南玻Ａ(000012)深南玻Ｂ2001年年度报告（英文版）

CSG TECHNOLOGY HOLDING CO., LTD. 2001 ANNUAL REPORT Contents: I. Important Notice ………………………………………………………….. 1 II. Company Profile ………………………………………………………….. 1 III. Financial Highlight …………………………………………………………. 2 IV. Changes in Share Capital and Particulars about the Shareholders ……… 3 V. Directors, Supervisors, Senior Executives and Staff …………………….. 7 VI. Administrative Structure ………………………………………………… 8 VII. Brief Introduction to Shareholder’s General Meeting ……………………. 11 VIII. Report of the Board of Directors …………………………………………… 12 IX. Report of the Supervisory Committee …………………………………... 17 X. Significant Events ………………………………………………………….. 19 XI. Financial Reports …………………………………………………………. 21 XII. Documents for Reference ………………………………………………… 53 I. Important Notice The Board of Directors of CSG Technology Holding Co., Ltd. (hereinafter referred to as the Company) hereby confirms that there are no important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. This Report is prepared both in Chinese and in English. Should there be any difference in interpretation of the text between the two versions, the Chinese version shall prevail. II. Company Profile 1. Legal Name of the Company In Chinese: 中国南玻科技控股 集团 股份有限公司 In English: CSG Technology Holding Co., Ltd. Short Form in Chinese: 南玻集团 Short Form in English: CSG 2. Legal Representative: Chen Chao 3. Secretary of the Board of Directors: Wu Guobin Authorized Representative in Charge of Securities Affairs: Zhang Zhiping Liaison Address: CSG Building, No.1, 6th Industrial Road, Shekou, Shenzhen, P.R.China Tel: (86) 755-6695970 Fax: (86) 755-6692755 E-mail: szcsgcsg@public.szptt.net.cn 4. Registered Address and Office Address of the Company: CSG Building, No.1, 6th Industrial Road, Shekou, Shenzhen, P.R.China Post Code: 518067 Company’s Internet Web Site: http://www.csgholding.com E-mail: nbdnb@public.szptt.net.cn 5. Newspapers for Disclosing the Information: China Securities Journal, Securities Times and Ta Kung Pao Internet Web Site Designated by China Securities Regulatory Commission for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Securities Department, 5/F, CSG Building, No.1, 6th Industrial Road, Shekou, Shenzhen, P.R.China 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock (A-share): Southern Glass Technology Short Form of the Stock (B-share): Southern Glass B Stock Code (A-share): 000012 Stock Code (B-share): 200012 1 7. Other Information About the Company (1) Initial registration date and place Initial registration date: Sept. 10, 1984 Initial registration place: Shenzhen (2) Entity Business License Registration number: GSWQGYSZ Zi No. 100482 (3) Tax Registration Number: National Revenue: S Zi 440301618838577 Local Revenue: D Zi 440305618838577 (4) The Certified Public Accountants engaged by the Company: Domestic: Arthur Andersen﹒Hua Qiang Certified Public Accountants Address: 28/F-29/F International Financial Bldg. 2022 Jianshe Road, Shenzhen Overseas: Arthur Andersen & Co Address: 21/F, Duke Bldg., Zhidi Plaza, No. 15, Queen Avenue C., Zhonghuan, Hong Kong III. Financial Highlight (I) Major accounting data as of the report period (Unit: In RMB) (1) Profit before tax 158,443,775 (2) Net profit 153,207,380 (3) Gross Profit 369,204,122 (4) Other operating income, net 7,521,297 (5) Profit from operations 186,815,990 (6) Net cash provided by operating activities 329,272,436 (7) Net increase in cash and cash equivalents -16,233,903 In the year 2001, the Company realized a net profit amounting to RMB 153,207,380 and RMB 151,297,232 respectively audited by Arthur Andersen & Co. and Arthur Andersen﹒Hua Qiang Certified Public Accountants. The difference between two results was due to: (Unit: In RMB) As reported under IAS: 153,207,380 Impact of adjustments: Real estate sales recognition 7,407,793 Deferred assets amortization -9,325,981 Deferred tax 792,852 Others -784,812 As reported under CAS: 151,297,232 (II) Major accounting date and financial indexes over the past three years (Unit: In RMB) Before adjustment 2 Items 2001 2000 1999 Sales 1,021,424,418 1,163,618,332 965,698,976 Net profit 153,207,380 189,359,453 -164,367,913 Total assets 2,687,911,944 2,729,248,353 2,852,587,909 Shareholders’ equity 1,936,767,845 1,864,892,223 1,753,987,882 Earnings per share 0.23 0.28 -0.24 Net assets per share 2.86 2.75 2.59 Net cash flow per share arising from 0.49 0.43 0.28 operating activities Return on Equity (%) 7.91 10.15 -9.37 After adjustment Items 2001 2000 1999 Sales 1,021,424,418 1,163,618,332 965,698,976 Net profit 153,207,380 189,359,453 -146,533,695 Total assets 2,687,911,944 2,755,818,156 2,773,376,343 Shareholders’ equity 1,936,767,845 1,864,892,223 1,674,999,297 Earnings per share 0.23 0.28 -0.22 Net assets per share 2.86 2.75 2.47 Net cash flow per share arising from 0.49 0.43 0.27 operating activities Return on Equity (%) 7.91 10.15 -8.75 (III) Particulars about change in