闽灿坤Ｂ(200512)2004年年度报告摘要（英文版）

TSANN KUEN (CHINA) ENTERPRISE CO., LTD. TSANN KUEN (CHINA) ENTERPRISE CO. LTD 2004 Annual Report--Summary (Prepared under International Accounting Standards) 1. IMPORTANT STATEMENT 1.1 The Board of Directors of the Corporation hereby guarantee that there is no fictitious record, misleading statements or any material omission in the information carried in this report, and collectively and individually accept full responsibilities for the truthfulness, accuracy and completeness of the whole contents. This Summary is extracted from the TKC’s 2004 Annual Report proper which is publicized at the same time on ShenZhen and . 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 semi-annual report. 1.3 All members in the Board of Directors attended the latest meeting of the board. 1.4 Deloitte Touche Tohmatsu CPA has issued for our company a standard unqualified audit report. 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 semi-annual report are truthful and complete. 2. COMPANY PROFILE 2.1 Basic information Short Name of Stock 闽灿坤 B Code of Stock 200512 Stock-marketing Place Shenzhen Stock Exchanges The official address No.88 Xinglong Road, Huli Industry Zone, Xiamen, P.R. China and Headquarters Post code 361006 Web Site www.tsannkuen.com E-mail address allenlo@tkl.tsannkuen.com 2.2 Contact Board of Director’ s Secretary Representative of the Stock Affairs Name Luo Qing Xing Address for contact No.88 Xing Long Road, Huli Industry District, Xiamen, P.R. China. Telephone 0592-5600887 Fax 0592-5600886 E-mail address allenlo@tkl.tsannkuen.com 3. MAJOR FINANCIAL INFORMATION AND INDEX 3.1 Major accounting data Unit: RMB Increase or Item 2004 2003 2002 decrease (%) Major operating income 6,692,236 4,204,669 59.16 3,484,815 Profit before tax 57,450 148,661 (61.36) 273,691 Net profit 38,621 126,416 (69.45) 246,731 Net profit after extraordinary 66,125 107,945 (38.74) 240,232 income or loss Net cash flow from operating (243,198) 131,677 (284.69) 402,084 activities Increase or Item 2004 2003 2002 decrease (%) Total assets 5,160,704 5,061,134 1.97 2,866,998 Stockholder’ s equity(Minority 1,439,947 1,401,410 2.75 1,275,419 equity excluded) 3.2 Major financial index Unit: RMB Increase or decrease Item 2004 2003 2002 (%) Earning Per Share 0.04 0.14 (71.43) 0.24 Return on share- holder’ s equity 2.68% 9.02% (6.34) 19.35% (%)-Dilution EPS (after extraordinary income or loss) 4.59% 7.70% (3.11) 18.84% Net cash flow from operating activities per share (0.24) 0.15 (260) 0.59 Increase or decrease Item 2004 2003 2002 (%) Net asset per B share 1.42 1.59 (10.69) 1.89 Net asset per B share (adjusted) 1.41 1.57 (10.19) 1.86 2 About the extraordinary income or loss √ Applicable □ Inapplicable Unit: RMB １? The items and amount of the extraordinary income or loss Less: (A) Subsidiary income 59,885.00 (B) Reverse of asset impairment 12,158,369.39 (C) Minority’s extraordinary income 5,114,197.96 (D) Income tax affected by Extraordinary items 245,885.18 Add: (E) Non-operating income 45,081,876.39 Total (27,503,538.86) 3.3 Summary on difference between IAS and PRC GAAP √ Applicable □ Inapplicable Unit: RMB’ 0000 PRC GAAP IAS Net profit 40,420 38,621 Summary on 1.Adjustment to record property, plant and equipment difference acquired before 1994 at swap rates: (2,223) 2. Adjustment for asset re-evaluation: 424 4. CHANGES OF STOCK AND SHAREHOLDER’ S EQUITY 4.1、Changes of stock capital √ Applicable □ Inapplicable 3 Unit: share Increase/decrease (+, -) Shares at Right Bonus Issue Reserve- Shares at Item New beginning Issue converted Others Subtotal the end shares shares Share not in circulation 1.Founders’ shares 641,671,875 64,167,187 32,083,594 96,250,781 737,922,656 Including: State-owned shares Shares owned by domestic legal person Shares owned by overseas legal person 641,671,875 64,167,187 32,083,594 96,250,781 737,922,656 Others 2.Shares of raising legal persons 3.Shares of the internal staff 4.Preferred shares or others Total shares not in circulation 641,671,875 64,167,187 32,083,594 96,250,781 737,922,656 Shares in circulation 1.Common shares in RMB 2.Foreign capital shares on sale within the boundary of China 237,656,250 23,765,625 11,882,812 35,648,437 273,304,687 3.Foreign capital shares on sale outside the boundary of China 4、Others 4 Increase/decrease (+, -) Shares at Right Bonus Issue Reserve- Shares at Item New beginning Issue converted Others Subtotal the end shares shares Total shares in circulation 237,656,250 23,765,625 11,882,812 35,648,437 273,304,687 Total shares 879,328,125 87,932,812 43,966,406 131,899,218 1,011,227,343 4.2 Shares held by the top ten stockholders Unit: share Number of shareholders 20,371 at the ending Shares held by the top ten stockholders N Full Name of Increase/ Shares held Holding Circulated Mortgage or Kind of o Shareholder Decrease at the end Ratio or not congealment. holders ＦＯＲＤＣＨＥＥ ＤＥＶＥＬＯＰＭＥＮＴ Others No None 1 ＬＩＭＩＴＥＤ 38,500,312 295,169,062 29.19% ＥＵＰＡ ＩＮＤＵＳＴＲＹ Partiall Ｏｔｈｅｒｓ None 2 ＣＯＲＰＯＲＡＴＩＯＮ ＬＩＭＩＴＥＤ 38,500,293 295,168,913 29.19% y ＦＩＬＬＭＡＮ ＩＮＶＥＳＴＭＥＮＴＳ Others No None 3 ＬＩＭＩＴＥＤ 19,250,156 147,584,531 14.59% ＴＩＭＭＥＲＴＯＮ ＣＯ ＩＮＣ Unknown Foreign 4 1,720,037 13,186,949 1.30% Yes fund ＭＥＲＲＩＬＬ ＬＹＮＣＨ Foreign Yes Unknown fund 5 ＩＮＴＥＲＮＡＴＩＯＮＡＬ 7,403,710 7,403,710 0.73% 6 ＣＯＲＥ ＰＡＣＩＦＩＣ－ＹＡＭＡＩＣＨＩ Foreign ＩＮＴＥＲＮＡＴＩＯＮＡＬ （Ｈ．