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Wumart Cover Output 3/2/04 10:22 ›¶ 1 C M Y CM MY CY CMY K kuolrt jtqrnsg ipmh kuolrt jtqrnsg ipmh kuolrt jtqrnsg ipmh =ABDFHGIC?@E<> =ABDFHGIC?@E<> L*w2v{~-13y+|./},0xzM LQ Y^X]b ab^SZ [X\XbUT S^\_Q]e X]S^`_^`QbUT X] bWU OU^_[UKa PU_cR[XS ^V NWX]Q dXbW [X\XbUT [XQRX[XbeM =ABDFHGIC?@E<> .116.0 4/3245 7;;8 .116.0 9: 4/3245 ,++- ,++- 9: ƒXƒ¤“” CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (‘‘GEM’’) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE ‘‘STOCK EXCHANGE’’) GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM Website in order to obtain up-to-date information on GEM-listed issuers. The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this report, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from, or in reliance upon, the whole or any part of the contents of this report. This annual report, for which the directors of Wumart Stores, Inc. (the ‘‘Directors’’) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the ‘‘GEM Listing Rules’’) for the purpose of giving information with regard to Wumart Stores, Inc. The directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (1) the information contained in this report is accurate and complete in all material respects and that the contents are not misleading; (2) there are no other matters the omission of which would make any statement in this report misleading; and (3) all opinions expressed in this report have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable. 02 Corporate Information 03 Shareholding and Group Structure 04 Chairman’s Statement 06 Management Discussion and Analysis 16 Review of Business Objectives 21 Use of Proceeds 23 Directors, Supervisors and Senior Management Profile 28 Report of the Directors 36 Report of the Supervisory Committee 37 Report of the Auditors 38 Consolidated Income Statement 39 Consolidated Balance Sheet 40 Balance Sheet 41 Consolidated Statement of Changes in Equity 42 Consolidated Cash Flow Statement 44 Notes to the Financial Statements 66 Financial Summary 02 Corporate Information BOARD OF DIRECTORS SPONSOR Executive Directors Cazenove Asia Limited Dr. Zhang Wen-zhong ( ), Chairman and President LEGAL ADVISERS Dr. Wu Jian-zhong ( ), As to Hong Kong Law: Vice Chairman and Vice President Coudert Brothers Dr. Meng Jin-xian ( ), Vice President As to PRC Law: Haiwen & Partners Non-Executive Director Mr. Wang Jian-ping ( ) PRINCIPAL BANKERS Agricultural Bank of China Independent Non-Executive Directors Industrial and Commercial Bank of China Mr. Han Ying ( ) China Merchants Bank Dr.RobertE.Larson HONG KONG SHARE REGISTRAR SUPERVISORS AND TRANSFER OFFICE Mr. Fan Kui-jie ( ) Ms. Xu Ning-chun ( ) Computershare Hong Kong Investor Mr. Wang Jin-yue ( ) Services Limited Shops 1712–1716, SENIOR MANAGEMENT 17th Floor, Hopewell Centre Mr. Mak Tak Cheong, Edmund ( ) 183 Queen’s Road East Ms. Li Dong-nu ( ) Wanchai Ms. Jin Xiao-qin ( ) Hong Kong Ms. Zhang Feng-ru ( ) Mr. Xu Shao-chuan ( ) LEGAL ADDRESS Mr. Guo Tu-wei ( ) Room 5610 Ms. Xie Dong ( ) 1 Shixingdong Street Badachu High Tech Park District QUALIFIED ACCOUNTANT Shijingshan District Mr. Mak Tak Cheong, Edmund Beijing (CPA, AICPA, AHKSA) The PRC COMPANY SECRETARIES HEAD OFFICE Mr. Mak Tak Cheong, Edmund 10th Floor, Yuquan Building (CPA, AICPA, AHKSA) Yu Quan Road Ms. Xie Dong Shijingshan District Beijing AUDIT COMMITTEE The PRC Mr. Han Ying Dr.RobertE.Larson PRINCIPAL PLACE OF BUSINESS IN HONG KONG COMPLIANCE OFFICER 39th Floor, Gloucester Tower Dr. Wu Jian-zhong The Landmark, 11 Pedder Street Central AUTHORISED REPRESENTATIVES Hong Kong Dr. Wu Jian-zhong Ms. Xie Dong WEBSITE www.wumart.com AUDITORS Deloitte Touche Tohmatsu STOCK CODE 8277 Wumart Stores, Inc. Annual Report 2003 Shareholding 03 During the period under review, the shareholding and corporate structure of Wumart Stores, and Group Inc. (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’ or ‘‘Wumart Structure Group’’) and associated companies was as follows: Wumart Stores, Inc. Annual Report 2003 04 Chairman’s Statement Dear Shareholders: I am pleased to present the report on the audited results of Wumart Stores, Inc. for the year ended 31st December, 2003. APPRECIATION The Company was listed on the Stock Exchange on 21st November, 2003 with tremendous