shareholders’ equity in the report period (Unit: In RMB) Capital Surplus Statutory public Undistributed Items Share capital public public Total welfare fund profit reserve reserve Amount at the beginning of 676,975,416 927,897,465 105,547,358 71,562,025 81,752,146 1,864,892,223 the report period Increase as of the report 10,254,878 5,127,440 56,588,012 71,875,622 period Decrease as of the report period Amount at the end of the 676,975,416 927,897,465 115,802,236 76,689,465 138,340,158 1,936,767,845 report period Withdraw The balance Mainly due to Withdraw from Reason of from the after the the profit of the profit of the change profit of the distribution of the report report period report period the profit period IV. Changes in Share Capital and Particulars about the Shareholders (I) Changes in share capital 1. Statement of changes in share capital as of the report period (Unit: Share) 3 Increase/ Decrease (+ / -) as of the period Before the Capitalization After the Shares Bonus Additional Sub change of Public Others change allotment shares issuance -total reserve . Shares unlisted 1. Promoters’ shares 318,371,179 (76,044,590) (76,044,590) 242,326,589 Including: Stated-owned shares Domestic juristic 242,326,589 242,326,589 person’s shares Foreign juristic 76,044,590 (76,044,590) (76,044,590) (Note) person’s shares Others 2. Raised juristic 28,430,284 28,430,284 person’s shares 3. Shares held by Senior executives 4. Preference shares or others Including: Transferred allotted shares Total unlisted shares 346,801,463 (76,044,590) (76,044,590) 270,756,873 II. Listed shares 1.Ordinary RMB 107,165,997 107,165,997 shares 2.Domestically listed 223,007,956 76,044,590 76,044,590 299,052,546 foreign shares (Note) 3. Overseas listed foreign shares 4. Others Total listed shares 330,173,953 76,044,590 76,044,590 406,218,543 . Total shares 676,975,416 676,975,416 Note: According to Notice regarding Listing of Unlisted Foreign Shares of Company with Domestically Listed Foreign Share (B-share), approved by CSRC with ZJGSZ[2001] No. 82 Document and arranged by Shenzhen Securities Exchange, unlisted foreign shares of the Company were listed for trade on Aug. 13, 2001. The announcement was published on China Securities Journal, Securities Times and Ta Kong Pao on Aug 9, 2001. 2. Share issue and listing The Company initially issued 71,587,436 A shares, including 17 million listed shares at issuance price of RMB 3.38 per share on Oct. 31, 1991; and issued 35,945,114 B shares, including 16 million listed shares at issuance price of HKD 5.30 per share on Dec. 18, 1991. A-share and B-share were listed in Shenzhen Stock Exchange on Feb. 28, 1992 for trading. 1992 bonus distribution plan: 3 bonus shares for every 10 shares with dividend of RMB 0.70 in cash. 1993 share allotment plan: 5 allotment shares for every 10 shares, allotment price for A- share is RMB 7.95 per share, allotment price for B-share is HKD 6.90 per share, and allotment date was May 14, 1993. 1993 bonus distribution plan: 58,067,577 bonus shares were distributed on the basis of 3 bonus shares for every 10 shares with dividend of RMB 1.00 in cash. The ex-right or ex- dividend date was May 11, 1994. 4 The employee’s shares of the Company (excluding shares held by directors, supervisors and senior executives) totally amounting to 2.4557 million shares were listed for trading on July 22, 1994. 1994 bonus distribution plan: 75,487,848 bonus shares were distributed on the basis of 3 bonus shares for every 10 shares with dividend of RMB 1.00 in cash. The ex-right or ex- dividend date was July 21, 1995. From June 30 to July 6, 1995, the Company issued US$ 45 million transferable bond of B shares at Switzerland Capital Market. Ended by Dec. 31, 1995, there were totally US$ 1.41 million bond transformed to 2,755,051 B shares. 1995 bonus distribution plan: 104,599,785 bonus shares were distributed on the basis of 3 bonus shares for every 10 shares (including 1 bonus share from public reserve capitalization) with dividend of RMB 0.50 in cash. The equity rights registration date was July 23, 1996. In 1996, there were totally 19.65 million transferable bond of B-share transformed to 44,242,162 B shares. From July 22, 1997 to Aug. 20, 1997, 98,127,880 shares were allotted at the rate of 1.935 shares for 10 shares with allotment prices of RMB 4.00 per share (A-share) and HKD 3.73 per share (B-share). 1996 bonus distribution plan: 71,722,471 bonus shares were distributed on the basis of 1.185 bonus shares for every 10 shares with dividend of RMB 0.395 in cash (including tax). The equity rights registration date was Oct. 31, 1997. The initial trading dates of A-share and B-share were respectively Nov. 5, 1997 and Nov. 6, 1997. In 1997, there were totally 11.2 million transferable bond of B-share transformed to 28,414,056 shares. In 1998, since the Company had not implemented any profit distribution or share allotment, there were no changes in its total share capital and structure of share. In 1999, since the Company had not implemented profit distribution or share allotment, there were no changes in its total share capital and structure of share. 