GINTIAN INDUSTRY (GROUP) CO., LTD.
Goldfield Industrial (Group) Co., Ltd
Audited Financial Statements
For the year ended December 31, 2001
AUDITORS’ REPORT TO THE SHAREHOLDERS OF
(Incorporated in the Peoples’ Republic of China with limited liability)
We have audited the consolidated accounts on pages 3 to 20 of Gintian Industry (Group) Co., Ltd.
(the “Company”) and its subsidiaries (together with the Company referred to as the “Group”) for the
year ended December 31, 2001. These consolidated accounts are the responsibilities of the Group’s
directors. Our responsibility is to express an opinion on these consolidated accounts based on our
audit.
We conducted our audit in accordance with International Standards on Auditing as promulgated by
the International Federation of Accountants. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the accounts are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
accounts. An audit also includes assessing the accounting principles used and significant estimates
made by directors, as well as evaluating the overall accounts presentation. However, the evidence
available to us was limited in connection with the followings:
- As at December 31, 2001, the Group’s accumulated losses amounted to RMB1,329,603,000
(2000: RMB1,346,164,000). Current liabilities exceeded current assets by
RMB1,334,083,000 (2000: RMB1,436,046,000) whilst bank loans of RMB887,004,000 (2000:
RMB872,004,000) have been overdue for repayment. Currently, the majority of the banks
have undertaken legal action against the Group as the Group is unable to pay its debts as they
| fall due. | These raise substantial doubts as to whether the Group can be operated as a going | |
|---|---|---|
| concern. | Accordingly, it might not be appropriate for the financial statements to be prepared | |
| on a going concern basis. | Should the Company be unable to continue to operate on the basis |
which is dependent on the outcome of negotiations for continuing bank financing and the
outcome of the litigation cases being in the process, adjustments would have to be made to
reduce the value of assets to their recoverable amounts, to provide for any further liabilities
which might arise, and to reclassify non-current assets and long-term liabilities as current assets
and liabilities. Currently, these have not yet been reflected in the consolidated financial
statements for the year ended December 31, 2001. Consequently, we are unable to ascertain
the impact of these adjustments to the net assets and net losses of the Group.
- As at December 31, 2001, properties under development amounted to RMB359,068,000, of which
an amount of approximately RMB22,600,000 (2000: RMB112,978,000) have already been under
custody of the banks since July 2000 whilst an amount of RMB35,669,000 (2000:
RMB37,759,000) is not properly supported by the legal evidence so that we are unable to
conclude the ownerships. As the Group does not have sufficient working capital, the
construction work of the remaining balance of RMB300,799,000 has been suspended and there is
no plan set by the management as to when the construction work is to be resumed. As there was
no satisfactory evidence available that we can ascertain the net realizable values of these
properties under development, we are unable to determine with reasonable certainty about the
realizable values of these balances.
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GINTIAN INDUSTRY (GROUP) CO., LTD. - CONTINUED
3 As at December 31, 2001, the Group has received over 68 legal claims which are in the process
in different courts in the PRC. The parties which undertook the legal claims against the Group
are mainly banks, construction contractors and customers and these claims mainly relate to the
bank loans overdue for repayments, the outstanding construction fee and the sales of properties.