神城A退(000018)深中冠Ｂ2004年年度报告摘要（英文版）

Shenzhen Victor Onward Textile Industrial Co., Ltd. Summary of Annual Report 2004 §1. Important Notice 1.1 Board of Directors of Shenzhen Victor Onward Textile Industrial 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 2004 annual report summary 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. 1.2 No director declares inability to warrant or objection to the authenticity, accuracy and completeness of the content of the annual report. 1.3 All directors attended the Board meeting. 1.4 Pricewaterhouse Coopers Zhongtian Certified Public Accountants issued unqualified auditors' report with no explanatory notes for the Company. 1.5 Mr. Hu Yongfeng, board chairman of the Company, Mr. Sun Zhiping, general manger in charge of accounting, and Ms Sun Yaqin, the person in charge of financial accounting organ represent and warrant the financial report in this annual report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock Victor Onward A, Victor Onward B Stock code 000018, 200018 Listed stock exchange Shenzhen Stock Exchange Registered address and office address Registered address: 26 Kuipeng Road, Baishi Hillock, Kuiyong Town, Longgang District, Shenzhen Office address: 26 Kuipeng Road, Baishi Hillock, Kuiyong Town, Longgang District, Shenzhen Post code Post code of registered address: 518119 Post code of office address: 518119 Internet web site of the Company http://www.chinaszvo.com E-mail of the Company szvo@chinaszvo.com 2.2 Contact person and method Secretary of the Board Securities Affairs Representative Name Chen Xing Jian Xiujuan Contact address Flat C, 10/F, Real Estate Building, Flat C, 10/F, Real Estate Building, Renmin Nan Road, Shenzhen Renmin Nan Road, Shenzhen Telephone 82323864 82325084 Fax 82339100 82339100 E-mail cx@chinaszvo.com jxj@chinaszvo.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2004 2003 2002 over last year（％） Income from main operations 264,335,516.00 208,255,352.00 26.93% 161,738,325.00 Total profit 1,046,186.00 2,390,403.00 -56.23% 1,925,541.00 Net profit 886,965.00 1,566,030.00 -43.36% 1,347,864.00 Net profit after deducting 880,853.00 818,988.00 7.55% 1,367,615.00 non-recurring gains and losses Net cash flows arising from 39,806,972.00 -14,873,420.00 367.64% 15,985,911.00 operating activities Increase/decrease At the end of At the end of At the end of from the end of 2004 2003 2002 previous year（％） Total assets 529,067,471.00 390,342,262.00 35.54% 376,445,241.00 Shareholder’s equity (excluding 312,442,877.00 311,140,450.00 0.42% 308,263,111.00 minority interests) 3.2 Major financial indexes Unit: RMB Increase/decrease over 2004 2003 2002 last year（％） Earnings per share 0.01 0.01 0.00% 0.01 Earnings per share (Note) 0.01 - - - Return on equity 0.28% 0.50% -0.22% 0.44% Return on equity as calculated based on net profit after deducting non-recurring gains 0.28% 0.26% 0.02% 0.44% and losses Net cash flow per share arising from 0.24 -0.09 366.67% 0.10 operating activities Increase or decrease At the end At the end At the end from the end of of 2004 of 2003 of 2002 previous year（％） Net assets per share 1.85 1.84 0.54% 1.83 Net assets per share after adjustment 1.83 1.83 0.00% 1.81 Note: Earnings per share was calculated based on new share capital if share capital was changed from the end of the report period to disclosure date of the report. Items of non-recurring gains and losses √Applicable □Inapplicable Items of non-recurring gains and losses (gains+, losses-) Amount Net losses from disposing fixed assets 428,944.00 Short-term investment loss 7,663.00 Switch-back of impairment losses for long-term investment withdrawn -144,970.00 in previous years Non-operating income -362,619.00 Other non-operating expenses 79,448.00 Impact of non-recurring gains and losses on income tax -14,578.00 Total -6,112.00 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB CAS IAS Net profit 886,965.00 1,880,330.00 1. Adjust with an increase of RMB 486568- the increment switch-back from Hong Kong house property assessment in accordance with IAS 2. Adjust with an increase of RMB 25553-Difference of disposing Explanation on difference good will amortization in accordance with IAS 3. Adjust with an increase of RMB 208681-Difference of disposing bad will in accordance with IAS 4. Adjust with an increase of RMB 272563-Income confirmed from offsetting