闽灿坤Ｂ(200512)2005年年度报告摘要（英文）

TSANN KUEN (CHINA) ENTERPRISE CO., LTD. SECURITY CODE:200512 ABBREVIATION:閩燦坤 B RELEASE NO:2006-0004 TSANN KUEN (CHINA) ENTERPRISE CO. LTD 2005 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. 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 senior 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 Sun Mei Mei Address for contact No.88 Xing Long Road, Huli No.88 Xing Long Road, Huli Industry Industry District, Xiamen, P.R. District, Xiamen, P.R. China. China. Telephone 0592-5600887 0592-5681819 Fax 0592-5600886 0592-5600886 E-mail address allenlo@tkl.tsannkuen.com mm_sun@tkl.tsannkuen.com 3. MAJOR FINANCIAL INFORMATION AND INDEX 3.1 Major accounting data Unit: RMB’000 Increase,(Decrease) Item 2005 2004 2003 (%) Gross sales 5,279,791 5,082,820 3.88 4,204,669 Gross profit 145,386 456,253 (68) 148,661 Net profit (368,008) 38,621 (1,053) 126,416 Net profit after (257,317) 66,125 (489) 107,945 extraordinary items Cash from Operating 73,400 (243,198) (130) 131,677 Activities Increase,(Decrease) End of 2005 End of 2004 End of 2003 (%) Total Assets 4,521,144 5,230,685 -13.56 5,061,134 Stockholder’s equity(Minority equity excluded) 1,071,939 1,439,947 -25.56 1,401,410 3.2 Major financial index Unit: RMB Increase or decrease Item 2005 2004 2003 (%) Earning Per Share - diluted (0.33) 0.04 (966.25) 0.14 Earning Per Share - weighted (0.33) 0.04 (966.25) 0.14 Return on share- holder’s equity -34.33% 2.68% (37.01) 9.02% (%)-Dilution EPS (after extraordinary income -24.00% 4.59% (28.60) 7.70% or loss) Net cash flow from operating 0.07 (0.24) (127.44) 0.15 activities per share Increase or decrease Item 2005 2004 2003 (%) Net asset per B share 0.9637 1.4240 (32.32) 1.59 Net asset per B share (adjusted) 0.9548 1.4052 (32.05) 1.57 About the extraordinary income or loss √ Applicable □ Inapplicable Unit: RMB Less: (A) Subsidy income (2,642,516.13) (B) Reverse of asset impairment 0.00 (C) Non-operating income (33,915,553.26) (D) Non-operating income 127,549,763.99 (E) Minority’s extraordinary income 19,969,447.09 (F) Income tax effect of Extraordinary items (269,090.45) Total 110,692,051.24 2 3.3 Summary on difference between IAS and PRC GAAP √ Applicable □ Inapplicable Unit: RMB’0000 PRC GAAP IAS Net profit (365,258) (488,204) Summary on 1. Adjustment to record property, plant and equipment difference acquired before 1994 at swap rates 2. Adjustment for asset re-evaluation 3. Asset Revaluation adjustment 4. Others 4. CHANGES OF STOCK AND SHAREHOLDER’S EQUITY 4.1、Changes of stock capital Unit: share Shares at beginning Increase/decrease (+,-) Shares at ending Item Reserve- Apportioning New Share % Bonus issue converted shares Others Subtotal Share % shares shares Share not in circulation - 1、Founders’ shares 636,797,118 62.97% 44,575,798 19,103,914 63,679,712 700,476,830 62.97% Including: Shares of State Holders Shares of legal person holders within the boundary of China Foreign legal holder’s shares 636,797,118 62.97% 44,575,798 19,103,914 63,679,712 700,476,830 62.97% Others 2.Shares of raising legal persons 3、Shares of the internal staff 4、Preferred shares or others Total shares not in circulation 636,797,118 62.97% 44,575,798 19,103,914 63,679,712 700,476,830 62.97% Shares in circulation 1、Common share in RMB 2.Foreign capital shares on sale within the boundary of China 374,430,225 37.03% 26,210,116 11,232,906 37,443,022 411,873,247 37.03% 3.Foreign capital shares on sale outside the boundary of China 4、Others Total shares in circulation 374,430,225 37.03% 26,210,116 11,232,906 37,443,022 411,873,247 37.03% Total shares 1,011,227,343 100% 70,785,914 30,336,820 101,122,734 1,112,350,077 100% 3 4.2 Shares held by the top ten stockholders (1)Number of the shareholders: The total number of the company’s shareholders at the end of the reported period is 77,890. (2)Shares held by the top ten stockholders Unit: share Name of Shareholder Attribute of Shares held at Shares in Shares in stockholder