闽灿坤Ｂ(200512)2003年年度报告摘要（英文版）

TSANN KUEN (CHINA) ENTERPRISE CO., LTD. 股票简称:闽灿坤 B 股票代码：200512 公告编号：2004-0006 TSANN KUEN (CHINA) ENTERPRISE CO. LTD 2003 Annual Report--Summary (Prepared under IAS) 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 2003 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. Yu Jing Lun was absent from this meeting owing to the reason that he asked for resignation from the board of Directors for health problem. 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 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 Zone, Headquarters Xiamen, P.R. China. Post Code 361006 Web Site www.tsannkuen.com E-mail Address allenlo@tkl.tsannkuen.com 2.2 The persons and the means for contact Board of Director’s Secretary Representative of the Stock Affairs Name Luo Qing Xing Address for No.88 Xing Long Road, Huli contact Industry Zone, Xiamen, P.R. China. Telephone 0592-5600887 Fax 0592-5600886 E-mail allenlo@tkl.tsannkuen.com address 3. FINANCIAL AND OPERATIONAL HIGHLIGHTS 3.1 Major accounting data Unit: RMB’000 Increase or 2003 2002 decrease (%) Item / year 2001 (this year) (last year) (Compared with last year) Major operating income 4,204,669 3,484,815 20.66% 2,798,417 Profit before tax 148,661 273,691 -45.68% 189,811 Net profit 126,416 246,731 -48.76% 172,521 Net profit (after extraordinary income 107,945 240,233 -55.07% 180,759 or loss) Increase or decrease (%) End of 2003 End of 2002 End of 2001 (Compared with last year) Total Assets 5,061,134 2,866,998 76.53% 2,315,492 Stockholder’s equity 1,401,410 1,275,419 9.88% 1,073,667 (Minority equity excluded) Net cash flow from operating activities 131,677 402,084 -42.46% 640,864 Total asset of 2003 increased by 76.53% compared with that of last year. The main reasons are the investment on household appliance in domestic market, which has many stock and cash from sales, and the found of material division in Tsann Kuen (Zhangzhou) Enterprise Co., Ltd, which also held a lot of stock with the prediction of rising price for aluminum. 2 3.2 Major Financial Index Unit: RMB Yuan Increase or Item / year 2003 2002 decrease (%) 2001 (2002 / 2001) Earning per share 0.1438 0.2806 -48.76% 0.2031 Return on shareholder’ s equity (%) 9.02% 19.35% -53.37% 16.07% Return on shareholder’ s equity (Based on net profit after extraordinary income 7.70% 18.84% -59.11% 16.84% or loss) (%) Net cash flow from operating 0.26 0.46 -42.46% 0.73 activities per share Increase or End of End of 2003 End of 2002 decrease (%) (2002 / 2001) 2001 Net asset value per B share 1.59 1.45 9.88% 1.22 Net asset value per B share (adjusted) 1.59 1.44 9.93% 1.21 3.3 Summary on difference between IAS and PRC GAAP √ Applicable □ Inapplicable Unit: RMB’000 PRC GAAP IAS Net profit 123,617 126,416 Summary on 1、 Adjustment to record property, plant and equipment acquired before 1994 at swap rates: (2,223) difference 2、 Elimination of revaluation reserves: 2,664 821 3、 Adjustments for subsidiaries’pre-operating fees: 1,537 4、 Reverse last year accounts payable written back: 3 4. CHANGES IN STOCK SHARES AND BRIEF INTRODUCTION ABOUT SHAREHOLDERS 4.1、Changes of stock shares Unit: share Increase/decrease (+, -) Shares at Surplus Shares at the Item reserve Contribution Apportioning beginning Others Subtotal end converted shares shares shares Share not in circulation 1.Founders’shares 425,951,250 127,785,375 127,785,375 553,736,625 Including: Shares of State Holders Shares of legal person holders within the boundary of China Legal foreign capital 425,951,250 127,785,375 127,785,375 553,736,625 holders Others 2.Shares of raising legal persons 3.Shares of the internal staff 4.Preferred shares or others Total shares not in circulation Shares in 425,951,250 127,785,375 127,785,375 553,736,625 circulation 1.Common share in RMB 2.Foreign capital 250,455,000 75,136,500 75,136,500 325,591,500 shares on sale within the boundary of China 3.Foreign capital shares on sale outside the boundary of China 4.Others Total shares in 250,455,000 75,136,500 75,136,500 325,591,500 circulation Total shares 676,406,250 202,921,875 202,921,875 879,328,125 4 4.2 Shares held by the top ten stockholders Unit: share Number of shareholders at 20,409 the ending Shares held by the top ten stockholders Increase/ Shares held at Holding Circulated Mortgage or Kind of Full Name of Shareholder Decrease the end Ratio or not congealment. holders FORDCHEE Foreign 59,231,250 