京东方Ａ(000725)京东方2001年年度报告（英文版）

BOE TECHNOLOGY GROUP CO., LTD. 2001 ANNUAL REPORT Important Board of Directors and its members of BOE TECHNOLOGY GROUP CO., LTD. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. The report was prepared in both Chinese and English versions. Should there be difference in interpretation in the two versions, the Chinese one shall prevail. Director Sun Jiping was absent from the Board meeting and entrusted Director Song Ying to vote on his behalf in written form. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: BOE - B, Stock Code: 200725 April 17, 2002 2001 ANNUAL REPORT Contents Chapter I Company profile Chapter II Financial Highlights and Business Highlights Chapter III Changes in Share Capital and Particulars about Shareholders Chapter IV Directors, Supervisors, Senior Executives and Employees Chapter V Administrative Structure Chapter VI Shareholders’ General Meeting Chapter VII Report of the Board of Directors Chapter VIII Report of the Supervisory Committee Chapter IX Significant Events Chapter X Financial Report Chapter XI Documents for Referenc 2001 ANNUAL REPORT CHAPTER I COMPANY PROFILE 1. Legal Name of the Company: In Chinese: 京东方科技集团股份有限公司 Short Form in Chinese: 京东方 In English: BOE TECHNOLOGY GROUP CO., LTD. Short Form in English: BOE 2. Legal Representative: Wang Dongsheng 3. Secretary of the Board of Directors: Chen Yanshun Authorized Representative in Charge of Securities Affairs: Zhong Huifeng Liaison Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing Tel: 010 - 64366264, 010 – 64370756 Fax: 010 – 64366264 e-mail yschen@boe.co.cn, hfzhong@boe.com.cn 4. Registered Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing Office Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing Post Code: 100016 The Company’s Internet Web Site: http://www.boe.com.cn E-mail: web.master@boe.com.cn 5. Newspapers Chosen for Disclosing the Information of the Company: Securities Times and Ta Kung Pao Internet Web Site Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: Capital and Securities Department of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form for A-share: BOE - A, Stock Code for A-share: 000725 Short Form for B-share: BOE - B, Stock Code for B-share: 200725 7. Other Related Information: Date of First Registration: April 9, 1993 Address of First Registration: No.10, Jiuxianqiao Road, Chaoyang District, Beijing Dates of Later Registrations: June 2,1997; December 25,1997; December 28,2000; June 18,2001; December 10,2001 Address of Later Registrations: No.10,Jiuxianqiao Road, Chaoyang District, Beijing Business License Registration Number of the Company’s legal person: 100001501259 2001 ANNUAL REPORT Tax Registration Number: GSJZ No.110105101101660 DSJZ No. 11010510110166-0 Domestic Auditor of the Company: Pricewaterhouse Coopers Zhongtian Certified Public Accountants Office Address: Building 12, Rui’an Square, No.333 Huaihaizhong Road, Shanghai International Auditor of the Company: Pricewaterhouse Coopers China, Co.,Ltd. Office Adress of the Company's International Auditor: 18/F, Beijing Kerry Center, No.1 Guanghua Road, Chaoyang District, Beijing 2001 ANNUAL REPORT CHAPTER II FINANCIAL HIGHLIGHTS AND BUSINESS HIGHLIGHTS 1. Major accounting data as of the year 2001 (Unit: In RMB’000) Income from sales 2,683,798 Gross profit of sales 340,289 Net income from other business lines 9,729 Operating profit 149,715 Profit before taxation: 93,471 Net profit 22,817 Net cash flows arising from operating activities 330,468 Net increase/decrease in cash and cash equivalents 1,207,639 Note: The financial statements respectively prepared under CAS and IAS adopted the same consolidation method, so there was no great difference between the two auditing results of sales revenue (income from main business lines). However, due to the difference in treatment of provisions for devaluation of suspended equipments in CAS and IAS, there existed a difference of RMB 37.43 million between the two auditing results of net profit as of 2001. Such difference was mainly due to the provisions for devaluation of assets withdrew for 14’ CMT production line of Beijing Panasonic CMT Co., Ltd. (a investee joint venture of the Company), which stopped operation due to market problem. Under the PRC EAR, the provisions were stated in prior years’ profit based on the retroactive adjustment while under IAS, the provisions were stated in the profit as of the report period. 2. Accounting Data and Financial Indexes over the Past Three Years as Ended the report Period: (Unit: In RMB) Items 2001 2000 1999 Income from sales (In RMB’0000) 2,683,798 2,234,822 708,072 Net profit (In RMB’000) 22,817 103,856 74,679 Total assets (In RMB’000) 4,034,811 3,977,329 2,216,014 Shareholders’ equity (In RMB’000) 2,113,010 2,148,451 1,069,517 Earnings per share (In RMB) 0 04 0 21 0 15 Net assets per share (In RMB) 3.84 3.91 2.18 Net cash flows per share from operating 0.60 0.46 0.21 activities (In RMB) Net return on equity (%) 1.08% 4.83% 6.98% Note 1: The said diluted data are calculated on the basis of total share capital 489.554 million shares at the end of the year 1999 and total share capital 549.554 million shares at the end of the year 2000 and 2001. Note 2: The above data were prepared in accordance with the consolidated accounting statements. 2001 ANNUAL REPORT Note 3: From the end of the report period to the date of disclosing this report, there was no change in share capital of the Company. 3.. Changes in Shareholders’ Equity in the Report Period (Unit: In RMB’000) Share capital Capital Public Surplus capital public reserve Undistributed Items Total (Share) Reserve &Legal public welfare fund profit Beginning of the year 549,554,000 568 211,718 235,716 2,148,451 Increase as of the year 23,603 22,817 22,817 Decrease as of the year 10 8 81,843 58,258 End of the year 549,554,000 558 235,313 176,690 2,113,010 Increase of Reason for Withdrawing according to profit as of the changes regulations year 2001 2001 ANNUAL REPORT CHAPTER III CHANGE IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS 1. Statement of change in the Company’s shares (ended Dec. 31, 2001) (Unit: In Share) Increase/decrease (+, -) this time Shares Before Increase After Shares Bonus transferred change of Others Subtotal change allotment shares from public issuance reserves I. Unlisted shares: 1. Promoters’ shares Including State-owned shares: 328029000 328029000 Domestic legal person’s shares: 0.0 0.0 Foreign legal person’s shares: Others: 2. Raised legal person’s shares: 3575000 3575000 3. Employees’ shares: 8450000 8450000 4.Preference shares or others: Total listed shares: 34005400o 340054000 II. Listed shares: 1.Domestically listed RMB ordinary 60000000 60000000 shares 2.Domestically listed foreign shares (B 149500000 149500000 share:) 1. Overseas listed foreign shares: 2. Others: Total listed shares: 209500000 209500000 III. Total shares: 549554000 549554000 2.Issuance and Listing Approved by State Council Securities Regulatory Commission with ZWF [1997] No. 32 document, the Company issued and listed 115 million domestically listed foreign shares (B-share) on June 10, 1997 at the issuance price of HK$ 3.08 per share. After issuance of B-share, share capital of the Company increased to 376.58 million shares from 261.58 million shares. Approved by Beijing Securities Regulatory Commission with JZJH [1997] No. 67 document, the Company implemented profit distribution plan at the rate of 3 bonus shares for every 10 shares with RMB 1.00 in cash as to cumulative undistributed profit by the year 1996. The last trade date of B-share is Nov. 5, 1997, the ex-right or ex-dividend of B-share is Nov. 6, 1997. Total share capital of the Company increased to 489.554 million shares from 376.58 million shares after the distribution of bonus shares. Approved by China Securities Regulatory Commission with ZJGSZ [2000] No. 197 document, the Company additionally issued 60 million RMB ordinary shares (A-share) on Dec. 19, 2000 at the issuance price of RMB 16.80 per share. After the additional issuance, share capital of the Company increased to 549.554 million shares from 489.554 million shares. On Jan. 12, 2001, the said 60 million A-share were listed with Shenzhen Stock Exchange for trade Issuance of the employees’ shares, amounting to 6.5 million shares, of the Company has been completed by Feb. 1993 with par value RMB 1.00 per share. After Nov. 6, 1997, when the Company implemented profit distribution plan at the rate of 3 bonus shares for every 10 shares with RMB 1.00 in cash, the employees’ shares of the Company have increased to 8.45 million shares from 6.5 million shares. 3. About shareholders (1) Ended Dec. 31, 2001, the Company had totally 60,054 shareholders, including 3 legal person shareholders, 44,026 shareholders of A-share and 16,025 shareholders of B-share. 2001 ANNUAL REPORT (2) Particulars about the shares held by top ten shareholders by Dec.31, 2001 Amount of Proportion in Name of shareholder Type shares (in share) total shares 1 State-owned legal Beijing Electron Tube Plant 325,429,000 59.22% person’s shares 2 Beijing Yixinwei Development Center of Picture Legal person’s 3,575,000 0.65% Technology shares 3 SOUTH CAPITAL NOMINEES LIMITED 2,721,400 0.50% B share 4 Beijing Picture Tube General Plant State-owned legal 2,600,000 0.47% person’s shares 5 RIPPERTON ASSETS LIMITED 2,318,470 0.42% B share 6 SCBL A/C ULTRAMATIC HOLDINGS LIMITED 1,897,800 0.35% B share 7 Lin Binquan 1,650,200 0.30% B share 8 STARBURST ASSETS LIMITED 1,590,200 0.29% B share 9 Guomeng Investment Group CO., LTD 1,510,000 0.27% B share 10 PERFECT SPACE INVESTMENTS 1,270,000 0.23% B share Note 1:Changes in the shares held by shareholders holding over 5% (including 5%)of total shares: Beijing Electron Tube Plant, the Number 1 shareholder of the Company, was restructured because of its implementation of debt-equity swap. 325.429 million state-owned legal person’s shares originally held by Beijing Electron Tube Plant were transferred gratis to Being BOE Investment & Development Company Co., Ltd. and Beijing Dongdian Development Company with the former holding 292.059 million shares (constituting 53.15% of the Company’s total share capital) and the latter 33.37 million shares (constituting 6.07% of the Company’s total share capital). After the transfer, Beijing BOE Investment & Development Company Co., ltd. and Beijing Dongdian Development Company became the first and the second largest shareholders of the company. The registration of the above-mentioned change is in process. For the details, please refer to Public Notice on the Change in the Equity of BOE TECHNOLOGY GROUP CO., LTD. carried in Nov.10, 2001 issue of Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. Note 2: The above-mentioned un-circulated shares were not mortgaged or blocked. Note 3: Beijing BOE Investment & Development Company Co., Ltd. is a debt-to-equity company co-funded by Beijing Electronics Holding Company Limited, the superior holding company of Beijing Electron Tube Plant, and China Huarong Assets Managements Company on the basis of assets (debt) restructuring of Beijing Electron Tube Plant. The two sides respectively hold 56.25% and 43.75% of its total shares. Beijing Dongdian Development Company and Beijing General Plant of Picture Tube are both solely funded by Beijing Electronics Holding Company Limited. Their relationship is unknown to the shareholding companies of the shares under circulation. (3) About the control shareholders Beijing BOE Investment & Development Company Co., Ltd. holds 53.15% of the Company’s total shares, therefore is the virtual control shareholder of the Company; Beijing Electronics Holding Company Limited holds 56.25% of the total shares of Beijing BOE Investment & Development Company Co. Ltd. and therefore is the virtual controller of the Company. Beijing Electronics Holding Company Limited is a state-owned holding company under Beijing Municipal Government and is authorized to operate state-owned assets. Beijing BOE Investment & Development Co., Ltd. Legal Representative: Wang Dongsheng 2001 ANNUAL REPORT Date of Foundation: Oct.15, 1956 Location: No.10 Jiuxianqiao Road,Chaoyang District, Beijing Registered Capital: 680.982 million RMB Type: Limited liability Company Business Scope: project investment, manufacture and design of electronic products, communications equipment, computer software & hardware, paper products, industrial gasses, mould and matrix, steam; acquisition and sales of mechanical and electrical equipment, metal products, computer software and hardware and supporting equipment, construction material, general merchandise; technical development, technical consultation, technical service and transfer, undertaking exhibitions and sales Beijing Electronics Holding Company Limited Legal Representative: Bao Yutong Date of Foundation: April 8, 1997 Location:No.12 Jiuxianqiao Road, Chaoyang District, Beijing Registered Capital: 1307.37 million RMB Type: Limited Liability Company (owned and funded solely by the state) Business scope: operation and management of state-owned assets within authorization; Communications equipments, audio & visual products for broadcasting and television; computer and its supporting equipments and the applied products; electronic raw material and components; home electric appliances and electronic products; electronic surveying instruments and meters; mechanical and electric equipments; electronic transportation products and investment in business fields other than electronics and its management; development of real estate, lease and sales of commodity apartments; property management. 