*ST本实B(200041)深本实Ｂ2002年年度报告（英文版）

SHENZHEN BENELUX ENTERPRISE CO., LTD. 2002 ANNUAL REPORT Important: Board of Directors of SHENZHEN BENELUX ENTERPRISE CO., LTD. (hereinafter referred to as the Company) hereby confirms that there are no any important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. Due to business trip, Director Mr. Lin Bingjun, Independent Director Mr. Zhou Yan and Mr. Zhou Rongming were absent from the Board meeting, in which the 2002 Annual Report was examined. Moore Stephens Certified Public Accountants issued an Auditors’ Report with explanatory notes for the Company; and the Board of Directors and the Supervisory Committee of the Company made explanations in details for the relevant matters, the investors are suggested to notice the content. Mr. Huang Xianfeng, Chairman of the Board, Mr. Li Mian, General Manager and Ms. Gu Xiaohong, Person in charge of Accounting hereby confirm that the Financial Report of the Annual Report is true and complete. Contents . Company Profile----------------------------------------------------------------------------2 . Summary of Financial Highlight and Business Highlight--------------------------3 . Changes in Capital Shares and Particulars about Shareholders-----------------4 . Particulars about Directors, Supervisors, Senior Executives and Employees------------ 6 . Administrative Structure-----------------------------------------------------------------8 . Brief Introduction to the Shareholders’ General Meeting -----------------------10 . Report of the Board of Directors ----------------------------------- ------------------11 . Report of the Supervisory Committee------------------------------------------------15 . Significant Events-------------------------------------------------------------------------16 . Financial Report--------------------------------------------------------------------------17 . Documents for Reference---------------------------------------------------------------17 -1- I. COMPANY PROFILE 1. Legal name of the Company In Chinese: 深圳本鲁克斯实业股份有限公司 In English: Shenzhen Benelux Enterprise Co., Ltd. 2. Legal Representative: Mr. Huang Xianfeng 3. Secretary of the Board of Directors: Mr. Shen Yanlei Contact Address: Building No. 11, Nanyou Zhongxing Industry Village, Nanshan District, Shenzhen Tel: (86) 755-26068614, 26068025 Fax: (86) 755-26068031 E-mail: szshbshi@public.szptt.net.cn 4. Registered Address: Building No. 11, Nanyou Zhongxing Industry Village, Nanshan District, Shenzhen Office Address: Building No. 11, Nanyou Zhongxing Industry Village, Nanshan District, Shenzhen Post Code: 518054 E-mail: szshbshi@public.szptt.net.cn 5. Newspapers Chosen for Disclosing Information of the Company: Securities Times and Ta Kung Pao Internet Web Site Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Secretariat of Board of Directors of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: SHEN BENELUX-B Stock Code: 200041 7. Other the Relevant Information: Initial Registered Date of the Company: Dec. 10, 1990 Initial Registered Address: Building No. 11, Nanyou Zhongxing Industry Village, Nanshan District, Shenzhen Registered Code of Enterprise Legal Person’s Business License: QGYSZ Zi No. 101951 Registered Code of Tax: National Revenue: 440301618853267 Local Tax: 440305618853267 Name and Address of the Certified Public Accountant engaged by the Company: Domestic: Shenzhen Nanfang Minhe Certified Public Accountant Address: 8/F, Electronics Tech. Bldg., No. 2072, Shennan Middle Road, Shenzhen Overseas: Moore Stephens Certified Public Accountants Address: 8/F, Electronics Tech. Bldg., No. 2072, Shennan Middle Road, Shenzhen -2- II. SUMMARY OF FINANCIAL HIGHLIGHTS AND BUSINESS HIGHLIGHTS 1. Major accounting data and financial indexes as of the year 2002 (Unit: In RMB) Total profit 7,655,019.19 Net profit 2,921,670.56 Net profit after deducting non-recurring gains and losses 2,707,878.22 Profit from core business 25,409,994.02 Profit from other business lines 61,285.70 Operating profit 7,318,993.93 Investment income 122,232.92 Subsidy income ------ Net income / expenditure from non-operating 213,792.34 Net cash flows arising from operating activities 14,779,230.64 Net increase (decrease) in cash and cash equivalents 503,491.89 Note: (1) There was no difference in net profit as calculated under different accounting standards and regulations. (2) Items of non-recurring gains and losses and the amounts involved: Income from non-operating of RMB 284,199.68, is mainly net income from disposal of fixed assets Expenditure of non-operating of RMB 70,407.34, is mainly penalty. 2. Major accounting data and financial indexes over the past three years ended the Report period: (Unit: In RMB) 2001 Items 2002 After Before 2000 adjustment adjustment Income from core business 56,938,732.26 66,713,870.35 66,713,870.35 10,460,444.01 Net profit 2,921,670.56 7,059,260.21 8,016,384.21 3,634,940.90 Total assets 262,144,738.49 262,420,517.09 271,071,401.50 250,272,484.06 Shareholders’ equity (excluding 125,327,710.94 122,406,040.38 131,065,924.79 123,055,400.69 minority interests) Earnings per share 0.05 0.12 0.13 0.06 Net assets per share 2.07 2.02 2.17 2.03 Net assets per share after 1.91 1.88 2.02 1.99 adjustment Net cash flows per share arising 0.24 (0.04) (0.04) 0.08 from operating activities Return on equity (%) 2.33 5.77 6.12 2.95 Note: 1. According to No. [2001] 57 document “Notice on printing and distributing Accounting Standard for Enterprise – fixed assets” promulgated by Ministry of Finance, the Company implemented the said Accounting Standard since Jan. 1, 2002. The Company additionally withdrew depreciation of fixed assets. Additionally, in order to provide the relevant and trusty information on the enterprise’s financial status, achievement results and cash flows, the Company decided to adopt RMB as standard money of account from HKD since Jan. 1, 2002. Meanwhile, the Company adopted the retroactive adjustment for changing of accounting policy, so as to adjusted income on hand at the period-begin and fixed assets. 2. According to Regulations on the Information Disclosure of Companies Publicly Issuing Shares (No. 9) released by CSRC, return on equity and earnings per share as of the year 2001 are calculated based on the fully diluted and weighted average: -3- Profit as of the report period Return on equity (%) Earnings per share (RMB/share) Fully diluted Weighted average Fully diluted Weighted average Profit from core business 20.77 20.51 0.42 0.42 Operating profit 5.84 5.91 0.12 0.12 Net profit 2.33 2.36 0.05 0.05 Net profit after deducting 2.19 2.21 0.05 0.05 non-recurring gains and losses 3. Changes in shareholders’ equity in the report year Amount at the Increase in the Decrease in Amount at the year-begin report year the report year year-end Share capital 60,500,000.00 - - 60,500,000.00 Capital public reserve 29,847,220.25 - - 29,847,220.25 Surplus public reserve 23,737,379.75 293,210.25 - 24,030,590.00 Statutory public welfare 7,539,369.38 146,605.12 - 7,685,974.50 fund Retained profit 782,071.00 2,921,670.56 439,815.37 3,263,926.19 Total of shareholders’ 122,406,040.38 3,361,485.93 439,815.37 125,327,710.94 equity III. CHANGE IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS (I) Statement of the changes in share (Unit: share) Increase/decrease of this time (+, - ) Before the After the Items Bonus Capitalization of Additional Others Sub- change Allotment change shares public reserve issuance total of share I. Unlisted Shares 1. Promoters’ shares 43,318,000 43,318,000 Including: State-owned share Domestic legal person’s shares 28,031,078 28,031,078 Foreign legal person’s shares 15,286,922 15,286,922 Others 2. Raised legal person’s shares 3. Employees’ shares 1,452,000 1,452,000 4. Preference shares or others Including: Transferred / allotted shares Total unlisted shares 44,770,000 44,770,000 II. Listed Shares 1. RMB ordinary shares 2.Domestically listed foreign 15,730,000 15,730,000 shares 3. Overseas listed foreign shares 4. Others Total listed shares 15,730,000 15,730,000 III. Total shares 60,500,000 60,500,000 2. Issuance and listing of shares -4- 1) The Company didn’t issue shares over the previous three years ended the report period. 2) In the report year, the Company's shares were neither change in the number nor the structure of the shares capital. 3) Employee’s shares presently were issued at an issuance price of RMB 3.67 in March 1994, and totally 1,200,000 shares have been issued. In 1995, the Company implemented profit distribution at the rate of 1 bonus share for every 10 shares; in 1997, the Company profit distribution at the rate of 1 bonus share for every 10 shares. Therefore, the Company has 1,452,000 employee’s shares. By the end of the report year, the said shares were not listed for trading. 3. About shareholders 1) Ended Dec. 31, 2002, the Company had 64 shareholders of A-share, 5,671 shareholders of B-share. 