Holding the year end circulation or mortgage or Ratio not in congealment circulation 1 FORDCHEE DEVELOPMENT LIMITED Other 29.19% 324,685,968 324,685,968 None 2 EUPA INDUSTRY Other None CORPORATION LIMITED 29.19% 324,685,805 213,447,878 3 Foreign None FILLMAN INVESTMENTS LIMITED stockholder 14.59% 162,342,984 162,342,984 4 Foreign Unknown TIMMERTON CO INC stockholder 1.30% 14,505,644 0 5 CORE PACIFIC-YAMAICHI Foreign Unknown INTERNATIONAL (H.K.) LIMITED stockholder 1.13% 12,546,126 0 6 MORGAN STANLEY INT’L Foreign Unknown (CHINA)-FIRM stockholder 0.57% 6,380,198 0 7 Foreign Unknown KGI ASIA LIMITED stockholder 0.51% 5,699,570 0 8 Foreign Unknown CSC SECURITIES (HK) LTD. stockholder 0.41% 4,598,087 0 9 Foreign Unknown TSAI SHU HUI stockholder 0.39% 4,294,433 0 10 CHEN YAYA Other 0.26% 2,894,588 0 None Shares held by top ten stockholders No Shares held Types of Shares Name of Shareholder at the year end 1 EUPA INDUSTRY CORPORATION LIMITED 111,237,927 B Shares 2 TIMMERTON CO INC 14,505,644 B Shares 3 CORE PACIFIC-YAMAICHI B Shares INTERNATIONAL (H.K.) LIMITED 12,546,126 4 MORGAN STANLEY INT’L (CHINA)-FIRM 6,380,198 B Shares 5 KGI ASIA LIMITED 5,699,570 B Shares 6 CSC SECURITIES (HK) LTD. 4,598,087 B Shares 7 TSAI SHU HUI 4,294,433 B Shares 8 CHEN YAYA 2,894,588 B Shares 9 HTHK-VALUE PARTNERS INTELLIGENT B Shares FD-CHINA B SH FD 2,857,222 10 LAU MING TO 2,617,304 B Shares Note to the consistent action between the above The top three stockholders are the controlling shareholders stockholders. TSAI SHU HUI is the spouse of Mr. WU TSAN KUN, who is the legal representative of the top three controlling company. 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 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 FILLMANINVESTMENT Tsann Kun 1992/07/21 Investment HK$10,000 None SLTD 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 ﹕ 5 5. ADVANCED MANAGEMENT PERSONNEL 5.1、Changes in the shares held by the directors, supervisors and senior administrative officials √ Applicable □ Inapplicable Term of 2005.01.01 2005.12.31 Reasons for Name Position Sex Age Position Shares Shares Changes Chairman of 2005.5.27 Mr. Tsai Yuan Board of Male 50 - 0 0 Song Directors 2008.5.26 2005.5.27 Mr. Yang Wen Director, CEO Male 47 - 0 0 Fang 2008.5.26 2005.5.27 Mr. Zhang Ke Director Male 46 - 0 0 Da 2008.5.26 2005.5.27 Mr. Zhuang Director Male 52 - 0 0 Xing 2008.5.26 2005.5.27 Mr. Wei Jun Director Male 49 - 0 0 Xian (independent) 2008.5.26 2005.5.27 Mr. He Jing Director Male 50 - 0 0 Hua (independent) 2008.5.26 2005.5.27 Mr. Xiao Director Male 62 - 0 0 Feng Xiong (independent) 2008.5.26 2005.5.27 Mr. Zhou Supervisor Male 51 - 0 0 Zong Geng 2008.5.26 2005.5.27 Mr. Diao Wei Supervisor Male 52 - 0 0 Ren 2008.5.26 Mr. Wang Cai 2005.4.1- Supervisor Male 47 0 0 Wang 2008.5.26 Mr. Luo Qing Secretary of Male 52 2003.1.7 - 0 0 Xing the board Senior Mr. Lin Zhi Accounting Male 41 2002.10 -- 0 0 Hong Manager 6. REPORT OF THE BOARD OF DIRECTORS 6.1、Operational status and business structure during the reported period: In the year 2005, the household appliances industry encountered impacts from both global price trend upward in raw materials and inflation in exchange rate of RMB, either critical factors did corrupt our profit-making organism. We also frustrated from a wholly–completed market which we were inexperienced 3C (computer, consumer electronics, and telecommunication) wholesaling market in PRC. Although we frustrated from past strategy of World Channel, yet this experience let us integrate a healthy corporate structure and a clear vision of World Factory. 