2001 ANNUAL REPORT CHAPTER IV DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES 1. Directors, supervisors and senior executives (1) General Introduction Shares held Receiving pay Name Sex Age Title Office term Year- Year- from the begin end company? Wang Male 45 Chairman of the Board, Chairman of June 2001-June 2004 6500 6500 Yes Dongsheng the Executive Committee, Chief Executive Jiang Yukun Male 49 Vice Chairman of the Board June 2001-June 2004 3900 3900 No Tai Zhonghe Male 52 Independent Director June 2001-June 2004 0 0 No Wang Hui Male 47 Director June 2001-June 2004 0 0 No Zhao Caiyong Male 55 Director June 2001-June 2004 6500 6500 No Shi Dong Male 46 Director June 2001-June 2004 2600 2600 No Liang Xinqing Male 50 Executive Director, President and June 2001-June 2004 2600 2600 Yes Chief Operator Song Ying Female 45 Executive Director and Senior Vice June 2001-June 2004 6500 6500 Yes President Chen Yanshun Male 37 Executive Director, Secretary of the June 2001-June 2004 0 0 Yes Board and Senior Vice President Sun Jiping Male 43 Executive Director and Senior Vice June 2001-June 2004 0 0 Yes President Ren Jianchang Male 56 Executive Director and Vice President June 2001-June 2004 0 0 Yes Wang Aizhen Female 53 Meeting Covener of the Supervisory June 2001-June 2004 1300 1300 No Committee Mu Chengyuan Male 34 Supervisor September 2001-June 650 650 No 2004 Yang Anle Male 32 Supervisor June 2001-June 2004 0 0 No Xu yan Female 51 Supervisor June 2001-June 2004 3900 3900 Yes Han Guojian Male 49 Vice President June 2001-June 2004 2600 2600 Yes Zhang Peng Male 38 Chief Tech. Supervisor June 2001-June 2004 0 0 Yes Wang Ynajun Male 33 Chief Financial Supervisor June 2001-June 2004 2600 2600 Yes Wang Jiaheng Male 34 Vice President June 2001-June 2004 0 0 Yes Gong Xianqing Male 37 Vice President June 2001-June 2004 0 0 Yes Han Weiping Male 39 Vice President June 2001-June 2004 0 0 Yes Qin Jun Male 34 Vice President June 2001-Dec. 2001 0 0 Yes Note: Shares held by directors, supervisors and senior executives are all employees’ shares. (2) Directors and supervisors assuming title in and receiving pay from shareholding companies Title Name Beijing Dongdian Beijing BOE Investment & Development Company Limited Development Company Jinag Yukun Director, President and Secretary of the Party Committee Zhao Caiyong Director, Standing Vice President and Chief Financial Supervisor General Manager Shi Dong Supervisor and Vice President Wang Aizhen Supervisor, Deputy Secretary of the Party Committee, Secretary of Discipline Commission and Chairwoman of Labor Union Yang Anle Manager of Auditing and Accounting Department Chief Accountant Mu Chengyuan Secretary of the Board and Vice President (3) Annual Salaries The remuneration and award of the Company’s directors, supervisors and senior executives are determined by the Company according to the evaluation of their performance under the company’s salary and personnel system. The total annual remuneration of the Company’s present directors, supervisors and senior executives is (including staple salary, various money awards, welfare, allowance, housing subsidy and other subsidies): RMB 1,993,700 Total remuneration of the top three directors is: RMB 995,000 Total remuneration of the top three senior executives is: RMB 995,000 Total sum of subsidy for independent directors and other subsidies is: USD 5,000 In the year of 2001,there were 14 directors, supervisors and senior executives 2001 ANNUAL REPORT receiving remuneration from the Company, among whom 3 people enjoyed an annual salary below RMB 100,000, 9 between 100,000 and 200,000 and 2 above 200,000. (4) Directors, supervisors and senior executives leaving their posts during the report period: After re-election of the company’s Supervisory Committee when the previous term expired, Mr. Duan Yuke did not continue to assume the post of the company’s supervisor for retirement. Due to some work reasons, Mr. Zhang Xu resigned the post of supervisor with the Company’s third Board of Directors. (5) Presidents, vice presidents and secretaries of Board engaged or disengaged during the report period After the deliberation and adoption of the First Session of the Third Board of Directors of the Company, Mr. Wang Dongsheng was engaged as the Company’s Chairman of Executive Committee and Chief Executive; Mr.Liang Xinqing the company’s President and Chief Operator; Ms. Song Ying, Mr. Chen Yanshun and Mr. Sun Jiping the Company’s Senior Vice President; Mr.Ren Jianchang, Mr.han Weiping, Mr.Han Guojian, Mr.Qin Jun, Mr.Gong Xiaoqing and Mr.Wang Jiaheng the Company’s Vice President; Mr.Wang Yanjun the Company’s Chief Financial Supervisor, Mr.Zhang Peng the Company’s Chief Technical Supervisor and Mr. Chen Yanshun the Company’s Secretary of the Board. 2. Employees By the end of the year 2001, the Company had a total of 1,728 employees, including 215 administrative personnel, 52 financial personnel, 193 technical personnel, 47 sales personnel, 46 highly skilled workers and 1,175 skilled workers. Educational background of employees: 431 persons received college or higher level education, including: 5 holding a doctoral or post-doctoral degree, 29 master’s degree, 266 college graduates and 131 junior college graduates. The Company has no retirees. 2001 ANNUAL REPORT CHAPTER V ADMINISTRATIVE STRUCTURE 1. The Company’s current management structure Proceeding from the principle of protecting the interests of the vast number of shareholders, in strict line with the requirements of The Corporation Law, Law of Securities, The Administrative Rules of Listed Companies and other laws and regulations, the Company has constantly standardized its management, perfected its structure of legal person management. The details are as follows: (1) On shareholders and General Meeting of Shareholders: The Company can guarantee all shareholders, the medium and small shareholders in particular, enjoy an equal status. Based on The Regulatory Opinions For Shareholders’ General Meeting of Listed Companies, the Company formulated its own Rules of Procedures For General Meeting Of Shareholders so as to ensure that the convening, holding, voting and other procedures of Shareholders’ General Meeting strictly follow the related regulations. (2) On control shareholders and listed company: All significant decisions of the Company were made according to regulated procedures and the control shareholders have never intervened with the company’s decision-making and operational activities, neither directly nor indirectly. The principle of “Five Separations” has been adopted by the Company and the control shareholder in dealing with personnel, assets, financial, institutional and business matters. The Company’s Board of Directors, Supervisory Committee and other internal organizations can operate independently. The related transactions of the company are fair and reasonable and the pricing criteria have been fully disclosed. (3) On directors and Board of Directors: The company stipulated the duties and obligations of directors. The Board of Directors established the post of Independent Director, revised the Working Regulations of Directors and the Board of Directors and therefore regulated the work of directors and the Board of Directors from the obligations of directors, the duties and makeup of the Board of Directors and other perspectives. According to the requirements of The Administrative Rules of Listed Companies, the Board of Directors has set up under it the Executive Committee, Auditing Committee and the Committee for Nomination, Salary & Remuneration and Evaluation to ensure the standard operation of the Board of Directors. (4) On supervisors and the Supervisory Committee: The Supervisory Committee formulated the Rules of Procedures for the Supervisory Committee. Supervisors of the company can earnestly perform their duties and supervise the finance of the Company and the performance of the Company’s directors and senior executives in the spirit of being responsible for shareholders. (5) On performance evaluation and stimulus & restraint mechanism: The company adopts a market-oriented personnel policy and has established a fairly good system of performance evaluation and stimulus indexes. (6) On related interest parties: The company can fully respect and protect the legitimate rights and interests of banks and other creditors, employees, clients and other related interest parties in order to promote sustained and healthy development of the company. (7) On information disclosure and transparency: The Company laid down The Rules of Information Disclosure to guarantee that the company’s information disclosure be conducted in a standard and orderly way and that all shareholders have equal access to information. 2001 ANNUAL REPORT 2. The performance of Independent Director Being deliberated and adopted by the 15th session of the company’s 2nd Board of Directors and the 2000’ General Meeting of Shareholders, Mr. Tai Zhonghe was engaged as the company’s Independent Director. During his term, Mr. Tai Zhonghe performed his duty as Independent Director as provided by The Guiding Opinions On the Establishment Of Independent Director System In Listed Companies, actively expressing independent opinions on the Company’s major projects and playing an important role in promoting the Company’s scientific and standardized decision-making process. 3. The separation between the Company and the control shareholder in dealing with personnel, assets, financial, institutional, business and other matters The Company’s business activities, personnel, assets, institutions and finance are separated from that of the control shareholder. The company has independent staff, financial system and set of institutions, and it has complete assets and full capacity for production and operation. (1) Staff: The Company independently decides its labor, personnel, salary and other matters. The Company’s president, vice presidents, chief financial supervisor, secretary of the Board and other senior executives are all full-time personnel and they do not have any dual duty in proprietary company. (2) Assets: The Company has independent and complete and clear property rights. The Company independently owns the assets required by its major business activities, such as manufacturing equipments, factory buildings, inventory and intellectual property rights and so on. There is no occupation of the Company’s assets by its control shareholder. (3) Finance: The Company has set up independent financial departments. The financial personnel are all full-time personnel. The Company has also established standard and independent financial and accounting system and the system of financial administration for its subsidiaries. Meanwhile, the Company has kept archives of its financial administration to strengthen the administration of its various original certificates and account books and it has also arranged proper administrative personnel. The Company opened independent account with the bank and has independently paid taxes in accordance with the law. (4) Institutions: The Company has set up organizations and institutions independent from its control shareholder, and it has never handled business together with its control shareholder in the same office. (5) Business activities: The Company handles its business affairs independent from its control shareholder and has full and independent capacity for operation and business activities. 4. The evaluation and stimulus system for senior executives The Company has established a system of evaluation & stimulus indexes. According to the Proposal on the Establishment of Award Fund examined and adopted by the company’s 2000’ General Meeting of Shareholders, the second session of the Company’s third Board of Directors examined and adopted Proposal for Drawing the Company’s 2000’ Award Fund and earmarked RMB 1,104 million as the award fund on the basis of the company’s net profit of 11,040 million RMB in the year 2000. To guarantee the sound implementation of the evaluation & stimulus system, the Board of Directors founded under it the Auditing Committee and the Committee for Nomination, Salary & Remuneration and Evaluation (CNSRE) and the CNSRE is in specific charge of evaluating, awarding and punishing the Company’s directors and senior executives. 2001 ANNUAL REPORT CHAPTER VI SHAREHOLDERS’ GENERAL MEETING 1. Announcement of General Meeting of Shareholders On April 21, 2001, the Company published the Announcement of BEIJING ORIENT ELECTRONICS GROUP CO., LTD. on Holding 2000’ General Meeting of Shareholders in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. On August 21, 2001, the Company published the Announcement of BOE TECHNOLOGY GROUP CO., LTD. on Holding 2001’ 1st Extraordinary General Meeting of Shareholders in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. 2. The convening and holding of General Meeting of Shareholders On June 29, 2001, the Company’s 2000’ general meeting of shareholders was held at Beijing Haiyi Hotel. 87 shareholders and shareholders’ representatives attended the meeting, representing 357,997,116 shares (valid), accounting for 65.14% of the Company’s total shares; including 44 shareholders of RMB based ordinary shares (A share), representing 325,557,350 shares; 43 shareholders of the domestically listed foreign shares (B share), representing 32,439,766 shares. The meeting examined and adopted the following proposals: 1) 2000’ Work Report of the Board of Directors 2) 2000’ Work Report of the Supervisory Committee 3) 2000’ Work Report of the Company’s Business Activities 4) 2000’ Report of the Company’s Financial Settlement 5) 2000’ Profit Distribution Proposal & 2001’ Profit Distribution Policy 6) Proposal on the Establishment of Award Fund 7) Proposal on the Application of the Additional Proceeds Raised through the Issuance of A Shares 8) Proposal on Changing the Company’s Registered Name 9) Proposal on Revising the Company’s Articles of Association 10) Proposal on the Listing of Zhejiang BOE Vacuum Electronics Co., Ltd. 11) Proposal on Purchasing Land-use Right in Beijing Economic & Technological Development Zone 12) Proposal on Re-election of the Board of Directors 13) Proposal on Re-election of the Supervisory Committee. On September 28, 2001, the Company’s 2001’ 1st extraordinary general meeting of shareholders was held in the meeting room of the Company.40 shareholders and shareholders’ representatives attended the meeting, representing 355,130,307 shares (valid), accounting for 64.62% of the Company’s total shares, including 13 shareholders of RMB based ordinary shares (A share), representing 329,041,700shares; 27 shareholders of the domestically listed foreign shares (B share), representing 26,088,607 shares. The meeting examined and adopted the following proposals:1) Proposal on Revising the Company’s Articles of Association 2) Interpretations on Submitting Related Matters for the Deliberation of 2001’ 1st Extraordinary General Meeting of Shareholders 3) Proposal on Additional Election of Supervisors 3. Announcement of resolutions adopted by General Meeting of Shareholders On June 30, 2001, the Company published Announcement of BEIJING ELECTRONICS GROUP CO., LTD. on Resolutions Adopted by 2000’ General Meetinfg of Shareholders in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. On September 29, 2001, the Company published Announcement of BOE TECHNOLOGY CO., LTD. on Resolutions Adopted by 2001’ 1st Extraordinary General Meeting of Shareholders in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. 