富奥股份(000030)ST英达2001年年度报告（英文版）

SHENZHEN LIONDA HOLDINGS CO., LTD. 2001 ANNUAL REPORT Important Note: Board of Directors of Shenzhen Lionda Holdings Co., Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. This report was prepared in both Chinese and English. Should there be any difference in interpretation of the two versions, the Chinese version shall prevail. K. C. Oh & Company Certified Public Accountants was unable to form an opinion in its Auditors’ Report, to which the Board of Directors and the Supervisory Committee made detailed explanation. The investors are reminded to notice. Contents . Company Profile . Financial Highlight and Business Highlight . Particulars about the Changes in Capital Shares and Shareholders . Particulars about Director, Supervisor, Senior Executive and staff . Administrative Structure . Brief Introduction to the Shareholders’ General Meeting . Report of the Board of Directors . Report of the Supervisory Committee . Significant Events . Financial Report . Documents Available for Reference I. COMPANY PROFILE 1. Legal name of the Company in Chinese: 深圳市莱英达集团股份有限公司 Legal name of the Company in English: Shenzhen Lionda Holdings Co., Ltd. (Abbreviation: LIONDA) 2. Legal Representative: Mr. Li Chengyou 3. Secretary of Board of Directors: Mr. Pan Shiming Liaison Tel: (86) 755 3361666 Fax: (86) 755 3361777 Authorized Representative in charge of Securities Affairs: Ma Keru Liaison Address: Property Right and Development Dept. of the Company, Jiahua Bldg., Huaqiang Rd. N., Shenzhen E-mail: lionda@mailcenter.com.cn 4. Registered Address: Huaqiang Rd. N., Shenzhen, Guangdong, China Office Address: Jiahua Bldg., Huaqiang Rd. N., Shenzhen Post Code: 518031 The Company’s Internet Website: www.lionda.com E-mail: szlionda@public.szptt.net.cn 5. Newspapers Chosen for Disclosing the Information of the Company: Securities Times and Ta Kung Pao Internet Website Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Property Right and Development Department on 3/F of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: ST Lionda A, ST Lionda B Stock Code: 000030, 200030 7. Other Relevant Information of the Company The initial registration of the Company: Date: Sep.1993 Address: Jiahua Bldg., Huaqinag Rd. N., Shenzhen Registration number of business license of enterprise juristic person: 4400001001658 -2- Number of taxation registration: 440301700200001 The certified public accountants engaged by the Company: K. C. Oh & Company Certified Public Accountants II. ACCOUNTING HIGHLIGHTS AND BUSINESS HIGHLIGHTS 1. Accounting data and business indexes as of the year 2001 (Unit: In RMB’000) Total profit -1,034,242 Net profit: -1,051,758 Net profit after deducting non-recurring gains and losses -697,409 Profit from main business lines 64,022 Profit from other business lines 3,444 Share in profits of associates -298,942 Financial expenditure -13,716 Extraordinary items -20,450 Net income / expenditure from non-operating -701,134 Net cash flows arising from operating activities -95,756 Net increase in cash and cash equivalents -129,293 Note1: Net profit of the Company calculated based on Enterprise Accounting Regulation (“EAR”) was RMB -995,379,245.69, difference between the domestic and overseas auditing results was mainly due to follows: (positive amount means due increase and negative amount means due decrease in net profit according to EAR) Unit: RMB Bad debt provision -8,466,000.00 Interest cancellation of estate projects -63,810,000.00 Amortization of expenditure to be amortized 429,245.69 Income from liabilities reorganization 19,996,000.00 Share in profits of associates -3,478,000.00 Organization cost cancellation -1,050,000.00 Note2: Items of non-recurring gains and losses and related amounts: Unit: In RMB’000 Disposed gains and losses of investee equity 38,754 -3- Income from guarantee 676 Net gains and losses from non-operating -413,775 Income from liabilities reorganization -19,996 Total amount from non-recurring gains and losses -354,349 2. Major accounting date and financial indexes over the past three years ended by the report year (Unit: In RMB) Item 2001 2000 1999 Income from main business lines 514,193,000 739,839,000 1,011,802,000 Net profit -1,051,758,000 40,794,000 79,224,000 Total assets 441,304,000 1,447,710,000 1,626,640,000 Shareholder’s equity (excluding minority interests) -984,818,000 78,927,000 52,611,000 Earnings per share (RMB/share) -3,67 0.141 0.27 Weighted average -3,67 0.141 0.27 Fully diluted -3,67 0.141 0.27 Earnings per share after deducting non-recurring gains and losses -- 0.02 -- Net assets per share (RMB/share) -3.41 0.27 0.18 Net cash flows per share arising from operating activities -0.33 0.163 -0.043 Note: Net assets as of the year 1999 and year 2001 are negative after the retroactive adjustments. Thus, the Company has not list item of return on equity because it has no actual meaning for the Company. Attachment: Supplementary statement of profit in the report year Earnings per share (RMB) Profit as of the year 2001 Fully diluted Weighted average Profit from main business lines 0.22 0.22 Operating profit -1.04 -1.04 Net profit -3.67 -3.67 Net profit after deducting non-recurring gains and losses -2.42 -2.42 2. Changes in shareholders’ equity and the causes in the report year Unit: In RMB’000 Capital public Surplus public Statutory capital Accumulated Stockholds’ Items Share capital reserve reserve welfare fund losses equity Total 288,420 298,744 119,515 18,285 -1,709,782 -984,818 Amount at the year-begin 288,420 298,283 118,019 16,789 -655,032 -221,941 Increase in the 0 461 1,496 1,496 0 0 -4- report year Decrease in the report year 0 0 0 0 1,051,758 762,877 Amount at the year-end 288,420 298,744 119,515 18,285 -1,709,782 -984,818 Recombination Profit Profit Causes Deficit Deficit of debts distribution distribution III. CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS (I) Particulars about share capital 1. Statement of changes in Share (Unit: shares) (Ended Dec. 31, 2001) Increase/decrease of this time (+, - ) Before the After the Items change Share Bonus Capitalization of Additional Sub- change Others Allotment shares public reserve issuance total I. Unlisted Shares 1. Promoters’ shares 208560000 0 0 0 0 0 0 208560000 Including: State-owned share 191400000 0 0 0 0 0 0 191400000 Domestic juristic person’s shares Foreign juristic person’s shares Others 2. Raised juristic person’s shares 17160000 0 0 0 0 0 0 17160000 3. Employees’ shares 4. Preference shares or others Total Unlisted shares 208560000 0 0 0 0 0 0 208560000 II. Listed Shares 1. RMB ordinary shares 40260000 0 0 0 0 0 0 40260000 2.Domestically listed foreign shares 39600000 0 0 0 0 0 0 39600000 3. Overseas listed foreign shares 4. Others Total Listed shares 79860000 0 0 0 0 0 0 79860000 III. Total shares 288420000 0 0 0 0 0 0 288420000 2. Issuance and listing of the shares The Company has not issued shares over the previous three years at the end of the report year; -5- and both the total share capital and its structure remained unchanged. 3. About Shareholders Ended Dec. 31, 2001, the Company has 10655 shareholders in total, including 5331 shareholders of A-share, 5324 shareholders of B-shares. Particulars about shares held by the top ten shareholders: Shares held at Proportion No. Shareholders the year-end in Total Type of share (Shares) Shares 1 Shenzhen Investment Management Co. 191400000 66.36% State-owned shares 2 CHINA EVERBRIGE HOLDINGS CO. LTD 5892360 2.04% Domestically listed foreign shares 3 Shenzhen Colored Metal Financial Co. Ltd. 5280000 1.83% Domestic juristic person’s shares 4 Shenzhen International Trust & Investment Co. 5280000 1.83% Domestic juristic person’s shares 5 Shenzhen South Securities Industrial Co., Ltd. 3960000 1.37% Domestic juristic person’s shares 6 Shenzhen Guoyin Investment Development Co., Ltd. 2640000 0.92% Domestic juristic person’s shares 7 WEN CAN RONG 866760 0.30% Domestically listed foreign shares 8 SHEN XIAO LIN 647599 0.22% Domestically listed foreign shares 9 FEI JIAN WEN 588000 0.20% A shares for circulation 10 MSTER UNIVERSE FUND LTD. 499800 0.17% Domestically listed foreign shares Note 1: Shenzhen Investment Management Co. holds the Company’s shares on behalf of the state, who was incorporated in July 1987, the Company is the first state assets operation company in China, performing investor’s rights on behalf of Shenzhen Municipal People’s Government for the state enterprises of industry, communications and transport, being in charge of operation of investment and property rights of the state assets. Legal representative: Mr. Li Heihu; registration capital: RMB 2 billion. Shenzhen Investment Management Co. is a state sole corporation, and its holding shareholder is Shenzhen State Assets Management Committee. Note 2: There was no change in the holding shareholder in the report period Note 3: Among the top ten shareholders, except that Shenzhen Investment Management Co. is the holding shareholder of Shenzhen International Trust & Investment Co. belonging to related parties, there are no other related parties. IV. PARTICULARS ABOUT DIRECTOR, SUPERVISOR, SENIOR EXECUTIVES AND STAFF (I) Basis condition Name Gender Title Age Office term Number of holding shares -6- Year-begin Year-end Li Chengyou Male Chairman of the Board 54 1999 to 2002 0 0 Xie Ruxian Male Director,General Manager 38 1999 to 2002 0 0 Cai Siying Male Director, Deputy General Manager 52 2000 to 2002 0 0 Cao Jianshe Male Director, Deputy General Manager 46 2000 to 2002 0 0 Rao Jiangshan Male Director, Deputy General Manager 34 2000 to 2002 0 0 Tang Bocao Male Director, Financial Chief Supervisor 46 2001 to 2002 0 0 Luo Guohua Male Director 58 2000 to 2002 0 0 Tang Jianxi Male Director 43 2001 to 2002 0 0 Peng Jihu Male Independent Director 64 2001 to 2002 0 0 Gao Peiye Male Independent Director 45 2001 to 2002 0 0 Liu Zhanjun Male Independent Director 43 2000 to 2002 0 0 Pan Shiming Male Secretary of the Board 31 2001 to 2002 0 0 Zhao Gesheng Male Chairman of the Supervisor 52 2000 to 2002 0 0 Committee Li Xin Male Supervisor 40 2000 to 2002 0 0 Yue Luyu Female Supervisor 54 2000 to 2002 0 0 Ji Tielan Female Supervisor 50 