江铃汽车(000550)江铃Ｂ2003年年度报告摘要（英文版）

Jiangling Motors Corporation, Ltd. Extracts From 2003 Annual Report §1 Important Note 1.1 The Board of Directors is collectively and individually liable for the truthfulness, accuracy and completeness of the information disclosed in the report and undertakes that no major events have been omitted, and that there are no misstatements and material misleading information in this report. These extracts are extracted from the original of Annual Report. Investors should read the original for details. 1.2 PwC Zhong Tian CPAs issued unqualified auditor ’ s reports for JMC’s year 2003 financial report. 1.3 Chairman Jiang Linsheng, President Lu Shuifang, CFO Manto Wong and Head of Finance Department, Wu Kai, ensure that the Financial Report in the Annual Report is truthful and complete. 1.4 Except that the Financial Report (Section 9) of the English version is drawn up according to the Auditors’ Report prepared in accordance with International Accounting Standards (‘IAS’), all financial data are based on Chinese Accounting Standards (‘CAS’). §2 Brief Introduction 2.1 Brief introduction Share’ s name Jiangling Motors Jiangling B Share’ s code 000550 200550 Place of listing Shenzhen Stock Exchange Company registered address No. 509, Northern Yingbin Avenue, Nanchang City, & headquarters address Jiangxi Province, P.R.C Post code 330001 Company’ s website http://www.jmc.com.cn E- mail relations@jmc.com.cn 2.2 Contact persons and contact details Board Secretary Person for financial Securities Affair information disclosure Representative Name Xiong Zhongping Manto Wong Quan Shi Telephone 86-791-5235675 86-791-5232888-6503 86-791-5232888-6178 Fax 86-791-5232839 E- mail relations@jmc.com.cn Contact address No. 509, Northern Yingbin Avenue, Nanchang City, Jiangxi Province, P.R.C 1 §3 Operating Highlight 3.1 Main accounting data Unit: RMB’000 Year-on-year changes 2003 2002 2001 (%) Turnover 5,094,897 4,270,869 19.29% 3,379,072 Total profits 535,634 345,919 54.84% 101,157 Net profits 448,812 286,760 56.51% 100,848 Net profits after non-recurring income 447,266 274,280 63.07% 103,636 and loss Changes from reporting December December December period-end to 31, 2003 31, 2002 31, 2001 year-beginning (%) Total assets 3,802,330 3,581,901 6.15% 3,666,636 Shareholder’s equity 2,258,863 1,904,453 18.61% 1,616,364 (after minority interests) Net cash flows from 826,487 990,401 -16.55% 681,185 operating activities 2 3.2 Main financial indexes Year-on-year changes 2003 2002 2001 (%) Earnings per share (RMB) 0.52 0.33 56.63% 0.12 Return on net asset ratio 19.87% 15.06% 31.94% 6.24% Return on net asset ratio based on net profits after non-recurring 19.80% 14.40% 37.50% 6.41% income and loss Net cash flows per share from 0.96 1.15 -16.55% 0.79 operating activities (RMB) Changes from December December December reporting period-end to 31, 2003 31, 2002 31, 2001 year-beginning (%) Net assets per share (RMB) 2.62 2.21 18.63% 1.87 Adjusted net assets per share (RMB) 2.47 1.94 27.32% 1.51 3.3 Difference between net profits per Chinese Accounting Standards (‘CAS’) and per International Accounting Standards (‘IAS’) ■Applicable □Not Applicable Unit: RMB’000 Chinese Accounting Standards International Accounting Standards Net profits 448,812 382,255 Net profits 2003 As prepared per CAS 448,812 Adjustment per IAS : Amortization difference of Housing Fund -26,956 Notes on Power Capability Upgrade expense 1,642 difference Deferred Tax asset -10,703 Pension defined benefit -22,206 Minority interest -253 Staff bonus and welfare fund of Jiangling -8,081 Isuzu appropriated from profit after tax As restated in confo rmity with IAS 382,255 3 §4 Share Capital Changes & Shareholders 4.1 Table on the changes of shareholding structure Before the Change (+, -) After the change change Allocated Bonus Reserve-con New Others Subtotal Shares Shares verted shares issuance I. Non-listed shares 1. Promotion shares 354,176,000 354,176,000 Including: State-owned shares 354,176,000 -456,000 -456,000 353,720,000 