2001 ANNUAL REPORT 4. Election for the Company’s directors and supervisors After being examined and adopted by the Company’s 2000’ General Meetingof Shareholders, Mr.Wang Dongsheng, Mr.Jiang Yukun, Mr.Wang Hui, Mr.Zhao Caiyong, Mr.Shi Dong, Mr.Liang Xinqing, Ms.Song Ying, Mr.Chen Yanshun, Mr.Sun Jiping, Mr.Ren Jianchang, Mr.Zhang Xusheng and Mr.Tai Zhonghe (Independent Director) constituted the Company’s third Board of Directors; Ms.Wang Aizhen, Mr.Yang Anle and Ms.Xu Yan constituted the Company’s third Supervisory Committee. After being adopted by 2001’ 1st Extraordinary General Meeting of Shareholders, Mr.Mu Chengyuan was additionally elected Supervisor with the Company’s third Supervisory Committee. 2001 ANNUAL REPORT CHAPTER VII REPORT OF THE BOARD OF DIRECTORS 1. Business Review (1) Principal Businesses and their operation The Company is mainly engaged in electronic information industry. Since its B share was listed in June 1997, the Company has steadily realized its strategic shifts, that is, the shift from development through investment and transfer investment to development through the integration of jointly run businesses and principal businesses and the shift from a manufacturer of traditional electronic components to an electronic-information-based high-tech company which concentrates on both components, complete machines and systems. The Company’s major businesses include optical electronic products and display devices, terminal equipments of information display; wireless communications and mobile information equipments; network solution, software, service and other sectors. The Company has made unremitting efforts in enhancing the image of BOE brand in its major business fields. It has developed and introduced to market a series of products under the brand of BOE, such as large screen display system, network computer, laptop, flat computer, all-in-one card, digital camera and so on. Many of the products are based on technological innovation and enjoy a fairly favorable market share in China. Moreover, the Company was honorably listed among China’s 520 Reliable & Creditable Enterprises, the assessment and selection of which were organized by State Administration of Industry and Commerce. 1> Steady growth in the Company’s principal businesses: The sales income amounted to RMB 2684 million, 20% increase over the same period last year. The businesses of the Company’s brand products, software and system integration and that of the Company’s subsidiaries—Beijing Orient Guanjie Electronics Co., Ltd. and Zhejiang BOE Vacuum Electronics Co., Ltd. have both increased by a large margin, thus becoming the main sources for the income increase and profit increase of the Company’s principal businesses, which means that the principal businesses of the Company after its shift have entered a stage of steady development. However, on the other hand, due to the decline of CRT industry, the business of the Company’s subsidiary Beijing Panasonic Color Picture Tube Company Limited and CRT’s supporting parts and components industry suffered significant recession, which led to the decrease in the Company’s investment return and net profit. In the year 2001, the Company realized a net profit of RMB 23 million, 78% lower than that of the same period last year, and failed to fulfill the business plan of 2001. 2> Substantial progress achieved in the construction of brand and channel: a. In August 2001, the Company formally changed its name into BOE TECHNOLOGY GROUP CO., LTD., therefore realized the unity of company anme and brand and further clarified BOE’s orientation as a high-tech company with its own intellectual property rights and brand. b. Brand and channel headquarter was established, and a series of new products under the brand of BOE were put into market, such as laptop, flat computer, digital camera and other terminal products; and also some solution category products, including intelligent card system, specialized computer system, LED large screen display system, applied software and so on. c. Gradual perfection of brand products’ supply, sales and service system: 2001 ANNUAL REPORT Through the strategic alliance with internationally famous groups, a system of supply chain with products and market as bond has taken shape. What’s more, eight sales platforms have been established covering the whole country, which has developed more than 130 distributors and agents. Consequently, a sales network covering the whole country has been set up. The service system mainly including 800 free service calls, receiving customers’ repair requests and home service has also come into operation. 3> Market for brand products enlarged and reputation constantly enhanced. Great progress has been made in intelligent IC card, software and system integration. The first phase project of Beijing Urban Traffic All-in-one Card system has been completed and the second phase project is going to start. The sales of LED large screen display system have registered top records in China and enjoy a very good reputation in this field. Strategic alliance has been established with manufacturers and suppliers on laptops and specialized computers and the sales of these products have been steadily growing. The quality of flat computers and digital cameras has been continuously updated so that their images in market have been continuously improving. 4> Commendable records of key products: The turnout of monitors in the report year was 2.58 million units, an increase of 25.85% over the same period last year wherein arose $120 million of foreign exchange. The yield of VFD products of the report year was 10.70 million pieces, 14% more than the same period last year. 15 products under four major categories of vacuum switch tube have passed the model test and set up an attractive image in market. 5> Remarkable results have been achieved in capital performance. The company acquired all the STN-LCD and OLED business of Korean HYNIX SEMICONDUCTOR. Meanwhile, some technology-intensified projects with high investment return including TFT-LCD module and apheliotropic sources etc. have been started, thus laying the foundation for the makeup of the Company’s optical electronic products. 6> The construction of BOE Digital Rose Garden, Beijing Yizhuang Hi-tech Park and Suzhou Technological Garden is advancing smoothly. The new productive force building is about to be completed and put into use, which will definitely further highlight the image of the Company’s technological garden. 7> Institution upgrading and process re-design: Aiming at its problems in strategic implementation and operation, the Company carried out the project of “Institution Upgrading and process Re-design” with “pursuit of pre-eminence” as the theme. With Puhua (Pricewaterhouse) consulting firm as its consultant, the Company redesigned its institutional set-up, improved the process of its marketing & sales system and drew up the plan for its information process. (2) Highlights of the Company’s principal businesses Sales revenue under classification according to geographic district of the clients: Unit: RMB’000 2001 2000 Domestic 1,688,041 975,277 Overseas - Asia 29,902 45,683 - Europe 549,171 377,043 2001 ANNUAL REPORT - America 416,684 836,819 2,683,798 2,234,822 (3) Business highlights of major shareholding subsidiaries and joint ventures: Joint Ventures Staple Products Registered Capital Total Assets Beijing Orient (Guanjie) Top Victory Manufacture and sales of color computer Electronics Co., Ltd. monitors RMB 244,000,000 RMB 966,870,000 Zhejiang BOE Vacuum Electronic Manufacture and sales of VFD Co., Ltd. RMB 99,200,000 RMB 458,710,000 Beijing Asahi Glass Electronics Co., Manufacture and sales of glass bracket and Ltd. low-temperature solder USD 8,626,000 RMB 100,350,000 Shenzhen BOE Intelligence Display Development of LED display system Technology Co., Ltd. RMB 10,000,000 RMB 32,570,000 Beijing BOE Software and System Development of internet and Integration Co., Ltd. communication technology RMB 20,000,000 RMB 5,410,000 Beijing BOE Vacuum Electrical Manufacture and sales of vacuum electrical Appliances Co., Ltd. appliances RMB 35,000,000 RMB 39,430,000 Beijing Matsushita Color CTP Co., Manufacture and sales of color computer Ltd. monitors JY 28,412,000,000 RMB 3,143,250,000 Beijing Rishen Electrical Precision Manufacture and sales of color cathode ray Parts Co., Ltd. tube and parts USD 5,600,000 RMB 97,770,000 (4) On major suppliers and clients: Purchase from the top 5 suppliers constitutes 46% of the year’s total purchase. Sales to the top 5 clients constitute 38% of the year’s total sales. (5) Problems/Difficulties in Operation and the Relevant Solutions In the year 2001, there appeared a considerable downturn in the industry of CRT and its parts and components under the impact of the sluggish development of color TV industry and Beijing Matsushita Color CRT Co., Ltd. suffered a deficit, which is also the main reason for the decrease in the Company’s net profit. In addition, with the implementation of zero tariffs for IT products and the strengthened trend of homogeneity in electronic information products after China’s entry into the WTO, the competition in domestic electronic information industry will be even more heated. Bearing this in mind, the Company will make efforts to improve its products makeup and sharpen its competitive edge from the following aspects: 1> To speed up the adjustment of products makeup with its own brand products as the core. The Company will foster the designing ability of its leading products, especially BOE brand products and will also constantly put into market attractive brand products and services with BOE characteristics to diversify the styles of BOE brand products and establish strategic and technological alliances of brand products. 2> To enhance technological power and competence. The Company will strategically technological course and strategy with BOE characteristics. Based on the technological course, the Company will establish its system of technological innovation and strategic alliance, strengthen its ability of technological design and implementation and constantly accumulate its own technological power and enhance its competence. 3>To introduce outstanding management team and employees. The Company will further improve its personnel management system, perfect its operating mechanism and provide good development platform for various advanced 2001 ANNUAL REPORT professionals in conformity with the Company’s development strategy. The Company will spend more efforts in performance management, strengthen stimulus mechanism to provide the talented people with the opportunity to shoe their talent and rise from obscurity through practice. The Company will also strengthen the construction of its management team, try to foster a forward-looking, flexible and pioneering style of leadership and cultivate energetic, enthusiastic and resolute outstanding leaders. 2. Investment during the report period (1) Application of proceeds raised through offering shares 1> Investment (Application) of proceeds raised through offering shares: Total Amount Accumulative Project Pledged to Invest Project Invested Investment Invested Amount Invested Capital increase project of Orient Top Victory 2589.6 Capital increase project of Orient Top Victory 0 2583.2 Technical innovation project of special Technical innovation project of special 4130.0 2204.2 3633 computer terminal production line computer terminal production line Technical innovation project of mobile Technical innovation project of mobile 5400.0 1800 2820.6 computer production line computer production line Technical innovation project of digital Technical innovation project of digital 5788.0 105 431 television receiver industrialization television receiver industrialization Beijing urban traffic “All-in-one card” project 10000.0 Beijing urban traffic “All-in-one card” project 1650 4913.3 BOE e-commerce project 19000.0 BOE e-commerce project 13212.6 16791.7 Replenishing operating capital 10000.00 Replenishing operating capital 10000 10000 Flat aphototropic source for digital terminals 2550.0 Flat aphototropic source for digital terminals 2533 2533 Digital camera project 6300.0 Digital camera project 1517 1517 Acquisition of Korean STN-LCD & OLED Acquisition of Korean STN-LCD & OLED 18675.0 7135 7135 business through joint investment business through joint investment The RMB 974.9 million net proceeds raised through the Company’s additional issuance of A shares to the public has become available in December 2000, and the proceeds were not deposited in the Company’s bank account. 2> Reasons for, procedure and disclosure of changes in projects: The 16th session of the Company’s second Board of Directors and 2000’General Meeting of Shareholders examined and adopted Proposal on the Application of Proceeds Raised from Additional Issuance of A Shares. The Company listed its investment increase in the Project of Aphototropic Source for Digital Terminals (U.S$3.06million in cash or RMB as of the value) and the Digital Camera Project (U.S$7.50million in cash or RMB as of the value) as the application of the above-mentioned proceeds, and on June16, 2001 and June 30, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the 16th Session of the Second Board of Directors and the Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by 2000’ General Meeting of Shareholders in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The 4th session of the Company’s third Board of Directors and 2002’ 1st Extraordinary General Meeting of Shareholders examined and adopted Proposal on Listing the Acquisition of Korean STN-LCD & OLED Businesses as the Application of the Proceeds Raised from the Additional Public Issuance of A Shares. The Company listed the Acquisition of Korean STN-LCD & OLED Businesses (The equivalent investment is RMB186.75 million) as the application of the proceeds raised from additional public issuance of A shares, and the Company published respectively on December 5, 2001 and January 12, 2002 the Announcement of BOE Technology Group Co., Ltd. on Resolutions Adopted by the 4th Session of the Third Board of Directors and the Announcement of BOE Technology Group Co., Ltd. on Resolutions Adopted by 2002’ 1st Extraordinary General Meeting of Shareholders in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. 