success. On behalf of the board of Directors, I would like to express our sincere appreciation to all investors who have shown strong interest in and firm support for the Group. The successful listing of the Company in Hong Kong has greatly enhanced the growth potentials as well as corporate profile of the Group. The Directors and the management have every confidence to secure sustainable returns for investors by achieving sound results on the back of rapid business expansion. REVIEW OF RESULTS . Our Retail Network comprised of 355 outlets, an increase of 270 stores, or 317.6% as compared with 2002; . The comparable-store sales (the comparison of turnover recognised by same store for different period of time) increase 17.9% from 2002; . Turnover amounted to RMB1,574.9 million, a 43.5% growth as compared with 2002; . Gross profit amounted to RMB262.1 million, a 47.4% growth as compared with 2002; . Net profit reached RMB71.6 million, a 161% growth as compared with 2002; . Gross profit margin reached 16.6%, 0.4% higher than that of 2002; and . Net profit margin reached 4.55%, 2.05% higher than that of 2002. 2003 demonstrated another year of rapid expansion and solid performance for the Group, which registered substantial growth in tandem in terms of the number of outlets, sales and net profit. The Group also pursued an expansion strategy focused on cost controls and regional development. Stringent cost controls, effective budget-based management, a professional management team and favourable market conditions are amongst some of the major reasons for sustained growth of the Group’s results. The Group strived persistently to enhance its core competitiveness and continued to sustain substantial year-on-year growth in comparable-store sales. Year-on-year growth for the Group’s comparable-store sales of 17.9% for 2003 was an important factor contributing to the substantial growth in its net profit. The regional advantage is first and foremost among any competitive advantages that a retail chain operation could claim. The benefits of brand name effect as well as systematic management, operation and distribution of a retail chain business could only be fully leveraged on to achieve cost reductions and efficiency enhancement by strong and extensive regional foothold. As such, the Group pursued a strategy of regional development underpinned by the building of regional dominance with priority for consolidating its business development in Beijing. Wumart Stores, Inc. Annual Report 2003 chairman’s 05 Meanwhile, the Group continued to follow a pattern of low-cost expansion by enhancing statement cooperation with state-owned enterprises on the back of past success while accelerating the establishment of wholly-owned outlets. Cost leadership is one of the Group’s operating principles. Stringent cost controls are implemented throughout its operations and made an integral part of its corporate culture. The Group continued to practise rigorous budget-based management in its operations, management, business development and use of human resources to ensure the realisation of the Company’s objectives and development plans. The Group is supported by a management team characterised by distinguished education background, international reach, professionalism and extensive experience in the industry, standing ready to discharge their duties with utmost dedication. It is on such management team and staff, who share the values of the Company, that the Company counts as it ventures for continual development and gratifying results. FUTURE PROSPECTS Rapid economic growth continued in China as the nation registered a 9.1% GDP growth in 2003. As one of the most prosperous and developed areas in China showing one of the nation’s fastest growth rates in terms of per capita income, Beijing registered a GDP value of RMB361.19 billion in 2003, representing a year-on-year growth of 10.5%. Total retail sales of consumer goods grew by approximately 14.5% compared to 2002. Meanwhile, Beijing’s retail chain operators are expected to benefit from favourable policies and opportunities for development ahead after the Beijing Municipal Government has identified the fast moving consumer goods industry as a forerunner in the national economy to be developed on a priority basis.