鲁泰Ａ(000726)鲁泰Ｂ2004年年度报告摘要（英文版）

LU THAI TEXTILE CO., LTD. SUMMARY OF ANNUAL REPORT 2004 (Adjustment based on International Accounting Standards) §1. Important Notes 1.1 The Board of Directors of Lu T hai Textile Co., Ltd. (hereinafter referred to as the Company) and its directors hereby confirm that there are no any important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. The summary of annual report 2004 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 stated that they couldn’ t ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. 1.3 Name list of Director having not attended the meeting Name of Directors having not attended Reason Assignee’name the Board meeting Xu Zhinan Business trip Liu Shizhen Independent Director Hong Xiaobin Business trip Independent Director You Shisong 1.4 Shandong Zhengyuan Hexin Certified Public Accountants and PricewaterhouseCoopers Zhongtian Certified Public Accountants Ltd. respectively issued the domestic and international unqualified Auditors’Report for the Company. 1.5 Chairman of the Board of the Company Mr. Liu Shizhen, Chief Accountant Mr. Su Huasheng and Person in Charge of Financing Ms. Qu Qingfeng hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. 1.6 This annual report is written in both Chinese and English. Should there be any difference in interpretation of the two versions, the Chinese version shall prevail. §2. Company Profile 2.1 Basic information Short form of the stock LUTHAI A, LUTHAI B Stock code 000726, 200726 Listed stock exchange Shenzhen Stock Exchange Registered address and office address Registered address: No. 11, Mingbo Road, High-tech Industrial Development Zone, Zibo, Shandong Office address: No. 81, Songling East Road, Zichuan District, Zibo Post code Post code of registered address: 255086 Post code of office address: 255100 Internet web site www.lttc.com.cn E-mail lttc@public.zbptt.sd.cn 2.2 Contact person and method Secretary of the Board of Securities Affairs Representative Directors Name Qin Guiling Zheng Weiyin Contact No. 81, Songling East Road, No. 81, Songling East Road, Zichuan address Zichuan District, Zibo District, Zibo Telephone (86)533-5285166; 5418361 (86)533-5285166; 5418361 Fax (86)533-5418833; 5282188 (86)533-5418833; 5282188 E-mail qinguiling@lttc.com.cn wyzheng@lttc.com.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB’000 Increase/decrease 2004 2003 from the previous 2002 year（％） Income from main operations 1,890,862 1,270,512 48.83% 950,880 Total profit 323,272 231,325 39.75% 152,986 Net profit 277,772 195,156 42.33% 128,542 Net profit after deducting 275,427 192,635 42.98% 129,482 non-recurring gains and losses Net cash flows arising from 279,092 82,277 239.21% 269,188 operating activities Increase/decrease At the end At the end At the end from the end of of 2004 of 2003 of 2002 （％） previous year Total assets 3,977,156 2,584,956 53.86% 1,785,690 Shareholder’s equity (excluding 1,565,675 1,446,327 8.25% 1,356,751 minority interests) 3.2 Major financial indexes Unit: RMB Increase/decrease 2004 2003 from the previous 2002 year（％） Earnings per share 0.66 0.46 43.48% 0.37 Earnings per share (Note) 0.66 - - - Return on equity (%) 17.74% 13.49% up 4.25% 9.47% Return on equity as calculated based on net profit after deducting 17.59% 13.32% up 4.27% 9.54% non-recurring gains and losses (%) Net cash flow per share arising 0.66 0.19 247.37% 0.76 from operating activities At the end At the end Increase or decrease At the end of of 2004 of 2003 from the end of 2002 previous year（％） Net assets per share 3.71 3.42 8.48% 3.85 Net assets per share after 3.69 3.42 7.89% 3.84 adjustment Items of non-recurring gains and losses √Applicable □Inapplicable Unit: RMB’000 Items of non-recurring gains and losses Amount Gain/loss from disposal of fixed assets and other long-term assets -1,612 Gain/loss due to short-term investment 484 Switching back reserve of impairment over the past years 6,154 Various non-operating income/expenses after deducting reserve of -2,593 impairment Impact on income tax due to the aforesaid items -150 Impact on minority interests due to the aforesaid items 62 Total 2,345 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: In RMB’000 CAS IAS Net profit 279,941 277,772 Increase of fixed assets translations was not been accepted due to USD’s statement of the year 1996 was converted into RMB’s statement 2,572 Accounts receivable over two years was reckoned into capital reserve under CAS, while was reckoned into Explanation on the profit and loss under IAS 252 difference Switching back amortization of goodwill under CAS 397 Long-term investment of Lu Ming confirmed according to equity method 22 Parent company’s homemade equipment was confirmed as deferred income and was amortized year after year under IAS -5,411 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of changes in shares of the Company Unit: shares Increase / decrease