2) Ended Dec. 31, 2002, particulars about shares held by the top ten shareholders Shares held at Increase / Name of Shareholders Type Quality of share end of the year decrease Shekou Hansheng Electronic Co., Ltd. 19,558,077 0 A-share Promoters’ shares Hong Kong Jiali Precision Manufacturing Co., Ltd. 14,247,290 0 B-share Promoters’ shares Wuhan Huaxing Electronic Co., Ltd. 8,473,001 0 A-share Promoters’ shares Jieli (Hong Kong) Sound Equipment Industry Co., Ltd. 1,039,632 0 B-share Promoters’ shares WANG YAN 300,000 -3,330 B-share Shares in circulation ZHANG HAN XING 235,600 105,600 B-share Shares in circulation KOTO TRANSPORT LTD 200,000 0 B-share Shares in circulation QI LONG YE 106,200 106,200 B-share Shares in circulation OU GUO HUA 103,070 103,070 B-share Shares in circulation ZHOU ZHONG XIN 101,030 101,030 B-share Shares in circulation Note: a. Among the above top ten shareholders, legal representative of Shekou Hansheng Electronic Co., Ltd. and legal representative of Wuhan Huaxing Electronic Co., Ltd. is the same person, and there exist no association relationship among the said other shareholders. b. Among the above top ten shareholders, there existed no state-owned shareholders. Shekou Hansheng Electronic Co., Ltd. and Wuhan Huaxing Electronic Co., Ltd. are Chinese shareholders, while the others are foreign ones. c. According to the known situation, Shekou Hangsheng Electronic Co., Ltd. mortgaged its 19,558,077 shares of the Company for a loan from Yitian sub-branch, Shenzhen Branch, Huaxian Bank; Wuhan Huaxing Electronic Co., Ltd. mortgaged its 8,473,001 shares of the Company for a loan from Guangzhou Branch, Huaxia Bank; and shares held by the other shareholders have not been pledged and frozen. 3) About controlling shareholder of the Company Shekou Hansheng Electronic Co., Ltd. (“Shekou Hansheng”) is the controlling shareholder of the Company. By the end of the report year, Shekou Hansheng held 19,558,077 promoter’s shares of the Company in total, and taking 32.33% of the total share capital. Shekou Hansheng has established on Dec. 11, 1984; and is a Chinese-foreign joint venture company; legal representative: Zhao Congzhao; registered capital: RMB 1 million. Chinese shareholder of Shekou Hansheng is Wuhan Huaxing Electronic Co., Ltd. (taking 75% of shares of Shekou Hansheng), foreign shareholder of Shekou Hansheng is Hong Kong Huabo Industrial Co., Ltd. (taking 25% of shares of Shekou Hansheng). At present, Shekou Hansheng invests in long-term equity investment of the Company, and the other operation activities have been stopped. -5- 4) Particulars about the controlling shareholder of Shekou Hansheng and the actual controller of the Company Wuhan Huaxing Electronic Co., Ltd. (“Wuhan Huaxing”) is the controlling shareholder of Shekou Hansheng. By the end of the report year, Wuhan Huaxing held 75% of shares of Shekou Hansheng. Wuhan Huaxing has established in 1984, and is an enterprises owned by the whole people, which is a subsidiary company of Wuhan Huazhong Information Technology Group Co., Ltd.. Its legal representative is Zhao Congzhao; registered capital: RMB 1.966 million; business scope: recording equipment for special use in broadcast; manufacture equipment of broadcast controlling and video program; retail and wholesale of computer and its fittings, hardware, AC, construction material and decoration material. The actual controller of the Company is the parent company of Wuahan Huaxing Electronic Co., Ltd., namely Wuhan Huazhong Information Technology Group Co., Ltd. (Wuhan Huaxing is an enterprises owned by the whole people, which controlled by Wuhan Huazhong Information Technology Group Co., Ltd., held state-owned enterprise legal person’s share). Wuhan Huazhong Information Technology Group Co., Ltd. (“Wuhan Huazhong”) has established on Dec. 29, 1999, registered capital: RMB 261.06 million, legal representative is Zhao Congzhao, state-owned sole enterprise, was in charge of Wuhan Municipal State-owned Assets Management Bureau, business scope of Wuhan Huazhong: operation and management of state-owned assets authorized by municipal government; property right transaction of state-owned assets, providing agency and information service; operation of self-produced manufacture and the relevant technology; R&D of raw material and import and export of the relevant technology; undertaking the following business such as Chinese-foreign joint venture, cooperation, production and process raw materials on clients’ demands, assemble parts for the clients and process according to the clients’ samples. 5) Particulars about juristic person’s shareholders holding over 10% (including 10%) of shares of the Company Besides Shekou Hansheng and Wuhan Huaxing, the juristic person’s shareholder holding over 10% of shares of the Company is Hong Kong Jiali Precision Manufacturing Co., Ltd. (Hong Kong Jiali), who has established in May 1980; legal representative: Zhong Ruiqin; business scope: manufacture and trading of the magnetism products; sales of whole construction equipment. IV. DIRECTORS, SUPERVISORS AND SENIOR EXECUTIVES AND EMPLOYEES 1. Basic information Shares held Shares held Change in Name Gender Age Title at the at the the year year-begin year-end (+,-) Huang Xianfeng Male 53 Chairman of the Board 24,200 24,200 0 Zhou Jiachen Male 50 Vice Chairman of the Board 0 0 0 Zhou Jiaping Male 52 Director 0 0 0 Lin Bingjun Male 53 Director 0 0 0 Zheng Huili Female 43 Director 1,210 1,210 0 Zhou Yan Male 36 Independent Director 0 0 0 Zhou Maorong Male 40 Independent Director 0 0 0 Chairman of the Supervisory Hui Shujian Male 46 500 500 0 Committee Li Lingling Female 37 Supervisor 1,210 1,210 0 Zhou Jiaqing Male 38 Supervisor 0 0 0 Li Mian Male 35 General Manager 0 0 0 Shen Yanlei Male 33 Secretary of the Board 0 0 0 Notes: Directors, supervisors and senior executives taking the post of Shareholding Company: Mr. Huang Xianfeng took the post of director of Shekou Hansheng Electronic Co., Ltd.; Mr. Lin Bingjun took the post of Chairman of the Board of Jieli (Hong Kong) Sound Equipment -6- Industry Co., Ltd.; the others didn’t take the post in the Shareholding Company. 2. About annual remuneration (1) The remuneration of directors, supervisors and senior executives of the Company was determined according to the actual situation and the position held by them in the Company. (2) The total annual remuneration of directors, supervisors and senior executives was RMB 126,000; one director drew the annual salary of RMB 36,000 from the Company; two supervisors drew the annual salary from the Company amounting to RMB 36,000. (3) Independent director of the Company didn’t receive remuneration from the Company. (4) Among the above directors, supervisors and senior executives, two enjoyed the annual remuneration between RMB 30,000 and RMB 40,000 respectively; three enjoyed the annual remuneration between RMB 10,000 and RMB 20,000 respectively. (5) Among directors, supervisors and senior executives, except that Mr. Huang Xianfeng, Mr. Hui Jianshu, ms. Li Lingling received the annual remuneration from the Company, the other director and supervisors received no pay from the Company. Directors, supervisors and senior executives received from Shareholding Company and associated company: Mr. Lin Bingjun drew the annual salary from Shareholding Company Hong Kong Jieli Sounds Industrial Co., Ltd.; Ms. Zheng Huili drew the annual salary from associated company Wuhan Huazhong Information Technology Group Co., Ltd.. Mr. Zhou Jiachen, Mr. Zhou Jiaping and Mr. Zhou Jiaqing draw pay neither from the Company nor the other associated company. 3. Directors, supervisors and senior executives leaving the office and the reason in the report year During the report year, in order to perfect the administrative structure of the Company, Mr. Huang Xianfeng, Chairman of the Board and concurrently General Manager of the Company, resigned from the post of General Manager of the Company; Mr. Li Mian and Gan Hui were nominated as General Manager and Deputy General Manager of the Company respectively, as approved by the Board of Directors, Mr. Li Mian and Mr. Gan Hui respectively took the post of General Manager and Deputy General Manager. Except for that, the other directors, supervisors and senior executives didn’t leave their position, the Company didn’t engage or dismissed senior executives such as General Manager, Deputy General Manager, Person in charge of Financial and Secretary of the Board. 