Ｋ．） Yes Unknown fund ＬＩＭＩＴＥＤ 2,693,692 6,762,228 0.67% ＴＳＡＩ ＳＨＵ ＨＵＩ Yes Foreign None fund 7 509,221 3,904,030 0.39% 8 ＬＡＵ ＭＩＮＧ ＴＯ 310,352 2 379 367 0.24% Yes Unknown Others 9 ＴＳＡＩ ＣＨＩＥＮ ＦＡＮＧ 234,601 1 798 610 0.18% Yes Unknown Others ＣＳＣ ＳＥＣＵＲＩＴＩＥＳ （ＨＫ） ＬＴＤ． Yes Foreign 10 489,454 1,660,378 0.16% Unknown fund Shares held by the top ten stockholders holding circulable shares Kind of shares( A? B? H shares or N Circulable shares others) o Full Name of Shareholder held at the end 1 ＥＵＰＡ ＩＮＤＵＳＴＲＹ ＣＯＲＰＯＲＡＴＩＯＮ ＬＩＭＩＴＥＤ 101,125,388 B share 2 ＴＩＭＭＥＲＴＯＮ ＣＯ ＩＮＣ 13,186,949 B share 3 ＭＥＲＲＩＬＬ ＬＹＮＣＨ ＩＮＴＥＲＮＡＴＩＯＮＡＬ 7,403,710 B share ＣＯＲＥ ＰＡＣＩＦＩＣ－ＹＡＭＡＩＣＨＩ 6,762,228 B share 4 ＩＮＴＥＲＮＡＴＩＯＮＡＬ （Ｈ．Ｋ．） ＬＩＭＩＴＥＤ 5 ＴＳＡＩ ＳＨＵ ＨＵＩ 3,904,030 B share 6 ＬＡＵ ＭＩＮＧ ＴＯ 2,379,367 B share 7 ＴＳＡＩ ＣＨＩＥＮ ＦＡＮＧ 1,798,610 B share 8 ＣＳＣ ＳＥＣＵＲＩＴＩＥＳ （ＨＫ） ＬＴＤ． 1,660,378 B share 9 ＴＨＥＲＭＡＳＴＥＲ ＬＩＭＩＴＥＤ 1,637,294 B share 1 ＣＨＥＮ ＨＯＮＧ ＰＩＮＧ B share 0 1,410,134 5 Note to interest-related relations or the consistent action The top three stockholders are the controlling stockholders. TSAI SHU HUI is the spouse of between the above shareholders Mr. WU TSAN KUN, who is the legal representative of EUPA INDUSTRY CORPORATION LIMITED. Shareholder, Mr. CHEN HONG PING is the controlling shareholder of TKC and the supervisor of TSANN KUEN ENTERPRISE CO. LTD (situated in Taiwan). TKC has neither knowledge about whether there is any interest-related relations 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. 4.3 Status 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 Introduction to the main shareholders and the real controlling holder (1) Brief introduction about the controlling shareholders Legal Business Registered Holder’ s name Founding day Mortgage representative scope capital Tsann Kun 1990/01/03 Investment HK$10,000 None FORDCHEEDEVELOPMENTLTD Wu EUPAINDUSTRYCORPORATIONLTD Tsann Kun 1989/07/21 Investment HK$100,000 None Wu FILLMANINVESTMENTS Tsann Kun 1992/07/21 Investment HK$10,000 None LTD Wu (2) Description of the real controlling shareholder A. Name of the real controlling shareholder ? TSANN KUEN ENTERPRISE CO. LTD (situated in Taiwan) B. Legal representative ? TSANN KUN WU C. Registered day ? Nov. 2nd, 1978 D. Major product and service ? Processing, manufacturing and sales of small household appliances as well as their spare parts and equipment, etc. E. Registered capital ? NT$2,212,150,000 F. Equity structure ? common stock 4.3.3 G. Diagram of the relationship between TKC and the real controlling shareholders ﹕ 6 TSANN KUEN ENTERPRISE CO.LTD 100% SINO GLOBAL 99.98% 99.96% DEVELOPMENT LIMITED 63.45% EUPA INDUSTRY FORDCHEE FILLMAN CORPORATION DEVELOPMENT INVESTMENTS LIMITED LIMITED LIMITED 29.19% TSANN KUEN (CHINA) ENTERPRISE CO.LTD.限公司 29.19% 14.59% (62.29%) 5. ADVANCED MANAGEMENT PERSONNEL 5.1、Changes in the shares held by the directors, supervisors and senior administrative officials √ Applicable □ Inapplicable 7 Term of Share- holdin Name Post Sex Age Name Post office g amount Mr. Tasi 2002.5.22 – CEO Male 49 0 0 Yuan Song 2005.5.20 Mr. Yang 2002.5.22 – Director Male 45 0 0 Wen Fang 2005.5.20 Mr. Zhang 2004.5.21 Director Male 45 0 0 Ke Da -2005.5.20 Mr. Zhuang 2002.5.22 Director Male 51 0 0 Xing -2005.5.20 Mr. Liu Director 2002.5.22 Male 46 0 0 Shun Ren (independent) -2005.5.20 Mr. Wei Director 2003.5.16 – Male 48 0 0 Jun Xian (independent) 2005.5.20 Mr. Zhou Director 2003.5.16 – Male 50 0 0 Zong Geng (independent) 2005.5.20 Mr. Yan Supervisory 2002.5.22 – Male 58 0 0 Liang Ji Chairman 2005.5.20 Mr. Lin 2002.5.22 – Supervisor Male 47 0 0 Zong Ming 2005.5.20 2005.4.1- 2008(the Mr. Wang same term Supervisor Male 45 with the 0 0 Cai Wang other members of the 5th BOD) Mr. Luo Secretary of Male 51 2003.1.7 - 0 0 Qing Xing board Mr. Lin Zhi Accounting Male 39 2002.10 -- 0 0 Hong Manager 5.2、Working status of BOD members in the companies of shareholders √ Applicable □ Inapplicable Name Name of Shareholder Title Period Salary or compensation( Yes or No) Mr. TSANN KUEN Zhuang ENTERPRISE CO. executive director 2003.5~ now Yes Xing LTD TSANN KUEN Senior Director of Mr. Yan ENTERPRISE CO. human resource & 2004.2 ~ now Yes Liang Ji LTD purchasing department Mr. TSANN KUEN the vice