Domestic legal-person shares 456,000 456,000 456,000 Foreign legal-person shares Others 2. Raising legal-person shares 47,438,000 47,438,000 3. Management shares 69,540 69,540 4. Preferred shares or others Subtotal 401,683,540 401,683,540 II. Listed shares 1. A shares 117,530,460 117,530,460 2. B shares 344,000,000 344,000,000 Overseas-listed Foreign-invested shares Others Subtotal 461,530,460 461,530,460 3. Total 863,214,000 863,214,000 4.2 Top ten shareholders and circulating-share shareholders Total shareholders at the end of 42,423 shareholders, including 30,527 A-share shareholders and 11,896 B-share shareholders reporting period Top ten shareholders Name Change Shares at the Ratio in Share type Shares due Shareholder type the total in 2003 end of 2003 to mortgage capital (+, -) stock or frozen （%） Jiangling Motors 354,176,000 41.03 Non listing 0 State-owned shareholder Company (Group) (‘JMCG’) Ford Motor Company 0 258,642,800 29.96 Circulation B 0 Foreign-invested (‘Ford’) shares shareholder Shanghai Automotive 0 25,970,000 3.01 Non listing 0 Co., Ltd. 4 China Baoan Group Co., 0 12,000,000 1.39 Non listing 12,000,000 Ltd. Tianhua Securities 8,733,077 8,733,077 1.01 Circulation A 0 Investment Fund shares Jingfu Securities 5,789,099 5,789,099 0.67 Circulation A 0 Investment Fund shares GT PRC FUND 5,499,933 5,499,933 0.64 Circulation B 0 Foreign-invested shares shareholder Puhui Securities 5,282,838 5,282,838 0.61 Circulation A 0 Investment Fund shares Tongyi Securities 3,572,023 3,572,023 0.41 Circulation A 0 Investment Fund shares Yinhua 3,332,069 3,332,069 0.39 Circulation A 0 Advantaged-Enterprise shares Securities Investment Fund Notes on association and concerted There is no association among the shareholders who respectively hold more than 5% of action among top ten shareholders JMC’s total shares. The top ten circulation-share shareholders Name Shares at the end of 2003 Share Type Ford Motor Company 258,642,800 B share Tianhua Securities Investment Fund 8,733,077 A share Jingfu Securities Investment Fund 5,789,099 A share GT PRC FUND 5,499,933 B share Puhui Securities Investment Fund 5,282,838 A share Tongyi Securities Investment Fund 3,572,023 A share Yinhua Advantaged-Enterprise Securities Investment Fund 3,332,069 A share MERRILL LYNCH INTERNATIONAL 3,270,351 B share Yulong Securities Investment Fund 2,473,685 A share Jingbo Securities Investment Fund 2,042,723 A share Tianhua Securities Investment Fund and Yinhua Advantaged-Enterprise Securities Notes on association among top ten Investment Fund are related funds, and Jingfu Securities Investment Fund and circulation-share shareholders Jingbo Securities Investment Fund are related funds. 4.3 Controlling Shareholders and actual controller 4.3.1 Changes of controlling shareholders and actual controller □Applicable ■Not Applicable 4.3.2 Controlling shareholders The controlling shareholders of JMC are JMCG and Ford, and there is no change in respect of the controlling shareholders in 2003. JMCG, a wholly state-owned enterprise founded on July 27, 1991, is subordinate to the State-owned Assets Administration Bureau of Nanchang. Its registered capital is RMB 420.85 million, and its legal representative is Mr. Wang Xigao. Main scope of business: manufacture of automobiles, engines, chassis, variant vehicles and 5 automotive components, automotive quality test, sales of self-produced products, as well as related after-sale services. Ford, founded in 1903, is a US-based listed company. Its registered capital is US$ 1.222 billion. Chairman & CEO: William Clay Ford, Jr. Main scope of business: design, manufacturing, assembly and sales of cars, trucks, parts and component, financing, leasing of vehicles and equipment, and insurance business. §5 Directors, Supervisors and Senior Management 5.1 Shareholding Changes of Directors, Supervisors and Senior Management Name Position Gender Age Term of office Shares at the Shares at Cause of beginning of the end of share Year 2003 Year 2003 change Jiang Linsheng Chairman Male 41 