东旭光电(000413)宝石Ｂ2001年年度报告（英文版）

SHIJIAZHUANG BAOSHI ELECTRONIC GLASS CO., LTD. 2001 ANNUAL REPORT Important Declaration: The Board of Directors of the Company hereby guarantees that there are no misstatement, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. Table of Contents Chapter 1 Brief Introduction of the Company 1 Chapter 2 Financial Highlights 2 Chapter 3 Particulars about the Changes of Share Capital and Shareholders 4 Chapter 4 Directors, Supervisors, Senior Executives and Staff 6 Chapter 5 Control Structure of the Company 8 Chapter 6 Brief Introduction of Shareholders’ General Meeting 9 Chapter 7 Report of the Board of Directors 10 Chapter 8 Repot of the Supervisory Committee 16 Chapter 9 Important Events 17 Chapter 10 Financial Reports 19 Chapter 11 List of Documents Available for Inspection 19 Chapter 1 Brief Introduction of the Company (I) Statutory name of the Company In Chinese : 石家庄宝石电子玻璃股份有限公司 In English : SHIJIAZHUANG BAOSHI ELECTRONIC GLASS CO., LTD. Short form of English Name: SJZBS (II) Legal Representative : Dong Qingxiang (III) Secretary of the Board of Directors: Luo Lina Authorized representative: Li Xinjian Contact address: No.2, Huaqing Street, Zhongshan East Road, Shijiazhuang, Hebei Province (the Securities Dept. of the Company) Tel : 0311-6044705 Fax : 0311-6041503 (IV) Registered Address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Hebei Province Office Address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Hebei Province Zip Code: 050035 E-mail: bsdz@sj-user.he.cninfo.net (V) Newspapers for Information Disclosure: China Securities Daily, Hong Kong Commercial Daily Internet Web Site for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Securities Dept. of the Company (VI) Stock Exchange with Which the Company’s Stocks Are Listed: Shenzhen Stock Exchange Short Form of the Stock: BAOSHI A, BAOSHI B Stock Code: 000413 200413 (VII) Other Relevant Information 1. The date when and the place where the Company made its first registration: December 26, 1992 Shijiazhuang City 2. Registration No. of Legal Entity Business License: 1300001001778 3. Tax Registration No.: 130102104395983 4. The name and office address of the Certified Public Accountants engaged by the Company: Domestic Certified Public Accountants: Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. Address: 12/F, Ruian Square, No.333 Huaihai Middle Road, Shanghai Overseas Certified Public Accountants: Pricewaterhouse Coopers China Co., Ltd. Business Address: New York, U.S.A. NY 10185 –1448 P.O Box 1448 -1- Chapter 2 Financial Highlights (I) Main Profit Indicators of the Report Year (consolidated financial statement) RMB Total profit 51,326,150 Net profit 39,390,980 Net profit after deducting the non-recurring gains and losses 41,703,438 Profit from key business 24,380,361 Profit from other businesses 19,987,032 Operating profit -6,548,173 Investment income 58,863,519 Subsidy income - Net amount of non-operating income/expenditure -989,196 Net cash flows from operating activities -83,467,597 Net increase of cash and cash equivalent -28,017,615 Note: The net profit after deducting the non-recurring gains and losses = net profit – income from sales of fixed assets – other non-operating income + loss from disposal of fixed assets + reserve for fixed assets depreciation + other non-operating expenses = 39,390,980-528,057 3,278,456+2,190,485+2,399,642+1,528,844=41,703,438 (II) The net profit calculated pursuant to Chinese accounting standards and International Accounting Standards (IAS) and the note to the net profit difference: 2001 2000 RMB ’000 RMB ’000 Pre-tax profit pursuant to IAS 19,110 134,049 Adjusted items (1) Entry reverse of inventory depreciation reserve - -483 provided in the previous year (2) Amortization of good will 2,537 3,383 (3) The amortization of deferred income -6,452 -6,451 (4) Income from debt reorganization confirmed as -2,701 -30,450 capital common reserve (5) House revolving fund transferred in from the final controlling company made up with public 38,832 - welfare fund, surplus common reserve and capital common reserve Total of adjustment items 32,216 -34,001 Pre-tax profit pursuant to Chinese Accounting 51,326 100,048 Standards and system -2- (III) Main Accounting Data and Financial Indicators over the Past Three Years as at the End of the Report Period RMB Item 2001 2000 1999 1999 (consolidated) (consolidated) (consolidated) (consolidated) Before After adjustment adjustment Income from key business 62,388,165 44,918,932 5,721,988 5,721,988 Net profit 39,390,980 83,961,160 37,129,889 -86,470,171 Total assets 1,538,478,066 1,616,898,335 2,045,540,187 2,045,540,187 Shareholders’ equity 547,155,173 542,682,303 433,977,356 433,977,356 Earnings per share 0.103 0.219 0.097 -0.226 Earnings per share (Weighted) 0.103 0.219 0.097 -0.226 Earnings per share after deducting 0.109 0.217 -0.200 -0.169 non-recurring gains and losses Net assets per share 1.43 1.42 1.13 1.13 Net assets per share after adjustment 1.41 1.40 1.08 1.08 Net cash flows per share from -0.218 -0.497 -0.035 -0.035 operating activities Return on net assets 7.20% 15.47% 8.56% -19.93% Return on net assets (Weighted) 7.41% 17.14% 8.94% -18.12% Note: In accordance with the provisions of (2001) No. 7 Document – Enterprise Accounting Standard – Debt Reorganization issued by the Ministry of Finance, Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. adjusted 1999 financial statements of the Company on retroactive basis. (IV) Attached Schedule of Profit Statement Profit in the report period Return on net assets (%) Earnings per share (RMB) Fully diluted Weighted Fully diluted Weighted average average Profit from key business 4.46 4.59 0.064 0.064 Operating profit -1.20 -1.23 -0.017 -0.017 Net profit 7.20 7.41 0.103 0.103 Earnings per share after deducting non-recurring gains 7.62 7.85 0.109 0.109 and losses -3- (V) Particulars about Changes of Shareholders’ Equity during the Report Period Unit: RMB Item Share Capital Surplus Statutory Retained Total capital common reserve public welfare profit shareholders’ (’000 reserve fund equity shares) Balance at beginning of 38300 535,841,567 61,862,747 20,620,916 -438,022,011 542,682,303 the period Increase in this period - 2,194,556 - - 39,390,980 41,585,536 Decrease in this period - 2,704,707 34,407,959 20,620,916 - 37,112,666 Balance at end of the 38300 535,331,416 27,454,788 - -398,631,031 547,155,173 period Reasons of Used to make up house revolving fund loss Increase of change after the approval of 2001 provisional operating shareholders’ general meeting and according profit to the regulations of the Ministry of Finance Chapter 3 Particulars about the Changes of Share Capital and Shareholders (I) The changes of share capital of the Company 1. The statement of changes of share capital: (in shares) Before the Increase/decrease this time (+ , - ) After the change Share Bonus Capitaliz Issuin Oth change allotm shares ation of g ers ent common additio reserve nal fund shares ( ) Non-negotiable Shares 233410500 233410500 1.Promoters’ shares: including 230410500 230410500 State-owned shares 3000000 3000000 Domestic corporate shares Foreign corporate shares Others 2. Raised corporate shares 4500000 4500000 3. Staff shares 4. Preferred shares or others 17100 17100 Total non-negotiable shares 237927600 237927600 . Negotiable Shares 1. Domestically listed RMB 45072400 45072400 common shares 2. Domestically listed 100000000 100000000 foreign-capital shares 3. Overseas listed foreign-capital shares 4. Others Total negotiable shares 145072400 145072400 . Total shares 383000000 383000000 -4- (II) Share issuance and listing The Company did not issue new shares in the previous three years by the end of the report period. (III) Particulars about Shareholders 1. As of December 31, 2001, the Company had 29,793 shareholders of A shares and 14,968 shareholders of B shares. 2. Particulars about the shares held by the top ten shareholders (as of December 31, 2001) Name of shareholders No. of Shares Proportion held of total share capital (%) 1 Shijiazhuang Baoshi Electronic Group Co., Ltd. 230410500 60.16 2 Daiwa Securities SSB. Capital Markets. HK Ltd. 13000000 3.39 3. China Electronic Import and Export Corporation 2000000 0.52 4 CBNY SIA PNC/SKANDIA SELECT FUND/CHINA EQUITY AC 1904000 0.50 5 Xie Yingjun 1598500 0.42 6 Zhonghua Hebei Import and Export Co. 1000000 0.26 7 Shijiazhuang Trust Investment Co. 1000000 0.26 8 Jiang Fengmei 443600 0.12 9 Han Ming 430000 0.11 10 Zhang Yihua 400000 0.10 Among the above ten shareholders, No.1 is the shareholder of state-owned shares. No.2, 3, 5, 8, 9, 10 are shareholders of domestically listed foreign investment shares. Note: a. Shijiazhuang Baoshi Electronic Group Co., Ltd. (the Group Co.), the shareholder holding over 5% (including 5%) of the total shares of the Company, holds 230.4105 million shares of the Company. Such shares were neither changed nor pledged in the report year. b. Related relationship between the top ten shareholders did not exist. 