general Zhang ENTERPRISE CO. manager of operation 2004.6~ now Yes Ke Da LTD department Mr. Lin TSANN KUEN Zong ENTERPRISE CO. Supervisor 2003~ now No Ming LTD 5.3、Annual remuneration (salary, bonus, allowance, etc.) to the present directors, supervisors and senior administrative officials 8 Total annual remuneration RMB 1,720,000 Yuan Sum of the top three directors RMB 949,000 Yuan Sum of the top three senior management RMB 741,000 Yuan Salary for director (independent) RMB 62,500 Yuan /Year Other compensation for director (independent) Reimbursement (travel expense, traffic allowance, communication fees related to attending the meeting) regulated by company policy Thoese do not get the annual remuneration from None TKC Remuneration range (annually) Persons Above RMB 300,000 2 RMB 100,000 -300,000 3 RMB 90,000 -100,000 7 6. REPORT OF THE BOARD OF DIRECTORS 6.1、Operational status during the reported period TKC achieved a sales turnover of RMB 669,200 ten thousand, which is an increase of 59.16%, as compared with the same item achieved in the same period of last year. The major reasons for the growth are due to the following two points: 1. The order taking of manufacturing division is smooth and prosperous. The capacity of the ZhangZhou Manufacturing site is totally lifted up. In terms of sales turnover and profits, the Company achieved 33.77% growth in sales turnover, and 36.98% growth in profits (the sales turnover of year 2004 of manufacturing division is RMB 508,282 ten thousand, and the profits of manufacturing is RMB 34,538 ten thousand). 2. With the set-up of new shops, the sales turnover of wholesaling division increased significantly to RMB 161,000 ten thousand. Which represented an incremental of RMB 120,400 ten thousand compared the sales turnover of last year. 3. Regarding the profits, the net profits of the reported period is gain RMB 3,862 ten thousand which represented 69.45% decrease, as compared with the same item achieved in the same period of last year. The reason for the decrease of profits was that the wholesaling division was newly set up last year and still in investment phase. The total profitability was lowered accordingly. In order to support the loss of wholesaling division in the early phase and create mid-term and long-term 9 benefits, the group will reduce the operation costs, and improve the efficiency to increase profitability. In order to achieve the goal of profits at an early date, the group has adjusted his business strategy and mode to form diversity and area advantage which include closing the shops with poor benefits, looking for better bases of operations, adjusting operation areas in great Shanghai area and Fujian Province, introducing the shopping guides of suppliers, increasing customer success rate, hiring local talents of wholesaling professions, and launching into weekly settlement of payable accounts to gain more pricing supports and rebates from suppliers. Through the above measures, the operation loss of wholesaling division will be effectively reduced at an early date in return for long -term investments and trusts of the shareholders. 6.2 Analysis of the major operation according to the trade and product Unit: RMB’0000 Major operation divided by trade Increase/decr ease (+, -)(%) Major Major Gross (compared Major Divided by Divided by trade operationa operationa profit rate operational with last trade l income l cost (%) income year’s same period) Small household 508,282 425,308 16.32 33.77 30.06 2.39 appliance Domestic 160,942 153,990 4.32 297.28 299.26 (0.47) wholesaling n which: related-party transactions 42,859 39,532 7.76 63.11 60.58 1.45 Major operation divided by product Home comforts 104,427 83,149 20.38 47.33 42.04 2.97 Gourmet cooking 287,930 237,119 17.65 12.86 7.52 4.09 Tea/coffee 89,419 79,255 11.37 88.82 90.58 (0.82) breakfast Others 26,507 25,784 2.73 302.07 306.15 (0.97) Domestic 160,942 153,990 4.32 297.28 299.26 (0.48) wholesaling In which: related-party transactions 42,859 39,532 7.76 63.11 60.58 1.45 10 Pricing principle for In accordance with signed by XIAMENT TAX BUREAU transactions and the corporation. Note to the necessity Expand the effect of group vertical integration, implement the unified and persistence of purchase to reduce costs? increase market share through the related advantages of world-wide operations of related parties. transactions Note: The public company sold its products to its controlling shareholders and its subsidiaries. The total amount of the reported period is RMB42,859 ten thousand yuan. 6.3 Analysis of the major operation according to the geographical location Unit:RMB’0000 Region Major operational income Increase/decrease (%) in major operational income (compared with last year) North America 