256,668,750 29.19% No None DEVELOPMENT LIMITED fund Part of EUPA INDUSTRY Foreign 59,231,250 256,668,750 29.19% them are None CORPORATION LIMITED circulated fund FILLMAN INVESTMENTS Foreign 29,615,625 128,334,375 14.59% No None LIMITED fund Unknown Foreign TIMMERTON CO INC 2,646,211 11,466,913 1.30% Yes fund CORE PACIFIC-YAMAICHI Foreign INTERNATIONAL (H.K.) 1,567,666 4,074,536 0.46% Yes Unknown fund LIMITED Foreign TSAI SHU HUI 783,418 3,394,809 0.39% Yes Unknown fund SKANDIA GLOBAL FUNDS Foreign 3,242,439 3,242,439 0.37% Yes Unknown PLC fund Foreign LAU MING TO 477,465 2,069,015 0.24% Yes Unknown fund Foreign TSAI CHIEN FANG 360,925 1,564,009 0.18% Yes Unknown fund Foreign THERMASTER LIMITED 966,704 1,423,734 0.16% Yes Unknown fund Notes to related-party The top three stockholders are the controlling stockholders. TSAI SHU relationship in the top ten HUI is the spouse of Mr. WU TSAN KUN, who is the legal stockholders representative of EUPA INDUSTRY CORPORATION LIMITED.TKC has neither knowledge about whether there is any related-party relationship between other shareholders holding circulable shares nor knowledge about whether or not the other shareholders holding circulable shares belong to the consistent action people specified in The Regulations for Information Disclosure on the Change of Shares Held by the Shareholders of the Listed Company. 5 Shares held by the top ten stockholders holding circulable shares Circulable shares held at the Kind of shares（A、B、H shares or Full Name of Shareholder end others） EUPA Industry Corporation Limited 87,935,250 B share TIMMERTON CO INC 11,466,913 B share CORE PACIFIC-YAMAICHI INTERNATIONAL (H.K.) LIMITED 4,074,536 B share TSAI SHU HUI 3,394,809 B share SKANDIA GLOBAL FUNDS PLC 3,242,439 B share LAU MING TO 2,069,015 B share TSAI CHIEN FANG 1,564,009 B share THERMASTER LIMITED 1,423,734 B share CSC SECURITIES (HK) LTD 1,096,964 B share TOYO SECURITIES ASIA LIMITED-A/C CLIENT 1,075,299 B share Notes to related-party relationship in the top 1. Top circulable stockholder is the controlling ten stockholders holding circulable shares stockholder of TKC. TSAI SHU HUI is the spouse of Mr. WU TSAN KUN, who is the legal representative of EUPA INDUSTRY CORPORATION LIMITED. 2.TKC doesn’t know whether or not there is any related-party relationship between the other top nine stockholders holding circulable shares. 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$10,000 None CORPORATION LTD FILLMAN INVESTMENTS Tsan Kun Wu 1992/07/21 Investment HK$10,000 None LTD 6 (2) Detailed information of the real controlling holder A、 Name of the real controlling shareholder: TSANN KUEN ENTERPRISE CO. LTD B、 Legal representative: TSAN KUN WU C、 Registered day: Nov. 2nd , 1978 D、 Major products and service: Processing, manufacturing and sales of small household appliances as well as their spare parts and equipment, etc. E、 Registered capital: NT$ 2,149,900,000 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 48 0 0 Song Mr. Yang Wen Managing Male 43 0 0 Fang Director 2002.5.22 –2005.5.20 Mr. Zhuang Xing Director Male 49 Mr. Yu Jing Lun Director Male 47 0 0 Director Male 44 0 0 Mr. Liu Shun Ren (independent) Director Male 46 0 0 Mr. Wei Jun Xian (independent) 2003.5.16 –2005.5.20 Mr. Zhou Zong Director Male 48 0 0 Geng (independent) Supervisory Male 58 0 0 Mr. Yan Liang Jie Chairman Mr. Lin Zong 2002.5.22 -2005.5.20 Supervisor Male 46 0 0 Ming Miss You Su Qiu Supervisor Female 37 0 0 Mr. Luo Qing Secretary of Male 50 2003.1.7-- 0 0 Xing board 7 5.2、Description of the directors and supervisors who hold a post in the main share-holders’companies √ Applicable □ Inapplicable Post in the Get remuneration Name of share- Name share-holder’s Term of office from TKC holding company company (Yes or No) Yu Jing Lun General Manager 2003- now Yes Executive Zhuang Xing TSANN KUEN 1994 - now Yes ENTERPRISE CO. LTD director Assistant of Yan Liang Jie Personnel & 1994 - now Yes Procuring Dept. 5.3 Remuneration (annually) for the present directors, supervisors and senior administrative officials: Total amount of annual remuneration RMB 1,240,000 The total payment for the top three directors RMB 778,000 The total payment for the top three senior RMB 646,000 administrative officials The allowance for the independent directors RMB 62,500 / yearly Other payment for the independent directors Their traveling expense (including traffic and communication