*ST舜喆B(200168)雷伊Ｂ2004年年度报告摘要（英文版）

GUANGDONG RIEYS GROUP COMPANY LTD. SUMMARY OF ANNUAL REPORT 2004 §1. Important Notice 1.1 Board of Directors of Guangdong Rieys Group Company 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 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 Naught 1.3 All directors attended the Board meeting. 1.4 Baker Tilly Hong Kong Limited Certified Public Accountants audited the financial report of the Company and issued standard unqualified Auditor’ s Report for the Company. 1.5 Chairman of the Board Mr. Chen Hongcheng and Chief Financial Officer Mr. Li Guoqiang hereby confirm that the Financial Report of the Annual Report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock RIEYS-B Stock code 200168 Listed stock exchange Shenzhen Stock Exchange Registered address and office address Registered address: Meixin Industrial Park of Jun Bu Town, Puning, Guangdong Office address: 26/F of Jiangsu Bldg., Yitian Road, Futian District, Shenzhen Post code Post code of registered address: 515322 Post code of office address: 518000 Internet web site of the Company http://www.rieys.com E-mail of the Company rieys@200168.com 2.2 Contact person and method Secretary of the Board Securities Affairs Representative Name Mr. Zhou Haolin Mr. Xu Wei Contact address Office of Secretary of the Board, Office of Secretary of the Board, 26/F of Jiangsu Bldg., Yitian 26/F of Jiangsu Bldg., Yitian Road, Road, Futian District, Shenzhen Futian District, Shenzhen Telephone 86-755-82960823 86-755-82960823 Fax 86-755-82960383 86-755-82960383 E-mail zhl@200168.com xu@200168.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 651,717,620.00 488,288,750.00 33.47% 476,822,720.00 Total profit 83,447,690.00 75,249,621.00 10.89% 49,278,243.00 Net profit 53,052,158.00 47,579,585.00 11.50% 40,145,854.00 Net profit after deducting 35,174,174.00 32,796,908.00 7.25% 32,772,230.00 non-recurring gains and losses Net cash flows arising from 8,272,202.00 61,272,944.00 -86.50% 98,372,310.00 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 1,279,012,027.00 1,117,318,635.00 14.47% 958,492,660.00 Shareholder’s equity (excluding 515,279,642.00 458,700,621.00 12.33% 411,121,036.00 minority interests) 3.2 Major financial indexes Unit: RMB Increase/decrease over 2004 2003 2002 last year（％） Earnings per share 0.17 0.18 -5.56% 0.23 Earnings per share (Note) 0.17 - - - Return on equity 10.30% 10.37% -0.07% 9.76% Return on equity as calculated based on net profit after deducting non-recurring gains 6.83% 7.15% -0.32% 7.96% and losses Net cash flow per share arising from 0.03 0.23 -86.96% 0.56 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 1.62 1.73 -6.36% 2.32 Net assets per share after adjustment 1.61 1.73 -6.94% 2.32 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 (Year 2004) Collection of income tax of subsidiaries checked and ratified in 15,777,070.00 shanghai Various government subsidies 2,006,641.00 Capital occupied received from non-financing enterprises reckoned into 5,805,646.00 gains and losses of current period Gains and losses from short-term investment 37,906.00 Other non-operating income/expenses after deducting daily reserve for -767,528.00 impairment losses of assets allotted by the Company based on regulations of Accounting System for Business Enterprise Switching back various reserves for impairment losses allotted over the 2,153,788.00 previous years Impact on income tax -1,660,198.00 Impact on minority interests -5,475,341.00 Total non-recurring gains and losses 17,877,984.00 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 53,052,158.00 53,210,001.00 -Withdrawal of depreciation occurred from fixed assets after assessment appreciation 27,000 Explanation on difference -Writing off organization expenses -105,077 -Deferred tax 235,920 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital Unit: share Increase / decrease in this time (+, -) After the Before the Bonus Capitalization of Subtotal change change shares public reserve I. Unlisted shares 1. Sponsors’shares 136,687,500 13,668,750 13,668,750 27,337,500 164,025,000 Including: State-owned share 0 0 0 0 0 Domestic legal person’ s shares 136,687,500 13,668,750 13,668,750 27,337,500 164,025,000 Foreign legal person’ s shares 0 0 0 0 0 Others 0 0 0 0 0 2. Raised legal person’ s shares 0 0 0 0 0 