4.About employees The Company had totally 325 employees. Of them, 127 production personnel, 41 salespersons, 87 technicians, 10 financial personnel, 60 administration personnel. Among the employees, persons graduated from 3-years regular college or above take 53.09% of the total employees. In the report year, the Company has no retirees. V. ADMINITRATIVE STRUCTURE (I) Actual Status of the Company’s Administration According to relevant regulations of Company Law and Securities Law, the Company consistently consummated the legal person administration structure of the Company, made efforts to establish modern enterprise system and standardized the Company’s operation. In the report period, according to the requirement of Notification on Carrying out Inspection of Establishing Modern Enterprise System in Listed Company promulgated by CSRC and SETC, the Company carried out the self-inspection of establishing modern enterprise system in listed company and accepted the circling inspection of Shenzhen Securities Management Office in the report period. According to the requirement of CSRC, compared with Administrative Rules for Listed -7- Company, the explanation on the legal person administration of the Company by the Board of Directors is as follows: 1. Shareholders and the Shareholders’ General Meeting: The administrative structure of the Company could ensure the equal status of the shareholders, especially the medium and small shareholders and ensure the shareholders to execute fully legal rights. The Company established Rules of Procedure of the Shareholders General Meeting. In the report period, the procedure of calling and holding of the Shareholders General Meeting, the qualification of the present people and the procedure of voting was in conformity with Company Law, Normative Opinion on the Shareholders General Meeting of Listed Company and Articles of Association. 2. Control Shareholders and Listed Company: The control shareholder of the Company, Shekou Hansheng Electronic Co., Ltd. paid much more attention to the listed company, gave much support, executed the rights of the shareholder according to laws and undertook the liabilities of the shareholder. The Company was separated from the control shareholder in respect of business, assets, organizations, personnel and financing, settled independent and undertook liabilities and risk independently: 3. Directors and the Board of Directors The Company elected directors strictly according to the election and engagement procedures as stated in the Articles of Association. The directors implemented duties in an honest and diligent way. The number of the members of the Board of Directors and personnel formation were in accordance with requirements of relevant laws and legislations. The Board of Directors of the Company established Rules of Procedure of the Board of Directors and the meetings of the Board of Directors were held according to the stipulated procedure. The Company initially established independent directors system according to the requirement of CSRC and Shenzhen Securities Management Office and at present, the Board of Directors of the Company has two independent directors. 4. Supervisors and the Supervisory Committee The Company elected supervisors strictly according to the election and engagement procedures as stated in the Articles of Association. The Supervisory Committee implemented duties in an honest and diligent way. The number of the members of the Supervisory Committee could ensure the Supervisory Committee to supervise over and inspect independently and effectively the directors, senior executives and financing of the Company. The Supervisory Committee established Rules of Procedure of the Supervisory Committee and the meetings of the Supervisory Committee were held according to the stipulated procedure. 5. Performance Evaluation, Encouragement and Binding Mechanism: The Company is positively setting about establishment of fair and transparent performance evaluation, encouragement and binding mechanism. 6.Relevant beneficiary The Company could respect and the legal rights of bank, other creditors, employees, community and other beneficiaries and actively cooperated with them to push the consistent and health development of the Company. -8- 7. Information Disclosure and Transparency: The Company patiently implemented the liabilities of information disclosure basically according to relevant regulations on information disclosure. But due to the misplay of the work, on May 30, 2002, the Company signed RMB 40,000,000 mutual guarantee agreement with Yantai Development Group Co., Ltd. in the scope of the Shareholders’ General Meeting’s authorization (only signed but not actually implemented). The Company did not make public notices on the event. The Company will enhance the study of relevant requirement on information disclosure and guaranteed to disclose publicly public notice on the similar significant agreement in time. (II) Performance of Independent Directors: According to the requirement of CSRC and Shenzhen Securities Management Office, the Shareholders’ General Meeting of the Company elected two experts as independent directors, initially consummated the legal person administrative structure, reformed the structure of the Board of Directors, improved the level of decision of the Board of Directors and standardized the operation of the Company. In the report period, two independent directors independently implemented duties according to Guide Opinion on Establishing Independent Directors System in Listed Company and Articles of Association. They totally attended three meetings of the Board of Directors, played fully a role of independent directors and safeguarded the whole interest of the Company especially the legal rights and interest of the medium and small shareholders. (III) Control Shareholders and Listed Company: The Company was separated from the control shareholder in business, personnel, assets, organization and financing and had independent and complete business and ability of self-operation. 1.In respect of business, the business of the Company was separated from the control shareholder and the control shareholders did not engage in the same or similar business with the listed company. 2.In respect of personnel, the personnel of the Company were independent from the control shareholder. The managers, person in charge of financing and the secretary of the Board of Directors took no any post in the control shareholder. 3. In respect of assets, the assets invested by the Company was finished independently and the property right was clear. The control shareholder did not interfere with the operation and management of the Company and the Company did not provide any guarantee for the control shareholder. 4.In respect of organization, the Board of Directors, the Supervisory Committee and other organizations of the Company independently operated and the control shareholder and its functional organization had no affiliation with the Company and its functional organization. The control shareholder and its subsidiaries did not release any plan and order on the Company’s operation to the Company and its subsidiaries and did not influence the independency of the Company’s operation and management in any forms. 5. In respect of financing, the Company established and consummated the financing and accounting management system according to relevant laws and regulations and independently settled. The control shareholder did not interfere with the financing and accounting activities. VI. Shareholders’ General Meeting I. Notification, convening and holding of Shareholders’ General Meeting: In the report period, the Company had held one Shareholders’ General Meeting, namely -9- 2001 Shareholders’ General Meeting held on June 30, 2002 with details of notification, convening and holding as follows: The Company published Public Notice of Resolutions of the Board of Directors and Holding of Shareholders’ General Meeting and Supplemental Public Notice of Holding 2001 Shareholders’ General Meeting on Securities Times and Hong Kong Ta Kung Pao dated May 29, 2002 and June 15, 2002 respectively. On June 30, 2002, this Shareholders’ General Meeting was held in the conference room in 6/F of the Company on time. II. Resolutions approved or objected by Shareholders’ General Meeting, newspapers of information disclosure on which the resolutions were published and the date of disclosure: 1. Resolutions approved by this Shareholders’ General Meeting: 1) 2001 Work Report of the Board of Directors 2) 2001 Work Report of the Supervisory Committee 3) 2001 Financial Report 4) 2001 Profit Distribution Plan 5) 2002 Profit Distribution Policy 6) 2001 Annual Report and its Summary 7) Rules of Procedures of Shareholders’ General Meeting After Amendment 8) Rules of Procedures of the Board of Directors After Amendment 9) Rules of Procedures of the Supervisory Committee After Amendment 10) Information Disclosure System After Amendment 11) Work System of Independent Directors 12) Preplan of Amendment of Articles of Association 13) Proposal on Using Self-owned Capital to Jointly Develop Real Estate with Beijing Ronglida Real Estate Development Co., Ltd. 14) Proposal on Engagement of Certified Public Accountants of the Company 15) Proposal on Engagement of Lawyers’ Firm of the Company 16) Proposal on Engagement of Mr. Zhou Yan as Independent Director 17) Proposal on Engagement of Mr. Zhou Rongming as Independent Director 18) Proposal on Postponing the Period of Validity of Proposal on Applying for Additionally Issuing RMB Ordinary (A) Share Through Public Raising to One Year 19) Proposal on Authorizing the Board of Directors to Sign Mutual Guarantee Agreement with Other Listed Companies Within the Mutual Guarantee Line of RMB 40 Million (Including RMB 40 Million) 2. Resolutions objected in the Shareholders’ General Meeting: The resolution objected in this Shareholders’ General Meeting was Proposal on Change of Member of the Board of Directors. Since the list of change of member of the Board of Directors has not confirmed when publishing public notice on holding Shareholders’ General Meeting, thus now this proposal was published. The meeting originally prepared to publish the list of change of Board member through form of amending the original proposal 15 days before the holding of the meeting and then could not submit it to this Shareholders’ General Meeting for examination because the final list could not be confirmed within 15 days before the holding of the meeting. While according to the normative opinion of Shareholders’ General Meeting, this proposal could not be cancelled, thus the meeting vetoed this proposal in form of overall objection. 