2000 to 2002 0 0 Wang Hangjun Male Supervisor 35 1999 to 2002 0 0 Ge Weimin Male Deputy General Manager 42 2000 to 2002 0 0 Liu Chuan Male Deputy General Manager 39 2000 to 2002 0 0 Yang Feibo Male Chief Engineer 42 2000 to 2002 0 0 Note: Dir. Mr. Luo Guohua took the post in Shenzhen International Trust & Investment Co.; Mr. Tang Jianxi took the post of deputy general manager of Shenzhen Colored Metal Financial Co. Ltd.; Supervisor Wang Hangjun took the post of secretary of the Audit Dept. of Shenzhen Investment Management Co.. (II) Particulars about the annual salary In the report year, the Company pays the annual salaries to directors, supervisors and senior executives according to Rules of Salary Management of the Company, their administrative titles and their length of service. The Company has totally 20 directors, supervisors and senior executives, and 13 persons draw their annual salary from the Company. The total annual salary (basis wage, various premium, welfare, subsidy, housing allowance and others) received from the Company is RMB 1,377,813 Of them, two enjoy their annual salary from RMB 150,000 to RMB 160,000 respectively; five enjoy their annual salary from RMB 100,000 to RMB 130,000 respectively; six enjoy their annual salary from RMB 70,000 to RMB 100,000. The total amount of the top three directors is RMB 431,709. The total amount of the top three senior executives is RMB 355,352. Dir. Luo Guohua, Tang Bocao and Tang Jianxi, Supervisor Wang Hangjun receive no pay -7- from the Company, and they draw their annual salary from Shareholding Company. In the report year, the independent directors drew their allowance under RMB 10,000 respectively. (III) Directors, supervisors and senior executives leaving the office and engaging in the report year In the report year, original director Liu Linfeng and Su Zhiming and original secretary of the Board Wei Dan left their office. In the report year, Tang Jianxi and Tang Bocao were engaged as director of the Conpany; Peng Jihu and Gao Peiye were engaged as independent director; Pan Shiming was engaged as secretary of the Board. For personal resumes, please refer to Public Notice published in Securities Time and Ta Kung Pao dated April 17, 2001. (IV) About staff The subsidiary companies of the Company have decreased because the partial equity were transferred, thus, there was decrease in number of staff members. At the end of the year 2001, the Company and its subsidiary companies had totally 1318 staff members in office at present, of them: Under 30-year-old: 37.2% of the whole staff members Between 31-year-old and 45-year-old: 50.8% of the whole staff members Over 45-year-old: 12% of the whole staff members Undergraduate of master degree or above: 2.54% of the whole staff members Bachelor degree: 17.09% of the whole staff members 3-years regular college: 14.70% of the whole staff members Technical secondary school: 13.62% of the whole staff members Senior high school: 39.49% of the whole staff members Junior high school: 12.55% of the whole staff members The Company needs to bear the cost of 11 retirees. V. ADMINISTRATIVE STRUCTURE The Company is continually improving its administrative structure and standardizing its -8- operation according to PRC Company Law, Securities Law and requirements of relevant laws and legislations released by CSRC and Shenzhen Stock Exchange in the following terms: 1. Shareholder and the Shareholders’ General Meeting: The Company operates in a standardized way, has been practically safeguarding the rights and interests of medium and small shareholders, ensuring all shareholders could fully implemented their own rights; The Company could convene and hold the Shareholders’ General Meeting strictly according to normative opinions of the Shareholders’ General Meeting. 2. Relationship between Controlling Shareholder and Public Company: The controlling shareholder Shenzhen Investment and Management Company hasn’t overstep the Shareholders’ General Meeting to directly or indirectly interfere in the Company’s decision-making and management activities; The Company is absolutely separated from the controlling shareholder in terms of personnel, assets, finance, organization and business. The Board of Directors, the Supervisory Committee and internal organizations function independently. 3. Directors and the Board of Directors: The Company elected directors strictly according to the election and employment procedure stated in the Articles of Association, and shall further improve the procedure; The number of members of the Board and its formation are in line with requirements of laws and regulations; Every director attended the Board meeting and the Shareholders’ General Meeting with an active and responsible attitude, and seriously and strictly performed the obligation of director in listed company; The Company engaged experts to be independent directors. Currently, among the 11 directors, most of them either receive no salaries from the Company or come from outside of the Company. 4. Supervisors and the Supervisory Committee: The number of supervisors and the formation are in line with requirements of laws and legislations; The supervisors have been performing their obligations seriously, supervising the Company’s finance and duty performance of directors, managers and other senior executives in the spirit of being responsible to shareholders. 5. Relevant Beneficiaries: The Company has been respecting and safeguarding the legal rights and interests of creditors, employees, consumers and other parties of related interests so as to collectively push the Company to solve problems and make development. 6. Information Disclosure: The Company further finalized information disclosing work in -9- 2001, and adjusted and replenished the staffs that were engaged in information disclosing work. II. Performance of Obligation of Independent Directors In the report year, according to requirements in Guild Lines on Establishing Independent Director System in Listed Companies, the Company elected 3 independent directors in the Shareholders’ General Meeting, namely, Mr. Peng Jihu, Mr. Gao Peiye and Mr. Liu Zhanjun. Strictly according to requirements of relevant laws, legislations and the Articles of Association, the independent directors have expressed personal viewpoints on the decisions made in the Board meeting since they took office, which has promoted scientific and standardized decision-making procedures. The independent directors have also expressed their opinions on the self-inspection events regarding administrative structure of the Company. III. Separation from the Controlling Shareholder Separation in respects of business, personnel, assets, organization and finance: 1. In respect of business: the Company is absolute independent from its controlling shareholder, and has independent and integrated business system and self-management capability; The Company’s main businesses are conducted among its holding subsidiaries that have independent purchase and sales system. Purchase of raw materials and sales of products are respectively conducted by the purchase department and marketing department. Each link in research, production, supplying and sales is separated from each other, and the management behaviors are separated from the Company’s controlling shareholder. 2. In respect of personnel: the Company is absolutely independent in administration of labor, human affairs and salaries, and is separated form its controlling shareholder in terms of office address, production and operation place; The Company’s senior executives including general manager, vice manager, financial person in charge and Board secretary all take full-time duties and receive salaries in the Company, and haven’t taken part-time positions in the controlling shareholder’s company. The controlling shareholder recommended candidate of director to the Company under the legal procedures. Decisions on engaging and removing personnel as made in the Board meeting and the Shareholders’ General Meeting could be - 10 - performed efficiently. 3. In respect of assets: the Company is strictly separated from the controlling shareholder in assets, and both of them operate independently. The Company’s each holding subsidiary has independent production system, auxiliary production system and accessory system, and independently holds intangible assets including industrial property right, trademark, non-patent technologies etc. 4. In respect of finance: The Company has established independent finance department as well as a set of independent and integrated accounting system and financial administration system; The Company could make financial decisions independently, and the controlling shareholder didn’t interfere in the Company’s utilization of funds. The Company has opened independent bank account, and hasn’t deposited money in the financial company or settlement center controlled by the controlling shareholder or other related parties. The Company independently paid taxes according to law. IV. Performance Evaluation, Encouragement and Binding Mechanism for Senior Executives In the report year, the Company established Reporting System of Property Right Representative, Performance Evaluation and Encouragement and Binding Mechanism for Managers, and required that managers write work report of property right representative at the end of each year. In 2001, the Company established performance evaluation team with the general manager as the team leader, which evaluated performance of middle-level cadres and property right representatives assigned in each department and measures of which included evaluation on operating achievements, assessment of management dissertation and reporting work. Evaluation results have been taken as the main foundation for adjusting cadres’ team. VI. BRIEFINGS ON THE SHAREHOLDERS’ GENERAL MEETING In the report year, the Company held two Shareholders’ General Meetings, namely, 2000 Shareholders’ General Meeting and 2001 Provisional Shareholders’ General Meeting. I. 2000 Shareholders’ General Meeting The Notification on Holding 2000 Shareholders’ General Meeting was published in Securities Times and Hong Kong Ta Kung Pao dated April 17, 2001, in which it was notified that 2000 Shareholders’ General Meeting was to be held on May 21, 2001 and discussion - 11 - topics were listed as well. The Shareholders’ General Meeting was held in the meeting room on the 6/F of Jia Hua Bldg., Huaqiang North Road, Shenzhen, on May 21, 2001. There were actually 3 shareholders’ proxies attended the meeting, who represented 201,116,500 shares with voting rights, taking 69.73% of the Company’s total shares. The Company’s directors, supervisors as well as representatives from intermediaries attended the meeting. The meeting reviewed and passed the following items through signing votes: 1. Reviewed and passed 2000 Work Report of the Board of Directors; 2. Reviewed and passed 2000 Work Report of the Supervisory Committee; 3. Reviewed and passed 2000 Financial Work Report; 4. Reviewed and passed 2000 Annual Report and Report Summary; 5. Reviewed and passed 2000 Profit Distribution Preplan and 2001 Profit Distribution Policies; 6. Reviewed and passed the proposal on engaging financial auditing institutions in 2001; 7. Reviewed and passed the proposal on engaging legal advisors for 2001; 8. Augmented through voting Mr. Peng Jihu and Mr. Gao Peiye to be independent director, and Mr. Tang Jianxi and Mr. Tang Bocao to be director. 