闽灿坤Ｂ(200512)2002年年度报告（英文版）

TSANN KUEN (CHINA) ENTERPRISE CO. LTD 2002 Annual Report (Prepared under International Accounting Standards) 1. IMPORTANT STATEMENT 1.1 The Board of Directors of the Corporation guarantees herein that there is no false record, misleading statement or any important omission existing in this report, and that they will bear the individual and joint responsibilities for the truthfulness, accuracy and integrity of the contents presented. This Summary is extracted from the TKC’s 2002 Annual Report proper. The investors should refer to the annual report proper if they want to get the details. 1.2 None of the directors has ever declared that he (she) is uncertain of or has any objection to the truthfulness, accuracy and integrity of the annual report. 1.3 Six members in the Board of Directors attended the latest meeting of the board. Mr. Zhang Ke Da was absent from this meeting owing to the reason that he was abroad for business reason. 1.4 Deloitte Touche Tohmatsu CPA has issued for our company an unqualified audit report that has no explanatory statements. 1.5 The chairman of the Board of Directors Mr. Tsai Yuan Song, the financial assistant Mr. Wei Xu Ping and the accounting manager Mr. Lin Zhi Hong jointly guarantee that the financial statements in this annual report are correct and complete. 2. COMPANY PROFILE 2.1 Basic information Short Name of Stock 闽灿坤 B Code of Stock 200512 Stock-marketing Place the Shenzhen Stock Exchanges Registered Address & No.88 Xing Long Road, Huli Industry District, Headquarters Xiamen, P.R. China. Post Code 361006 Web Site www.tsannkuen.com E-mail Address allenlo@tkc.tsannkuen.com 2.2 The persons and the means for contact TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Board of Director’s Secretary Representative of the Stock Affairs Name Luo Qing Yu Zhang Lei Address for No.88 Xing Long Road, Huli No.88 Xing Long Road, Huli contact Industry District, Xiamen, P.R. Industry District, Xiamen, P.R. China. China. Telephone 0592-5600887 0592-5681819 Fax 0592-5600886 0592-5600886 E-mail allenlo@tkc.tsannkuen.com Betty Zhang@tkc.tsannkuen.com address 3. FINANCIAL AND OPERATIONAL HIGHLIGHTS 3.1 Major accounting data Unit: RMB’000 Increase or 2002 2001 decrease (%) Item / year 2000 (This year) (last year) (Compared with last year) Major operating income 3,484,815 2,798,417 24.53 2,506,148 Profit before tax 273,691 189,811 44.19 193,256 Net profit 246,731 172,521 43.02 178,621 Net profit (after extraordinary 240,233 180,759 32.90 180,510 income or loss) Increase or End of decrease (%) End of End of 2002 2001 (Compared with 2000 last year) Total Assets 2,570,845 2,315,492 11.03 2,139,889 Stockholder’s equity (Minority equity excluded) 1,275,420 1,073,667 18.79 901,206 Net cash flow from operating 402,084 640,864 -37.26 406,074 activities 1 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 3.2 Major Financial Index Unit: RMB Yuan Increase or Item / year 2002 2001 decrease (%) 2000 (2002 / 2001) Earning per share 0.3648 0.3826 -4.66 0.3961 Return on shareholder’s Dilution 19.35% 16.07% 20.41 19.82% equity (%) Weighted 21.01% 17.47% 20.26 21.53% Return on shareholder’s Dilution 18.84% 16.84% 11.87 20.03% equity (Based on net profit after extraordinary income or loss) (%) Weighted 20.45% 18.58% 10.06 20.03% Net cash flow from operating 0.59 1.42 -58.45 0.90 activities per share Increase or End of End of 2002 End of 2001 decrease (%) 2000 (2002 / 2001) Net asset value per B share 1.89 2.38 -20.59 2.00 Net asset value per B share (adjusted) 1.88 2.36 -20.34 1.97 3.3 Summary on difference between IAS and PRC GAAP √ Applicable □ Inapplicable Unit: RMB’000 PRC GAAP IAS Net profit 240,293 246,731 Summary on 1、 Adjustment to record property, plant and equipment difference acquired before 1994 at swap rates: (2,223) 2、 Elimination of revaluation reserves: 650 (821) 3、 Adjustments for subsidiaries’ pre-operating fees: 8,832 4、 Transfer of long-suspended payables : 4. CHANGES OF STOCK AND SHAREHOLDER’S EQUITY 4.1、Changes of stock capital unit: share Increase/decrease (+, -) Shares at Surplus Shares at Item reserve Contribution Apportioning beginning Others Subtotal the end converted shares shares shares Share not in 2 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Increase/decrease (+, -) Shares at Surplus Shares at Item reserve Contribution Apportioning beginning Others Subtotal the end converted shares shares shares circulation 1 、 Founders’ 283,967,500 70,991,875 70,991,875 141,983,750 425,951,250 shares Including: Shares of State Holders Shares of legal person holders within the boundary of China Legal foreign 283,967,500 70,991,875 70,991,875 141,983,750 425,951,250 capital holders Others 2、Shares of raising legal persons 3 、 Shares of the internal staff 4 、 Preferred shares or others Total shares not 283,967,500 70,991,875 70,991,875 141,983,750 425,951,250 in circulation Shares in circulation 1 、 Common share in RMB 2. Foreign capital shares on sale within the 121,875,000 30,468,750 30,468,750 60,937,500 181,812,500 boundary of China legal person shares awaiting 45,095,000 11,273,750 11,273,750 22,547,500 67,642,500 circulation 3 、 Foreign capital shares on sale outside the boundary of China 4、Others Total shares in 166,970,000 41,742,500 41,742,500 83,485,500 250,455,000 circulation Total shares 450,937,500 112,734,375 112,734,375 225,468,750 676,406,250 3 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 4.2 Shares held by the top ten stockholders Unit: share Number of shareholders 18,897 at the ending Shares held by the top ten stockholders Increase/ Shares held Holding Circulated Mortgage or Kind of Full Name of Shareholder at the end or not congealment. holders Decrease Ratio FORDCHEE Foreign DEVELOPMENT LIMITED 65,812,500 197,437,500 29.19% No None fund EUPA INDUSTRY Foreign CORPORATION LIMITED 65,812,500 197,437,500 29.19% No None fund FILLMAN INVESTMENTS Foreign LIMITED 32,906,250 98,718,750 14.59% No None fund TIMMERTON CO INC 2,940,234 8,820,702 1.30% Yes None B share CBNY S/A PNC/SKANDIA SELECT FUND/CHINA 832,122 2,631,198 0.39% Yes None B share EQUITY AC TSAI SHU HUI 870,464 2,611,392 0.39% Yes None B share CORE PQCIFIC-YAMAICHI INTERNATIONAL (H.K.) 2,139,687 2,506,870 0.37% Yes None B share LIMITED MERRILL LYNCH INTERNATION 2,044,855 2,219,773 0.33% Yes None B share LAU MING TO 643,600 1,591,550 0.24% Yes None B share TSAI CHIEN FANG 802,056 1,203,084 0.18% Yes None B share Notes to related-party The top three shareholders are TKC’s controlling holders with relationship in the top ten Legal person share. stockholders 4.3 Description of the main shareholders and the real controlling holder 4.3.1 Change in the main shareholders and the real controlling holder □ Applicable √ Inapplicable 4.3.2 Description of the main shareholders and the real controlling holder (1) Brief on the main shareholders Registered Business Name of shareholders Representative Capital stock Mortgage day scope FORDCHEE Yuan Song Tsai 1990/01/03 Investment Hk$100,000 None DEVELOPMENT LTD EUPA INDUSTRY Tsan Kun Wu 1989/07/21 Investment HK$100,000 None CORPORATION LTD FILLMAN INVESTMENTS Tsan Kun Wu 1994/03/31 Investment HK$100,000 None LTD (2) Description of the real controlling holder A、 Name of the real controlling shareholder: TSANN KUEN ENTERPRISE CO. LTD B、 Legal representative: TSANN KUEN WU C、 Registered day: Nov. 2nd, 1978 4 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. D、 Major products and service: Manufactory E、 Registered capital: NT$ 2,122,900,000 F、 Equity structure: Common stock 5. ADVANCED MANAGEMENT PERSONNEL 5.1、Changes in the shares held by the directors, supervisors and senior administrative officials Share-holding amount Name Post Sex Age Term of office Reason for Begin End change Mr. Tasi Yuan CEO Male 47 0 0 Song Mr. Yang Wen Director Male 42 0 0 Fang Mr. Zhang Ke Director Male 42 0 0 Da Mr. Zhuang Xing Director Male 48 0 0 Mr. Yu Jing Lun Director Male 46 2000.5.22 0 0 Mr. Liu Shun Director -2005.5.20 Male 43 0 0 Ren (independent) Mr. Li Hao Director Male 40 0 0 Zheng (independent) Mr. Yan Liang Supervisor Male 57 0 0 Jie Mr. Lin Zong Supervisor Male 45 0 0 Ming Miss You Su Qiu Supervisor Female 36 0 0 Secretary of Male 47 2003.1.7-- 0 0 Mr. Luo Qing Yu board 5.2、Description of the directors and supervisors who hold a post in the main share-holding companies √ Applicable □ Inapplicable Post in the Get remuneration Name of share- Name share-holding Term of office from TKC holding company (Yes or No) company FORDCHEE Legal Tasi Yuan Song