233,111 31.60 Europe 113,487 25.48 Asia 290,747 187.86 Other 31,878 (38.55) Total 669,224 206.38 Note: Asia area includes China, Japan, Taiwan, and Hong Kong. 6.4 Purchases and sales √ Applicable □ Inapplicable Unit:RMB’0000 Percentage of total Total amount of top 5 suppliers 17.39% 93,631 purchased Total amount of top 5 customers 2 2 2 , 4 6 0Percentage of total sales 33.24% 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 Unit:RMB’0000 Investee Tsann Kuen China (Shanghai) Enterprise Ltd The investing earning of this The percentage in TKC’ s net (2,685) -66.43% period profit 11 Production of household appliances、electronic、light industrial products、modern office equipments and their related modules、 the company Business Range various kinds of computers and their related facilities or spare parts. in which Development of computer software, IC packing and testing. Sale of TKC holds their own products (the exporting of which will not be restricted by a share the requirements of license. and quota, or by whether or not being the product of class B). Net profit (4,223) Investee Tsann Kuen Zhangzhou Enterprise Co. Ltd. The investing earning of this The percentage in TKC’ s net 33,752 835.03% period 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 the products, modern office supplies; designing and producing the molds company Business Range related to the above products. (Excluding those products restricted by in which the government or those whose import or export quota is under TKC holds license administration. When involved in those projects which need a share 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 45,003 Investee Xiamen TSANN KUEN Dian Tong Electronic Co. Ltd The investing earning of this The percentage in TKC’ s net (13,880) -343.4% period profit Wholesaling and its follow-up service of household appliances, computer sets and their attachments, communication materials, the motor and electric equipments, office supplies and the related company Business Range attachments (including kitchen facilities). (For those business items in which which need to be examined and approved first according to the laws TKC holds and regulations, the company will carry out its operation only after it a share has obtained the license) Net profit (21,354) Investee Shanghai Tsann Pao Electronics Co., Ltd The investing earning of this The percentage in TKC’ s net (15,610) -386.20% period profit Wholesaling and its follow-up service of household appliances, the computer sets and their attachments, communication materials, company motor and electric equipments, office supplies and the related in which Business Range attachments (including kitchen facilities). (For those business items TKC holds which need to be examined and approved first according to the laws a share and regulations, the company will carry out its operation only after it has obtained the license). 12 Net profit (15,610) Investee Tsann Kuen Xiamen Technology Co., Ltd. The investing earning of this The percentage in TKC’ s net (14) 0.35% period profit Producing and marketing network service products like internet the server, router and other digital communication devices, network company Business Range multi- media PC products and their assemblies, related software. in which Designing, researching, developing and producing sophisticated TKC holds pressing modules, model normalizers and the like. a share Net profit (19) Investee Chengdu Tsann Kuen Electronics Co., Ltd The investing earning of this The percentage in TKC’ s net (1,024) -25.33% period profit Wholesaling and its follow-up service of household appliances, computer sets and their attachments, communication materials, the motor and electric equipments, office supplies and the related company Business Range attachments (including kitchen facilities). (For those business items in which which need to be examined and approved first according to the laws TKC holds and regulations, the company will carry out its operation only after it a share has obtained the license). Net profit (2,047) Investee T.K. Merchandising Service Co., Ltd. The investing earning of this The percentage in TKC’ s net 0 0% period profit the Software developing and consulting (For those business items which company Business Range need to be examined and approved first according to the laws and in which regulations, the company will carry out its operation only after it has TKC holds obtained the license). a share Net profit 0 6.6 Reason for significant changes in the major business scope and its structure √ Applicable □ Inapplicable The sales turnover of wholesaling division increased significantly to 297%. The percentage of the sales turnover of manufacturing division occupying the total sales decreased form 90% in 2003 to 76% in 2004 accordingly. The percentage of the sales turnover of wholesaling division occupying the total sales increased from 10% in 2003 to 24% in 2004. 