3. Brief Introduction of the controlling shareholder of the Company and the actual controller of the controlling shareholder The controlling shareholder of the Company is Shijiazhuang Baoshi Electronic Group Co., Ltd. (Baoshi Group Co.) It holds 60.16% equity of the Company. Date of establishment: October 10, 1997. Nature: Wholly state-owned enterprise. Legal representative: Dong Qingxiang. Business scope: Dealing in state-owned capital within authorized scope, color cathode-ray tube series products and supporting -5- electronic components, etc. The actual controller of the controlling shareholder is Shijiazhuang State-owned Asset Management Committee. Chapter 4 Directors, Supervisors, Senior Executives and Staff (I) Directors, Supervisors and Senior Executives 1. Basic information Name Sex Age Position Term of office No. of shares held Dong Qingxiang Male Chairman of Board 63 of Directors 2000.6-2003.6 2000 Gao Tiezhan Male Deputy Chairman of 58 Board of Directors 2000.6-2003.6 500 Wang Rongxian Male Deputy Chairman of 57 Board of Directors 2000.6-2003.6 1500 Wang Xi Male Director 56 2000.6-2003.6 500 Lu Fengyi Male Director 55 2000.6-2003.6 1600 Song Hongbo Male Director & GM 46 2000.6-2003.6 0 Zhou Bo Male Director 36 2000.6-2003.6 6800 Luo Lina Female Director, secretary of 46 the Board of 2000.6-2003.6 0 Directors Gao Dacai Female Director, deputy GM 56 2000.6-2003.6 0 Ye Huifeng Female Director 43 2000.6-2003.6 0 Li Zhenzhong Male Supervisor 58 2000.6-2003.6 0 Fan Zhenping Male Supervisor 45 2000.6-2003.6 1000 Li Huiming Male Supervisor 47 2000.6-2003.6 2400 Zhang Yanqiao Female Supervisor 51 2000.6-2003.6 0 Li Hong Male Supervisor 47 2000.6-2003.6 800 Yao Junting Male Supervisor 32 2000.6-2003.6 0 Feng Guoqing Female Supervisor 52 2000.6-2003.6 0 Zhou Yumao Male Chief accountant 49 2000.6-2003.6 0 Zhang Wenhai Male Deputy GM 50 2000.6-2003.6 0 Mao Shuzhi Male Deputy GM 55 2000.6-2003.6 0 Yang Guang Male Deputy GM 49 2000.6-2003.6 0 -6- Note: The shares held by the above personnel did not change in the report period. 2. The positions held by the directors and supervisors of the Company at the shareholder companies: Name Company Position Dong Qingxiang Shijiazhuang Baoshi Electronic Group Co., Chairman of board of Ltd. directors and GM Gao Tiezhan Shijiazhuang Baoshi Electronic Group Co., Director, chief accountant Ltd. and deputy GM Wang Rongxian Shijiazhuang Baoshi Electronic Group Co., Deputy GM Ltd. Wang Xi Shijiazhuang Baoshi Electronic Group Co., Chief mechanist Ltd. Lu Fengyi Shijiazhuang Baoshi Electronic Group Co., Director and chairman of Ltd. Labor Union Song Hongbo Shijiazhuang Baoshi Electronic Group Co., Director Ltd. Zhou Bo Shijiazhuang Baoshi Electronic Group Co., Director Ltd. Ye Huifeng Shijiazhuang Baoshi Electronic Group Co., Manager of Sales Dept. Ltd. Li Zhenzhong Shijiazhuang Baoshi Electronic Group Co., Chairman of the supervisory Ltd. committee Fan Zhenping Shijiazhuang Baoshi Electronic Group Co., Deputy director of Public Ltd. Security Section Yao Junting China Electronic Import and Export Deputy GM of Finance Corporation Management Dept. Feng Guoqing Zhonghua Hebei Import and Export Co. Manager of Comprehensive Management Dept. 3. Annual remuneration 1. The procedure of deciding the remuneration and the basis for determining remuneration In the report period, post skill wage system applied to the directors, supervisors and senior executives of the Company. Their remuneration is determined according to the wage management system of the Company. 2. The annual remuneration of the current directors, supervisors and senior executives In the report period, the total annual remuneration of the directors, supervisors and senior executives of the Company was RMB 328426.02. Annual remuneration of RMB 20,000 – RMB 30,000: 9 persons. Annual remuneration of over RMB 30,000: 3 persons. The total remuneration of the top three directors receiving the remuneration of the highest amount was RMB 85874.60. The total remuneration of top three senior executives receiving the remuneration of the highest amount was RMB 92959. The directors and supervisors not receiving remuneration from the Company include Dong Qingxiang, Gao Tiezhan, Wang Rongxian, Wang Xi, Lu Fengyi, Zhou Bo, Ye Huifeng, Li Zhenzhong, Fan Zhenping, Yao Junting and Feng Guoqing. Except that director Zhou Bo received remuneration from the associated company of the Company, all -7- other above-mentioned personnel received remuneration from shareholders’ companies. (II) Particulars about staff As of December 31, 2001, the Company has 1165 staff members in total, including 580 production staff, 24 sales staff, 95 technical staff, 17 financial staff, 97 administrative staff and 352 other staff. The personnel with university, college and secondary specialized school education accounted for 37% of the total staff and workers. 25.22% of the staff had professional technical titles. The number of the retired staff whose retirement pension is paid by the Company is 280. Chapter 5 Control Structure of the Company For enhancing the control structure level of the Company and protecting the interests of investors, the Company organized directors, supervisors and senior executives to seriously study the Standards of Control of Listed Companies issued by CSRC and State Economic and Trading Commission on January 7, 2002 and inspected its status of control structure according to these standards and its actual conditions. The Company supplemented and amended the rules and regulations including the Articles of Association of the Company, the Rules of Procedure of the Board of Directors, the Rules of Procedure of the Supervisor Committee and the Detailed Rules of the Work of General Manager according to the requirements of the Company Law, Securities Law, relevant rules and regulations of CSRC and the Listing Rules of Shenzhen Stock Exchange and implemented them. The Company and its controlling shareholder have done a lot of work relating to separation in respect of personnel, assets and finance and independence in respect of internal structure and business according to the requirements of CSRC. The Company has complete and independent assets, independent financial department, financial management system, sound financial and accounting systems and independent business and ability of production and operation. It was able to seriously implement the Standard Opinions on the Shareholders’ General Meeting and regulations on information disclosure. For perfecting its control structure, the Company will further do the following work well according to the requirements of the Standards of Control of Listed Companies: 1. To select and appoint independent directors as scheduled according to the regulations on the establishment of independent director system, ensure the rights and interests of independent directors according to relevant regulations and give full play to their functions; 2. To amend relevant documents including Articles of Association of the Company at appropriate time according to the requirements of the Standards of Control of Listed Companies; 3. To make improvement concerning separation in respect of personnel, assets and finance and independence in respect of internal structure and business according to the requirements of the Standards of Control of Listed Companies; -8- 4. To actively explore and establish the performance appraisal standards and procedures as well stimulation and restriction mechanism applicable to directors, supervisors and managers. The Company held 2000 Annual Shareholders’ General Meeting at the meeting room of the office building of the Company in the morning of June 18, 2001. The announcement of the resolutions of this meeting was published on China Securities Daily and Hong Kong Commercial Daily on June 19, 2001. Chapter 6 Brief Introduction of Shareholders’ General Meeting The Company held 2000 Annual Shareholders’ General Meeting and 2001 Provisional Shareholders’ General Meeting in the report year. 1. 2000 Annual Shareholders’ General Meeting The Company published the announcement of holding 2000 Annual Shareholders’ General Meeting on June 18, 2001 on China Securities Daily and Hong Kong Commercial Daily on May 15, 2001. 2000 Annual Shareholders’ General Meeting of the Company was held at the meeting room in its office building in the morning of June 18, 2001, at which the following proposals were examined and adopted: (1) 2000 Working Report of the Board of Directors; (2) 2000 Annual Report of the Company; (3) 2000 Working Report of the Supervisory Committee; (4) 2000 Final Accounting Report; (5) 2000 Profit Distribution Preplan; (6) The proposal for continuing the appointment of Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. as the financial auditing organ of the Company inside and outside China in 2001. (7) The proposal for amending the Articles of Association of the Company; (8) The proposal for proposal that Shijiazhuang Baoshi Color Bulb Co., Ltd. (Color Bulb Co.), the controlled subsidiary of the Company, will sign an agreement with Shijiazhuang Representative Office of China Great Wall Asset Management Co. and Shijiazhuang Baoshi Electronic Group Co., Ltd. in respect of the transfer of the debts of RMB 0.15 billion. The announcement of the resolutions of this meeting was published on China Securities Daily and Hong Kong Commercial Daily on June 19, 2001. 2. 2001 Provisional Shareholders’ General Meeting The Company published the announcement of holding 2001 Provisional Shareholders’ General Meeting on December 25, 2001 on China Securities Daily and Hong Kong Commercial Daily on November 22, 2001. 2001 Provisional Shareholders’ General Meeting of the Company was held at the meeting room in its office building in the morning of December 25, 2001, at which -9- the following report was examined and adopted: The Company’s loss of house revolving fund of RMB 37,112,665 was covered with public welfare fund of RMB 20,620,916, statutory surplus common reserve fund of RMB 13,787,043 and capital common reserve fund of RMB 2,704,706. Total loss of RMB 37,112,665 was covered. The announcement of the resolution of this meeting was published on China Securities Daily and Hong Kong Commercial Daily on December 26, 2001. Chapter 7 Report of the Board of Directors (I) Business Highlights 1. The scope of its key business and its operation The Company is engaged in the electronic parts and components industry, mainly in the manufacturing and sales of electronic vacuum glass devices and supporting electronic parts and components. To deal with the unfavorable factors including the gradual deterioration of operation environment and continuous lowering of product price, the Company continued to center on the development strategy of rectification and renovation, timely adjusted operation strategy and took the measures including strengthening technical renovation, quickening the adjustment of product variety and structure, strengthening basic management, further expanding product market and making efforts to reduce product cost in the report period, making good progress in market with keen competition. The income from key business and profit from key profit of the Company in the report period were RMB 62.39 million and RMB 24.38 million. The Company produced 101.08 million pins and anode caps and sold 101.30 million. The production and sales ratio reached 100.2%. 