accounts payable not paid for long time §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital Unit: share Before the Increase / decrease in this time (+, -) After the change Subtotal change I. Unlisted shares 1. Sponsors’shares 79,489,253 0 79,489,253 Including: State-owned share 47,359,859 0 47,359,859 Domestic legal person’ s shares 32,129,394 0 32,129,394 Foreign legal person’ s shares 0 0 0 Others 0 0 0 2. Raised legal person’ s shares 0 0 0 3. Inner employees’shares 0 0 0 4. Preference shares or others 0 0 0 Total unlisted shares 79,489,253 0 79,489,253 II. Listed shares 1. RMB ordinary shares 20,231,200 0 20,231,200 2. Domestically listed foreign 69,421,903 0 69,421,903 shares 3. Overseas listed foreign shares 0 0 0 4. Others 0 0 0 Total listed shares 89,653,103 0 89,653,103 III. Total shares 169,142,356 0 169,142,356 The amount of shares offered by funds, inner employees’shares traded in the counter, shares offered by strategic investor and shares offered ordinary juridical person should be disclosed respectively □Applicable √Inapplicable 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulating share Total number of shareholders at the end of report year 17,435 Particulars about shares held by the top ten shareholders Number of Nature of Increase / Holding Type of shares share shareholders decrease in shares at Proportion Full name of Shareholders (Circulating/ pledged/ (State -owned the report the year-end (%) Non-circulating) frozen shareholder/foreign year (share) (share) (share) shareholder) State-owned Union Holdings Co., Ltd. 0 47,359,859 28.00% Non-circulating 0 shareholder Style-Success Ltd. 0 24,466,029 14.46% Circulating 0 Foreign shareholder Shenzhen Textile (Group) Holdings Co., 0 24,458,231 14.46% Non-circulating 12,229,115 Ltd. Union Developing Group Co., Ltd. 0 7,671,163 4.54% Non-circulating 0 Rich Crown Investment Co., Ltd. 0 6,114,556 3.62% Circulating 0 Foreign shareholder Shing Ying Chieh -115,468 5,446,261 3.22% Circulating Foreign shareholder Chen Song 0 398,400 0.24% Circulating Foreign shareholder Huang Weili 21,300 226,562 0.13% Circulating Foreign shareholder Zhong Yonglai 27,100 223,700 0.13% Circulating Foreign shareholder Zhu Ruihong 19,400 192,608 0.11% Circulating Foreign shareholder Particulars about shares held by the top ten shareholders of Circulating share Full name of Shareholders Holding circulating share at the year-end Type (A-share, B-share, H-share or (share) others) Style-success Limited 24,466,029 B-share Rich Crown Investment Co., Ltd. 6,114,556 B-share Shing Ying Chieh 5,446,261 B-share Chen Song 398,400 B-share Huang Weili 226,562 B-share Zhong Yonglai 223,700 B-share Zhu Ruihong 192,608 B-share Zhu Guoming 191,220 B-share Li Jiying 178,900 B-share Zhang Jifang 170,000 A-share Explanation on associated relationship among the The controlling shareholder of the above principal shareholder “Union top ten shareholders or consistent action Holdings Co., Ltd.”was Union Developing Group Ltd.. The Company was not aware of the associated relationship among the other circulating shareholders and whether other circulating shareholders belonged to the consistent action person regulated in Management Measures on Information Disclosure on Shares Held Changes of Public Company. 4.3 Particulars about the holding shareholders and actual controller of the Company 4.3.1 Particulars about change in the holding shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for holding shareholder and other actual controller Name of the principal shareholder of the Company: Union Holdings Ltd. Legal representative : Dong Binggen Date of establishment: September 11, 1989 Business scope: Production of and dealing in various fabrics, garments chemical fibers and textile equipment, domestic commerce, material supply and marketing (excluding monopolized commodities), management of self-owned properties, processing with imported materials and designs, internal introduction and foreign cooperation, assembling with imported spare parts and cooperation in compensation trade. Registered capital：RMB 449.5551 million Nature of enterprise: Share-holding system Registered address: Shanghai Municipality Name of the actual controller: Union Developing Group Ltd. Legal representative: Dong Binggen Date of establishment: Aug. 23, 1983 Nature of Union Development Group Ltd.: enterprise