fees, etc.) for attending meetings can be paid back according to the company’s regulations. Directors and supervisors not getting payment from None TKC Remuneration range Number of person Above RMB 300,000 2 RMB 100,000 -300,000 2 RMB 24,000 -100,000 7 8 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 “SARS”, thus facing a tough adverse business situation in 2003, 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 2003, TKC achieved a sales turnover of RMB 4,204,669,000, which is an increase of 20.66%, as compared with the same item of RMB 3,484,815,000 achieved in the same period of last year. It also obtained a gross profit of RMB 547,421,000, which is an decrease of 12.19%, as compared with RMB 623,450,000 in last year. From the analysis for the reason of increase, one can see that it is mainly due to the expansion of production and business scale. The gross profit ratio of 2003 decreased by 4.89% compared with that of 2002. The main reasons are: in order to bear the loss together with our customers during the hard time of “SARS”, we lowered our unit price by 6% in Europe and our gross profit rate of domestic sales of household was kept only 4.79%. The profit after tax of 2003 was RMB134,052,000, which decreased by 42.88% compared with that of 2002 (RMB234,686,000). The profit ratio of 2003 decreased by 3.55% than that of 2002. The company stick to the bibusiness strategy of world factory and world channel is the main reason of profit decrease. The company expanded its manufac turing scope to cater to the increasing competition in international consumable electronic appliances and developed the domestic market to improve the domestic market shares. From the mid of 2003, the company began to strengthen the marketing in domestic market. It changed the model of domestic division to set up Xiamen Tsann Kuen Dian Tong Electronics Co., Ltd and Shanghai Tsann Pao Electronics Co., Ltd, which focus on the consumable electronic appliances sales in domestic market. With the huge fees in early stage of operation and non-scale effect, the profit of 2003 decreased than that of 2002. According to the reason of profit decreasing, the company integrated the procure, manufacture and sales of all group and set up the net of channel for domestic sales to get the scale effect so as to rationalize the bibusiness strategy, get more net profit and returns to stockholders. 9 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 profit product income cost (%) operational operational rate income cost Small household 3,799,556 3,271,559 13.90 9.11 17.39 -30.40 appliance Wholesaling 405,113 385,689 4.79 In which: related-party 262,760 246,180 6.31 44.50 50.08 -35.61 transactions Home 708,803 585,382 17.41 32.65 47.50 -32.34 comforts Gourmet 2,551,258 2,205,412 13.56 15.04 24.52 -32.67 cooking Tea/coffee 473,570 415,862 12.19 25.49 26.68 -6.30 breakfast Others 65,925 64,903 1.55 -81.32 -77.68 -91.21 In which: related-party 262,760 246,180 6.31 44.50 50.08 -35.61 transactions Pricing principle for In accordance with The Pricing Agreement for Preordain Purchases between the related-party Related Parties signed by XIAMENT TAX BUREAU and the corporation. transactions Notes to the It can increase the Group’s vertical integrating leverage, make good use of uniform necessity and continuity of purchasing, and greatly reduce the cost. By taking advantage of the related-party related-party enterprises’worldwide sales branches, it can increase its marketing share. transactions 6.3 Analysis of the major operation according to the geographical location Unit: RMB’000 Region Major operational income Increase/decrease (%) in major operational income (2003 / 2002) America 1,870,466 -4.98% Europe 904,440 5.33% Asia 1,010,038 149.85% Other 419,725 65.68% Total 4,204,669 20.66% 10 6.4 Chief customers and suppliers Percentage in the Sum of purchasing amount from RMB535,691,000 total purchasing 23.12% the top five suppliers amount Sum of sales amount to the top Percentage in the RMB1,725,192,000 41.03% five customers total sales amount 6.5 The operational situation of the companies in which TKC holds a share (suitable for those whose investing earning made up more than 10% of the net profit) √ Applicable □ Inapplicable Investee Tsann Kuen Zhangzhou Enterprise Co. Ltd. The investing earning of this RMB 132,042,000 The percentage in 104.45% period TKC’s net profit 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 