in Before the change this time (+, -) After the change Subtotal I. Unlisted shares 1. Sponsors’shares 118,232,400 0 118,232,400 Including: State-owned share 0 0 0 Domestic legal person’ s shares 59,116,200 0 59,116,200 Foreign legal person’ s shares 59,116,200 0 59,116,200 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 118,232,400 0 118,232,400 II. Listed shares 1. RMB ordinary shares 141,960,000 0 141,960,000 2. Domestically listed foreign shares 162,240,000 0 162,240,000 3. Overseas listed foreign shares 0 0 0 4. Others 0 0 0 Total listed shares 304,200,000 0 304,200,000 III. Total shares 422,432,400 0 422,432,400 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 Particulars about change in shares held by the top ten shareholders and the top ten shareholders of circulation share Total number of shareholders at the end of report period 24,055 Particulars about shares held by the top ten shareholders Increase / Number Nature of Shares held decrease in Type of shares of share shareholders at the Proportion Name of Shareholder the report (Circulating/No pledged (State-owned year-end (%) year n-circulating) or frozen shareholder/foreig (share) (share) n shareholder) ZIBO LUCHENG TEXTILE CO., 0 59,116,200 14.00% Non-circulating 0 Sponsor shareholder LTD. TAILUN TEXTILE CO., LTD. 0 59,116,200 14.00% Non-circulating 0 Foreign shareholder XINGHUA SECURITIES 8,293,500 8,593,500 2.03% Circulating 0 A-share INVESTMENT FUND HTHK–VALUE PARTNERS INTELLIGENT FD -CHINA B SHS 7,353,522 7,353,522 1.74% Circulating 0 B-share FD HAIFUTONG INCOME GROWTH 4,812,280 6,961,545 1.65% Circulating 0 A-share SECURITIES INVESTMENT FUND DBS VICKERS (HONG KONG) LTD 3,755,216 5,682,689 1.35% Circulating 0 B-share A/C CLIENTS ZHU SHENG DI -337,482 4,600,000 1.09% Circulating 0 B-share SHANGHAI (HONGKONG) 3,794,650 4,267,172 1.01% Circulating 0 B-share WANGUO SECURITIES TOYO SECURITIES ASIA 532,282 4,262,010 1.01% Circulating 0 B-share LIMIYED-A/C CLIENT NATIONAL SOCIAL INSURANCE 3,922,714 3,922,714 0.93% Circulating 0 A-share FUND 103 PORTFOLIO Particulars about shares held by the top ten shareholders of circulation share Shareholders’name (full name) Number of circulation share held at Type (A-share, B-share, H-share the year-end (share) and other) XINGHUA SECURITIES INVESTMENT FUND 8,593,500 A-share HTHK–VALUE PARTNERS INTELLIGENT B-share 7,353,522 FD-CHINA B SHS FD HAIFUTONG INCOME GROWTH SECURITIES A-share 6,961,545 INVESTMENT FUND DBS VICKERS (HONG KONG) LTD A/C CLIENTS 5,682,689 B-share ZHU SHENG DI 4,600,000 B-share SHANGHAI (HONGKONG) WANGUO SECURITIES 4,267,172 B-share TOYO SECURITIES ASIA LIMIYED-A/C CLIENT 4,262,010 B-share NATIONAL SOCIAL INSURANCE FUND 103 A-share 3,922,714 PORTFOLIO BOSHI WELL- CHOSEN STOCK SECURITIES A-share 3,697,207 INVESTMENT FUND GINTAI SECURITIES INVESTMENT FUND 3,636,673 A-share Explanation on associated relationship among the The Company was unknown whether there exists associated top ten shareholders of circulation share relationship or consistent action among the top ten shareholders of circulation share. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company √Applicable □Inapplicable Name of new controlling Zibo Lucheng Textile Investment Co., Ltd. shareholder Name of new actual controller Liu Shizhen Changing date Changing date of new controlling shareholder: Oct. 18, 2004 Changing date of new actual controller: Oct. 18, 2004 Publishing date and newspaper Oct. 20, 2004 of the controlling shareholder Securities Times, Shanghai Securities News and Ta Kung Pao Publishing date and newspaper Oct. 20, 2004 of the actual controller Securities Times, Shanghai Securities News and Ta Kung Pao 4.3.2 Introduction to the information of the controlling shareholder and other actual controller Zibo Lucheng Textile Investment Co., Ltd. (hereinafter referred to as “Lucheng Investment”) Legal representative: Liu Zibin Registered capital: RMB 37.34 million Business scope: Lucheng Investment was engaged in investment textile, electric power and pharmacy; knitwear and the relevant import and export business; retail of lubricating oil, gas oil and diesel oil; Chinese meal and wholesale and retail of general merchandise and etc.. Lucheng Investment is the first largest shareholder of the Company as well as the actual controlling shareholder of the Company. The original name of Lucheng Investment is Zibo Lucheng Textile Co., Ltd., which was founded on Sep. 25, 1998 based on Zibo the 7th Cotton Textile Plant, sponsor of the Company. It is a Limited Company that its shares held by natural persons. On Oct. 18, 2004, Zibo Lucheng Textile Co., Ltd. changed its registration of industry and commerce as Zibo Lucheng Textile Investment Co., Ltd. presently with registered capital of RMB 37.34 million, the said public notice on changing has published on Securities Times and Shanghai Securities Times and Ta Kung Pao dated Oct. 20, 2004. Of them, Mr. Liu Shizhen held 21% equity of Lucheng Investment, and became the first largest shareholder of Lucheng Investment as well as the actual controller of Lucheng Investment. Basic information of Liu Shizhen: Chinese nationality, he has not enjoy the residence power in the other country or area; he took the post of Chairman of the Board and General Manager of the Company since 1999. As at the end of the report period, Lucheng Investment held 59.1162 million shares of the Company, taking 14% of total share capital of the Company (sponsors’shares), and the said shares have not been listed for circulation. At the end of the report period, the said shares have not been frozen and pledged. 