2000 bonus distribution plan: Distributed to all the shareholders at the rate of RMB 1.2 for 10 shares (including tax) based on the total share capital of 676,975,416 shares at the end of 2000. Particulars about employee’s shares (A-share): Date of issuance: Oct. 31, 1991 Quantity of issuance: 3.3 million shares Price of issuance: RMB 3.38 per share Custodian period: From Jan. 15, 1992 to Jan. 25, 1992 Proportion in total share capital: 3.07% In 1993, 595.3 thousand employee’s shares of the Company were listed for trading. 5 On July 22, 1994, 2.4557 million employee’s shares of the Company were listed for trading. Ended by the report period, there were totally 366,212 shares held by the directors, supervisors and senior executives of the Company being frozen. (II) Particulars about the principal shareholders ended by the report period 1. Ended by the report period, the Company had totally 42,756 shareholders. 2. Particulars about the shares held by the top ten shareholders Amount at the end of the Proportion Name of shareholder Share style report period (%) (Share) China Northern Industry Shenzhen Corporation 87,175,364 12.88 Juristic person share (A share) Yiwan Industrial Development (Shenzhen) Co., Ltd. 87,175,364 12.88 Juristic person share (A share) Shenzhen Yida Trading Co., Ltd. 76,204,633 11.26 Juristic person share (A share) China Merchants (Glass Industry) Holding Co., Ltd. 47,891,297 7.07 Circulating share (B share) San Xia Securities Co., Ltd. 22,730,951 3.36 Circulating share (A share) Shanghai Yexuan Printing Co., Ltd. 9,183,551 1.36 Circulating share (A share) Hubei Hengrui technology Co., Ltd. 7,271,554 1.07 Circulating share (A share) Shenzhen Jun An Securities Co., Ltd. 5,878,371 0.87 Juristic person share (A share) Hubei Anfeng Assets Administration Co., Ltd. 5,868,098 0.87 Circulating share (A share) Beijing Century Star Real Estate Development Co., Ltd. 5,495,238 0.81 Circulating share (A share) (1) The shares of 76,204,633 held by Shenzhen Yida Trading Co., Ltd. have been transferred to Shenzhen Freeway Development Co., Ltd. on March 21, 2002. This event was disclosed on Securities Times, China Securities Journal and Ta Kung Pao dated March 28, 2002. (2) Yiwan Industrial Development (Shenzhen) Co., Ltd., Shenzhen Yida Trade Co., Ltd. and Shenzhen Freeway Development Co., Ltd. are related parties, all three parties are directly or indirectly holding companies of Shenzhen Investment Holding Corp. Except for this, there is no relation among the other shareholders. 3. Brief introduction of juristic shareholders holding no less than 10% of total shares of the Company China Northern Industry Shenzhen Company China Northern Industry Shenzhen Company with registered capital of RMB 124.85 million was founded on May 22, 1981, which is a wholly owned subsidiary of China Northern Industry Company. Legal representative: Jiao Zhiren Business scope: domestic trading, supply and marketing of materials, storage, etc. Yiwan Industrial Development (Shenzhen) Co., Ltd. Yiwan Industrial Development (Shenzhen) Co., Ltd. with registered capital of HKD 20 million was founded on Sept 13, 1994, which is a wholly owned subsidiary of Shenzhen International Holdings Limited. Legal representative: Chen Chao Business scope: manufacture and operation of construction material, decoration material, new style macromolecule material, energy saving electromechanical products, subtle chemical industry products, etc. 6 Shenzhen Yida Trade Co., Ltd. Shenzhen Yida Trade Co., Ltd. with registered capital of RMB 5.28 million was founded on May 22, 1981, which is a wholly owned subsidiary of Shenzhen International Holdings Limited. Legal representative: Chen Chao Business scope: manufacture and operation of construction material, metallic material, chemically products and raw material, automobile fittings and mineral products, etc. Shenzhen Freeway Development Co., Ltd. Shenzhen Freeway Development Co., Ltd. with registered capital of RMB 200 million was founded on September 8, 1993, which is a holding company of Shenzhen Investment Holding Corp. Legal representative: Chen Chao Business scope: investment and management of roads, bridges and tunnels, provision of ancillary services such as road transportation, maintenance, gas stations and passenger and freight transportation agency. In the report period, there was neither pledge nor frozen on the shares held by said shareholders. V. Directors, Supervisors, Senior Executives and Staff (I) Directors, supervisors and senior executives 1. Basic status Shares held at Shares held at Name Title Sex Age Term of office the beginning of the end of the the report period report period Chairman of the Chen Chao Male 46 2000/5-2002/5 