6.7 Reason for significant changes in the major business earning ability (gross profit rate) 13 as compared with the previous year √ Applicable □ Inapplicable The gross profits was an increase of 64.27%, as compared with the same item achieved in the same period of last year. The main reason for the increase was that the sales turnover of wholesaling division increased significantly compared with the same item achieved in the same period of last year. 6.8 Analysis on the reason for significant changes in the profit structure as compared with the previous year √ Applicable □ Inapplicable Regarding the profits, the net profits of the reported period is gain RMB 3,862 ten thousand which represented 69.45% decrease, as compared with the same item achieved in the same period of last year. The reason for the decrease of profits was that the wholesaling division was newly set up last year and still in investment phase. The total profitability was lowered accordingly. In order to support the loss of wholesaling division in the early phase and create mid-term and long-term benefits, the group will reduce the operation costs, and improve the efficiency to increase profitability. Analysis on the reason for significant changes in the overall financial position as compared with the previous year √ Applicable □ Inapplicable (1) The decrease of net profits resulted in the decrease of the following financial indicators: Due to the wholesaling division is still in loss, the earning per share of the reported period, RMB 0.04 is 71.43% decreased, as s compared with the same item, RMB 0.14, achieved in the same period of last year. Return on share- holder’s equity (%)-Dilution, 2.68% is 6.34% decreased, as s compared with the same item, 9.02%, achieved in the same period of last year. EPS (after extraordinary income or loss), 4.59% is 3.11% decreased, as s compared with the same item, 7.7%, achieved in the same period of last year. (2) Net cash flow from operating activities per share, -0.24 is 260% decreased, as s compared with the same item, 0.15, achieved in the same period of last year. The price of raw materials, such as petroleum, steel, and aluminum, went upward. The huge funds 14 were occupied because the Company adapted prepaid payment term in raw- materials purchase policy and merchandising policy in wholesaling division. 6.9 Changes in the macroscopic policies, laws or regulations that might bring significant influence to the company’s operating status √ 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 RMB7,160 thousand yuan. 6.10 Status of completeness of earning forecast □ Applicable √ Inapplicable 6.11 The Board of Directors’explanation to the change the year’s operating plan √ Applicable □ Inapplicable Unit:RMB’0000 Original year’s operating plan Actual amount of the reported period Sales Turnover 680,000 669,224 Costs and None 665,231 expenses Explanation Due to the performance of the wholesaling division and failure to meet the original evaluation and sales goals. 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 Unit:RMB’0000 Name Registered capital Item Status Most of the factories are Tsann Kuen Zhangzhou completed, and major Profits in 31,889 45,003 Enterprise Co. Ltd. product lines are all in 2004 production. 15 Name Registered capital Item Status Expand the domestic Xiamen TSANN KUEN Dian 6,500 sales shops of householdLoss in 2004 (21,354) Tong Electronic Co. Ltd electronic appliances Expand the domestic Shanghai Tsann Pao Electronics 1,000 sales shops of householdLoss in 2004 (15,610) Co., Ltd electronic appliances Expand the domestic Chengdu Tsann Kuen 500 sales shops of householdLoss in 2004 (2,047) Electronics Co., Ltd electronic appliances Train the shopping guides and management T.K. Merchandising Service 1,240 staff of wholesaling Loss in 2004 0 Co., Ltd. division and household appliances Total 41,129 5,992 6.14 The explanations from the company’s top management to the auditor’s opinion about operations in this reported period □ Applicable √ Inapplicable 6.15 Business plan in 2005 √ Applicable □ Inapplicable (1).2005 sales target: RMB 7,200,000,000 (2).Focus of operations: A. Costs leadership, expenses control, profitability reinforcement; B. Construct and roll out ERP system and CRM mechanism; C. Continuously drive the improvement of manufacturing skills to advance efficiency; D. Build up the mechanism of unit functions and integrate them with workflows and standard operations; E. Strengthen ISO quality standards, perfect the workflow of quality management; F. Speed up the development of human