3> Project progress and returns: Capital increase project of Beijing Guanjie (Top Victory) Electronics Co., Ltd.: 2001 ANNUAL REPORT The Company planned to invest RMB 25.896 million of the proceeds raised from offering shares to the public, while the virtual amount invested was RMB 25.832 million. The discrepancy was duo to the conversion on exchange rate. The project has been completed in May 2000. During the report pried, the production & sales record of color monitor was 2.58 million sets, with an sales income of RMB 2,193,360,000 20 % increase over the same period of last year. Technological innovation project of specialized computer terminal production line: The Company planned to invest RMB 41.3 million of the proceeds raised from offering shares to the public. By the end of the report period, 36.33 million has been invested. Presently, part of the specialized computer products (such as BEO “Securities Guide 158”, education computer, office computer, finance computer, series products and etc.) have been introduced into the market and some are now providing securities resolutions. Technological innovation project of mobile computer production line: The Company planned to invest RMB 54.00 million of the proceeds raised from offering shares to the public, and RMB 28.206 million has been invested. Through the strategic alliance and cooperation with internationally famous enterprises, batches of BOE laptop have been put into market with quite favorable brand image for BOE. Technical innovation project of digital television receiver industrialization: The Company planned to invest RMB 57.88 million of the proceeds raised from offering shares to the public. By the end of the report period, RMB 4.31 million has been invested. As one of the projects participating the digital information’s ground reception experiment of Beijing, its progress needs to be unified with the related experiment data, and the investment should be in conformity with the project progress. At present, the proceeds invested in the project are mainly devoted to preliminary research & development. Beijing urban traffic “All-in-one Card” project: The Company planned to invest RMB100million of the proceeds raised from offering shares to the public. By the end of the report period, RMB 49.133 million has been invested. Since June 28, 2001,the project has been put into operation for buses on a trial basis. BOE e-commerce project: The Company planned to invest RMB190million of the proceeds raised from offering shares to the public. By the end of the report period, RMB 167,917,000 has been invested. Presently, construction of hardware platform and the connection of wide band for business zone of the Hi-tech Park have been completed, and the on-line transaction platform is under preparation. Flat aphototropic source for digital terminals: The Company planned to invest RMB 25.50 million of the proceeds raised from offering shares to the public, while the virtual amount invested was RMB 25.33 million. The discrepancy was duo to the conversion on exchange rate. All the investment was ready; the installment of production line equipments has been basically completed and has been put into use on a trial basis in the second half year of 2001. Digital camera project: The Company planned to invest RMB 63.00 million of the proceeds raised from offering shares to the public, while the virtual amount invested was RMB 15.17 million. Part of the preliminary investment has been available. Transformation of the production buildings has been basically completed. Production line equipments are going through installment and trial runs, and some sample products have come out. Presently, BOE and its foreign partners are planning to research & develop high quality digital camera with more than 1 million picture elements. 2001 ANNUAL REPORT The joint acquisition of Korean STN-LCD and OLED project: The Company planned to invest RMB 186.75 million of the proceeds raised from offering shares to the public, while the virtual amount invested was RMB 71.35 million. The formal Acquisition Contract has been signed and Joint Venture HYUNDAI LCD CO., LTD. has been established in Korea, whose 45% equity was held by the Company. (2) Investment of the proceeds raised from other channels Project Investment Progress Joint incorporation of Beijing BEO Mobil RMB 19.78 m The joint venture was established with registered Technology Co., Ltd. capital of RMBA 38.78 million (51% held by the Company) RMB 1.5 m The joint venture was established with registered Joint incorporation of Beijing BEO capital of RMBA 10 million (30% held by the Software Co., Ltd. Company) Project of Wangfujing LED RMB 14.57 m Installation and adjustment for LED Innovation on VFD Production Line RMB 78.13 m As scheduled Plant Construction RMB 19.92 m As scheduled Innovation on No. 4 Staff Dormitory RMB 10.44 m 48% completed 3. Financial situation (Unit: In RMB’000) Index 2001 2000 Increase/Decrease Total assets 4,034,811 3,977,329 1.45% Shareholders’ equity 2,113,010 2,148,145 -1.64% Operating profit 149,715 142,109 5.35% Profit before tax 93,471 156,858 -40.41% Net profit 22,817 103,856 -78% Reasons for decrease in profit before tax: associated companies suffered deficits and the Company’s income from investment was decreased. Reasons for decrease in net profit: decrease of profit before tax. 4. Affect from the macro economic situation After China’s accession to the WTO, its domestic industrial protective policies will be weakened in a step-by-step manner, ITA agreement and the policy of zero tariff for IT products will be carried out ahead of time, which will definitely result in heated competition of both domestic and foreign electronic information industry. However, most of the Company’s products have been long up to international standards and enjoyed a favorable international reputation and market share. On top of that, the majority of the Company’s products have passed many internationally recognized certification test, such as VL, FCC, CF and so on, and have an advantage over other products in the market; meanwhile, the Company has set a market orientation centering on international market. In conclusion, the opportunities for the Company brought about by China’s entry into the WTO outweigh its challenges. The state has enhanced its support for high-tech enterprises. After being examined and verified by State Economic and Trade Commission and Ministry of Finance, the Company’s “All-in-one Card” department was granted appropriation specifically for the support of high & new technology projects. Presently, several of the Company’s high & new technology projects are 2001 ANNUAL REPORT applying for the related policy support. China’s exciting success in bidding for 2008 Olympic Games will enormously promote the development of electronic information industry in Beijing. It is estimated that in the future five years, Beijing will devote RMB180billion to the city’s infrastructure construction, including 30 billion for the city’s informationization construction, which will create more opportunities for the Company’s development. It is projected that the Company will have more market accesses in LED dimply system, network information display terminal, intelligent IC card charging system and the integration of system and software. The Company has established Office of Olympic Projects, which is specifically responsible for developing urban information market after successful bid for Olympic Games. During the period of the 10th Five Year Plan, Beijing municipal government has put the development of information industry in a very important place. Information industry has been listed as high-tech and industrialized key field given priority in its development. At the same time, to support the implementation of Several Policies for Encouraging the Development of Software Industry and Integrated Circuit Industry promulgated by the State Council, Beijing municipal government issued Announcement on Opinions about the Implementation of Several Policies for Encouraging the Development of Software Industry and Integrated Circuit Industry (JZF No. [2001] 4), laying down the detailed preferential policies for software industry and integrated circuit industry, which will greatly benefit the production and development of the Company’s related products. 5. Work Objectives, Policies and Focus in the year 2002 (1) Work policies in 2002: Strictly following standard process and achieving perfection in everything (2) Business objectives: To realize income from principal businesses of RMB 4 billion, and maintain steady growth in net profit rate and return rate of net assets. (3) To speed up the adjustment of products makeup and foster new industry and profit growth point, focusing on distribution products, mainly including laptop and digital camera, and system and resolution products, mainly including intelligent card system, specialized computer system and other related devices and software. Besides, the company will also pay much attention to STN-LCD screen & module, TFT module and aphototropic source projects, and try to make them yield profit as soon as possible. (4) To enhance the staff members’ notion of brand, to constantly accumulate the experience and ability of brand and channel business, to consolidate the foundation of brand and channel cause, and to increase the value of brand and channel. (5) To take concrete measures to promote ability construction, to upgrade the Company’s ability of management, marketing & sales and its competitiveness. (6) To further improve the stimulus and restraint mechanism centering on salary & award system and option system, to strengthen business objective responsibility system. (7) With a view to fostering a core business team, to strengthen institution construction at various levels, expertise construction and the construction of thinking style, to improve the team’s comprehensive quality and competitiveness and to turn out a responsible pioneering team with esprit de corps, which is outstanding in both ethics and talent. 6. Routine work of the Board of Directors 2001 ANNUAL REPORT (1) Board Meetings and Their Resolutions in the Report Period: The 14th session of the Company’s second Board of Directors examined and adopted Proposal on the Establishment of Joint Venture Beijing BOE Dahe Optics and Electronics Co., Ltd.; Proposal on the Establishment of joint Venture Beijing BOE Mobile Technology Co., Ltd.; Proposal for Acquiring 15% Equity of Beijing Xingcheng (Star City) Property Co., Ltd. Held by Singapore Dianli Technology Co., Ltd.; Proposal on the Establishment of Beijing BOE Digital Picture Co., Ltd. and Proposal on the Establishment of the Company’s Foreign Representative Office. On February 23, 2001, the Company published the Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the 14th Session of the Second Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The 15th session of the Company’s second Board of Directors examined and adopted 2000’ Work Report of the Board of Directors; 2000’ Business Report; 2000’ Financial Settlement Report; 2000 Financial Report and Summary; 2000 Profit Distribution Proposal & 2001 Profit Distribution Policy; Proposal on the Establishment of Committee for Salary & Remuneration; Proposal on the Application of the Proceeds Raised through Additional issuance of A Shares; Proposal for Changing the Company’s Registered Name; Proposal for Revising the Company’s Constitution; Proposal for Adjusting the Preparatory Policy on Collectable Debts & Drawable Vicious Debts; Proposal on the Establishment of Joint Venture Beijing BOE Software Co., Ltd.; Proposal for Listing Zhejiang BOE Vacuum Electronics Co., Ltd.; Proposal for Acquiring Land-use Right in Beijing Economic & Technological Development Zone; Proposal on the Re-election of the Board of Directors; Proposal for Holding 2000’ General Meeting of Shareholders. On April 21, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the 15th Session of the Second Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The 16th session of the Company’s second Board of Directors examined and adopted Interpretation on Increasing Investment Project for the Proceeds Raised from Additional issuance of A Shares; Proposal for Increasing Contents Examined by 2000’ General Meeting of Shareholders. On June 16, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the 16th Session of the Second Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The first meeting of the Company’s third Board of Directors examined and adopted Proposal for Recommending and Electing Chairman of the Board; Proposal for Recommending and Electing Vice Chairman of the Board; Proposal on the Establishment of Executive Committee; Proposal for Appointing Secretary of the Board; Proposal for Appointing President of the Company; Proposal for Appointing Senior Executives of the Company; Proposal for Carrying Out Institution Upgrading and Process Remaking and Proposal for the Board of Directors to Authorize the Chairman of the Board to Exercise Functions and Powers. On June 30, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the First Meeting of the Second Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The second meeting of the Company’s third Board of Directors examined and adopted Proposal for Drawing 2000’ Award Fund. On July 20, 2001, the 2001 ANNUAL REPORT Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the Second Meeting of the Third Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The third meeting of the Company’s third Board of Directors examined and adopted 2001’ Interim Report and Summary; 2001’ Interim Profit Distribution Proposal; Proposal for Changing the Company’s Auditing Policy; Proposal on the Establishment of Joint Venture Beijing BOE S&T Development Co., Ltd.; Reform & Consolidation Report of BOE Technology Group Co., Ltd. in Response to the Tour Inspection Opinion of CSRC Beijing Securities Regulatory Office; Proposal on Revising Board of Directors and its Work Regulations; Proposal on Revising the Company’s Articles of Association; Interpretations on Change in External Equity Investment; Interpretations on Submitting Related Matters to 2001’ 1st Extraordinary General Meeting of Shareholders and Proposal for Holding 2001’ 1st Extraordinary General Meeting of Shareholders. On August 21,2001,the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the