3. Inner employees’shares 0 0 0 0 0 4. Preference shares or others 0 0 0 0 0 Total unlisted shares 136,687,500 13,668,750 13,668,750 27,337,500 164,025,000 II. Listed shares 1. RMB ordinary shares 0 0 0 0 0 2. Domestically listed foreign 128,812,500 12,881,250 12,881,250 25,762,500 154,575,000 shares 3. Overseas listed foreign shares 0 0 0 0 0 4. Others 0 0 0 0 0 Total listed shares 128,812,500 12,881,250 12,881,250 25,762,500 154,575,000 III. Total shares 265,500,000 26,550,000 26,550,000 53,100,000 318,600,000 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) Shenzhen Shenghengchang Industrial Co., 19,642,500 117,855,000 36.99% Non-circulating 117,855,000 Legal person shares Ltd. Shenzhen Risheng Investment Co., Ltd. 5,670,000 34,020,000 10.68% Non-circulated 34,020,000 Legal person shares CHEN MEI XIANG 1,537,313 25,753,588 8.08% Circulating B-share Shantou Lianhua Industrial Co., Ltd. 2,025,000 12,150,000 3.81% Non-circulating 12,150,000 Legal person shares SKANDIA GLOBAL FUNDS PLC -2,264,027 4,606,541 1.45% Circulating B-share WANG YING 127,900 767,398 0.24% Circulating B-share YAO JIN GEN 82,620 495,720 0.16% Circulating B-share PAN XIU LING 411,240 411,240 0.13% Circulating B-share BEST RELIANCE INVESTMENTS LTD 9,691 371,841 0.12% Circulating B-share CHENG AI XUE 36,930 346,680 0.11% Circulating B-share 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) CHEN MEI XIANG 25,753,588 B-share SKANDIA GLOBAL FUNDS PLC 4,606,541 B-share WANG YING 767,398 B-share YAO JIN GEN 495,720 B-share PAN XIU LING 411,240 B-share BEST RELIANCE INVESTMENTS LTD 371,841 B-share CHENG AI XUE 371,700 B-share LIANG, JIA 346,680 B-share LIU SHU WEN 317,738 B-share CAI LINZI 316,980 B-share Explanation on associated relationship among the There existed associated relationship among Shenzhen Shenghengchang top ten shareholders or consistent action Industrial Co., Ltd., Ms. Chen Meixiang, Shenzhen Risheng Investment Co., Ltd. and Shantou Lianhua Industrial Co., Ltd., and they belonged to the consistent actors regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Company. The Company was not aware of the associated relationship among the other shareholders. 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 (1) The controlling shareholder of the Company is Shenzhen Shenghengchang Industrial Co., Ltd. (hereafter referred to as Shenghengcha ng Industrial), who holds 117.855 million shares of the Company, taking up 36.99% of the total share capital. The registered capital of this company is RMB 98 million, including Mr. Chen Hongcheng holds 70% equity of Shenghengchang Industrial, while Mr. Chen Honghai holds 30% equity of Shenghengchang Industrial. Its registered place: 5th Floor, Hubei Baofeng Building, Bao’an South Road, Shenzhen; legal representative: Ding Lihong. The business scope of Shenghengchang Industrial: sales of hardware, AC parts, building materials, electronic products and car fittings. (2) Mr. Cheng Hongcheng is the actual controller of Shenghengchang Industrial. Mr. Chen Hongcheng was engaged in operation and management of the enterprise for over 20 years. He was once Chairman of the Board and concurrently President of Puning Hongxing Weaving and Clothing Co., Ltd., and executive director of Puning Haicheng Industrial Co., Ltd.. Mr. Chen Hongcheng is the standing commissar of Political Consultative Conference of Puning, the deputy of the National People ’ s Congress of Jieyang City and Guangdong Province. In 1998, Mr. Chen was awarded as the excellent village and township entrepreneur of Guangdong province, the advanced member of Guangdong Industry and Commerce Union, and the advanced member of Guangdong Chamber of Commerce. In 1999, Jieyang municipality People’ s Government awarded him as the advanced individual of splendor undertaking; Vice Chairman of Costume Association of Guangdong Province; Vice Chairman of Costume Association of Shenzhen City. 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: CHEN HONG CHEGN CHEN HONG HAI holding 70% equity holding 30% equity 持有 ３６．