闽灿坤Ｂ(200512)2001年年度报告（英文版）

证券代码 200512 证券简称 闽灿坤 B 公告编号 2002——0007 TSANN KUEN (CHINA) ENTERPRISE CO. LTD 2001 Annual Report (IAS GAAP) I. COMPANY PROFILE 1 Company name(Chinese) :厦门灿坤实业股份有限公司 Company name(English) :TSANN KUEN (CHINA) ENTERPEISE CO.LTD Brief Company name : TKC 2 Representative of legal entity : Tsann Kuen Wu 3 Board of director’s Secretary : Mrs. Ju Yin Teng Address for contact :No.88 Xing Long road huli industry district ,Xiamen ,China. Telephone : 0592-6030228 Fax : 0592-6035905 E-mail address : tcy@tke.tsannkuen.com 4 The official address : Xiamen China Headquarters : No.88 Xinglong Road Huli industry district Post code : 361006 Email address : www.tsannkuen.com 5 Disclosure paper : ShenZhen Home page : www.cninfo.com.cn Prepared place : No.88 Xinglong Road Huli industry district 6 Common stock : Common stock of TSANN KUEN China is traded on the Shenzhen Stock Exchange under the symbol 闽灿坤 B.200512 7 Registered day : Jan the first 1988 xiamen Business license :企独闽厦总副字 00233 号 - 1 - TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Tax register code :国税 外字 35020661202170 Auditor : Deloitte Touche Tohmatsu CPA Auditor address: 99 Huangpu road Shanghai II. FINANCIAL AND OPERATIONAL HIGHLIGHTS 1 Realized profit for this year Item Content Amount 1 Profit before tax 189,811 2 Net profit 172,521 Net income after extraordinary income or 3 180,759 loss 4 Operating revenue 511,997 5 Other revenue 12,434 6 Operating profit 188,918 7 Investment income (1,145) 8 Subsidy income 6,035 9 Non-operating earning or(expenditure) (3,998) 10 Net cash inflow from operating activities 640,864 11 Net cash and cash equivalents 112,282 (1) The project and amount of the extraordinary income or loss: a Subsidiary income 5,604 b Non-operating income 6,732 c Non-operating expenditure (19,544) d Assert extraordinary loss (1,031) (2) summary of difference between IAS and PRC GAAP Financial statements prepared in conformity with IAS, which are different from its statutory financial statements ,which are prepared in accordance with PRC GAAP The profit as reported under PRC GAAP after taxation is RMB170,408 ,and the profit under IAS GAAP after taxation is RMB 172,521 2 Financial information and index 2 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 2001 Item/year 2001 2000 1999 2000 1 Sales (RMB’000) 2,798,417 2,506,148 1,773,964 111.66% 2 Net profit (RMB’000) 172,521 178,621 140,294 96.58% 3 Total Asserts (RMB’000) 2,315,492 2,139,889 1,306,449 108.21% Stockholder’s equity 4 (Minority equity excluded) 1,073,667 901,206 740,168 119.14% (RMB’000) Dilution 0.3826 0.3961 0.3889 96.58% 5 EPS (rmb) Weighted 0.3826 0.3961 0.3889 96.58% EPS (after extraordinary Dilution 0.4009 0.4003 0.4212 103.23% 6 income or loss) Weighted 0.4009 0.4003 0.4212 103.23% 7 Net assert value per B share (rmb) 2.38 2.00 2.05 119.14% Net assert value per B share 8 (adjusted)(rmb) 2.36 1.97 2.02 119.64% Net cash inflow from operating activities 9 per share (rmb) 1.42 0.90 0.76 157.78% Return on stock -holder’s Dilution 16.07% 19.82% 18.95% 81.15% 10 equity (%) Weighted 17.47% 21.53% 20.94% 75.68% The company has obtained approval from XIAMEN Tax Bureau that it is exempted from PRC income for four years from the first profitable year of operation followed by a 50%relief on PRC income tax for the next five years. The first profitable year was the year ended December 31 1992,being the year in which there was taxable profit after allowance for losses carried forward from previous year. As for that, the company had enjoyed tax exemption from 1992 to 1995 and the 7.5% income taxation from 1996 to 2000. As for the export amount overrun 70% in total output amount, the company’s application tax rate is 10% in 2001. 3 Financial Ratio 3 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Return on stock -holder’s EPS Profits equity % Dilution Weighted Dilution Weighted Gross profit 47.69 52.63 1.1354 1.1354 Operating profit 17.60 19.42 0.4189 0.4189 Net profit 16.07 17.74 0.3826 0.3826 Net profit (after extraordinary income 16.84 18.58 0.4009 0.4009 or loss) 4 Changing by owner’s equity in 2001 Authorized Capital Surplus Public Undivided Item Capital stock total reserved reserve welfare profit fund Opening 450,938 128,655 203,572 20,030 117,587 900,752 account Increase 27,402 9,134 172,521 199,923 Decrease 27,402 27,402 Ending 1,073,27 450,938 128,655 230,974 9,164 262,706 account 3 Surplus Transfer Balancing Reason reserve to capital charge for Transfer from the changing profit of the year (Effect of foreign exchange rate change RMB394,000 not include. ) III. STOCK AND SHAREHOLDER’S EQUITY 1 stock Increase/decrease (+, -) Shares of Accumulati Shares of Item opening of Contributi the end of the period on funds Others Total the period on shares shares Share not in circulation 1 founders shares 329,063 329,063 Including: Shares of State Molders 4 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Increase/decrease (+, -) Shares of Accumulati Shares of Item opening of Contributi the end of the period on funds Others Total the period on shares shares Shares of legal person holders with the boundaries of China Legal foreign capital 329,063 329,063 holders Others 2 Shares of raising legal persons 3 Shares of staff and member 4 Preference shares or others Total shares not in circulation 329,063 329,063 Shares in circulation 1 General RMB on sale with the boundaries of China 2 Foreign capital shares on 121,875 121,875 sale within the boundaries of China 3 Foreign capital shares on sale outside the boundaries of China 4 Others Total shares in circulation 121,875 121,875 Total 450,938 450,938 2 stockholders (1) Number of stockholder For the year end , the total number of stockholder are 18,263; (2) Top ten stockholders Increase/ No Shareholder Beginning Ending Ratio Kind Decrease 5 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Increase/ No Shareholder Beginning Ending Ratio Kind Decrease FORDCHEE Legal 1 DEVELOPMENT 131,625,000 0 131,625,000 29.19% person LIMITED share EUPA INDUSTRY Legal 2 CORPORATION 131,625,000 0 131,625,000 29.19% person LIMITED share FILLMAN Legal 3 INVESTMENTS 65,812,500 0 65,812,500 14.59% person LIMITED share 4 TIMMERTON CO INC 5,880,468 0 5,880,468 1.30% B share CBNY S/A PNC/SKANDIA SELECT 5 0 2,273,545 2,273,545 0.50% B share FUND/CHINA EQUITY AC 6 TSAI SHU HUI 1,740,928 0 1,740,928 0.39% B share 7 LAU,MING TO 916,950 31,000 947,950 0.21% B share 8 TSAI CHIEN FANG 802,056 0 802,056 0.18% B share CHINA PINGAN 9 INSURANCE (HK) 1,256,663 (655,261) 601,402 0.13% B share CO.LTD 10 Yuxiang pon 0 580,000 580,000 0.13% B share (All the stock held by shareholder has no impawning or congealment) (3) Shareholder holding shares over 10% Register Business Capital Name Representative Mortgage day scope stock FORDCHEE Holding Hk$100,00 Yuan Song Tsai 1990/01/03 None DEVELOPMENT LTD company 0 EUPA INDUSTRY Holding HK$100,00 Tsan Kun Wu 1989/07/21 None CORPORATION LTD company 0 FILLMAN INVESTMENTS Holding HK$100,00 Tsan Kun Wu 1994/03/31 None LTD company 0 (Companies beyond are the subsidiary companies belong to TKE) (4) Description of the controlling shareholders A Name of legal controlling shareholder: TSANN KUEN ENTERPRISE CO. LTD B Representative of legal entity: TSANN KUEN WU C Register day: Nov. 11th 1978 D Major product and service: manufactory E Registered capital: NT$1,767,000,000 6 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. F Equity interest: common stock 3 Advanced management person’s data and employee (1) Directors, supervisors and advanced manager (All the person bellowed were appointed from Jan 26th 1999 to Jan 26th 2002) Holding amount Name Sex Age Duty Appointed period Beginning Ending Mr.Wu Male 50 CEO 1999.6.26-2002-6.26 0 0 Tsan Kun Mr. Tasi Yuan Male 49 Director 1999.6.26-2002-6.26 0 0 Zhong Mr. Wang Male 43 Director 1999.6.26-2002-6.26 0 0 Tsai Wan Mr. Lin Zong Male 44 Director 1999.6.26-2002-6.26 0 0 Ming Miss Tsai Secretary Female 40 1999.6.26-2002-6.26 0 0 Shu Hui of board Miss Tsai Female 47 Supervisor 1999.6.26-2002-6.26 0 0 Shu Hui Mr. Jian Male 41 Supervisor 1999.6.26-2002-6.26 0 0 Derong Mr. Yan Male 56 Supervisor 1999.6.26-2002-6.26 0 0 Liang jie Mr. Tasi General Yuan Male 46 1999.6.26-2002-6.26 0 0 manage Song Vice Mr. Yang Male 43 general 1999.6.26-2002-6.26 0 0 wen fang manage Steven Male 40 CFO 1999.6.26-2002-6.26 0 0 Huang Mr.Wu Tsan Kun is the legal person of EUPA INDUSTRY CORPORATION LIMITED; Mr. Tasi Yuan Song is the legal person of FORDCHEE DEVELOPMENT LIMITED; Mr. Yan Liang jie is manage of human resource department of TKE 7 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. (2) Salary in reporting year A salary decision formula and conformation of director supervisor and advanced manager According to company ,salary of director and supervisor were decided by general meeting, others were decided according to director proposal. All these were done by company B Salary (allowance included) There are eleven directors, supervisors and advanced managers in company. Total salary is RMB640,000 yuan .The top three paid of director is RMB 120,000 and RMB 430,000 is for the supervisor. C Salary range RMB180,000 -220,000 two person RMB30,000-60,000 