Third Meeting of the Third Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The Company’s third ad hoc Board of Directors examined and adopted Proposal for Acquiring All HYNIX SEMICONDUCTOR.INC STN-LCD Industry and OLED Business through Joint Investment; Proposal for Implementing Share Option in the Company’s Subsidiary Beijing Orient Guanjie Electronics Co., Ltd. and Proposal on Partial Change of Directors. On November 29, 2001, the Company published Announcement of BOE Technology Group Co., Ltd. on Resolutions Adopted by the Third ad hoc Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The 4th session of the Company’s third Board of Directors examined and adopted Proposal on Listing the Acquisition of Korean STN-LCD & OLED Businesses as the Application of the Proceeds Raised from the Additional Public Issuance of A Shares; Self-examination Questionnaire on Standard Operation of Listed Companies Sponsored by CSRC Beijing Securities Regulatory office; Rules of Procedures for the Board of Directors; Rules for Information Disclosure; Work Rules for Executive Committee; Proposal on the Establishment of Auditing Committee and Committee for Nomination, Salary & Remuneration and Evaluation and Proposal for Holding 2001’ 1st Extraordinary General Meeting of Shareholders. On December 5, 2001, the Company published Announcement of BOE Technology Group Co., Ltd. on Resolutions Adopted by the 4th Session of the Third Board of Directors in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. (2) Implementation of profit distribution proposal in report period: With 549.554 million shares of total share capital ended on December 31, 2000 as the base, the Company implemented a profit distribution plan of RMB 1.00 cash bonus for every 10 shares (tax included). The dividend of B share holders was paid in HK dollar and the exchange rate was the median (1: 1.0612) of all exchange rates between HK dollar and RMB published by the People’s Bank of China since the first workday after the profit distribution plan was adopted by 2000’ General Meeting of Shareholders (July 2, 2001). The plan was examined and adopted by 2000’ General Meeting of Shareholders held on June 29, 2000. The Company published Announcement of BOE Technology Group Co., Ltd. on 2000 Distribution of Dividend and Interest on Shares on the August 3, 2001 2001 ANNUAL REPORT issue of Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The registration date of A shares and the last trade date of B shares was August 20, 2001, and the ex-dividend date was August 13, 2001. 7. Proposal for profit distribution and proposal for converting public fund to additional share capital (1) Proposal for profit distribution: Audited by Pricewaterhouse Coopers Zhongtian Certified Public Accountants, the Company realized net profit RMB 60,250,853 in 2001. According to the Articles of Association, the Company would allot the statutory public reserve based on 10% of the net profit amounting to RMB 5,900,691 and the statutory public welfare fund based on 5% of the net profit amounting to RMB 2,950,345, and the discretionary surplus public reserve based on 25% of the net profit amounting to RMB 14,751,727. Deducted by the employees’ welfare fund amounting to RMB 1,243,944 and plus with retained profit of the previous year amounting to RMB 135,479,535, the amount of the profit available for distribution to the shareholders in the year was RMB 170,883,681. Based on the total share capital 549.554 million shares ended Dec. 31, 2001, the Company would distribute “RMB 0.50 cash bonus for every 10 shares (tax included)” to the all shareholders. The total amount to be distributed was RMB 27,477,700.00, and the remaining would be carried down to the next year for distribution. Implementation of the above distribution proposal would be subject to the approval of the annual shareholders’ general meeting. (2) Projected2002 Profit Distribution Proposal: 1> The Company plans to conduct profit distribution once in the year 2002; 2> About 20% to 50% of the net profit to be realized in the year 2002 would be used for dividend distribution; 3> About 20% of the retained profit of the year 2001 would be used for profit distribution of the next year; 4> The dividends would be distributed mainly in cash, and the cash dividends would make up about 50% of the dividends to be distributed. 5> After the end of 2002, the Company’s Board of Directors shall put forward a detailed profit distribution proposal based on the aforesaid profit distribution policy and the actual situation of the Company and then submit it to the annual shareholders’ general meeting for examination and approval. The Board of Directors reserves the right to adjust the above policy according to the actual situation of the Company. 2001 ANNUAL REPORT CHAPTER VIII REPORT OF THE SUPERVISORY COMMITTEE 1. Meetings of the Supervisory Committee and their resolutions The eight meeting of the second Supervisory Committee examined and adopted 2000 Work Report of the Supervisory Committee; 2000 Business Report; 2000 Financial Settlement Report; 2000 Financial report and Summary; 2000 Profit Distribution Proposal and 2001 Profit Distribution Policy; Proposal on the establishment of the Committee for Salary & Remuneration; Proposal on the Re-election of the Supervisory Committee. On April 24, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the 8th meeting of the Second Supervisory Committee in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The first meeting of the Company’s third Supervisory Committee examined and adopted Proposal on Recommending and Selecting the Convener of Supervisory Committee. On June 30, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on Resolutions Adopted by the 1st Meeting of the Third Supervisory Committee in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The second meeting of the Company’s third Supervisory Committee examined and adopted 2001 Interim Report and Summary; Proposal on Changing Auditing Policy; Proposal on Formulating Rules of Procedures for Supervisory Committee; Proposal on Electing Additional Supervisors and Reform & Consolidation Report of BOE Technology Group Co., Ltd. in Response to the Tour Inspection Opinion of CSRC Beijing Securities Regulatory Office. On August 21, 2001, the Company published Announcement of BOE Technology Group Co., Ltd. on Resolutions Adopted by the Second Meeting of the Third Supervisory Committee in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. The third meeting of the Company’s third Supervisory Committee examined and adopted Self-examination Questionnaire on Standard Operation of Listed Companies Sponsored by CSRC Beijing Securities Regulatory Office. On December 5, 2001, the Company published Announcement of BOE Technology Group Co., Ltd. on Resolutions Adopted by the Third Meeting of the Third Supervisory Committee in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. 2. Independent opinion of the Supervisory Committee (1) In the report year, the Supervisory Committee conducted regular inspection and supervision over the Company’s operation according to state laws, regulations and the Articles of Association of the Company. In the opinion of the Supervisory Committee, the Company made business decision and established the management system in a scientific and standardized way, established good internal control system and effectively prevented business risks and financial risks. The Company perfected rules of procedures for the Board of Directors and clarified work duties of the senior executives, according to which directors and senior executives may conduct self-binding and self-control while performing their duties. None of the directors or senior executives breached the law, regulations or the Articles of Association, nor did anyone of them do anything harmful to the interests of shareholders while performing their duties. There was not any record of the Company’s directors or senior executives breaching criminal or securities regulations (including public criticism of regulatory 2001 ANNUAL REPORT institutions). (2) The Supervisory Committee conducted daily supervision over the Company’s finance. The Company had established independent financial books guided by the principle of “Five Separations”, and had independent financial personnel and strict and standardized financial management system. Pricewaterhouse Coopers Zhongtian Certified Public Accountants (the domestic auditor) and Pricewaterhouse Coopers (the international auditor) had produced unqualified auditors’ report for the Company’s accounting statements and relevant accounting data. In the opinion of the Supervisory Committee, the auditors’ report had truly reflected the Company’s financial position and business achievements. (3) By December 2000, the latest proceeds raised through additionally issuing 600 million A shares had been available in the account, amounting to RMB974.9. The investment project pledged in the Share Allotment Memorandum had been progressing smoothly. The flat aphototropic source project, digital camera project and the acquisition of Korean STN-LCD and OLED business had been included into the application of proceeds raised through additional issuance of A shares. The application procedures conform to the procedure as provided by the Company’s Articles of Association and related securities regulation. (4) The acquisition of assets conducted by the Company was in accordance with the market standard and the price was fair and reasonable. Neither secret transactions nor activities have been found causing harm to the interests of medium and small shareholders, or losses of the Company’s assets. (5) All the related transactions were carried out by signing agreement and based on the market price and the relevant procedures were handled strictly according to the rules for operation concerning related transactions. No related transaction harmful to the Company’s interests had been found. (6) Thanks to the debt-to-equity transformation of the Company’s previous control shareholder Beijing Electron Tube Co., Ltd., the change in the Company’s large shareholders caused no effect on its business and management. The Company’s new control shareholder had no intention of changing the Company’s plan or proposal. 2001 ANNUAL REPORT CHAPTER IX IMPORTANT EVENTS 1. In the report year, the Company had never been involved in any material lawsuits or arbitration. 2. Assets Acquisition and Sales in the report period: (1) Beijing Orient Guanjie Electronics Inc., the Company’s previous subsidiary, and 52% of its total shares were held by the Company, converted its assets into shares at the rate of 1:1 on December 31, 2000 based on the net assets audited by Pricewaterhouse Coopers Zhongtian Certified Public Accountants. Co-initiated by its previous shareholders, Beijing Orient Guanjie Electronics Inc. was restructured into Beijing Orient Guanjie Co., Ltd. with a registered capital of RMB244 million, and the Company still holds 52% of its total shares. (2) The Company together with SEMICON ENGINEERING CO., LTD. and SEMICONDUCTOR. INC co-established HYUNDAI LCD, CO., LTD., (hereinafter referred to as the joint venture) through joint investment. The join venture, as the buyer, acquired all assets of HYNIX Semiconductor’s STN-LCD and OLED business. On November 23, 2001, the two sides signed Assets Acquisition Agreement in Korea. By the end of the report period, the acquisition had been completed and the acquisition had no significant influence on the Company’s financial position and business achievement in the report period. 3. Important Related Transactions: In the report period, the Company had never been involved in significant related transactions. The related transactions between the Company and its control shareholder, BOE Investment & Development Co., Ltd. (previously called Beijing Electron Tube Plant), were carried out after signing agreement based on market price. Such related transactions did not affect significantly the Company’s business activities. 4. Important contract and its implementation: (See the Financial Report) 5. Implementation of commitment of the Company or its shareholders holding over 5% of the total shares in the designated newspapers or website: The Board of Directors made the Profit Distribution Preplan for 2001 based on the actual operation of the Company in 2001 as “RMB 0.5 for every 10 shares (tax included)”. Such plan was not in compliance with the profit distribution policy for 2001 committed by the Company in 2000 annual report as “approximately 20% of retained profit as of 2000 will be distributed in 2001”. Such incompliance was because the Board of Directors made adjustment on the distribution policy based on the operation budget for 2002. 6. In the report period, the Company did not change the engagement of its domestic or foreign certified public accountants. Remuneration paid by the Company to its auditors (Unit: In RMB) Item 2001 2000 Financial auditing fee 1,200,000 1,200,000 Others 451,063 Auditors’ travel accommodation and other expenses incurred while providing service were paid by the Certified Public Accountants. 7. In the report year, the Company, any director or senior executive had never been engaged in any action against the law and regulations. 8. Tour inspection conducted by CSRC Beijing Securities Regulatory Office: From July 23-28, 2001, CSRC Beijing Securities Regulatory Office conducted tour inspection of the Company, and issued on August 3, 2001 Notice on Reform 2001 ANNUAL REPORT & Consolidation of Beijing Orient Electronics Group Co., Ltd. in Required Time Based on the Tour Inspection (JZJF No.[2001]92), hereinafter referred to as the Notice). According to the requirements of the Notice, the Company organized study and discussion among directors, supervisors, senior executives and the departments concerned, and drew up reform & consolidation measures relevant to the problems pointed out by the Notice with reference to Corporation Law of the People’s Republic of China, Securities Law of the People’s Republic of China, Securities Listing Regulations of Shenzhen Stock Exchange and the Company’s Articles of Association. On August 21, 2001, the Company published Reform & Consolidation Report of BOE Technology Group Co., Ltd. in Response to the Tour Inspection Opinion of CSRC Beijing Securities Regulatory Office in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. 