9. Reviewed and passed the proposal on amending the Articles of Association; 10. Reviewed and passed the proposal on transferring 95% of equity rights of Shenzhen Light Industry Import and Export Co., Ltd., for which related parties gave up voting right. The public notice on the resolutions of 2000 Shareholders’ General Meeting was published in Securities Times and Hong Kong Ta Kung Pao dated May 22, 2001. II. The 1st Provisional Shareholders’ General Meeting of 2001 The Notification on Holding the 1st Shareholders’ General Meeting of 2001 was published in Securities Times and Hong Kong Ta Kung Pao dated September 13, 2001, in which it was notified that the 2001 Shareholders’ General Meeting was to be held on October 16, 2001 and discussion topics were listed as well. The 1st Provisional Shareholders’ General Meeting was held in the meeting room on the 6/F of Jia Hua Bldg., Huaqiang North Road, Shenzhen, on October 16, 2001. There were actually 4 shareholders’ proxies attended the meeting, who represented 200,666,600 shares with - 12 - voting rights, taking 69.57% of the Company’s total shares; Among the representing shares, 200,640,000 shares were domestic capital shares, taking 69.56% of total shares, while 26,600 shares were foreign capital shares, taking 0.01% of total shares. The Company’s directors, supervisors as well as representatives from intermediaries attended the meeting. The meeting reviewed and passed the following items through signing votes: The meeting reviewed and passed the proposal on rescinding the liability of guarantee offered to Shen Zhong Hua who owed debts to Hua Rong Assets Management Company at certain cost. The public notice on the resolutions of the 1st Provisional Shareholders’ General Meeting of 2001 was published in Securities Times and Hong Kong Ta Kung Pao dated October 17, 2001. VII. REPORT OF THE BOARD OF DIRECTORS I. Business Highlights (I) Main business scope and the operation 1. The Company is principally engaged in the production and nationwide sales of water purifying, mineralizing and magnetizing equipments; as well as development and management of real estate in Shenzhen. Revenue and profit from main business lines listed under different section: Unit: RMB Revenue from main Profit from main Section business lines business lines Drinking Water Equipment Manufacture 469,833,605.23 50,583,404.42 Real Estate Development 36,611,524.33 8,393,423.12 Property management 6,175,906.41 4,655,672.36 2. As the principal product, sales of drink water equipments accounted for 91% of the total revenue from main business lines, details as follows: Unit: RMB Product Sales revenue Sales cost Gross profit rate Drink Water Equipment Manufacture 469,833,605.23 50,583,404.42 10.16% 3. Business scope and the structure remained changed in the report period. (II) Operation and achievement of major shareholder and investee subsidiaries - 13 - 1. ShenZhen New Era Drinking Water Sci & Tech. Co., Ltd. (“New Era”) As one of the largest and earliest manufacturers and sales companies of water dispenser/cooler in China, the company had a registered capital of RMB 27.45 million. Its main series products branded "ANGEL" covers 4 categories including household type, group type, reverse osmosis type, and domestic appliances type and more than 50 models with monthly production capacity exceeding 500 thousand pieces. Total assets, net assets and net profit as of the year reached RMB 119,157,551.43, RMB 66,682,698.22 and RMB 30,064,930.76 respectively. Dec. 2001, 33.5% equity of New Era originally held by the Company was auctioned due to lawsuit to the acquirer who again put the said equity under in trust of the Company. So although the Company was no longer shareholder of New Era, it was the actual controller of it in the report period ended Dec. 31, 2001. (III) Major suppliers and customers Main sales revenue was generated by Shenzhen New Era Drinking Water Sci & Tech. Co., Ltd. and all sales was undertaken by Shenzhen Angel Electronic Appliances Co., Ltd. So, the proportion of purchase amount of top five supplier to the total purchase amount is no applicable. (IV) Problems and difficulties occurred in the operation and the solutions 1. Worsened operation environment Rulings on most defeated lawsuits concerning the Company’s failure in timely repaying loans were implemented in 2001. Such ruling implementation imposed negative impact on the Company’s operation. To counter the problem, the Company made great effort to negotiate with debtors for reconciliation on one hand and sold partial non-core assets to repay debts on the other hand. 2. Heavy liabilities burden The Company born a direct liability totaling RMB 800 million, with significant contingent risk, and offered guarantee for loans totaling RMB 1.7 billion. The heaven burden from the loan interest and penalty made it even more difficult for the Company to realize profit. As the only way to solve the problem of heavy liabilities burden and high risky guarantee, reorganization of the Company was carried out continually and obvious results was achieved. 3. Keen competition Since the product has gone into mature period, major models of the Company’s products - 14 - went into the period of price war. Also due to increased competitor in the section, market share of the Company was decreased and profitability was lessened. Besides, major products of the Company, Angel brand drinking water cooler, suffered a serious problem of counterfeit production in scale. Facing this problem, the Company has reinforced its marketing and anti-fake strength in 2001 and achieved favorable results in districts of Jiangsu and Zhejiang provinces. II. Investment In the report period, the Company did not raise any proceeds, or apply the previously raised proceeds in the report year. The Company had no investment project in the report period. III. Financial Highlights and Operation Achievement In the report period, Shenzhen Dahua Tiancheng Certified Public Accountants issued an Auditors’ Report without conserved opinion, details as follows: (1) Total assets as at the end of the report period was RMB 441,304,000, a decrease of 69.52% over the same period of previous year, RMB1,447,710,000 which was mainly due to the cancellation of doubtful accounts of receivables, inventory, long-term investment and consolidation scope changes. (2) The Company had no long-term liability in the report period. (3) Shareholders’ equity as at the end of the report period was RMB -984,818,000, a decrease of RMB1,063,745,000 over the same period of previous year, RMB 78,927,000, which was mainly due to the cancellation of doubtful assets of receivables, inventory, long-term investment . (4) Income from main business lines as of 2001 was RMB 64,022,160.57, a decrease of 38.22 % over the same period of previous year, RMB 103,629,583.03, which was mainly due to reduction in turnover and increase in cost. (5) Net profit as of 2001 was RMB-1,051,758,000, a decrease of RMB1,092,552,000over the same period of previous year, RMB 40,794,000, which was mainly due to the cancellation of doubtful assets of receivables, inventory, long-term investment and decrease of income from reorganization. IV. Impact of lawsuits on the Company’s finance - 15 - Since the rulings of lawsuits arising from the direct liabilities and guarantees offered were under implementation. All equity, inventory, receivables and most assets including all fixed assets of the Company were frozen. If the Company failed to reach agreement with the debtors, the courts in different areas are to auction the frozen assets. If so, the Company may lost the control over some subsidiaries and the consolidation scope may accordingly decreased, which may reduce the consolidated assets and revenue by great margin in 2002. V. Notes to auditors’ opinion of K. C. Oh & Company Certified Public Accountants: Based on IAS, K. C. Oh & Company Certified Public Accountants considers that large amount of provisions for doubtful debts and devaluation as well as huge amount of liabilities caused significant deficits of the Company in 2001 and imposed certain pressure on the Company sustain operation. So it expresses no opinion on the Company’s financial statements. While the Board considers such auditing result does not affect the fact that the Company’s financial statement subjectively and precisely represent the Company’s assets and liabilities as at Dec. 31, 2001 and the achievements of operation as of 2001. The Board of Directors considers the provisions fro devaluation and doubtful debts in compliance with the new EAS and the actual situation of the Company. V. Operation plan for 2002 The Company will attach great efforts on developing main business lines as well as new profit growth point, sot to enhance the profitability of main business lines. The liabilities and assets reorganization maintain