DEVELOPMENT 1990 - now Yes LIMITED representative Vice general Zhang Ke Da manager 1997- now Yes TSANN KUEN Executed Zhuang Xing ENTERPRISE CO. 1994 - now Yes LTD director General affairs Yan Liang Jie 1994 - now Yes assistant 5.3 Remuneration (annually) for the present directors, supervisors and senior administrative officials: Total amount of annual remuneration RMB 1,520,000 5 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. The total payment for the top three directors RMB 423,000 The total payment for the top three supervisors RMB 660,000 The allowance for the independent directors RMB 62,500 Other payment for the independent directors None Directors and supervisors not getting payment from Zhang Ke Da, Zhuang Xing , TKC Yu Jing Lun Remuneration range Number of person Above RMB 220,000 4 RMB 60,000 -220,000 7 6 REPORT OF THE BOARD OF DIRECTORS 6.1 Discussion and analysis on the overall operational situation during the reported period Although affected by the continuous depression in global economy and by the influence of “September 11 Terrorist Attack” in U.S.A., thus facing a tough adverse business situation in 2002, TKC still successfully made a big progress in the year mentioned above. In its sales strategy, TKC Group adopted a “World Factory” E.D.S.S. strategy. Together with the principle of Differential Management, Cost Guidance, All-direction Customer Orientation, as well as with its global economy, wonderful design and competitive price advantage, the Group is making itself as a world level life-servicing enterprise group that holds design integrating as its core. According to the auditor’s report, in 2002, TKC achieved an operating income of RMB 3,484,815,000, which is an increase of 24.53%, as compared with the same item of RMB 2,798,417,000 achieved in the same period of last year. It also obtained a gross profit of RMB 623,450,000, which is an increase of 21.77%, as compared with RMB 511,997,000 in last year. From the analysis for the reason of increase, one can see that it is mainly in the sales of those high-added-value products such as frying roaster, which had an increase of 53.79% as compared with last year. 6.2 Analysis on the major business according to trade and to product Unit:RMB,000 Increase/decrease (+, -)(%) Divided by Major Major Gross trade or operational operational profit rate Major Major Gross product income cost (%) operational operational profit rate income cost Small household 3,482,438 2,786,957 19.97 28.81 26.45 8.06 appliance Computer 2,377 74,407 -3,030.47 -97.49 -9.76 -23,304.21 accessories In which: related-party 181,843 164,029 9.80 41.92 28.37 3,529.63 transactions 6 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Home 534,335 396,874 25.73 -14.99 -20.34 24.06 comforts Gourmet 2,217,736 1,771,078 20.14 53.79 57.69 -8.95 cooking Tea/coffee 377,371 328,285 13.01 7.41 4.37 24.26 breakfast Others 352,996 290,720 17.64 25.33 8.43 267.50 In which: related-party 181,843 164,029 9.80 41.92 28.37 3,529.63 transactions Pricing In accordance with signed by XIAMENT TAX BUREAU and the transactions corporation. Notes to the It can increase the Group’s vertical integrating leverage, make good use of necessity and continuity of uniform purchasing, and greatly reduce the cost. By taking advantage of the related-party related-party enterprises’ worldwide sales branches, it can increase its transactions marketing share. 6.3 Analysis of the major operation according to the geographical location Unit:RMB,000 Region Major operational Increase/decrease (%) in major income operational income (2002 / 2001) America 1,968,514 5.19 Europe 858,710 89.44 Asia 404,252 47.76 Other 253,339 26.57 Total 3,484,815 24.53 6.4 Chief customers and suppliers Percentage in the Sum of purchasing amount 820,977 total purchasing 38.11% from the top five suppliers amount Sum of sales amount to the top Percentage in the 2,299,946 66.00% five customers total sales amount 6.5 The operational situation of the shareholding companies (suitable for those whose investing earning made up more than 10% of the net profit) □ Applicable √ Inapplicable 6.6 Reason for significant changes in the major business scope and its structure □ Applicable √ Inapplicable 6.7 Reason for significant changes in the major business earning ability (gross profit rate) as compared with the previous year □ Applicable √ Inapplicable 6.8 Analysis on the reason for significant changes in the operational results and in the profit structure as compared with the previous year □ Applicable √ Inapplicable 7 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Analysis on the reason for significant changes in the overall financial status as compared with the previous year □ Applicable √ Inapplicable 6.9 Remark on the significant changes in the government’s policies, laws and regulations and in the company’s operating environment, which have resulted, or may result, in significant influence to the company’s financial status or operating result at present and in the future. □ Applicable √ Inapplicable 6.10 Achievement to the earning prediction □ Applicable √ Inapplicable 6.11 Achievement to the operating plan □ Applicable √ Inapplicable 6.12 Utilization state of raised funds □ Applicable √ Inapplicable Change in the utilization state □ Applicable √ Inapplicable 6.13 Utilization state of non-raised funds √ Applicable □ Inapplicable Project name Invested amount Progress of plan Earning of project Most workshops have been The predicted constructed and it is estimated Tsann Kuen earning in 2009 RMB 120,000,000 that its electric fan factory and Zhangzhou motor factory will start running will be US$ Enterprise Co. Ltd. in March, 2003. 1,600,000,000. Total RMB 120,000,000 6.14 The Board of Directors’ explanation to the auditor’s opinion □ Applicable √ Inapplicable 6.15 The Board of Directors’ new year operational plan √ Applicable □ Inapplicable 1. 2003’s sales target: US$ 520,000,000 for the whole Group. 2. Operational strategy: A、Building an international dual core business, with “the World‘s Factory” as one core which adopts the E.D.S.S strategy and “the International Channel” as the other which adopts the DATA MINIING strategy; B、Creating a leading enterprise with“strategy innovation”; 8 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. C、Differentiating management, and cost guidance； D、Closely keeping in contact with the customer, and serving them in all possibilities. 、 (3) The key points of management: A、 Elaborating the control of manufacturing, while introducing 6 sigma idea; B 、 Continuing to popularize application of QS9000 quality control system; C、 Encouraging innovation of production skill, for the purpose of raising production efficiency and obtaining an admirable ratio of output; D、 Increasing vertical integrating leverage, and building an advantage of “the world’s factory and the cost guidance”; E 、 Strengthening the sense of customer serving, and creating the value of customer; F 、 Implementing education and training, to cultivate special talents; G、 Combining the work of making work-flow more reasonable, to strengthen information management system. H、 Combining production with sales, and trying to get a bigger share in Asian market. Prediction of earning in 2003 □ Applicable √ Inapplicable 6.16 The Board of Directors’ plan for distribution of profit or for converting accumulated funds or reserves into shares this time 9 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Amount Item Ratio range Actual ratio Remark (RMB’000) Undistributed surplus 104,878 reserve at beginning Current net profit 246,731 Extraction of statutory 10% 10% 24,819 public reserve The year’s distributable surplus reserve 326,791 Items for distribution - 1. Public welfare fund, 5%-10% 5% 12,409 and bonus fund 2. Discretionary 26.33% 65,358 surplus reserves, Distribution of stock dividend 3. Fund for dividend 62.10% 202,922 with 3 shares for every 10 shares Undistributed surplus 46,101 reserve at end 7. MAJOR EVENTS 7.1 Significant purchase of assets □ Applicable √ Inapplicable 7.2 Significant disposal of assets □ Applicable √ Inapplicable 7.3 Significant guarantees □ Applicable √ Inapplicable 7.4 Creditor’s right or liability between parties √ Applicable □ Inapplicable Unit: RMB00,000 Relative party’s name Funds to the relative party Funds from the relative party Amount Balance Amount Balance NEW COUNTRY LTD. - 1,675 - - TSANN KUEN HONG 37 9,248 670 3,439 KONG,LTD. TSANN KUEN 3,884 2,050 77,662 25,726 ENTERPRISE CO. LTD TSANN KUEN(U.S.A) 1 39 251 60 CO.,LTD TSANN KUEN(JAPAN) 10,603 1,958 687 1,088 CO.,LTD TERMASTER 385 420 5,511 3,634 ELECTRONIC LIMITED SINO GLOBAL DEVELOPMENT - 77 - - CO.,LTD.