6 Our main business operational status is as follows, Gross revenue in year 2005 was summed to RMB 5,896 million which was lesser by 12% than that of last reporting period; among them, revenue in household appliances segment was RMB 5,279 million, 4 % up. Gross revenue in the wholesaling segment decreased by RMB 616 million with declining rate of 62% and major reason was the closedown of 3C wholesaling segment on 1 July 2005. Generally speaking, gross revenue of household appliances segment in the North America and Europe was a tradeoff. Our battlefield would be the North America market and it explained almost 50 %. As a matter of product, gross sale of gourmet cooking was the number one in product mix. But it’s market weakened since 2005. The rising star in 2006 is home comforts. Net realized loss in 2005 was RMB 368 million and operational income from household appliances segment was RMB 123 million with decreasing rate of 73% and the reason of decreasing trend was price upward in international raw material market, inflation in exchange rate of RMB, and major profit producer- Tsann Kuen (Zhangzhou) Enterprise Co., Ltd. which tax exempt decreased by 50% since 2005. Household appliances segment was discontinued on 1 July 2005 and its business activity was terminated. Accordingly, operational loss and disposal loss totals RMB 476 million, of course, operational income was dramatically worse than that of last reporting period.. 6.2 Analysis of the major operation according to the trade and product Major Business by trade Increase/decrease Major Major Gross (+, -)(%) Major Divided by by trade operationaloperational profit rate (compared with operational trade income cost (%) last year’s same income period) Small household 527,979 478,772 9.32 3.88 12.57 (7.00) appliance Domestic wholesaling 61,625 73,366 -19.05 (61.71) (52.36) (23.37) In which: related-party 35,486 33,195 6.46 (17.20) (16.03) (1.31) transactions Major operation by product Home comforts 137,514 123,316 10.33 31.68 48.31 (10.05) Gourmet cooking 256,986 225,316 12.32 (10.75) (4.98) (5.33) Tea/coffee breakfast 92,480 87,174 5.74 3.42 9.99 (5.63) Other 40,999 42,967 -4.80 54.67 66.64 (7.53) Domestic wholesaling 61,625 73,366 -19.05 (61.71) (52.36) (23.37) In which: related-party 35,486 33,195 6.46 (17.20) (16.03) (1.30) transactions Pricing principle for In accordance with signed by XIAMENT TAX BUREAU and the transactions 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 advantages of related transactions world-wide operations of related parties. 7 6.3 Analysis of the major operation according to the geographical location Unit:RMB’0000 Trade Product Major operational Increase/decrease (%) in major income operational income (compared with last year) Home comforts 219,170 (5.98) Gourmet cooking 124,718 9.90 Manufacturing of Tea/coffee breakfast 107,639 (17.08) household appliances Other 76,452 139.83 Domestic Wholesaling 61,625 (61.71) Total 589,604 (11.90) 6.4 Utilization state of raised funds □ Applicable √ Inapplicable Changes in proposed funds projects □ Applicable √ Inapplicable 6.5 Utilization state of non-raised funds： √Applicable □ Inapplicable Unit : RMB ‘0000 Item Amount Status Profit or loss To invest in Tsann Kuen Major plants and (Zhangzhou) Enterprise Co., 33,076 production line are Profit in 2005 20,199 Ltd. completed To invest in Xiamen Tsann Kuen Dian Tong Electronic Co. 6,500Discontinued Loss in 2005 (45,316) Ltd. To invest in Xiamen Tsann Kuen Dian Tong Electronic Co. 1,000Discontinued Loss in 2005 (14,742) Ltd. Chengdu Tsann Kuen Discontinued Loss in 2005 500 (451) Electronics Co., Ltd. Total 41,076 (40,310) 6.6 The explanations from the Board of Directors to the auditor’s opinion of non-unqualified. □ Applicable √ Inapplicable 8 6.7 The Board of Directors’ explanation to the profit distribution or capital surplus turned to capital. □ Applicable √ Inapplicable Net loss disclosed in this reporting period, so there is no available earnings to distribute to stockholders. 