to be the core task for the Company in next two years. As the key task in the next two years, the liabilities and assets reorganization decided the Company’s future. The basic principal is: firstly, in order to set the Company free from the responsibility as guarantor for loans approximately totaling RMB 1.248 billion born by Shenzhen China Bicycle Company (Holdings) Limited, the Company will implement the contract signed with Hua Rong Company as soon as possible and assist Hua Rong Company to expedite the reorganization for China Bicycle, which is the foundation of China Bicycle’s reorganization and the most important key works for the Company in 2002. Secondly, the Company will try to succeed in the policy that all stakeholders of the Company, including debtors, control shareholder, copartners and shareholders with circulation shares, jointly solve the Company’s long-lasting problems in depth as heavy burden from liabilities, high risk - 16 - from guarantee, weakness in main business, so to bring about a uprising for the Company. VI. Business Plan for 2002 In 2002, the Company will continue to adopt various means to cancel its date and deficits-suffering subsidiaries, so to reduce the operation cost. The Company will reinforce its reform, especially the equity structure reform, to multiply the equity structure by assigning partial equity of its subsidiaries. Although the Company may lost the control of some subsidiaries, these subsidiary may enjoy a better development by introducing external resources and profound capital as well as optimized equity structure. VI. Routine Work of the Board of Directors The Company held totally seven Board meetings in the report period. 1. The 1st Board meeting in 2001 was held in the afternoon of April 27, 2001, in which following proposals were examined and approved as resolutions: (1) Proposal on Cancellation of Shenzhen Porcelain Enamel Company; (2) Proposal on Assignment of Equity of Shenzhen Guang Hua Vacuum Glass Engineer Co., Ltd.; (3) Proposal on Exclusion of Shenzhen Lionda Jishi Industrial Co., Ltd. from the Company’s Consolidation as of 2000; (4) Proposal on Replacing Mr. Wei Dan with Mr. Pan Shiming as the Secretary of the Board. 2. The 2nd Board meeting in 2001 was held on April 11, 2001, in which following resolutions were examined and adopted: (1) 2000 Work Report of the Board of Directors; (2) 2000 Annual Report and the summary; (3) 2000 Financial Settlement Report; (4) Profit Distribution Preplan for 2000 and Profit Distribution Policy for 2001; (5) Proposal on Engagement of Financial Auditors; (6) Proposal on Engagement of Lawyer Advisors; (7) Proposal on Changing Directors; (8) Proposal on Amending Articles of Association; (9) Proposal on Repaying Debts Owned to Shenzhen Lionda Group Co., Ltd. with equity of - 17 - Lionda Development Co., Ltd.; (10) Proposal on Holding Shareholders’ General Meeting 2000. 3. The 3rd Board meeting in 2001 was held on June 11, 2001 and the Proposal on Bankruptcy of Shenzhen Lionda Jishi Industrial Co., Ltd. was examined and approved in the meeting. 4. The 4th Board meeting in 2001 was held on Aug. 9, 2001, in which following resolutions were examined and approved: (1) 2001 Interim Report and the summary; (2) Resolution on 2001 Interim Profit Distribution: neither profit distribution nor capital public reserve transferring into share capital. 5. The 5th Board meeting in 2001 was held on Sep. 12, 2001, in which following resolutions were examined and approved: (1) Proposal on Releasing the Responsibility of the Company arising from the Guarantee offered to China Bicycle Company (Holdings) Limited for Liabilities Owning to Hua Rong Assets Management Company (“Hua Rong Company”); (2) Resolution on Examination over the above Issue in the 1st Extraordinary Shareholders’ General Meeting 2001 dated Oct. 16, 2001. 6. The 6th Board meeting was held on Oct. 26, 2001, in which following resolutions were examined and approved: (1) 2001 Third Quarterly Report; (2) 2001 Third Quarterly Financial Settlement Report; (3) 2001 Third Quarterly Profit Distribution Plan. 7. The 7th Board meeting was held on Nov. 26, 2001, in which following resolution were examined and approved: Due to hard operation and consecutive deficits, Shenzhen Lionda Paper Manufactory, Shenzhen Lionda Electronic Appliances Co., Ltd., Shenzhen Lionda Food Industrial Co., Ltd. and Shenzhen Lionda Material Import and Export Co., Ltd. went bankruptcy in the last year and was excluded in the Company’s consolidation since Sep. 2001. In the report period, the Board carefully implemented all resolutions of the Shareholders’ General Meeting strictly within the entrustment limit: (1) The Company conducted neither profit distribution nor capital public reserve transferring into share capital for 2001; - 18 - (2) Proposal on Releasing the Responsibility of the Company arising from the Guarantee offered to China Bicycle Company (Holdings) Limited (China Bicycle) for Liabilities Owning to Hua Rong Company was approved in the 1st Extraordinary Shareholders’ General Meeting. The Board of Directors carefully implemented this reorganization plan in spite of the unexpected difficulties, assigned 65,098,412 shares of China Bicycle to Hua Rong Company by means of auction and settled the first installation payment. VI. Profit Distribution Preplan As audited by K. C. Oh & Company Certified Public Accountants, the Company realized a net profit of RMB-1,051,758,000in 2001 and had a retained profit of RMB 1,709,782,000. The Company decided to conduct neither profit distribution nor capital public reserve transferring into share capital, pending to eth examination of Shareholders’ General Meeting. VIII. REPORT OF THE SUPERVISORY COMMITTEE I. Work of the Supervisory Committee in the Report Year The Company held altogether 3 meetings of the Supervisory Committee in the report year: 1. The 1st Meeting of the Supervisory Committee of 2001 was held on April 11, 2001, in which following resolutions were reviewed and passed: (1) Reviewed and passed 2000 Annual Report and Report Summary; (2) Reviewed and passed Work Report of the Supervisory Committee. 2. The 2nd Meeting of the Supervisory Committee of 2001 was held on August 13, 2001, in which 2001 Interim Report and Summary were reviewed and passed. 3. The 3rd Meeting of the Supervisory Committee of 2001 was held on October 26, 2001, in which following resolutions were reviewed and passed: (1) Reviewed and passed the 3rd Quarter Report of 2001; (2) Reviewed and passed the 3rd Quarter Financial Report of 2001. II. Independent Opinions Expressed by the Supervisory Committee on Relevant Issues 1. Operation according to law In the report year, the Supervisory Committee, pursuant to relevant national laws and legislations, carried out superintendence on the holding procedures of Shareholders’ General Meetings and Board meeting, resolution events, implementation of resolutions of Shareholders’ General Meetings by the Board of Directors, performance of duties of senior - 19 - executives as well as the Company’s administration system etc.; It believed that in 2001, the Board of Directors strictly complied with PRC Company Law, Securities Law, Rules for Stock Listing, Articles of Association and other relevant systems, operated in a standardized manner, worked conscientiously, conducted business and made decisions in a scientific and reasonable way, and further improved internal administration and internal control system; The directors and managers haven’t violated law, legislation, the Articles of Association or damaged the interests of the Company and shareholders when performing duties. 2. Financial Inspection The Supervisory Committee made serious and careful inspection on the Company’s financial system and financial status, and believed that 2001 annual financial report truly reflected its financial status and business results. Based on IAS, K. C. Oh & Company Certified Public Accountants considers that large amount of provisions for doubtful debts and devaluation as well as huge amount of liabilities caused significant deficits of the Company in 2001 and imposed certain pressure on the Company sustain operation. So it expresses no opinion on the Company’s financial statements. While the Supervisory Committee considers such auditing result does not affect the fact that the Company’s financial statement subjectively and precisely represent the Company’s assets and liabilities as at Dec. 31, 2001 and the achievements of operation as of 2001. 3. In the report year, the Company purchased or sold assets at reasonable price, there was no inside trading, damaging of the rights and interests of part of shareholders or asset runoff. 4. Implementation of resolutions of Shareholders’ General Meetings by the Board of Directors The Supervisory Committee members attended Board meetings and Shareholders’ General Meetings as non-voting delegates, carried out superintendence on implementation of resolutions of Shareholders’ General Meetings, and believed the Board of Directors had seriously implemented each resolution of the Shareholders’ General Meetings. 