９９％股份 SHENZHEN SHENGHENGCHANG INDUSTRIAL CO., LTD. THE COMPANY §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 Chen Chairman of the Board May 30, 2003– Male 47 0 0 Hongcheng and concurrently President May 30, 2006 Vice Chairman of the May 30, 2003– Zheng Yujian Male 38 0 0 Board May 30, 2006 May 30, 2003– Chen Honghai Director Male 51 0 0 May 30, 2006 May 30, 2003– Ding Lihong Director Male 34 0 0 May 30, 2006 May 30, 2003– Fang Meidi Independent Director Female 59 0 0 May 30, 2006 May 30, 2003– Cai Shaohe Independent Director Male 44 0 0 May 30, 2006 May 30, 2003– Yang Xinfa Independent Director Male 36 0 0 May 30, 2006 Chairman of the May 30, 2003– Yan Mingfei Male 37 0 0 Supervisory Committee May 30, 2006 May 30, 2003– Liu Li Supervisor Female 36 0 0 May 30, 2006 May 30, 2003– Xu Wei Supervisor Male 28 0 0 May 30, 2006 May 30, 2003– Zhang Yongli Vice President Male 46 0 0 May 30, 2006 Vice President, Secretary May 30, 2003– Zhou Haolin Male 35 0 0 of the Board May 30, 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) Shenzhen Shenghengchang Chen Hongcheng Director Mar. 18, 2003 to now No Industrial Co., Ltd. Director and Shenzhen Shenghengchang Chen Honghai concurrently Mar. 18, 2003 to now Yes Industrial Co., Ltd. General Manager Shenzhen Shenghengchang Chairman of the Ding Lihong Mar. 18, 2003 to now Yes Industrial Co., Ltd. Board 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual remuneration RMB 716,400 Total annual remuneration of the top three RMB 90,000 directors drawing the highest payment Total annual payment of the top three senior RMB 360,000 executives drawing the highest payment Allowance of independent director RMB 30,000 per person/ year Other treatment of independent directors The Company reimbursed the reasonable charges 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 the relevant laws and regulations and Articles of Association. Name of directors and supervisors receiving no Vice Chairman of the Board Mr. Zheng Yujian, Director Mr. payment or allowance from the Company Cheng Honghai, Director Mr. Ding Lihong and Chairman of the Supervisory Committee Mr. Yan Mingfei received no payment from the Company. Director Chen Honghai and Director Ding Lihong drew their remuneration from Shenzhen Shenghengchang Industrial Co., Ltd.. Payment Number of persons Over RMB 100,000 1 RMB 50,000 ～ RMB 100,000 4 Under RMB 50,000 5 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, the Company kept a good development tendency and its achievement has increased by a certain margin compared with the same period of 2003. In 2004, the Company realized income from main operations amounting to RMB 652 million, up 33.47% year-on- year; and realized profit from main operations of RMB 193.08 million, an increase of 22.42% compared with the same period of last year, which was mainly because that the Company adjusted the sales policies of products and enlarged the sales of domestic brand garments, resulting in raise of sale volume; and realized net profit of RMB 53.05 million, an increase of 11.50% than over the same period of last year. The Company’ s operating expenses has increased by 60% compared with the same period of last year, which was mainly because of the increase of the Company’ s export sales and brand apparel sales; expenses of income tax has increased by 273% than that in the same period of last year, which was mainly because that the Company’ s total profit has risen and Puning Tianhe (the controlling subsidiary of the Company) in the current period was in the first collection period of halving of income tax. Tightly based on the core business of clothes operation, through implementing series of active and steady brand marketing expanding plans, the Company has realized transition from single clothes production to clothes production and brand marketing paralleled. At present, brand marketing of the Company possessed certain popularity at home and the market share rate improved constantly, which provided another important profit source of the Company. The Company adjusted development mind, put clothes as core business and decided to strengthen and large core business. The Company would not conduct trans- industry development and concentrate resources into core business. The Company would consistently cultivate new profit increasing points into core business. 