resources, cultivate professional talents in all aspects; G. Further complete soundness the evaluation mechanism of operating performance; H. Root enterprise culture. Earnings forecast in 2005 □ Applicable √ Inapplicable 6.16 Plan of 2004’ s profits distribution √ Applicable □ Inapplicable (A). Distribution of stock dividend with 0.7 shares for every 10 shares Unit: RMB 16 Item Ratio range Actual ratio Amount Remark Undistributed profit at 42,725,774 beginning Net profit of this period 38,621,206 Appropriate of statutory 10% 10% 3,733,741 surplus reserve Distributable profit 77,613,239 Items for distribution Distribution of stock 1. Statutory public welfare 5%-10% 5% 1,866,871 dividend with 0.7 reserve, and bonus reserve shares for every 10 2. Discretionary surplus shares ? reserves, 3. Fund for dividend 96.91% 70,785,914 ---Stock dividends Undistributed profit 4,960,454 at end (B). Distribution of stock dividend with 0.3 shares for every 10 shares for discrepancy surplus reserve conversion into share capital Unit: RMB Item Amount Remarks Discrepancy surplus reserve at beginning 46,728,388 Add: appropriation of net profit of 2004 Discrepancy surplus reserve at end 46,728,388 Distribution of stock dividend with Description: 0.3 shares for every Minus: distribution of stock dividend with 0.3 30,336,820 10 shares for shares for every 10 shares discrepancy surplus Discrepancy surplus reserve at beginning after 16,391,567 reserve conversion conversion into share capital into share capital Discrepancy surplus reserve after conversion 16,391,567 into share capital * TKC will distribute stock dividends based on the shareholder list of the granted date in the registration book of the Shengzhen registration company. * The granted date will be announced later. (C). The reason for inability to distribute cash dividend and the purpose and plan of unappropriated profits: Reason Purpose and plan To maintain stable financial a. Tsann Kuen Zhangzhou Enterprise Co. Ltd. is the structure, improve cashflows, subsidiary of TKC. In order to strengthen the and reduce the liabilities ratio competitiveness, expand the business scale, the and the risk of insufficient company with the rapid business growth needs the funds funds to acquire the land of 0.86 million square meters from Zhangzhou Economics Development Co. Ltd. b. Due to the loss of Xiamen Tsann Kuen Dian Tong Electronic Co. Ltd. and Shanghai Tsann Pao Electronics Co., Ltd, the funds will be used to cover the insufficiency of the working capital. 7.1 Purchase of assets 17 □ Applicable √ Inapplicable 7.2 Disposal of assets √ Applicable □ Inapplicable On 8 March 2004, the Company received [2005] Di No.102 Notice from Xiamen Municipal Government, which stated that the land in Tsann Kuen Technology Park located at Jinshang Road, Xiamen, will be taken back by the government. The Company arrived at a agreement in respect of the compensation for the withdrew of the land with Xiamen State-owned Land and Buildings Management Bureau on 31 March 2005. The acquired price is RMB 136,424,180. The acquisition gain will be recognized in the first quarter of year 2005. Impact of 7.1 and 7.2 on business continuity and stability of the management. Tsann Kuen Xiamen Technology Co., Ltd. is the manufacturer of PC products invested by TKC. In 2003, Tsann Kuen Xiamen Technology Co., Ltd. transformed into the factory of developing and processing modules. Though the land is acquired on 31 March 2005, Tsann Kuen Xiamen Technology Co., Ltd. leased the factory space from Tsann Kuen Zhangzhou Enterprise Co. Ltd. since November 2004. There is no impact on its business continuity and stability of the management. 7.3 Ｓｉｇｎｉｆｉｃａｎｔ ｇｕａｒａｎｔｅｅ √ Applicable □ Inapplicable Unit:RMB’0000 Outstanding guarantee( guarantee for the subsidiaries are excluded) Guaranteed Date of Guaranteed Type of Period of Finished Rel Related party unit transaction（date amount guarantee guarantee or not guarantee or of signature） not Total of guarantee None Total of balance of guarantee None Outstanding guarantee for the subsidiaries Total of guarantee 22,227.95 Total of balance of guarantee 22,227.95 Outstanding guarantee( guarantee for the subsidiaries are included) 18 Total of guarantee 22,227.95 Total of guarantee to the total net assets 15.59% Ｉｌｌｅｇａｌ ｇｕａｒａｎｔｅｅ Guarantee amount for the controlling shareholder and other related parties with None less than 50% ownership Guarantee amount for those whose liabilities ration is over 70% None Whether guarantee amount is more than 50% of the net assets (Yes or No) No Ｉｌｌｅｇａｌ ｇｕａｒａｎｔｅｅ None 7.4 Significant related-parties transations 7.4.1 √ Applicable □ Inapplicable Unit:RMB’0000 Sales Purchases Relative party’s name Amount % Amount % Tsann Kuen Enterprise Ltd. 20,740 