the company in Business related to the above products. (Excluding those products restricted by which TKC Range the government or those whose import or export quota is under license holds a share administration. When involved in those projects which need to be examined and approved first, the company carries out its operation and production only within the range and within the valid period set in the license.) Net profit RMB 176,056,000 Investee Tsann Kuen China (Shanghai) Enterprise Ltd The investing earning of this RMB-45,770,000 The percentage in -36.21% period TKC’s net profit Production of household appliances 、 electronic 、 light industrial products、modern office equipments and their related modules、various the company in Business kinds of computers and their related facilities or spare parts. which TKC Range Development of computer software, IC packing and testing. Sale of holds a share their own products (the exporting of which will not be restricted by the requirements of license. and quota, or by whether or not being the product of class B). Net profit RMB-73,963,000 Investee Xiamen TSANN KUEN Dian Tong Electronic Co. Ltd The investing earning of this RMB-49,683,000 The percentage in -39.30% period TKC’s net profit Wholesaling and its follow-up service of household appliances, computer sets and their attachments, communication materials, motor and electric equipments, office supplies and the related attachments the company in Business (including kitchen facilities). (For those business items which need to which TKC Range be examined and approved first according to the laws and regulations, holds a share the company will carry out its operation only after it has obtained the license) Net profit RMB-52,598,000 11 Investee Shanghai Tsann Pao Electronics Co., Ltd The investing earning of this RMB-44,266,000 The percentage in -35.02% period TKC’s net profit Wholesaling and its follow-up service of household appliances, computer sets and their attachments, communication materials, motor and electric equipments, office supplies and the related attachments the company in Business (including kitchen facilities). (For those business items which need to which TKC Range be examined and approved first according to the laws and regulations, holds a share the company will carry out its operation only after it has obtained the license). Net profit RMB-52,266,000 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 The gross profit ratio of 2003 decreased by 4.89% compared with that of 2002. The main reasons are: in order to bear the loss together with our customers during the hard time of “SARS”, we lowered our unit price by 6% in Europe and our gross profit rate of domestic sales of household was kept only 4.79%. 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 The profit after tax of 2003 was RMB134,052,000, which decreased by 42.88% compared with that of 2002 (RMB234,686,000). The profit ratio of 2003 decreased by 3.55% than that of 2002. The company stick to the bibusiness strategy of world factory and world channel is the main reason. The company expanded its manufacturing scope to cater to the increasing competition in international consumable electronic appliances and developed the domestic market to improve the domestic market shares. From the mid of 2003, the company began to strengthen the marketing in domestic market. It changed the model of domestic division to set up Xiamen Tsann Kuen Dian Tong Electronics Co., Ltd and Shanghai Tsann Pao Electronics Co., Ltd, which focus on the consumable electronic appliances sales in domestic market. With the huge fees in early stage of operation and non-scale effect, the profit of 2003 decreased than that of 2002. According to the reason of profit decreasing, the company integrated the procure, manufacture and sales of all group and set up the net of channel for domestic sales to get the scale effect so as to rationalize the bibusiness strategy, get more net profit and returns to stockholders. Analysis on the reason for significant changes in the overall financial status as compared with the previous year √ Applicable □ Inapplicable EPS of 2003 is RMB0.14, which decreased by 48.76% compared with that of 2002(RMB0.28) Return on net asset of 2003 is 9.02%, which decreased by 53.37% compared with that of 2002(19.35%). Return on 12 net asset after extraordinary items of 2003 is 7.70%, which decreased by 59.11% compared with that of 2002(18.84%). The reason for all of these is the decrease of net profit. Net cash flow from operating activities per share of 2003 is RMB0.26, which decrease by 42.46% compared with that of 2002(RMB0.46). Its reason is the expansion of manufacture, investment on domestic sales and material division founded in Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. All of these took up a lot of cash for purchase of goods and wasted aluminum and demanded more expenditure on employees. 