5. The Supervisory Committee considers the notes from the Board to the auditors’ opinion expressed by K. C. Oh & Company Certified Public Accountants as appropriate. IX. SIGNIFICANT EVENTS - 20 - (I) Material lawsuits and arbitration The Company defaulted in repaying the loan of RMB 17,719,150 extended by China Construction Bank, Shenzhen Housing City Construction Sub-branch in 1997 and the loan of RMB 17,975,500 extended by China Construction Bank, Shenzhen City East Sub-branch in 1998. Shenzhen Petrochemical Industrial Co., Ltd. (Petrochemical Co.) is the guarantor of these two loans. China Construction Bank, Shenzhen Housing City Construction Sub-branch and China Construction Bank, Shenzhen City East Sub-branch brought an action against the Company and the Petrochemical Co. in Shenzhen Intermediate People’s Court on April 13, 2001 and August, 2001. Petrochemical Co. raised objection to the case in respect of jurisdiction. So this case has not been heard. The Company defaulted in repaying the loan of RMB 8 million extended by Shenzhen Development Bank Shatoujiao Branch in 1998. Shenzhen Petrochemical Industrial Group Co., Ltd. is the guarantor of the loan. Shenzhen Development Bank Shatoujiao Branch brought an action against the Company and the Petrochemical Co. Yantian District Court held a hearing of the case and decided that the Company should repay the loan and accrued interest and the Petrochemical Co. should bear joint and several liability for debt liquidation. Shenzhen Guoyin Investment Development Co., Ltd. (Guoyin Investment Co.) defaulted in repaying the loan of RMB 4.8 million extended by Guangdong Development Bank Shenzhen Luohu Sub-branch in 1999. The Company is the guarantor of this loan. Guangdong Development Bank Luohu Sub-branch brought an action against Guoyin Investment Co. and the Company. Shenzhen Luohu Court held a hearing of the case on March 1, 2001 and decided that the Guoyin Investment Co. should repay the loan and accrued interest and the Company should bear joint and several liability for debt liquidation. Gintian Industry (Group) Co., Ltd. (Gintian Co.) defaulted in repaying the loan of HKD 25 million extended by China Merchants Bank, Shenzhen Shangbu Sub-branch in 1998. The Company is the guarantor of this loan. China Merchants Bank, Shangbu Sub-branch brought an action against Gintian Co. and the Company. Shenzhen Intermediate People’s Court held a - 21 - hearing of the case on May 23, 2001 and decided that the Gintian Co. should repay the loan and accrued interest and the Company should bear joint and several liabilities for debt liquidation. Thereafter, Shenzhen Intermediate People’s Court attached part of the assets of Gintian Co. according to the application of China Merchants Bank Shangbu Sub-branch. Shenzhen Lionda Leke Box Co., Ltd. (associated company of the Company) defaulted in repaying the loans totaling RMB 13 million extended by Bank of China, Shenzhen Longhua Sub-branch in March, August and December of 1998 respectively. The Company is the guarantor of the loans. Bank of China Shenzhen Longhua Sub-branch brought an action against Leke Co. and the Company in Shenzhen Baoan District Court on September 6, 2001. Baoan District Court heard the case and decided that Leke Co. should repay the loan and accrued interest and the Company should bear joint and several liabilities for debt liquidation. Shenzhen Lionda Materials Import and Export Co., Ltd. (the share-held subsidiary of the Company) defaulted in repaying the loan of RMB 10 million extended by Bank of China, Shenzhen Luohu Port Sub-branch in 1999. The Company is the guarantor of this loan. Bank of China, Shenzhen Luohu Port Sub-branch brought an action against Lionda Material Import and Export Co. and the Company. Shenzhen Intermediate People’s Court held a hearing of the case on November 8, 2001 and decided that the Lionda Material Import and Export Co. should repay the loan and accrued interest. Bank of China, Luohu Port Sub-branch would enjoy the priority of compensation to the proceeds from the disposal of the collaterals under the case within the scope of the principal of RMB 1.5 million and accrued interest. The Company should bear joint and several liabilities for liquidating the part of debt that the collaterals for the loan are insufficient to cover. The Company provided joint and several guarantee for the financing lease of HKD 19,042,343.75 extended by Anhui International Trust Investment Co. to Shenzhen OUR International Technology Development Co. and accrued interest. Anhui International Trust Investment Co. brought an action against in Anhui Provincial High People’s Court in 1998. 9.20 million shares of Shenzhen New Century Drinking Water Technology Co., Ltd. held by the Company were frozen. The case entered the stage of enforcement in December 2001. The - 22 - frozen shares were sold at the price of RMB 61.10 million to liquidate the debt. Refer to the announcement of the Company published on Securities Times and Hong Kong Ta Kung Pao on December 30, 2001 for details. The Company received the civil judgment and notice of Shenzhen Intermediate People’s Court on December 27, 2001. As the Company provided guarantee to debt owed by Shenzhen China Bicycle Company (Holding) Ltd. to China Huarong Assets Management Co. (Huarong Co.), Shenzhen Intermediate People’s Court decided that 65098412 corporate A shares of ST China Bicycle held by the Company should be auctioned. After auction, Huarong Co. obtained the shares at the price of RMB 23435428.32 on March 12, 2002. Refer to the announcement of the Company published on Securities Times and Hong Kong Ta Kung Pao on December 29, 2001 and March 13, 2002 respectively for details. (II) Acquisition and sales of assets, absorption and merger After discussion, the Board of Directors of the Company agreed to transfer 25% equity of Shenzhen Guanghua Double Glazing Engineering Co., Ltd. held by the Company to China Luoyang Float Glass Group Co., Ltd. and China Building Material and Equipment Import and Export Zhujiang Co. at the price of RMB 1.75 million on March 27, 2001. As this equity was attached by the court, the procedure of transfer of title has not been settled. Except the above sales of assets and the asset disposal related to the case in which Anhui High People’s Court decided to auction the equity of New Century Co. for debt repayment, the Company was not involved in other sales or acquisition of assets, absorption or merger in the report period. (III) Material related transactions The Company did not conclude any material related transaction in the report period. (IV) Important contracts and their performance - 23 - 1. As the Company owed debts totaling RMB 86624268.24 to Shenzhen Lionda Group Co., Ltd. (Lionda Group) and enjoyed creditors’ right totaling RMB 88553622.43 to Shenzhen Lionda Development Co., Ltd. (Lionda Development Co.), the Company signed debt restructuring agreement with Lionda Group and Lionda Development Co. According to the agreement, Lionda Development Co. will directly repay the debt of the company to Lionda Group Co. The board meeting held on April 11 adopted this proposal. Refer to the announcement of the Company published on Securities Times and Hong Kong Ta Kung Pao on April 20 for details. 2. The Company signed frame agreement with Huarong Co. on August 30, 2001. According to the agreement, the Company was to pay RMB 0.11 billion by installments and transfer 88 million corporate shares of ST China Bicycle to Huarong Co. Huarong Co. was to release the Company from the joint and several guarantee liability for the principal and accrued interests of the debt totaling RMB 0.917 billion owed by ST China Bicycle to Huarong Co. The Company held shareholders’ general meeting on October 16, which adopted this proposal. The Company signed supplementary agreement of the above frame agreement (the Agreement) with Huarong Co. The Agreement made specific scheduling of the payment of RMB 0.11 billion in cash and the transfer of 88 million corporate shares of ST China Bicycle to Huarong agreed in the above frame agreement. Refer to the announcement of the Company published on Securities Times and Hong Kong Ta Kung Pao on November 7, 2001 for details. Thereafter, the Company paid RMB 50 million in cash to Huarong Co. As decided by the court, 65098412 corporate A shares of ST China Bicycle held by the Company were auctioned on March 12, 2002. Huarong Co. obtained these shares. 3. As mentioned in Section IX (I) hereof, 9.20 million shares of Shenzhen New Century Drinking Water Technology Co., Ltd. (New Century Co.) held by the Company were to be sold off to liquidate debts according to judgment of Anhui High People’s Court. So the title of these shares has been transferred to Shengzhuo Co. However, for realizing the continuous and stable development of New Century Co., the Company signed equity trust agreement with Shengzhuo Co. Shengzhuo Co. agreed to trust 9.2 million shares of New Century Co. held by it to the Company and the term of trust is one year from the date of signing of this - 24 - agreement. According to the agreement, the Company was to obtain 80% of the distributable profit corresponding to the trusted equity. (V) Other important events The certified public accountants appointed by the Company remained Shenzhen Dahua Tiancheng Certified Public Accountants. The Company paid audit fee of RMB 0.65 million to the above certified public accountants in the report year. X. FINANCIAL REPORT Report of the auditors to the members of SHENZHEN lIONDA hOLDINGS cOMPANY lIMITED (A joint stock limited company incorporated in the People’s Republic of China) We have audited the financial statements on pages 2 to 24, which 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In forming our opinion, we have considered the disclosures made in note 2 to the financial statements concerning the adequacy of the going concern basis as adopted in the financial statements. As explained in note 2 to the financial statements, the validity of the going concern basis depends upon the external funding being made available to meet the Group’s financial obligations that have been due and overdue. The board of directors believes that after the funding the Group will be able to meet its future working capital requirements. Accordingly the financial statements have been prepared on a going concern basis and do not include any adjustments that would result from the failure to obtain such funding. We consider that appropriate disclosures have been made. However, in view of the significant - 25 - impact on the financial statements in relation to the possibility to raise sufficient working capital funds, there will be pressure on the going concern basis. Because of the pressure on the going concern basis, we are unable to form an opinion as to whether the financial statements give a true and fair view of the Group as at December 31, 2001 and the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards. K. C. Oh & Company Certified Public Accountants Hong Kong : April 15, 2002 - 26 - Shenzhen Lionda Holdings Company Limited Consolidated profit and loss account for the year ended December 31, 2001 Note 2001 2000 RMB’000 RMB’000 Turnover 6 514,193 739,839 