four person RMB24,000 there person D Change of director supervisor and advanced manager Follow by aggregative plan, Mr. Lin Zong Ming is currently the vice president of Shanghai Tsann Kuen Taiwan Enterprise. Mr. Yang wen fang replaced him. (2) human resource Master Amount Type Amount Master 2 R&D engineer 160 Bachelor 312 Academy 279 Middle 311 Technicians 682 Academy Technology 2,426 school Staff 1,137 Senior high 3,070 school Middle school 3,422 Worker 7,895 8 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Elementary 52 school Total 9,874 Total 9,874 IV.MANAGEMNET STRUCTURE OF THE COPERATION 1 Management layout of the corporation The corporation enforced strictly the requirement of issued by CESS, and perfect constantly the corporation management structure and normalize the corporation management. The concrete condition is as follows: (1) About the shareholders and the shareholder meeting Normative management \, convene and open the shareholder's meeting strictly according to the law program, maintains the rights and interests of middle and small shareholders , ensures all shareholders exercise themselves rights fully.; (2) About the controlling shareholders and the listed company The behaves of the controlling shareholders do not intervene the corporation decisions and activities directly or indirectly; this is dividual in the personnel capital financial affairs organization and vocational work strictly between the Corporation and the controlling shareholders; the shareholder meeting the supervisory committee and the internal organization can carry the work independently. (3) About the director and the board of directors The corporation votes the director strictly according to ; The form fits the requirement of the law and regulations; The 9 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. corporation has laid down , execute it strictly. (4) About the supervisor and the supervisory committee The supervisory committee form fits the requirement of the law and regulations The corporation has laid down ; the member of the supervisor performs themselves duties as to the spirits that it is responsible to the shareholders, and supervises to the corporation financial affairs as well as the corporation director , manager and other senior management personnel; (5) About the interest relative personnel The corporation respects and maintains the legal rights and interests of the interest relative personnel such as bank and his creditor staff and consumers who prompt the developments of the corporation continuously and healthy. (6) About information disclosure The corporation enforce strictly the laws regulations and to disclose the concerned information truly accurately completely promptly, and ensures all shareholders have the equal chance to gain information . 2 The dividual conditions between the corporation and the controlling shareholders in the business personnel capital organization financial affairs etc. (1) In the business. In the business, the corporation is independent to the controlling shareholders gradually, set up the complete work system and the independent ability; make the Corporation become the legal person towards market 10 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. (2) In personnel . A In labor human and salary management , the corporation is independent completely, there is separate with the controlling shareholders in office place and production, do not exist the mixed management and the conditions that handled official business in the same office; B Do not exist the conditions that the controlling shareholders intervene the corporation decision which is appointment and fire; (3) In capital. The corporation capital is separate with the controlling shareholders capital strictly, independent business, the corporation possesses the independent product system , supplement production system and the necessary system The invisible capitals such as industry property trademark and non-patent technology etc are possessed by the corporation independently.; (4) In the financial affairs A he corporation establish the independent financial and accounting department and build one set of accounting system and the financial management system that is independence and complete B The Corporation make the financial decisions independently and do not exist the conditions that the controlling shareholders intervene the corporation fund application; C The Corporation open the independent bank account and do not exist the conditions that deposit funds into the center settlement account of the big shareholders or other financial company which is relative; 11 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. D The corporation pays taxes according to law independently; 3 The comments and the hortative restricted framework of the senior management Personnel The corporation has examined to the senior management personnel according to the relative index and standards, the comment result enter into the personal files and are combined with the personal treatments and whether or not appointment; V. RESUME OF THE SHAREHOLDERS’GENERAL MEETING 1 The condition of the meeting about informing calling opening . 2001 shareholders’ general meeting was taken place on Jun 02,2001 at Xiamen Mandarin Hotel. There were eight shareholders and them agents (all of them are the shareholders of the inside-border listed foreign share) , the share total that have the right to vote is 332,304,132 shares which occupies 73.69 percent of the corporation sum shares; the Corporation director , supervisor , other senior management personnel and corporation lawyer and CESS’s concerned personnel in Xiamen all attend this shareholders’ general meeting, and fit the relative rules of and . 2 the passed proposal as follow: A The 2000’s financial statements B The 2000’s profit distribution policy C The 2001’s planning profit distribution policy D The temporal proposal that the supervisory committee put forward E About the proposal that apply for increasing the inside-border listed foreign share in the 2001 year F About the feasible proposal how to use the fund by increasing the B-share 12 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. G About the proposal that the new and old shareholders will enjoy the 2000’sNon-distribution profit and the after-tax profits from the beginning of the 2001 Year to the date of increasing B-share H About the proposal that the validity of increasing B-share (All the proposal were published in SHENZHEN and on Jun 4th 2001) VI. DIRECTORS’ REPORT 1 Business scope and common situation (1) Business scope and common situation A Series contribution Unit:RMB,00 0 Series Product Sales Gross Profit Home comforts 628,559 130,368 Gourmet cooking 1,442,031 318,920 Tea/coffee Electronic breakfast 351,344 36,794 Other 281,642 13,529 Subtotal 2,703,576 499,611 Network service 94,841 12,385 Total 2,798,417 511,997 B Geographical breakdown Unit:RMB,000 13 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Area Sales Gross profit America 1,871,395 372,527 Europe 453,281 70,310 Asia 273,582 42,241 Other 200,159 26,919 Total 2,798,417 511,997 C Ratio to sales over 10% Unit:RMB,000 Gross Sales Cost of sales profit Type Ratio ratio Home comforts 22.46% 628,559 498,191 20.74% Gourmet cooking 51.53% 1,442,031 1,123,111 22.12% Tea/coffee breakfast 12.56% 351,344 314,550 10.47% Other 10.06% 281,642 268,113 4.80% Total 96.61% 2,703,576 2,203,965 18.48% D There are no great change in business line or operating structure ; (2) Management condition and achievement of main holding company A Holding in subsidiaries introduction (A) Tsann Kuen Shanghai Enterprise Co., Ltd. a Business Habitude: Manufacturing; b Major Products and Service: Produce household appliances electron light industry products modern official equipment and related module serious computer and others. They sales own products. They exported without coving license. and quota administer scope. 