Board Sun chengming Director Male 42 2001/5-2002-5 Jiao Zhiren Director Male 55 2000/5-2002/5 Director, General Zeng Nan Male 57 1999/5-2002/5 67,680 67,680 Manager Zhou Daozhi Independent Director Male 52 1999/5-2002/5 Li Jingqi Director Male 45 2000/5-2002/5 Sun Jiawen Director Male 39 2001/5-2002/5 Liu Jun Director Male 38 2000/5-2002/5 Ding Jiuru Director Male 39 1999/5-2002/5 Long Long Independent Director Male 45 2000/5-2002/5 Yang Hai Director Male 40 2001/5-2002/5 Yan Ganggang Independent Director Male 42 2001/5-2002/5 Chairman of the Hao Hongbo Supervisory Male 62 2001/5-2002/5 Committee Meng Yinglong Supervisor Male 50 1999/5-2002/5 36,442 36,442 Jiang Hui Supervisor Male 36 2001/5-2002/5 Deputy General Zhong Zhongliu Male 59 1999/5-2002/5 43,171 43,171 Manager Sun Jingbo Chief Accountant Female 39 1999/5-2002-5 24,816 24,816 2. Particulars about the annual salary of directors, supervisors and senior executives (1) The salary of the Company’s senior executives shall be determined by the Board of Directors, including basis pay and bonus. 7 (2) Among directors and supervisors currently holding the post, director and general manager Zeng Nan and supervisor Meng Yinglong received their salaries from the Company. Following persons received no pay from the Company: Chen Chao, Sun Chengming, Jiao Zhiren, Zhou Daozhi, Li Jingqi, Sun Jiawen, Liu Jun, Ding Jiuru, Long Long, Yan Ganggang, Hao Hongbo and Jiang Hui. (3) There are 17 directors, supervisors and senior executives in office at present, 4 persons received their annual salary from the Company. Of them, 1 person enjoyed RMB150,000 to RMB 200,000 and 3 persons enjoyed RMB 100,000 to RMB 150,000. In the report period, the total annual salary paid to the above listed persons was RMB 538,800, and the total amount of salary of the top three senior executives was RMB 432,500. 3. Resign of directors, supervisors and senior executives in the report period (1) Due to work adjustment, Sheng Bin, Zhao Huxiang and Yu Liming, the former directors resigned from their title on the Shareholders’ General Meeting 2000 dated May 12, 2001. (2) Due to work adjustment, Yuan Wu and Tao Xiaodong, the former supervisors resigned from their title on the Shareholders’ General Meeting 2000 dated May 12, 2001. (3) Due to the restriction of the legal age of retirement, Wang Chunsheng, the former deputy general manager resigned from his title on the 7th meeting of 2nd Board of Directors dated Oct. 17, 2001. (II) Staff Categories Number Proportion % Production personnel 1526 64 Marketing personnel 74 3 Technical personnel 467 19 Financial personnel 61 3 Administrative personnel 273 11 Total 2401 100 Ended by the report period, there were 1225 staff having schooling background of college and polytechnic school graduation or higher, taking 51 % of the total staff. There was no retired staff who was paid by the Company. VI. Administrative Structure (I) Company Administration According to the PRC Company Law, the Securities Law and other relevant laws and regulations issued by CSRC, the Company continuously improves the legal person administration system and standardizes the operation of the Company. The Company has established the Articles of Association, the Rules of Procedures of the Board of Directors, the Rules of work of General Manager, the Financial and Accounting Management System and the Conference System. Present administrative structure of the Company complies with the Rules concerning Administration of Listed Companies issued by CSRC. Details are set out as follows: (1) Shareholders and shareholders’ general meeting: The Company can ensure equal status and full rights of all shareholders, especially those small or medium shareholders. The 8 Company called and held shareholders’ general meetings strictly in accordance with the rules of shareholders’ general meeting. (2) Relationship between holding shareholder and listed company: The performance of holding shareholders of the Company is in conformity with rules, without intervening the decision or operation of the Company directly or indirectly exceeding the authority of the shareholders’ general meeting. The Company has been absolutely independent in personnel, assets, finance, organization and business from its holding shareholders ever since its establishment. The Board of Directors, the Supervisory Committee and the management performed their respective functions in an independent way. (3) Director and the Board of Directors: The Company has elected directors strictly according to the Article of Association. The number and composition of the Board members are in compliance with the requirements of relevant laws and regulations. The Board of Directors has established the Rules of Procedures of the Board of Directors. All directors attended the Board meetings and the shareholders’ general meeting in a positive and responsible manner, actively received related