47.61% 71,392 87.09% Tsann Kuen Japan Inc. 22,777 52.29% 0.00% Thermaster Electronic 43 0.10% 8,662 10.57% (Xiamen) Ltd Taiwan Supreme Inc., Ltd 644 0.79% Tsann Kuen USA Inc. 608 0.74% Tsann Kuen Hong Kong Ltd 668 0.81% Total 43,560 81,974 7.4.2 Creditor’s right or liability between parties √ Applicable □ Inapplicable Unit:RMB’0000 Funds to the relative party Funds from the relative party Relative party’s name Amount Balance Amount Balance Tsann Pao Co., Ltd. (The same ultimate holding company) 3 3 0 134 Tsann Kuen USA Inc. 1 1 23 232 (The same ultimate holding company) Tsann Kuen Hong Kong Ltd (Other companies controlled by key senior management 33,321 3,864 33,289 1,039 and their family members with close connection) 19 Thermaster Electronic (Xiamen) Ltd (Other companies controlled by key senior management 266 349 5 54 and their family members with close connection) Tsann Kuen Japan Inc. 460 165 514 1,271 (The same ultimate holding company) Tsann Kuen Enterprise Ltd. 14,352 726 16,425 19,112 (Ultimate holding company) Sino Global Development Ltd. 1 0 1 0 (The same ultimate holding company) Eupa Industry Corporation Ltd. (Shareholder) 0 0 0 64 Total 48,404 5,108 50,257 21,906 7.5 Deputized financing □ Applicable √ Inapplicable 7.6 Commitment √ Applicable □ Inapplicable Ｔｈｅ Ｓｈａｒｅｈｏｌｄｅｒｓ’Ｇｅｎｅｒａｌ Ｍｅｅｔｉｎｇ ｏｆ ＴＫＣ ｐａｓｓｅｄ ｔｈｅ ｄｉｓｔｒｉｂｕｔｉｏｎ ｐｌａｎ ｆｏｒ ２００３’ ｓ ｐｒｏｆｉｔ ｏｎ Ｍａｙ ２１ｓｔ， ２００４． Ａｎｄ ｔｈｅ ｄｉｓｔｒｉｂｕｔｉｏｎ ｐｌａｎ ｆｏｒ ２００３’ ｓ ｐｒｏｆｉｔ ｗａｓ ｅｘｅｃｕｔｅｄ ｏｎ Ｊｕｎｅ １６ｔｈ， ２００４． 7.7 Significant litigation or arbitration □ Applicable √ Inapplicable 7.8 The independent directors’performance of duty Name Times of Personal Deputized Absence Remark meetings Presence Attendance (Times) (Times) (Times) Mr. Liu Shun Ren 7 5 0 2 Overseas business trip Mr. Wei Jun Xian 7 6 0 1 Overseas business trip Mr. Zhou Zong Geng 7 6 0 1 Overseas business trip TKC held 7 times of BOD meetings in 2004. Because 3 independent directors are all the decision makers of their units, responsible for important business activities, under some circumstances, they were unable to some of the BOD meetings. Objections from independent directors □ Applicable √ Inapplicable 8. REPORT OF THE SUPERVISORY COMMITTEE □ Applicable √ Inapplicable 9. FINANCIAL REPORT 9.1 The auditor’ s opinion Deloitte Touche Tohmatsu CPA has issued for our company a standard unqualified audit report. 20 9.2 The disclosed comparative consolidated balance sheet, income statement , cashflows statement and those of the mother company (see attachments). 9.3 Change in accounting policies, accounting assessment □ Applicable √ Inapplicable 9.4 Correction to the accounting errors occurring during the reported period. □ Applicable √ Inapplicable 21 9.5 Remarks to the change in consolidating range of the financial statements √ Applicable □ Inapplicable Name of the subsidiary Place Registered capital Ownership by TKC (%) Principal activity Consolidated Direct Indirect Xuzhou Tsann Kuen XuZhou RMB1,000,000 - 100 Whole sale and retail of Yes Electronics Co., Ltd (Xuzhou Tsann Kuen) consumable electronic appliances, computers and communication equipments T.K. Merchandising Service Xiamen RMB12,400,000 95 5 Soft developing and consulting Yes Co., Ltd (T.K. Merchandising Service) (Signed by:) Tsai Yuan Song The chairman of the Board of Directors of TSANN KUEN (CHINA) ENTERPRISE CO. LTD on Apr. 22th, 2005 22 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 NOTES 2004 2003 RMB’000 RMB’000 Revenue 4 6,692,236 4,204,669 Cost of sales (5,792,975) _________ (3,657,248) ________ Gross profit 899,261 547,421 Other operating income 6 64,231 44,495 Selling and distribution expenses (630,819) (266,532) Administrative expenses (228,515) _________ (165,746) ________ Profit from operations 7 104,158 159,638 Interest income 3,686 2,441 Interest expenses (50,394) _________ (13,418) ________ Profit before tax 57,450 148,661 Income tax expense 8 2,783 _________ (14,609) ________ Profit before minority interests 60,233 134,052 Minority interests (21,612) _________ (7,636) ________ Net profit for the year 38,621 _________ 126,416 ________ _________ ________ RMB RMB Basic earnings per share 10 4 cents _________ 13 cents ________ See accompanying notes to the financial statements. 