(BVI) TSANN PAO (shanghai) - 80 - - CO.,LTD. TSANN PAO CO.,LTD. - 190 23 3,521 10 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. EUPA INDUSTRY - 20 - 737 CORPORATION LTD XIAMEN YEJU 14 12 - - ELECTRONIC LTD. FORDCHEE - - - 737 DEVELOPMENT LTD FILLMAN INVESTMENTS - - - 369 LTD UNION HONGKONG 12,562 4,209 2,739 2,547 TAIWAN SUPREME INC., 222 - 12,946 1,891 LTD Total 27,708 19,978 100,489 43,749 7.5 Entrusted property management □ Applicable √ Inapplicable 7.6 Implementation of commitment √ Applicable □ Inapplicable According to the resolution about the 2000’s and 2001’s surplus reserves and dividends distribution policies and 2002’s profit distribution plan made by the Board of Directors at the first meeting of 2002’s held on the date of Apr. 17th, 2002, the company committed itself to implement the above-mentioned profit distribution plan, which was that all the shareholders would be given cash dividend of 1 RMB for every 10 shares, and stock dividend of 2.5 shares from the converting surplus accumulated funds as well as another 2.5 shares from the converting discretionary surplus reserves for every 10 shares on the basis of 450,937,500 shares calculated at the end of the year 2002. This commitment was fulfilled on June 28th, 2002. 7.7 Significant litigation or arbitration □ Applicable √ Inapplicable 7.8 The implementation of the independent directors to their duties In accordance with the regulations of The Guiding Opinion Regarding the Establishment of Independent Director System in the Listed Company issued by CESS, the corporation appointed 2 persons as its independent directors and set up a system of independent director management. A. The independent directors attended all the corporation’s meetings of the Board of Directors and of the shareholders’ general meeting held in 2002. They can carry out their duties according to the relevant laws and regulations. B. The independent directors helped the Board of Directors to set up a set of standard pattern for evaluation of the corporation’s policies and strategy and of the operational results (the reporting model for the corporation’s evaluation), which has brought a great effect on improvement of the corporation’s management since it entered into force in June of 2002. 11 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 8. REPORT OF THE SUPERVISORY COMMITTEE A. No case has been found to be against the laws in the performance of the board of directors. B. The company’s financial statements truly reveal the financial status and the operating results of the company. C. The actual utilization of the funds latest raised by the company meets the commitment of the raiser. D. No case of inside-deal has been found to be conducted by the company. E. The transactions with the relative parties were carried out fairly, and none of them was found to be harmful to the interest of the corporation and the shareholders. 9.. FINANCIAL REPORT A. The unqualified audit report issued by Deloitte Touche Tohmatsu CPA which bears no explanatory statements. B. Comparative consolidated balance sheet, income statement and cash flow statement of the present year and those of the mother company. C. Compared with the latest annual financial report, there is no change in accounting policies, accounting assessment and examination methods. D. Compared with the latest annual financial report, Tsann Kuen Zhangzhou Enterprise Co. Ltd, a new subsidiary company, was added to the consolidation scope. In July of 2002, TKC invested funds in Longhai Developing District of Zhangzhou city to set up a new subsidiary company—Tsann Kuen Zhangzhou Enterprise Co. Ltd. in which TKC holds 75 percent of its stockholder’s equity. The registered capital for this new subsidiary company is US$ 40,000,000, of which US$ 6,000,000 has arrived in hand. The operating scope of the company will be: development, production and sale of small household electrical appliances, new kind of electronic appliances and parts (such as electrical kits, sensors and sensitive transmitters), light industrial products, modern office supplies; designing and producing the molds related to the above products. (Excluding those products restricted by the government or those whose import or export quota is under license administration.) So far, most of the 12 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. workshops have been constructed and it is estimated that the electric fan factory and the motor factory in this new company will be put into production in March, 2003. (Signed by:) Tsai Yuan Song The chairman of the Board of Directors of TSANN KUEN (CHINA) ENTERPRISE CO. LTD on Apr. 8th, 2003 13 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. TSANN KUEN (CHINA) ENTERPRISE CO., LTD. Report and Financial Statements for the year ended 31 December 2002 (Prepared under International Financial Reporting Standards) Registered Office: 88 Xinlong Road, HuLi Industry Zone Xiamen China 14 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) CONTENTS PAGE(S) REPORT OF THE INTERNATIONAL AUDITORS 1 CONSOLIDATED INCOME STATEMENT 2 CONSOLIDATED BALANCE SHEET 3 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 4 CONSOLIDATED CASH FLOW STATEMENT 5-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 - 34 DTT(A)(03)I068 REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF TSANN KUEN (CHINA) ENTERPRISE CO., LTD. We have audited the accompanying consolidated balance sheet of the Tsann Kuen (China) Enterprise Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) as of 31 December 2002 and the related consolidated statements of income, changes in equity and cash flows for the year then ended. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2002, and the results of its operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards. Deloitte Touche Tohmatsu Certified Public Accountants Ltd. 8 April 2003 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) NOTES 2002 2001 RMB’000 RMB’000 Revenue 4 3,484,815 2,798,417 Cost of sales (2,861,365) (2,286,420) Gross profit 623,450 511,997 Other operating income 6 26,798 16,422 Selling and distribution expenses (232,525) (182,897) Administrative expenses (140,627) (145,812) Profit from operations 7 277,096 199,710 Interest income 2,331 1,941 Interest expenses (5,736) (11,840) Profit before tax 273,691 189,811 Income tax expense 8 (39,005) (23,593) Profit after tax 234,686 166,218 Minority interests 12,045 6,303 Net profit for the year 246,731 172,521 RMB RMB Basic earnings per share 10 36 cents 26 cents See accompanying notes to financial statements. 2 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) NOTES 2002 2001 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 11 1,254,747 1,164,269 Investment properties 12 2,051 2,306 Goodwill 13 9,093 10,306 Land use rights 14 81,529 83,419 Investment in associate 16 200 - Other investments 17 71 71 1,347,691 1,260,371 Current assets Inventories 18 421,004 346,824 Trade and other receivables 19 422,315 296,523 Amounts due from related companies 28(c) 147,367 158,387 Bank balances and cash 232,468 253,387 1,223,154 1,055,121 Total assets 2,570,845 2,315,492 EQUITY AND LIABILITIES Capital and reserves Share capital 20 676,406 450,938 Retained profits 249,023 262,706 Other reserves 21 349,990 360,023 1,275,419 1,073,667 Minority interests 130,482 119,789 Non-current liabilities Long-term payable-due after one year 22 15,609 31,219 Current liabilities Trade and other payables 23 611,261 481,602 Long-term payable-due within one year 22 15,610 6,610 Amounts due to related companies 28(c) 339,566 422,452 Income tax liabilities 32,749 15,391 Short-term bank borrowings 24 150,149 164,762 1,149,335 1,090,817 Total equity and liabilities 2,570,845 2,315,492 See accompanying notes to financial statements. 