7. Material events 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 Disposal of assets √ Applicable □ Inapplicable Legal Profit Date of Transaction Nature of entity of Involved rights and claims Transaction Price contributes to Transaction gain or loss transaction transaction complete transferred net income transferred Under Agreement﹕ 1) 40% of 1st payment of RMB 54 million was Non collected on Apr 4, 2005 Sales of 2)30% of 2nd payment of March 31, related Tsann Kuen 13,642.42 2,741.84 2,741.84 Not yet RMB 40 million was 2005 parties Science Park collected on May 7, 2005 transaction 3)30% of final payment of RMB 41 million will be collected before Jun 30, 2006. Sales of The first payment of RMB Non partial asset 50 million was collected related of July 1 , 2005 14,380.00 (10,548.93) (10,548.93) Not yet on Jul 4, 2005. Other parties wholesaling actions will base on transaction segment Assets transfer agreement Events of 7.1 and 7.2 impact on corporate operational continuity and stability (1) Tsann Kuen Xiamen Technology Co., Ltd.(TKK) is the manufacturer of PC products invested by TKC. In 2003, Tsann Kuen Xiamen Technology Co., Ltd. TKK was 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. (2) According to “Asset Transfer Agreement” which entered into in Shanghai on 1 July 2005. Major assets of the domestic wholesaling segment were sold to YOLO household 9 appliances Co., Ltd. There is no demand-supply relationship between household appliance segment and wholesaling segment, and those two segments were operated independently, so it is no impact or influence on stability and continuity of TKC management. Fund impropriation and settlement √ Applicable □ Inapplicable Fund impropriation tablets of TKC’s controlling stockholders and related parties Type Name who Relationship Account Beginning Occurrence Interest Accumulated End of Reasons Nature dominate of 2005 in 2005 Amount 2005 Non-operating between (interest capital Listed excluded) company and the Dominator Subsidiaries of the listed company Accounts and its receivable 2,990 9,187 - (8,433) 3,744 Sales Operarting impropriation related parties Tsann Kuen Ultimate holding Other Enterprise Ltd. company receivable 726 11,229 - (11,199) 756 Advance from customers Non-perarting impropriation Tsann Kuen USA Inc. The same ultimate Other holding company receivable 1 1 - (1) 1 Disbursement on behalf of others Non-perarting impropriation Accounts receivable 5,579 27,155 - (22,612) 10,122 Sales Non-perarting impropriation Tsann Kuen Japan Inc. The same ultimate Other holding company receivable 165 961 - (1,015) 111 Advance from customers Non-perarting impropriation (Other companies controlled by key senior management and their family Financing to/borrowing members with from related parties， close connection) Advance from customers Tsann Kuen Hong Kong Ltd Other receivable 10,146 266 - (1,942) 8,470 Non-perarting impropriation Accounts receivable 0.4 3.1 - (3) 0.5 Sales Non-perarting impropriation Thermaster Electronic The same ultimate Other (Xiamen) Ltd. holding company receivable 349 21,658 - (373) 21,634 Advance from customers Non-perarting impropriation Tsann Pao Co., The same ultimate Other Ltd holding company receivable 3 (3) Advance from custome Non-perarting impropriatio Subtotal 19,959.4 70,460.1 (45,581) 44,838.5- 10 UNIT : RBM ,0000 Type Name who Relationship Account Beginning Occurrence Interest Accumulated End of Reasons Nature dominate between of 2005 in 2005 Amount 2005 Non-operating Listed (interest capital company and excluded) the Dominator Subsidiaries of Tsann Kuen China Other - Disbursement Non-operating the listed (Shanghai) receivable on behalf of impropriatio company and its Enterprise Ltd. Subsidiary 1,136 205 (1,172) 169 others n related parties Other - Advance receivable from customers Tsann Kuen and (Zhangzhou) Disbursement Enterprise Co., on behalf of Non-operating Ltd. Subsidiary 11,226 17,004 (20,637) 7,593 others impropriation Tsann Kuen Other - (Zhangzhou) South receivable Port Eletronics Disbursement Enterprise Co., on behalf of Non-operating Ltd. Subsidiary - 188 (148) 40 others impropriation Tsann Kuen Other - Xiamen receivable Disbursement Technology Co., on behalf of Non-operating Ltd. Subsidiary 282 504 (70) 716 others impropriation Financing to / 650 borrowing from