Cost of sales ( 450,171) ( 636,209) Gross profit 64,022 103,630 Other incomes 3,444 2,185 Distribution costs ( 8,792) ( 8,788) Administrative costs ( 296,633) ( 80,865) Other operating expenses ( 60,983) ( 6,748) Operating profit/(loss) ( 298,942) 9,414 Finance costs ( 20,450) ( 42,449) Abnormal items 7 ( 701,134) 92,765 Share of results from associates ( 13,716) 14,398 Profit/(loss) before taxation 8 (1,034,242) 74,128 Taxation 9 ( 5,356) ( 8,965) Profit/(loss) after taxation (1,039,598) 65,163 Minority interests ( 12,160) ( 24,369) Profit/(loss) for the year (1,051,758) 40,794 Earnings/(loss) per share RMB(3.647) RMB0.141 No separate statement of recognised gains and losses is prepared as the loss for the year is the only component of that statement. - 27 - The calculation of the basic earnings/loss per share is based on the current year’s loss of RMB1,051,758,000 (2000 - profit of RMB40,794,000) attributable to the shareholders and on the weighted average number of 288,420,000 shares in issue during the year. - 28 - SHENZHEN lIONDA hOLDINGS cOMPANY lIMITED Consolidated balance sheet as at December 31, 2001 Note 2001 2000 RMB’000 RMB’000 Non-current assets Property, plant and equipment 11 38,806 79,838 Properties held under/for development 12 - 4,375 Interests in unconsolidated subsidiaries 13 8,356 3,081 Interests in associates 14 104,182 188,852 Long-term investments 15 54,503 73,850 205,847 349,996 Current assets Inventories 16 62,872 345,836 Account receivables 17 37,563 31,946 Other receivables and prepayments 18 114,863 570,480 Short-term investments, at cost - 80 Cash and bank balances 20,159 149,372 235,457 1,097,714 Current liabilities Bank and other loans 19 ( 709,902) ( 866,996) Account payables ( 3,594) ( 99,263) Other payables and accrued charges ( 712,233) ( 352,786) Taxation payable and provision for deferred tax ( 73) ( 2,865) (1,425,802) (1,321,910) Net current liabilities (1,190,345) ( 224,196) Minority interests ( 320) ( 46,873) Total assets less total liabilities ( 984,818) 78,927 Capital and reserves - 29 - Share capital 20 288,420 288,420 Reserves 21 (1,273,238) ( 209,493) Shareholders’ equity ( 984,818) 78,927 The financial statements on pages 2 to 24 were approved and authorised for issue by the board of directors on April 15, 2002 and are signed on its behalf by : Director Director - 30 - SHENZHEN lIONDA hOLDINGS cOMPANY lIMITED Consolidated cash flow statement for the year ended December 31, 2001 2001 2000 RMB’000 RMB’000 Cash flow from operating activities Profit/(loss) before taxation ( 1,034,242) 74,128 Adjustment items : Interest income ( 13,738) ( 16,777) Interest expense 41,027 66,842 Depreciation 2,641 6,703 Debt restructuring income ( 19,996) ( 34,580) Provision for loss on guarantees 412,857 - Loss on disposal of property, plant and equipment 625 703 Deemed disposal gain on a subsidiary ( 476) - (Increase)/decrease in interests in unconsolidated subsidiaries ( 56,679) 15,399 Impairment loss provision of unconsolidated subsidiaries made/(reversed) 13,017 ( 40,669) Impairment loss provision of interests in associates 17,856 - Share of results from associates 13,716 ( 14,398) Impairment loss provision of long-term investments 680 - Provision for inventory obsolescence 80,992 2,048 Inventories written off 63,810 - Provision for doubtful debts on account receivables ( 40,728) ( 19,585) Provision for doubtful debts on other receivables and prepayments 169,168 21 Net operating cash inflow/(outflow) before movements in working capital ( 349,470) 39,835 Decrease in inventories 138,162 30,966 Decrease in account receivables 35,111 44,918 Decrease in other receivables and prepayments 278,695 80,492 Increase/(decrease) in account payables ( 95,669) 23,006 Decrease in other payables and accrued charges ( 53,410) ( 92,820) Cash inflow/(outflow) from operating activities before interest and tax payments ( 46,581) 126,397 Interest paid ( 41,027) ( 66,842) - 31 - Corporate and profits tax paid ( 8,148) ( 12,557) Net cash inflow/(outflow) from operating activities ( 95,756) 46,998 - 32 - SHENZHEN lIONDA hOLDINGS cOMPANY lIMITED Consolidated cash flow statement for the year ended December 31, 2001 (cont'd) 2001 2000 RMB’000 RMB’000 Net cash inflow/(outflow) from operating activities ( 95,756) 46,998 Investing activities Interest received 21,492 2,594 Purchases of property, plant and equipment ( 211) ( 6,400) Proceeds from disposal of property, plant and equipment 571 - Decrease in properties held under/for development 4,375 1,654 Decrease in investments in associates 18,283 59,380 Increase in long-term investments - ( 9,875) Net cash inflow from investing activities 44,510 47,353 Financing activities Dividend paid ( 12,448) ( 6,879) Advance to minority shareholders - ( 22,784) Increase/(decrease) in amounts due to unconsolidated subsidiaries 3,080 ( 2,819) Increase in amounts due to long-term investments 33,143 - Bank and other loans repaid (102,283) (79,518) Increase in capital reserve 461 10 Decrease in statutory public welfare fund - ( 36) Net cash outflow from financing activities ( 78,047) ( 112,026) Decrease in cash and cash equivalents (129,293) ( 17,675) Cash and cash equivalents as at beginning of the year 149,452 167,127 Cash and cash equivalents as at end of the year 20,159 149,452 Cash flows from financing Bank and Minority other loans interests RMB’000 - 33 - RMB’000 Balance as at beginning of the year 866,996 46,873 Cash outflow from financing (102,283) - Reduced by debts restructuring ( 54,811) - Reduced by subsidiaries being unconsolidated - ( 58,713) Minority interests’ share of results - 12,160 Balance as at end of the year 709,902 320 SHENZHEN lIONDA hOLDINGS cOMPANY lIMITED Notes to the financial statements for the year ended December 31, 2001 1. Corporate information Shenzhen Lionda Holdings Company Limited (the “Company”) is established in the People’s Republic of China (the “PRC”) as a joint stock limited company. The principal activity of the Company is investment holding and the principal activities of the subsidiaries and associates (which together with the Company comprise the “Group”) are set out in note 4. 2. Basis of account preparation The consolidated financial statements have been prepared in accordance with the International Accounting Standards (“IAS”) issued by the International Federation of Accountants. These accounting standards differ from those used in the preparation of the PRC statutory financial statements, which are prepared in accordance with the PRC Accounting Standards. To conform to IAS, adjustments have been made to the PRC statutory financial statements. Details of the impact of such adjustments on the net asset value as at December 31, 2001 and on the operating results for the year then ended are included in note 26 to the financial statements. During the year, the Group has critically reviewed the fair value with respect to diminution in value of inventories, aged receivables with recoverability problem and contingent liabilities arising from corporate guarantees and adequate provisions of - 34 - RMB80,992,000, RMB169,168,000 and RMB412,857,000 respectively have been made in this respect. Hence, the Group sustained a significant loss for the year. As at December 31, 2001, the Group’s accumulated loss amounted to RMB1,709,782,000. Moreover, the Group has outstanding liabilities such as bank and other loans, account payables, other payables totalling RMB1,425,729,000. The Group is now seeking external financing and the management believes that new funding can be raised in need of future working capital requirements. In view of this, the financial statements are prepared on going concern basis. 3. Adoption of International Accounting Standard IAS 10 (Revised) In the current year, the Group has adopted the presentation requirements specified by the International Accounting Standard IAS 10 (Revised) “Events after the Balance Sheet Date” for the first time. In accordance with the presentation requirements by IAS 10 (Revised) “Events after the Balance Sheet Date”, dividends proposed or declared after the balance sheet date but before the issue of the financial statements are not treated as a liability at the balance sheet date, but as a separate component of equity. As proposed dividends were previously regarded as a liability, new presentation has been applied retrospectively pursuant to the provisos in IAS 10 (Revised). - 35 - The effects can be summarised as follows : Dividend reserve Net equity RMB’000 RMB’000 As at January 1, 2001 (before restatement) - (221,941) Dividend declared after balance sheet date 12,448 12,448 As at January 1, 2001 (after restatement) 12,448 (209,493) 4. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and of its subsidiaries made up to December 31 each year. Except for those subsidiaries not consolidated for the reasons stated below, all significant inter-company transactions and balances within the Group have been eliminated on consolidation. (a) Subsidiaries A SUBSIDIARY IS A COMPANY IN WHICH THE COMPANY HOLDS, DIRECTLY OR INDIRECTLY, MORE THAN 50% OF THE EQUITY INTEREST AS A LONG-TERM INVESTMENT AND/OR HAS THE POWER TO CAST THE MAJORITY OF VOTES AT MEETINGS OF THE BOARD OF DIRECTORS/MANAGEMENT COMMITTEE. THE DETAILS OF THE PRINCIPAL SUBSIDIARIES ARE AS FOLLOWS : Place of establishment/ Attributable Name operation equity interest Principal activity Shenzhen Lionda PRC 100% Property development and Development Co. Limited management Shenzhen Lionda Light PRC 100% Trading, import and Textile Chemical export Industrial Co. Limited Shanghai Lionda Industrial PRC 100% Trading in light Co. Ltd. industrial products - 36 - Shenzhen Lionda PRC 100% Property management, Property Management trading of foods and Co. Limited motor car spare parts Shanghai Kengde Property PRC 90% Property development and Co. Ltd. management Shenzhen Lionda PRC 51% Trading of junk Junk Trading Market Co. Limited - 37 - (a) Subsidiaries (cont’d) THE DETAILS OF THE PRINCIPAL SUBSIDIARIES ARE AS FOLLOWS : Place of establishment/ Attributable Name operation equity interest Principal activity Shenzhen Paper Making PRC 100% * Manufacturing paper products Co. and printing machinery Shenzhen Lionda Food PRC 100% * Production of fruit jelly, jelly Industrial Co. sweets and high strength agar Shenzhen Lionda Materials PRC 100% * Import and export of printing Import & Export Co., material, machinery, Limited chemical products, clothing, silk and shoes Shenzhen Lucky C. & B. PRC 100% * Design and production of Industrial Co. Limited luggage cases Shenzhen Lionda PRC 100% * Production of vacuum Electrical Equipment flasks and home Co. Limited electrical fans Shenzhen Paper PRC 100% * Paper processing Manufacturing & Processing Factory Shenzhen Lionda Electrical PRC 100% * Production of electric oven Manufacturing Factory and metal products Shenzhen Lionda Hunan PRC 100% * Import and export trading Branch - 38 - Shenzhen Xin Qi PRC 75% * Production of fruit juice Beverage Co. Ltd. products and pudding Shenzhen Lionda Time PRC 70% * Production of watches, Industrial Co. Limited clocks and parts Shanghai Lioyin Property PRC 55% * Property development and Development Co. Ltd. management and trading of construction materials * NOT REQUIRED TO BE CONSOLIDATED AS THE SUBSIDIARY HAS CEASED THE BUSINESS, IS UNDER LIQUIDATION OR IS UNABLE TO TRANSFER FUNDS TO THE PARENT BECAUSE OF ITS OPERATIONS UNDER LONG-TERM RESTRICTIONS - 39 - (b) Associates An associate is a company, not being a subsidiary, in which the Company holds, directly or indirectly, not less than 20% or not more than 50% equity interest as a long-term investment and is able to exercise significant influence on this company. Investment in associates is accounted for by equity method. Share of results from associates represents the Group’s share of post-acquisition profit/loss by the associates during the year. The details of the principal associates are as follows : Place of establishment/ Attributable Name operation equity interest Principal activity DONGGUAN SHEN LIAN PAPER PRC 50% PRODUCTION AND TRADING MANUFACTURING CO. LTD. OF PAPER PRODUCTS SHENZHEN JIALU HOTEL PRC 50% HOTEL OPERATIONS YUESHEN LIGHT INDUSTRY PRC 50% IMPORT AND EXPORT OF FOOD TRADING CO. AND TEXTILES SHENZHEN YINZHIZUO CLUB PRC 50% PROVISION OF LAW CONSULTANT SERVICE AND RESTAURANT SHENYANG LIONDA TIMER PRC 50% PRODUCTION OF WATCH INDUSTRIAL CO. LTD. SHENZHEN SILVERPEARL PRC 45% PRODUCTION OF PLASTIC FOAM PLASTIC PRODUCTS CO. LTD. PRODUCTS, ETC. - 40 - HUNAN SHENLI SPECIAL PRC 45% PRODUCTION OF HARD ALLOY ALLOY CO. LTD. WARE SHENZHEN M.C. PACKAGING PRC 40% PRODUCTION OF PACKING CO. LTD. CONTAINERS SHENZHEN GOLDEN BELL PRC 40% PRODUCTION OF DRY BATTERIES BATTERIES CO. LTD. AND ELECTRONIC PRODUCTS AMERICAN XINHUA FOODS USA 40% PRODUCTION OF FRUIT JELLY INDUSTRIAL CO. LTD. SHENZHEN TAIYANG TCCP PRC 34% PRODUCTION, TRANSPORTATION CO. LTD. AND INSTALLATION OF STEEL, CONCRETE TUBE SHENZHEN LIONDA INDUSTRIAL PRC 32% IMPORT AND EXPORT TRADING TRADING CO. LTD. AND PROPERTY MANAGEMENT SHENZHEN LIONDA BAO PRC 30% TRADING SHUI TRADING CO. LTD. - 41 - (b) Associates (cont’d) The details of the principal associates are as follows : Place of establishment/ Attributable Name operation equity interest Principal activity SHENZHEN ANMIZ WATCH PRC 30% PRODUCTION OF WATCHES, CLOCK & CLOCK CO. LTD. PARTS, COUNTERS AND METERS sHENZHEN GAOKEDA PRC 30% PRODUCTION OF HDSL ELECTRONIC CO. LTD. TRANSMISSION LINES SHANGHAI QINGPU YINDA PRC 30% PROPERTY DEVELOPMENT PROPERTY DEVELOPMENT CO. SHENZHEN GOODYEAR ENTERPRISE PRC 26.54% PACKAGING HOLDINGS CO. LTD. SHENZHEN DONG XIANG PRC 25% TRADING OF ELECTRONIC PARTS ELECTRONIC ENTERPRISE CO. LTD. SHENZHEN GUANGHUA PRC 25% PRODUCTION AND INSTALLATION INSULATING GLASS OF INSULATING GLASS ENGINEERING CO. SHENZHEN ENAMELWARE PRC 20.33% PRODUCTION OF ENAMELWARE ENTERPRISE CO. LTD. - 42 - SHENZHEN JIANDA PRC 20% PRODUCTION OF PLASTIC MACHINERY CO. LTD. INJECTION MACHINERY, ETC. SHENZHEN CHINA BICYCLE PRC 19.87% * PRODUCTION AND ASSEMBLY COMPANY (HOLDINGS) LIMITED OF BICYCLES, AND BICYCLE PARTS, ACCESSORIES AND FITNESS BICYCLES LIONDA NANGCHANG PRC 51% ** PRODUCTION AND TRADING FOODSTUFFS CO. OF FOODSTUFFS AND BEVERAGE BALTIC SEA COMMERCIAL LATVIA 51% ** HOTEL OPERATION AND CENTRE COMMERCIAL SERVICE * ABLE TO EXERCISE SIGNIFICANT INFLUENCE ** NO CONTROLLING INTEREST NOTE : CERTAIN COMPANY NAMES OF THE SUBSIDIARIES AND ASSOCIATES ARE DIRECT TRANSLATION OF THEIR CHINESE REGISTERED NAMES - 43 - (c) Related companies A related company is a company, not being a subsidiary or an associate, in which the major shareholders or directors of the Company or its group companies have a beneficial interest therein, or are in a position to exercise significant influence over that company. 5. Principal accounting policies (a) Property, plant, equipment and depreciation Such assets are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable cost of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the assets have been put into operation, such as repairs and maintenance and overhaul costs, are charged to the consolidated profit and loss account in the period in which they are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of the assets, the expenditures are capitalised as an additional cost of the assets. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any profit or loss resulting from their disposal is included in the consolidated profit and loss account. Depreciation is provided to write off the cost of depreciable assets, after taking into account of their estimated residual values, over their estimated useful lives on a straight line basis. The estimated useful lives of property, plant and equipment are as follows : Leasehold land under - Long-term lease Nil - Medium or short-term lease Over the remaining lease term Buildings 20 to 35 years - 44 - Plant and machinery 5 to 10 years Office equipment 5 years Motor vehicles 5 years (b) Construction in progress Construction in progress represents properties under construction and equipment purchased prior to installation and is stated at cost. Cost comprises direct costs, attributable overheads and where applicable finance expenses arising from borrowings used specifically to finance the construction of the properties and the acquisition of the equipment until the construction or installation is completed. The cost of completed construction work is transferred to appropriate category of property, plant and equipment, and depreciation commences when the assets are ready for their intended use. (c) Properties held under/for development Properties held under/for development are stated at cost less foreseeable losses. Costs comprise land cost, construction cost, direct attributable overheads and interest cost capitalised during the period of development. (d) Investments Investments, whether they are held on a long-term or a short-term basis, are stated at cost less provision for any permanent diminution in value considered necessary by the directors. Income from investments is accounted for to the extent of dividend and/or interest income received or receivable. (e) Inventories Inventories are stated at the lower of cost and net realisable value. Cost, which 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, is calculated on weighted average basis. Net realisable value represents the estimated selling price less all estimated cost to completion and cost to be incurred in marketing, selling and distribution. - 45 - Properties held for sale are treated as inventories and are stated at the lower of cost and net realisable value. Cost comprises land cost, construction cost, direct attributable overheads and interest cost capitalised during the period of development. Net realisable value represents the estimated selling price less related expenses. - 46 - (f) Revenue recognition Revenue is recognised when it is probable that the benefits will flow to the Group and when the revenue can be measured reliably. Sales of goods Sales of goods are recognised when the goods are delivered and the title has passed. Sales of properties under development are recognised when the properties developed for sale are sold in advance of completion and the outcome of projects can be ascertained with reasonable certainty by reference to the construction progress. Profit is recognised over the course of the development after taking into account of allowance for contingencies. Sales of properties are recognised when all the conditions of sale have been met and the risks and rewards of ownership have been transferred to the buyer. Interest income from bank deposit is accrued on a time proportion basis on the principal outstanding and at the interest rate applicable. Dividend income from investments is recognised when the shareholders’ right to receive payment is established. (g) Capitalisation of borrowing costs Borrowing costs incurred, net of any investment income on the temporary investment of the specific borrowings, that are directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Borrowing costs not - 47 - eligible for capitalisation are recognised as an expense in the period in which they are incurred. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. (h) Foreign currency transactions The PRC Group companies maintain their books and records in Renminbi. Foreign currency transactions are translated into Renminbi at the applicable rates of exchange prevailing at the first of January every year. Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at the applicable rates of exchange prevailing at the balance sheet date. Exchange differences arising from changes of exchange rates subsequent to the dates of transactions are included in the determination of the current year’s results. (i) Cash equivalents Cash equivalents represent short-term highly liquid investments that have insignificant risk of changes in value. 