4.3.3 P roperty right and controlling relationship between the actual controller of the Company and the Company is as follows: LIU SHI ZHEN 21% equity ZIBO LUCHENG TEXTILE INVESTMENT CO., LTD. 14% equity LUTHAI TEXTILE CO., LTD. §5. Particulars about Directors, Supervisors and Senior Executive 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Unit: share Shares Shares held Reason Name Title Sex Age Office term held at the at the of year-begin year-end change May 8, 2004- Liu Shizhen Chairman of the Board Male 65 171,974 171,974 May 7, 2007 Director May 8, 2004- Xu Zhinan Male 75 0 0 May 7, 2007 Director May 8, 2004- Liu Zibin Male 40 0 0 May 7, 2007 Tengyuan Yingli Director May 8, 2004- Male 65 0 0 May 7, 2007 May 8, 2004- Chen Ruimou Director Male 61 0 0 May 7, 2007 May 8, 2004- Su Huasheng Director Male 61 39,749 39,749 May 7, 2007 Director May 8, 2004- Wang Fangshui Male 44 20,280 20,280 May 7, 2007 Director May 8, 2004- Sun Zhigang Male 43 23,930 23,930 May 7, 2007 May 8, 2004- Qin Guiling Director Female 39 24,336 24,336 May 7, 2007 May 8, 2004- Wang Yonggui Independent director Male 35 0 0 May 7, 2007 May 8, 2004- Hong Xiaobin Independent director Male 32 0 0 May 7, 2007 May 8, 2004- You Shisong Independent director Male 68 0 0 May 7, 2007 May 8, 2004- Wu Yuhua Independent director Male 61 0 0 May 7, 2007 May 8, 2004- Zhou Zhiji Independent director Male 42 0 0 May 7, 2007 May 8, 2004- Li Tongmin Supervisor Male 49 26,769 26,769 May 7, 2007 May 8, 2004- Zhao Kegui Supervisor Male 58 40,560 40,560 May 7, 2007 May 8, 2004- Zhu Lingwen Supervisor Male 51 56,784 56,784 May 7, 2007 5.2 Particulars about directors, supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Title in shareholding Name Name of shareholding Company Office term from the Company Company (Yes / No) Zibo Lucheng Textile Investment Liu Zibin Legal representative Apr. 3, 2000 to now Yes Co., Ltd. Xu Zhinan Tailun Textile Co., Ltd. Legal representative Jan. 29, 1985 to now Yes 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 5,037,300 Total annual payment of the top three directors drawing RMB 2,928,700 the highest payment Total annual payment of the top three senior executives RMB 1,287,000 drawing the highest payment Allowance of independent director RMB 30,000 per person/ year Other treatment of Independent Directors The Company reimbursed the relevant expenses of business trip. Name of directors and supervisors received no payment All Directors and Supervisors drew their payment or allowance from the Company from the Company Limits of payment Number of persons Over RMB 600,000 2 RMB 300,000 ～ RMB 350,000 5 RMB 180,000 ～ RMB 300,000 3 RMB 50,000 ～ RMB 100,000 2 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, the Company’ s whole operation was as follows: realizing income from main operations amounting to RMB 1,890.862 million, foreign currency from export amounting to USD 165.532 million, profit from main operations amounting to RMB 535.487 million and net profit amounting to RMB 277.772 million, an increase of 48.83%, 30.73%, 28.09% and 42.33% over the last year. In the report period, the project of construction expansion of 40,000-ingot COM spinning implemented and invested by the Company with self-owned capital amounting to RMB 210 million, of which the 1st phased 20-000 ingots have been put into production and operation in July 2004 while the 2nd phased 20-000 ingots were under construction at present; it invested RMB 180 million to conduct technical reconstruction project of high-graded yarn-dyed fabric, which was put into production in Jul. 2004, thus resulting in the increase of 13 million meters of yarn-dyed fabric; Lu Feng Textile Co., Ltd. with registered capital amounting to RMB 100 million, was jointly set up by the Company and Hong Kong United Garments Manufacture Co., Ltd., where the Company invested RMB 75 million, accounting for 75% of its registered capital. This company was mainly engaged in production and sales of high-graded dyeing shirt fabric. At present, the project was in progress smoothly and has entered into the debugging phase of equipments. It was expected that the 1st phased 20 million meters would be put into production in the 1st