2. The share-held subsidiaries of the Company and the results of their operation With registered capital of RMB 540.68 million, Shijiazhuang Baoshi Color Glass Bulb Co., Ltd. (Color Bulb Co.) is a share-holding subsidiary of the Company. The Company owns 81.26% equity of Color Bulb Co. Shijiazhuang Baoshi Electrical Nitre Glass Co., Ltd. (the Joint Venture Co.) establish by Color Bulb Co. and Electrical Nitre Kaisha and Nissho-Iwai Kaisha of Japan is mainly engaged in production, processing and sales of glass bulb for color kinescope and display. Color Bulb Co. owns 49% equity of the Joint Venture Co. In 2001, the Joint Venture Company produced 8.9 million color screen (21”) and 8.44 million color cone (21”), sold 8.78 million color screen (21”) and 8.95 million color cone (21”) and earned sales income of RMB 1140.05 million and sales profit of RMB 303.68 million. The Company realized investment income of RMB 58.86 million. 3. Problems and difficulties occurred in operation and their solutions In the first quarter of 2001, the strong sales of color bulb products of the Joint Venture -10- Co. was kept. The Company obtained high investment income. With the malicious and disorderly competition in domestic color TV market and the production limitation of color kinescopes manufacturers to keep price, the upstream products including color bulb were affected quickly in the second quarter of 2001. The influence has been increasingly serious. As a result, the selling price of the main products of the Company, i.e., pins and anode caps lowered by 20% in the report period and that of color bulb products of the Joint Venture Co. lowered by 30%, which seriously affected the economic result of the Company. The Company was confronted with grim market test again. To solve the problem, the Board of Directors and management of the Company forged ahead despite difficulties and resolutely took the following measures: (1) The Company strengthened technical renovation, increased product varieties and enlarged production scale. For developing its core competitiveness, the Component Factory rushed to complete the phase-I technical renovation project that enlarged production capacity and increased product varieties. The annual production capacity of pins and anode caps has increased from 90 million before renovation to 120 million. Two series of pins and anode caps have had 38 varieties. The Component Factory enlarged market share and further satisfied market demand. In the report period, the Joint Venture Co. completed the expansion project of color cone shaping. The production capacity of color cone reached RMB 15 million. The output was enhanced, which laid foundation for further development of color bulb with multiple varieties. (2) The Company quickened the pace of adjusting product variety and structure and effectively conducted product innovation. To deal with the rapid change of the market, the Company quickened the pace of adjusting product variety and structure. In 2001, it decided to renovate and construct L-35 glass tube production line with small investment to strengthen its key business by giving full play to its advantages based on absorbing foreign advanced technology and years’ production experience of Baoshi Group Co. The furnace of this project was ignited on March 15, 2002. The whole project is estimated to be completed in advance. The Component Factory adjusted the varieties of pins and anode caps at appropriate time according to market change, reduced the products forming complete set with 21” color bulb and increased the products forming complete set with 14” and 25”. In the report period, the Company produced 101.08 million pins and anode caps and sold 101.30 million. In the report period, the pure-plane renovation of 29” color bulb production line of the Joint Venture Co. was completed. The 29” color bulb pure-plane products have been sold in batch at present. The product innovation has laid foundation for the sustained development of the Company. (3) The Company actively developed product market and occupied market share. When the market demand of pins and anode cap products was strong in 2001, the -11- Company made a prompt decision and carried out phase-II technical renovation of the Component Factory to occupy market share and make more profits. The domestic market share of the Component Factory of the Company, the largest pin and anode cap manufacturer, has reached 30%. (4) The Company strengthened basic management and reduced product cost. Facing the reality of continuously lowering of product price and increasingly fierce market competition, the Company educated its staff to establish crisis awareness, cost awareness and development awareness, conducted activities of improving proposals and thoroughly learning from Handan Steel, reduced product cost and obtained certain effect through strengthening basic management. 4. Main suppliers and customers The total amount of purchase from the top five suppliers accounted for 89.98% of the total purchase amount of the year. The total amount of sales to the top five customers accounted for 100% of the total sales amount of the Company. (II) Investment of the Company 1. The Company did not raise funds through share offering in the report period. No funds previously raised were carried forward to be utilized in the report period. 2. Important projects utilizing non-raised funds in the report period The 9th meeting of the third Board of Directors of the Company was held on November 6, 2001, which examined and adopted the resolution for the project of renovating and constructing L-35 glass tube production line. The total investment of the project is RMB 59.78 million, which will be totally raised by the Company itself. The Company will renovate relevant equipment of the original black-and-white glass bulb production line, import key equipment and use some homemade supporting equipment based on making use of the existing factory buildings and public facilities of the Company. Term of construction is two years. After the project is completed and put into production, the annual output of L-35 glass tube will be 5800 tons. The project is under smooth progress. As of December 31, 2001, RMB 38 million was made and 90% of the project was completed. The furnace of this project was ignited on March 15, 2002. The whole project is estimated to be completed in advance. (III) Financial status of the Company in the report period Item 2001 (RMB) 2000 (RMB) Increase/dec rease (%) Total assets 1,538,478,066 1,616,898,335 -4.85 Long-term - - - liabilities Shareholders’ 547,055,173 542,682,303 0.82 equity Profit from key 24,380,361 17,783,922 37.09 business Total profit 51,326,150 100,048,288 -48.70 Net profit 39,390,980 83,961,160 -53.08 -12- Main reason of change: 1. The change of profit from key business was mainly due to the enhancement of the production capacity of main products of the Company, i.e., pins and anode caps, and the increase of sales volume. 2. The change of total profit and net profit was mainly due to the decrease of investment income. (IV) The influence of the change of production environment and macro-economic policies, laws and regulations 1. In 2001, the domestic color TV manufacturers were at price war with each other and in malicious competition, which seriously affected upstream products including color kinescope and color bulb. Influenced by this situation, the selling price of the products of the Company lowered by big margin. After China’s entry to WTO, the Company will face fiercer market competition while having wider space for survival and development. The opportunities and challenges will coexist. The Company will seize opportunities and meet challenges, consolidate it position and seek development by taking the measures including product innovation and the development of domestic and international market. 2. According to the provisions of CS (2000) No. 99 Document issued by the Ministry of Finance and JCQ (2000) No. 74 Document issued by Hebei Financial Commission, the Company enjoyed the preferential policy that the corporate income tax is first levied at the statutory tax rate of 33% and 18% will then be refunded (the actual tax rate is 15%). This policy was reserved till December 31, 2001. From January 1, 2002, the corporate tax will be levied against the Company at the statutory tax rate of 33%, which will exert certain influence on the net profit of the Company. (V) Business Development Plan for the New Year As the problems of the price war of the domestic color TV market and the trend of the lowering of the price of upstream products including color kinescope and color bulb continued, the Company is in very unfavorable operation environment. In the new year, the Company will strengthen confidence, further change conceptions, deepen reform, make innovations and focus on the following work: (1) To quicken technical renovation and fully complete the phase-II technical renovation project of its Component Factory that can enhance its production capacity and increase product variety, complete the model selection, order, installation and commissioning of equipment, fulfill the target of annual output of 0.16 billion pins and anode caps and further enlarge market share. (2) To strengthen new product development. The Component Factory of the Company will focus on developing Philip-typed pins and anode caps , pins for 29” and 34” pure-plane big screen color bulb and form the scale of batch production. The Company will complete the renovation and construction of L-35 glass tube production line and put it into production as