3 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) Other reserves (note 20) Statutory Discretionary Statutory Share Share surplus surplus public Translation Retained capital premium reserve reserve welfare reserve reserve Sub-total profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 YEAR ENDED 31 DECEMBER 2001 Balance at 1 January 2001 450,938 128,655 69,391 114,151 20,030 454 332,681 117,587 901,206 Exchange differences arising on translation of subsidiaries’ financial statements not recognised in income statement - - - - - (60) (60) - (60) Net profit for the year - - - - - - - 172,521 172,521 Appropriations - - 18,268 - 9,134 - 27,402 (27,402) - Balance at 31 December 2001 450,938 128,655 87,659 114,151 29,164 394 360,023 262,706 1,073,667 YEAR ENDED 31 DECEMBER 2002 Balance at 1 January 2002 450,938 128,655 87,659 114,151 29,164 394 360,023 262,706 1,073,667 Exchange differences arising on translation of subsidiaries’ financial statements not recognised in income statement - - - - - 115 115 - 115 Net profit for the year - - - - - - - 246,731 246,731 Appropriations - - 24,819 65,358 12,409 - 102,586 (147,680) (45,094) Capitalization 225,468 - - (112,734) - - (112,734) (112,734) - Balance at 31 December 2002 676,406 128,655 112,478 66,775 41,573 509 349,990 249,023 1,275,419 See accompanying notes to financial statements. 4 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 2002 2001 RMB’000 RMB’000 OPERATING ACTIVITIES Profit before tax 273,691 189,811 Adjustments for: Interest expenses 5,736 11,840 Interest income (2,331) (1,941) Depreciation of property, plant and equipment and investment properties 213,887 180,834 Impairment loss on property, plant and equipment 68,866 6,825 Loss on disposals of property, plant equipment 2,828 3,599 Amortisation of land use rights 1,905 1,880 Amortisation of goodwill 1,213 1,144 Accounts payable written back (10,890) - Effect of foreign exchange rate changes 115 (60) Operating cash flows before movements in working capital 555,020 393,932 Decrease in advance to a related company - 60,844 Increase in inventories (74,180) (44,331) (Increase) decrease in trade and other receivables (125,792) 72,503 Decrease (increase) in amounts due from related companies 11,020 (34,697) Increase in trade and other payables 140,549 93,434 (Decrease) increase in amounts due to related companies (82,886) 122,237 Cash generated by operations 423,731 663,922 Income taxes paid (21,647) (23,058) NET CASH INFLOW FROM OPERATING ACTIVITIES 402,084 640,864 INVESTING ACTIVITIES Interest received 2,331 1,941 Proceeds on disposal of property, plant and equipment 4,027 1,669 Purchases of property, plant and equipment (379,831) (411,978) Acquisition of land use rights (15) (2,878) Acquisition of investment in an associate (200) - NET CASH USED IN INVESTING ACTIVITIES (373,688) (411,246) 5 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 2002 2001 RMB’000 RMB’000 FINANCING ACTIVITIES Cash received from minority shareholders 22,738 4,152 Interest paid on loans (5,736) (11,840) Dividends paid (45,094) - Repayments of bank borrowings (466,307) (714,364) New bank loans raised 451,694 611,326 Repayment of long-term payable (6,610) (6,610) NET CASH USED IN FINANCING ACTIVITIES (49,315) (117,336) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (20,919) 112,282 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 253,387 141,105 CASH AND CASH EQUIVALENTS AT END OF YEAR 232,468 253,387 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash 232,468 253,387 6 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 1. GENERAL Tsann Kuen (China) Enterprise Co., Ltd. (“the Company”) was established in the People’s Republic of China (the “PRC”) in 1988 under the name of Tsann Kuen China (Xiamen) Ltd. as a wholly owned foreign investment enterprise. On February 16, 1993, with the approval of the Ministry of Foreign Trade and Economic Co-operation, the Company was reorganised into a joint stock company limited by shares and was renamed as Tsann Kuen (China) Enterprise Co., Ltd. In June 1993, the Company issued 40,000,000 new shares pursuant to an international placing and public offer and these new shares (“B shares”) were then listed on the Shenzhen Stock Exchange on June 30, 1993. The Company and its subsidiaries are hereinafter collectively referred to as the Group. As at 31 December 2002, the Group has 13,789 (31 December 2001: 12,157) employees. 2. PRESENTATION OF FINANCIAL STATEMENTS The Company and its subsidiaries maintain their accounting records and prepare their statutory financial statements in accordance with accounting standards and regulations of the People's Republic of China that are applicable to the Company and its subsidiaries. These financial statements (“IFRS financial statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRSs”). The basis of accounting under IFRSs differs in certain respects from that used in the preparation of the Company and its subsidiaries’ statutory financial statements. In preparing these IFRS financial statements, appropriate adjustments, which are not taken up in the accounting records of the Company and its subsidiaries, have been made to the Company and its subsidiaries’ statutory financial statements. A reconciliation of the Group’s profit and net assets under IFRSs and PRC GAAP is set out in note 29. These financial statements are presented in Renminbi (“RMB”) since that is the currency in which the majority of the Group’s transactions are denominated. 7 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All significant intercompany transactions and balances between group enterprises are eliminated on consolidation. Investment in associates An associate is an enterprise over which the Group’s in a position to exercise significant influence, but not control, though participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in these financial statements using the equity mentioned of accounting. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate less any impairment in the value of individual investments. Any excess (deficiency) of the cost of acquisition over (below) the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill (negative goodwill.) 8 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Investment in associates - continued Where a group enterprise transacts with an associate of the Group unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate except to the extent that unrealised losses provide evidence of an impairment of the asset transferred. Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is recognised as an asset and amortised on a straight-line basis over its estimated useful life of 10 years. Revenue recognition Sales of goods are recognised when goods are delivered and title has passed. Services income is recognised when services are rendered. Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable. Rental income, including rentals invoiced in advance, from properties under operating leases is recognised on a straight-line basis over the term of relevant lease. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable by the Group as lessee under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. 9 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Foreign currencies Transactions in currencies other than RMB are initially recorded at the rates of exchange ruling on the first day of the month in which the transaction takes place which approximates to the rates of exchange ruling on the dates of transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement. On consolidation, the assets and liabilities of the subsidiary operations which are denominated in a reporting currency different from that of the Group are translated at exchange rates ruling on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the subsidiary is disposed of. Research and development costs Expenditure on research activities is recognised as an expense in the period in which it is incurred. Expenditure on development activities is recognised as an expense in the period in which it is incurred except where an asset is created that can be identified; it is probable that the asset created will generate future economic benefits; and the development cost of the asset can be measured reliably. Any such development costs incurred are recognised as an intangible asset and amortised on a straight-line basis over the life of the project from the date of commencement of commercial operation. Borrowing costs Borrowing costs are recognised in net profit or loss when they are incurred. Subsidy income Subsidy income is recognised when the Group’s rights to receive is established. 10 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Retirement benefit costs The employees of the Group are members of State-managed retirement benefit schemes, under which the Group’s obligations are equivalent to those arising in a defined contribution retirement benefit plan. Payments made to State-managed retirement benefit schemes are charged as expenses as they fall due. 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. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reserve in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. 11 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Taxation - continued Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Land use rights Land use rights are measured initially at cost and are amortised on a straight-line basis over their estimated useful lives. Property, plant and equipment Properties in the course of construction for production, rental or administrative purposes or for purposes not yet determined, are carried at cost, less any impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs dealt with in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Other item of property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of assets, other than properties under construction, over their estimated useful lives and after taking into account their residual value, using the straight-line method, on the following bases: Buildings 20 years Machinery and equipment 10-15 years Motor vehicles 5 years Furniture and office equipment 5 years Moulds 5-10 years The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in income statement. 12 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Investment property Investment property, which is property held to earn rentals or for capital appreciation, is stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the cost of investment property over the estimated useful lives of 20 years, using the straight-line method. Impairment At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the greater of net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. 13 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. Financial instruments Financial assets The Group’s principal financial assets are bank balances and cash, trade and other receivables and amounts due from related companies. Trade and other receivables and amounts due from related companies are stated at their nominal value as reduced by the appropriate allowances for estimated irrecoverable amounts. Other investments consist of investments available-for-sale which are initially recorded at cost and are measured at subsequent reporting dates at fair value at the balance sheet date. Increases or decreases in the carrying amount of such investments are recognised as income or expenses of the year. Bank balances and cash are stated at their nominal values. Financial liabilities Significant financial liabilities include interest-bearing bank borrowings, trade and other payables, amounts due to related companies and a long-term payable. Interest bearing bank borrowings are recorded at the proceeds received, net of direct issue costs. Finance charges are accounted for on an accrual basis. Trade and other payables and amounts due to related companies are stated at their nominal values. 14 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 4. REVENUE An analysis of the Group’s revenue from its principal activities is as follows: 2002 2001 RMB’000 RMB’000 Sales of household electrical products 3,482,439 2,703,576 Sales of computer accessories 2,376 94,841 3,484,815 2,798,417 5. BUSINESS AND GEOGRAPHICAL SEGMENTS The Group is principally engaged in the manufacture and sale of household electrical products, as detailed in note 4. The Group’s primary basis of segmentation is by geographical market. An analysis of Group’s revenue and result by geographical market is as follows: 2002 North South Others America America Europe PRC Japan (Note) Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 REVENUE 1,903,110 65,404 858,710 80,249 271,841 305,501 3,484,815 RESULT Segment result 349,620 10,677 139,736 (60,302) 10,158 36,614 486,503 Unallocated corporate expenses (209,407) Profit from operations before interest income 277,096 Interest income 2,331 Interest expenses (5,736) Profit before tax 273,691 Income tax expense (39,005) Profit after tax 234,686 15 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 5. BUSINESS AND GEOGRAPHICAL SEGMENTS - continued 2001 North South Others America America Europe PRC Japan (Note) Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 REVENUE 1,789,258 82,137 453,281 81,055 192,527 200,159 2,798,417 RESULT Segment result 301,982 13,317 59,859 12,289 9,823 8,794 406,064 Unallocated corporate expenses (206,354) Profit from operations before interest income 199,710 Interest income 1,941 Interest expenses (11,840) Profit before tax 189,811 Income tax expense (23,593) Profit after tax 166,218 Note: Others include Taiwan and Hong Kong. An analysis of Group’s assets and liabilities by geographical market is as follows: 2002 2001 Assets Liabilities Assets Liabilities RMB’000 RMB’000 RMB’000 RMB’000 North America 213,240 15,510 126,824 15,040 South America 7,947 1,202 12,193 3,529 Europe 92,027 10,582 88,075 3,841 PRC 27,510 464,978 73,099 372,182 Japan 25,974 7,444 71,146 7,268 Taiwan 1,519 324,115 20,023 359,718 Hong Kong 126,415 22,612 41,785 69,495 Others 75,050 104,384 21,765 72,981 Subtotal 569,682 950,827 454,910 904,054 Unallocated assets and liabilities 2,001,163 214,117 1,860,582 217,982 Total 2,570,845 1,164,944 2,315,492 1,122,036 The unallocated assets represent property, plant and equipment, investment properties, goodwill, land use rights, other investments, inventories and bank balances and cash. The unallocated liabilities represent income tax liabilities, short-term bank loans and long-term payable. The assets, including additions thereto during the year, are located in the PRC. 16 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 6. OTHER OPERATING INCOME 2002 2001 RMB’000 RMB’000 Income from sales of materials 13,009 8,146 Management income 1,579 1,719 Accounts payable written back (Note) 10,890 - Subsidy income 717 6,035 Rental income 603 522 26,798 16,422 Note: During the year, the directors reviewed certain long outstanding accounts payable over three years due to loss of contract with the suppliers and considered that these amounts will not require to be settled. Accordingly, these accounts payable were written back. 7. PROFIT FROM OPERATIONS Profit from operations has been arrived at after charging (crediting): 2002 2001 RMB’000 RMB’000 Staff costs 289,722 220,545 Depreciation 213,887 180,834 Amortisation - goodwill (included in administrative expenses) 1,213 1,144 - land use rights (include in administrative expenses) 1,905 1,880 Impairment loss (included in cost of sales) 68,866 6,825 Net foreign exchange (gain) losses (2,121) 9,463 Research and development costs 35,657 25,720 17 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 8. INCOME TAX EXPENSE 2002 2001 RMB’000 RMB’000 PRC income tax for the year 39,005 23,593 The Company has obtained approval from the Xiamen Tax Bureau that it is exempted from PRC income tax for four years from the first profitable year of operation followed by a 50% relief on the PRC income tax for the next five years. The first profitable year was the year ended December 31, 1992, being the year in which there was taxable profit after allowance for losses carried forward from previous years. The year ended 31 December 2001 is the last year that the Company enjoyed the 50% relief from the PRC income tax, the applicable tax rate after tax relief being 7.5%. According to the “Detailed Rules and Regulations for Implementation of the Income Tax Law of the People’s Republic of China Concerning Enterprises with Foreign Investment and Foreign Enterprises”, an export oriented enterprise established with foreign investment which, on the expiry of the period of reduction of or exemption from enterprise income tax as stipulated in the tax law, has an export value for the year amounting to 70% or more of the value of its product output for that year may pay enterprise income tax at one-half of the prevailing rate pursuant to the provisions of the tax law. However, an export oriented enterprise located in economic zones which pays enterprise income tax at 15% has to levy income tax at 10%. The Company is applying for the above tax privilege. Income tax for the current year has been provided at the rate of 10%, since in the opinion of the directors, the application for the tax privilege will be approved by the Tax Bureau, on the basis that the Company has clearly fulfilled the requirements. 