training to be familiar with relevant laws, regulations as well as rights, obligations and responsibilities of the director. The Company has engaged 3 independent directors who did not occupy any position other than director in the Company. All independent directors implemented the responsibility according to relevant laws, regulations and the Articles of Association to safeguard the interests of the Company and small or medium shareholders. The Board of Directors is going to establish the special committee of the Board of directors in terms of relevant regulations. (4) Supervisors and Supervisory Committee: The number and composition of the Supervisory Committee members are in compliance with the requirements of laws and regulations. All supervisors took the responsible attitude to all shareholders, implemented their duties seriously and supervised over the financial affairs as well as the performance of the directors, managers and other senior executives in terms of the laws and regulations. (5) Performance evaluation, encouragement and binding mechanism: The Company is actively preparing for a fair and open performance evaluation criteria and encouragement and binding mechanism for directors, supervisors and senior executives. The Company engaged the managers and senior executives in an open and transparent way and in compliance with the laws and regulations. (6) Relevant beneficiaries: The Company has been fully respecting and safeguarding the legal rights and interests of the banks and other creditors, staff and other parties of related interests, so to jointly develop the Company in a consistent and healthy ways. (7) Information disclosure and transparency: The Company has authorized the secretary of the Board of Directors to take charge of disclosing information, receiving the visit and inquiry of the shareholders. The Company has been disclosing the relevant information in a real, accurate, complete and timely way strictly according to the laws, regulations and the Articles of Association, ensured all the shareholders to have equal opportunity to obtain the information. The Company timely disclosed the detail information concerning the large shareholders or the actual controllers of the Company and the changes of share capital. The Company has been operating strictly according to the laws and regulations such as the PRC Company Law and Rules concerning Administration of Listed Company ever since its 9 establishment and will further perfect the administrative structure in coming days. The Company will dedicate to pursue the maximum of the profit and practically safeguard the interests of small or medium shareholders. (II) Performance of independent directors The Company has established independent director system by engaging 3 independent directors in May 1999, May 2000 and May 2001 respectively. All independent directors implemented the responsibility according to relevant laws and regulations, took part in the operating and managing activities in a positive and responsible manner, put forward independent opinion on important affairs of the Company and safeguarded the interests of the Company and small or medium shareholders. (III) Separation between the Company and its holding shareholders in terms of personnel, assets, financial, organization and business The Company has been absolutely independent in personnel, assets, finance, organization and business from its holding shareholders ever since its establishment. (1) In terms of personnel: The Company is absolutely independent in the management of labor, personnel and salaries. General manager, deputy general managers and other senior executives get their pay from the Company and have not received any remuneration from the holding shareholders or held any title therein. (2) In terms of assets: The Company possesses independent production system, auxiliary production system and complementary facilities. The intangible assets, such as industrial property rights, trade mark, non-patent technologies, etc. solely belong to the Company. The Company has independent purchase and sales system. (3) In terms of finance: The Company has independent financial department and has established independent accounting calculation system and financial management system. The Company has independent bank accounts. The Company has paid taxes independently according to the laws. (4) In terms of organization: The Company has been totally independent from its holding shareholders in production, operation and administration. The Company has its own office and production sites different from those of the holding shareholders. There is no such situation of operating and working together with the holding shareholders. (5) In terms of business: The business scope of the Company covers production and dealing in new-typed display devices and materials, new-typed electronic components, structure ceramic materials and products, raw