directly under Central People ’s Government, one of the 520 national key enterprises. Registered capital: RMB 90.61 million Business scope: self-operate and act as agent for import and export business of the other commodities and technologies excluding the import commodities organized unitedly and jointly operated by the state and import commodities operated by the company authorized by the state, assembling with imported spare parts and cooperation in compensation trade, processing with imported materials, counter selling and transfer trade (pursuant to (1999) WJMZSHZ No.193 Document), export-oriented commodities sold at home business, textile technical consultant service, realty management, leasing service; contract with overseas textile field projects and domestic international biding projects; the import and export of equipment and material required by the above- mentioned overseas projects; sending contract workers to abroad to implement the aforesaid overseas projects (pursuant to (98) WJMZSHZ No. 3109 Document); vehicles sale(including cars). 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: UNION DEVELOPING GROUP LTD. 40.15% 4.54% UNION HOLDINGS LTD. 28% SHENZHEN VICTOR ONWARD TEXTILE INDUSTRIAL CO., LTD. §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Holding Holding Reason Name Title Sex Age Office term shares at the shares at the for year-begin year-end change May, 2003- Hu Yongfeng Board chairman Male 42 0 0 May, 2006 Deputy chairman of the May, 2003- Li Zhihua Male 45 0 0 Board May, 2006 Deputy chairman of the May, 2003- Song Tao Male 52 0 0 Board May, 2006 May, 2003- Ding Yue Director Male 47 0 0 May, 2006 May, 2003- Guan Tongke Director Male 58 0 0 May, 2006 May, 2003- Sun Zhiping Director/General manager Male 40 0 0 May, 2006 May, 2003- Mai Jianguang Independent director Male 43 0 0 May, 2006 May, 2003- Li Weiping Independent director Male 51 0 0 May, 2006 Fe- Dec., 2003- Shu Man Independent director 39 0 0 male May, 2006 Convener of the May, 2003- Dong Binggen Male 55 0 0 Supervisory Committee May, 2006 Fe- May, 2003- Gui Liping Supervisor 46 0 0 male May, 2006 May, 2003- Cai Wanqing Supervisor Male 54 0 0 May, 2006 May, 2003- Chen Jingqiu Deputy GM Male 62 0 0 May, 2006 May, 2003- Ye Jianzhong Deputy GM Male 49 0 0 May, 2006 Dec., 2004- Zhang Jinliang Deputy GM Male 42 0 0 May, 2006 May, 2003- Chen Xing Board secretary Male 31 0 0 May, 2006 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Title in Drawing the payment Name of Shareholding Name Shareholding Office term from the Listed Company Company Company (Yes / No) Chairman of the Jun. 18, 2004- Dong Binggen Union Holdings Ltd. No board of directors Jun. 17, 2007 Secretary of Party Union Developing Group Co., committee, Dong Binggen Jun. 1, 2001 till now Yes Ltd. Chairman of board of directors and GM Convener of the Jun. 18, 2004- Ding Yue Union Holdings Ltd. supervisory No Jun. 17, 2007 committee Union Developing Group Co., Deputy general Ding Yue July 1, 1998 till now Yes Ltd. manager Vice chairman of the Jun. 18, 2004- Hu Yongfeng Union Holdings Ltd. No Board Jun. 17, 2007 Union Developing Group Co., Deputy general Hu Yongfeng July 1, 1998 till now Yes Ltd. manager Shenzhen Textile Holdings Co., Chairman of the Jun.30, 2003- Guan Tongke Yes Ltd. board of directors Jun.29, 2006 Deputy chief Union Developing Group Co., accountant and Gui Liping Feb. 1, 2001 till now Yes Ltd. manager of Finance Dept. 5.3 Particulars about the annual payment of directors, supervisors and senior executives Unit: RMB’0000 Total annual remuneration 93.50 Total annual remuneration of the top three 24.00 directors drawing the highest payment Total annual payment of the top three senior 61.00 executives drawing the highest payment Allowance of independent director RMB 30,000 per person/ year Other treatment of independent directors The traveling expenses of independent directors for attending board meetings and shareholders' general meetings and the expenses from exercising powers and functions according to the Articles of Association of the Company shall be borne by the Company and included in the administration expenses of the Company. Name of directors and supervisors receiving no Dong Binggen, Li Zhihua, Hu Yongfeng, Guang Tongke, payment or allowance from the Company Song Tao, Ding Yue and Gui Liping. Payment Number of persons RMB 200,000 ～ RMB 300,000 1 RMB 100,000 ～ RMB 190,000 3 RMB 30,000 ～ RMB 100,000 6 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period Influenced by near abolishment of textile quota, in 2004, printing and dyeing market went downwards. For expecting the price-declining of pure cotton products exported to US, customers slowed down the steps of their orders with lowering price, which gave a big impact on the Company, because products of the Company were exported to US. In addition, since 2001, printing and dyeing enterprises enlarged produc tivity on big scale, and the competition got fiercer. In 2004, sharp increase in prices of international energy market directly resulted in quick-rising of costs in printing and dyeing industry and shortage of water caused by abnormal climate seriously affected normal production of the Company. Encountered with various and deep pressure, the Company facilitated operating good will and benign information channels formed for many years, reinforced trade of Victor Onward (Hong Kong) Company, developed and cultivated customers; meanwhile further consummated product structure and increased epiboly proportion, decreased orders draining resulted by price element to promote profitability of unit product. With tough efforts for one year, in 2004 the Company made profits totaling RMB 1,146,000. 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Main operations classified according to industries Classified according to Income from Cost of Gross Increase/decrease in Increase/decreas Increase/decrease industries or products main main profit income from main e in cost of main in gross profit ratio operations operations ratio (%) operations over the operations over over the last year last year (%) the last year (%) (%) Other textile industry 26,434.00 22,221.00 15.94% 26.93% 24.24% 12.89% Including: related 0.00 0.00 0.00% 0.00% 0.00% 0.00% transactions M ain operations classified according to products Printing and dyeing 26,102.00 21,985.00 15.77% 25.33% 22.92% 11.73% cloth Sales of clothes 332.00 236.00 28.92% Including: related 0.00 0.00 0.00% 0.00% 0.00% 0.00% transactions Pricing rules for related transactions Based on market price Necessity and durative of related Naught transactions Including: total amount of related transactions that the listed company sold products or provided labor service to the controlling shareholder and its subsidiaries was RMB 24.64 mil in the report period. 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main Increase/decrease in income from main operations operations over the last year (%) Mainland China 22,156.00 2,200.30% Hong Kong, China 4,278.00 -78.46% 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase of Proportion in the total 5,069.00 26.00% the top five suppliers amount of purchase Total amount of sales of the Proportion in the total 7,722.00 29.00% top five sales customers amount of sales 6.5 Operation of share-holding companies √Applicable □Inapplicable Unit: RMB’0000 Name of share-holding company Shenzhen lianchang Printing and Dyeing Co., Ltd. Investment earnings contributed -42.60 Proportion in net profit of 37.52% in the period listed company Share-holding Business scope Production and sale of corduroy, color cloth and allover company Net profit -113.54 Name of share-holding company Zhejiang Hualian Hangzhou Gulf Pioneer Co., Ltd. Investment earnings contributed -44.40 Proportion in net profit of 50.00% in the period listed company Share-holding Business scope Real estate development, Initiating industries, construction company project management and service, and property management Net profit 0.00 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 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 Tight supply of raw materials, especially the price rising- up of fuel and dyestuff, urged the increase in the production costs of the Company. 