early as possible, realize -13- scale operation and form new channel for profit growth. (3) The Joint Venture Co. will all-roundly promote the progress of the pure-plane renovation of color bulb, increase a 34” pure-plane color screen production line based on the success of the pure-plane renovation of 29” color bulb and conduct technical renovation of color cone production line to produce color cone products with small size (such as 14”). It will realize the transformation from hyperplane color bulb series products to pure-plane ones within the year. (4) To seize the opportunities brought by China’s entry to WTO, strengthen marketing, actively occupy market share based on consolidating the existing users, make efforts to develop sales market of new products by various channels and means and enlarge products’ market share. (5) To make effort to enhance capital operation level and thoroughly study and explore means of capital operation including substantiating its key business through asset reorganization and improving its asset-liability structure through debt reorganization to enhance its comprehensive strength. (VI) Routine Work of the Board of Directors 1. Board Meetings and Resolutions in the Report Period (1) The Board of Directors held a meeting on March 15, 2001. The meeting examined and adopted the proposal that Color Bulb Co. will sign an agreement with Shijiazhuang Representative Office of China Great Wall Asset Management Co. and Baoshi Group Co. in respect of the transfer of the debts of RMB 0.15 billion and submitted it to 2000 Annual Shareholders’ General Meeting for examination and adoption. (2) The Board of Directors held a meeting on April 19, 2001, at which the following reports and proposals were examined and adopted: A. 2000 Working Report of the Board of Directors; B. 2000 Annual Report of the Company and its summary; C. 2000 Final Accounting Report; D. 2000 Profit Distribution Preplan; E. 2001 Policy for Profit Distribution; F. The proposal for separate announcement of the holding of 2000 Annual Shareholders’ General Meeting of the Company. (3) The Board of Directors held a meeting on May 14, 2001, at which the following proposals were examined and adopted: A. The proposal for amending the Articles of Association of the Company; B. The proposal for continuing the appointment of Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. as the financial auditing organ of the Company inside and outside China in 2001. (4) The Board of Directors held a meeting on August 24, 2001, at which the following proposals were examined and adopted: A. 2001 Interim Report of the Company and its Summary; -14- B. 2001 Interim Profit Distribution Plan of neither distributing 2001 interim profit nor capitalizing any capital common reserve fund. C. Approving the report of covering the loss of house revolving fund of RMB 37,112,665 with public welfare fund, statutory discretionary common reserve and capital common reserve according to relevant provisions of CQ (2000) No. 295 document and CQ (2000) No. 878 document issued by the Ministry of Finance and submitting it to the next general meeting for examination and approval. D. The internal control system of the Company concerning the provision of depreciation reserve for fixed assets, construction-in-progress, intangible assets and entrusted loans. (5) The Board of Directors held a meeting on November 6, 2001, at which the following proposals were examined and adopted: A. Approving the investment in the project of renovation and construction of L-35 glass tube production line. B. The Company and Baoshi Group Co. has reached agreement on the competition between the Company and Baoshi Group Co. in the same industry arising from this project and will properly solve this issue by the means including asset exchange. (6) The Board of Directors held a meeting on November 21, 2001. The meeting decided to hold 2001 Provisional General Meeting of the Company on December 25, 2001 for examining and adopting report of covering the loss of house revolving fund of RMB 37,112,665 with public welfare fund, statutory discretionary common reserve and capital common reserve according to relevant provisions of CQ (2000) No. 295 document and CQ (2000) No. 878 document issued by the Ministry of Finance; (7) The Board of Directors held a meeting on December 13, 2001, at which the following proposals were examined and adopted: A. As for the accounts of RMB 102.05 million payable by Baoshi Group Co. to Color Bulb Co. formed in business as of October 31, 2001, the measure that Color Bulb Co. will sign an agreement with Shijiazhuang Representative Office of China Great Wall Asset Management Co. and Baoshi Group Co. in respect of the transfer of the debts of RMB 50 million and the remaining accounts payable will be settled by debt reorganization or asset reorganization in 2002 will be taken; B. As of October 31, 2001, the Joint Venture Co. borrowed funds of RMB 0.26 billion from Color Bulb Co. It plans to fully repay the loan in the next two years. The Company will urge both parties to implement the plan. 2. Implementation by the Board of Directors of the Resolutions of the Shareholders’ General Meeting The Board of Directors duly implemented all resolutions of Shareholders’ General Meeting in the report period. -15- (VII) The Profit Distribution Plan As audited by Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd., the net profit of the Company in 2001 was RMB 39,390,980. As the Company still had uncovered losses, the Board of Directors of the Company decided neither to distribute profit nor capitalize any capital common reserve fund for the report year according to relevant regulations. This preplan is to be submitted to 2001 Annual Shareholders’ General Meeting for examination. (VIII) Miscellaneous The press selected by the Company for information disclosure remained China Securities Daily and Hong Kong Commercial Daily in the report period. Chapter 8 Report of the Supervisory Committee 1. The meetings of Supervisory Committee: (1) The Supervisory Committee held a meeting on April 24, 2000, at which the following proposals were examined and adopted: A. 2000 Working Report of the Supervisory Committee; B. 2000 Annual Report of the Company and its Summary; C. 2000 Final Accounting Report of the Company; (2) The Supervisory Committee held a meeting on August 24, 2001, at which the following proposals were examined and adopted: A. 2001 Interim Report of the Company and its summary. B. The report of covering the loss of house revolving fund of RMB 37,112,665 with public welfare fund, statutory discretionary common reserve and capital common reserve according to relevant provisions of CQ (2000) No. 295 document and CQ (2000) No. 875 document issued by the Ministry of Finance. C. The internal control system of the Company concerning the provision of depreciation reserve for fixed assets, construction-in-progress, intangible assets and entrusted loans. 2. The independent opinion of the Supervisory Committee of the Company (1) The operation of the Company according to law In 2001, the Company was able to operate in accordance with relevant laws and regulations of the state, the Articles of Association of the Company and the resolutions of Shareholders’ General Meeting. Its decision making procedure was legal. The Company established corresponding internal control system while perfecting its legal person organizational structure. No act of the directors and managers of the Company was found to violate the laws, regulations and the Articles of Association or harm the Company’s interests when they performed their duties. (2) The 2001 financial reports of the Company truly reflected the financial status and operating results of the Company. The standard unqualified auditors’ report issued by Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. was objective and fair. -16- (3) The related transactions were fairly conducted without harming the interests of the Company. Chapter 9 Important Events (I) Material lawsuits and arbitration The Company did not get involved in any material lawsuit or arbitration in the report period. (II) Material Related Transactions 1. The related transactions in respect of purchase and sales of commodities and provision of labor service Related Contents of Transaction Pricing Mode Proportion Influence parties transactions Amount principle of of the same on the (RMB) settlement kind of profit of transaction the Company Baoshi Sales of Agreed Currency Group Co. power 12,804,561 price 12.66% Profit increase The Joint Sales of Agreed Currency Profit Venture finished 23,644,600 price 37.90% increase Co. products Sales of 84,489,154 Agreed Currency 83.54% Profit power price increase Provision of 27,347,447 Agreed Currency 79.53% Profit labor service price increase 2. The current debts and creditor’s rights between the Company and related parties Related parties Amount (RMB) Reason of Influence on the formation Company The Group Co. 68,512,567 Normal transaction The Company collected reasonable fund occupation fee from the Group Co. The Joint Venture 265,482,108 According to the Color Bulb Co. Co. agreement between collected Color Bulb Co. and reasonable fund the Joint Venture occupation fee Co., the Joint from the Joint Venture Co. Venture Co. borrowed the The development money from Color of color bulb Bulb Co. to project by the Joint develop the project Venture Co. of color bulb. increased the investment income of the Company -17- 3. Other material related transactions Color Bulb Co., the share-held subsidiary of the Company signed agreement with creditor Great Wall Asset Management Co. and Boashi Group Co. on December 11, 2001. Great Wall Asset Management Co. agreed that the loan of RMB 50 million borrowed by Color Bulb Co. would be borne by Boashi Group Co. Boashi Group Co. will repay the loan. Color Bulb Co. will no longer assume this obligation to Great Wall Asset Management Co. This agreement will be submitted to 2001 Annual Shareholders’ General Meeting for examination and adoption. (III) Important contracts and their performance 1. The Company did not hold in trust or contract for or lease the assets of other companies nor did other companies hold in trust, contract for or lease the assets of the Company in the report period. 