sheets of high-grade float glasses and deep-processed series glass products. There is no competition in business between the Company and the holding shareholders. The Company has been completely independent from the holding shareholders in Business. The Company has owned independent purchase and supply system of the raw resources, complete production systems, independent salesmen and customers. The Company has established its own R & D institution to ensure the innovation and advantage of the technology (IV) Evaluation and encouragement mechanism of senior executives 10 The Company has established target and liability evaluation mechanism to strengthen the management and encouragement for the senior executives. At every end of operating year, the Board of Directors values the performance of the senior executives based on the target accomplishment and relevant criteria, decides the bonus of the senior executives according to the evaluation result. VII. Brief Introduction to Shareholder’s General Meeting The Company held one Shareholders’ General Meeting in the report period. According to the Resolutions of the 9th meeting of 2nd Board of Directors, the Company published the notice of convening the Shareholders’ General Meeting 2000 on Securities Time, China Securities Journal and Ta Kung Pao dated April 7, 2001. The Shareholders’ General Meeting 2000 was held in 7/F conference room of Technology Bldg. of the Company in the morning of May 12, 2001. Shareholders, shareholder’s proxies attending the meeting and representing shares were in conformity with the PRC Company Law and the Articles of Association of the Company. Through witness by Chen Xueming, attorney of Guangdong Jing Tian Law Firm, the meeting was legal and effective. The following items were examined and approved by means of disclosed ballot in the meeting: (1) 2000 Report of Board of Directors (2) 2000 Report of Supervisory Committee (3) 2000 Annual Report and its Summary (4) 2000 Financial Settlement Report (5) 2000 Profit Distribution Preplan 2000 Profit Distribution Preplan: distribute to all the shareholders at the rate of RMB 1.2 for 10 shares (including tax) based on the total share capital of 676,975,416 shares at the end of 2000. (6) Proposal on Engaging of Law Counselor for the Company in 2001 (7) Proposal on Engaging of Audit Organization for the Company in 2001 (8) Rules of Procedures of the Board of Directors (9) Proposal on Change of Part of Directors (10) Proposal on Change of Part of Supervisors (11) Proposal on Amendment of the Articles of Association The Resolutions of 2000 Shareholders’ General Meeting were published on Securities Times, China Securities Journal and Ta Kung Pao dated May 15, 2001. 11 VIII. Report of the Board of Directors (I) Business operation in the report period 1. Main business scope and the operation Main business scope: R & D, production and dealing in raw sheets of high-grade float glasses and deep-processed series glass products, new-typed display devices and materials, new-typed electronic components, structure ceramic materials and products; design and installation of the works of glass curtain wall; investment in technology, asset management. Main business of the Company falls into the category of nonmetal mineral products industry (C61). The Company is principally engaged in the R & D, production, marketing and selling of raw sheets of high-grade float glasses and deep-processed series glass products, new-typed display devices and materials, new-typed electronic components, structure ceramic materials and products. In the report period, the slowing down of the global economic growth, especially the deep adjustment in IT industry significantly influenced sales revenue and profit of the Company. In the year 2000, IT industry of the Company contributed 60.61% of the total profit of the Company, whereas in year 2001, the contribution of IT industry to total profit of the Company decreased to 31.71%. The change was amazing. Fortunately, the Company has not ignored the traditional glass industry at the same time as it concentrated on its hi-tech industry in recent years. The Low-E coating glass being developed for four years began to yield good marketing return. The profit making ability of auto glass invested six years ago was greatly improved. As for the float glass, the Company insisted on the faith in quality, and the finished product rate of float glass was ranking at the top in glass industry. As for the display devices and electronic components, the Company still remained the leading manufacturer in the industry despite the adverse circumstances. In the year 2001, under the leadership of the Board of Directors and the Supervisory Committee, the management of the Company continuously improved the legal person administration system and standardized the operation of the Company to minimize the negative effect of exterior environment. The Company