14 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. c Register capital: US$40,000,000 d Capital extent RMB799,960,000 e Net profit: RMB10,864,000 (B) Tsann Kuen Xiamen Technology Co. , Ltd. f Business Habitude: Manufacturing; g Major Products and Service: Producing and marketing internet communications products like internet server, router and so-like digital communications device and their assemble. h Register capital: US$20,000,000 i Capital extent RMB197,487,000 j Net profit: RMB-18,555,000 (3) Chief customers and suppliers Purchasing amount by the top five in 2001 were 47.4%in total purchasing amount; Sales amount from the top five in 2001 were 62.28 % in total turnover amount; (4) Achievement in financial budget In report year ,the net profit is RMB172,521,000 and the net profit ratio is 6.16% .Its achievement is 86% comparing with RMB200,293,000 and ratio of 6.4%. All these were caused by fail achieving of mainly operating revenue. The detail item as below: Achievement Item 2001(audited) 2001(budget) Minus Ratio amount Light-appliance 2,703,576 2,746,296 98.44% 42,720 PC adherence 94,841 179,383 52.87% 84,542 PC 208,546 0.00% 208,546 15 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Total 2,798,417 3,134,225 89.29% 335,808 Under the influence of worse production of IT all over the world and the failure cooperation on capital investment, the company decided to change the operating emphasis from IT to light-electronic products in order to avoid too much expense; 2 Investment statue (1) Utilization state of raised funds A TKC has not raised funds since 1994 except the 40,000,000 raised shares outside the boundaries of China in 1993. And there was no raised funds utilized after 1998. B On the Meeting of Shareholders in 1999, the plan to issue 50 million more B-shares had been approved. On July 7, 2000 it was granted by CESS. But till Jun the second 2001 has no news about it. (2) Utilization state of non-raised funds none 3 Financial statue and marketing analysis Increase or Reason Item/Year 2001 2000 decrease% Total assets 2,315,492 2,139,889 8.21% Long-term Paid liabilities 31,219 37,829 -17.47% liabilities Shareholders’ Increasing in net profit and equity 1,073,667 901,206 19.14% reduction in dividend distribution Gross profit Increasing in production a 511,997 472,203 8.43% nd sales Net profit Decrease in profit by Sub 172,521 178,621 -3.42% sidiary company 16 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 4 There was not any change in government s policy, legal rules and operating status, which maybe result in significant effect on our company s financial status and operating result. 5 Business plan in 2002 (1) 2002 sales target: us$285,000,000 (2) operation strategy: A Building international dual core business. World factory adopts E.D.S.S and the international channel adopts DATA MINIING strategy; B Creating a classic enterprise as strategy innovation ; C Difference management ,cost guidance D By the core value of designing, emphasizing on the core value of following the latest fashion distribution in a scientific way and building bright prospects; E Customer relationship management, all direction customer oriented; F Though SCM. ERP. CRM. to raise a great improvement in management; (3) operation focus: A Combining flow reasonable, deeply use IT; B Combining production and sales, hog Chinese market; C Increasing vertical integrating leverage, building the benefit of the cost guidance; D Push education training, cultivate special talent; E Elaborating the control of manufacturing, apply 6 sigma 17 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. and QS9000 quality system F Improving innovation of production skill raise, efficiency and admirable ratio; G Building knowledge operating system, realizing information communion to get intelligence value; H Strengthen the sense of customer serving , creating the value of customer; (4) Research and development plans A Executing annual development case, becoming the first of IRON product in china and the world; B The first grill products; C Globing the out-door products line; D Hogging the Chinese market , devoted the manufacturing line of new product; (5) capital investment plan A Purchase large Die-casting machine 18 products; B Purchase SMT; C Develop 310 sets of module used for new products; D Invest USD4,500,000 to build grass factory; 6 Day to day work of shareholders’ meeting 6-1 The important proposal of the shareholder’s meeting during this year (1) On Apr. 22th 2001, the 2001’s first meeting , passed the following proposal: A The 2000’s financial statements B The 2000’s profit distribution policy 18 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. C The 2001’s planning profit distribution policy D About the proposal that apply for increasing the inside-border listed foreign Share in the 2001 year; E About the feasible proposal how to use the fund by increasing the B share; F About the proposal that the new and old shareholders will enjoy the 2000’s non-distribution profit and the after-tax profits from the beginning of the 2001 year to the date of increasing B-share; G About the proposal that the validity of increasing B-share; H Decide to take place the 2000’s shareholders’ meeting at 9:00AM on May 26,2001 at XiaMen Mandarin Hotel. Those proposals were disclosed in the ShenZhen and on April 24,2001; (2) On April 25th 2001, the 2001’s second meeting . Through issuing the RMB special B share in the year 1993, being raised HKD177,600,000, that is RMB198,000,000 were used and made result to explain. It has carried on the difference explanations to the real and promised investment item through raising fund .; (3) On May 12th 2001 the 2001’s third meeting, passed the following proposals: A Discussing official business regulation of the shareholder’s meeting; B According to nominating of the corporation general manager, appoint Mr. Yang Wen fang to act as the vice general manager of the corporation. C Passed the proposal that the relative licence authority in the have revised and supplemented.; 19 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. D The temporary proposal that the supervisor offered. (4) On May 16th 2001, the 2001’s fourth meeting Passed the proposal that the opening date of the shareholder’s meeting had postponed from May 26th 2001 to June the second 2001; (5) On July the third 2001, the 2001’s fifth meeting Passed the proposal to study discuss and improve No.[2001] 075 issued by CESS in XIAMEN when they have gone round to check the corporation on Jun 4th to Jun 8th 2001; (6) On Aug 20,2001, the 2001’s sixth meeting, Passed the following proposal A The 2001’s middle-term report B The middle 2001’s planning profit distribution policy; (Those proposals were disclosed in the ShenZhen and on Aug. 22th 2001.) 6-2 The execution condition of the board of directors to the shareholder’s meeting. (1) Distribution of dividend reserve and distribution of discretionary fund of 2000 Cash dividend per one share is 0.1; stock dividend per ten share is 1.5; One share of non-compensation stock dividend per ten share (2) Distribution of dividend reserve and distribution of discretionary fund of 2001 Cash dividend per ten share is 1; stock dividend per ten share is 1; One share of non-compensation stock dividend per ten share 7 Distribution of dividend reserve and distribution of discretionary fund of 2002 budget 20 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. In respect of current year, the directors propose a cash dividend of 10 cents per share and a bonus issue of 50 bonus shares for every 100 shares held from the capitalisation of discretionary surplus fund and retained earnings. This is subject to the approval of the shareholders at the next Annual General Meeting. VII. REPORT OF THE BOARD OF SUPERVISOR 1 Supervisors’ meeting (1) On April 22th 2001, the 2001’s first meeting, Approved the 2000 financial report (2) On May 12th 2001, the 2001’s second meeting, Approved Discussing official business regulation of the supervisor’s meeting (3) On July the third 2001, the 2001’s third meeting Approved to study discuss and improve No.[2001] 075 issued by CESS in XIAMEN when they have gone round to check the corporation on Jun 4th to Jun 8th 2001; (4) On Aug 20,2001, the 2001’s fourth meeting Approved the 2001’s middle-term report. 2 The board of directors has not been found to do things against the laws. 3 The real investment item of the latest raised funds is concordance with the promised investment item. 4 The transactions with relative company are fair, and it do not make a loss to the corporation and the shareholders. VIII. MAJOR EVENTS 1 Significant litigation or arbitration: none. 21 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 2 Significant purchase or disposal of assets and acquisition or merge: none 3 Significant relative business (1) Detail in DTT report; (2) All the transactions were done based on the signed by XIAMEN TAX BUREAU and the company; 4 In the report time, the company or shareholder holding more 5% share have no decision opened on the appointed newspaper or net site; 5 In the report time, continue to retain Deloitte Touche Tohmatsu shanghai CPA, Never change Payroll this year is RMB1,517,000 IX. Financial report (detail bellowed) X. MEMO 1 The annual report of 2000 with the personal Signature and Stamp of C.E.O; 2 The financial statement with the signature of Legal Agent and Manager of accounting; 3 All the script of the files and manuscript of announcement that disclosed openly on signed paper by The committee of stock supervision during the period of this report; 22 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Report and Financial Statements for the year ended December 31, 2001 (Prepared under International Accounting Standards) Registered Office: 88 Xinlong Road, HuLi Industry Zone Xiamen China 23 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) CONTENTS PAGE(S) REPORT OF THE INTERNATIONAL AUDITORS 1 CONSOLIDATED INCOME STATEMENT 2 CONSOLIDATED BALANCE SHEET 3 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 4 CONSOLIDATED CASH FLOW STATEMENT 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 – 32 - 24 - DTT(A)02I0 REPORT OF THE INTERNATIONAL AUDITORS TO THE SHAREHOLDERS OF TSANN KUEN (CHINA) ENTERPRISE CO., LTD. We have audited the accompanying consolidated balance sheet of the Tsann Kuen (China) Enterprise Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2001 and the related consolidated statements of income, changes in equity and cash flows for the year then ended. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements give a true and fair view of the financial position of the Group as of December 31, 2001 and of the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards. Deloitte Touche Tohmatsu Shanghai CPA - 25 - TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) NOTES 2001 2000 RMB’000 RMB’000 Revenue 5 2,798,417 2,506,148 Cost of sales (2,286,420) (2,033,945) Gross profit 511,997 472,203 Other income 7 14,472 10,804 Distribution costs (182,897) (155,381) Administrative expenses (141,921) (117,744) Profit from operations 8 201,651 209,882 Interest expenses (11,840) (16,626) Profit before tax 189,811 193,256 Income tax expense 9 (23,593) (15,639) Profit after tax 166,218 177,617 Minority interests 6,303 1,004 Net profit for the year 172,521 178,621 RMB RMB Basic earnings per share 11 38 cents 40 cents 26 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2001 (Prepared under International Accounting Standards) NOTES 12.31.2001 12.31.2000 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 12 1,164,269 1,047,513 Investment properties 13 2,306 1,276 Goodwill 14 10,306 11,450 Land use rights 15 83,419 82,421 Advance to a related company 31(d) - 60,844 Other investments 17 71 71 1,260,371 1,203,575 Current assets Inventories 18 346,824 302,493 Trade and other receivables 19 296,523 369,026 Amounts due from related companies 31(c) 158,387 123,690 Bank balances and cash 253,387 141,105 1,055,121 936,314 Total assets 2,315,492 2,139,889 EQUITY AND LIABILITIES Capital and reserves Share capital 20 450,938 450,938 Retained profits 262,706 117,587 Other reserves 21 360,023 332,681 1,073,667 901,206 Minority interests 119,789 121,940 Non-current liabilities Long-term payable-due after one year 22 31,219 37,829 Current liabilities Trade and other payables 23 481,602 489,433 Long-term payable-due within one year 22 6,610 6,610 Amounts due to related companies 31(c) 422,452 300,215 Income tax liabilities 15,391 14,856 Short-term bank borrowings 24 164,762 267,800 1,090,817 1,078,914 Total equity and liabilities 2,315,492 2,139,889 27 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) Other reserves StatutoryDiscretionaryStatutory Share Share surplus surplus public Translation Retained capital premium reserve reservewelfare reservereserve Sub-total profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 YEAR ENDED DECEMBER 31, 2000 Balance at January 1, 2000 360,750 128,655 50,992 95,031 10,830 - 285,508 93,910 740,168 Exchange differences arising on translation of subsidiaries’ financial statements - - - - - 454 454 - 454 Capitalisation issue 90,188 - - (36,075) - - (36,075) (54,113) - Net profit for the year - - - - - - - 178,621 178,621 Dividends - - - - - - - (18,037) (18,037) Appropriations - - 18,399 55,195 9,200 - 82,794 (82,794) - Balance at December 31, 2000 450,938 128,655 69,391 114,151 20,030 454 332,681 117,587 901,206 YEAR ENDED DECEMBER 31, 2001 Balance at January 1, 2001 450,938 128,655 69,391 114,151 20,030 454 332,681 117,587 901,206 Exchange differences arising on translation of subsidiaries’ financial statements - - - - - (60) (60) - (60) Net profit for the year - - - - - - - 172,521 172,521 Appropriations - - 18,268 - 9,134 - 27,402 (27,402) - Balance at December 31, 2001 450,938 128,655 87,659 114,151 29,164 394 360,023 262,706 1,073,667 28 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) NOTES 2001 2000 RMB’000 RMB’000 OPERATING ACTIVITIES Cash generated by operations 25 663,922 419,595 Income taxes paid (23,058) (13,521) NET CASH INFLOW FROM OPERATING ACTIVITIES 640,864 406,074 INVESTING ACTIVITIES Interest received 1,941 1,450 Proceeds on disposal of property, plant and equipment 1,669 - Purchases of property, plant and equipment (411,978) (330,045) Acquisition of land use rights 27(b) (2,878) (23,667) Acquisition of a subsidiary 26 - 6,571 NET CASH USED IN INVESTING ACTIVITIES (411,246) (345,691) FINANCING ACTIVITIES Cash received from minority shareholders 4,152 6,216 Interest paid on loans (11,840) (16,626) Dividends paid - (18,037) Repayments of bank borrowings (714,364) (657,550) New bank loans raised 611,326 721,182 Repayment of long-term payable (6,610) - NET CASH (USED IN) FROM FINANCING ACTIVITIES (117,336) 35,185 NET INCREASE IN CASH AND CASH EQUIVALENTS 112,282 95,568 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 141,105 45,537 CASH AND CASH EQUIVALENTS AT END OF YEAR 253,387 141,105 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash 253,387 141,105 29 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 1. GENERAL Tsann Kuen (China) Enterprise Co., Ltd. (“the Company”) was established in the People’s Republic of China (the “PRC”) in 1988 under the name of Tsann Kuen China (Xiamen) Ltd. as a wholly owned foreign investment enterprise. On February 16, 1993, with the approval of the Ministry of Foreign Trade and Economic Co-operation, the Company was reorganised into a joint stock company limited by shares and was renamed as Tsann Kuen (China) Enterprise Co., Ltd. In June 1993, the Company issued 40,000,000 new shares pursuant to an international placing and public offer and these new shares (“B shares”) were then listed on the Shenzhen Stock Exchange on June 30, 1993. The Company and its subsidiaries are hereinafter collectively referred to as the Group. As at December 31, 2001, the Group has 12,157 staff (December 31, 2000: 10,465). 2. PRESENTATION OF FINANCIAL STATEMENTS The Company and its subsidiaries maintain their accounting records and prepare their statutory financial statements in accordance with the accounting standards and regulations applicable to joint stock companies limited by shares of the People’s Republic of China (“PRC GAAP”). These consolidated financial statements have been prepared in accordance with International Accounting Standards (“IAS”). The accounting policies and bases adopted in the preparation of the statutory financial statements differ in certain respects from IAS. The differences arising from the restatement of the results of operations and the net assets for compliance with IAS are adjusted in the consolidated financial statements but are not taken up in the accounting records of the Company and its subsidiaries. A reconciliation of the Group’s profit and net assets under IAS and PRC GAAP is set out in note 32. These financial statements are presented in Renminbi (“RMB”) since that is the currency in which the majority of the Group’s transactions are denominated. 30 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 3. ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS In current year, the Group has adopted the following IAS for the first time. IAS 39 (Revised 2000) Financial Instrument: Recognition and Measurement IAS 40 Investment Property Adoption of these Standards has resulted in some changes in the detailed application of the Group’s accounting policies and some modifications to financial statements presentation. However, none of these amendments has affected the results for the current or prior periods. Revisions to a number of other IAS also took effect in 2001. Those revisions concerned matters of detailed application which have no significant effect on amounts reported for the current or prior accounting periods. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) made up to December 31 each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. The results of subsidiaries acquired during the year are included in the consolidated income statement from the effective date of acquisition, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All significant intercompany transactions and balances between the group 31 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. enterprises are eliminated on consolidation. 32 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is recognised and amortised on a straight-line basis over its estimated useful life of 10 years. Revenue recognition Sales of goods are recognised when goods are delivered and title has passed. Services income is recognised when services are rendered. Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable. Rental income, including rental invoiced in advance, from properties under operating leases is recognised on a straight-line basis over the term of relevant lease. Operating leases Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Foreign currencies Transactions in currencies other than RMB are initially recorded at the rates of exchange ruling on the first day of the month in which the transaction takes place which approximates to the rates of exchange ruling on the dates of transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement. On consolidation, the assets and liabilities of the subsidiaries operations which are denominated in a reporting currency different from that of the Group are translated at exchange rates ruling on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which 33 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. the subsidiary is disposed of. 34 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Research and development costs Expenditure on research activities is recognised as an expense in the period in which it is incurred. Expenditure on development activities is recognised as an expense in the period in which it is incurred except where (a) an asset is created that can be identified; (b) it is probable that the asset created will generate future economic benefits; and (c) the development cost of the asset can be measured reliably. Any such development costs incurred are recognised as an intangible asset and amortised on a straight-line basis over the life of the project from the date of commencement of commercial operation. Borrowing costs Borrowing costs are recognised as expenses when they are incurred. Government grants Government grants towards income taxes paid are recognised as income over the periods necessary match them with the related costs and are deducted in reporting the related expense. Retirement benefit costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as defined contribution plans where the Group’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit plan. Taxation The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that would be applicable to expected total annual earnings. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not 35 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit. 36 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Taxation - continued Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Land use rights Land use rights are stated at cost less accumulated amortisation. Amortisation is charged so as to write off the cost of land use rights over the term of the relevant land use right using straight-line method. Property, plant and equipment Property, plant and equipment other than construction in progress are stated at cost less accumulated depreciation and accumulated impairment loss. Construction in progress is stated at cost which includes all development expenditure and the direct costs attributable to such projects. Construction in progress is not depreciated or amortised until the completion of construction. Cost of completed construction work is transferred to the appropriate category of property, plant and equipment. Depreciation is charged so as to write off the cost of assets other than construction in progress, over their estimated useful lives, using the straight-line method, on the following bases: Buildings 4.5% Machinery and equipment 6%-9% Motor vehicles 18% Furniture and office equipment 18% Moulds 9%-18% The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income statement. 37 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Investment properties Investment properties are properties held to earn rentals or for capital appreciation or both. Investment properties are carried at cost less accumulated depreciation and any accumulated impairment loss where the recoverable amount of the assets is estimated to be lower than its carrying value. Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, the depreciation rate of investment properties is 4.5% per annum. Impairment At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in 38 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. marketing, selling and distribution. 39 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Financial instruments Financial assets The Group’s principal financial assets are bank balances and cash, trade and other receivables, amounts due from related companies and an advance to a related company. Trade and other receivables, amounts due from related companies and the advance to a related company are stated at their nominal value as reduced by the appropriate allowances for estimated irrecoverable amounts. Other investments consists of investments available-for-sale which are initially recorded at cost and are measured at subsequent reporting dates at fair value at the balance sheet date. Increases or decreases in the carrying amount of current investment are recognised as income or expenses of the year. Bank balances and cash are stated at their nominal values. Financial liabilities Significant financial liabilities include interest-bearing bank borrowings, trade and other payables, amounts due to related companies and a long-term payable. Interest bearing bank borrowings are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accrual basis. Trade and other payables and amounts due to related companies are stated at their nominal values. 5. REVENUE An analysis of the Group’s revenue is as follows: 2001 2000 RMB’000 RMB’000 Sales of household electrical products 2,703,576 2,448,003 Sales of computer accessories 94,841 58,145 2,798,417 2,506,148 40 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 6. BUSINESS AND GEOGRAPHICAL SEGMENTS The Group is principally engaged in the manufacture and sales of household electrical products, see note 5. An analysis of Group’s revenue and result by geographical market is as follows: 2001 North South Others America America Europe PRC Japan (Note) Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 REVENUE 1,789,258 82,137 453,281 81,055 192,527 200,159 2,798,417 RESULT Segment result 301,982 13,317 59,859 12,289 9,823 8,794 406,064 Unallocated Corporated expenses (206,354) Profit from operations before interest income 199,710 Interest income 1,941 Interest expenses (11,840) Profit before tax 189,811 Income tax expense (23,593) Profit after tax 166,218 2000 North South Others America America Europe PRC Japan (Note) Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 REVENUE 1,686,387 60,737 365,294 80,729 131,653 181,348 2,506,148 RESULT Segment result 280,587 10,255 52,131 6,892 16,612 7,573 374,050 Unallocated Corporated expenses (165,618) Profit from operations before interest income 208,432 Interest income 1,450 Interest expenses (16,626) Profit before tax 193,256 Income tax expense (15,639) Profit after tax 177,617 Note: Others include Taiwan and Hong Kong. 41 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2001 (Prepared under International Accounting Standards) 6. BUSINESS AND GEOGRAPHICAL SEGMENTS - continued An analysis of Group’s assets and liabilities by geographical market is as follows: 12.31.2001 12.31.2000 Assets Liabilities Assets Liabilities RMB’000 RMB’000 RMB’000 RMB’000 North America 126,824 15,040 128,109 2,803 South America 12,193 3,529 10,522 3,152 Europe 88,075 3,841 106,972 5,964 PRC 73,099 378,792 27,804 535,009 Japan 71,146 7,268 85,421 2,351 Taiwan 20,023 359,718 56,469 181,726 Hong Kong 41,785 69,495 100,239 15,825 Others 21,765 72,981 38,024 49,428 Subtotal 454,910 910,664 553,560 796,258 Unallocated assets and liabilities 1,860,582 211,372 1,586,329 320,485 Total 2,315,492 1,122,036 2,139,889 1,116,743 The unallocated assets represent property, plant and equipment, investment properties, goodwill, land use rights, other investments, inventories and bank balances and cash. The unallocated assets, including additions thereto during the year, are located in the PRC. The unallocated liabilities represent income tax liabilities, short-term bank loans and long-term payable. 7. OTHER INCOME 2001 2000 RMB’000 RMB’000 Income from sales of materials 4,255 3,208 Management income 1,719 2,247 Government incentive subsidies 6,035 3,672 Interest income from bank deposits 1,941 1,450 Rental income 522 227 14,472 10,804 42 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 8. PROFIT FROM OPERATIONS Profit from operations has been arrived at after charging: 2001 2000 RMB’000 RMB’000 Staff costs 220,545 146,152 Depreciation 180,834 128,271 Amortisation - goodwill (included in administrative expenses) 1,144 674 - land use rights (include in administrative expenses) 1,880 1,145 Impairment loss (included in cost of sales) 6,825 - Net foreign exchange losses 9,463 2,698 Research and development costs 25,720 8,411 9. INCOME TAX EXPENSE 2001 2000 RMB’000 RMB’000 PRC income tax for the year 23,593 15,639 The Company has obtained approval from the Xiamen Tax Bureau that it is exempted from PRC income tax for four years from the first profitable year of operation followed by a 50% relief on the PRC income tax for the next five years. The first profitable year was the year ended December 31, 1992, being the year in which there was taxable profit after allowance for losses carried forward from previous years. The year ended December 31, 2000 is the last year that the Company enjoys the 50% relief in the PRC income tax, the applicable tax rate after tax relief is 7.5%. According to the “Detailed Rules and Regulations for Implementation of the Income Tax Law of the People’s Republic of China Concerning Enterprises with Foreign Investment and Foreign Enterprises”, an export oriented enterprise established with foreign investment which, on the expiry of the period of reduction of or exemption from enterprise income tax as stipulated in the tax law, has an export value for the year amounting to 70% or more of the value of its product output for that year may pay enterprise income tax at one-half of the prevailing rate pursuant to the provisions of the tax law. However, an export oriented enterprise located in economic zones which pays enterprise income tax at 15% has to levy income tax at 10%. The Company is applying for the above tax privilege. Income tax for the current year has been provided at the rate of 10%, since in the opinion of the directors, the application for the tax privilege will be approved by the Tax Bureau, on the basis that the Company has clearly fulfilled the 43 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. requirements. 