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 (%) (%) Clothing manufacturing 65,171.76 45,744.43 29.81% 33.47% 38.67% -2.63% Including: related 0.00 0.00 0.00% 0.00% 0.00% 0.00% transactions M ain operations classified according to products Sales of export clothing 44,205.81 36,733.34 16.90% 37.04% 49.99% -7.18% Sales of clothing at 20,965.95 9,011.10 57.02% 26.53% 6.06% 8.29% home Including: related 0.00 0.00 0.00% 0.00% 0.00% 0.00% transactions Pricing rules for related transactions Naught 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 0.00 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 (%) Sales of export clothing 44,205.81 37.04% Sales of clothing at home 20,965.95 26.53% 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase of 8,501.05 Proportion in the total 26.00% the top five suppliers amount of purchase Total amount of sales of the 28,630.00 Proportion in the total 49.00% top five sales customers amount of sales 6.5 Operation of share-holding companies □Applicable √Inapplicable 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) than that in the last year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year □Applicable √Inapplicable Analysis to reasons of material changes in the whole financial position than that in the last year □Applicable √Inapplicable 6.9 Explanatio n on the past, current and future important effects of the material changes in production and operation environment, macro-policies and regulations on the Company’ s financial position and operating results □Applicable √Inapplicable 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds not raised through shares offering √Applicable □Inapplicable Unit: RMB’0000 Name of projects Amount of Progress of projects Earnings of projects projects To increase investment in Shenzhen 510.00 Be completed -7.71 Heyiyi Fashion Co., Ltd. To set up Guangzhou Ruitang 35.00 Be completed -1.14 Trade Co., Ltd. To set up Shanghai Jiancheng 35.00 Be completed 102.15 Trading Co., Ltd. To set up Sichuan Baodewei 35.00 Be completed -12.60 Trading Co., Ltd. To set up Guangzhou Ruicheng 35.00 Be completed -1.30 Trade Co., Ltd. To acquire Shanghai Baodewei 70.00 Be completed 1101.08 Apparel Co., Ltd. To set up Sino-foreign joint venture 12,235.33 In preparation Still uncompleted Puning Rieys Paper Industry Co., Ltd. To set up Sino-foreign enterprise 7,956.13 Be completed -33.65 Dongguan Jinjing Textile Manufactory Co., Ltd. To acquire 25% of Puning Tianhe 1,331.54 The procedure of industrial and 212.32 Textile Manufactory Co., Ltd. commercial registration is in process. Total 22,243.00 - - 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 Ended Dec. 31 st , 2004, the profit after tax of the year audited and confirmed by Shenzhen Pengcheng Certified Public Accountants and Baker Tilly Hong Kong Limited Certified Public Accountants according to Chinese Accounting Standards and International Accounting Standards respectively was RMB 53,052,158 and RMB 53,210,001 respectively. According to the principle of the lower amount in profit distribution, based on the profit after tax amounting to RMB 53,052,158 in 2004 audited by Shenzhen Pengcheng Certified Public Accountants, after being appropriated as statutory surplus public reserve amounting to RMB 5,449,521 and 5% as public welfare fund amounting to RMB 2,724,761 and adding retained earnings carried down from end of 2003 amounting to RMB 43,094,133 and subtracting the dividend of ordinary shares transferred into share capital amounting to RMB 26,550,000, thus the total profit available for distributing to shareholders is RMB 61,422,009. The profit distribution preplan and project on converting capital public reserve into share capital in 2004 is: based on total number of shares amounting to 318,600,000 shares on Dec. 31st , 2004, the Company allots cash dividend at the rate of HKD 0.5 for every 10 shares by using retained earnings, which totally amounts to allotting cash dividends HKD 15,930,000. The Company made profits in the report period, but didn’t propose Preplan on Dividend Distribution. □Applicable √Inapplicable §7. Significant Events 7.1 Purchase of assets √Applicable □Inapplicable RMB’0000 Assets Debts and Contribution to net ownership Liabilities profit of the Related Explain involved in the involved Transaction The assets Date of Purchasing Company of the transaction or principle of assets in the parties purchased sale price assets sold from no pricing transferred or assets the year-beginning not transferred to the date of sale or not Shenzhen Based on Heyiyi Increase May 20, investment 510 -7.71 