2003.9～2005.6 0 0 Mei Wei Cheng Vice chairman Male 54 2002.6～2005.6 0 0 Zhou Ming Director Male 42 2003.9～2005.6 0 0 Dave Schoch Director Male 53 2003.9～2005.6 0 0 Lu Shuifang Director & President Male 50 2002.6～2005.6 0 0 Gordon L. Spaulding Director & SEVP Male 55 2002.6～2005.6 0 0 Xu Wenguang Independent director Male 52 2003.9～2005.6 0 0 Pan Yuexin Independent director Male 45 2002.6～2005.6 0 0 Lok·Kim·Chai Independent director Male 57 2003.9～2005.6 0 0 Wu Yong Chief supervisor Male 54 2002.6～2005.6 4,860 4,860 Alvin Qing Liu Supervisor Male 47 2002.6～2005.6 0 0 Zhu Yi Supervisor Male 34 2002.6～2005.6 0 0 Zhang Jianguo Supervisor Male 47 2002.6～2005.6 0 0 Jin Wenhui Supervisor Male 37 2002.6～2005.6 0 0 Xiong Chunying EVP Female 40 2002.6～2005.6 0 0 Liu Nianfeng EVP Female 42 2002.6～2005.6 0 0 Eric Hoile VP Male 62 2002.6～2005.6 0 0 Manto Wong CFO Male 41 2002.6～2005.6 0 0 Wan Hong VP Male 43 2002.6～2005.6 0 0 Zhou Yazhuo VP Male 41 2002.6～2005.6 0 0 Kevin Whipp VP Male 37 2002.6～2005.6 0 0 Xiong Zhongping Board Secretary Male 41 2002.6～2005.6 0 0 5.2 Directors and Supervisors who held a position in shareholder entities ■Applicable □Not Applicable Name of Shareholder Position with shareholder Compensation and Name entit ies entities held Term of office allowance paid by shareholder entit ies? Jiang Linsheng JMCG Chairman Yes 6 Vice President and the Mei Weicheng Ford Chairman & CEO of Ford Yes Motor (China), Ltd. Zhou Ming JMCG Board member Yes Director of Finance for Yes Dave Schoch Ford Ford Asia Pacific operations Lu Shuifang JMCG Board member No Wu Yong JMCG Board member Yes Vice President of Ford Alvin Qing Ford Motor (China), Ltd. Yes Head of JMCG Asset & Zhu Yi JMCG Finance Department Yes 5.3.Annual compensation of director, supervisors and senior management Total annual compensation About RMB 1.7 million for Chinese-side senior management About US$ 1.2 million for foreign senior management Total compensation for 3 directors Nil with the highest compensation Total compensation for 3 persons About RMB 1 million for these Chinese-side senior management with the highest compensation About US$ 900 thousand for these foreign senior management Allowance of independent RMB 30 thousand per person each year directors Other treatment of independent Nil directors Name of directors and supervisors Jiang Linsheng, Mei Wei Cheng, Zhou Ming, Dave Schoch, who were not paid by JMC Wu Yong, Alvin Qing Liu, Zhu Yi Compensation range Number About US$ 300 thousand 4 persons RMB 350-400 thousand 1 persons RMB 250-350 thousand 2 persons RMB 200-250 thousand 3 persons §6 Report of the Board of Directors 6.1 Discussions and analysis on operating results during the reporting period 6.1.1 Operating Results JMC’ s core business is production and sales of light vehicles and related components. Its major products include JMC series light truck and pickup, and Ford Transit series commercial bus. The Company also produces engine, casting and other components. In 2003, JMC sales volume reached a record of 58,518 units including 22,719 light 7 trucks and microbuses, 24,289 pickups and 11,510 Transit commercial vehicles. Total sales volume was up 14% from last year. Total production volume was 60,276 units, including 22,728 light trucks and microbuses, 26,111 pickups and SUV, and 11,437 Transits. JMC’ s sales increase was primarily due to the introduction of new Baodian pickup which was launched into the market at the beginning of this year. Sales of better equipped 2003 Model pickup increased by 31% compared with last year. Transit sales increased by 20%, owning to the launch of Transit 03 Model and gas model, increase in SVO volume, and aggressive marketing actions. In 2003, the Company achieved a market share of about 1.3% of the Chinese automotive market, down slightly from last year. JMC light trucks (including pickup) accounted for 7% of the light truck market, down 1 point from year ago. Transit achieved about 8% of the light bus market (excluding MPV, SUV, chassis cab and quasi-car products), slightly