44 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 9. INCOME TAXES EXPENSES - continued Tsann Kuen China (Shanghai) Enterprise Ltd. (“TKS”), a subsidiary of the Company, is an export oriented enterprise located in Shanghai, which is entitled to income tax exemption for two years commencing from the first profitable year and a reduction in the applicable tax rate for the next three years. Year 2001 is the second year that TKS enjoys the tax exemption period. No provision for taxation has been made for Tsann Kuen (China) Technology Co., Ltd. (“TKK”), a subsidiary of the Company, as it does not have any assessable income since its establishment. The charge for the year can be reconciled to the profit per the income statement as follows: 2001 2000 RMB’000 % RMB’000 % Profit before tax 189,811 193,256 Tax at the PRC tax rate of 10% (2000: 7.5%) 18,981 10.0 14,494 7.5 Tax effect of expenses that are not deductible in determining taxable profit 1,995 1.0 715 0.2 Effect of tax holiday enjoyed by a subsidiary (192) (0.1) (260) (0.1) Tax loss of a subsidiary not recognised 2,809 1.5 690 0.4 Tax expense and effective tax rate for the year 23,593 12.4 15,639 8.0 Deferred tax asset in respect of the tax losses of a subsidiary amounting to RMB 3,499,000 (December 31, 2000: RMB 690,000) is not recognised in the consolidated financial statements as it is uncertain whether the loss will be utilised in the foreseeable future. 10. DIVIDENDS On June 30, 2000, a cash dividend of 5 cents per share was paid to shareholders. At the same date, there was a bonus issue of 25 bonus shares for every 100 shares held from the capitalisation of discretionary surplus fund and retained earnings. In respect of current year, the directors propose a cash dividend of 10 cents per share and a bonus issue of 50 bonus shares for every 100 shares held from the capitalisation of discretionary surplus fund and retained earnings. This is subject to the approval of the shareholders at the next Annual 45 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. General Meeting. 46 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 11. EARNINGS PER SHARE The calculation of the basic earnings per share is based on the following data: Earnings 2001 2000 RMB’000 RMB’000 Earnings for the purposes of basic earnings per share (net profit for the year) 172,521 178,621 Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 450,938 450,938 12. PROPERTY, PLANT AND EQUIPMENT Machinery Furniture and Motor and office Construction Buildings equipment vehicles equipment Moulds in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 COST At January 1, 2001 190,518 393,642 31,156 90,354 952,654 62,200 1,720,524 Additions 5,070 31,066 1,612 6,906 60,880 205,179 310,713 Transfers 46,184 2,888 326 (11,719) 174,567 (212,246) - Transferred to investment properties (2,840) - - - - - (2,840) Disposals (184) (4,322) (1,706) (3,183) (1,061) - (10,456) At December 31, 2001 238,748 423,274 31,388 82,358 1,187,040 55,133 2,017,941 ACCUMULATED DEPRECIATION At January 1, 2001 32,733 113,401 18,222 40,882 467,773 - 673,011 Charge for the year 12,998 24,816 4,868 11,073 126,952 - 180,707 Transferred to investment properties (1,683) - - - - - (1,683) Impairment loss - - - - 6,825 - 6,825 Eliminated on disposals (53) (1,653) (1,108) (1,844) (530) - (5,188) At December 31, 2001 43,995 136,564 21,982 50,111 601,020 - 853,672 NET BOOK VALUES At December 31, 2001 194,753 286,710 9,406 32,247 586,020 55,133 1,164,269 At December 31, 2000 157,785 280,241 12,934 49,472 484,881 62,200 1,047,513 47 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. As at December 31, 2000, the Group has pledged certain property, plant and equipment of approximately RMB 56.39 million to secure general banking facilities granted to the Group. During the current year, the security of these pledged assets was released. 48 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 12. PROPERTY, PLANT AND EQUIPMENT - continued The directors estimate RMB 6,825,000 (December 31, 2000: Nil) of impairment loss on those idle moulds based on discounted future cash flow. 13. INVESTMENT PROPERTIES RMB’000 COST At January 1, 2001 2,820 Transferred from property, plant and equipment 2,840 At December 31, 2001 5,660 ACCUMULATED AMORTISATION At January 1, 2001 1,544 Charge for the year 127 Transferred from property, plant and equipment 1,683 At December 31, 2001 3,354 NET BOOK VALUES At December 31, 2001 2,306 At December 31, 2000 1,276 The directors consider the carrying amount of the investment properties approximates to their fair value determined by discounted future cash flow. 14. GOODWILL RMB’000 COST At January 1 and December 31, 2001 12,124 AMORTISATION At January 1, 2001 674 Charge for the year 1,144 At December 31, 2001 1,818 CARRYING AMOUNT At December 31, 2001 10,306 At December 31, 2000 11,450 49 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 15. LAND USE RIGHTS RMB’000 COST At January 1, 2001 86,806 Additions 2,878 At December 31, 2001 89,684 ACCUMULATED AMORTISATION At January 1, 2001 4,385 Charge for the year 1,880 At December 31, 2001 6,265 NET BOOK VALUES At December 31, 2001 83,419 At December 31, 2000 82,421 As at December 31, 2001, the Group has balance payable of RMB 38 million in respect of the acquisition of the land use rights. As a result, the Group has not yet obtained the land use right certificate. As at December 31, 2001, land use rights have remaining amortisation periods from 38 to 57 years. 16. SUBSIDIARIES Details of the Company’s subsidiaries at December 31, 2001 are as follows: Place Proportion of Name of and date of Registered ownership and subsidiary establishment capital voting right Principal activity Tsann Kuen China Shanghai, PRC USD 40,000,000 62.5% Production and sale of household (Shanghai) Enterprise August 17, 1993 appliance. Ltd. Tsann Kuen (China) Xiamen, PRC USD 20,000,000 75% Production and sale of digital Technology Co., Ltd. August 4, 2000 telecom equipment. 50 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 17. OTHER INVESTMENTS 12.31.2001 12.31.2000 RMB’000 RMB’000 Unlisted shares 71 71 The directors consider that the carrying amount of other investments approximate to their fair value. 18. INVENTORIES 12.31.2001 12.31.2000 RMB’000 RMB’000 Raw materials 177,256 157,706 Work-in-progress 72,996 62,178 Finished goods 96,572 82,609 346,824 302,493 Carrying amount of inventories at net realisable value - Raw materials 3,599 2,966 - Work-in-progress 779 1,409 - Finished goods 20,479 13,806 24,857 18,181 19. OTHER FINANCIAL ASSETS Trade and other receivables comprise amounts receivable for the sale of goods of RMB 234 million (December 31, 2000: RMB 291 million) and advances to suppliers and other prepayments of RMB 63 million (December 31, 2000: RMB 78 million). The average credit period taken on sale of goods is 49 days. An allowance has been made for estimated irrecoverable amounts from the sale of goods of RMB 28 million (December 31, 2000: RMB 25 million). This allowance has been determined by reference to past default experience. The directors consider that the carrying amount of trade and other receivables and amounts due from related companies and advance to a related company approximates to their fair value. Bank balances and cash comprise cash and short-term deposits held for treasury function. The carrying amount of these assets approximates to 51 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. their fair value. 52 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 19. OTHER FINANCIAL ASSETS - continued Fair value The carrying amount of financial assets and financial liabilities recorded in the consolidated financial statements approximates to their respective fair values, determined in accordance with the accounting policies disclosed in note 4. Fair value estimates are made at specific point in time and are based on relevant market information. The estimate is subjective in nature and involved uncertainty and matters of significant judgment and therefore cannot be determined with precision, changes in valuation methods and assumptions could significantly affect the estimates. Credit risk The Group’s credit risk is primarily attributable to its trade and other receivables, amounts due from related companies and advance to a related company. The amounts presented in the consolidated financial statements are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and the current economic environment. Credit risk of amounts due from related companies is limited as the amounts are guaranteed by the major shareholder of the ultimate holding company. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings in China. Concentration of credit risk For the year 2000 and 2001, net sales to the Group’s five largest customers accounted for approximately 60.07% and 62.28%, respectively, of the Group’s total revenue. Net sales to the Group’s largest customer, Salton Inc., accounted for 48.26% and 43.40% of the Group’s total revenue for 2000 and 2001, respectively. Details of the amounts receivable from the five non-related customers with the largest receivable balances at year end are as follows: Percentage of trade receivable 12.31.2001 12.31.2000 53 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Five largest receivable balances 45.97% 36.85% 54 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 19. OTHER FINANCIAL ASSETS - continued Foreign exchange risk The Company and its subsidiary, TKS, are export-oriented enterprises with the United States as their largest market. Changes in international exchange rates, the rate for United States dollars in particular, will have an impact on the revenue of the Group. In addition, the Group purchases its equipment from overseas and the purchase price of its equipment is denominated in foreign currency. 20. SHARE CAPITAL 12.31.2001 12.31.2000 RMB’000 RMB’000 Registered, issued and fully paid: Legal person shares of RMB 1 each 329,063 329,063 B shares of RMB 1 each 121,875 121,875 450,938 450,938 Balance at January 1 450,938 360,750 Captialisation issue (note 10) - 90,188 Balance at December 31 450,938 450,938 All the shares rank pari passu with each other in all respects except that the B shares are listed on the Shenzhen Stock Exchange. 21. OTHER RESERVES (a) Other reserves of the Group include statutory surplus reserve, discretionary surplus reserve and statutory public welfare reserve, which form part of shareholders’ equity. Statutory surplus reserve / Discretionary surplus reserve In accordance with relevant PRC laws and regulations and the Company’s Articles of Association, the Company is required to appropriate 10% of its profit after taxation reported in its PRC statutory financial statements to the statutory surplus fund. Allocation to a discretionary surplus reserve shall be approved by the shareholders in general meeting. 55 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 21. OTHER RESERVES – continued (a) Other reserves of the Group include statutory surplus reserve, discretionary surplus reserve and statutory public welfare reserve, which form part of shareholders’ equity. - continued Statutory surplus reserve / Discretionary surplus reserve – continued The appropriation of statutory surplus reserve may cease to apply if the balance of the statutory surplus reserve has reached 50% of the Company’s registered capital. Surplus reserve can be used to make up losses or for conversion into share capital. The Company may, upon the approval by a resolution of shareholders’ general meeting, convert its surplus reserves into share capital by issuing new shares to existing shareholders in proportion to their original shareholding or by increasing the nominal value of each share. However, when converting the Company’s statutory surplus reserve into share capital, the amount of such fund remaining unconverted must not be less than 25% of the registered capital. Statutory public welfare reserve In accordance with relevant PRC laws and regulations and the Company’s Articles of Association, the Company is required to appropriate 5% to 10% of the profit after tax as reported in its PRC statutory financial statements to the statutory public welfare reserve. The statutory public welfare fund shall only apply to collective welfare of staff and workers and welfare facilities remain a property of the Company. When the public welfare reserve is utilised, an amount equal to the cost of the assets acquired is transferred to discretionary surplus reserve. On disposal of the relevant assets, the original transfers from the reserve are reversed. (b) Basis for profit distribution In accordance with the Company’s Articles of Association, profit available for distribution to shareholders should be based on the lower of the amount determined under PRC GAAP and the amount determined under IAS after deduction of the current year’s appropriation to the statutory reserves. The unappropriated profit carried forward for distribution to shareholders as at December 31, 2001 was approximately RMB 262,706,000. 56 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 22. LONG-TERM PAYABLE-DUE AFTER ONE YEAR The amount represents outstanding balance for land use rights acquired in 2000. It is interest free and is repayable as follows: 12.31.2001 12.31.2000 RMB’000 RMB’000 Within one year 6,610 6,610 In the second year 15,610 6,610 In the third to fifth years 15,609 31,219 37,829 44,439 Less: Amount due for settlement within 12 months (Shown under current liabilities) (6,610) (6,610) 31,219 37,829 23. OTHER FINANCIAL LIABILITIES Trade and other payables comprise amounts outstanding for trade purchase and ongoing costs and land use right due within one year. The directors consider that the carrying amount of trade and other payables and amounts due to related companies approximates to their fair value. 24. SHORT-TERM BANK BORROWINGS 12.31.2001 12.31.2000 RMB’000 RMB’000 Short-term bank loans 164,762 243,207 Trust receipt loans - 24,593 164,762 267,800 At December 31, 2001, RMB 100,000,000 of short-term bank loan is interest free (Decembe 31, 2000: Nil) and the remaining loans are with interest rates ranged from 2.8572% to 5.58% (December 31, 2000: 4.65%-6.435%) per annum. As at December 31, 2000, short-term borrowing of RMB 78,778,000 was secured on certain property, plant and equipment of the Group, see note 12. The security of these pledged assets was released during the current year. The directors consider the carrying amount of the short term bank loans approximates to their fair value. 57 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 24. BORROWINGS - continued Analysis of borrowings by currency: 12.31.2001 12.31.2000 RMB’000 RMB’000 Renminbi 130,000 234,928 US Dollar 34,762 32,872 164,762 267,800 25. CASH GENERATED BY OPERATIONS 2001 2000 RMB’000 RMB’000 Profit before tax 189,811 193,256 Adjustments for: Interest expenses 11,840 16,626 Interest income (1,941) (1,450) Depreciation of property, plant and equipment and investment properties 180,834 128,271 Impairment loss on property, plant and equipment 6,825 - Loss on disposals of property, plant equipment 3,599 2,858 Amortisation of land use rights 1,880 1,145 Amortisation of goodwill 1,144 674 Effect of foreign exchange rate changes (60) 766 Operating cash flows before movements in working capital 393,932 342,146 Decrease in advance to a related company 60,844 - (Increase) decrease in inventories (44,331) 78,877 Decrease in trade and other receivables 72,503 6,857 (Increase) decrease in amounts due from related companies (34,697) 38,786 Increase in trade and other payables 93,434 171,829 Increase (decrease) in amounts due to related companies 122,237 (218,900) Cash generated by operations 663,922 419,595 58 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 26. ACQUISITION OF A SUBSIDIARY In 2000, the Company acquired a subsidiary TKS and the transaction has been accounted for by the acquisition method of accounting. 2000 RMB’000 Net assets acquired: Property, plant and equipment 388,424 Inventories 107,948 Trade and other receivables 201,506 Amounts due from related companies 57,453 Bank and cash balances 6,571 Trade and other payables (12,736) Amounts due to related companies (412,644) Short-term bank loans (25,248) Minority interest (116,728) 194,546 Goodwill 12,124 Total consideration 206,670 Satisfied by investment in a related company (note 1) 206,670 Net cash inflow arising on acquisition: Cash consideration - Bank balances and cash acquired 6,571 6,571 Note 1: The amount represented RMB equivalent of USD 25 million at the acquisition date. TKS contributed RMB 377 million of revenue and RMB 1.9 million of profit before tax for the period between the date of acquisition and the balance sheet date. 59 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 27. NON CASH TRANSACTIONS (a) Acquisition of TKS in 2000 as disclosed in note 26. (b) Acquisition of land use right in 2000 amounting to RMB 44,439,000 were financed by long-term debt, see note 22. 28. CAPITAL COMMITMENTS 12.31.2001 12.31.2000 RMB’000 RMB’000 Commitments for the acquisition of property, plant and equipment: - contracted for but not provided in the financial statements 35,321 3,751 29. OPERATING LEASE COMMITMENTS 12.31.2001 12.31.2000 RMB’000 RMB’000 Minimum lease payments paid under operating leases in respective of office properties 6,733 7,478 At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, which fall due as follows: 12.31.2001 12.31.2000 RMB’000 RMB’000 Within one year 1,853 3,837 In the second to fifth years inclusive 775 5,995 2,628 9,832 The above leases are negotiated for an average term of 2 years. In addition to the above, according to the co-operative joint venture agreement of TKS, the Group is obliged to pay annually a fixed return to the joint venture partner for the land on which TKS is located during the joint venture period ending August 16, 2043. The initial annual payment of USD 103,600 (equivalent to approximately RMB 858,000) was paid on July 15, 1996. The annual rental is subject to an increment of 1% by every 5 years. The minimum lease payment paid under this arrangement for the year amounted to RMB 864,000 (2000: RMB 858,000). 