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds not raised through shares offering √Applicable □Inapplicable Unit: RMB’0000 Name of projects Amount of Progress of projects Earnings of projects projects Zhejiang Hualian Hangzhou Gulf 6,186.00 10 0 Pioneer Co., Ltd. Total 6,186.00 - - 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors □Applicable √Inapplicable Profit estimation of the next year □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors □Applicable √Inapplicable The Company made profits in the report period, but didn’t propose Preplan on Dividend Distribution. √Applicable □Inapplicable The reason why The Company made profits in the report The usage and utilization plan of period, but didn’t propose Preplan on Dividend Distribution retained profit of the Company Great capital in need of investment and equipment Investment and equipment innovation innovation §7. Significant Events 7.1 Purchase of assets √Applicable □Inapplicable Unit: RMB’0000 Contribution to Debts and Assets net profit of the Liabilities ownership Company of the Related Explain involved Transaction The assets Date of Purchasing involved in assets sold from transaction or principle of in the parties purchased sale price the assets the not pricing assets transferred or year-beginning to transferred not the date of sale or not 65% share Based on Shenzhen equity of registered Hualian Shenzhen May 24, capital 65.00 -59.00 Yes Yes Yes Development Huaguanli 2004 Co., Ltd. Trade Co., Ltd. 7.2 Sales of assets □Applicable √Inapplicable 7.1, 7.2 Influence on consistence of business and stability of managers caused by the issues interfered in purchase and sale Shenzhen Veal Opel Garment Co., Ltd. (original Shenzhen Huaguanli Trade Co., Ltd.) mainly engaged in children’wear project. The above acquisition didn’t influence the consistence of business and stability of managers. It’ s a trial for the Company to explore new possible development trend. 7.3 Significant guarantees √ Applicable □ Inapplicable Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Guarantee Name of the Date of happening Complete Amount of Guarantee for related Company (date of signing Guarantee term Implementation guarantee type party (yes or guaranteed agreement) or not not) Total amount of guarantee in the report period 0.00 Total balance of guarantee at the end of the report period 0.00 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 800.00 Total balance of guarantee for controlling subsidiaries at the end of the report 800.00 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 800.00 The proportion of the total amount of guarantee in the net assets of the 0.00% Company Particulars about the guarantees out of line Total amount of guarantee for other related parties, which the Company or 0.00 controlling shareholders held less than 50% The debts guarantee amount provided for the guarantee of which the 0.00 assets-liability ratio exceeded 70% Proportion of total amount of guarantee in net assets of the Company exceeded No 50% (Yes of No) Total amount of guarantee breaking regulations 0.00 7.4 Significant related transactions 7.4.1 Related purchase and sale √Applicable □Inapplicable Unit: RMB’0000 Selling products and providing Purchasing products and accepting service to related parties service to related parties Related parties Transaction Proportion in the Transaction Proportion in the amount same kind of amount same kind of transaction amount transaction amount Shenzhen Lianchang Printing 0.00 0.00% 51.00 9.80% and Dyeing Co., Ltd. Total amount 0.00 0.00% 51.00 9.80% 7.4.2 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 Union 0.00 180.00 0.00 0.00 Union Development Group 0.00 3.00 0.00 1,629.00 Co., Ltd. Shenzhen Hualian Trade Co., 0.00 6.00 0.00 0.00 Ltd. Shenzhen Lianchang Printing 0.00 31.00 0.00 0.00 and Dyeing Co., Ltd. Shenzhen Hualian Development Investment Co., 0.00 10.00 0.00 0.00 Ltd. Shenzhen Huaye Textile 0.00 100.00 0.00 0.00 Knitting and Dyeing Co., Ltd. Total 0.00 330.00 0.00 1,629.00 Including: in the report period, the capital amount the listed company provided to controlling shareholder and its subsidiaries was RMB 307.00 mil and the balance was RMB 70.87 mil. 7.5 Entrusted assets management □Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable 1. Capital commitments (1) On balance sheet date, the following capital expenditure commitments had been signed and needed not to be confirmed in the Accounting Statement: On Feb. 8, 2001, Hong Kong Victor Onward and Union Holdings signed the Letter of Investment Intent on establishing Ningbo Union New Material Technology Co., Ltd. (‘Ningbo Union’) through joint investment. According to this letter of intent, the registered capital of Ningbo Union would be RMB 0.7 billion, of which, the amount provided by Hong Kong Victor Onward would be RMB 0.175 