higher than last year. (Data source for above analysis: China Association of Automobile Manufacturers and the Company sales records) 6.1.2 Operational Challenges and Resolutions JMC mainly participates in light bus and light truck segments of the industry. In the light bus segment, JMC Transit was able to slightly increase its market share in 2003 without reducing prices for the most part of 2003, while some of major competitors reduced prices during the year. In the light truck segment, which includes cargo truck and pickup, however, JMC market share was down compared with last year. Although JMC cargo truck sales declined slightly, the Company was able to achieve strong sales growth for Baodian pickup, up 31% from last year. This slight decline of cargo truck sales was mainly due to the aging of JMC products and aggressive marketing and pricing pressure from competition. The Company was facing major challenges from stagnant sales of cargo truck and pressure to maintain the market share. To respond to competition and to improve market shares and profitability, the Company plans to take measures to increase its marketing activities, and to speed up the introduction of freshened models with new styling, functions and pricing required by the market. On February 1, 2004, the Company reduced prices of JMC brand cargo truck ranging from RMB 5000 – 8000. In addition, a new cargo truck model will be launched in First Half of 2004. In 2003, the Company continued its focus on benchmarking competition with respect to quality and customer satisfaction. Significant improvement has been made with customer expectation met or even exceeded. In order to improve and sustain product quality and customer satisfaction, the Company has taken a number of initiatives in many respects, including the systematic improvements in product development, part purchasing, production, vehicle delivery and customer service processes, and institutionalization of these corrective measures step by step. Lastly, Company continued to focus on aggressive cost control over all business aspects in response to the significant steel and other raw material price increases, and 8 product cost pressure resulted from adding equipment and meeting regulatory requirements. In 2003, the Company was able to maintain its gross margin of 25%, about the same with last year. 6.2 Table on the income & costs from core business Unit: RMB’000 Year-on-year Costs in Year-on-year Year-on-year Margin changes of costs Product Turnover core changes of changes of (%) in core business business turnover (%) margin (%) (%) I. Vehicles 4,863,369 3,574,403 25.01 15.63 15.23 2 II. Components 231,528 183,110 20.85 257.76 286.51 -22.02 Total 5,094,897 3,757,513 24.80 19.29 19.31 -6.81 Including: related party 138,750 106,750 23.06 511.17 456.18 49.16 transactions Ford and its designated suppliers applied the negotiated arm- length pricing; the pricing Pricing principle for localized components from related parties were determined through the process of of related party suppliers quote, costing assessment and negotiation between both sides. The prices transactions were adjusted periodically. Sales to related parties applied market price. The purchase of the imported components will immediately stop when the respective localization is achieved, and these components will be substituted by localized ones; Necessity and some components from other related parties were unique parts for JMC’ s Transit series, N series and T series, and other general components were purchased through continuity of bid. related party Jiangling Import and Export Co., Ltd had mature network and human resources in transactions import & export trade, so JMC will continue to use its sales network to sell products to overseas markets. JMC will also continue supplying relevant components to Jiangling Land-wind Autos Co., Ltd. for the attractive margin from the supply. 