18 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 8. INCOME TAXES EXPENSES - continued Tsann Kuen China (Shanghai) Enterprise Ltd. (“TKS”), a subsidiary of the Company, is an export oriented enterprise located in Shanghai, which is entitled to income tax exemption for two years commencing from the first profitable year and a reduction in the applicable tax rate for the next three years. Year 2002 is the first year that TKS enjoys the 50% relief. No provision for taxation has been made for Tsann Kuen (China) Technology Co., Ltd. (“TKK”) and Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. (“TKL”), subsidiaries of the Company, as they have not had any assessable income since their establishment. The charge for the year can be reconciled to the profit per the income statement as follows: 2002 2001 RMB’000 % RMB’000 % Profit before tax 273,691 189,811 Tax at the PRC tax rate of 10% (2001: 10%) 27,369 10.0 18,981 10.0 Tax effect of expenses that are not deductible in determining taxable profit 4,282 1.6 1,995 1.0 Effect of different tax rate of a subsidiary 339 0.1 - - Effect of tax holiday enjoyed by a subsidiary - - (192) (0.1) Tax loss of a subsidiary not recognised 7,015 2.6 2,809 1.5 Tax expense and effective tax rate for the year 39,005 14.3 23,593 12.4 A deferred tax asset in respect of the tax losses of the subsidiaries amounting to RMB 10,514,000 (31 December 2001: RMB 3,499,000) is not recognised in the consolidated financial statements as it is uncertain that taxable profits will be available against which the tax losses can be utilised. The unrecognized tax losses will be expired by the end of 2008. 9. DIVIDENDS On 22 May 2002, a cash dividend of 10 cents per share was paid to shareholders. At the same date, there was a bonus issue of 50 bonus shares for every 100 shares held from the capitalisation of discretionary surplus fund and retained earnings. In respect of current year, the directors propose a bonus issue of 30 bonus shares for every 100 shares held from the capitalisation of discretionary surplus fund and retained earnings. This is subject to the approval of the shareholders at the next Annual General Meeting. 19 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 10. EARNINGS PER SHARE The calculation of the basic earnings per share is based on the following data: Earnings 2002 2001 RMB’000 RMB’000 Earnings for the purposes of basic earnings per share (net profit for the year) 246,731 172,521 Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 676,406 676,406 The earnings per share in the previous year has been adjusted for the effect of the capitalization issue in 2002. 11. PROPERTY, PLANT AND EQUIPMENT Machinery Furniture and Motor and office Construction Buildings equipment vehicles equipment Moulds in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 COST At 1 January 2002 238,748 423,274 31,388 82,358 1,187,040 55,133 2,017,941 Additions 12,266 33,256 3,606 7,399 51,160 272,144 379,831 Transfers 12,747 35,987 139 233 185,722 (234,828) - Disposals - (8,796) (616) (1,470) (6,960) - (17,842) At 31 December 2002 263,761 483,721 34,517 88,520 1,416,962 92,449 2,379,930 ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 January 2002 43,995 136,564 21,982 50,111 601,020 - 853,672 Charge for the year 12,137 35,614 2,689 8,067 155,125 - 213,632 Impairment loss - 2,265 - - 66,601 - 68,866 Eliminated on disposals - (2,910) (359) (1,093) (6,625) - (10,987) At 31 December 2002 56,132 171,533 24,312 57,085 816,121 - 1,125,183 NET BOOK VALUES At 31 December 2002 207,629 312,188 10,205 31,435 600,841 92,449 1,254,747 At 31 December 2001 194,753 286,710 9,406 32,247 586,020 55,133 1,164,269 As at 31 December 2001, the Group has pledged certain property, plant and equipment of approximately RMB 79 million to secure general banking facilities granted to the Group. During the current year, the security of these pledged assets was released. The directors estimate RMB 75,691,000 (31 December 2001: RMB 6,825,000) that a impairment loss has arising in respect of idle moulds and machinery based on their respective recoverable amounts, which presents the estimated net selling prices determined by the reference to the market of those moulds and machinery in the PRC. 20 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 12. INVESTMENT PROPERTIES RMB’000 COST At 1 January and at 31 December 2002 5,660 DEPRECIATION At 1 January 2002 3,354 Charge for the year 255 At 31 December 2002 3,609 CARRYING AMOUNT At 31 December 2002 2,051 At 31 December 2001 2,306 The directors consider the carrying amount of the investment properties approximates to their fair value determined by discounted future cash flow. The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to RMB 603,000 (2001: RMB 522,000). 13. GOODWILL RMB’000 COST At 1 January and 31 December 2002 12,124 AMORTISATION At 1 January 2002 1,818 Charge for the year 1,213 At 31 December 2002 3,031 CARRYING AMOUNT At 31 December 2002 9,093 At 31 December 2001 10,306 Goodwill is amortised over its estimated useful life of 10 years. The foreseeable life of the goodwill arising on past acquisition is 10 years. 21 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 14. LAND USE RIGHTS RMB’000 COST At 1 January 2002 89,684 Additions 15 At 31 December 2002 89,699 ACCUMULATED AMORTISATION At 1 January 2002 6,265 Charge for the year 1,905 At 31 December 2002 8,170 NET BOOK VALUES At 31 December 2002 81,529 At 31 December 2001 83,419 As at 31 December 2002, the Group has balance payable of RMB 32 million in respect of the acquisition of the land use rights. As a result, the Group has not yet obtained the land use right certificate. As at 31 December 2002, land use rights have remaining amortisation periods from 37 to 56 years. 15. SUBSIDIARIES Details of the Company’s subsidiaries at 31 December 2002 are as follows: Place Proportion of Name of and date of Registered ownership and subsidiary establishment capital voting right Principal activity Tsann Kuen China Shanghai, PRC USD 40,000,000 62.5% Production and sale of household (Shanghai) Enterprise 17 August 1993 appliance. Ltd. Tsann Kuen (China) Xiamen, PRC USD 20,000,000 75% Production and sale of digital Technology Co., Ltd. 4 August 2000 telecom equipment. Tsann Kuen (Zhangzhou) Zhangzhou, PRC USD 40,000,000 75% Production and sale of household Enterprise Co., Ltd. 26 July 2002 appliance. 22 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 16. INVESTMENT IN ASSOCIATE 2002 2001 RMB’000 RMB’000 Cost of investment 200 - Details of the Group’s associate at 31 December 2002 are as follows: Place of Proportion of Proportion Name of incorporation and ownership of voting associate operation interest power held Principal activity Shanghai Tsann Pao Co., Ltd. Shanghai, PRC 20% 20% Production and sale of household appliance 17. OTHER INVESTMENTS 2002 2001 RMB’000 RMB’000 Unlisted shares 71 71 The directors consider that the carrying amount of other investments approximate to their fair value. 18. INVENTORIES 2002 2001 RMB’000 RMB’000 Raw materials 222,531 177,256 Work-in-progress 125,841 72,996 Finished goods 72,632 96,572 421,004 346,824 Carrying amount of inventories at net realisable value - Raw materials 10,759 3,599 - Work-in-progress 6,810 779 - Finished goods 30,161 20,479 47,730 24,857 23 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 19. OTHER FINANCIAL ASSETS Trade and other receivables comprise amounts receivable for the sale of goods of RMB 372 million (31 December 2001: RMB 234 million) and advances to suppliers and other prepayments of RMB 50 million (31 December 2001: RMB 63 million). The average credit period taken on sale of goods is 41 days. An allowance has been made for estimated irrecoverable amounts from the sale of goods of RMB 10 million (31 December 2001: RMB 28 million). This allowance has been determined by reference to past default experience. The directors consider that the carrying amount of trade and other receivables and amounts due from related companies approximates to their fair value. Bank balances and cash comprise cash and short-term deposits held for treasury function. The carrying amount of these assets approximates to their fair value. Fair value The carrying amount of financial assets and financial liabilities recorded in the consolidated financial statements approximates to their respective fair values, determined in accordance with the accounting policies disclosed in note 3. Fair value estimates are made at specific point in time and are based on relevant market information. The estimate is subjective in nature and involved uncertainty and matters of significant judgment and therefore cannot be determined with precision, changes in valuation methods and assumptions could significantly affect the estimates. Credit risk The Group’s credit risk is primarily attributable to its trade and other receivables and amounts due from related companies. The amounts presented in the consolidated financial statements are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and the current economic environment. Credit risk of amounts due from related companies is limited as the amounts are guaranteed by the major shareholder of the ultimate holding company. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings in China. 24 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 19. OTHER FINANCIAL ASSETS - continued Concentration of credit risk For the year 2001 and 2002, net sales to the Group’s five largest customers accounted for approximately 62.28% and 66.00%, respectively, of the Group’s total revenue. Net sales to the Group’s largest customer, Salton Inc., accounted for 43.40% and 44.11% of the Group’s total revenue for 2001 and 2002, respectively. Details of the amounts receivable from the five non-related customers with the largest receivable balances at year end are as follows: Percentage of trade receivable 2002 2001 Five largest receivable balances 56.20% 45.97% Foreign exchange risk The Company and its subsidiary, TKS, are export-oriented enterprises with the United States as their largest market. Changes in international exchange rates, the rate for United States dollars in particular, will have an impact on the revenue of the Group. In addition, the Group purchases its equipment from overseas and the purchase price of its equipment is denominated in foreign currency. 20. SHARE CAPITAL 2002 2001 RMB’000 RMB’000 Registered, issued and fully paid: Legal person shares of RMB 1 each 493,594 329,063 B shares of RMB 1 each 182,812 121,875 676,406 450,938 Balance at 1 January 450,938 450,938 Captialisation issue (note 9) 225,468 - Balance at 31 December 676,406 450,938 All the shares rank pari passu with each other in all respects except that the B shares are listed on the Shenzhen Stock Exchange. 25 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 21. OTHER RESERVES (a) Other reserves of the Group include statutory surplus reserve, discretionary surplus reserve and statutory public welfare reserve, which form part of shareholders’ equity. Statutory surplus reserve / Discretionary surplus reserve In accordance with relevant PRC laws and regulations and the Company’s Articles of Association, the Company is required to appropriate 10% of its profit after taxation reported in its PRC statutory financial statements to the statutory surplus fund. Allocation to a discretionary surplus reserve shall be approved by the shareholders in general meeting. The appropriation of statutory surplus reserve may cease to apply if the balance of the statutory surplus reserve has reached 50% of the Company’s registered capital. Surplus reserve can be used to make up losses or for conversion into share capital. The Company may, upon the approval by a resolution of shareholders’ general meeting, convert its surplus reserves into share capital by issuing new shares to existing shareholders in proportion to their original shareholding or by increasing the nominal value of each share. However, when converting the Company’s statutory surplus reserve into share capital, the amount of such fund remaining unconverted must not be less than 25% of the registered capital. Statutory public welfare reserve In accordance with relevant PRC laws and regulations and the Company’s Articles of Association, the Company is required to appropriate 5% to 10% of the profit after tax as reported in its PRC statutory financial statements to the statutory public welfare reserve. The statutory public welfare fund shall only apply to collective welfare of staff and workers and welfare facilities remain a property of the Company. When the public welfare reserve is utilised, an amount equal to the cost of the assets acquired is transferred to discretionary surplus reserve. On disposal of the relevant assets, the original transfers from the reserve are reversed. (b) Basis for profit distribution In accordance with the Company’s Articles of Association, profit available for distribution to shareholders should be based on the lower of the amount determined under PRC GAAP and the amount determined under IFRS after deduction of the current year’s appropriation to the statutory reserves. The unappropriated profit carried forward for distribution to shareholders as at 31 December 2002 was approximately RMB 249,023,000. 26 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 22. LONG-TERM PAYABLE-DUE AFTER ONE YEAR The amount represents outstanding balance for land use rights acquired in 2000. It is interest free and is repayable as follows: 2002 2001 RMB’000 RMB’000 Within one year 15,610 6,610 In the second year 15,609 15,610 In the third to fifth years - 15,609 31,219 37,829 Less: Amount due for settlement within 12 months (Shown under current liabilities) (15,610) (6,610) 15,609 31,219 23. OTHER FINANCIAL LIABILITIES Trade and other payables comprise amounts outstanding for trade purchase and ongoing costs and land use right due within one year. The directors consider that the carrying amount of trade and other payables and amounts due to related companies approximates to their fair value. 24. SHORT-TERM BANK BORROWINGS 2002 2001 RMB’000 RMB’000 Short-term bank loans 150,149 164,762 At 31 December 2002, RMB 30,000,000 of short-term bank loan is interest free (31 December 2001: 100,000,000) and the remaining loans carry interest rates ranging from 2.76% to 4.89% (31 December 2001: 2.8572% to 5.58%) per annum. As at 31 December 2001, short-term borrowing of RMB 78,778,000 was secured on certain property, plant and equipment of the Group, as detailed in note 11. The security of these pledged assets was released during the current year. The directors consider the carrying amount of the short term bank loans approximates to their fair value. 27 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 24. BORROWINGS - continued Analysis of borrowings by currency: 2002 2001 RMB’000 RMB’000 Renminbi 90,000 130,000 US Dollar 60,149 34,762 150,149 164,762 25. CAPITAL COMMITMENTS 2002 2001 RMB’000 RMB’000 Commitments for the acquisition of property, plant and equipment: - contracted for but not provided in the financial statements 32,821 35,321 26. OPERATING LEASE COMMITMENTS The Group as lessee 2002 2001 RMB’000 RMB’000 Minimum lease payments under operating leases recognised in income for the year 12,509 6,733 At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, which fall due as follows: 2002 2001 RMB’000 RMB’000 Within one year 28,404 1,853 In the second to fifth years inclusive 119,243 775 After five years 1,242,162 - 1,389,809 2,628 28 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 26. OPERATING LEASE COMMITMENTS - continued The above leases are negotiated for an average term of 2 years except for a lease entered into by a subsidiary TKL for leasehold land of which the lease period is 50 years. In addition to the above, according to the co-operative joint venture agreement of TKS, the Group is obliged to pay annually a fixed return to the joint venture partner for the land on which TKS is located during the joint venture period ending 16 August 2043. As at 27 August 2001, the occupied area of the land was re-measured and the fixed annual payment increased from USD 103,600 to USD 104,344 under a new agreement. The annual rental increased 1% based on amount USD 104,344 from 1 July 2001 according to the co-operative joint venture agreement, and the annual rental after increment was USD 105,388 (equivalent to approximately RMB 872,287). The annual rental is subject to an increment of 1% by every 5 years. The minimum lease payment paid under this arrangement for the year amounted to RMB 872,287 (2001: RMB 864,000). 27. RETIREMENT BENEFITS PLANS The employees of the Group are members of a state-managed retirement benefit scheme operated by the local government. The Group are required to contribute a specified percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The total cost charged to income statement of RMB 7.6 million (2001: RMB 5.5 million) represents contributions payable to these schemes by the Group at rates specified in the rules of the schemes. As at 31 December 2002, no contributions due in respect of the current reporting period had not been paid over to the schemes (31 December 2001: RMB 78,000). 