related Short-term parties and Xiamen Tsann investment and Disbursement Kuen Dian Tong other on behalf of Non-operating Electronic Co. Ltd. Subsidiary receivables 36,163 108,071 (53,414) 91,470 others impropriation Shanghai Tsann Disbursement Pao Electronics Other - on behalf of Non-operating Co., Ltd. Subsidiary receivables 84 1,316 - 1,400 others impropriation Subtotal 48,891 127,288 650 (75,441) 101,388 Related nature NA person and its controlling legal entity NA NA NA NA NA NA NA NA NA Other related NA NA NA parties and NA subsidiary NA NA NA NA NA NA Total 68,850.4 197,748.1 650 (121,022) 146,226.5 Schedule of proposed settlement Expected time to settle Method of settlement Amount（RMB ‘0000） Jan, 2006 Cash settlement 2 Feb, 2006 Cash settlement 2,338 Mar, 2006 Cash settlement 1,029 Apr, 2006 Cash settlement 5,775 May, 2006 Cash settlement 2,700 Jun, 2006 Cash settlement 4743 Jul, 2006 Cash settlement 4853 Aug, 2006 Cash settlement 4853 Sep, 2006 Cash settlement 4679 Oct, 2006 Cash settlement Nov, 2006 Cash settlement Dec, 2006 Cash settlement Total 30,972 Ending balances of non-operating impropriation of major stockholders and their related parties totaled RMB 309.71 million. 11 Can settlement project solve the fund impropriation before end of 2006 ? √ Applicable □ Inapplicable 7.3 Significant guarantee √ Applicable □ Inapplicable Unit:RMB’0000 Guarantee on non-related company (subsidiaries company excluded ) Name of guarantor Date of Guaranteed Type of Duration Due ated party transaction amount guarantee or not guarantee （date of (yes or no) signature） Total guarantee occurred during reporting period None Total guarantee at end of reporting period None Guarantee on subsidiaries company Total guarantee occur on holding company during 36,777 reporting period Total guarantee for holding company at end of 4,808 reporting period Total guarantee amount(subsidiaries company included) Total guarantee 4,808 Total guarantee / Total Assets 4.49% Among them Guarantee for other Stockholders of Holding Company 0 or Holding Company Guarantee, directly or indirectly, for Company’s 0 liability which debt ratio is greater than 70% Amount of guarantee exceed net asset by 50% 0 Total above three guarantee 0 7.4 Significant related-parties transactions 7.4.1 √ Applicable □ Inapplicable Unit:RMB’0000 Purchases and accept services Sales and to provide services Relative party’s name provided Amount % Amount % Tsann Kuen Enterprise Ltd. 9,187 1.56% 41,140 9.28% Tsann Kuen Japan Inc. 27,155 4.61% 0 0.00% Thermaster Electronic 42 0.01% 9,238 2.08% (Xiamen) Ltd Total 36,384 6.17% 50,378 11.37% 7.4.2 Creditor’s right or liability between parties √ Applicable □ Inapplicable Unit:RMB’0000 12 Funds to the relative party Funds from the relative party Relative party’s name Amount Balance Amount Balance Tsann Kuen Enterprise Ltd. (Ultimate holding company) 30 756 (62) 19,050 Tsann Kuen USA Inc. (The same ultimate holding company) 0 1 (127) 105 Tsann Kuen Hong Kong Ltd (Other companies controlled by key senior management and their family members with close connection) (1,677) 8,470 (731) 1,266 Thermaster Electronic (Xiamen) Ltd (Other companies controlled by key senior management and their family members with close connection) 21,285 21,634 (48) 6 Tsann Kuen Japan Inc. (The same ultimate holding company) (54) 111 (893) 378 Tsann Pao Co., Ltd. (The same ultimate holding company) (3) 0 (134) 0 Eupa Industry Corporation Ltd. (Shareholder) (64) 0 Total 19,581 30,972 (2,059) 20,805 7.5 Deputized financing □ Applicable √ Inapplicable 7.6 Commitment □ Applicable √ Inapplicable 7.7 Significant litigation or arbitration □ Applicable √ Inapplicable 8. REPORT OF THE SUPERVISORY COMMITTEE The Meeting of the Supervisory Committee At 20 April 2005, in the first meeting of the year 2005, the following decision was released in the newspapers of on 22 April 2005, and on 22 April 2005.The decision made is as follows: (1) Working Report of the Supervisors for the