13:14 TONG REN TANG<08069> - Quarterly Results Announcement (2) 3. Turnover The Group's turnover is derived principally from the sales of Chinese Patent Medicine. An analysis of the Group's turnover is as follows: For the three months ended 31 March 2005 2004 RMB'000 RMB'000 Sales of medicine: Domestic 300,914 304,999 Overseas 2,948 9,141 Agency fee income - 25 --------- --------- 303,862 314,165 ========= ========= 4. Finance (cost) income, net For the three months ended 31 March 2005 2004 RMB'000 RMB'000 Interest expenses on bank loans repayable within 5 years (1,089) (669) Interest income 188 259 Exchange (loss)/gain, net (297) (583) Others (3) (14) --------- --------- (1,201) (1,007) ========= ========= 5. Profit before taxation Profit before taxation was determined after charging the following: For the three months ended 31 March 2005 2004 RMB'000 RMB'000 Depreciation of property, plant and equipment 6,591 6,002 ========= ========= 6. Taxation Pursuant to the relevant regulations of the PRC, a high-technology enterprise ("HTE") located in a designated area of Beijing Economic and Technological Development Zone ("BETDZ") is subject to Enterprise Income Tax ("EIT") at a rate of 15%. Moreover, upon approval by the relevant local tax bureau, such a HTE is entitled to an exemption from EIT for the first three years from its commencement of operations and a 50% reduction for the three years thereafter. The certification as a HTE is subject to an annual review by the relevant government bodies. In addition, an amount equal to the EIT exemption or reduction from 15% has to be appropriated to a non-distributable tax reserve. In June 2004, the Company renewed its HTE certification granted by Beijing Science-Technology Committee for the years of 2004 and 2005. The Company was registered in the BETDZ and has obtained an approval from the BETDZ Local Tax Bureau ("BETDZ LTB") (Document Jingdishuikaijianmianfa [2000] No. 23) to enjoy an EIT exemption for three years commencing from 2000 and a 50% reduction in EIT for the three years thereafter. Moreover, BETDZ LTB has also verbally confirmed to the Company that the above EIT preferences should be available to the Company as long as the Company's registered address is in BETDZ and it remains as a HTE. However, the preferential tax treatment the entities comprising the Group obtained, including the EIT exemption as mentioned in the preceding paragraph, may be subject to review by higher authorities as Beijing Administration of Taxation issued a circular in October 2002, namely Jingguoshuihan [2002] No. 632, stating that a HTE can enjoy the preferential tax treatment only if both the registration and operation are in the designated area. Should the EIT exemption not be available to the Company, an additional EIT liability for this period would arise. Management believes that the possibility of such liabilities arising is unlikely.