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 The VAT rebate rate for export product was lowered from 17% to 14% in 2004. Accordingly, the company’s manufacture cost will rise by RMB78,000,000. 6.10 Achievement to the earning prediction □ Applicable √ Inapplicable 6.11 Achievement to the operating plan √ Applicable □ Inapplicable The original operating plan for this The actual achievement in this year year Revenue US$ 520,000,000 US$ 508,000,000 Cost & Expenditure None US$490,000,000 Description for discrepancy Domestic sales turnover was US$49,000,000, which did not reach the target of US$68,000,000 6.12 Utilization state of raised funds □ Applicable √ Inapplicable Change in the utilization state □ Applicable √ Inapplicable 13 6.13 Utilization state of non-raised funds √ Applicable □ Inapplicable Project name Invested amount Progress of plan Earning of project So far, most workshops have Net profit of 2003 Tsann Kuen Registered capital is been constructed. By the end of (Zhangzhou) the reported period, major is US$ 40,000,000 Enterprise Co. Ltd. production lines have been RMB132,040,000 installed and put into operations. By the end of the reported Xiamen TSANN Registered capital is period, the company has already Net loss of 2003 is KUEN Dian Tong opened display stores specially RMB 65,000,000 RMB49,680,000 Electronic Co. Ltd for household appliance and related within China By the end of the reported Registered capital is period, the company has already Net loss of 2003 is Shanghai Tsann Pao opened display stores specially Electronics Co., Ltd RMB 10,000,000 RMB44,270,000 for household appliance and related within China By the end of the reported Chengdu Tsann Registered capital is period, the company has already Net loss of 2003 is Kuen opened display stores specially RMB 5,000,000 RMB1,860,000 Electronics Co., Ltd for household appliance and related within China Total RMB 402,000,000 6.14 The Board of Directors’explanation to the auditor’s opinion □ Applicable √ Inapplicable 6.15 The Board of Directors’new year operational plan (if any) √ Applicable □ Inapplicable 1. 2004’s sales target: RMB6,800,000,000 for the whole Group. 2. Focus of operations: a. Improvement of quality b. Integration of marketing, R&D and manufacturing. Divide the profit center according the product line. c. Development in channel of sales and procurement. d. Innovation of technology to improve the competition e. Provide the overall service for customers f. Set up the overall performance appraisal system to speed the decision-making. g. Strengthen the training to cultivate the professionals. h. Set up the knowledge-sharing system for knowledge management. 14 Prediction of earning in 2004 (if any) □ Applicable √ Inapplicable 6.16 The Board of Directors’plan for distribution of profit or for converting accumulated funds or reserves into shares this time a. Plan of 2003’ s retain earning distribution Amount Item Ratio range Actual ratio Remark (RMB’000) Undistributed profit at 46,101 beginning Net profit of this period 126,416 Appropriate of statutory 10% 10% 11,960 surplus reserve Distributable profit 160,558 Items for distribution Distribution of 1. Statutory public stock dividend welfare reserve, and 5— 10% 5% 5,980 with 1 shares for bonus reserve every 10 shares 2. Discretionary surplus 20% 23,919 reserves, 3. Fund for dividend--Stock 54.77% 87,933 dividends Undistributed profit 42,726 at end b. Plan of conversion from discrepancy surplus reserve into share capital Amount Item Remarks (RMB’000) Discrepancy surplus reserve at beginning 66,775 Add: appropriation of net profit of 2003 23,919 Discrepancy surplus reserve at end 90,695 Distribution of stock dividend Description: with 0.5 shares for every 10 Minus: distribution of stock dividend with 0.5 shares from discrepancy surplus shares for every 10 shares 43,966 reserve conversion into