60 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 30. RETIREMENT BENEFITS PLANS The employees of the Group are members of a state-managed retirement benefit scheme operated by the local government. The Group are required to contribute a specified percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The total cost charged to income statement of RMB 5.5 million (2000: RMB 6.0 million) represents contributions payable to these schemes by the Group at rates specified in the rules of the schemes. As at December 31, 2001, contributions of RMB 78,000 (December 31, 2000: RMB 420,000) due in respect of the current reporting period had not been paid over to the schemes. 31. RELATED PARTY TRANSACTIONS The ultimate holding company of the Company is Tsann Kuen Enterprise Ltd., a company incorporated in Taiwan. (a) During the year, the Group entered into the following transactions with its related companies. 2001 2000 RMB’000 RMB’000 Transactions Sales of raw materials and finished goods - Ultimate holding company 23,620 8,764 - Fellow subsidiaries 102,587 92,749 - Companies in which the Company’s directors have controlling interests 691 3,885 Purchases of raw materials and finished goods - Ultimate holding company 500,277 328,579 - Fellow subsidiaries 84,296 - - Companies in which the Company’s directors have controlling interests 52,097 110,311 61 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Sales of mould and machinery - Ultimate holding company 10 2,803 - Companies in which the Company’s directors have controlling interests - 2,063 Purchases of mould and machinery - Ultimate holding company 206,706 187,537 - Fellow subsidiaries 39,148 15,338 - Companies in which the Company’s directors have controlling interests 6 61,255 62 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 31. RELATED PARTY TRANSACTIONS - continued (a) During the year, the Group entered into the following transactions with its related companies. - continued For the Company, all transactions except those with Tsann Pao Co., Ltd. (“TPE”, a fellow subsidiary) and Thermaster Electronic (Xiamen) Ltd. (“THERMASTER (XIAMEN)”, a company in which the Company’s directors have controlling interests) were priced according to a “Pricing Agreement for related companies’ transaction” which has been approved by Xiamen Tax Bureau. The transactions between the related parties and the subsidiaries (TKS and TKK) were all under the prices agreed in the contracts. 2001 2000 RMB’000 RMB’000 Other services paid Technology and know-how usage fee (i) - Ultimate holding company 28,005 43,829 - Fellow subsidiaries 41,273 27,062 Sales commissions (i) - Fellow subsidiaries 25,338 15,232 - Companies in which the Company’s directors have controlling interest - 663 Agency fee (iv) - Fellow subsidiaries 8,628 8,564 - Companies in which the Company’s directors have controlling interests 2,689 2,803 Other services rendered Rental income (ii) - Companies in which the Company’s directors have controlling interests 522 227 Management income (iii) - Companies in which the Company’s directors have controlling interests 1,719 2,247 63 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 31. RELATED PARTY TRANSACTIONS - continued (a) During the year, the Group entered into the following transactions with its related companies. - continued (i) Technology and know-how usage fee and sales commissions the Group paid except to TPE were arrived at fixed percentage of net sales. Technology and know-how usage fee with TPE were payable at the amount stipulated in the contract over a three-year period. This contract has been rendered to Xiamen Tax Bureau for approval. (ii) Rental income the Company received from THERMASTER (XIAMEN) was calculated based on actual occupied area, time and unit rental charge. (iii) Management income the Company received from THERMASTER (XIAMEN) was calculated at certain percentage of the managed company’s revenue income. (iv) The Group has appointed several of its related companies as sales agents for its export sales. The customers of the Group place their orders with its related companies and sales proceeds are collected by those related companies on the Group’s behalf. The Group records those sales as its own sales as the Group bears substantially all the risks of these transactions. The resulting agency fee as disclosed above was arrived at as a certain percentage of operating expenses incurred by the agents. (b) Directors’ remuneration Remuneration paid to directors during the year was as follows: 2001 2000 RMB’000 RMB’000 Salaries 756 586 64 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 31. RELATED PARTY TRANSACTIONS - continued (c) Amounts due from/to related parties Accounts 12.31.2001 12.31.2000 RMB’000 RMB’000 Amounts due from related parties - Fellow subsidiaries 72,831 82,224 - Companies in which the Company’s directors have controlling interest 85,556 41,466 158,387 123,690 Amounts due to related parties - Ultimate holding company 261,205 188,582 - Shareholders 5,090 - - Fellow subsidiaries 128,893 99,086 - Companies in which the Company’s directors have controlling interest 27,264 12,547 422,452 300,215 At December 31, 2001, balances with related companies of RMB 109 million (December 31, 2000: RMB 124 million) represent sales proceeds received on the Group’s behalf. The major shareholder of the ultimate holding company has issued a letter of guarantee for the repayment of this balance. Amounts due from/to related companies were unsecured, interest free and have no fixed repayment terms. (d) Advance to a related company Pursuant to an agreement with a company in which the Company’s directors have controlling interest, the related company will use the advance to acquire equipment for the Group on or before December 31, 2002. At December 31, 2001, the outstanding balance amounting to RMB 45,521,300 was transferred to amount due from related parties. 65 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 32. SUMMARY OF DIFFERENCES BETWEEN IAS AND PRC GAAP These financial statements are prepared in conformity with IAS which are different from its statutory financial statements which are prepared in accordance with PRC GAAP. The statutory financial statements for the year ended December 31, 2001 reported profit for the year as RMB 170,408,000 and net assets as RMB 1,011,739,000. The principal IAS adjustments made for profit after taxation and net assets are as follows: Profit for the year Net assets RMB’000 RMB’000 As reported under PRC GAAP 170,408 1,011,739 Adjustments to confirm IAS: Adjustment to record property, plant and equipment acquired before 1994 at swap rates (2,327) 19,048 Elimination of revaluation reserves 732 (4,124) Adjustment for pre-operating expenses of a subsidiary 3,708 - Dividends - 45,094 Others - 1,910 As reported under IAS 172,521 1,073,667 33. APPROVAL OF FINANCIAL STATEMENTS The financial statements were authorised for issue by the Board of Directors on April 17, 2002. 34. LANGUAGE The Chinese text of the financial statements is a translated version for reference only. The English text of the financial statements will prevail over the Chinese text. * * * * * 66 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2001 (Prepared under International Accounting Standards) 2001 2000 RMB’000 RMB’000 (Company) (Company) Revenue 2,204,657 2,135,846 Cost of sales (1,746,691) (1,710,331) Gross profit 457,966 425,515 Other income 14,209 10,310 Loss from subsidiaries (19,871) (5,414) Distribution costs (146,897) (134,048) Administrative expenses (92,858) (88,180) Profit from operations 212,549 208,183 Interest expenses (4,161) (13,923) Profit before tax 208,388 194,260 Income tax expense (23,593) (15,639) Net profit for the year 184,795 178,621 - 67 - TSANN KUEN (CHINA) ENTERPRISE CO., LTD. BALANCE SHEET AS AT DECEMBER 31, 2001 (Prepared under International Accounting Standards) 12.31.2001 12.31.2000 RMB’000 RMB’000 (Company) (Company) ASSETS Non-current assets Property, plant and equipment 715,645 590,468 Investment properties 2,306 1,276 Goodwill 10,306 11,450 Land use rights 80,586 82,421 Investment in subsidiaries 203,196 208,954 Other investments 71 71 1,012,110 894,640 Current assets Inventories 258,128 196,965 Trade and other receivables 207,002 336,585 Amounts due from related companies 187,269 122,903 Bank balances and cash 202,899 109,790 855,298 766,243 Total assets 1,867,408 1,660,883 EQUITY AND LIABILITIES Capital and reserves Share capital 450,938 450,938 Retained profits 274,980 117,587 Other reserves 359,629 332,227 1,085,547 900,752 Non-current liabilities Long-term payable 31,219 37,829 Current liabilities Trade and other payables 335,885 351,462 Amounts due to related companies 299,366 206,056 Income tax liabilities 15,391 14,856 Short-term borrowings 100,000 149,928 750,642 722,302 Total equity and liabilities 1,867,408 1,660,883 - 68 -