year of 2004. (2) Annual Report and Brief report for the year of 2004. (3) Amended The rules of meeting for Supervisors (4) Propose candidates for the next Supervisory Committee and submit of compensation program for Supervisors. On 27 May in the second meeting of the year 2005, the following decision was released in the newspapers of and on 28 May 2005,.The decision made is to elect Mr. Zhou Zong Geng to be a convener for Committee in next year. In 2005 supervisory committee performed the supervisory functions, conducted duties, and their independent opinion is as follows: 13 1. The Company was operated under the Law: The decision-making process of the Company is lawful. The Company establishes a functional internal control system. No evidence of any managerial irruption on Laws, Regulations, Articles of corporations, and the interest of the Company and stockholders when practices. 2. Examination on corporate financials: reported financial statements were presented fairly, in materially respect, the operational results and financial status. 3. The actual input items of latest fund-raising were performed under the Promissory items。 4. Assets acquisition or disposal transacted in reasonable market price. No case of inside trading has been found which conducted by the company. No relative corruption acts which will do damage to corporate assets or stockholder’s equity. 5. 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. 6. After carrying out examinations to the year 2005’s work of the company’s directors and other senior administrative persons, no case of violation has been found, and all the above-mentioned persons were recognized to be responsible and faithful to their duties in the year 2005. 9. FINANCIAL REPORT 9.1 The auditor’s opinion Deloitte Touche Tohmatsu CPA has issued for our company a standard unqualified audit report. 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 9.5 Changes in consolidated entities in two reporting periods. √ Applicable □ Inapplicable 9.5.1 New reporting entities Name of subsidiary Ownership , % Date of establishment or Direct Indirect acquisition Tsann Kuen (Zhangzhou) South Port 75 0 Feb, 2005 Eletronics Enterprise Co., Ltd. EUPA (Hong Kong) Limited. 100 0 Apr, 2005 9.5.2 Subsidiaries nullified in this reporting period. Name of subsidiary Ownership , % Date of establishment or Direct Indirect acquisition Zhengzhou Tsann Kuen 100 May, 2005 Electronics Co., Ltd. Xuzhou Tsann Kuen 100 Sep, 2005 Electronics Co., Ltd; T.K. Merchandising Service 95 5 Dec, 2005 Co., Ltd, 14 (Signed by:) Tsai Yuan Song The chairman of the Board of Directors of on May. 8th, 2006 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 NOTES 2005 2004 RMB’000 RMB’000 (Restated) Continuing operations Revenue 6 5,279,791 5,082,820 Cost of sales (4,788,869) _________ (4,246,838) ________ Gross profit 490,922 835,982 Other operating income 8 98,913 68,807 Selling and distribution expenses (259,755) (316,777) Administrative expenses (144,214) (121,588) 15 Interest income 5,084 2,902 Finance costs 9 (45,564) _________ (13,073) ________ Profit before tax 145,386 456,253 Income tax expense 10 (30,751) _________ 2,783 ________ Profit for the year from continuing operations 114,635 459,036 Discontinued operation Loss for the year from discontinued operation 11 (602,839) _________ (398,803) ________ (Loss) profit for the year 7 (488,204) _________ 60,233 ________ Attributable to: Equity holders of the parent (368,008) 38,621 Minority interests (120,196) _________ 21,612 ________ (Loss) profit for the year 12 (488,204) _________ 60,233 ________ RMB RMB Basic earnings (losses) per share From continuing and discontinued operations 14 (33) cents _________ 4 cents ________ From continuing operations 7 cents _________ 33 cents ________ See accompanying notes to the financial statements. 