No Yes Yes Fashion investment 2004 amount Co., Ltd. Shanghai Based on Baodewei Share Jan. 8, investment 70 1,101.08 Yes Yes Yes Dressing equity 2004 amount Co., Ltd. Hong Kong Based on Xingli Share Nov. 30, investment 1,331.54 212.32 No No No Trade Co., equity 2004 amount 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 The above behaviors of increasing investment and purchasing share equity, further enlarged operating scale of the Company, reorganized resources of the Company, facilitated the Company concentrate on enlarging and strengthening core business, and at the same time, increased brand types of operation of the Company and further promoted competitive edge of brand marketing business of the Company. 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) Palm Spring Property Credit Development Oct. 28, 2004 1,400.00 6 months No No Guarantee (Shenzhen) Co., Ltd. Total amount of guarantee in the report period 1,400.00 Total balance of guarantee at the end of the report period 1,400.00 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 11,690.40 Total balance of guarantee for controlling subsidiaries at the end of the report 11,690.40 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 13,090.40 The proportion of the total amount of guarantee in the net assets of the 25.41% 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 7.4.2 Related credits and liabilities current □Applicable √Inapplicable 7.5 Entrusted assets management □Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable 1. For details concerning commitments made by the Company in the report period or lasting to the report period, please refer to the contents of 6.13. 2. Shenzhen Shenghengchang Industrial Co., Ltd. promised to appropriate an amount not less than RMB 8 million to the Company before Aug. 30, 2004 as a protective measure for the Company, so as to thoroughly put an end to the payment responsibility the Company had undertaken during the transfer agreement in which Shenzhen Shenghengchang Industrial Co., Ltd. was assigned 51% equity of Shenzhen Yuanwangcheng Multi-Media Computer Co., Ltd.. For details, please refer to the notification of the Company published on Securities Time and Hong Kong Ta Kung Pao dated Jul. 29, 2004. On Aug. 30, 2004, Shenzhen Shenghengchang Industrial Co., Ltd. appropriated RMB 8 million to the Company. 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) Cai Shaohe 9 9 0 0 Yang Xinfa 9 9 0 0 Fang Meidi 9 7 0 2 Particulars about the independent directors proposed different opinions about the relevant matters of the Company □Applicable √Inapplicable §8. Report of the Supervisory Committee √Applicable □Inapplicable I. Work of the Supervisory Committee in the report period Besides the supervisors attending the Board meeting of the Company as non-voting delegates, the Supervisory Committee totally held two meetings: 1. The 1st meeting of the 2nd Supervisory Committee for 2004 was held on the morning of Feb. 27, 2004 at the meeting room on 26/F, Tower A, Jiangsu Bulg., Yitian Road, Futian District, Shenzhen. The following resolutions were examined and approved in this meeting: 1) Work Report 2003 of the Supervisory Committee; 2) Annual Report 2003 and its Summary; 3) Opinions of the Supervisory Committee on the operation of the Company in 2003. 2. The 2nd meeting of the 3rd Supervisory Committee for 2004 was held at the meeting room of the Company, on 26/F, Tower A, Jiangsu Building, Yitian Road, Futian District, Shenzhen on the morning of Aug. 2, 2004. The following resolutions were examined and approved: Semi-annual Report 2004 and its Summary II. Authorized by the Shareholders’General Meeting, the Supervisory Committee and all supervisors performed the supervision duties according to the present laws and regulations of the State, the Article of Association and Rules of Procedure of the Supervisory Committee: (I) The Company’s operation according to laws In the report period, the Supervisory Committee conducted supervision and investigation about every item of work of the Company. The Company could strictly operate according to relevant policies, regulations of the State and the Articles of Association. Based on the principle of prudently operating and effectively preventing and minimizing risks, the Company had established a relatively perfect