quarter of 2005; the production-line project with annual output of 2 million pieces of high-classed shirts invested with RMB 30 million has been put into production in July 2004; the Company’ s shirt processing capability has reached scale of 7 million pieces. Through construction of the said projects, the Company’ s product varieties were more colorful so as to meet demands of various kinds of customers in the market. The construction of Zibo Limin Purified Water Company where the Company held 99.62% shares, has put into production and operation in the 4 th quarter of 2004. This company’ s sewerage disposal capability reached 30,000 steres per day, which would reach the national level of water used for city viewing. The establishment of this company would set up a good foundation for the Company’ s further development. In the report period, the Company further expanded the input of technical renovation and strengthened the development of new products. In 2004, under the matching of all offices, the Company’ s science committee conducted development and research of nine new products and gained outstanding achievements. Cotton and silk compound fabric, cotton and bamboo compound fabric, flax fabric, leno fabric, Lisai fiber fabric and XLA latitude spring united fabric and other various kinds of shirt fabric researched and developed by the Company were in advance levels at home and abroad. At present, the Company’ s products have formed over 30 series and nearly 100,000 varieties, which could meet requirements of all customers. The Company would also further push continuous upgrading of shirt yarn-dyed fabric and better meet the continuously increasing life demand of the people through itself technical development and upgrading of products. 6.2 Statement of main operations classified according to industries or products Unit: RMB’000 Main operations classified according to industries Classified according to Income from Cost of Gross Increase/decrease Increase/decre Increase/decrease industries or products main main profit in income from ase in cost of in gross profit operations operations ratio (%) main operations main ratio over the last over the last year operations year (%) (%) over the last year (%) Cotton textile industry 1,709,127 1,217,543 28.76% 35.60% 43.54% -12.04% Production and supply of electricity, gas and 23,308 22,765 2.33% 0.00% 0.00% 0.00% hot-water Chinese patent medicine and its 18,532 14,203 23.36% 0.00% 0.00% 0.00% process business Agriculture 139,895 103,436 26.06% 1,289.36% 1,326.90% 2.68% Including: related transactions Main operations classified according to products Cotton yarn -18.91 31,166 37,060 % Yarn-dyed outside 1,403,913 1,018,199 27.47% 37.88% 45.57% -15.50% material of shirts Shirts 272,671 178,853 34.41% 24.12% 27.54% -4.84% Lint 139,895 103,436 26.06% 1,289.36% 1,326.90% 2.68% Chinese patent 18,532 14,203 23.36% 0.00% 0.00% 0.00% medicine Electricity and gas 23,308 22,765 2.33% 0.00% 0.00% 0.00% Others 1,377 1,280 7.04% -39.02% -16.78% Including: related transactions Pricing rules for related transactions Necessity and durative of related transactions 6.3 Particulars about main operations classified according to areas Unit: RMB’000 Areas Income from main operations Increase/decrease in income from main operations over the last year (%) Japan and Korea 306,242 12.79% Hong Kong 266,273 -3.34% Southeast Asia 551,033 85.87% Europe and America 191,260 7.78% Others 28,727 456.40% Mainland of China 547,327 123.90% 6.4 Particulars about the customers of purchase and sales Unit: RMB’ 0000 Total amount of purchase Proportion in the total 43,523.54 44.69% of the top five suppliers amount of purchase Total amount of sales of the Proportion in the total 66,543.97 35.19% top five sales customers amount of sales 6.5 Operation of share-holding companies √Applicable □Inapplicable Name of share-holding company Zibo Shidanlu Cosmetic Co., Ltd. Investment earnings contributed in the Proportion in net profit 0.43 0.0015% period of listed company Share-holding Business scope Cosmetic company Net profit 4.06 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 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 Names of projects Amount Progress of projects Earnings of projects of projects Expansion project of COM The 1st phased has been Increase of COM spinning of spinning of 40,000 ingots 21,000.00 put into production and 1157 tons operation in July 2004 Technical renovation project It has been put into Increased of 13 million meters 18,000.00 of top grade yarn-dyed fabric production in Jul. 2004 yarn-dyed fabric Jointly establish Lufeng It will be put into A losses of RMB 1,990,900 Textile and Dyeing Co., 10,000.00 operation in the 1st Ltd. quarter of 2005 Production line project of It has been put into Increase of 2 million shirts 3,000.00 high-graded shirts production in Jul. 2004 Establish “Zibo Limin 1,910.00 It will