billion, taking 25%, while the amount provided by Union Holdings would be RMB 0.525 billion, taking 75%. The Shareholders’General Meeting 2000 of the Company held on Jun. 30, 2001 had already approved this investment project. Ended this report day, the joint- investment parties had not formally signed the Joint Investment Contract on the above- mentioned investment intent. (2)On the day of balance sheet, other capital expenditure commitments that had been signed and needed not to be confirmed in the Accounting Statement were as fo llows: (Unit: HKD) Dec. 31, 2004 Dec. 31, 2003 Plants, buildings and machinery facilities 80,662 - Intangible assets 122,215 - Total 202,877 - 2. Operating lease commitments According to the signed irrevocable operating lease contracts, the lowest rents payable in the future could be summarized as follows: (Unit: HKD) Dec. 31, 2004 Dec. 31, 2003 Within 1 year 729,967 - Within 1 to 2 years 654,967 - Within 2 to 3 years 549,967 - Over 3 years 274,984 - Total 2,209,885 - The operating lease commitment was the building lease commitment between the subsidiary Vea Opel, which had been listed into the consolidation scope of the Company this year, as well as Nanhua Xingye. 7.7 Significant lawsuit and arbitrations □Applicable √Inapplicable 7.8 Particulars about the performance of obligations of Independent Directors Particulars about the independent directors attending the Board Name of This year times Presence in Entrusted Absence Notes Independent of attending the person presence (Times) Directors Board meeting (times) Mai Jianguang 6 6 0 0 Li Weiping 6 6 0 0 Shu Man 6 6 0 0 Particulars about the independent directors proposed different opinions about the relevant matters of the Company □Applicable √Inapplicable Other relevant information In the report period, the Company held two Shareholders’General Meetings (2004 1st Provisional Shareholders’General Meeting and 2003 annual Shareholders’General Meeting), at which Mr. Li Weiping and Ms. Shu Man all attended. Mr. Mai Jiangguang attended 2004 1st Provisional Shareholders’General Meeting. §8. Report of the Supervisory Committee √Applicable □Inapplicable I Meetings of the Supervisory Committee In the report period, the Supervisory Committee held three meetings in total. (i) The 4th meeting of the 4th Supervisory Committee was held on the morning of Mar. 9, 2004 in the meeting room on the 16th floor of Shenzhen Union Building. Convener of the Supervisory Committee of the Company Mr. Dong Binggen presided at the meeting. 3 people should attend, and actually all 3 had attended. The meeting examined and approved through voting the Proposal on Establishing the Zhejiang Hualian Hangzhou Gulf Pioneer Co., Ltd. (in preparation) with joint fund. Resolution notifications of this meeting had been published in Securities Times and Hong Kong Commercial Daily dated Mar. 11, 2004. (ii) The 5th meeting of the 4th Supervisory Committee was he ld on the afternoon of Apr. 16, 2004 in the meeting room on the 16th floor of Shenzhen Union Building. Convener of the Supervisory Committee of the Company Mr. Dong Binggen presided at the meeting. 3 people should attend, and actually all 3 had attended. The meeting examined and approved the following resolutions through voting: 1. Work Report 2003 of the Company 2. Auditors’Report 2003 for A-share and B-share of the Company 3. Profit Distribution Preplan of 2003 and Profit Distribution Policy of 2004 of the Company 4. Annual Report 2003 and Summary of Annual Report 2003 of the Company 5. Proposal on holding the 2003 Shareholders’General Meeting of the Company Resolution notifications of this meeting had been published in Securities Times and Hong Kong Commercial Daily dated Apr. 20, 2004. (iii) The 6th meeting of the 4th Supervisory Committee was held on the morning of Aug. 24, 2004 in the meeting room on the 16th floor of Shenzhen Union Building. Convener of the Supervisory Committee of the Company Mr. Dong Binggen presided at the meeting. 