internal control system. While performing their duties in the Company, directors, general managers or other senior executives had no cases that were against laws, regulations, or Articles of Association, or did harm to the interests of the Company. (II) Financial situation of the Company The financial department of the Company could strictly carried out relevant State regulations, and no deed that was against the Company Law, Articles of Association or any other laws or regulations had been founded. The unqualified Auditor’s Report for the year 2004, which issued by Shenzhen Pengcheng Certified Public Accountant Ltd. and Baker Tilly Hong Kong Limited Certified Public Accountants, objectively and truly reflected the financial status and operating achievements of the Company. (III) In the report period, the Company had not used raised proceeds: (IV) Purchase of assets by the Company during the report period: 1. The Company acquired 50% equity of Shanghai Baodewei Apparel Co., Ltd. held by Mr. Zhang Yongli, 10% equity of Shanghai Baodewei Apparel Co., Ltd. held by Mr. Liu Wenbo and 10% equity of Shanghai Baodewei Apparel Co., Ltd. held by Mr. Lv Yi, which was no such case that these transactions had done harm to the interests of the shareholders or investors. 2. Tianrui (Hong Kong) Trading Co., Ltd., the sole corporation of the Company’ s controlling subsidiary Shenzhen Rieys Industrial Co., Ltd., acquired 25% equity of Puning Tianhe Textile Manufactory Co., Ltd. held by Hong Kong Xingli Trading Corporation, which was no such case that the transaction had done any harm to the interests of the shareholders or investors. In the report period, the Company had no significant sales of assets. (V) Related transactions of the Company in the report period: 1. In the report period, the Company acquired 50% equity of Shanghai Baodewei Apparel Co., Ltd held by related party Mr. Zhang Yongli, and jointly invested and established Guangzhou Ruicheng Trade Co., Ltd, Guangzhou Ruitang Trade Co., Ltd, Shanghai Jiancheng Trading Co., Ltd., and Sichuan Baodewei Trading Co., Ltd. with Mr. Zhang, which was no such case that the said transactions had done harm to the interests of the shareholders or investors. 2. In the report period, Tianrui (Hong Kong) Trade Co., Ltd, the sole corporation of the Company’ s controlling subsidiary Shenzhen Rieys Industrial Co., Ltd., acquired 25% equity of Puning Tianhe Textile Manufactory Co., Ltd. held by the related party Hong Kong Xingli Trade Co., Ltd. with whom Tianrui (Hong Kong) Trade Co., Ltd had no controlling relationship, which was no such case that the transaction had done any harm to the interests of shareholders or investors. §9. Financial Report 9.1 Auditor’s opinions Auditor ’ s opinions : Standard unqualified auditor ’ s opinions 9.2 Financial statement GUANGDONG RIEYS (GROUP) COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2004 (Expressed in thousands of Renminbi except for earnings per share) Notes 2004 2003 Sales 651,718 488,289 Cost of sales (458,638) (330,573) Gross profit 193,080 157,716 Other operating income, net 3 11,177 5,796 Distribution costs (56,010) (35,114) General and administrative expenses (43,405) (39,696) Profit from operations 104,842 88,702 Finance costs, net 4 (21,588) (15,232) Share of gain of an associate 116 58 Profit before tax 5 83,370 73,528 Income tax expenses 6 (7,870) (450) Profit after tax 75,500 73,078 Minority interests 24 (22,290) (25,495) Net profit for the year 53,210 47,583 Dividends 7 26,550 70,800 As restated Earnings per share - Basic and diluted 8 RMB0.17 RMB0.15 GUANGDONG RIEYS (GROUP) COMPANY LIMITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2004 (Expressed in thousands of Renminbi) Notes 2004 2003 ASSETS Non-current assets Property, plant and equipment, net 9 535,431 407,322 Land use rights, net 10 12,683 12,960 Goodwill 11 35,484 40,255 Computer software and other deferred assets 12 1,435 1,983 Prepayments for property, plant and equipment 13 95,976 35,237 Prepayments for long-term investments 14 - 60,900 Investments in an associate 16 12,961 12,845 Deferred tax assets 17(b) 3,798 3,562 697,768 575,064 Current assets Marketable securities 18 300 648 Inventories, net 19 95,918 74,648 Trade and other receivables, net 20 267,406 222,607 Prepayments 1,208 1,790 Advances to suppliers 21 