3. The resolutions of this Shareholders’ General Meeting were published on Securities Times and Hong Kong Ta Kung Pao dated July 2, 2002. III. Election and replacement of directors and supervisors - 10 - In the report period, the Company complementarily added two independent directors Mr. Zhou Yan and Mr. Zhou Rongming according to the relevant regulations of the Supervisory Committee, in addition to this, the Company did not newly elected or replaced the directors and supervisors of the Company. VII. Report of the Board of Directors I. Operation in the report period 1. Analysis and discussion of the Management In the report period, the Company further optimized the product structure, gradually reduced the production and sales of products with comparatively low profit and increased the production and promotion of new products with comparatively high profit such as intravenous injection human immunoglobulin, human hepatitis B immunoglobulin and new lithotritor and at the same time continue to reinforce the development of new products. In the report period, new products human tetanus immunoglobulin has passed the authentication of China Pharmaceutical and Biological Products Authentication and shall gain the approval document soon to be produced and sold. Human hydrophobia immunoglobulin shall also finish the sample examination soon. Along with the promotion of these new products in successive, the Company could keep more strong competitive force in the same industry and thus gain bigger profit space. 2. Scope of core business and operation The Company is mainly engaged in the production and sales of magnetism recording products, high-grade office products, biological products/blood products, medical appliance and simulation products. In the report period, the income from core business realized was RMB 56,938,700, which declined slightly compared with the previous year. Since the certified public accountants which was responsible for the Company’s overseas auditing considered based on the cautiousness principle, thus the accounting estimation policy of the Company changed, resulting in the increase of reserve for bad debts of accounts receivable in the report period by a big margin, which made the profitability of the Company decline by a big margin compared with the previous accounting year (for relevant change, please refer to notes V.2 of financial statements) and only realize a net profit of RMB 2,921,700. The operation of core business in the report period: Items Income from core Cost of core business Gross profit ratio of business (RMB) (RMB) core business (%) Electronic products 9,388,089.01 9,636,859.13 -2.65 Medical appliance 8,273,329.56 3,604,154.81 56.44 Biological blood 38,751,936.34 17,454,589.74 54.96 products Simulation series 523,377.35 489,377.95 6.50 products 3. Operation and achievements of main holding companies of the Company 1) Wuhan Ruide Biological Products Co., Ltd. This company, whose 99% equity is held by the Company, is mainly engaged in the production and sales of biological products (blood products) with a registered capital of RMB 45.84 million. The total assets of this company at the end of 2002 amounted to RMB 161,694,300. In the report period, this company realized an income from core business of RMB 38,751,900 and a net profit of RMB 9,468,300. - 11 - 2) Shenzhen Houyuan Medical Instrument Co., Ltd. This company, whose 75% equity is held by the Company, is mainly engaged in the production and sales of medical appliance with a registered capital of RMB 6 million and had total assets of RMB 45 million at the end of 2002. In the report period, this company realized an income from core business of RMB 8,273,300 and a net profit of RMB-149,200. 3) Shenzhen Benelus Simulation & Control Ltd. This company, whose 91.11% equity is held by the Company, is mainly engaged in the production and sales of simulation equipments with a registered capital of RMB 9 million and had total assets of RMB 15,377,600 at the end of 2002. In the report period, this company realized an income from core business of RMB 523,400 and a net profit of RMB-248,900. 4. Main suppliers and customers The total amount of purchase of the top five suppliers took 82.5% of the total annual amount of purchase and the total amount of sales of the top five customers took 72.35% of the total annual amount of sales. II. Investment in the report period In the report period, the Company did not newly increase foreign investment and the original foreign investment also had no change. For the relevant situation of invested companies, please refer to notes VI, 7 of accounting statements. III. Financial status and operating results in the report period (Unit: RMB) In 2002 In 2001 Proportion of increase and decrease Total assets 262,144,738.49 262,420,517.09 -0.11% Shareholders’ equity 125,327,710.94 122,406,040.38 2.39% Profit from core 25,409,994.02 28,711,831.97 -11.49% business Net profit 2,921,670.56 7,059,260.21 -58.61% Net increase of cash 503,491.89 405,493.07 24.17% and cash equivalents Explanation of reason of change: 1. The profit from core business decreased by 11.49% compared with the last year, which was mainly because that the Company gave up the profits to marketing merchants in order to promote the new products. 2. The net profit decreased by 58.61% compared with the last year, which was mainly because that the change of accounting estimation policy made the reserve for bad debts appropriated from accounts receivable increase by a big margin. IV. In the report period, Moore Stephens Certified Public Accountants produced Auditors’ Report with interpretative explanation. Aiming at this, the Company planned to adopt the following measures to make improvement: 1. Making use of the good opportunity in the pharmaceutical industry at present, Shenzhen Houyuan Medical Instrument Co., Ltd. and Wuhan Ruide Biological Products Co., Ltd., which are both holding subsidiaries of the Company and are engaged in the production of pharmaceutical products, actively expanded the production, reinforced the recovery of payments for goods and tried hard to improve the cash flow of operating activities basically, thus to found a solid foundation for the Company to solve the overdue liabilities problems. 2. The Company has reached intent with Shekou Hansheng Electronic Co., Ltd. (hereinafter referred to as Shekou Hansheng), which is the first large shareholder of the Company and - 12 - Shekou Hansheng planned to solve the aforesaid problems thoroughly by financing before end of June, 2003. Thus, the Board of Directors of the Company thought that though there was material uncertainty existing in the sustainable operation of the Company, but the Company ensured that the aforesaid improvement measures could eliminate the influence basically. Therefore, the preparation and organization of the accounting statements of the report period was still based on the sustainable operation and no adjustment that was necessary in the failure of sustainable operation was made to the amount and classification of balance sheet. V. Routine work of the Board of Directors 1. Meetings and resolutions of the Board of Directors in the report period: In the report period, the Board totally held nine meetings with details as follows: 1) On April 1, 2002, the Board of Directors held the meeting and examined and approved the Resolution on Change of Certified Public Accountants. 