9. Others: (1) With the examination and adoption of the 15th session of the Company’s second Board Of Directors and 2000 General Meeting of Shareholders, with the verification and approval of State Administration of Industry and Commerce, the Company changed its name from Beijing Orient Electronics Group Co., Ltd. to BOE Technology Group Co., Ltd., and on July 20, 2001, the Company published Announcement of Beijing Orient Electronics Group Co., Ltd. on the Change of Company Name in Ta Kung Pao, Securities Times, China Securities and Shanghai Securities News. (2) Due to the extension of stock code with the stock exchange, the stock code of BOE A shares was changed to 000725; the stock code of BOE B shares was changed to 200725. 2001 ANNUAL REPORT CHAPTER X FINANCIAL REPORTS 1. Auditors’ Report 2. Accounting Statements (1) Consolidated Income Statement (2) Consolidated Balance Sheet (See the attachment) (3) Consolidated Statement of Changes in Equity (See the attachment) (4) Consolidated Cash Flow Statement (See the attachment) 3. Notes to Accounting Statements 2001 ANNUAL REPORT CHAPTER XI DOCUMENTS FOR REFERENCE 1. Original of Annual Report carried with the original signature of Chairman of the Board. 2. Accounting statements carried with the personal signatures and seals of legal representative, chief financial supervisor and person in charge of handling accounting affairs; 3. Original of Auditors’ Report carried with the seal of Certified Public Accountants as well as personal signatures and seals of certified public accountants; 4. Originals of all documents and manuscripts of Public Notices/Announcements of the Company disclosed in public on the newspapers designated by CSRC in the report period. Board of Directors of BOE TECHNOLOGY GROUP CO., LTD. April 17, 2002 2001 ANNUAL REPORT Report of the auditors To the shareholders of BOE Technology Group Co., Ltd. (formerly known as Beijing Orient Electronics Group Co., Ltd.) We have audited the accompanying consolidated balance sheet of BOE Technology Group Co., Ltd. (formerly known as Beijing Orient Electronics Group Co., Ltd.) (the Company) and its subsidiaries (the Group) as of 31 December 2001 and the related consolidated income and cash flow statements for the year then ended. These financial statements set out on pages 2 to 28 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly in all material respects, the financial position of the Group as of 31 December 2001 and of the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards. PricewaterhouseCoopers 17 April 2002 GENERAL INFORMATION BOE Technology Group Co., Ltd. (the Company) was founded in 1993 in Beijing, People’s Republic of China (PRC). It was reorganized into a joint stock limited company in 1997 and is registered in Beijing. The Company and its subsidiaries are collectively referred to as the Group. The Group manufactures and sells electronic products, invests in enterprises engaging in the manufacturing of electronic products and provides property management services to properties it owns. The Group employs over 5,595 employees (2000: 5,357), of whom 1,258 are part-time workers (2000: 773). The parent company of the Group is Beijing Orient Investment and Development Co., Ltd., which is a state-owned enterprise incorporated in Beijing, PRC and its ultimate holding company is Beijing Electronics Holding Co., Ltd., which is a state-owned enterprise reorganized from the General Office of Electronics of the Beijing Municipals Government. The Company has its primary listing on the Shenzhen Stock Exchange issuing B shares, with further offerings in the Shenzhen Stock Exchange of A shares in 2000. On 10 December 2001, the Company’s name was changed from Beijing Orient Electronics Group Co., Ltd. to BOE Technology Group Co., Ltd. ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below: A Basis of preparation The consolidated financial statements have been prepared in accordance with International Accounting Standards ("IAS"). This basis of accounting differs from that used in the preparation of the Group's statutory financial statements ("PRC statutory financial statements"). The financial statements of the Company and its subsidiaries comprising the Group have been prepared in accordance with the relevant accounting principles and regulations applicable to them, as appropriate in the PRC. Appropriate adjustments have been made to these financial statements to conform with IAS. Differences arising from the restatement have not been incorporated in the statutory accounting records of the Company and its subsidiaries. The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. In 2001, the Group adopted IAS 39 – Financial Instruments: Recognition and Measurement and IAS 40 – Investment Property. The effects of adopting these standards are summarised in the consolidated statement of changes in shareholders’ equity, and further information is disclosed in accounting policies D Investment property and in Note 9. B Group accounting (1) Subsidiary undertakings Subsidiary undertakings, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operations are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated; unrealized losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. (2) Associated undertakings Investments in associated undertakings are accounted for by the equity method of accounting. These are undertakings over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Equity accounting is discontinued when the carrying amount of the investment in an associated undertaking reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated undertaking. Unrealised gains on transactions between the Group and its associated undertakings are eliminated to the extent of the Group's interest in the associated undertakings; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associated undertakings includes negative goodwill (net of accumulated amortisation) on acquisition. Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. It is amortised using the straight-line method over a ten-year period. (3) Joint ventures The Group’s interests in jointly controlled entities are accounted for by proportionate consolidation. Under this method, the Group includes its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows in the relevant components of the financial statements. (4) Foreign currency translation The Group maintains its books and accounting records in Renminbi. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions; gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated at year-end exchange rates. C Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on the straight-line method to write off the cost of each asset, to their residual values over their estimated useful life as follows: Land use rights Buildings 20-40 years Plant and machinery 5-10 years Motor vehicles Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in other operating income. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the asset for its intended use. All other borrowing costs are expensed. D Investment property Investment property, principally comprising office buildings, is held for long-term rental yields and is not occupied by the Group. Investment property is treated as a long-term investment and is carried at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on the straight-line method to write off the cost of each asset, to their residual values over their estimated useful life ranging from 20 to 40 years. Previously the investment property had been recorded in the property, plant and equipment and has been reclassified for the year ended 31 December 2001. The comparative amounts for the year ended 31 December 2000 have been restated accordingly. E Intangible assets (1) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary/associated undertaking at the date of acquisition. Goodwill on acquisitions of subsidiary undertakings is included in intangible assets. Goodwill on acquisitions of associated undertakings is included in investments in associated undertakings. Goodwill is amortised using the straight-line method over its estimated useful life. Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. Negative goodwill is presented in the same balance sheet classifications as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group’s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities, that portion of negative goodwill is recognised in the income statement when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statement over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those assets is recognised in the income statement immediately. (2) Other intangible assets Expenditure on acquired technology rights is capitalised and amortised using the straight-line method over its useful life which is 10 years. Intangible assets are not revalued. Where an indication of impairment exists, the carrying amount of any intangible asset is assessed and written down immediately to its recoverable amount. F Investments At 1 January 2001 the Group adopted IAS 39 and classified its investments into the following categories: held-to-maturity and available-for-sale. Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; these are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. All purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Available-for-sale investments are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair value of available-for-sale investments are included in the income statement in the period in which they arise. Dividends are recognised when received or receivable. G Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity), but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. H Trade receivables Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. I Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprises cash on hand and deposits held at call with banks. J Share capital External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition. Dividends on ordinary shares are recognised in equity in the period in which they are declared. K Borrowings Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. L Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The principal temporary differences arise from depreciation on property, plant and equipment, provisions for receivables, inventories and property, plant and equipment. Tax rates enacted by the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary difference can be utilized. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint-venture, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. M Employee benefits The Group participates in defined contribution employee benefits plans by respective local governments. Under the plans, the Group’s contribution is based on defined percentage of salaries and wages subject to certain salary ceilings. Contributions to the plans are charged to the income statement as incurred. N Government grants Government grants are recognized as income upon receipt. O Revenue recognition Sales are recognised upon delivery of products and customer acceptance, if any, or on the performance of services. Sales are shown net of sales taxes and discounts, and after eliminating sales within the Group. Other revenue earned by the Group are recognised on the following basis: Interest and rental income − on an accrual basis. Dividend income − when the Group’s right to receive payment is established. P Financial instruments The Group adopted IAS 39 - Financial Instruments: Recognition and Measurement, at 1 January 2001. Financial instruments on the balance sheet include cash and cash equivalents, investments, receivables and prepayments, trade and other payables and bank borrowings. The particular recognition methods adopted are disclosed in note 15. Financial Risk Management (1) Financial risk factors The Group’s activities expose it to a variety of financial risks, including the effects of: changes in foreign currency exchange rates and interest rates. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The overall responsibility for the implementation of the Group’s financial risk management policies lies with the Board of Directors. (i) Foreign exchange risk The Group is exposed to foreign exchange risk arising from currency exposures primarily with respect to Korean Won (KRW). The Group does not hedge (through derivative or other financial instruments) its exposures to foreign exchange risk arising from foreign currency denominated assets as they do not form a significant part of the Group’s overall asset base at the year end. (ii) Interest rate risk The Group’s income and operating cash flows are substantially independent of changes in interest rates. The Group has no significant interest bearing assets. The Group’s policy is to maintain all of its borrowings in fixed rate instruments. (iii) Credit risk The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The carrying amount of receivables and cash represent the Group’s maximum exposure to credit risk. In respect of receivables and cash, the Group has policies in place to ensure that customers and counter parties and banks with whom the Group maintains its cash are of suitable credit standing. (iv) Liquidity risk The Group ensures that it maintains sufficient cash which is available to meet its liquidity requirements. (2) Fair value estimation The carrying amounts of the following financial assets and financial liabilities approximate to their fair value: cash, trade receivables and payables, other receivables and payables, and banking borrowings. The fair values of these financial assets and financial liabilities as at the balance sheet date approximate their carrying amounts as shown in the balance sheet. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Amounts are expressed in RMB’000 unless otherwise stated) 1 Sales The Group is principally engaged in the manufacture and sales of electronic and related products and the leasing of properties and commercial facilities. The lease of properties and commercial facilities contributed to less than 10% of consolidated sale revenue. Sales revenue based on the geographical areas in which the customers are located comprises the following: 2001 2000 Sales within the PRC 1,688,041 975,277 Sales outside the PRC - Asia 29,902 45,683 - Europe 549,171 377,043 - America 416,684 836,819 2,683,798 2,234,822 The principal geographical area in which the Group’s assets are located is PRC. No other geographical areas contributed more than 10% of consolidated assets. 