be put into Naught Purified Water Co., Ltd.” operation in the 1st quarter of 2005 Total 53,910.00 - 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 9th meeting of the 4th Board of Directors of the Company suggested the profit distribution preplan for year 2004 as follows: based on the total share capital amounting to 422,432,400 shares at the end of year 2004, distributing cash dividends amounting to RMB 3.75 (tax included) for every 10 shares, of which, for B shares, the dividends were paid according to HKD converted from middle price of norm exchange released by People’ s Bank of China in the next day when Annual Shareholders’ General Meeting 2004 is held (Tax exempted according to the provisions in GS (1993) No. 45 document). §7. Significant Events 7.1 Purchase of assets √Applicable □Inapplicable Unit: RMB’0000 Contribution Assets Debts and to net profit of ownership Liabilities the Company involved involved Transaction The assets Date of of the assets Sale price Related in the in the parties purchased purchase sold from the Explain principle of transaction assets assets year-beginning pricing or no transferred transferred to the date of or not or not sale the purchasing price of the Zibo Assets of above assets was based on Lucheng knitting Sep. 23, value RMB 151,401,000 of Textile and 14,587.41 214.72 Yes 2004 the assets purchased Investment twisting evaluated by Shandong Co., Ltd. thread Bokuai, the value of fixed assets would be confirmed after the balance adjustment that evaluation value about fixed assets in Assets Evaluation Report reduced depreciation of the assets according to accounting system from Yes Yes the standard date to prompt date (the date that all assets are delivered); the value of inventories and construction in progress would be confirmed after planned evaluation value of inventories and construction in progress added or reduced the change from the standard date to prompt date. Zichuan Changming Share Aug. 16, Net assets Yes Yes 2,000.00 -278.66 Yes Power Co., equity 2004 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 purchase would not cause influence on the management stability and consistent business of the Company; Purchase of assets for knitting and twisting thread would provide long-term material supply for the Company; Purchase of share equity of Changming Power would provide steady supply for the Company in the long term. 7.3 Important guarantee √Applicable □Inapplicable 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 31,238.23 Total balance of guarantee at the end of the report period 21,324.00 Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling subsidiaries in the report period 31,238.23 Total balance of guarantee for controlling subsidiaries at the end of the report 21,324.00 period Particulars about the external guarantee of the Company (Including the guarantee for the controlling subsidiaries) Total amount of guarantee 31,238.23 The proportion of the total amount of guarantee in the net assets of the 19.74% 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 supplying labor Purchasing products and accepting labor Related parties service to related parties service to related parties Transaction amount Proportion in the Transaction amount Proportion in the transaction amount transaction amount of the same kind of the same kind Lucheng Textile 1,800.88 12.87% 30.36 100.00% Investment Co., Ltd. Taimei Tie Co., Ltd. 0.37 0.02% 52.18 100.00% Stanluian Cosmetics 0.46 0.02% 12.58 100.00% Co., Ltd. Lucheng Textile 23.79 10.59% 2,365.12 5.43% Investment Co., Ltd. Lucheng Textile 0.00 0.00% 14,587.40 100.00% Investment Co., Ltd. Lucheng Textile 0.00 0.00% 233.25 100.00% Investment Co., Ltd. Total 1,825.50 0.00% 17,280.89 0.00% 7.4.2 Related credits and liabilities current □Applicable √Inapplicable 7.5 Entrusted assets □Applicable √Inapplicable 7.6 Implementation of commitment items √Applicable □Inapplicable This year, 2003 profit distribution proposal promised by the Company was implemented completely in May 2004. Committed investment project has been conducted as schedule. Parial invested projects have been finished on schedule. There are no commitments of Zibo Lucheng Textile Investment Co., Ltd. and Tailun Textile Co., Ltd., holding over 5% shares of the Company. 7.7 Significant lawsuit and arbitration □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 Presence in Entrusted Absence Notes Independent times of person presence (Times) Directors attending the (times) Board meeting Wu Yuhua 11 3 1 2 5 times vote by communication You Shisong 11 4 0 1 6 times vote by communication Zhou Zhiji 11 6 0 1 4 times vote by communication Hong Xiaobin 11 6 0 1 4 times vote by communication Wang Yonggui 11 3 1 2 5 times vote by communication Particulars about the independent directors proposed different opinions about the relevant matters of the Company □Applicable √Inapplicable §8.Report of the Supervisory Committee I. The work of the Supervisory Committee in the report period In the report period, the Company held 5 meetings of the supervisory committee, which attended 11 Board meetings of the Company. Particulars of every supervisory committee were as follows: 1. On Mar. 30, 2004, the Company held 11 meeting of 3rd Supervisory Committee. 