2. The Company did not provide guarantee to others in the report period. 3. The Company did not entrust others to management its cash assets in the report period. (IV) The commitments made by the Company and shareholders holding over 5% of the total shares of the Company 1. The Company published the announcement of the resolutions of the 9th meeting of the third Board of Directors on China Securities Daily and Hong Kong Commercial Daily on November 7, 2001. The Board of Directors of the Company and Baoshi Group Co. has reached agreement on the competition between the Company and Baoshi Group Co. in the same industry arising from the project of renovating and constructing L-35 glass tube production line and will properly solve this issue by the means including asset exchange. This matter is still in the period of commitment . In addition, after the overhaul of furnace, the pull tube production line of Baoshi Group Co. can also produce other varieties of products according to market situation to make a distinction between the varieties of products produced by Baoshi Group Co. and those by the Company and thus solve the problem of competition in the same industry. 2. The Company published the announcement of the resolutions of the 11th meeting of the third Board of Directors on China Securities Daily and Hong Kong Commercial Daily on December 14, 2001. As for part of the accounts payable by Baoshi Group Co. to Color Bulb Co. formed in business as of October 31, 2001, the Company plans to settle the accounts payable by debt reorganization or asset reorganization in 2002. This matter is still in the period of commitment and has not been settled. As of October 31, 2001, the Joint Venture Co. borrowed funds of RMB 0.26 billion from Color Bulb Co. It plans to fully repay the loan in the next two years. The Company will urge both parties to implement the plan. This matter is still in the period of commitment. In the report period, the Joint Venture Co. repaid RMB 122.74 million as planned. By the end of the report period, the balance of the funds borrowed by the Joint Venture Co. from Color Bulb Co. was RMB 265.48 million. -18- (V) The appointment of Certified Public Accountants and the payment of remuneration 1. The appointment of Certified Public Accountants 2000 Annual Shareholders’ General Meeting examined and adopted the proposal continuing the appointment of Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. as the financial auditing organ of the Company inside and outside China in 2001. 2. The procedure of deciding remuneration The Company signed agreement with the auditing organs after consultation to determine the remuneration of the auditing organs. 3. Payment of remuneration The Company paid total remuneration of RMB 1.1 million to Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. in the report period. The traveling expenses were born by the auditing organs. Year 2001 2000 Remuneration paid to RMB 1,100,000 RMB 1,000,000 auditing organs (VI) The Company, its Board of Directors and directors were not investigated, administratively punished or publicly criticized by CSRC or publicly condemned by stock exchange. Chapter 10. Financial Reports (I) Auditors’ Report (Attached hereinafter) (II) Financial Statements (Attached hereinafter) (III) Notes to Financial Statements (Attached hereinafter) Chapter 11 List of Documents Available for Inspection 1. Financial statements bearing the seal and signature of legal representative, financial controller and accounting clerks. 2. The original of the auditors’ report bearing the seal of the certified public accountants and the seal and signature of C.P.A. 3. The original of all Company’s documents and the original manuscripts of announcements publicly disclosed on China Securities Daily and Hong Kong Commercial Daily in the report period. Shijiazhuang Baoshi Electronic Glass Co., Ltd. April 18, 2002 -19- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED (Incorporated in the People’s Republic of China with limited liability) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 Mailing Address: 12th Floor Shui On Plaza 333 Huai Hai Zhong Lu Shanghai 200021 People’s Republic of China Telephone: +86 (21) 6386 3388 Facsimile: +86 (21) 6386 3300 Report of the Auditors To the Shareholders of Shijiazhuang Baoshi Electronic Glass Company Limited (Incorporated in the People’s Republic of China with limited liability) We have audited the accompanying consolidated balance sheet of Shijiazhuang Baoshi Electronic Glass Company Limited (the “Company”) and its subsidiary (collectively known as the “Group”) as at 31 December 2001 and the related consolidated income and cash flows statements for the year then ended. These financial statements set out on pages 2 to 24 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2001, and the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards. PricewaterhouseCoopers China Limited Shanghai, China 15 April 2002 Business is undertaken in the registered name of PricewaterhouseCoopers China Limited, incorporated in Bermuda with limited liability. Registered address is Clarendon House, 2 Church Street, Hamilton, Bermuda. SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 2001 2000 Notes Sales 1 62,388 44,918 Cost of sales (37,158) (26,469)   Gross profit 25,230 18,449 Other operating income 29,859 37,925 Distribution costs (1,470) (1,340) Administrative expenses (70,590) (32,383) Other operating expenses (6,401) (632)   Operating (loss) /profit 2 (23,372) 22,019 Finance costs - net 3 (18,537) (53,034) Share of result of an associate 12 58,318 133,626   Profit before tax 16,409 102,611 Tax 5 (5,157) -   Profit from ordinary activities 11,252 102,611 Extraordinary items 6 2,701 31,438   Group profit before minority interest 13,953 134,049 Minority interest 25 (5,565) (21,793)   Net profit 8,388 112,256   Basic and diluted earnings per share (Rmb Yuan per share) 7 Rmb 0.02 Rmb 0.29   Earnings per share excluding extraordinary items (Rmb Yuan per share) 7 Rmb 0.01 Rmb 0.21   The accounting policies on pages 6 to 9 and the Notes on pages 10 to 24 form an integral part of these consolidated financial statements. -2- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED BALANCE SHEET As at 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 2001 2000 Notes ASSETS Non-current assets Property, plant and equipment 8 164,044 174,669 Construction in progress 9 44,149 3,285 Land use rights 10 14,757 15,072 Goodwill 11 - 2,537 Investment in associated undertakings 12 886,544 887,703 Other investment - 5,000 Deferred assets 13 - 1,257   1,109,494 1,089,523   Current assets Inventories 14 23,261 29,089 Receivables and prepayments 15 76,717 58,489 Amount due from the holding company 16 68,827 60,011 Amount due from associate 12 174,039 271,583 Amounts due from related parties 17 11,009 7,592 Other long-term assets receivable within one year 18 58,000 58,000 Cash and cash equivalents 17,446 45,463   429,299 530,227   Total assets 1,538,793 1,619,750   EQUITY AND LIABILITIES Capital and reserves Ordinary shares 24 383,000 383,000 Reserves 26 568,296 566,102 Accumulated loss (407,586) (413,780)   543,710 535,322   Minority interest 25 87,889 82,324   Non-current liabilities Deferred income 23 3,764 10,216   3,764 10,216   Current liabilities Trade and other payables 19 203,326 175,774 Amount due to related parties 17 3,055 3,054 Current tax liabilities 7,415 2,765 Short-term borrowings 20 15,403 127,035 Long-term borrowings due within one year 21 591,231 600,260 Other long-term liabilities due within one year 22 83,000 83,000   903,430 991,888   Total liabilities 907,194 1,002,104   Total equity and liabilities 1,538,793 1,619,750   On 17 April 2002, the Board of Directors of Shijiazhuang Baoshi Electronic Glass Company Limited authorised these financial statements for issue. The accounting policies on pages 6 to 9 and the Notes on pages 10 to 24 form an integral part of these consolidated financial statements. -3- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) Capital Statutory Statutory Share accumulation accumulated welfare Capital fund fund fund Balance at 1 January 2000 383,000 355,859 41,265 20,634 Profit for the year - - - - Minority share in profit of subsidiary - - - - Gain arising from waive of interest expenses appropriated to reserve (note 26) - 148,344 - -      Balance at 31 December 2000 383,000 504,203 41,265 20,634      Balance at 1 January 2001 383,000 504,203 41,265 20,634 Profit for the year - - - - Minority share in profit of subsidiary - - - - Gain arising from liabilities waived and appropriated to reverse (Note 26) - 2,194 - -      Balance at 31 December 2001 383,000 506,397 41,265 20,634      The accounting policies on pages 6 to 9 and the Notes on pages 10 to 24 form an integral part of these consolidated fin -4- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 2001 2000 Note Cash flows from operating activities Cash used in operations 27 (71,911) (181,646) Interest received 21,014 57,106 Interest paid - (61,337) Tax paid (14,017) (8,638)   Net cash used in operating activities (64,914) (194,515)   Cash flows from investing activities Purchase of property, plant and equipment (55,549) (5,244) Proceeds from sales of property, plant and equipment 2,252 208 Repayment of loans to SBEG 122,020 490,674 Proceeds from sale of other investment 5,000 - Dividends received 34,833 7,968   Net cash from investing activities 108,556 493,606   Cash flows from financing activities Repayments of borrowings (71,659) (269,362)   Net cash used in financing activities (71,659) (269,362)   (Decrease)/increase in cash and cash equivalents (28,017) 29,729   Movement in cash and cash equivalents At start of year 