2 Operating profit The following items have been included in arriving at operating profit: 2001 2000 Depreciation on property, plant and equipment (note 8) 60,791 40,105 Net loss on disposal of property, plant and equipment 428 1,786 Amortization of intangible assets – Technology rights (included in “administrative expenses”) (note 10) 2,570 1,772 Amortization of intangible assets - goodwill (included in “other operating expense”) (note 10) 2,587 (283) Cost of inventory recognised as expense (included in “cost of sales”) 1,964,352 1,787,875 Provision for bad and doubtful debts, obsolete and slow-moving inventories 12,136 11,802 Impairment of property, plant and equipment 9,170 2,744 Government grant received 15,467 2,197 Investment property – rental income 21,876 5,781 Investment property – operating expense 11,699 5,352 Other income(included in “other operating income”) 6,866 - Other income was received from Beijing Branch of China Electronics Import and Export Co., Ltd., the import and export agency of Beijing Matsushita Color CRT Co., Ltd., as a commission fee and with no cost incurred for the income. 3 Finance costs – net 2001 2000 Interest expense – bank borrowings (50,565) (38,794) Interest income 29,681 11,501 Net foreign exchange transaction gains 354 1,344 (20,530) (25,949) 4 Staff costs 2001 2000 Wages and salaries 105,214 78,044 Welfare 24,223 19,238 129,437 97,282 5 Tax 2001 2000 Current tax 23,646 16,643 Share of tax of associates (note 11) 3,215 12,332 26,861 28,975 The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the tax rate of the Company as follows: Profit before tax 93,471 156,858 Tax calculated at a tax rate of 15% (2000: 15%) 14,021 23,529 Effect of different tax rates 7,899 270 Income not subject to tax (601) (1,523) Expenses not deductible for tax purposes 5,542 6,699 26,861 28,975 The Group has restated tax expenses of year 2000, as one of the subsidiaries has restated its tax expenses due to the changes of tax policy. On 17 July 2000, the Company was identified as an enterprise with new technology under circular 0150053F issued by the regulatory committee of Zhong Guan Cun Technology Garden. In accordance with policy No. [1999] 373 administered by the State Administration of Taxation and approval granted under circular 2000 (Suo) No.104 issued by the Beijing Chaoyang District Administration of Taxation, the Company is subject to a preferential income tax rate of 15% from July 2000 as an enterprise with new technology in Beijing New Technology Development Zone. Before 17 July 2000, the Company applied “pay first refund 18%” (effective tax rate at 15%) tax policy. The Company has two subsidiaries, Beijing Asahi Glass Electronics Co., Ltd (“BAE”) and Beijing Orient Top Victory Electronics Co., Ltd (“BOTE”) (formerly known as Beijing Top Victory Electronics Co., Ltd.), that are foreign investment industrial enterprises which are exempted from tax for the first and the second profit-making years and are further entitled to a 50% reduction in the normal corporate tax rate in the third, fourth and fifth profit-making years. Under the approval given by circular (1995)1191 issued by Beijing District Administration of Taxation, BAE is entitled to a preferential income tax rate of 24%. In 1999, BAE has continued to be recognised as an enterprise with advanced technology and was therefore, entitled to a reduced tax rate of 12% from 1999 to 2001. In 1998, BOTE was certified as an enterprise with new technology and was entitled to a preferential income tax rate. The Company enjoyed a reduced tax rate of 15% for 1998, tax exemption from 1999 to 2000 and a 50% reduction in the normal corporate tax rate from 2001 to 2003 under circular [2000] No.4999 issued by the Beijing District Administration of Taxation. Beijing BOE Mobile Technology Shenzhen BOE Intelligence Display Technology Co., Ltd, another subsidiary of the Company, is also subject to a preferential income tax rate of 15%. In accordance with circular [1999]119 issued by the Shenzhen District Administration of Taxation, the Company is exempted from tax for the first and the second profit-making years and are further entitled to a 50% reduction in the normal corporate tax rate in the third, fourth and fifth profit-making years. Co., Ltd., BOE Digital Technology Co., Ltd. and Beijing BOE YAMATO Photoelectron Co., Ltd., subsidiaries of the Group, are foreign investment industrial enterprises and are in loss position or in pre-operation period. Thus, they have no taxable income for year 2001. All other subsidiaries of the Company are subject to a corporate tax rate of 33%. There is no material unprovided potential liability or asset for deferred taxation. 6 Basic earnings per share Basic earnings per share is calculated by dividing the net profit by the weighted average number of ordinary shares in issue during the year. 2001 2000 Net profit 22,817 103,856 Weighted average number of ordinary shares in issue 549,554 491,685 Basic earnings per share Rmb0.04 Rmb0.21 7 Dividends per share At the Board of Directors’ meeting on 17 April 2002, a dividend in respect of 2001 of Rmb0.05 per share amounting to a total of Rmb27,478,000 is to be proposed. These consolidated financial statements do not reflect this dividend payable, which will be accounted for in shareholder’s equity as an appropriation of retained earnings in the year ending 31 December 2002. 8 Property, plant and equipment Land use Plant & Motor Constructio rights Buildings machinery n in Process Total vehicles Year ended 31 December 2001 Opening net book amount 25,786 260,013 274,130 7,043 26,100 593,072 Additions 55,951 13,161 111,580 3,909 172,123 356,724 Disposals - (93) (580) (531) - (1,204) Depreciation charge (note 2) (1,487) (7,328) (49,987) (1,989) - (60,791) Impairment charge (note 2) - - (7,605) - (1,565) (9,170) Closing net book amount 80,250 265,753 327,538 8,432 196,658 878,631 At 31 December 2001 Cost 83,019 288,435 518,505 14,292 196,658 1,100,909 Accumulated depreciation (2,769) (22,682) (190,967)) (5,860) - (222,278) Net book amount 80,250 265,753 327,538 8,432 196,658 878,631 Buildings with original costs of Rmb71,227,000 (2000: Rmb36,308,000) and plant and machinery with original costs of Rmb25,376,000(2000: Rmb19,512,000) were pledged as security for the Group’s bank borrowings (note19). The Group is in the process of obtaining formal title certificate for the building amounting Rmb18,960,000. Bank borrowing cost of Rmb3,177,000 arising on financing the construction of property, plant and equipment was capitalised during the year. A capitalisation rate of 6.16% was used representing the borrowing cost of the loan used to finance the projects. 9 Investment property Year ended 31 December 2001 2000 At the beginning of the year 19,424 20,727 Depreciation charge (1,302) (1,303) At the end of the year 18,122 19,424 Cost 24,276 24,276 Accumulated amortisation (6,154) (4,852) Net book amount 18,122 19,424 Investment property is not measured at fair value as it is not practicable within constraints of timeliness or costs to determine its fair value with sufficient reliability. There is no active market for similar property in the same location and condition and alternative estimates of fair value are not readily available. 10 Intangible assets Technology Total Goodwill rights Year ended 31 December 2000 Opening net book amount (2,503) 11,311 8,808 Additions 1,714 2,801 4,515 Amortisation charge (note 2) 283 (1,772) (1,489) Closing net book amount (506) 12,340 11,834 At 31 December 2000 Cost (1,414) 19,105 17,691 Accumulated amortisation 908 (6,765) (5,857) Net book amount (506) 12,340 11,834 Year ended 31 December 2001 Opening net book amount (506) 12,340 11,834 Additions 53,343 17,392 70,735 Amortisation charge (note 2) (2,587) (2,570) (5,157) Closing net book amount 50,250 27,162 77,412 At 31 December 2001 Cost 51,929 36,497 88,426 Accumulated amortisation (1,679) (9,335) (11,014) Net book amount 50,250 27,162 77,412 The additions of goodwill in the year 2001 mainly represent the excess of cost of an acquisition over the net assets of Beijing Orient Heng Tong Property Centre. 11 Investments in associated undertakings 2001 2000 At beginning of year 757,876 748,673 Additions 39,036 1,459 Disposal or transfer to subsidiary (22,364) - Share of retained earnings from acquired associated undertakings 1,189 Share of result before tax (35,714) 40,698 Share of tax (note 5) (3,215) (12,332) Share of result after tax (38,929) 29,555 Dividend received (40,542) (21,811) Staff bonus and welfare funds for year 2000 (3,285) - At end of year 691,792 757,876 On 30 October 2001, the Company entered into a joint venture agreement to invest KRW 17,100,000,000 in Hyundai LCD Co., Ltd. As a result, the Company will own a 45% share in the joint venture. As at 31 December 2001, a total amount of Rmb71,350,000 (including capital amounting Rmb37,499,000 and corporate bonds amounting Rmb33,851,000) has been paid. Particulars of associated undertakings are set out in Note 28. 12 Available-for-sale investments Available-for-sale investments mainly represent the investments in Beijing Star City Real Estate Development Co., Ltd., Beijing BOE YAMATO Photoelectron Co., Ltd. and Beijing Digital Technology Co., Ltd. The Company purchased land use right of Rmb26,858,000 from its holding company in 2000 and in accordance with its agreement with the holding company, it has put the land use right as investment in Beijing Star City Real Estate Development Co., Ltd. In 2001 the Company has invested an additional Rmb21,780,000 in Beijing Star City Real Estate Development Co., Ltd. and owned 15% share in this investment. 13 Hold-to-maturity investments Hold-to-maturity investments mainly represent the corporate bonds purchased from Hyundai LCD Co., Ltd. The corporate bonds are due in 31 December 2003 and bear an interest of 7% per annum. The above investments are stated at costs less impairment losses, which approximate to their fair values. 14 Inventories 2001 2000 Raw materials (at cost) 172,254 216,643 Work in progress (at cost) 14,266 20,592 Finished goods (at cost) 80,978 93,055 Provision for obsolete and slow-moving inventories (5,374) (5,832) 262,124 324,458 15 Financial instruments Notes receivable at 31 December 2001 represent bank acceptances and commercial acceptance in Renminbi with a term less than six months. The carrying amounts of other financial assets and financial liabilities approximate to their fair values. 16 Receivables and prepayments 2001 2000 Trade receivables from third parties 463,781 561,562 Less: Provision for bad and doubtful debts (12,059) (20,947) 451,722 540,615 Notes receivable from third parties 82,073 12,385 Receivables from Hua Cheng Finance Co. - 63,305 Prepayments to third parties 28,532 12,541 Receivables from holding company and its subsidiaries(note 26) 4,048 33,155 Receivable from subsidiaries of ultimate holding Company(note 26) 63,305 - Receivables from associated undertakings(note 26) 36,641 62,078 Receivables from subsidiary of minority shareholder(note 26) 12,610 5,383 Other receivables 52,215 62,498 731,146 791,960 In 2001 the receivables from Hua Cheng Finance Co. was transferred to Beijing Orient Electronics Industry Development Company, a subsidiary of the ultimate holding company. The receivables from related parties are unsecured and interest free. 17 Cash and cash equivalents 2001 2000 Cash at bank and in hand 359,283 230,394 Short term deposits – bank 848,356 1,200,636 1,207,639 1,431,030 At 31 December 2001, Rmb25,041,000 of the short term bank deposits was pledged as security for the Group’s bank borrowings (note 19). 18 Trade and other payables 2001 2000 Trade payables to third parties 463,260 364,640 Accrued expenses 65,236 38,355 Advances from third parties 10,351 11,057 Wages and welfare payables 16,197 26,186 Payables to subsidiaries of holding company (note 26) 3,184 2,521 Payables to subsidiaries of ultimate holding company (note 26) 62,037 67,974 Payables to subsidiaries of minority shareholders (note 26) 5,469 14,384 Dividends payable 22,623 51,060 Other payables 76,018 53,142 724,375 629,319 Payables to subsidiaries of ultimate holding company represent the payables for the purchase of share of Beijing Matsushita Color CRT Co., Ltd. In 1998, the Group purchased 5% share of Beijing Matsushita Color CRT Co., Ltd. from Beijing Kinescope Factory, the subsidiaries of ultimate holding company. This amount is still outstanding as at 31 December 2001 and has no fixed term of repayment. 19 Bank borrowings 2001 2000 Current Bank borrowings – secured 20,500 52,258 Bank borrowings – unsecured 671,741 741,484 692,241 793,742 Non-current Bank borrowings – secured Due between one and two years 14,700 - Due between two and five years 40,800 51,100 Bank borrowings – unsecured Due between one and two years 49,000 70,900 Due between two and five years 57,800 56,000 162,300 178,000 Current bank borrowings bear interest at rates ranging from 5.58% to 6.435% (2000: 4.05% to 6.534%). Non-current bank borrowings bear interest at rates ranging from 5.94% to 6.534% (2000: 5.85% to 6.03%). The bank borrowings are secured over certain of the property, plant and equipment (note 8) and over certain of the short term bank deposits of the Group (note 17). 20 Other long term liabilities 2001 2000 Payable to holding company (note 26) 75,956 26,516 Others 2,598 1,391 78,554 27,907 The payable to holding company represents the payables with installment payment scheduled to be paid over 5 and 10 years arising from the purchase of land use rights from holding company. 21 Contingent liabilities 2001 2000 Related parties 50,000 169,701 Third parties 122,415 124,000 172,415 293,701 Above balances represent the credit facilities from banks which the Group has guaranteed for other enterprises. 22 Capital commitments Capital expenditures contracted for at the end of balance sheet date but not recognised in the financial statements are as follows: 2001 2000 Property, plant and equipment 37,027 62,418 Equity investment 93,035 132,227 130,062 194,645 23 Ordinary shares 2001 2000 Number of Number of shares shares Domestic non-listed shares of Rmb1 each 340,054 340,054 A shares of Rmb1 each 60,000 60,000 B shares of Rmb1 each 149,500 149,500 549,554 549,554 All shares rank pari passu in all respects. 