2) On April 25, 2002, the Board of Directors held the meeting and examined and approved the following resolutions: 2001 Work Report of the Board of Directors 2001 Financial Report 2001 Profit Distribution Plan 2002 Profit Distribution Policy 2001 Annual Report and its Summary Mutual Guarantee Agreement Between the Company and Shenzhen Taifeng Electronic Co., Ltd. 3) On April 28, 2002, the Board of Directors held the meeting and examined and approved The First Quarterly Report of Year 2002 4) On May 28, 2002, the Board of Directors held the meeting and examined and approved the following resolutions: a. Rules of Procedures of Shareholders’ General Meeting After Amendment b. Rules of Procedures of the Board of Directors After Amendment c. Information Disclosure System After Amendment d. Work System of Independent Directors e. Preplan of Amendment of Articles of Association f. Proposal on Using Self-owned Capital to Jointly Develop Real Estate Projects with Beijing Ronglida Real Estate Development Co., Ltd. g. Proposal on Confirming 2002 Certified Public Accountants As Soon As Possible and Submitting to 2001 Shareholders’ General Meeting for Examination h. Proposal on Confirming 2002 Lawyers’ Firm As Soon As Possible and Submitting to 2001 Shareholders’ General Meeting for Examination i. Proposal on Confirming List of Two Independent Directors As Soon As Possible and Submitting to 2001 Shareholders’ General Meeting for Examination j. Proposal on Confirming List of Adjustment of Member of the Board of Directors As Soon As Possible and Submitting to 2001 Shareholders’ General Meeting for Examination k. Proposal on Postponing the Period of Validity of Proposal on Applying for Additionally Issuing RMB Ordinary (A) Share Through Public Raising to One Year k. Proposal on Holding 2001 Shareholders’ General Meeting l. Mutual Guarantee Agreement of Amount of RMB 40 Million Between the Company and Yantai Hualian Development Group Co., Ltd. m. Proposal on Authorizing the Board of Directors to Sign Mutual Guarantee Agreement with Other Listed Companies Within the Mutual Guarantee Line of RMB 40 Million (Including RMB 40 Million) by Shareholders’ General Meeting - 13 - 5) On June 14, 2002, the Board of Directors held the meeting and examined and approved the following resolutions: a. Agreement of Mr. Zhou Yan and Mr. Zhou Rongming as Candidates of Independent Directors and Submitting to 2001 Shareholders’ General Meeting for Examination b. Agreement of Engagement of Hong Kong Ho And Ho & Company as Domestic Auditing Certified Public Accountants and Submitting to 2001 Shareholders’ General Meeting for Examination c. Engagement of Guangdong Guanghe Lawyers’ Firm as Perennial Counselor of the Company and Submitting to 2001 Shareholders’ General Meeting for Examination 6) On June 27, 2002, the Board of Directors held the meeting and examined and approved Self-inspection Report 7) On June 30, 2002, the Board of Directors held the meeting and examined and approved the following resolutions: a. In order to further standardize the operation of the Company, the meeting agreed Chairman of the Board and concurrently General Manager Mr. Huang Xianfeng to resign from the post of General Manager b. According to the nomination of Mr. Huang Xianfeng, the meeting agreed to engage Mr. Li Mian as General Manager and Mr. Gan Hui as Deputy General Manager 8) On Aug. 22, 2002, the Board of Directors held the meeting and examined and approved the following resolutions: a. 2002 Semi-annual Report Summary b. 2002 Interim Profit Distribution Plan 9) On Oct. 28, 2002, the Board of Directors held the meeting and examined and approved The Third Quarterly Report of Year 2002 2. Implementation of resolutions of Shareholders’ General Meeting by the Board of Directors: In the report period, the Company held one Shareholders’ General Meeting and all resolutions of Shareholders’ General Meeting has been finished in implementation according to the contents of resolutions in the report period. VI. Preplan of Profit Distribution and Preplan of Converting Capital Public Reserve into Share Capital In 2002, the Company realized a net profit of RMB 2,921,670.56, adding the undistributed profit at the beginning of the year of RMB 782,071.00, the actual profit available for distribution was RMB 3,703,741.56. After deducting statutory surplus public reserve amounting to RMB 293,210.25 and statutory public welfare fund amounting to RMB 146,605.12, the profit available for distributing to shareholders was RMB 3,263,926.19. Due to the business development need of the Company, the Board of Directors decided the profit distribution preplan as follows: neither to distribute profit nor to convert public reserve into share capital. The aforesaid preplan should be submitted to Shareholders’ General Meeting for examination and approval. VIII. REPORT OF THE SUPERVISORY COMMITTEE (1). Work of the Supervisory Committee In the report period, the Supervisory Committee of the Company totally held 5 meetings. The meetings and resolutions are as follows: 1.On Apr.25, 2002, the Supervisory Committee of the Company held the meeting, examined and approved the following resolutions: 2001 Work Report of the Supervisory Committee; - 14 - 2001 Financial Report; 2001 Profit Distribution Proposal; 2001 Annual Report and Summary. 2.On Apr.28, 2002, the Supervisory Committee of the Company held the meeting, examined and approved the 1st Quarterly Report of 2002. 3.On May 28, 2002, the Supervisory Committee of the Company held the meeting, examined and approved Rules of Procedure of the Supervisory Committee after amendment. 4.On Aug.22, 2002, the Supervisory Committee of the Company held the meeting, examined and approved the following resolutions: 2002 Semi Annual Report and Summary of the Company 2002 Intermediate Profit Distribution Proposal of the Company 5.On Aug.28, 2002, the Supervisory Committee of the Company held the meeting, examined and approved the 3rd Quarterly Report of 2003 of the Company. (II) Independent Opinions Expressed by the Supervisory Committee 1.Operation according to law: In the report period, the Supervisory Committee believed that the Company made decisions in legal procedures, established rather perfect internal control system, and the directors and managers hadn’t violated laws, legislations and the Articles of Association or damaged the interests of the Company when they performed their duties. 2.Financial inspection: The Supervisory Committee believed that the auditors’ reports issued by Shenzhen Nanfang-Minhe Certified Public Accountants and Moore Mtephens Certified Public Accountants truly reflected the Company’s financial status and operation results. 3.Concerning explanation on significant uncertainty in the Company’s consistent operation of Certified Public Accountants, the Supervisory Committee believed that although the Company’s consistent operation existed significant uncertainty, the Supervisory Committee assured that the improvement measure put forward by the Board of Directors of the Company could basically remove its influence and expressed approbate on making the accounting statements in the report period on the basis of consistent operation and not making necessary adjustment for the amount and kind of assets and liabilities under inconsistent operation. IX. SIGNIFICANT EVENTS (I) In the report period, the Company had no significant lawsuits and arbitrations. (II) In the report period, the Company had no purchase and sale of assets, consolidation and merge. (III) In the report period, the Company had no significant related transaction. (IV) In the report period, the Company had no significant contract. (V) In the report period, the Company or the shareholders holding over 5% equity had no commitments. (VI) In the report period, due to the busy audit work of Zhongtian Huazheng Certified Public Accountants which was in charge of the audit of the Company, it could not guarantee to complete the Company’s audit in stipulated period. Through negotiation with it, the Company decided to change into Shenzhen Nanfang-Minhe Certified Public Accountants in charge of the domestic audit of the Company and change from Ho % Ho and Company to Moore Mtephens Certified Public Accountants in charge of the overseas audit of the Company. The remuneration of the aforesaid Certified Public Accountants was RMB 0.25. The present audit institutions provided audit service for the Company for not consistent one year. (VII) In the report period, the Company, the Board of Directors and the directors had neither been checked, given administrative punishement and circling comment by CSRC nor been publicly condemned by SSE. - 15 - In the report period, Shenzhen Securities Management Office conducted circling inspection of the Company and put forward to correction opinion and the Company patiently corrected item by item according to the correction opinion. Concerning the problems existed in the Company’s administration and information disclosure, the Company strenghthened related persons’ study and traning and made corresponding correction in time on the problems existed in financing and accounting settlement. The correction report was disclosed on Securities Times and Ta Kung Pao dated Mar.14, 2003. Please refer to it for details. (VIII) In the report period, the Company did occurred neither significant events as stated in Article 62 of Securities Times, Articles of Association of Detailed Rules of Implementation of Information Disclosure of Company Publicly Issuded Shares nor the significant events the Board of Directors judged as. X. FINANCIAL REPORT 1.Auditor’s Opinion (attached) 2.Audited Financial Statements (attached) 3.Notes of Audited Financial Statements (attached) XI. DOCUMENTS AVAILABLE FOR REFERENCE 1. Accounting statements carried with personal signatures and seals of legal representative, person in charge of the accounting affairs and person in charge of accounting organizations. 