45,463 15,734 (Decrease)/increase (28,017) 29,729   At end of year 17,446 45,463   The accounting policies on pages 6 to 9 and the Notes on pages 10 to 24 form an integral part of these consolidated financial statements. -5- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 1 GENERAL INFORMATION THE COMPANY The Company, Shijiazhuang Baoshi Electronic Glass Company Limited, was incorporated on 26 December 1992 in Shijiazhuang, Hebei Province, the People’s Republic of China (the “PRC”) as a joint stock limited company. The principal activities of the Company and its subsidiaries and associates (collectively known as the “Group” ), were the manufacture and sale of black and white television bulbs (“BW Bulbs”) and black and white television cathode ray tubes (“BW CRTs”). In June 1997, the Company suspended production of its primary products due to a significant adverse change in market demand for black and white television sets. On 30 March 2000, the shareholders approved and authorised the sale of all plant and machinery relating to production of BW Bulbs and BW CRTs together with part of the associated liabilities to the holding company, Shijiazhuang Baoshi Electronic Group Company Limited, in exchange for certain assets and liabilities of a division of the holding company with the principal activities of manufacturing colour television tube components. The Company’s principal activities therefore become the manufacture and sale of components for colour television cathode ray tubes. THE SUBSIDIARY AND THE ASSOCIATED UNERTAKINGS At 31 December 2001, the Company had the following interests in a subsidiary and an associate. Attributable Year of equity Principal Name incorporation interest activities Subsidiary Shijiazhuang Baoshi Colour 1994 81.26% Investment holding Bulb Company Limited (“SBCB”) of SBEG Associate Manufacture and Shijiazhuang Baoshi Electric 1997 39.82% sale of colour Glass Company Limited (“SBEG”) television bulbs On 3 July 1997, SBEG was established as a Sino-foreign investment enterprise between SBCB, Nippon Electric Glass Co., Ltd. and Nissho Iwai Corporation. SBCB holds 49% equity interests of SBEG. -6- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 2 BASIS OF PREPARATION The Company maintains the books and prepares the statutory financial statements in accordance with accounting principles and relevant financial regulations applicable to joint stock limited companies in the PRC. These PRC accounting regulations and bases differ in certain respects from International Accounting Standards ("IAS"). The consolidated financial statements, which comprise the results, assets and liabilities, changes in equity and cash flows of the Company and the subsidiary, have incorporated adjustments made to the statutory financial statements so as to conform to IAS. The consolidated financial statements have been prepared in accordance with IAS. The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. 3 GROUP REPORTING (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 unrealised gains on transactions between group companies are eliminated; unrealised 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. 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. 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. (3) Foreign currency translation Foreign currency transactions are translated into Renminbi at the rates of exchange stipulated by the People’s Bank of China at the date of transactions. Monetary assets and liabilities denominated in foreign currencies are translated into Renminbi at year-end exchange rates stipulated by the People’s Bank of China. Exchange gains or losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities are recognised in the income statement. Exchange gains and losses relating to funds borrowed to finance construction of fixed assets are capitalised during the construction period. -7- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 4 PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment is 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: Years Buildings 20-21 Plant and machinery 11-12 Motor vehicles 11-12 Office equipment 11-12 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 operating profit. 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. 5 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 undertaking at the date of acquisition. It is amortised using the straight-line method over a period of five years. 6 LAND USE RIGHT Land use rights are stated at cost less amortisation. Amortisation is provided to write off the cost of land use rights over the approved use period of 50 years on a straight-line basis. 7 INVESTMENTS Investments held for long-term purposes are stated at cost less any provision for permanent diminution in value considered necessary by the directors. 8 INVENTORIES Inventories comprise raw materials, work in progress, finished goods, spare parts and low cost consumables for use in the production process. Inventories are stated at the lower of cost or net realisable value. Cost is calculated on a weighted average basis. Cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads 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. Spare parts and low cost consumables for use in the production process are stated at cost less any permanent diminution in value. The cost of spare parts and low cost consumables is charged to the income statement when they are put into use. -8- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 9 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. 10 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 comprise cash on hand and deposits held at call with banks. 11 SHARE CAPITAL Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. 12 TAXATION PRC income taxes are provided for based on the estimated assessable profits and tax rates applicable to the Company and other companies comprising the Group. 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. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temoprary differences can utilised. 13 EMPLOYEE BENEFITS The Group participates in a government pension scheme to which it is required to pay monthly retirement contributions at the rate of 20% (2000: 20%) of the wages of existing employees. Under the scheme, retirement benefits of existing and retired employees are provided by the government - managed pension fund and the Group has no further obligations beyond the monthly contributions. The Group’s contributions are charged to income statement in the period to which they relate. 14 REVENUE RECOGNITION Sales are recognised upon delivery of products and customer acceptance. Sales are shown net of sales taxes and discounts, and after eliminating sales within the Group. Interest income is recognized on an effective yield basis. 15 FINANCIAL INSTRUMENTS The Group adopted IAS 39 - Financial Instruments : Recognition and Measurement, at 1 January 2001. Financial assets and financial liabilities carried on the balance sheet include cash and bank balances, trade receivables, trade payables and borrowings. Trade receivables are stated at carrying amounts determined in accordance with accounting policy 9. Other financial assets and financial liabilities are stated at cost. The financial risk factors associated with the Group’s activities are summarised in Note 29. -9- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 1 SALES Sales represent revenues from sales of components for colour television cathode ray tube. 2 OPERATING ITEMS The following items have been included in arriving at operating loss/(profit): 2001 2000 Depreciation on property, plant and equipment (Note 8) 18,132 14,638 Impairment of property, plant and equipment (Note 8) 2,400 - Loss /(profit) on disposal of property, plant and equipment (included in “Other operating expenses/(income)”, Note 27) 1,662 (34) Amortisation of: - goodwill (included in “Administrative expenses”; Note 11) 2,537 3,383 - land use rights (included in “Administrative expenses”; Note 10) 315 238 - deferred assets (included in “Administrative expenses”; Note 13) 1,257 2,755 Provision for doubtful debts (included in “Administrative expenses”) (105) (9,596) Provision for inventory obsolescence (included in “Administrative expenses”) (6,970) (11,278) Amortisation of deferred income (included in “Other operating income”; Note 23) (6,452) (6,451) Staff costs (Note 4) 57,855 13,835 - 10 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 3 FINANCE COSTS - NET 2001 2000 Interest expense on borrowings 42,362 109,294 Interest income (24,891) (55,743) Net foreign exchange transaction losses / (gains) 1,055 (536) Others 11 19   Finance costs, net 18,537 53,034   4 STAFF COSTS 2001 2000 Wages and salaries 12,031 9,174 Retirement benefits 2,815 1,835 One-off expenditure of housing welfare 38,832 - Others 4,177 2,826   57,855 13,835   Average monthly number of full time people employed by the Group during the year 1,189 1,113   In accordance with the resolution by the shareholders’ General Meeting and as approved by the authorities, during the year the Group paid Rmb 38,832 thousand of one-off expenditure of housing welfare to Shijiazhuang Baoshi Electronic Group Company Limited, the ultimate parent of the Group. 5 TAXATION 2001 2000 Current tax 5,157 -   Taxable income is calculated based on total revenue less deductible cost of goods sold, expenses and other losses under the existing tax regulations. The prevailing corporate income tax rate is 30% and the local tax rate is 3%, together 33% of taxable income. Deferred tax is not provided as temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purpose are not significant. - 11 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 6 EXTRAORDINARY ITEMS 2001 2000 Waive of interest expenses (i) - 30,450 Waive of debts (ii) 2,701 988   2,701 31,438   (i) During last year, several banks agreed to waive a portion of accrued interest owed by the Group. (ii) During the year, several creditors agreed to waive a portion of trade payables owed by the Group. 