24 Minority interest 2001 2000 At beginning of year 175,161 153,497 Acquisition 33,781 4,127 Share of net profit of subsidiaries 43,793 24,027 Dividends payable - (6,000) Dividends paid (490) (490) At end of year 252,245 175,161 25 Reserves Reserves can be analysed as follows: 2001 2000 Capital reserves 558 568 General reserves 235,313 211,718 235,871 212,286 The movement in general reserves were as follows: 2001 2000 At beginning of year - as previously reported 229,473 185,315 - effect of restatement (17,755) - - as restated 211,718 185,315 Statutory surplus reserve for the year 5,899 11,039 Discretionary surplus reserve for the year 14,747 27,599 Statutory public welfare reserve for the year 2,949 5,520 At end of year 235,313 229,473 In accordance with the relevant PRC regulations, the Company appropriated 10% and 5% of statutory net profit to the statutory surplus reserve and statutory public welfare reserve. The Company also appropriated 25% of statutory net profit to the discretionary surplus reserve which has been approved by the Board of Directors. 26 Related party transactions (1) The Company regards Beijing Orient Investment and Development Co., Ltd. as its holding company. Except disclosed in other footnotes, related party transactions as of 31 December 2001 consist of the following: 2001 2000 Product sales Holding company and its subsidiaries 1,013 - Associated undertakings 52,950 64,138 Subsidiaries of minority shareholders 22,082 10,832 Purchases Holding company and its subsidiaries 726 6,911 Subsidiaries of minority shareholders 20,854 380,675 Utility income Holding company and its subsidiaries 3,669 810 Associated undertakings 23,159 2,155 Rental income Holding company and its subsidiaries 2,431 1,523 Associated undertakings 5,829 2,401 Land rental and utility fee Holding company - 4,428 Purchase of land use right Holding company - 26,858 Construction and service fees Associated undertakings - 2,000 Maintenance expense Subsidiaries of minority shareholders 17,501 - Management believes that related party transactions were entered into under normal commercial terms. (2) Related parties balances Related party receivables and payables primarily resulted from operating transactions entered into during 2001 and 200 are as follows: 2001 2000 Trade receivables due from: Beijing Matsushita Color CRT Co., Ltd. 28,977 30,352 Subsidiaries of minority shareholders 7,420 2,041 Other receivables due from : Holding company - 24,584 Subsidiaries of holding company 4,048 8,571 Subsidiaries of ultimate holding company 63,305 - Associated undertakings 7,664 32,009 Subsidiaries of minority shareholders 5,190 3,342 Trade payables due to : Subsidiaries of minority shareholders (3,018) (11,332) Subsidiaries of holding company (3,184) (2,521) Other payables due to : Subsidiaries of ultimate holding company (62,037) (67,974) Subsidiaries of minority shareholders (294) (3,052) Long-term payables due to : Holding company (75,956) (26,516) Accruals: Subsidiaries of minority shareholders (2,157) - (3) Directors’ remuneration In 2001 the total remuneration of the directors was Rmb1,287,000 (2000: Rmb400,000). 27 Interest in joint venture The Group has a 50% interest in a joint venture, Beijing Asahi Glass Electronics Co., Ltd., which manufactures electronics products. The following amounts represent the Group’s 50% share of the assets and liabilities, revenue and expenses of the joint venture and are included in the consolidated balance sheet and income statement: 2001 2000 Property, plant and equipment 19,064 22,079 Intangible assets 2,797 2,353 Current assets 28,314 27,720 50,175 52,152 Current liabilities (9,805) (10,586) Net assets 40,370 41,566 Sales 30,736 43,076 Profit before tax 3,377 9,420 Income taxes (349) (1,208) Profit after tax 3,028 8,212 There are no contingencies and commitments relating to the Group’s interest in the joint venture. The average number of employees in the joint venture in 2001 was 241 persons (2000: 285 persons). 28 Subsidiaries and associated undertakings Except for BOE Technology Incorporation which is registered in the United States with limited liability, the following subsidiaries and associated undertakings are incorporated in the PRC. Name Equity interest Principal Activities Note 2001 2000 Subsidiaries Beijing Oriental 100% 100% Manufacture and sales of Semi-conductor Factory semi-conductor products Beijing Oriental Electron 100% 100% Manufacture and sales of electron Tube Factory tube products Beijing Electronics Glass 100% 100% Manufacture and sales of electronic Factory glass products Beijing Oriental Gas 100% 100% Manufacture and sales of oxygen for Factory medical usage Beijing Software and 100% 100% Research and development of System Integrated Factory network and telecommunication Beijing Orient Top 52% 52% Manufacture and sales of color Victory Electronics Co., Ltd. computer monitors Beijing Weisong 51% 51% Manufacture and sales of color Electronics Co., Ltd. cathode ray tube (“color CRT”) metal parts Zhejiang BOE Vacuum 60% 60% Research, development, manufacture Electronic Co., Ltd. and sales of monitor and related parts China Business 80% 80% Sales of computer software, Information Network Co., hardware and provision of technology Ltd. services Beijing BOE Vacuum 55% 55% Manufacture and sales of vacuum Electronic Co., Ltd. electronic products Shenzhen Tai Dong Dian 51% 51% Commercial and trading service (1) Industry Co., Ltd. Shaoxing BOE Electronic 79.6% 79.6% Manufacture and sales of electronic Co., Ltd. monitor, related parts and material Shenzhen BOE 59.8% 59.8% Development of electronic Intelligence Display intelligence system Technology Co., Ltd. BOE Technology 100% 100% Research, development, manufacture (2) Incorporation and sales of high technology electronic information products Beijing Orient Heng Tong 100% 50% Lease of commercial facilities (3) Property Centre Beijing BOE Mobile 51% - Research, development and (4) Technology Co., Ltd. manufacture of mobile technology products Hyundai LCD Co., Ltd. 45% - Manufacture of LCD and related products (1) Shenzhen Tai Dong Dian Industry Co., Ltd. is undergoing liquidation procedures. (2) The subsidiary is in the pre-operating stage. (3) During the year, the Group paid Rmb54,000,000 of a total of Rmb 60,000,000 to Beijing Orient HengTong Property Centre (“Beijing Orient HengTong”) and obtained 95% of its share capital. One of the Company’s subsidiary, Beijing Software and System Integration Co., Ltd., owned 5% of the share capital. The Group’s share of equity in Beijing Orient HengTong in total is 100%. The interest of 50% was disclosed as an investment in associate in the previous financial year. (4) During the year, the Group established Beijing BOE Mobile Technology Co., Ltd. for an amount of Rmb19,780,000 and owned 51% of its share capital. Name Equity interest Principal Activities 2001 2000 Associated undertakings Beijing Matsushita 30% 30% Manufacture and sales of color picture tubes Color CRT Co., Ltd. and color display tubes, and modern lighting products Shenzhen Evergreat 40% 40% Development and manufacture of mechanical Industrial Co., Ltd. integrated products, satellite communication equipment, computer software and automatic instruments Beijing Universal 40% 40% Commercial leasing operation of a restaurant, Plaza Co., Ltd. entertainment and business centres Beijing Nittan 40% 40% Manufacture and sales of terminals, Electronics Co., Ltd. connectors and stampers Beijing Nissin 40% 40% Manufacture and sales of electronics tubes Electronics Precision and related spare parts Component Co., Ltd. Beijing Huaxu Jinka 20.89 24.35% Manufacture and sales of IC card, magnetic Co., Ltd. 6% card, laser card and related read-write equipment Beijing Orient Mosler 35% 35% Manufacture and sales of security and Security Technology protection system and products System Co., Ltd. Beijing Matsushita 30% - Manufacture and sales of lightings and Lighting Co., Ltd. related products Beijing Oriental 30% - Design, develop, manufacture of software, Software Co., Ltd. hardware and computer components; network integration Druing the year, Beijing Matsushita Color CRT Co., Ltd. span off its lighting division to form a separate legal entity, Beijing Matsushita Lighting Co., Ltd., adopting the same structure as Beijing Matsushita Color CRT Co., Ltd. with respect to capital ratios. 29 Approval of Financial Statements On 17 April 2002, BOE Technology Group Co. Ltd.’s (formerly known as Beijing Orient Electronic Group Co. Ltd.) Board of Directors authorised these financial statements for issue. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001 Year ended 31 December (all amounts in RMB’000) Notes 2001 2000 Sales 1 2,683,798 2,234,822 Cost of sales (2,343,509) (1,972,761) Gross profit 340,289 262,061 Other operating income 9,729 35,457 Distribution costs (87,220) (65,357) Administrative expenses (113,083) (90,052) Operating profit 2 149,715 142,109 Finance costs – net 3 (20,530) (25,949) Group profit before tax 129,185 116,160 Share of result before tax of associates 11 (35,714) 40,698 Profit before tax 93,471 156,858 Tax 5 (26,861) (28,975) Group profit before minority interest 66,610 127,883 Minority interests 24 (43,793) (24,027) Net profit 22,817 103,856 Basic earnings per share 6 Rmb0.04 Rmb0.21 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2001 31 December 31 December (all amounts in RMB’000) Notes 2001 2001 2000 2000 ASSETS Non-current assets Property, plant and equipment 8 878,631 593,072 Investment Property 9 18,122 19,424 Intangible assets 10 77,412 11,834 Investments in associated undertakings 11 691,792 757,876 Available-for-sale investments 12 101,096 38,397 Hold-to-maturity investments 13 34,151 600 Other assets 32,698 8,678 1,833,902 1,429,881 Current assets Inventories 14 262,124 324,458 Receivables and prepayments 16 731,146 791,960 Cash and cash equivalents 17 1,207,639 1,431,030 2,200,909 2,547,448 Total assets 4,034,811 3,977,329 EQUITY AND LIABILITIES Capital and reserves Ordinary shares 23 549,554 549,554 Share premium 1,150,895 1,150,895 Reserves 25 235,871 212,286 Retained earnings 176,690 235,716 2,113,010 2,148,451 Minority interest 24 252,245 175,161 Non-current liabilities Bank borrowings 19 162,300 178,000 Other long term liabilities 20 78,554 27,907 240,854 205,907 Current liabilities Trade and other payables 18 724,375 629,319 Current tax liabilities 12,086 24,749 Bank borrowings 19 692,241 793,742 1,428,702 1,447,810 Total liabilities 1,669,556 1,653,717 Total equity and liabilities 4,034,811 3,977,329 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2001 Share Share Capital General Retained (all amounts in RMB’000) capital premium reserves reserves earnings Total Year ended 31 December 2000 Balance at 1 January 2000 489,554 235,995 263 185,315 158,390 1,069,517 Issue of share capital 60,000 914,900 - - - 974,900 Net profit - - - - 109,801 109,801 General reserves for 2000 - - - 44,158 (44,158) - Others - - 305 - - 305 Balance at 31 December 2000 549,554 1,150,895 568 229,473 224,033 2,154,523 Year ended 31 December 2001 Balance at 1 January 2001 549,554 1,150,895 568 229,473 224,033 2,154,523 Effect due to change of Regulations - - - - (6,072) (6,072) Reversal of Reserves under PRC GAAP - - - (17,755) 17,755 - Restated Balance 549,554 1,150,895 568 211,718 235,716 2,148,451 Adjust for the staff welfare and bonus funds of year 2000 - - - - (3,285) (3,285) Adjustment for the dividends of year 2000 - - - - (54,955) (54,955) Net profit - - - - 22,817 22,817 General reserves for 2001 - - - 23,603 (23,603) - Others - - (10) (8) - (18) Balance at 31 December 2001 549,554 1,150,895 558 235,313 176,690 2,113,010 The analysis of the movement in each category within reserves is presented in Note 25. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001 Year ended 31 December (all amounts in RMB’000) Notes 2001 2000 Cash flows from operating activities Net profit 22,817 103,856 Adjustments for: Minority interest 24 43,793 24,027 Tax 5 26,861 28,975 Depreciation 8,9 62,093 41,408 Amortisation 2 5,157 1,489 Provision of bad debt and inventory obsolete 2 12,136 11,802 Impairment loss for property, plant and equipment 2 9,170 2,744 Loss on sale of property, plant and equipment 2 428 1,786 Finance costs 3 20,530 25,949 Share of result before tax of associated undertakings 11 35,714 (40,698) Others 19,034 (30,788) Changes in working capital: Inventories 63,614 (153,260) Trade and other receivables 45,381 (315,125) Payables 40,173 100,789 Cash generated from operations 406,901 (197,046) Interest expense (50,672) (47,292) Tax paid (25,761) (8,823) Net cash from operating activities 330,468 (253,161) Cash flows from investing activities Acquisition of subsidiary , net of cash acquired (34,887) (4,127) Addition of investments in associated undertakings - (3,579) Acquisition of other investment, net of cash acquired (127,083) - Purchase of property, plant and equipment (274,023) (214,322) Purchase of intangible assets (17,392) (2,801) Purchase of other assets (29,753) (5,997) Proceeds from sale of property, plant and machinery 776 1,328 Interest received 31,645 8,932 Dividends received 11 40,542 21,811 Government grant received 15,467 2,197 Proceeds from other investment activity 217 4,565 Net cash used in investing activities (394,491) (191,993) Cash flows from financing activities Proceeds from issue of ordinary shares 1,008,000 - Proceeds from minority interest 19,002 2,384 Proceeds from return of investment 5,345 - Proceeds from borrowings 826,000 942,800 Repayments of borrowings (943,200) (405,220) Dividends paid to group shareholders (49,804) (6,000) Dividends paid to minority interests (6,490) (9,015) (Payment for) other financing activities (4,876) (26,880) Net cash from financing activities (159,368) 1,511,414 (Decrease)/Increase in cash and cash equivalents (223,391) 1,066,260 Movement in cash and cash equivalents At start of year 17 1,431,030 364,770 (Decrease)/increase (223,391) 1,066,260 At end of year 17 1,207,639 1,431,030 SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTS PREPARED UNDER PRC ACCOUNTING REGULATIONS (“PRC GAAP”) AND INTERNATIONAL ACCOUNTING STANDARDS (“IAS”) (Amounts are expressed in RMB’000 unless otherwise stated) Net assets Net Profit As reported under PRC GAAP 2,083,538 60,251 Adjustments to conform with IAS - Impairment loss on Property, plant and equipment - (32,670) - Dividends relating to current year 27,478 - - Shareholder’s loan written-off in PRC accounts 3,682 - - Difference on the amortisation period of goodwill (1,334) (1,334) - Appropriation of staff bonus and welfare funds - (1,244) - Others (354) (2,186) As reported under IAS 2,113,010 22,817