made good use of limited chances in adversity and acquired quite good operating results. (1) Business segments (before elimination) Unit: In RMB Industry Turnover Gross profit Net Profit Production of glass products 963,412,702 348,532,738 160,637,177 Property development 29,799,061 2,102,700 -10,235,564 Other businesses 48,876,671 18,582,016 835,061 (2) Geographical segments Unit: In RMB Region Turnover Net Profit PRC 1,002,831,529 156,390,298 United State 5,942,202 -3,370,132 Australia 12,650,687 187,214 (3) Cash flow segments Unit: In RMB 12 Cash flow Production of Property Other Total from: glass development businesses Operating 316,497,484 3,490,064 9,284,888 329,272,436 activities Investing -199,804,760 -2,410,958 -5,802,645 -208,018,363 activities Financing -134,932,857 -2,371,602 -183,517 -137,487,976 activities Total -18,240,133 -1,292,496 3,298,726 -16,233,903 2. Particulars about the wholly owned subsidiaries and jointly controlled entities Please refer to Note 34 of the Auditors’ Report. 3. Major suppliers and customers In the report period, the calculated purchase volume of the top five suppliers accounted for 21.71% of the total purchase volume; the calculated sales volume of the top five customers accounted for 9.63% of the total sales volume of the Company. 4. Problems and difficulties occurred in operation and solutions thereof In the report period, the great decrease in sales and profit of hi-tech enterprises of the Company and the overstock of real estate were two main problems and difficulties occurred in operation. (1) The slowing down of the global economic growth, especially the deep adjustment in IT industry brought negative effects on sales revenue of hi-tech display devices and electronic components of the Company. In the year 2000, hi-tech enterprises contributed 60.6% of the total profit of the Company, whereas in the year 2001, the contribution of hi-tech enterprises to total profit of the Company decreased to 31.7%. However, the Company took advantage of the opportunity of adjustment in IT industry to develop the new products and enhance the grade of products in 2001. The Company ensures that the IT industry will come out of the difficulties in near future along with the constant investment of multinational companies on IT industry. (2) In the year 2001, the sales situation of real estate was still not good. The overstock of real estate used large amount of funds of the Company. In the year 2002, the Company will adopt new sales mechanism and method to accelerate the sales of the stocks of real estate and recover the funds as soon as possible. (II) Investment 1. In the report period, the Company did not raise any fund through share offering or utilize any fund raised before the report term. 2. Application of the funds not raised through share offering (1) The third ITO coating production line: The equipment of the production line has been installed and is being regulated. The line is expected to put into production in early 2002. (2) The precise coating glass production line with daily melting capacity of 250 tons: The construction of the production line is under smooth progress as scheduled. The line is 13 expected to start production kindling in September 2002 and produce products in Oct. 2002. (III) Financial status (Unit: In RMB ’0,000) Increase/ Item 2001 2000 Reason Decrease (%) Repayment of loan and decrease in Total assets 268,791 275,582 -2.46 trade receivable and inventories. Long-term liabilities 16 Capital and reserves 193,677 186,489 3.85 Earning in the report period Decrease in sales revenue and profit Gross profit 36,920 43,045 -14.23 making ability of hi-tech products Decrease in sales revenue and profit Net profit 15,321 18,936 -19.09 making ability of hi-tech products (IV) Impact of changes in macro-policies 1. Impact of the state policy In the year 2002, the positive financial policy is still adopted by the state, including increasing investment and encouraging consumption for promoting the growth of economy. There is no doubt that IT industry and real estate industry are two major forces to push the economy forward. Although the growth of IT industry was sluggish in 2001, it still has a promising prospect. Along with the promotion in housing reform, the demand for real estate property will increase continuously. All these factors will provide wider space and more opportunities for the Company’s development. 2. Impact of WTO entrance According to the relevant articles of WTO, the import tariff of flat glass will not be lessened by great margin in the near future, which slows down the entrance of international glass products in large scale. On the other hand, WTO entrance will speed up the development and the adjustment of domestic glass industry. Moreover, it is beneficial for the Company to acquire the information relating technology and market quickly in a fair-trade environment, which helps the Company to expand the export and upgrade the products. 