3 Supervisors should attend the meeting and actually 3 attended, which accorded with the relevant regulations of the Company Law and the Articles of the Supervisory Committee. The resolutions of the meeting were lawful and effective. The meeting formed the following resolutions: “ examine and approve Work Report 2003 of the Supervisory Committee”, “ examine and approve 2003 Annual Report of the Company and its Summary” “examine and approve Proposal on Nominating the candidates for the 4th Supervisory Committee of the Company, which nominated Mr. Zhao Ke Gui and Zhu Lingwen as consecutive candidates for the Supervisory Committee”, “examine and approve Proposal on Establishing Zibo Limin Wasted Water Disposing Co., Ltd. with Zibo Taimei Tie Co., Ltd.. The Supervisory Committee believed, the related transaction abided by principles of open, fair and objective; there existed no situations which do harm to the Company and arose competition in the same field”, “Examine and approve Proposal on internal control system about withdrawing every item of impairment losses”, “Examine and approve Proposal on partial inventory depreciation reserve and fixed assets impairment losses of 2003”. 2. On May. 12, 2004, the Company held 1st meeting of the 4th Supervisory Committee in the meeting room. 3 Supervisors should attend the meeting and actually 3 attended, which complied with the relevant regulations of the Company law and the Articles of the Association. The meeting elected Mr. Li Tongmin as Chairman of the 4th Supervisory Committee of the Company. 3. On Jul. 15, 2004, the Company held 2nd meeting of the 4th Supervisory Committee in the meeting room. 3 Supervisors should attend the meeting and actually 3 attended, which complied with the relevant regulations of the Company law and the Articles of the Association. The resolutions of the meeting were lawful and effective. The meeting examined and approved Proposal on Purchasing Relevant Assets of Knitting and Twisting Thread of Lucheng Company and Proposal on Establishing Company invested together with Lucheng Company. 4. On Jul. 29, 2004, the Company held 3rd meeting of the 4th Supervisory Committee in the meeting room. 3 Supervisors should attend the meeting and actually 3 attended, which complied with the relevant regulations of the Company law and the Articles of the Association. The resolutions of the meeting were lawful and effective. The meeting examined and approved Semi-annual Report 2004 of the Company and its summary. 5. On Sep. 24, 2004, the Company held 4th meeting of the 4th Supervisory Committee in the meeting room. 3 Supervisors should attend the meeting and actually 3 attended, which complied with the relevant regulations of the Company law and the Articles of the Association. The resolutions of the meeting were lawful and effective. The meeting examined and approved Proposal on the Company in line with the conditions o f issuing convertible bonds, Proposal on Issuance Plan of Convertible Bonds, Proposal on the Feasibility of Invested Projects with Raised Proceeds, Proposal on Explanation about Last Raised Proceeds of the Board of the Company, and Proposal on Supplement Agreement to the [Investment Agreement] of Luqun Textile Company together set up by the Company and Lucheng Company. II. Independent Opinions presented by the Supervisory Committee 1. Particulars about operation according to law In the report period, the Supervisory Committee of the Company examined wholly and patiently the procedure of decision-making of the Company, implementation of internal control system and duties of directors and managers and believed that the internal control system of the Company was perfect and the procedure of decision-making was normative and found no actions of breaking laws, regulations and Articles of Association or harmful of the interest of the Company. 2. Inspection of the Company’s financing The Supervisory Committee has checked the financial reports made by Shandong Zhengyuan Hexin Certified Public Accountants and PricewaterhouseCoopers Zhongtian Certified Public Accountants and thought conformably the reports have truthfully and accurately reflected the Company’ s financial status and business results. 