7 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit for the year by the number of shares in issue during the year: 2001 2000 Net profit for the year 8,388 112,256 Number of shares in issue 383,000 383,000 Basic and diluted earnings per share (Rmb Yuan) Rmb 0.02 Rmb 0.29   Earnings per share excluding extraordinary items is calculated by dividing the net profit before extraordinary items for the year by the number of shares in issue during the year: 2001 2000 Net profit for the year 8,388 112,256 Less: Extraordinary items (Note 6) (2,701) (31,438)   Net profit before extraordinary items 5,687 80,818   Number of shares in issue 383,000 383,000 Earnings per share excluding extraordinary items (Rmb Yuan) Rmb 0.01 Rmb 0.21   - 12 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 8 PROPERTY, PLANT AND EQUIPMENT Plant and Motor Office Buildings machinery vehicles equipment Total Year ended 31 December 2000 Net book value at beginning of year 116,653 151,742 2,071 2,846 273,312 Additions 436 1,123 163 237 1,959 Assets swap-in 8,815 49,084 - - 57,899 Disposals - (63) (111) (1) (175) Assets swap-out - (143,380) (308) - (143,688) Depreciation charge (Note 2) (6,212) (7,851) (293) (282) (14,638)      Net book value at end of year 119,692 50,655 1,522 2,800 174,669      At 31 December 2000 Cost 161,415 123,736 3,276 5,852 294,279 Accumulated depreciation (41,723) (73,081) (1,754) (3,052) (119,610)      Net book value 119,692 50,655 1,522 2,800 174,669      Year ended 31 December 2001 Net book value at beginning of year 119,692 50,655 1,522 2,800 174,669 Additions 3,942 9,481 265 134 13,822 Disposals (1,246) (1,920) (416) (333) (3,915) Impairment charge (Note 2) - (2,385) (12) (3) (2,400) Depreciation charge (Note 2) (7,379) (10,049) (248) (456) (18,132)      Net book value at end of year 115,009 45,782 1,111 2,142 164,044      At 31 December 2001 Cost 163,454 120,946 2,985 5,339 292,724 Accumulated depreciation (48,445) (75,164) (1,874) (3,197) (128,680)      Net book value 115,009 45,782 1,111 2,142 164,044      (i) The impairment charge of Rmb2,400 thousand principally relates to certain plant and machinery which are not used. (ii) As at 31 December 2001, fixed assets with an original cost of Rmb170,000 thousand has been pledged to State-owned Assets Administration Companies for loans. 9 CONSTRUCTION IN PROGRESS 2001 2000 At beginning of year 3,285 - Additions 44,254 3,294 Transfer to PP&E (3,390) (9)   At end of year 44,149 3,285   - 13 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 10 LAND USE RIGHTS 2001 2000 Net book value at beginning of year 15,072 6,590 Add: Purchase - 2,492 Assets swap-in - 6,228 Less: Amortisation during the year (315) (238)   Net book value at end of year 14,757 15,072   Cost 15,997 15,997 Accumulated amortisation (1,240) (925)   Net book value 14,757 15,072   11 GOODWILL 2001 2000 Net book value at beginning of year 2,537 5,920 Less: Amortisation during the year (2,537) (3,383)   Net book value at end of year - 2,537   Cost 16,914 16,914 Accumulated amortisation (16,914) (14,377)   Net book value - 2,537   - 14 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 12 INVESTMENT IN ASSOCIATED UNDERTAKINGS 2001 2000 Share of net assets of SBEG 795,100 771,070 Amount due from SBEG 265,483 388,216   1,060,583 1,159,286 Less: Amount due from SBEG within one year (174,039) (271,583)   886,544 887,703   Amount due from SBEG is unsecured, and bears interest at 6.21% per annum (2000: January to March:11%,April to December 6.21%). 2001 2000 Net book value at beginning of year 771,070 637,444 Decrease in investment (34,288) - Share of result of SBEG 58,318 133,626   Net book value at end of year 795,100 771,070   13 DEFERRED ASSETS 2001 2000 Pre-operating expenses - Net book value at beginning of year 1,257 4,012 Less: Amortisation during the year (1,257) (2,755)   Net book value at end of year - 1,257   Cost 20,143 20,143 Accumulated amortisation (20,143) (18,886)   Net book value - 1,257   - 15 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 14 INVENTORIES 2001 2000 At net realisable value - Raw materials 3,423 1,123 Finished goods 10,703 15,307 Spare parts and low cost consumables 9,135 12,659   23,261 29,089   Provisions have been made based on the difference between cost of individual items and their net realisable value. 15 RECEIVABLES AND PREPAYMENTS 2001 2000 Trade receivables 34,132 27,762 Less : Provision for doubtful debts (14,268) (14,377)   Trade receivables - net 19,864 13,385 Notes receivable 41,283 26,180 Prepayments 2,478 5,625 Other receivables 13,077 13,105 Deferred and prepaid expenses 15 194   76,717 58,489   Included in the other receivables is HK$3,030 thousand (Rmb3,203 thousand equivalent) (2000: HK$3,030 thousand) due from Guotai Junan Securities Co., Ltd. The amount is unsecured, interest free and has no fixed terms of repayment. 16 AMOUNTS DUE FROM THE HOLDING COMPANY Amount due from the holding company are unsecured and have no fixed terms of repayment. The related interest is calculated at a rate equivalent to the interest rates of the Company’s short-term bank loans. 17 AMOUNTS DUE FROM / DUE TO RELATED PARTIES These are amounts due from/due to subsidiaries of the holding company. The balances are unsecured, interest free and have no fixed terms of repayment. 18 OTHER LONG-TERM ASSETS RECEIVABLE WITHIN ONE YEAR Other long-term assets receivable within one year represents the amount receivable under a foreign currency swap transaction entered into by SBCB in 1993. This amount was due to be received in November 1998 (see Note 22). - 16 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 19 TRADE AND OTHER PAYEBLES 2001 2000 Accrued interest 133,180 93,259 Trade payables 28,371 33,732 Payables to contractors 16,595 25,884 Accrued utility expenses 2,113 1,956 Notes payable 7,182 4,762 Advances from customers 511 1,044 Staff welfare funds 3,958 4,339 Staff welfare 2,467 3,015 Accrued expenses 550 1,023 Others 8,399 6,760   203,326 175,774   20 BORROWINGS 2001 2000 Current Bank borrowings - 77,061 Other borrowings (Note iii & Note iv) 15,403 49,974   15,403 127,035 Long-term other borrowings due within one year (Note iii) 591,231 600,260   606,634 727,295   (i) The borrowings include secured liabilities in a total amount of Rmb 379,991 thousand (2000: Rmb 423,967 thousand). The borrowings are secured over certain fixed assets of the Group with an aggregate original cost of Rmb 170,000 thousand (2000: Rmb 212,000 thousand). (ii) The weighted average effective interest rates at the balance sheet date were as follows: 2001 2000 Bank and other borrowings 5.97% 9.26%   - 17 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 20 BORROWINGS (continued) (iii) In accordance with the relevant circulars issued by the State Council and the People’s Bank of China, the borrowings from the original lenders listed below have been transferred to the State Assets Administration Companies. The details are tabulated below: Original lender Current lender Principal terms of Interest rate under Collateral original agreement original contract Agriculture Bank of China China Great Wall Assets Shijiazhuang Hua’an sub-branch Administration Company 45,702 1999.12.31-2001.12.31 6.56% Agriculture Bank of China China Great Wall Assets Shijiazhuang Hua’an sub-branch Administration Company 379,991 1995.3.23-2001.12.31 Floating rate Secured over fixed assets with an original cost amounting to Rmb170,000,000 and guaranteed by a third-party.  425,693  Bank of China Shijiazhuang China Orient Asset Zhongshan sub-branch Administration Company 165,538 1996.2.15-2001.2.15 Floating rate Bank of China Shijiazhuang China Orient Asset Yuhua sub-branch Administration Company 10,000 1997.1.21-1998.1.21 11.1%  175,538  601,231  According to the relevant circulars of the State Council and the “Regulation for the Financial Assets Management Companies”, after the above borrowings transfers, the Company shall comply with the conditions stipulated by the original agreements with respect to China Great Wall Asset Administration Company and China Oriental Asset Administration Company from 1 April 2000, in respect of the obligations of repayments of principals and payment of interest. - 18 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 20 BORROWINGS (continued) (iv) Borrowings owed to other lenders were overdue as at 31 December 2001. Up till 31 December 2001, extensions had still not been formally granted by lenders. The Company’s Board of Directors had obtained the confirmation from the lenders that no additional interest will be charged on these overdue borrowings. The details of the borrowings are listed below: Lender Principal Period Interest rate Hebei Finance Bureau 403 1995.6.1-1995.11.30 7.2% Financing Bureau of Shijiazhuang 1995.3.1-1997.3.1 12.8% Finance Bureau 5,000  5,403  Short-term borrowings included borrowings dominated in foreign currency amounting to US$ 49 thousand, with the Rmb equivalent of Rmb 403 thousand. 21 LONG-TERM BORROWINGS DUE WITHIN ONE YEAR 2001 2000 Secured 379,991 388,993 Unsecured 211,240 211,267   591,231 600,260   Long-term borrowings due within one year are all dominated in US dollars amounting to US$ 71,431 thousand (2000: US$72,639 thousand), equivalent to Rmb 591,231 thousand (2000: Rmb600,260 thousand). All these borrowings have been transferred to the State-owned Assets Administration Companies. Please refer to Note 20 for details. 