131,779 85,287 Taxes recoverable 17(a) 21,946 57,523 Cash and cash equivalents 22 59,995 121,556 578,552 564,059 Total assets 1,276,320 1,139,123 LIABILITIES AND EQUITY Current liabilities Trade payables 79,533 131,305 Accruals and other payables 51,370 25,825 Short-term bank loans 23 504,900 383,300 Taxes payable 17(c) 7,965 2,331 643,768 542,761 Minority interests 24 119,448 136,468 Equity Share capital 25 318,600 265,500 Reserves 26 131,732 150,108 Retained earnings 62,772 44,286 513,104 459,894 Total liabilities and equity 1,276,320 1,139,123 GUANGDONG RIEYS (GROUP) COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2004 (Expressed in thousands of Renminbi) Reserves Statutory Share Share revenue Discretionary Retained Notes capital premium reserves reserve earnings Total Balances at January 1, 2003 177,000 92,854 30,817 27,000 84,640 412,311 Net profit for the year - - - - 47,583 47,583 Dividends 7, 25 70,800 - - - (70,800) - Issue of shares 25 17,700 (17,700) - - - - Appropriation from retained earnings - Statutory revenue reserves 26 - - 7,137 - (7,137) - - Discretionary reserve - - - 10,000 (10,000) - Balances at December 31, 2003 265,500 75,154 37,954 37,000 44,286 459,894 Net profit for the year - - - - 53,210 53,210 Dividends 7, 25 26,550 - - - (26,550) - Issue of shares 25 26,550 (26,550) - - - - Appropriation from retained earnings - Statutory revenue reserves 26 - - 8,174 - (8,174) - Balances at December 31, 2004 318,600 48,604 46,128 37,000 62,772 513,104 GUANGDONG RIEYS (GROUP) COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2004 (Expressed in thousands of Renminbi) Note 2004 2003 OPERATING ACTIVITIES Profit from operations 83,370 73,528 Adjustments for: Provision for doubtful debts 4,660 4,504 (Write back of) Provision for obsolete stocks (2,436) 724 Write back of provision for marketable securities - (25) Depreciation of property, plant and equipment 21,904 20,001 Loss on disposal of property, plant and equipment 31 - Amortization of land use rights 277 303 Amortization of goodwill 4,771 4,771 Amortization of computer software and other deferred assets 577 615 Share of gain of an associate (116) (58) Interest expenses 29,767 18,828 Interest income (8,976) (4,598) Operating profit before working capital changes 133,829 118,593 (Increase) Decrease in inventories (18,834) 13,869 Increase in trade and other receivables (59,944) (7,276) (Increase) Decrease in prepayments (45,911) 11,590 (Decrease) Increase in trade payables (51,772) 649 Increase in accruals and other payables 25,545 1,665 Cash (used in) generated from operations (17,087) 139,090 Interest paid (29,767) (18,828) Taxes refunded (paid) 33,105 (9,406) Net cash (used in) generated from operating activities (13,749) 110,856 INVESTING ACTIVITIES Purchases of property, plant and equipment (102,601) (155,423) Net proceeds from disposals of marketable securities 348 430 Increase in prepayments for property, plant and equipment (82,396) (35,237) Decrease (Increase) in prepayments for long-term investment 4,891 (60,900) Interest received 9,944 4,598 Net proceeds from disposals of property, plant and equipment 90 15,055 Decrease in other deferred assets (28) (1,072) Net cash flows used in investing activities (169,752) (235,549) FINANCING ACTIVITIES Increase in short-term bank loans 121,600 61,500 Decrease in long-term bank loan - (60,000) Contribution from minority shareholders 5,740 4,419 Dividends paid (5,400) - Net cash flows generated from financing activities 121,940 5,919 Net decrease in cash and cash equivalents (61,561) (115,774) Cash and cash equivalents, beginning of year 121,556 237,330 Cash and cash equivalents, end of year 22 59,995 121,556 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 that of last year, units in consolidation scope of this year, increased (1) Shenzhen Heyiyi Fashion Co., Ltd. 92) Dongguang Jinjing Textile Manufactory Co., Ltd., (3) Sichuan Baodewei Trade Co., Ltd. (4) Guangzhou Ruicheng Trade Co., Ltd., (5) Guangzhou Ruitang Trade Co., Ltd., (6) Shanghai Jiancheng Trade Co., Ltd., (7) Shanghai Baodewei Dressing Co., Ltd., (8) Tainrui (Hong Kong) Trade Co., Ltd., (9) Shenzhen Tainqi Clothes Textile Manufactory, the above 9 newly increased controlling subsidaireis and sub-subsidiaries. Board of Directors of Guangdong Rieys Group Company Ltd. Apr. 12, 2005