3 people should attend, and actually all 3 had attended. The meeting examined and approved through voting the Semi-Annual Report 2004 and Summary of Semi-Annual Report 2004 of the Company. Resolution notifications of this meeting had been published in Securities Times and Hong Kong Commercial Daily dated Aug. 26, 2004. II In the report period, the Supervisory Committee had carefully performed its duty, and expressed its independent opinions on the following items as follows: 1. The Company’s operation according to law In the report period, the Company operated strictly according to Company Law, Securities Law and the Articles of Association of the Company as well as other relevant laws and regulations. The procedure of decision of the Board of Directors of the Company was legal and its internal control system was perfect. The directors, managers and other senior administrative personnel of the Company all fully performed their duties during their work and none of their acts were found against the laws, regulations or the Articles of Association of the Company, nor done harm to the Company's interests. 2.Inspection of the financial status of the Company. The Supervisory Committee carefully checked and examined the financial materials of the Company, such as the Financial Report 2004 of the Company audited by PricewaterhouseCoopers Zhongtian Certified Public Accountants, and held that the Company’ s financial status in 2004 was good and its financial structure was reasonable. The unqualified Auditors' Report 2003 of the Company furnished by PricewaterhouseCoopers Zhongtian Certified Public Accountants was true and truly reflected the financial situation and operating achievements of the Company. 3. The Company did not raise funds in the report period. The practical projects in which the proceeds raised the last time since the Company’ s listing had been invested were in accordance with the projects committed to invest in. 4. Neither insider dealing nor act that would do harm to the rights and interests of part of the shareholders or cause the loss of the Company's assets was found in respect of the transaction price of the assets purchased or sold by the Company. 5. The Company and related enterprises (companies) made fair transactions according to the market prices. The joint investment made by the Company and related enterprises conformed to the Company’ s interests and the procedure of decision was in accordance with the Articles of Association of the Company and relevant regulations stipulated in Listing Rules by Shenzhen Stock Exchange. Related directors had abided by the avoidance system. Related transactions were fare and square and had done no harm to the interests of the Company or medium or small shareholders. 6. This year, PricewaterhouseCoopers Zhongtian Certified Public Accountants had provided standard and unqualified Auditors’Report for the Financial Report 2004 of the Company §9. Financial Report 9.1 Auditor’s opinions Auditor ’ s opinions : Standard unqualified auditor ’ s opinions 9.2 Financial statement 9.2.1 Balance Sheet Unit: HKD’000 Notes 2004 2003 HKD’000 HKD’000 ASSETS Non-current assets Property, plant and equipment 11 158,851 103,285 Investment properties 12 28,150 26,422 Leasehold land payments 13 2,448 - Intangible assets 14 (3,915) 410 Investments in associates 15 61,252 28,166 Available-for-sale investments 16 29,585 29,449 276,371 187,732 Current assets Inventories 17 90,128 67,933 Receivables and prepayments 18 83,998 82,978 Due from related parties 30 1,869 6,563 Trading investments 19 44 51 Pledged deposits 20 7,820 6,000 Cash and cash equivalents 20 36,050 26,969 219,909 190,494 Total assets 496,280 378,226 Shareholders’equity Share capital 24 207,871 207,871 Reserves 25 52,185 51,120 Retained earnings 22,083 21,374 282,139 280,365 Minority interest 26 28,195 335 LIABILITIES Non-current liabilities Long-term borrowings 23 2,296 - Deferred income 21 1,032 - Due to original shareholders 1 14,754 14,754 18,082 14,754 Current liabilities Trade and other payables 22 47,882 29,298 Due to related companies 30 17,716 - Current tax liabilities 786 1,865 Short-term borrowings 23 101,480 51,609 167,864 82,772 Total liabilities 185,946 97,526 Total equity and liabilities 496,280 378,226 SHENZHEN VICTOR ONWARD TEXTILE INDUSTRIAL COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004 Reserves Share Other Retained Share capital premium reserves earnings Total HKD’ 000 HKD’ 000 HKD’ 000 HKD’ 000 HKD’ 000 (Note 24) (Note 25) (Note 25) Balances at 1 January 2003 207,871 11,826 39,073 19,603 278,373 Net profit for the year - - - 1,992 1,992 Transfer to statutory reserves - - 221 (221) - Balances at 31 December 2003 207,871 11,826 39,294 21,374 280,365 Balances