29 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 27. RELATED PARTY TRANSACTIONS The ultimate holding company of the Company is Tsann Kuen Enterprise Ltd., a company incorporated in Taiwan. (a) During the year, the Group entered into the following transactions with its related companies. 2002 2001 RMB’000 RMB’000 Transactions Sales of raw materials and finished goods - Ultimate holding company 29,580 23,620 - Fellow subsidiaries 231,392 102,587 - Companies in which the Company’s directors have controlling interests 450 691 Purchases of raw materials and finished goods - Ultimate holding company 468,100 500,277 - Fellow subsidiaries 113,538 84,296 - Companies in which the Company’s directors have controlling interests 55,106 52,097 Sales of mould and machinery - Ultimate holding company 16 10 - Companies in which the Company’s directors have controlling interests 107 - Purchases of mould and machinery - Ultimate holding company 196,572 206,706 - Fellow subsidiaries 47,712 39,148 - Companies in which the Company’s directors have controlling interests 245 6 30 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 28. RELATED PARTY TRANSACTIONS - continued (a) During the year, the Group entered into the following transactions with its related companies. - continued For the Company and a subsidiary, TKS, all transactions except those with Thermaster Electronic (Xiamen) Ltd. (“THERMASTER (XIAMEN)”, a company in which the Company’s directors have controlling interests) and A-Switch Electronic (Xiamen) Limited (“A-SWITCH”, a company in which the Company’s directors have controlling interests”) and Union Channel Limited (“Union Channel”, a fellow subsidiary) were priced according to the “Pricing Agreements for related companies’ transaction” which have been approved by Xiamen Tax Bureau and Shanghai Jiading Tax Bureau. The transactions between the Company and Union Channel were all under the prices agreed in the contracts. The transactions between the related parties and the subsidiaries (TKL and TKK) were all under the prices agreed in the contracts. 2002 2001 RMB’000 RMB’000 Other services paid Technology and know-how usage fee (i) - Ultimate holding company 105,719 28,005 - Fellow subsidiaries - 41,273 Sales commissions (i) - Fellow subsidiaries - 25,338 Agency fee (iv) - Fellow subsidiaries - 8,628 - Companies in which the Company’s directors have controlling interests 1,862 2,689 Other services rendered Rental income (ii) - Companies in which the Company’s directors have controlling interests 603 522 Management income (iii) - Companies in which the Company’s directors have controlling interests 1,579 1,719 31 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 28. RELATED PARTY TRANSACTIONS - continued (a) During the year, the Group entered into the following transactions with its related companies. - continued (i) Technology and know-how usage fee and sales commissions the Group paid were arrived at fixed percentage of net sales. (ii) Rental income the Company received from THERMASTER (XIAMEN) and A-SWITCH were calculated based on actual occupied area, time and unit rental charge. (iii) Management income the Company received from THERMASTER (XIAMEN) was calculated at certain percentage of the managed company’s revenue income. (iv) The Group has appointed several of its related companies as sales agents for its export sales. The customers of the Group place their orders with its related companies and sales proceeds are collected by those related companies on the Group’s behalf. The Group records those sales as its own sales as the Group bears substantially all the risks of these transactions. The resulting agency fee as disclosed above was arrived at as a certain percentage of operating expenses incurred by the agents. (b) Directors’ remuneration Remuneration paid to directors during the year was as follows: 2002 2001 RMB’000 RMB’000 Salaries 693 756 32 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 28. RELATED PARTY TRANSACTIONS - continued (c) Amounts due from/to related companies Accounts 2002 2001 RMB’000 RMB’000 Amounts due from related companies - Fellow subsidiaries 26,086 72,831 - Companies in which the Company’s directors have controlling interest 120,479 85,556 - Associated company 802 - 147,367 158,387 Amounts due to related companies - Ultimate holding company 236,763 261,205 - Shareholders 18,232 5,090 - Fellow subsidiaries 52,434 128,893 - Companies in which the Company’s directors have controlling interest 32,137 27,264 339,566 422,452 At 31 December 2002, balances with related companies of RMB 84 million (31 December 2001: RMB 109 million) represent sales proceeds received on the Group’s behalf. The major shareholder of the ultimate holding company has issued a letter of guarantee for the repayment of this balance. At 31 December 2002, amounts due from related companies included balance amounted to approximately RMB 45,521,000 with a company in which the Company’s directors have controlling interest, which pursuant to an agreement was advanced by the Group to the related company to acquire equipments on or before 31 December 2002. Up to 31 December 2002, the agreement has not been completed. The major shareholder of the ultimate holding company has issued a letter of guarantee for the repayment of this balance. Amounts due from/to related companies were unsecured, interest free and have no fixed repayment terms. 33 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. NOTES TO THE CONSOLIDATION FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 29. SUMMARY OF DIFFERENCES BETWEEN IFRS AND PRC GAAP These financial statements are prepared in conformity with IFRS which are different from its statutory financial statements which are prepared in accordance with PRC GAAP. The statutory financial statements for the year ended 31 December 2002 reported profit for the year as RMB 240,293,000 and net assets as RMB 1,260,979,000. The principal IFRS adjustments made for profit after taxation and net assets are as follows: Profit for the year Net assets RMB’000 RMB’000 As reported under PRC GAAP 240,293 1,260,979 Adjustments to conform to IFRS: Adjustment to record property, plant and equipment acquired before 1994 at swap rates (2,223) 16,825 Elimination of revaluation reserves 650 (3,474) Adjustment for pre-operating expenses of a subsidiary (821) (821) Accounts payable written back 8,832 - Others - 1,910 As reported under IFRS 246,731 1,275,419 30. APPROVAL OF FINANCIAL STATEMENTS The financial statements were authorised for issue by the Board of Directors on 8 April 2003. 31. LANGUAGE The Chinese text of the financial statements is a translated version for reference only. The English text of the financial statements will prevail over the Chinese text. * * * * * 34 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 2002 2001 RMB’000 RMB’000 (Company) (Company) Revenue 2,878,661 2,204,657 Cost of sales (2,267,615) (1,746,691) Gross profit 611,046 457,966 Other operating income 17,979 13,054 Loss from subsidiaries (43,458) (19,871) Selling and distribution expenses (182,876) (146,897) Administrative expenses (112,485) (92,858) Profit from operations 290,206 211,394 Interest income 1,515 1,155 Interest expenses (403) (4,161) Profit before tax 291,318 208,388 Income tax expense (36,693) (23,593) Net profit for the year 254,625 184,795 TSANN KUEN (CHINA) ENTERPRISE CO., LTD. BALANCE SHEET AS AT 31 DECEMBER 2002 (Prepared under International Financial Reporting Standards) 2002 2001 RMB’000 RMB’000 (Company) (Company) ASSETS Non-current assets Property, plant and equipment 861,117 715,645 Investment property 2,051 2,306 Goodwill 9,093 10,306 Land use rights 78,751 80,586 Investment in subsidiaries 277,698 203,196 Investment in associate 200 - Other investments 71 71 1,228,981 1,012,110 Current assets Inventories 303,017 258,128 Trade and other receivables 278,542 207,002 Amounts due from related companies 138,507 187,269 Bank balances and cash 124,287 202,899 844,353 855,298 Total assets 2,073,334 1,867,408 EQUITY AND LIABILITIES Capital and reserves Share capital 676,406 450,938 Retained profits 269,191 274,980 Other reserves 349,481 359,629 1,295,078 1,085,547 Non-current liabilities Long-term payable – due after one year 15,609 31,219 Current liabilities Trade and other payables 438,864 329,275 Long-term-payable – due within one year 15,610 6,610 Amounts due to related companies 232,265 299,366 Income tax liabilities 31,228 15,391 Short-term borrowings 44,680 100,000 762,647 750,642 Total equity and liabilities 2,073,334 1,867,408