16 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2005 NOTES 2005 2004 RMB’000 RMB’000 (Restated) ASSETS Non-current assets Property, plant and equipment 15 1,434,728 1,581,578 Goodwill 16 6,668 6,668 Prepaid operating rental – non-current 17 19,687 75,914 Other investments 19 71 _________ 71 ________ 1,461,154 _________ 1,664,231 ________ Current assets Inventories 20 1,347,983 1,409,892 Trade and other receivables 21 860,330 1,406,433 Prepaid operating rental – current 17 554 1,803 Amounts due from related companies 30(c) 448,380 199,771 Restricted deposits 26,067 41,383 Derivative financial instruments 25 957 - Bank balances and cash 375,719 _________ 507,172 ________ 3,059,990 _________ 3,566,454 ________ Total assets 4,521,144 _________ 5,230,685 ________ EQUITY AND LIABILITIES Capital and reserves Share capital 22 1,112,350 1,011,227 Other reserves 23 322,637 352,974 (Accumulated losses) retained profits (363,048) _________ 75,746 ________ Equity attributable to equity holders of the parent 1,071,939 1,439,947 Minority interests 353,791 _________ 248,718 ________ Total equity 1,425,730 _________ 1,688,665 ________ Current liabilities Trade and other payables 26 1,306,139 1,669,167 Long-term bank loans-due within one year 24 - 50,000 Amounts due to related companies 30(c) 439,914 493,898 Income tax liabilities 1,704 2,075 Short-term bank loans 24 1,346,688 1,326,880 Derivative financial instruments 25 969 _________ ________- 3,095,414 _________ 3,542,020 ________ Total equity and liabilities 4,521,144 _________ 5,230,685 ________ See accompanying notes to the financial statements. 17 CCONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Notes 2005 2004 RMB’000 RMB’000 OPERATING ACTIVITIES (Loss)Profit for the year (488,204) 60,233 Adjustments for: Interest income (5,599) (3,686) Finance costs 9 67,125 50,394 Income tax expense 10 31,144 2,783 Depreciation of property, plant and equipment 355,223 311,096 Impairment loss reversed on property, plant and equipment (620) (10) Impairment loss provided on property, plant and equipment - 4,064 Loss(gain) on disposals of property, plant and equipment 31,529 23,404 Amortisation of prepaid operating rental 969 1,906 Amortisation of goodwill - 1,212 Effect of foreign exchange rate changes _________- (84) ________ Operating cash flows before movements in working capital (8,433) 451,312 Decrease (increase) in inventories 61,909 (86,646) Decrease (increase) in trade and other receivables 587,030 (162,385) (Increase) decrease in amounts due from related companies (52,490) 32,803 Decrease in trade and other payables (429,116) (396,165) Decrease in amounts due to related companies (53,984) _________ (66,466) ________ Cash generated by operations 104,915 (227,547) Income taxes paid (31,515) _________ (15,651) ________ NET CASH FROM (USED IN) OPERATING ACTIVITIES 73,400 _________ (243,198) ________ INVESTING ACTIVITIES Interest received 5,599 3,686 Proceeds on disposals of property, plant and equipment 147,880 7,317 Purchases of property, plant and equipment (309,841) (316,125) Receipt of loan due from related companies 17,091 - Payment on behalf of related companies (213,211) _________ ________- NET CASH USED IN INVESTING ACTIVITIES (346,481) _________ (305,122) ________ (Continued) 18 2005 2004 RMB’000 RMB’000 FINANCING ACTIVITIES Cash received from minority shareholders 12,059 37,546 Interest paid on bank loans (68,766) (50,394) Repayments of bank loans (2,024,951) (2,087,233) New bank loans raised 2,257,970 2,588,021 Decrease in restricted deposit 15,316 8,277 Repayment of long-term loan (50,000) _________ (23,414) ________ NET CASH (USED IN) FROM FINANCING ACTIVITIES (141,628) _________ 472,803 ________ NET DECREASE IN CASH AND CASH EQUIVALENTS (141,628) (75,517) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 507,172 _________ 582,689 ________ CASH AND CASH EQUIVALENTS AT END OF YEAR 375,719 _________ 507,172 ________ ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS Bank balances and cash 375,719 _________ 507,172 ________ See accompanying notes to the financial statements. 19