6. Turnover 2001 2000 RMB’000 RMB’000 SALE OF MERCHANDISES 477,582 671,055 SALE OF FINISHED PRODUCTS - 7,531 SALE OF PROPERTIES HELD FOR SALE 36,611 55,181 TAKINGS FROM CATERING SERVICES - 6,072 514,193 739,839 7. Abnormal items 2001 2000 RMB’000 RMB’000 - 48 - Provision/(reversal) of impairment loss provision of unconsolidated subsidiaries ( 13,017) 40,669 Impairment loss provision of interests in associates ( 17,856) - Impairment loss provision of long-term investments ( 680) - Provision for inventory obsolescence ( 80,992) ( 2,048) Inventories written off ( 63,810) - Provision for doubtful debts of account receivables reversed 40,728 19,585 Provision for doubtful debts of other receivables and prepayments ( 169,168) ( 21) Provision for loss on guarantees ( 412,857) - Loss on minority shareholders’ interests ( 3,478) - Debt restructuring income - liabilities waived 19,996 34,580 (701,134) 92,765 8. Profit/loss before taxation 2001 2000 RMB’000 RMB’000 The Group’s profit/loss before taxation is arrived at after charging : Auditors' remuneration 700 700 Directors' emoluments 649 634 Depreciation 2,641 6,703 Loss on disposal of property, plant and equipment 625 703 Interest expense 41,027 66,842 Staff costs 3,537 3,385 Contributions to retirement scheme 466 534 And after crediting : Interest income 13,738 16,777 Deemed disposal gain on a subsidiary 476 - Rental income 944 2,632 - 49 - 9. Taxation 2001 2000 RMB’000 RMB’000 Income tax - Company and subsidiaries 5,356 8,965 - Associates - - 5,356 8,965 The amount of taxation in the consolidated balance sheet represents PRC income tax provision less tax paid during the year. 10. aPPROPRIATIONS 2001 2000 RMB’000 RMB’000 TRANSFER TO RESERVES - STATUTORY SURPLUS RESERVE - 3,573 - STATUTORY PUBLIC WELFARE FUND 1,496 2,551 - DISCRETIONARY SURPLUS RESERVE 1,496 - 2,992 6,124 PURSUANT TO THE RELEVANT LAWS AND REGULATIONS OF THE PRC, A JOINT STOCK LIMITED COMPANY IS REQUIRED TO MAKE CERTAIN APPROPRIATIONS TO RESERVES FROM ITS NET PROFIT AFTER TAXATION DETERMINED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS. THE DIRECTORS OF THE COMPANY PROPOSE TO MAKE TRANSFERS FROM THE PROFIT AFTER TAXATION, ASCERTAINED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS AT THE FOLLOWING PERCENTAGES : 2001 2000 - 50 - STATUTORY SURPLUS RESERVE - 10% STATUTORY PUBLIC WELFARE FUND 5% 5% THE PROFIT DISTRIBUTABLE TO SHAREHOLDERS IS CALCULATED BASED ON THE LOWER OF THE AGGREGATE OF THE CURRENT YEAR’S NET PROFIT AFTER TAXATION (AFTER TRANSFERS TO STATUTORY SURPLUS RESERVE AND STATUTORY PUBLIC WELFARE FUND) AND THE RETAINED PROFIT BROUGHT FORWARD, PREPARED UNDER THE PRC ACCOUNTING STANDARDS OR INTERNATIONAL ACCOUNTING STANDARDS. THE DIRECTORS DO NOT PROPOSE THE PAYMENT OF DIVIDEND IN RESPECT OF THE YEAR ENDED DECEMBER 31, 2001. 12. Properties held under/for development 2001 2000 RMB’000 RMB’000 Cost - 706 Interest capitalised - 3,669 - 4,375 13. Interests in unconsolidated subsidiaries 2001 2000 RMB’000 RMB’000 Cost of unconsolidated subsidiaries (*) 32,671 11,299 Impairment loss provision (21,235) ( 8,218) 11,436 3,081 Amounts due to unconsolidated subsidiaries (*) ( 3,080) - 8,356 3,081 - 51 - (*) Certain subsidiaries of the Group were excluded from consolidation because they were dormant, held temporarily by the Company with a view to their subsequent disposal in the near future or operating under long-term restrictions that significantly impaired their abilities to transfer funds to their parent. In the opinion of the directors, their exclusion from consolidation would not have a material impact on the overall presentation of the financial statements of the Group as a whole. 14. Interests in associates 2001 2000 RMB’000 RMB’000 Share of net assets of associates 127,209 194,023 Impairment loss provision ( 23,027) ( 5,171) 104,182 188,852 15. Long-term investments 2001 2000 RMB’000 RMB’000 “A” shares of companies listed in the PRC, at cost 10,000 12,685 Other unlisted equity investments, at cost 87,609 70,448 97,609 83,133 Impairment loss provision ( 9,963) ( 9,283) 87,646 73,850 Amounts due to other long-term investments (33,143) - - 52 - 54,503 73,850 16. Inventories 2001 2000 RMB’000 RMB’000 Raw materials 192 15,422 Work in progress - 203 Finished goods 6,281 28,280 Properties held for sale 139,439 303,979 145,912 347,884 Provision for inventory obsolescence ( 83,040) ( 2,048) 62,872 345,836 17. Account receivables 2001 2000 RMB’000 RMB’000 Amount receivables 44,903 80,014 Provision for doubtful debts ( 7,340) (48,068) 37,563 31,946 18. Other receivables and prepayments 2001 2000 RMB’000 RMB’000 Prepayments 517 17,945 Dividend receivable 1,932 6,364 Other receivables 317,622 582,211 320,071 606,520 Provision for doubtful debts (205,208) ( 36,040) 114,863 570,480 19. Bank and other loans - 53 - 2001 2000 RMB’000 RMB’000 Bank loans - unsecured 503,826 773,209 Bank loans - secured 33,000 39,280 Other loans 173,076 54,507 *709,902 866,996 * This comprised overdue amounts of RMB681,192,000 20. Share capital 2001 2000 RMB’000 RMB’000 Registered, issued and fully paid, at par value of RMB1 each 208,560,000 (2000 - 208,560,000) domestic shares 208,560 208,560 40,260,000 (2000 - 40,260,000) “A” shares 40,260 40,260 39,600,000 (2000 - 39,600,000) “B” shares 39,600 39,600 288,420 288,420 - 54 - 22. Related party transactions (a) In the ordinary course of business, the amounts due from/to related companies as at the balance sheet date are disclosed as follows : 2001 2000 RMB’000 RMB’000 Amounts due from - Holding companies - 87,739 - Associates 13,621 109,269 - Other related companies 81,094 94,908 94,715 291,916 Amounts due to - Holding companies 20,156 108,016 - Associates 6,103 22,907 - Other related companies 34,172 35,923 60,431 166,846 (b) (i) Sales During the year, the Group did not sell any items (2000 - RMB600,285,708) to Shenzhen Angel Electric Appliance Company Limited, a director of which is also a director of the Group. (ii) Loan guarantee service charge and interest income During the year, the Group received service charge and interest income of RMB6,764,774 (2000 - RMB13,863,584) from its associate, Shenzhen China Bicycle Company (Holdings) Limited in relation to the loan guarantees made. (iii) Guarantees As at December 31, 2001, the Group had guarantees on banking facilities granted to associates amounting to RMB1,338,444,150 (2000 - RMB1,353,829,000). 23. Pledge of assets As at December 31, 2001, the Group had pledged its buildings with a net book value of RMB17,000,000 and 40,308,590 “A” shares of Shenzhen China - 55 - Bicycle Company (Holdings) Limited and 30,000,000 “A” shares of Shenzhen Lionda Holdings Company Limited to banks to secure general banking facilities. 24. Contingent liabilities As at December 31, 2001, the Group had the following contingent liabilities : 2001 2000 RMB’000 RMB’000 Potential liabilities from court action in relation to the guarantees given by the Group 727,498 746,639 Guarantees to financial institutions in respect of the Group’s facilities 1,652,879 1,601,929 2,380,377 2,348,568 25. Holding company and ultimate holding company The holding company is Shenzhen Lionda Holdings Limited Liability Company. In the opinion of the directors, the ultimate holding company of the Group is Shenzhen Investment Administrative Company, a state-owned enterprise established in the PRC. 26. Impact on loss attributable to shareholders and net asset value as reported by the PRC Certified Public Accountants Loss attributable Net to shareholders asset value RMB’000 RMB’000 As reported by PRC Certified Public Accountants ( 995,379) (971,769) Adjustments to conform to IAS Share of results from an associate - ( 3,153) Provision for doubtful debts ( 8,466) - Prior year adjustment on interest in an associate - ( 198) Housing welfare fund transfer - 192 Loss on minority shareholders’ interests ( 3,478) ( 3,478) Capitalised interest on properties written off ( 63,810) ( 6,381) Deferred assets written off/(reversed) 429 ( 31) Debt restructuring income 19,996 - Pre-operating expenditures written off ( 1,050) - As restated in conformity with IAS (1,051,758) (984,818) 27. FINANCIAL INSTRUMENTS FINANCIAL ASSETS OF THE GROUP INCLUDE CASH AND BANK BALANCES, ACCOUNT RECEIVABLES, OTHER RECEIVABLES AND - 56 - PREPAYMENTS. FINANCIAL LIABILITIES INCLUDE BANK AND OTHER LOANS, ACCOUNT PAYABLES, OTHER PAYABLES AND ACCRUED CHARGES. (A) CREDIT RISK CASH AND BANK BALANCES : SUBSTANTIAL AMOUNTS OF THE GROUP’S CASH BALANCES ARE DEPOSITED WITH THE BANK OF CHINA, CHINA MERCHANTS BANK, SHENZHEN DEVELOPMENT BANK AND INDUSTRIAL AND COMMERCIAL BANK OF CHINA. ACCOUNT RECEIVABLES, OTHER RECEIVABLES AND PREPAYMENTS : THE GROUP DOES NOT HAVE A SIGNIFICANT EXPOSURE TO ANY INDIVIDUAL CUSTOMER OR COUNTERPART. THE MAJOR CONCENTRATIONS OF CREDIT RISK ARISE FROM EXPOSURES TO A SUBSTANTIAL NUMBER OF ACCOUNT RECEIVABLES THAT ARE MAINLY LOCATED IN THE PRC. (B) FAIR VALUE THE FAIR VALUE OF THE FINANCIAL ASSETS AND FINANCIAL LIABILITIES IS NOT MATERIALLY DIFFERENT FROM THEIR CARRYING AMOUNT. THE CARRYING VALUE OF SHORT-TERM LOANS IS ESTIMATED TO APPROXIMATE ITS FAIR VALUE BASED ON THE BORROWING TERMS AND RATES OF SIMILAR LOANS. FAIR VALUE ESTIMATES ARE MADE AT A SPECIFIC POINT IN TIME AND BASED ON RELEVANT MARKET INFORMATION AND INFORMATION ABOUT THE FINANCIAL INSTRUMENTS. THESE ESTIMATES ARE SUBJECTIVE IN NATURE AND INVOLVE UNCERTAINTIES ON MATTERS OF SIGNIFICANT JUDGEMENT, AND THEREFORE CANNOT BE DETERMINED WITH PRECISION. CHANGES IN ASSUMPTIONS COULD SIGNIFICANTLY AFFECT THE ESTIMATES. 28. LANGUAGE THE TRANSLATED ENGLISH VERSION OF FINANCIAL STATEMENTS IS FOR REFERENCE ONLY. SHOULD ANY DISAGREEMENT ARISE, - 57 - THE CHINESE VERSION SHALL PREVAIL. 29. COMPARATIVE FIGURES CERTAIN COMPARATIVE FIGURES HAVE BEEN RECLASSIFIED SO AS TO CONFORM TO THE CURRENT YEAR’S PRESENTATION. XI. DOCUMENTS AVAILABLE FOR REFERENCE There is complete set of documents in the secretariat of the Board, which will be provided for reference to CSRC, Stock Exchange or shareholders: 1. Accounting statements carried with personal signatures and seals of legal representative, person in charge of the financial affairs and person in charge of handling accounting affairs. 2. Original of Auditors’ Report carried with the seal of Certified Public Accountants as well as personal signatures and seals of certified public accountants; 3. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public on the newspapers designated by CSRC in the report period; 4. Original of 2001 Annual Report carried with personnel signature of the Chairman of the Board. Board of Directors of Shenzhen Lionda Holdings Co., Ltd. April 19, 2002 - 58 -