6.3 Core business by region □Applicable ■Not Applicable 6.4 Suppliers and customers Unit: RMB’000 Total amo unt of the purchase Ratio in total 925,217 25% from the top 5 suppliers purchasing amount Total sale amount to the top 5 Ratio in total 1,073,233 22% customers turnover 9 6.5 Operating results of associated companies □Applicable ■Not Applicable 6.6 Cause of major changes on core business and its structure □Applicable ■Not Applicable 6.7 Cause of year-on- year major changes on profitability (margin) of core business □Applicable ■Not Applicable 6.8 Cause of year-on- year major changes on operating results and profit structure □Applicable ■Not Applicable Cause of year-on- year major changes on overall financial status ■Applicable □Not Applicable Revenue in 2003 was RMB 5,095 Million, up 19% from year ago. This increase reflected higher vehicle sales volume and growth in automotive component OEM business. Under Chinese Accounting Standards, net profit was RMB 449 Million, up 56% from year ago. Higher net profit was attributed to higher sales volume in vehicles and components, part cost reduction, and lower financing cost. Higher profit was partially offset by higher steel costs, higher selling expense and administrative expenses (primarily resulted from projects and R&D spending), and price reduction of selected Transit models effective from November 2003. Cash flow from operations was positive RMB 826 million, driven by profitability and working capital control and management. Investment cash flow was negative RMB 159 million, reflecting primarily spending for capital goods such as facilities, equipment and tooling. Financing cash flow was negative RMB 501 million, reflecting mainly bank loan pay down, dividends, and interest expenses. At the end of 2003, the Company had total of RMB 984 million cash and cash equivalents, up RMB 167 million from the end of 2002. The balance of bank borrowing was RMB 356 million, down RMB 367 million from end of 2002 (reduced 51%). Total liabilities as percent of asset was reduced from 47% to 41%, compared with that of December 31, 2002. Total asset was RMB 3,802 million, up 6% from RMB 3,582 million at year-end 2002, reflecting mainly higher cash balance. Total liabilities were RMB 1,543 million, down 8% from the end of last year, reflecting mainly reduction of bank borrowing. Higher account payable due to productio n volume increase partially offset bank debt reduction. 10 Shareholder equity was RMB 2,259 million at December 31, 2003, up RMB 354 million from year-end 2002. This increase was due to net profit earned in the reporting period. Dividends payment of 2002 year partially offset equity increase. 6.9 Impact on operation due to policy & statute changes ■Applicable □Not Applicable Per the timetable of automobile emission issue announced by State Environmental Protection Administration, enforcement date for type approval of light vehicles reaching Euro II Emission Standard is July 1, 2004. The overwhelming majority of the Company’ s products have achieved Euro II Emission Standard, and the rest can also meet the requirements prior to the stipulated dates. The implementation of Euro II Emission Standard will possibly increase costs of the Company’ s productions and thereby may reduce the gross margin of the products. 6.10 Completion of profitability forecast □Applicable ■Not Applicable 6.11 Completion of business plan ■Applicable □Not Applicable 2003 business plan drafted Actual figures in 2003 formerly Turnover RMB 4.7-5 billion RMB 5.095 billion 6.12 Raised fund use □Applicable ■Not Applicable Changed projects □Applicable ■Not Applicable 6.13 Non-raised fund use ■Applicable □Not Applicable Program Name Total Investment Progress Yield Euro III Project (Engine & Vehicle) RMB 120 mil. RMB 5.4 mil. A3 Press Line RMB 90 mil. RMB 36.7 mil. Euro II Project (Engine & Vehicle) RMB 86.8 mil. RMB 51.3 mil. J116 Light Truck RMB 46.2 mil. RMB 43.7 mil. Gas Engine RMB 40.3 mil. Completed Computer Server Expansion RMB 14.5 mil. Completed 11 Engine Warehouse RMB 13.4 mil. Completed 1000T Press RMB 8.3 mil. RMB 1.8 mil. Transit Assembly Tool Upgrade RMB 