LU THAI TEXTILE CO., LTD. ANNUAL REPORT (Adjustment based on International Accounting Standards) ==2003== Shandong · Zibo April 1, 2004 CONTENTS I. IMPORTANT NOTES-----------------------------------------------------------------------------2 II. COMPANY PROFILE----------------------------------------------------------------------------2 III. SUMMARY FINANCIAL HIGHLIGHT AND BUSINESS HIGHLIGHT----------3 IV. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS---------------------------------------------------------------------------5 V. PARTICULARS ABOUT DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES-----------------------------------------------------------------------------------7 VI. ADMINISTRATIVE STRUCTURE----------------------------------------------------------9 VII. BRIEF OF THE SHAREHOLDERS’ GENERAL MEETING-----------------------10 VIII. REPORT OF BOARD OF DIRECTORS------------------------------------------------11 IX. REPORT OF SUPERVISORY COMMITTEE-------------------------------------------19 X. SIGNIFICANT EVENTS------------------------------------------------------------------------21 XI. FINANCIAL REPORT (ATTACHED)-----------------------------------------------------23 XII. DOCUMENTS AVAILABLE FOR REFERENCE--------------------------------------23 1 I. IMPORTANT NOTES The Board of Directors of Luthai 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. 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. Mr. Chen Youhan, Mr. Xu Zhinan, Mr. Chen Ruimou and Mr. Wang Yonggui, Director of the Company, were absent from the Board meeting due to some reasons; Mr. Xu Zhinan and Mr. Chen Ruimou entrusted Mr. Liu Shizhen, Chairman of the Board, to vote on them behalf, Independent Director Mr. Wang Yonggui entrusted Independent Director Zhou Zhiji to vote on his behalf, Mr. Chen Youhan did not entrust other to vote. Shandong Zhengyuan Hexin Certified Public Accountants and PricewaterhouseCoopers (China) Certified Public Accountants respectively issued the domestic unqualified Auditors’ Report and international unqualified Auditors’ Report for the Company. 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. II. COMPANY PROFILE 1. Legal Name of the Company: In Chinese: 鲁泰纺织股份有限公司 In English: LU THAI TEXTILE CO., LTD. 2. Legal Representative: Liu Shizhen 3. Liaison Methods of Secretary of the Board of Directors and Authorized Representative in Charge of Securities Affairs: Secretary of the Board of Authorized representative in Directors charge of securities affairs Name Qin Guiling Zheng Weiyin Liaison No. 81, Songling East Road, No. 81, Songling East Road, address Zichuan District, Zibo Zichuan District, Zibo Telephone (86)533-5285166 (86)533-5285166;3586827 Fax (86)533-5282188 (86)533-5282188 E-mail [email protected] [email protected] 4. Registered Address: No. 11, Mingbo Road, High-tech Industrial Development Zone, Zibo, Shandong Office Address: No. 81, Songling East Road, Zichuan District, Zibo No. 11, Mingbo Road, High-tech Industrial Development Zone, Zibo Post Code: 255100 E-mail: [email protected] Internet Web Site: www.lttc.com.cn 2 5. Newspapers for Disclosing the Information of the Company: Securities Times, Shanghai Securities News and Ta Kung Pao The Place Where the Annual Report is Prepared and Placed: Securities Department of the Company Internet Web Site Designated by China Securities Regulatory Commission for Publishing the Annual Report: www.cninfo.com.cn 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: LUTHAI A, LUTHAI B Stock Code: 000726, 200726 7. Other Relevant Information of the Company Registration date after change: Aug. 7, 2003 Place: Zibo Municipal Administration Bureau for Industry and Commerce Registered number of enterprise legal person’s business license: QGLZZ Zi No.: 000066 Registered number of taxation: 370302613281175 Particulars about certified public accountants engaged by the Company: Domestic: Shandong Zhengyuan Hexin Certified Public Accountants Address: Rm. F, 20/F of Real Estate Bldg., Jinan (No. 88, Jingqi Road, Jinan) Overseas: PricewaterhouseCoopers Zhongtian Certified Public Accountants Ltd. (former PricewaterhouseCoopers (China) Certified Public Accountants) Address: 12/F, Rui An Plaza, No. 333, Huai Hai Middle Road, Shanghai, and PRC III. SUMMARY FINANCIAL HIGHLIGHT AND BUSINESS HIGHLIGHT 1. Accounting data as of the year 2003 Unit: In RMB’000 Total profit 231,325 Net profit 195,156 Net profit after deducting non-recurring gains and losses 192,635 Profit from main operations 418,057 Other operating profit 29,057 Operating profit 241,960 Investment income -10 Financial expense -10,625 Net cash flow arising from operating activities 82,277 Net increase/decrease in cash and cash equivalents 31,851 Note: Impact on net profit due to non-recurring gains and losses amounting to RMB 2,521,000, its composing is: non-operating income amounting to RMB 6,114,000, non- operating expenses amounting to RMB 10,328,000, subsidy income amounting to RMB 2,203,000, reversal of impairment amounting to RMB 6,874,000, impact on income tax amounting to RMB 1,240,000 and minority interests amounting to RMB 1,102,000. Explanation for difference in net profit and net assets under IAS and CAS Unit: RMB’000 1. Net profit under IAS 195,156 Adjustment: 3 Depreciation -3,000 Other operating income -422 Net profit under CAS 191,734 2. Net assets under IAS 1,446,327 Effect of accumulated amount as of past year 44,778 Capital reserve -28 Retained profit -38,974 Translation balance of foreign currency 28 Net assets under CAS 1,452,131 2. Major accounting data and financial indexes over the past three years Unit: RMB’000 Indexes/Items 2003 2002 2001 Income from main operations 1,270,512 950,880 785,693 Net profit 195,156 128,542 120,518 Total assets 2,584,956 1,785,690 1,477,554 Shareholders’ equity (excluding minority interests) 1,446,327 1,356,751 1,314,320 Earnings per share (RMB/share) 0.46 0.37 0.45 Net assets per share (RMB/share) 3.42 3.85 4.85 Net assets per share after adjustment (RMB/share) 3.42 3.84 4.84 Net cash flow per share arising from operating 0.19 0.76 -0.13 activities (RMB) Return on equity (%) 13.49% 9.47% 9.17% 3. Supplemental statement of financial indexes Earnings per share Return on equity (%) (RMB/share) Fully Weighted Fully Weighted diluted average diluted average Profit from main operations 28.90 29.83 0.98 0.98 Operating profit 16.73 17.26 0.57 0.57 Net profit 13.49 13.92 0.46 0.46 Net profit after deducting non-recurring 13.32 13.74 0.46 0.46 gains and losses 4. Particulars about changes in shareholders’ equity during the report period Unit: RMB’000 Translation Total Share Share Capital Retained Item balance of shareholders’ capital premium reserve profit foreign currency equity Amount at the period-begin 352,027 765,795 86,878 152,051 1,356,751 Increase in the report period 70,405 29,694 28 195,156 295,283 Decrease in the report period 70,405 135,302 205,707 Amount at the period-end 422,432 695,390 116,572 28 211,905 1,446,327 Increase of shareholders’ equity compared with the period-begin is because the Reason for change Company realized net profit in 2003. 4 IV. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT THE SHAREHOLDERS 1. Statement of changes in shares of the Company Unit: shares Increase / decrease this time (+, -) Before the Shares capital After the Rationed Bonus Additional change transferred from Others Sub-total change shares shares issuance public reserve I. Unlisted shares 1. Sponsors’ shares 98,527,000 19,705,400 19,705,400 118,232,400 Including: State-owned shares Domestic legal person’s share 49,263,500 9,852,700 9,852,700 59,116,200 Foreign legal person’s share 49,263,500 9,852,700 9,852,700 59,116,200 Others 2. Raised legal person’s shares 3. Inner employees’ shares 33,800,000 6,760,000 -40,560,000 -33,800,000 0 4. Preference shares or others Total unlisted shares 132,327,000 26,465,400 -40,560,000 -14,094,600 118,232,400 II. Listed shares 1. RMB ordinary shares 84,500,000 16,900,000 40,560,000 57,460,000 141,960,000 2. Domestically listed foreign 135,200,000 27,040,000 27,040,000 162,240,000 shares 3. Overseas listed foreign shares 4. Others Total listed shares 219,700,000 304,200,000 III. Total shares 352,027,000 70,405,400 70,405,400 422,432,400 2. Issuance and listing of the share (1) Issuance of shares over the past three years The Company additionally issued 50 million RMB ordinary shares to increase its share capital in Dec. 2000 at the issuing price of RMB 17.80 per share. The said shares were listed at Shenzhen Stock Exchange for trade on Dec. 25, 2000. (2) Change in total share and structure of share in the report period In the report period, the Company implemented 2002 Profit Distribution Plan: transfer capital public reserve into share capital to all shareholders at the rate of 2 for 10. After transfer, the total share of the Company has increased by 20%, from 352027000 shares to 422432400 shares. In the report period, the Company’s shares held by inner employees have reached three years from additional issuance of A shares, as approved by Shenzhen Stock Exchange, 40,560,000 inner employees’ shares (404,382 shares held by senior executives were frozen) were listed fro trade on Dec. 26, 2003, thus, the Company’s circulation A shares increased to 141,960,000 shares. 5 3. About shareholders at the end of the report period (1) At the end of the report period, the Company had totally 40096 shareholders, including 9660 shareholders of B-share.