3. The Supervisory Committee of the Company seriously checked the explanation report of the Board of the Company about the usage of lastly raised proceeds. They believed the usage of lastly raised proceeds basically accorded with the projected committed. The adjusted usage for special project fulfilled the relevant procedures of Board and Shareholders’General Meeting, which was standard and lawful. The Supervisory Committee believed the usage of capital was good. 4. The transact ion price of the Company purchasing and selling assets is reasonable or not In the report period, 2nd meeting of the 4th Board of the Company and 1st Provisional Shareholders’General Meeting of 2004 examined and approved the matter that the Company purchased relevant assets of spinning and twisting yarn of first principal control shareholder, Zibo Lucheng Company, and invested the assets to establish Zobo Luqun Textile Co., Ltd.. with first principal control shareholder, Zibo Lucheng Company. On Jun. 28, 2004, Shandong Bokuai CPAs presented BKPBZ(2004) No. 24Assets Evaluation Report of Zobo Lucheng Textile Co., Ltd.. The standard date for the Report was May 31, 2004. The book value of assets planned to purchase of this time was: RMB 142,760,700 and the evaluation value was RMB 151,401,000. The transfer price was RMB 145,874,100. The Supervisory Committee of the Company checked and witnessed all process. They believed there was no insider transaction in purchasing assets; the purchasing price was fair and reasonable; there existed no actions, which do harm to interests of partial shareholders and caused no loss of assets of the Company. In the report period, there was no selling of assets. III. Related transaction is fair or not, whether do harm to the interests of listed company or not In the report period, the Company purchased relevant assets of spinning and twisting yarn of first principal control shareholder, Zibo Lucheng Textile Investment Company, and invested the assets to establish Zobo Luqun Textile Co., Ltd.. with first principal control shareholder, Zibo Lucheng Company. The transaction belonged to related transaction. Shandong Bokuai CPAs presented BKPBZ(2004) No. 24 Assets Evaluation Report of Zobo Lucheng Textile Co., Ltd.. Independent directors of the Company presented Independent Opinion on the purchase and establishing new company. The Board of the Company published notice on the two related transactions. The Supervisory Committee of the Company held 3rd meeting of the 4th Board and specially examined the matter seriously. They believed the related transaction accorded with relevant regulations, and principles of “ Just, Fair and Open, which did not harm to the interests of the listed companies. IX. Significant contracts of the Company and Implementation 1. In the report period, the matters of the Company entrusting, contracting and leasing assets of other companies In the report period, the Company rented land of 92.09 Mu, houses of 6484.71 square meters and a gas station form Zibo Lucheng Textile Investment Co., Ltd.. This year the Company paid rent RMB 2,332,572.24. 2. handong Zhengyuan Hexin Certified Public Accountants and PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd. presented unqualified CAS and IAS auditor’ s report for the Company respectively. §9. Financial Report (IAS) 9.1 Auditor’ s Opinion Report of the Auditors To the Shareholders of Luthai Textile Company Limited: We have audited the accompanying consolidated balance sheet of Luthai Textile Company Limited (the “Company”) and its subsidiaries (together, the “Group”) as of 31 December 2004 and the related consolidated statements of income, cash flows and changes in shareholders’equity for the year then ended. These consolidated financial statements set out on pages 2 to 30 are the responsibility of the Company’ s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2004, and of the results of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Zhong Tian CPAs Limited Company 2 February 2005 9.2 Financial statement LUTHAI TEXTILE COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Year ended 31 December (all amounts in RMB thousands) Notes 2004 2003 Sales 2 1,890,862 1,270,512 Cost of sales (1,355,375) (852,455) Gross profit 535,487 418,057 Other operating income 28,004 29,057 Distribution costs (63,453) (50,203) Administrative expenses (142,189) (154,951) Operating profit 3 357,849 241,960 Finance cost – net 4 (34,617) (10,625) Share of results before tax of unconsolidated subsidiaries 12 40 (10) Profit from ordinary activities before tax 6 323,272 231,325 Income tax expense 6 (37,547) (33,721) Group profit after tax 285,725 197,604 Minority interest 21 (7,953) (2,448) Net profit 7 277,772 195,156 Earnings per share (basic and diluted) 7 RMB 0.66 RMB 0.46 LUTHAI TEXTILE COMPANY LIMITED CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2004 31 December 31 December (all amounts in RMB thousands) Notes 2004 2004 2003 2003 ASSETS Non-current assets Property, plant and equipment 9 2,421,823 1,403,031 Land use rights 10 140,546 96,786 Intangible assets 11 36,006 9,626 Investment in unconsolidated subsidiaries 12 5,280 431 Available-for-sale investment 13 215 215 2,603,870 1,510,089 Current assets