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. Other Annual Report disclosed in other Stock Exchange. This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. Board of Directors of Shenzhen Benelux Enterprise Co., Ltd. April 28, 2003 - 16 - REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF SHENZHEN BENELUX ENTERPRISE COMPANY LIMITED (Incorporated in the People’s Republic of China with limited liability) We have audited the accompanying consolidated balance sheet of Shenzhen Benelux Enterprise Company Limited (the “Company”) and its subsidiaries (the “Group”) as of 31 December 2002 and the related consolidated statements of income, cash flows and changes in equity for the year then ended. These financial statements set out on pages 2 to 20 are the responsibility of the Company’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 consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December, 2002 and of the results of operations and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards. Without qualifying our opinion, we draw attention to Note 2 in the financial statements which indicates that, as of 31 December 2002, the Group’s current liabilities exceeded its current assets by RMB27, 347,000. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. Moore Stephens Shenzhen Nanfang Minhe Certified Public Accountants 25 April 2003 - 17 - CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 Notes 2002 2001 RMB’000 RMB’000 Turnover 4 56,939 66,714 Cost of sales (31,529) (38,002) Gross Profit 25,410 28,712 Less: Selling expenses (1,700) (1,159) General and administrative expenses (11,911) (13,086) Operating profit 11,799 14,467 Net finance expenses 5 (4,728) (3,889) Negative goodwill released to income 122 130 Other income 462 2,124 Profit before tax 6 7,655 12,832 Income tax expense 7 (4,698) (4,707) Profit after tax 2,957 8,125 Minority interests (35) (1,066) Net profit 2,922 7,059 Earnings per share 8 RMB0.05 RMB0.12 The notes on pages 6 to 20 form part of these financial statements. - 18 - CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2002 Appro ASSETS Notes 2002 2001 ved by RMB’000 RMB’000 the Non-current assets Board Fixed assets 9 69,345 73,041 of Construction in progress - 1,360 Directo Land use rights 10 43,547 44,459 rs on Negative goodwill 11 (978) (1,100) 25 Franchise rights 12 14,925 16,948 April Proprietary technology 480 560 2003 Investment 13 28,880 28,880 Deferred assets 14 1,212 1,633 The Total non-current assets 157,411 165,781 notes on Current assets pages 6 Inventories 15 15,753 15,092 to 20 Accounts receivable, net 62,932 48,692 form Other receivables, net 22,027 29,436 part of Advances to suppliers 1,414 1,251 these Cash and bank balances 2,487 1,983 financi Deferred and prepaid expenses 121 185 al Total current assets 104,734 96,639 statem ents. Total assets 262,145 262,420 EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital 18 60,500 60,500 Reserves 19 64,828 61,906 Total shareholders’ equity 125,328 122,406 Minority interests 4,736 4,701 Non-current liabilities - - Current liabilities Accounts payable and other payables 16 28,032 25,047 Short term loans 17 96,494 107,552 Taxes payable 7,555 2,714 Total current liabilities 132,081 135,313 Total equity and liabilities 262,145 262,420 - 19 - CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 2002 2001 Notes RMB’000 RMB’000 OPERATING ACTIVITIES Cash receive from sales of goods or rendering of services 37,185 27,227 Other cash received relating to operating activities 19,816 7,997 Cash paid for goods and services (26,190) (18,887) Cash paid to and on behalf of employees (3,674) (3,176) Taxation paid (3,280) (8,344) Interest paid (4,012) (15,058) Cash paid relating to other operating activities (9,085) (7,310) NET CASH FROM/(USED IN) OPERATING ACTIVITIES 21(a) 10,760 (17,551) INVESTING ACTIVITIES Interest received 8 285 Acquisition of fixed assets (421) (1,585) Proceeds from disposal of fixed assets 1,216 - Acquisition of deferred assets - - Payment for construction in progress - - NET CASH FROM/(USED IN) INVESTING ACTIVITIES 803 (1,300) FINANCING ACTIVITIES Proceeds from borrowings 29,773 50,222 Other cash received relating to financing activities - - Repayments of borrowings (40,832) (30,708) Dividends paid - (235) NET CASH (USED IN)/FROM FINANCING ACTIVITIES (11,059) 19,279 Increase in cash and cash equivalents 504 428 Cash and cash equivalents at beginning of the year 1,983 1,555 Cash and cash equivalents at end of the year 2,487 1,983 The notes on pages 6 to 20 form part of these financial statements. - 20 - CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2002 Staff Share Share welfare General Retained capital premium fund reserve earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January 2001 60,500 29,847 7,539 23,738 (6,277) 115,347 Profit of the year - - - - 7,059 7,059 Addition - - - - - - Balance at 31 December 2001 60,500 29,847 7,539 23,738 782 122,406 Profit of the year - - - - 2,922 2,922 Appropriations - - 147 293 (440) - Balance at 31 December 2002 60,500 29,847 7,686 24,031 3,624 125,328 a. PRC laws and regulations restrict the distribution of share premium in the form of cash dividends to shareholders. b. PRC laws and regulations require companies to make appropriations to certain statutory reserves from net profit after taxation as reported in the statutory accounts. These statutory reserves include the staff welfare fund and the general reserve which are designated for specific purposes and are not distributable in the form of cash dividends. The notes on pages 6 to 20 form part of these financial statements. - 21 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 1. COMPANY BACKGROUND The Company was established on 25 September 1990 as a Sino-foreign joint venture company as approved by the Shenzhen Municipal Government. Pursuant to the approval granted by the Shenzhen Municipal Government on 31 August 1993, the Company was reorganized from a Sino-foreign joint venture company to a company limited by shares and changed its name to Shenzhen Benelux Enterprise Company Ltd. (深圳本鲁克斯实业股份有限公司). It was then listed on the Shenzhen Securities Exchange for its “B” shares on 30 May 1994. The principal activities of the Company and its subsidiaries (together with the Company referred to as the “Group”) are the sales and manufacture of medical equipment, clinical products, biological and blood products, cassettes and videotapes and development of the technology. 2. BASIS OF PREPARATION The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). This basis of accounting differs from that used in the management accounts of the Group which were prepared in accordance with the generally accepted accounting principles and the relevant financial regulations in the PRC (“PRC GAAP”). Adjustments have therefore been made for compliance with IFRS but will not be recognised in the books of the companies within the Group. The directors have prepared the financial statements on the going concern basis. At 31 December 2002, the Group’s current liabilities exceeded its current assets by RMB 27,347,000, and the short-term loans of the Company were overdue which amount to RMB22, 000,000 and HKD5, 000,000 and USD4, 762,000 as at December 31,2002. The directors have successfully negotiated with the banks to extend the substantial part of the bank loans which have fallen. In addition, the ultimate holding company deemed to lend much cash to the Company before the end of June 2003 to settle the overdue liabilities roundly and drastically. The ability of the Company and the Group to continue as a going concern is dependent upon their future profitable operations, the continuing support of the bankers and the ultimate holding company. If the Company and the Group were not a going concern, non-current assets will not realise their full values and further liabilities will arise. In addition, non-current assets and non-current liabilities will be reclassified as current. The directors believe that it is appropriate with the available information for the financial statements to be prepared as a going concern basis. - 22 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 3. PRINCIPAL ACCOUNTING POLICIES Basis of consolidation The group accounts comprise the accounts of the Company and its subsidiaries made up to 31 December 2002. All significant inter-company transactions and balances within the Group have been eliminated on consolidation. Minority interests represent the interests of outside shareholders in the operation results and net assets of subsidiaries. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate. B. Fixed assets and depreciation Fixed assets are stated at cost or valuation less accumulated depreciation. Depreciation is provided to write off the cost or valuation of fixed assets less their estimated residual values over their estimated useful lives on a straight-line basis as follows: Estimated residual value as Useful lives a percentage of cost Buildings 20-30 years 10% Plant and machinery 5-15 years 10% Electronic equipment 5-6 years 10% Motor vehicles 5-8 years 10% Furniture, fixtures and office equipment 5-10 years 10% C. Inventories Inventories are valued at the lower of cost and net realisable value. Costs of finished goods and work in progress include cost of raw materials, direct labour and an appropriate portion of production overheads, calculated using the weighted average method. Net realisable value is calculated as the actual or estimated selling price less all further costs of production and the related costs of marketing, selling and distribution. - 23 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued D. Investments Investments are stated at cost less provision for impairment loss. E. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statement and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. F. Foreign currency translation The reporting currency used was Hongkong Dollar in the past. Since the Company has implemented assets restructuring at the end of 2000, the main transactions of the Company are expressed in Renminbi, in order to give better presentation of the financial situation of the Company, the Company decided to change the reporting currency from Hongkong Dollar to Renminbi from 2002. Transactions in foreign currencies during the financial year are converted into Renminbi at the rates ruling on transaction dates. Foreign currency monetary assets and liabilities are translated into Renminbi at rates of exchange prevailing at the balance sheet date. Exchange differences arising from the settlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilities are included in the income statement. G. Land use rights Land use rights are amortised using the straight-line method over a period of 50 years. H. Goodwill Goodwill represents the excess of the purchase consideration over the fair value ascribed to the Group’s share of the separable net assets at the date of acquisition of a subsidiary and is amortised using the straight-line method over its estimated useful life. Any impairment of the goodwill will be charged as an expense in the profit and loss account in the period when it is incurred. - 24 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued Negative goodwill, which represents the excess of the fair value ascribed to the group’s share of the separable net assets at the date of acquisition of a subsidiary over the purchase consideration is credited to profit and loss account using the straight-line method over its estimated useful life. I. Franchise rights Franchise rights are amortised using the straight-line method over a period of 10 years, less any impairment loss, deemed appropriate by the directors. J Deferred assets Deferred assets are amortized using the straight-line method over a period of 5 years, less any impairment loss, deemed appropriate by the directors. K Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in net profit or loss in the period in which they are incurred. L. Accounts receivable and other receivables Accounts receivable and other receivables are carried at original invoice amounts less an estimate made for doubtful debts based on a review of all outstanding amounts at the year-end. Bad debts are written off when identified. M. Retirement benefit cost The Group participates in retirement schemes operated by local authorities and the annual cost of providing retirement benefits is charged to the consolidated profit and loss account according to the contribution determined by the relevant schemes. - 25 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued N. Financial instruments Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Bank borrowing Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carry amount of the instrument to the extent that they are not settled in the period in which they arise. Trade payable Trade payables are stated at their nominal value. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. O. Revenue recognition Sale of goods is recognized when goods are delivered and title has passed. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate appliance. Dividend income from investments is recognised when the shareholder’s rights to receive payment have been established. P. Cash and cash equivalents Cash and cash equivalents comprise short term highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advances. - 26 - SHENZHEN BENELUX ENTERPRISE COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 4. SEGMENT INFORMATION An analysis of the Group’s turnover by principal activities for the year ended 31 December 2002 is as follows: All sales were made in the PRC during the year. Videotapes and Cassettes Technology Development Medical Instrument Products of Biology and Bloo 2002 2001 2002 2001 2002 2001 2002 2001 REVENUE External sales 9,388 9,640 526 4,777 8,273 10,621 38,752 41,6 Inter-segment sales - - - - - - - _____ _____ ____ _____ _____ ______ ______ ____ Total Revenue 9,388 9,640 526 4,777 8,273 10,621 38,752 41,6 ==== ==== === ==== ==== ===== ===== === RESULT Segment result (249) (45) 35 1,068 4,644 6,235 20,980 21,4 ==== ==== === ==== ==== ===== ===== === Unallocated corporate expenses Business expenses - - - - (1,425) (899) (275) (26 Overhead expenses (4,115) (5,348) (313) (466) (2,061) (1,587) (5,422) (5,68 Finance expenses (2,144) (439) 2 (1,247) (120) (1,151) (1,24 Other income 283 (1) 29 - (37) 37 - Amortization of goodwill - - - - - - - Income taxes - - - - (34) - (4,664) (4,70 Net profit OTHER INFORMATION Segment assets 54,854 69,458 11,679 11,043 25,948 24,263 151,694 142,8 External investment - - - - 18,880 18,880 10,000 10,0 Unallocated corporate assets - - - - - - - Consolidated total assets Segment liabilities 68,844 77,224 3,078 2,194 33,953 32,119 36,380 37,0 Unallocated corporate Liabilities Consolidated total liabilities Capital expenditure 8 145 413 1,4 Depreciation 1,904 2,317 174 231 150 136 2,271 2,3 Amortization of goodwill - - - - 80 80 2,936 2,9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 5. FINANCE EXPENSES 2002 2001 RMB’000 RMB’000 Interest expenses 4,680 3,877 Others 48 12 4,728 3,889 6. PROFIT BEFORE TAXATION 2002 2001 RMB’000 RMB’000 Profit before taxation is arrived at after charging/(crediting): Amortisation -Land use rights 912 912 -Goodwill (122) (130) -Franchise rights 2,023 2,023 -Proprietary technology 80 80 -Deferred assets 421 421 Staff costs 3,674 3,176 Depreciation 4,499 4,791 Interest expenses 4,680 3,877 Provision for bad debts 2,664 1,559 Interest income (8) (2,085) 7. INCOME TAX EXPENCE 2002 2001 RMB’000 RMB’000 Current tax: Domestic 4,698 4,707 Foreign - - 4,698 4,707 Deferred tax - - Reconciliation to the domestic tax expense as follows: - 28 - 2002 2001 RMB’000 RMB’000 Profit before taxation 7,655 12,832 Tax at the domestic rate of 7.5%(2001: 0%) 34 - Tax at the domestic rate of 15%(2001: 15%) - - Tax at the domestic rate of 33%(2001: 33%) 4,664 4,707 Tax expense 4,698 4,707 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued The Company is subject to income tax rate of 15% on its assessable profit. Shenzhen Benelux Simulation & Control Ltd., a subsidiary of the Company, is subject to income tax rate of 15% on its assessable profit. In accordance with the relevant income taxation laws applicable to enterprises in Shenzhen Special Economic Zone, the PRC, Shenzhen Houyuan Medical Instrument Co., Ltd., a subsidiary of the Company, is subject to income tax rate of 7.5% on its assessable profit. Wuhan Rui De Biological Products Co., Ltd., a subsidiary of the Company, is subject to income tax rate of 33% on its assessable profit. No deferred taxes have been provided in the financial statements, as timing differences are immaterial. 8. EARNINGS PER SHARE The calculation of earnings per share is based on the profit after taxation of RMB2,922,000 (2001: RMB7,059,000) and 60,500,000 shares (2001: 60,500,000 shares) in issue at the end of the year. 9. FIXED ASSETS - 29 - 2002 Items Plant and Electronic Motor Buildings machinery equipment vehicles Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost/Valuation Beginning of year 59,526 47,164 1,127 2,190 4,152 114,159 Additions 85 1,614 3 - 46 1,748 Disposals - (7,628) - - (188) (7,816) End of year 59,611 41,150 1,130 2,190 4,010 108,091 Accumulated depreciation Beginning of year 13,857 22,317 598 1,372 2,974 41,118 Charge for the year 1,944 2,135 54 173 193 4,499 Eliminated on disposals - (6,712) - - (159) (6,871) End of year 15,801 17,740 652 1,545 3,008 38,746 Net book value End of year 43,810 23,410 478 645 1,002 69,345 Beginning of year 45,669 24,847 529 818 1,178 73,041 As at 31 December 2002, buildings and machinery amounted to RMB26,360,000 were mortgaged for the loans granted to the Company and its subsidiaries. (Note 17). NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 10. LAND USE RIGHTS 2002 2001 RMB’000 RMB’000 Cost Beginning of year 45,599 45,599 Additions - - End of year 45,599 45,599 Accumulated amortization Beginning of year 1,140 228 Charge for the year 912 912 - 30 - End of year 2,052 1,140 Net book value End of year 43,547 44,459 Beginning of year 44,459 45,371 11. GOODWILL (NEGATIVE GOODWILL) Wuhan Rui De Shenzhen Houyuan Biological Medical Products Co., Ltd. Instrument Co., Ltd. Total Cost Beginning of year (5,747) 4,525 (1,222) Additions - - - End of year (5,747) 4,525 (1,222) Accumulated amortization Beginning of year (575) 453 (122) Charge for the year - 452 452 Release in the year (574) - (574) End of year (1,149) 905 (244) Net book value End of year (4,598) 3,620 (978) Beginning of year (5,172) 4,072 (1,100) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 12.FRANCHISE RIGHTS 2002 2001 RMB’000 RMB’000 Cost Beginning of year 20,237 20,237 - 31 - Additions - - End of year 20,237 20,237 Accumulated amortization Beginning of year (3,289) (1,266) Charge for the year (2,023) (2,023) End of year (5,312) (3,289) Net book value End of year 14,925 16,948 Beginning of year 16,948 18,971 13. INVESTMENT Long-term investment represents an investment in a property construction project developed by Beijing Ronglida Real Estate Development Company Ltd. This investment was made through the transfer of other receivables, a due from a company related to Beijing Ronglida Real Estate Development Company, Ltd. The investment is expected to be completed at end of 2004. The directors consider that the carrying amount of the investment lower to its fair value. 