23 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2004 NOTES 2004 2003 RMB’000 RMB’000 ASSETS Non-current assets Property, plant and equipment 11 1,581,578 1,611,324 Goodwill 12 6,668 7,880 Land use rights 13 77,717 79,623 Other investments 15 71 _________ 71 ________ 1,666,034 _________ 1,698,898 ________ Current assets Inventories 16 1,402,730 1,316,084 Trade and other receivables 17 1,406,433 1,244,048 Amounts due from related companies 27(c) 136,952 169,755 Restricted deposits 21 41,383 49,660 Bank balances and cash 507,172 _________ 582,689 ________ 3,494,670 _________ 3,362,236 ________ Total assets 5,160,704 _________ 5,061,134 ________ EQUITY AND LIABILITIES Capital and reserves Share capital 18 1,011,227 879,328 Other reserves 19 352,974 391,424 Retained profits 75,746 _________ 130,658 ________ 1,439,947 _________ 1,401,410 ________ Minority interests 248,718 _________ 189,560 ________ Non-current liabilities Long-term bank loans 21 _________- 50,000 ________ Current liabilities Trade and other payables 22 1,608,764 2,004,929 Long-term payable-due within one year 20 - 23,414 Long-term bank loans-due within one year 21 50,000 - Amounts due to related companies 27(c) 484,320 550,786 Income tax liabilities 2,075 14,943 Short-term bank loans 21 1,326,880 _________ 826,092 ________ 3,472,039 _________ 3,420,164 ________ Total equity and liabilities 5,160,704 _________ 5,061,134 ________ _________ ________ See accompanying notes to the financial statements. 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004 Other reserves (note 19) 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 2003 Balance at 1 January 2003 676,406 128,655 112,478 66,775 41,573 509 349,990 249,023 1,275,419 Exchange differences arising from translation of subsidiaries’ financial statements not recognised in income statement - - - - - (425) (425) - (425) Capitalisation 202,922 - - - - - - (202,922) - Net profit for the year - - - - - - - 126,416 126,416 Appropriations ________- _______- 11,960 _______ 23,919 ______ 5,980 ______ ____- 41,859 _______ (41,859) ________ _________- Balance at 31 December 2003 879,328 ________ 128,655 _______ 124,438 _______ 90,694 ______ 47,553 ______ 84 ____ 391,424 _______ 130,658 ________ 1,401,410 _________ YEAR ENDED 31 DECEMBER 2004 Balance at 1 January 2004 879,328 128,655 124,438 90,694 47,553 84 391,424 130,658 1,401,410 Change of measurement currency used certain subsidiaries into RMB - - - - - (84) (84) - (84) Capitalisation 131,899 - - (43,967) - - (43,967) (87,932) - Net profit for the year - - - - - - - 38,621 38,621 Appropriations ________- _______- 3,734 _______ ______- 1,867 ______ ____- 5,601 _______ (5,601) ________ _________- Balance at 31 December 2004 1,011,227 ________ 128,655 _______ 128,172 _______ 46,727 ______ 49,420 ______ ____- 352,974 _______ 75,746 ________ 1,439,947 _________ 25 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 RMB’000 RMB’000 OPERATING ACTIVITIES Profit from operations 104,158 159,638 Adjustments for: Depreciation of property, plant and equipment and investment properties 311,096 246,759 Impairment loss reversed on property, plant and equipment (10) (1,956) Impairment loss provided on property, plant and equipment 4,064 - Loss(gain) on disposals of property, plant and equipment 23,404 (356) Gain on disposal of investment properties - (10,679) Amortisation of land use rights 1,906 1,906 Amortisation of goodwill 1,212 1,213 Accounts payable written back - (2,050) Effect of foreign exchange rate changes (84) _________ (425) ________ Operating cash flows before movements in working capital 445,746 394,050 Increase in inventories (86,646) (895,080) Increase in trade and other receivables (162,385) (821,733) Decrease in amounts due from related companies 32,803 75,543 (Decrease) increase in trade and other payables (396,165) 1,395,718 (Decrease) increase in amounts due to related companies (66,466) _________ 15,594 ________ Cash generated by operations (233,113) 164,092 Income taxes paid (10,085) _________ (32,415) ________ NET CASH (USED IN) FROM OPERATING ACTIVITIES (243,198) _________ 131,677 ________ INVESTING ACTIVITIES Interest received 3,686 2,441 Proceeds on disposals of property, plant and equipment 7,317 2,196 Proceeds on disposals of investment properties - 14,384 Purchases of property, plant and equipment (316,125) (507,179) Acquisition of subsidiary _________- 1,000 ________ NET CASH USED IN INVESTING ACTIVITIES (305,122) _________ (487,158) ________ 26 2004 2003 RMB’000 RMB’000 FINANCING ACTIVITIES Cash received from minority shareholders 37,546 50,642 Interest paid on bank loans (50,394) (13,418) Repayments of bank loans (2,087,233) (1,118,465) New bank loans raised 2,588,021 1,844,408 Decrease (increase) in restricted deposit 8,277 (49,660) Repayment of long-term payable (23,414) _________ (7,805) ________ NET CASH FROM FINANCING ACTIVITIES 472,803 _________ 705,702 ________ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (75,517) 350,221 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 582,689 _________ 232,468 ________ CASH AND CASH EQUIVALENTS AT END OF YEAR 507,172 _________ 582,689 ________ _________ ________ ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash 507,172 _________ 582,689 ________ _________ ________ 27