at 1 January 2004 207,871 11,826 39,294 21,374 280,365 Net profit for the year - - - 1,766 1,766 Currency translation differences - - 8 - 8 Transfer to reserves for long outstanding payables written back and negative goodwill (Note 25(c)) - - 932 (932) - Transfer to statutory reserves - - 125 (125) - Balances at 31 December 2004 207,871 11,826 40,359 22,083 282,139 9.2.2 Income Statement and Statement of Profit Distribution Unit: HKD’000 Notes 2004 2003 HKD’000 HKD’000 Sales 4 248,270 195,931 Cost of sales (208,701) (168,272) Gross profit 39,569 27,659 Other operating income 2,468 2,480 Distribution costs (10,756) (7,213) Administrative expenses (23,403) (18,133) Other operating expenses (1,250) (1,243) Other gains – net 2,470 1,966 Profit from operations 9,098 5,516 Finance costs – net 7 (5,584) (1,811) Share of results of associates before tax 15 (1,598) (758) Profit before tax 5 1,916 2,947 Income tax expense 8 (591) (989) Group profit before minority interest 1,325 1,958 Minority interest 26 441 34 Net profit 1,766 1,992 Earnings per share (expressed in Hong Kong dollar per share) – basic and diluted 9 0.01 0.01 9.2.3 Statement of Cash Flow Unit: HKD’000 Notes 2004 2003 HKD’000 HKD’000 Cash flows from operating activities Cash generated/(used in) from operations 28 38,622 (13,396) Interest paid (5,190) (2,102) Tax paid (1,198) (713) Net cash generated from/(used in)operating activities 32,234 (16,211) Cash flows from investing activities Acquisition of subsidiaries and effect of consolidation of Rich Sino, net cash received 29 17,533 - Investment in an associate 15 (58,320) - Purchase of property, plant and equipment (6,412) (3,998) Purchase of intangible assets 14 (59) (410) Proceeds from disposal of property, plant and equipment 174 1,647 Proceeds from disposal of trading investments - 2,858 Government subsidies received 21 1,032 - Interest received 173 276 Dividend received 1,550 1,555 Net cash (used in)/generated from investing activities (44,329) 1,928 Cash flows from financing activities Proceeds from borrowings 134,060 107,910 Repayments of borrowings (112,884) (96,744) Net cash generated from/(used in) financing activities 21,176 11,166 Net increase/(decrease) in cash and cash equivalents 9,081 (3,117) Cash and cash equivalents at beginning of year 26,969 30,086 Cash and cash equivalents at end of year 20 36,050 26,969 9.3 Explanation on changes of accounting policy, accounting estimation and settlement compared with the latest annual report □Applicable √Inapplicable 9.4 Contents, correct amount, reason and its influence of significant accounting errors □Applicable √Inapplicable 9.5 Explanation on change of consolidated scope compared with the latest annual report √Applicable □Inapplicable Compared with the latest annual report, the consolidation scope increased the following companies: Shengzhong Industrial Co., Ltd., Shenzhen Nanhua Printing and Dyeing Co., Ltd., Nanhua Industrial Co., Ltd. and Shenzhen Vea Opel Garment Co., Ltd.. 1.Shengzhong stopped its original business in Feb., 1999 and went out of business temporarily. The directors of the Company believed the influence of its total assets on the whole assets of the Group was not relatively serious. In 2003, the Company didn’t list it into consolidation scope. Since Jan. 1, 2004, Shengzhong resumed operation. On Jan. 1, 2004, the Company listed it into consolidation scope of accounting statements. 2. In 2004, wholly subsidiary of the Company, Hong Kong Victor Onward pur chased 1.6% equity of Nanhua Printing and Dyeing held by Changzhou Dieqiu Textile Printing and Dyeing Group Ltd.. By far, the Company directly and indirectly held equity of Nanhua Printing and Dyeing attaining to 51.16%. Therefore, the Company listed it into consolidation scope this year. Nanhua Industrial was wholly subsidiary of Nanhua Printing and Dyeing, so the company listed it into consolidation scope of accounting statements with Nanhua Printing and Dyeing. 3. In 2004, the Company purchased 65% equit y of Shenzhen Vea Opel Garment Co., Ltd. held by Shenzhen Union Development Investment Co., Ltd.. By far the Company directly held equity of Shenzhen Vea Opel Garment Co., Ltd. attaining to 90%. Therefore, the Company listed it into consolidation scope of accounting statements. Board of Directors of Shenzhen Victor Onward Textile Industrial Co., Ltd. Apr. 14, 2005