4.2 mil. Completed 6.14 Explanation of the board of directors to abnormal opinions from accounting firms □Applicable ■Not Applicable 6.15 2004 plan ■Applicable □Not Applicable In 2004, the Company plans to focus on three areas: (1) maintain growth momentum, (2) increase customer satisfaction, and (3) continue to generate cash and profits. Specific actions include: a). Introduce new models and editions for light cargo truck, Pick-up and Transit. b). Enhance and strengthen distribution network; continue to roll out JMC cares. c). Accelerate cost reduction and quality improvement through the deployment of modern management methods, such as 6-Sigama. The Company is projecting revenue in the range of RMB 6,100 to 6,500 million for 2004. Continuing price pressure from the market place is expected. In addition, product cost is expected higher to meet higher emission, noise, and safety standards. Every effort will be made, including purchase cost reduction and quality cost management, to offset cost increase due to regulatory requirement to the maximum extent possible. 2003 profitability forecast □Applicable ■Not Applicable 6.16 The proposal on year 2003 profit distribution ■Applicable □Not Applicable Details on the profit available for appropriation of the Company in 2003 prepared in accordance with Chinese Accounting Standards (‘CAS’) and International Accounting Standard (‘IAS’) are as follows: Unit: RMB’ 000 CAS IAS Profit available for appropriation after tax 485,997 382,350 Include: Net profit for 2003 448,812 382,255 Transferred profit available for appropriation 123,506 86,416 at the beginning of the year Allocation of dividend for 2002 (86,321) (86,321) The upper limit of profit available for distribution was based on the lower of the unappropriated profit calculated in accordance with CAS and that calculated in 12 accordance with IAS. Therefore, the Company’s profit available for distribution in 2003 was RMB 382,350 thousand. The Board approved to submit to the 2003 Annual Shareholders’Meeting the following proposal on year 2003 profit distribution: (1). to appropriate 10% of the 2003 net profit calculated in accordance with CAS to statutory surplus reserve; (2). to appropriate 5% of the 2003 net profit calculated in accordance with CAS to statutory public welfare fund; (3). to appropriate for dividend distribution from the net profit the year, basing on the Company’s total share capital and a dividend of RMB 0.15 per share; (4). the balance of the unappropriated profit will be brought forward to the following financial year. Dividend distribution proposal: A cash dividend of RMB1.5 (including tax) will be distributed for every 10 shares held. Based on the total share capital of 863,214,000 shares as at 31 December 2003, total cash dividend distribution amounted to RMB 129,482,100. B share dividend is to be paid in Hong Kong Dollars exchanged from RMB based on the HKD-to-RMB exchange rate published by the People’s Bank of China on the first working day when the profit distribution proposal is approved at JMC’s Shareho lders’ Meeting. The Board decided not to transfer capital surplus reserve to share capital at this time. §7 Major events 7.1 Acquirement of operation □Applicable ■Not Applicable 7.2 Sales of operation □Applicable ■Not Applicable 7.3 Major guarantee □Applicable ■Not Applicable 13 7.4 Creditor’s rights and liabilities between listing company and related parties ■Applicable □Not Applicable Unit: RMB’ 000 Fund provided to related parties by Fund provided to listed company listed company by related parties Related parties Incurred Incurred Balance Balance Debit Credit Debit Credit JMCG Finance Co., Ltd. 2,728,990 2,719,700 99,800 Jiangling Industry Company 94,120 9,1500 6,870 JMCG Jiangxi Water Tank Plant 2,680 3000 360 Jiangxi Jiangling Chassis Co., Ltd. 25,310 2,3920 1,390 JMCG Nanchang Brake Plant 8,080 8060 20 16,890 20,440 3,560 JMCG Interior Trim Plant 67,980 65,920 4,970 Jiangling Land-wind Autos Co., Ltd. 19,730 18,380 1,350 139,420 135,000 32,140 Jiangling