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SZSE announced to have finished the annual report view for 2007. SZSE paid special attention to implementation of new accounting codes, effectiveness of interior control system, trading of restricted shares, stock incentive scheme and income disclosure of senior management. By 30 May, 2008, SZSE has sent out 214 inquires, and urged 47 listed companies to make statements on supplementary and correction on annual reports. Supervisors revealed the following problems through annual report view:
Company management needs to be improved. 52 companies have 90 percent-less attendance for independent directors to the meeting of Board of Directors, and independent directors’ voting represents no more than 1 percent pf the total resolutions. Function of the professional committee of the Board of Director should be reinforced. 40 companies still do not have auditing committee. And for some companies, the auditing committee have put forward propels no more than 3 times, only one company has negative from the committee while others voted approval.
There are potential risks in profit increase for some companies. The aggregate performance of the companies listed at the main board of Shenzhen Stock Exchange has a sharp increase for 2007, however, the percentage of net non-operating income and expenditure jumped from 1.79 in 2006 to 8.96 in 2007, which indicated that the main business’s contribution to the company is slashed. Besides, the abnormal increment of absolute amount is partly due to the company expansion with the injection of asset after stock reform.
Implementation of the new account code is not up to standard. Some listed companies did not acquire right definition of non-current profit and loss while some others randomly confirmed income from associated liability restructure. Some companies also restructure associated liability and take the liability as non-operating revenue to avoid trading suspension.
Corrections and amendments of account policy and appraisal affect investors’ judgment. 28 listed companies made account corrections and estimations, of which 6 companies reduced RMB 37.50 million due to account estimations changes, while other 22 RMB 100 million due to account amendments.
Some companies did not disclose income of senior management as required.
25 companies did not include specific information such as real controller.
The information disclosure system needs to be regulated. It was calculated that 37 companies did not reveal interior holding pattern while some of them just include simple information without real holding information.
Besides, the stock incentive plan requires optimization. Some companies misled investors as a result of neglecting the effect of the plans on company performance.
SZSE officially censured *ST Weida (SZSE: 000603) and involved officials for delay and non-disclosure of information in annual report, and will handle the cases of embezzlement according to investigation.