14. DEFERRED ASSETS Extension fee of power and Financial Repair cost running water Software Total RMB’000 RMB’000 RMB’000 RMB’000 Cost Beginning of year 315 1,709 25 2,049 Additions - - - - End of year 315 1,709 25 2,049 Accumulated amortization Beginning of year 135 281 - 416 Charge for the year 103 317 1 421 End of year 238 598 1 837 Net book value End of year 77 1,111 24 1,212 Beginning of year 180 1,428 25 1,633 - 32 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 15. INVENTORIES 2002 2001 RMB’000 RMB’000 Raw materials 1,258 1,481 Work in progress 7,048 8,110 Finished goods 5,983 3,965 Spare parts 1,464 1,536 15,753 15,092 Included above are raw materials of RMB 1,530,000(2001:RMB 1,642,000) and work in progress of RMB 8,517,000(2001:RMB 9,675,000) carried at net realisable value. 16. ACCOUNTS PAYABLE AND OTHER PAYABLES Accounts payable and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The directors consider that the carrying amount of trade payables approximates to their fair value. 17. SHORT TERM LOANS 2002 2001 RMB’000 RMB’000 Guaranteed loans 14,873 25,749 Mortgaged loans 42,206 39,596 Credit loans 39,415 42,207 96,494 107,552 The loans amounted to HKD5, 000,000 and RMB9,000,000 are mortgaged on the Company’s properties and production facilities which net values are amounted to RMB10,970,000 and RMB15,390,000 respectively. Besides this, loan amounted to - 33 - RMB20, 000,000 is mortgaged on the ‘A’ shares held by Shekou Hansheng Electronic Co., Ltd., which is a shareholder of the Company. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 18. SHARE CAPITAL 2002 2001 Registered capital RMB’000 RMB’000 29,483,078 ‘A’ shares at RMB1.00 each (Unlisted) 29,483 29,483 31,016,922 ‘B’shares at RMB1.00 each (Listed) 31,017 31,017 60,500 60,500 Paid-up capital RMB’000 RMB’000 29,483,078 ‘A’ shares at RMB1.00 each 29,483 29,483 31,016,922 ‘B’shares at RMB1.00 each 31,017 31,017 60,500 60,500 ‘A’ shares and ‘B’ shares rank pari passu in all respects. 19. RESERVES Share Staff welfare General Retained premium fund reserve earnings Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance as at 1 January 2002 29,847 7,539 23,738 782 61,906 Profit for the year - - - 2,922 2,922 Appropriations - 147 293 (440) - Balance as at 31 December 2002 29,847 7,686 24,031 3,264 64,828 - 34 - 20. SUBSIDIARIES Particulars of the Company’s subsidiaries at 31 December 2002 are as follows: Nominal Percentage of Country of Value of Capital held by Names Incorporation Issued Capital the Company Principal activities RMB’000 Shenzhen Benelux Technology PRC 9,000 91.11% Simulation & Control Ltd. Development Shenzhen Houyuan Distribution of Medical Instrument Co., PRC 6,000 75.00% Medical instruments Ltd and clinical products Wuhan Rui De Biological Manufacture of Products Co., Ltd. PRC 45,840 99.00% biological and blood products NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued 21. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (a) Reconciliation of profit before taxation to net cash (outflow)/inflow from operating activities 2002 2001 RMB’000 RMB’000 Profit before taxation 7,655 12,832 Adjustment for: Interest expenses 668 - Interest income (8) (2,085) Depreciation 4,499 4,791 Amortisation of land use rights 912 912 Negative goodwill released to income (122) (130) Amortisation of franchised rights 2,023 2,023 Amortisation of proprietary technology 80 80 Amortisation of deferred assets 421 725 Provision for bad debts 2,664 1,559 Gain on disposal of fixed assets (283) (16) Increase in inventories 284 (3,955) - 35 - (Increase)/Decrease in accounts receivable and other (9,467) (32,250) receivables Decrease/(Increase) in advances to suppliers (163) 10,201 Increase in deferred and prepaid expenses - (57) (Decrease)/Increase in accounts payable and other payables 1,454 (12,181) Increase in taxes payable 143 - Net cash (outflow)/inflow from operating activities 10,760 (17,551) (b) Analysis of changes in financing during the year Bank Loans RMB’000 Balance as at 1 January 2002 107,552 Additions during the year 29,773 Repayments during the year (40,831) Balance as at 31 December 2002 96,494 22. RELATED PARTY TRANSACTIONS AND RELATIONSHIPS Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common significant influence. Shekou Hansheng Electronic Co., Ltd. is the ultimate holding company of the Company. The directors are of the opinion that Shekou Hansheng Electronic Co., Ltd. is a related party of the Company. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued (a) During the year, the Company had the following transactions with shareholders: Shekou Hansheng Electronic Co., Ltd paid the interest expenses of this year for the loan of the Company, which amounted to USD4, 762,000, based on the correlative agreement. Houyuan Medical Instrument Co.,Ltd., the subsidiary of the Company, borrowed money from Huaxia Bank Shenzhen branch Yitian subbranch amounted to RMB20,000,000, - 36 - which was mortgaged on 19,558,077 “A” shares of the Company held by Shekou Hansheng Electronic Co.,Ltd. The maturity of the loan was May. 31, 2002, The Shenzhen Secondary Court froze the shares mentioned above as the loan is neither repaid nor transacted the procedure of moratorium up to the present, the frozen balance is limited to RMB20, 250,000, the frozen period is 6 months. (b) The Company had the following significant balances with related parties: 2002 2001 RMB’000 RMB’000 Other receivables - Shekou Hansheng Electronic Co., Ltd. 8,472 9,798 Other payables - Shekou Hansheng Electronic Co., Ltd. 1,130 - Amounts due from Shekou Hansheng Electronic Co., Ltd. are unsecured, interest free and have no fixed terms of repayment. 23. FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial assets of Group mainly include short-term deposits and bank balances, deposits with suppliers, trade receivables. Financial liabilities of the Group include bank and other loans, obligations under finance leases, amounts due to related companies, trade payables and other payables. (a) business risk The Group conducts its principal operations in the PRC associated with, among others, the political, economic and legal environment over various aspects of the Group’s operations, and competition, in the medical industry. (b) price risk The Group’s results of operations may be significantly affected by the fluctuation of - 37 - economy. The international prices are determined by worldwide market demand and supply. The Group does not undertake financial instruments to hedge supply price risk. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 - continued (c) interest rate risk The Group is exposed to risk arising from changes in market interest rates. To hedge against the change in market interest rates, the Group entered into certain interest rate swaps during the year. (d) credit risk The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The Group has policies that limit the amount of credit exposure to any one financial institution. (i) Trade receivables These are mainly invoiced sales receivable from numerous third parties. (ii) Other receivables These are spread among numerous third parties. (iii) Amounts due from the related companies These balances are disclosed in note 22. (e) liquidity risk The carrying amounts of financial assets best represent their maximum credit risk exposure at the balance sheet date. As disclosed in Note 2 to the financial statements, the directors have successfully negotiated with the Company’s bankers to extend a substantial part of the Group’s bank loans. The most significant of the extended bank loans are: Loan of HKD5, 000,000, matures in 2004; Loan of USD4, 762,000, matures in 2004; 24. NET IMPACT OF IAS ADJUSTMENTS ON THE RESULTS AND NET ASSETS - 38 - Profit after taxation for the year ended 31 Net assets at December 2002 31 December 2002 RMB’000 RMB’000 As reported in the ‘A’ share statutory Financial statements prepared under PRC GAAP 2,922 125,328 Adjustments to align with IAS: Fixed assets - - As reported in the ‘B’ share financial statements in accordance with IAS 2,922 125,328 25. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the current year’s presentation. - 39 -