Tractor Co., Ltd. 2,600 2,430 320 JMCG Import & Export Co., Ltd. 128,910 136,170 21,200 15,060 16,090 5,730 Nanchang Gear Co. Ltd. 15,940 31,540 17,710 132,700 134,400 1,790 Jiangxi Fujiang After-Sales Service Co., Ltd. 98,960 97,580 4,460 Jiangling Jianye Co., Ltd. 870 2,210 1,210 JMCG Variant Vehicle Plant 52,720 48,630 5,230 Jiangxi Jiangling Lear Interior Trim Co., Ltd. 49,640 64,840 15,200 Jiangxi FuChang Climate System Co., Ltd. 103,360 100,480 11,990 Jiangling Forging Co., Ltd. 12,810 11,870 1,170 JMCG 50,020 44,250 900 Ford 44,320 44,290 9,430 Total 3,194,170 3,200,410 159,660 616,940 620,290 87,140 7.5 Trust investment □Applicable ■Not Applicable 7.6 Fulfilment of commitment □Applicable ■Not Applicable 7.7 Major litigation and arbitration □Applicable ■Not Applicable 7.8 Status of independent directors in execution of duty JMC has appointed three independent directors so far. JMC independent directors have diligently fulfilled their duties, attend ing all the Board meetings and the shareholder’s meeting held during their term of office. The independent directors 14 exercised their fiduciary duties regarding the routine work and major decision-making of the Board of Directors, and actively dealt with the affairs of Compensation Committee and Audit Committee, to protect the interests of the Company and all shareholders. §8 Report of Supervisory Committee 8.1 Work of the Supervisory Committee Pursuant to the relevant regulations in the Company Law, Securities Law and JMC Articles of Association as well as the spirit of being responsible to the shareholders, the Supervisory Committee seriously fulfilled its duties stipulated by the laws and regulations and energetically worked to perform its functions fully in 2003. The Chief Supervisor attended all the board meetings as a non- voting attendee, and all the supervisors attended the annual Shareholders’ Meeting. The committee held 3 meetings during the reporting period. The following is the information in regard to the meetings and the subjects at the meetings: 1. The Supervisory Committee reviewed and passed the following proposals with the written consent of the supervisors on March 27, 2003: i. reviewed and passed the 2002 annual work report of the Supervisory Committee; and ii. reviewed and passed 2002 Annual Report of JMC and the extracts from the annual report. 2. The Supervisory Committee reviewed and passed the following resolutions with the written consent of the supervisors on August 14, 2003: reviewed and passed 2002 Half- year Report of JMC and the extracts from the half- year report. 3. The 2nd session of the fourth Supervisory Committee, held in JMC administrative building on September 5, 2003, passed the following resolutions by discussion: i. the committee highly appraised the operating results of JMC in the first half year and the successes achieved in quality improvement activity; ii. the committee hoped that JMC can speed up approval and implement of new product development plan; and, iii. to strengthen learning and training of the supervisors to further bring the supervisory committee into play. 8.2 Supervisory Committee’ s independent opinion on the following matters during the reporting period: 1. JMC’ s operation in conformity with laws JMC operated in conformity with the laws and regulations, such as Company Law, Securities Law and the Articles of Association in 2003. The decision-making procedure was standardized and legal, and a relative complete internal control system was established. No behaviors violating laws, regulations and the Articles of Association or harming JMC’ s interest by the Directors, President and other senior 15 management in carrying out their duties were found. 2. JMC’ s financial status PwC Zhong Tian audited JMC’ s 2003 financial statements and issued unqualified audit reports. We believe the reports reflect JMC’s financial status, operating results and asset change objectively and truly. 