22 OTHER LONG-TERM LIABILITIES DUE WITHIN ONE YEAR Other long-term liabilities due within one year represent US$10,000,000 payable under a foreign currency swap transaction entered into by SBCB in 1993. This amount was payable in October 1998 (see Note 18). The Company is still in a process of negotiating the settlement of this swap transaction. - 19 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 23 DEFERRED INCOME Deferred income represents the premium arising from a transfer of assets to SBEG as capital contribution in 1997. This premium has been deferred and is being amortised to the income statement over a period of five years. The movement of the deferred income is as follows: 2001 2000 Net book amount at beginning of year 10,216 16,667 Less: Amortisation during the year (6,452) (6,451)   Net book amount at end of year 3,764 10,216   Original amount 32,256 32,256 Accumulated amortisation (28,492) (22,040)   Net book amount 3,764 10,216   24 SHARE CAPITAL The par value of the shares of the Company is Rmb 1 Yuan each. 2001 2000 Category of shares: Unlisted shares State 230,411 230,411 Legal persons 7,500 7,500   237,911 237,911   Listed shares A shares 45,089 45,089 B shares 100,000 100,000   145,089 145,089   383,000 383,000   25 MINORITY INTEREST 2001 2000 At beginning of year 82,324 60,531 Share of net profit of subsidiary 5,565 21,793   At end of year 87,889 82,324   - 20 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 26 RESERVES (a) Capital accumulation fund Transactions of the following nature are recorded in the Capital accumulation fund: (i) share premium arising from the issue of shares at a price in excess of their par value; (ii) donations received; (iii) surplus arising from the revaluation of assets; and (iv) any other items required by PRC regulations to be so treated. In accordance with the Enterprise Accounting Standards regarding debt restructure promulgated by the Ministry of Finance of the People’s Republic of China on 18 January 2001, the Group has appropriated the gain arising from trade payables waived by debtors in 2001 and interests waived by banks in 1999 and 2000 to capital accumulation fund. The details are as follows: 2001 Attributable Appropriations equity interest Amount to Reserve Waive of SBCB’s trade payables in 2001 81.26% 2,701 2,194   2000 Waive of SBCB’s interest expenses in 2000 81.26% 30,450 24,744 Waive of SBCB’s interest expenses in 1999 81.26% 65,049 52,859 Waive of the Company’s interest expenses in 1999 100% 70,741 70,741   166,240 148,344   Amounts in the Capital accumulation fund can be utilised to offset prior years' losses or for issue of bonus shares. (b) Statutory accumulation and welfare funds The PRC Company Law requires a company to appropriate ten percent of its profit after taxation for the year computed in accordance with PRC accounting regulations (after offsetting any prior years' losses) to the Statutory accumulation fund. When the balance of such fund reaches 50 percent of the company's share capital, any further appropriation is optional. The Statutory accumulation fund can be utilised to offset prior years' losses or for issuance of bonus shares. However, the fund shall be maintained at a minimum amount equivalent to 25 percent of share capital after any such issuance. The PRC Company Law also requires a company to appropriate between five percent and ten percent of profit after taxation for the year to the Statutory welfare fund computed in accordance with PRC accounting regulations. The fund shall be utilised for the collective benefits of the workforce, including the provision of staff quarters or housing. No other distribution shall be made from the fund other than upon liquidation of the Company. The Statutory accumulation and welfare funds represent amounts appropriated in accordance with the PRC accounting regulations in previous years. - 21 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 27 CASH USED IN OPERATIONS Reconciliation of profit before tax and extraordinary items to cash used in operations: 2001 2000 Profit before tax and extraordinary items 16,409 102,611 Adjustments for: Depreciation (Note 8) 18,132 14,638 Impairment charge (Note 8) 2,400 Amortisation of goodwill (Note 11) 2,537 3,383 Amortisation of land use rights (Note 10) 315 238 Amortisation of deferred assets (Note 13) 1,257 2,755 Loss /(Profit) on disposal of property, plant and equipment (Note 2) 1,662 (34) Amortisation of deferred income (Note 23) (6,452) (6,451) Interest expense (Note 3) 42,362 109,294 Interest income (Note 3) (24,891) (55,743) Share of result of associate (Note 12) (58,318) (133,626) Other investment income (546) (7,968) One-off expenditure of housing welfare (Note 4) 38,832 - Changes in working capital - trade and other receivables (116,126) (95,323) - inventories 5,828 (13,706) - trade and other payables 4,688 (101,714)   Cash used in operations (71,911) (181,646)   - 22 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 28 RELATED PARTY TRANSACTIONS The ultimate parent of the Group is Shijiazhuang Baoshi Electronic Group Company Limited, a company incorporated in the People’s Republic of China. In addition to the related party balances and transactions described elsewhere in this report, the following significant transactions were carried out with related parties: Related party transactions were carried out on commercial terms and conditions and at market prices. i) Sale of goods and services 2001 2000 Sale of goods to: The holding company 813 2,797 SBEG 24,557 16,980   25,370 19,777   Services rendered to: The holding company 12,805 12,784 SBEG 111,836 76,992   124,641 89,776   ii) Purchase of goods and services 2001 2000 Rental for assets leased from the holding company 6,972 1,969 Purchase of goods from the holding company - 2,211   6,972 4,180   iii) Interest earned 2001 2000 Interest earned from the holding company 2,668 6,411 Interest earned from SBEG 18,552 57,106   21,220 63,517   iv) Assets swap transaction with the holding company 2001 2000 Net value of the fixed assets transferred in - 57,899 Net value of the fixed assets transferred out - (143,688) Loans being transferred out - (53,900) Land use rights transferred in - 6,228 Net current assets transferred in - 20,443   - 23 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 28 RELATED PARTY TRANSACTIONS (continued) v) Other transactions with the holding company 2001 Notes receivable transferred and cash paid to the holding company 85,094 Miscellaneous expenditures prepaid by the Group on behalf of the holding company 79,048 One-off expenditure of housing welfare paid through the holding company (38,832) Long-term loans transferred to the holding company (50,000) Notes receivable transferred and cash paid to the Group (39,538) The Group charges interests on the amount due from the holding company, the related interest is calculated at a rate equivalent to the interest rates of the short-term bank loans and the average monthly outstanding balance due from the holding company. The Group has charged interests of 2,668 thousand from the holding company in 2001 (2000:6,411 thousand). 29 FINANCIAL RISK The Group’s activities expose it to a variety of financial risks, including: (a) Foreign exchange risk Most of the transactions of the Group were settled in Renminbi. In the opinion of the directors, the Group do not have significant foreign currency exposure. (b) Interest rate risk The interest rates and terms of repayment of borrowings are disclosed in Note 20. Other financial assets and liabilities do not have material interest rate risk. (c) Credit risk At 31 December 2001, the trade receivables of the Group were spread among a number of customers in the PRC. Details of amounts due from the holding company and related companies are included in Note 16 and Note 17. The other financial assets of the Group do not represent a concentration of risk. 30 Fair value estimation The Group’s investments in associated undertakings are investments in unlisted companies. As there is no market value available, their fair values are based on directors’ best estimate of their net assets, profit generating ability and other circumstances as considered appropriate. The fair values of cash and bank, trade receivables and payables, amounts due from and to related companies, and borrowings are not materially different from their carrying amounts. - 24 - APPENDIX SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED RECONCILIATION OF GROUP PROFIT BEFORE TAX BETWEEN PRC REPORTING AND IAS REPORTING FOR THE YEAR ENDED 31 DECEMBER 2001 (All amounts are shown in Rmb thousands unless otherwise stated) 2001 2000 As reported in the consolidated financial statements prepared in accordance with PRC requirements 51,326 100,048   Adjustments for: 1. Provision for inventory obsolescence provided in previous years - 483 2. Amortization of goodwill (2,537) (3,383) 3. Amortization of deferred income 6,452 6,451 4. Waive of debts and interest expenses which is recogniszed as capital accumulation fund in accordance with PRC requirements 2,701 30,450 5. One-off expenditure of housing welfare (38,832) -   Subtotal (32,216) 34,001   As stated in the consolidated financial statements prepared in accordance with IAS 19,110 134,049   DOCUMENT CONTROL FORM Doc. Name : 01 Baoshi.SEB Doc. Locat : Operator : Input Date : Audit Group : Correction Checked Correction Checked date by date by Document type ________ _______ ________ _______ ________ _______ ________ _______ SHIJIAZHUANG BAOSHI ELECTRONICS GLASS ________ _______ ________ _______ CO., LTD. ________ _______ ________ _______ ________ _______ ________ _______ Financial Statements ________ _______ ________ _______ for the year ended 31 December 2001 ________ _______ ________ _______ ________ _______ ________ _______ 1 CALL OVER Initials Sent to KWX 1st 2nd Final Called over by _____ to_____ _____ to _____ ______ to ______ Additions checked by ______ ______ ______ Cross referenced by ______ ______ ______ Cross-checked to Chinese version by ______ ______ ______ Proofread by (Manager) ______ ______ ______ 2 REVIEWED AND APPROVED FOR PRINTING BY __________ _________ Manager Partner 3 TO PRINTING ROOM Accounts Letterhead Auditors’ copy _________ PWDH _________ Tax copy _________ PW ASIA _________ AGM copy _________ Other _________ Additional copy _________ Tech Dept copy _________ Total No. of pages _________ Type of Binding Staple ________ Plastic _________ Required by: Date ________ Time _________ ***** This page is generated by the word processing ***** centre and is not part of the report.