Inventories 14 597,991 458,271 Receivables and prepayments 15 423,937 413,839 Cash and cash equivalents 16 351,358 202,757 1,373,286 1,074,867 Total assets 3,977,156 2,584,956 LUTHAI TEXTILE COMPANY LIMITED CONSOLIDATED BAL ANCE SHEET (CONTINUED) AS OF 31 DECEMBER 2004 31 December 31 December (all amounts in RMB Notes 2004 2004 2003 2003 thousands) SHAREHOLDERS’ EQUITY Capital and reserves Ordinary shares 20 422,432 422,432 Share premium 20 695,390 695,390 Reserves 22 160,073 116,600 Retained earnings 287,780 211,905 1,565,675 1,446,327 Minority interest 21 163,205 96,180 LIABILITIES Non-current liabilities Borrowings 18 586,177 - Deferred Income 19 5,411 - Other liabilities 14,659 2,673 606,247 2,673 Current liabilities Trade and other payables 17 513,608 310,144 Current tax liabilities 874 2,982 Borrowings 18 1,127,547 726,650 1,642,029 1,039,776 Total liabilities 2,248,276 1,042,449 Total shareholders’ equity and liabilities 3,977,156 2,584,956 LUTHAI TEXTILE COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004 Share Share Retained (all amounts in RMB thousands) Notes capital premium Reserves earnings Total Balance at 1 January 2003 352,027 765,795 86,878 152,051 1,356,751 Dividend relating to 2002 - - - (105,608) (105,608) Net profit 7 - - - 195,156 195,156 Transfer to reserves 22 - - 29,694 (29,694) - Capitalisation of share premium 20 70,405 (70,405) - - - Currency translation difference - - 28 - 28 Balance at 31 December 2003 422,432 695,390 116,600 211,905 1,446,327 Balance at 1 January 2004 422,432 695,390 116,600 211,905 1,446, 327 Dividend relating to 2003 - - - (158,412) (158,412) Net profit 7 - - - 277,772 277,772 Transfer to reserves 22 - - 43,485 (43,485) - Currency translation difference - - (12) - (12) Balance at 31 December 2004 422,432 695,390 160,073 287,780 1,565,675 LUTHAI TEXTILE COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Year ended 31 December (all amounts in RMB thousands) Notes 2004 2003 Cash flow from operating activities Net profit 277,772 195,156 Adjustments for: Minority interest 21 7,953 2,448 Tax 6 37,547 33,721 Depreciation 9 131,757 109,162 Amortisation of land use rights 10 6,363 4,545 Amortisation of intangible assets 11 5,382 3,777 Impairment charge of property, plant and equipment 9 1,734 10,809 Loss on disposal of property, plant and equipment 3 2,950 2,803 (Reversal of)/provision for inventory provision 3 (2,861) 10,463 (Reversal of)/provision f or investment impairment 3 (1,340) 2,300 Share of results before tax in unconsolidated subsidiaries 12 (40) 10 (Reversal of)/provision for doubtful debts provision (153) 10,522 Interest expenses 4 47,914 16,158 Interest income 4 (3,265) (2,844) Dividend income - (8) 511,713 399,022 Changes in working capital Inventories (129,793) (177,389) Receivables and prepayments 4,317 (94,645) Restricted deposits 16 (58,209) - Trade and other payables 33,222 2,192 Cash generated from operations 361,250 129,180 Interest paid (47,914) (16,158) Tax paid (34,244) (30,745) Net cash generated from operating activities 279,092 82,277 LUTHAI TEXTILE COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2004 Year ended 31 December (all amounts in RMB thousands) Notes 2004 2003 Cash flow from investing activities Acquisition of subsidiary, net of cash acquired 23 (9,678) 25,444 Proceeds from consolidation of Luthai (Hong Kong) Textile Co., Ltd. (“Luthai HK”) 12 - 6,367 Purchase of property, plant and equipment (973,613) (464,876) Purchase of land use rights (10,221) (22,972) Purchase of intangible assets (10,350) (2,329) Proceeds from sale of property, plant and equipment 718 10,373 Proceeds from sale of investment 2,186 - Dividend received - 8 Interest received 3,265 2,844 Net cash used in investing activities (997,693) (445,141) Cash flow from financing activities Proceeds from borrowings 1,974,249 864,618 Repayments of borrowings (1,030,212) (381,327) Dividend paid to Group shareholders (158,412) (106,211) Dividend paid to minority shareholders (2,272) (2,365) Proceeds from minority shareholders 25,640 20,000 Net cash generated from financing activities 808,993 394,715 Increase in cash and cash equivalents 90,392 31,851 Movement in cash and cash equivalents At beginning of the year 202,757 170,906 Increase in cash and cash equivalents 90,392 31,851 At end of the year 16 293,149 202,757 9.3 Accounting policy, accounting assessment and settlement method has no change 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 The consolidation cope of the term increased 4 controlling subsidiaries: 1. Zibo Lufeng Co., Ltd., of which the Company held 75% share equity; 2. Zibo Liming Water Purification Co., Ltd., of which the Company held 99.62% share equity; 3. Zibo Luqun Textile Co., Ltd., of which the Company held 90%; 4. Zichuan Changming Thermoelectricity Co., Ltd., of which the Company held 56.91%. Board of Directors of Lu Thai Textile Co., Ltd. Feb. 4 2004