share capital Discrepancy surplus reserve at beginning after conversion into share capital 22,809 Discrepancy surplus reserve after conversion into share capital 46,728 7. MAJOR EVENTS 7.1 Significant purchase of assets □ Applicable √ Inapplicable 15 7.2 Significant disposal of assets √ Applicable □ Inapplic able Unit: RMB’000 Buyer and the Date of Price Net profit brought by Gain Business between asset be sold transaction the sold asset from the &loss related party or not beginning of the year of sold (If yes, please to the date of business asset demonstrate the pricing principle) Buyer: Thermaster In May, 15,297 10,231 Yes. The basis is on the Electronic (Xiamen) 2003 appraised value Ltd by valuer Sold asset: No.11 factory building in Yuehua Road in Huli Industry Zone Note: The transaction was passed in the first meeting of the board of Directors on April 17th 2002. The related procedure of the transaction was finished in May, 2003. 7.3 Significant guarantees √ Applicable □ Inapplicable Guaranteed Date of Guaranteed Type of Period of guarantee Finished Rel Related party unit transaction amount guarantee or not guarantee （ date of or not signing） Shanghai In March, US$2m Bank loan 2003.3.24-2004.3.24 Not yet Yes Tsann Pao 2003 Electronics Co., Ltd Total of guarantee US$2m Total of balance of guarantee US$2m Including: the balance of guarantee for US$2m related party Total of guarantee for its subsidiaries US$2m Total of unlawful guarantee None Total of guarantee/net asset of the company 1.18% 16 7.4 Creditor’s right or liability between parties √ Applicable □ Inapplicable Unit: RMB’0000 Relative party’ s name Funds to the relative party Funds from the relative party Amount Balance Amount Balance TSANN KUEN HONG KONG,LTD. 19 4,376 651 3,513 TSANN KUEN ENTERPRISE CO. LTD 5,816 5,807 71,739 37,589 TSANN KUEN(U.S.A) CO.,LTD 23 142 90 TSANN KUEN(JAPAN) CO.,LTD 21,064 6,664 896 994 Thermaster Electronic (Xiamen) Ltd. 1,618 7,191 4,335 TERMASTER ELECTRONIC LIMITED 87 SINO GLOBAL DEVELOPMENT CO.,LTD.(BVI) 175 Taiwan Tsann Pao Electronics Co., Ltd 23 2938 UNION HONGKONG 205 19 TAIWAN SUPREME INC., LTD 8,650 5,444 Total 28,722 16,976 89,292 55,078 7.5 Entrusted property management □ Applicable √ Inapplicable 7.6 Implementation of commitment √ Applicable □ Inapplicable According to the resolution about 2002’s profit distribution plan made by the Board of Directors on the date of May 16th, 2003, the company committed itself to implement the above-mentioned profit distribution plan, which was that all the shareholders would be given stock dividend of 3 shares from the capitalization of retained earnings for every 10 shares held on the basis of 676,406,250 shares calculated at the end of the year 2002. The shares to be given in this distribution amounted to 202,921,875 shares in all. After the completion of this distribution, the company’s total shares have been increased to 879,328,125 shares from the former 676,406,250 ones. This commitment was fulfilled on June 11 th , 2003. 7.7 Significant litigation or arbitration □ Applicable √ Inapplicable 7.8 The independent directors’performance of duty In accordance with the regulations of The Guiding Opinion Regarding the Establishment of Independent Director System in the Listed Company issued by CSRC, the corporation appointed 3 persons as its independent directors, who make up 43 percent of its total directors, and set up a system of independent director management. 17 A. The independent directors attended all the corporation’s meetings of the Board of Directors and of the shareholders’general meeting held in 2003. They can carry out their duties according to the relevant laws and regulations. B. The standard pattern for evaluation of the corporation’s policies and strategy and of the operational results (the reporting model for the corporation’s evaluation) set up by the Board of Directors with the help of the independent directors has brought a great effect on improvement of the corporation’s management since it entered into force. C. The constructive suggestions put forward by the independent directors on the company’ s current management status have enabled the company’s operation to get improvement continuously. 8. REPORT OF THE SUPERVISORY COMMITTEE The supervisory committee fulfilled its duty according to Company Law, The Corporation’s Articles of Association and related laws & regulations and played an important role in the guarantee of TKC’s legal operation and protecting the shareholders’right. 