3. In 2003, JMC’s procedure for asset sale was legal and the prices were reasonable. There were no insider trading and deals or situations harmful to shareholders’interest or where a leak of JMC’ s assets was detected. 4. JMC’ s related transactions: the imported component purchasing applied negotiated arm- length prices. The pricing for localized components was determined through the process of inviting public bidding, discussion and business negotiation. The prices were adjusted periodically, were fair and reasonable. §9 Financial Report 9.1 Auditor’s opinion PwC Zhong Tian CPAs issued unqualified auditor’s reports without explanatory notes for JMC’s year 2003 financial report. 9.2 Financial Statements 16 Consolidated Income Statement (Prepared under International Accounting Standards) Unit: RMB’000 Year ended 31 December 2003 2002 Sales 5,094,897 4,270,869 Sales tax and surcharge (72,757) (54,822) Net sales 5,022,140 4,216,047 Cost of sales (3,757,513) (3,149,441) Gross profit 1,264,627 1,066,606 Other operating income 22,971 28,883 Distribution costs (315,038) (298,333) Administrative expenses (475,460) (407,343) Other operating expense (10,498) (8,044) Profit from operations 486,602 381,769 Finance costs - net (11,563) (53,018) Share of result of associates before tax 4,993 2,415 Profit before tax 480,032 331,166 Income tax expense (59,138) 6,119 Group profit before minority interest 420,894 337,285 Minority interest (38,639) (24,177) Net profit 382,255 313,108 Earnings per share (RMB per share) 0.443 0.363 17 Consolidated balance sheet (Prepared under International Accounting Standards) Unit: RMB’000 As at 31 December 2003 2002 ASSETS Non-current assets Property, plant and equipment 1,707,675 1,832,525 Land use rights 151,483 154,899 Investment property 23,751 19,507 Intangible assets - 7,372 Investments in associates 18,891 15,091 Other non-current assets - 26,956 Deferred tax assets 18,675 29,378 1,920,475 2,085,728 Current assets Inventories 602,533 436,839 Receivables and prepayments 314,059 297,091 Held-to- maturity investments - 200 Cash and cash equivalents 983,938 816,735 1,900,530 1,550,865 Total assets 3,821,005 3,636,593 Shareholder’ s equity Ordinary shares 863,214 863,214 Share premium 816,609 816,609 Reserves 168,514 101,192 Retained earnings 315,029 86,416 Total shareholders’equity 2,163,366 1,867,431 Minority interest 104,664 80,836 LIABILITIES Non-current liabilities Borrowings 191,111 404,890 Retirement benefit obligations 93,722 80,516 284,833 485,406 Current liabilities Trade and other payables 1,016,743 819,084 Current tax liabilities 3,592 5,637 Borrowings 165,000 318,480 Provisions 63,807 49,719 Retirement benefits obligations 19,000 10,000 1,268,142 1,202,920 Total liabilities 1,552,975 1,668,326 Total equity and liabilities 3,821,005 3,636,593 18 Consolidated cash flow statement (Prepared under International Accounting Standards) Unit: RMB’000 Year ended 31 December 2003 2002 Cash flows from operating activities Cash generated from operations 876,967 1,007,424 Interest paid (31,635) (57,480) Tax paid (50,480) (19,746) Net cash from operating activities 794,852 930,198 Cash flows from investing activities Purchase of property, plant and equipment (184,093) (124,154) Proceeds from sale of property, plant and equipment 3,257 2,325 Proceeds from disposal of held-to- maturity investments 200 200 Interest received 20,213 14,023 Complementary investment in an associate - (3,553) Dividend received 1,193 Net cash used in investing activities (159,230) (111,159) Cash flows from financing activities Proceeds from borrowings 450,000 444,394 Repayments of borrowings (817,406) (1,036,151) Dividends paid to group shareholders (85,625) - Dividends paid to minority interest (14,811) (12,864) Other cash paid relating to financing activities (1,152) (6,794) Net cash used in financing activities (468,994) (611,415) Effects of exchange rate changes 574 (254) Net (decrease)/increase in cash and cash equivalents 167,202 207,370 Cash and cash equivalents at beginning of year 816,735 609,365 Cash and cash equivalents at end of year 983,937 816,735 19