINANCING ACTIVITIES Dividend paid to minority shareholders -2,121 - New bank and other loans raised 1,244,500 961,500 Repayment of bank and other loans -1,399,299 -1,022,889 NET CASH USED IN FINANCING ACTIVITIES -156,920 -61,389 (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS -231,931 411,394 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 880,562 469,168 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS AT END OF YEAR Cash and bank balances 648,631 880,562 18 9.3 Accounting policy, accounting assessment and settlement method has no cha nge compared with the latest annual report. 9.4 Explanation on change of consolidated scope compared with the latest annual report The Company sold 80% equity of Shenzhen SEG Orient Industrial Development Co., Ltd., the subsidiary of the Company. After the sale, the Company holds 20% equity of the company, so it is not put into the scope of consolidated statement in this year. Xi’an SEG Electron Market Co., Ltd., of which the Company holds 65% equity has been put into the scope of consolidated statement. Board of Directors of Shenzhen SEG Co., Ltd. April. 17, 2004 19