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. Notes to the change in the consolidated scope of the financial statements: Place and date Proportion of Name of new subsidiary of establishment Registered capital ownership interest Principal activity Direct Indirect Xiamen Tsann Kuen Xiamen, PRC RMB 65,000,000 (Note 1) - Whole sale and retail of Dian Tong Electronics 28 March 2003 consumable electronic Co., Ltd. appliances, computers and communication equipments. Shanghai Tsann Pao Shanghai, PRC RMB 10,000,000 (Note 2) - Whole sale and retail of Electronics Co., Ltd. 2 January 2003 consumable electronic (Note 2) appliances, computers and communication equipments. Nanjing Tsann Kuen Nanjing, PRC RMB 1,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 21 November 2003 consumable electronic appliances, computers and communication equipments. Beijing Tsann Kuen Beijing, PRC RMB 2,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 5 September 2003 consumable electronic appliances, computers and communication equipments. 18 Fuzhou Tsann Kuen Fuzhou, PRC RMB 2,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 27 October 2003 consumable electronic appliances, computers and communication equipments. Shanghai Tsann Hung Shanghai, PRC RMB 2,500,000 - 100% Whole sale and retail of Electronics Co., Ltd. 21 July 2003 consumable electronic appliances, computers and communication equipments. Chengdu Tsann Kuen Chengdu, PRC RMB 5,000,000 50% 50% Whole sale and retail of Electronics Co., Ltd. 13 October 2003 consumable electronic appliances, computers and communication equipments. Wuhan Tsann Kuen Wuhan, PRC RMB 1,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 8 December 2003 consumable electronic appliances, computers and communication equipments. Shenyang Tsann Kuen Shenyang, PRC RMB 1,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 18 November 2003 consumable electronic appliances, computers and communication equipments. Hebei Shijiazhuang Shijiazhuang, PRC RMB 1,000,000 - 100% Whole sale and retail of Tsann Kuen 23 December 2003 consumable electronic Electronics Co., Ltd. appliances, computers and communication equipments. Tianjing Tsann Pao Tianjing, PRC RMB 1,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 17 December 2003 consumable electronic appliances, computers and communication equipments. Zhengzhou Tsann Kuen Zhengzhou, PRC RMB 1,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 29 December 2003 consumable electronic appliances, computers and communication equipments Kunming Tsann Kuen Kunming, PRC RMB 1,000,000 - 100% Whole sale and retail of Electronics Co., Ltd. 25 December 2003 consumable electronic appliances, computers and communication Note 1: Xiamen Tsann Kuen Dian Tong Electronics Co., Ltd. was established by the Company and Thermaster Electronic (Xiamen) Co., Ltd. in Mach 2003. The registered capital is RMB 10 million. The Company contributed 95%. At 31 December 2003, the registered capital increased to RMB 65 million and the contributio n rate of the Company changed to 65%. According to the agreement between the Company and Thermaster Electronic (Xiamen) Co., Ltd., the Company takes 95% of total operating loss in 2003 of Xiamen Tsann Kuen Dian Tong Electronic Co., Ltd. 19 Note 2: Shanghai Tsann Pao Electronics Co., Ltd. (Shanghai Tsann Pao) was established by the Company and Shanghai Huangdu Management Company (Shanghai Huangdu) in December 2002 and obtained its business licence on 2 January 2003. The registered capital was RMB 1 million, of which the Company contributed 20%. Shanghai Tsann Pao increased its paid- in capital by RMB 9 million in August 2003, of which the Company contributed RMB 1.8 million. After capital injection, the Company still holds 20% of registered capital of Shanghai Tsann Pao. Since the Company control the majority of the board of directors, and has committed to provide sufficient working capital to finance the operation of Shanghai Tsann Pao Electronics Co., Ltd., the management of the Company regards that the Company has substance control over Shanghai Tsann Pao’ s financial policy since the establishment of Shanghai Tsann Pao and operation policy and is able to continue such control. As a result, the Company incorporates Shanghai Tsann Pao into the consolidation financial statements. (Signed by:) Tsai Yuan Song The chairman of the Board of Directors of TSANN KUEN (CHINA) ENTERPRISE CO. LTD on Apr. 16th, 2004 20 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 (Prepared under International Financial Reporting Standards) 2003 2002 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 1,611,324 1,254,747 Investment properties - 2,051 Goodwill 7,880 9,093 Land use rights 79,623 81,529 Investment in associate - 200 Other investments 71 71 1,698,898 1,347,691 Current assets Inventories 1,316,084 421,004 Trade and other receivables 1,244,048 620,537 Amounts due from related companies 169,755 245,298 Restricted deposit 49,660 - Bank balances and cash 582,689 232,468 3,362,236 1,519,307 Total assets 5,061,134 2,866,998 EQUITY AND LIABILITIES Capital and reserves Share capital 879,328 676,406 Other reserves 391,424 349,990 Retained profits 130,658 249,023 1,401,410 1,275,419 Minority interests 189,560 130,482 Non-current liabilities Long-term payable-due after one year - 15,609 Long-term bank loans 50,000 - 50,000 15,609 Current liabilities Trade and other payables 2,004,929 809,483 Long-term payable-due within one year 23,414 15,610 Amounts due to related companies 550,786 437,497 Income tax liabilities 14,943 32,749 Short-term bank loans 826,092 150,149 3,420,164 1,445,488 Total equity and liabilities 5,061,134 2,866,998 21 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (Prepared under International Financial Reporting Standards) 2003 2002 RMB’000 RMB’000 Revenue 4,204,669 3,484,815 Cost of sales (3,657,248) (2,861,365) Gross profit 547,421 623,450 Other operating income 44,495 26,798 Selling and distribution expenses (266,532) (232,525) Administrative expenses (165,746) (140,627) Profit from operations 159,638 277,096 Interest income 2,441 2,331 Interest expenses (13,418) (5,736) Profit before tax 148,661 273,691 Income tax expense (14,609) (39,005) Profit before minority interests 134,052 234,686 Minority interests (7,636) 12,045 Net profit for the year 126,416 246,731 RMB RMB Basic earnings per share 14 cents 28 cents 22 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (Prepared under International Financial Reporting Standards) 2003 2002 RMB’000 RMB’000 OPERATING ACTIVITIES Profit from operations 159,638 277,096 Adjustments for: Depreciation of property, plant and equipment and investment properties 246,759 213,887 Impairment loss (reversed) recognized on property, plant and equipment (1,956) 68,866 (Gain) loss on disposals of property, plant and equipment and investment properties (11,035) 2,828 Amortisation of land use rights 1,906 1,905 Amortisation of goodwill 1,213 1,213 Accounts payable written back (2,050) (10,890) Effect of foreign exchange rate changes (425) 115 Operating cash flows before movements in working capital 394,050 555,020 Increase in inventories (895,080) (74,180) Increase in trade and other receivables (821,733) (110,638) Decrease in amounts due from related companies 75,543 76,358 Increase in trade and other payables 1,395,718 125,395 Increase (decrease) in amounts due to related companies 15,594 (148,224) Cash generated by operations 164,092 423,731 Income taxes paid (32,415) (21,647) NET CASH FROM OPERATING ACTIVITIES 131,677 402,084 INVESTING ACTIVITIES Interest received 2,441 2,331 Proceeds on disposals of property, plant and equipment and investment properties 16,580 4,027 Purchases of property, plant and equipment (507,179) (379,831) Acquisition of land use rights - (15) Acquisition of investment in an associate - (200) Acquisition of subsidiary 1,000 - NET CASH USED IN INVESTING ACTIVITIES (487,158) (373,688) 23 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (Prepared under International Financial Reporting Standards) 2003 2002 RMB’000 RMB’000 FINANCING ACTIVITIES Cash received from minority shareholders 50,642 22,738 Interest paid on bank loans (13,418) (5,736) Dividends paid - (45,094) Repayments of bank loans (1,118,465) (466,307) New bank loans raised 1,844,408 451,694 Increase in restricted deposit (49,660) - Repayment of long-term payable (7,805) (6,610) NET CASH FROM (USED IN) FINANCING ACTIVITIES 705,702 (49,315) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 350,221 (20,919) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 232,468 253,387 CASH AND CASH EQUIVALENTS AT END OF YEAR 582,689 232,468 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash 582,689 232,468 24