3. Impact of Beijing Olympic Games Beijing Olympic Games will enlarge the demand for glass and deep processed glass products and bring the huge opportunity for glass enterprises, which helps the Company to enhance the market share. (V) Arthur Andersen﹒Hua Qiang Certified Public Accountants and Arthur Andersen & Co. audited the Company’s accounting statements for 2001 and presented standard Auditor’s Report without reserved opinion. (VI) Operation plan for the year 2002 In the year 2002, the Company will still have to face the challenge due to the continual recession of the world economy. The Company will focus on the construction and management to make voice to the challenge. All investment projects shall be completed on schedule. The operation of the Company shall be improved by strengthening the management and establishing the effective encouragement mechanism. Although there are difficulties, the Company is confident in acquiring better operation result through hard working of 14 management and staff. The details are as follows: (1) The Company will continue to focus on innovation, improve existing operating mechanism and optimize the resources allocation. (2) The Company will strengthen the management, perfect the result evaluation mechanism of the staff, strictly control the costs and reinforce the quality management. (3) The Company will emphasize on the research and development of new products, strengthen the technical service, marketing investigation and competition analysis. (4) The Company will make great effort to recover the funds in the real estate so as to vitalize the inventory assets. (5) The Company will reinforce its management over the invested projects and strengthen the planning, appraisal and control over the planned projects. Also, the Company will standardize and coordinate the assets of the Company to form a reasonable and flexible relationship of interests. (6) The Company will strengthen the strategic research of medium/long-term development and plan the development of the Company carefully to enhance its core competitiveness and increase its anti-risk ability in the market. (VII) Routine work of the Board of Directors 1. Board Meetings and Resolutions In the report period, the 2nd Board of Directors altogether held six board meetings. The 9th meeting of the 2nd Board of Directors was held on April 6, 2001 at the 5th floor meeting room of CSG Building. The meeting discussed and adopted the following documents: (1) 2000 Report of the Board of Directors (2) 2000 Annual Report and its Summary (3) 2000 Financial Settlement Report (4) 2000 Profit Distribution Preplan (4) 2001 Profit Distribution Policy (5) Proposal on Engaging of Law Counselor for the Company in 2001 (6) Proposal on Engaging of Audit Organization for the Company in 2001 (7) Rules of Procedures of the Board of Directors and Rules of Work of General Manager (8) Proposal on Change of Part of Directors (10) Proposal on Amendment of the Articles of Association (11) Determination of the Items to Hold Shareholders’ General Meeting 2000 The resolutions of the said board meeting were published on Securities Times, China Securities Journal and Ta Kung Pao dated April 7, 2001. The 10th meeting of the 2nd Board of Directors was held on May 12, 2001 at the 7th floor meeting room of CSG Technology Building. At the meeting, Mr. Chen Chao was elected Chairman of the Board of the Company. The resolution of the meeting was published on Securities Times, China Securities Journal and 15 Ta Kung Pao dated May 15, 2001. The 11th meeting of the 2nd Board of Directors was held on July 25, 2001 at the 5th floor meeting room of CSG Office Building. The meeting discussed and adopted the following resolutions: (1) Work Summary of the First Half Year of 2001 (2) Report on Provision for Devaluation of Fixed Assets (3) The Effect of Implementing Accounting Regulations for Enterprise on Undistributed Profit and Corresponding Suggestions (4) 2001 Interim Report and its Summary (5) 2001 Interim Profit Distribution Preplan The resolutions of the said board meeting were published on Securities Times, China Securities Journal and Ta Kung Pao dated July 27, 2000. The 12th meeting of the 2nd Board of Directors was held on Sept.15, 2001 at Zhuhai International Conference Center. The meeting decided to dismiss the Shenzhen Zhongtianqin Certified Public Accountants and engage the Arthur Andersen﹒Hua Qiang Certified Public Accountants as audit organization of A share. The resolution of the meeting was published on Securities Times, China Securities Journal and Ta Kung Pao dated Oct. 30, 2001. 2. Implementation of the resolutions of the shareholders’ general meeting by the Board of Directors (1) Approved by Extraordinary Shareholders’ General Meeting 2000, the Company’s name was changed from “China Southern Glass Holding Co., Ltd.” to “CSG Technology Holding Co., Ltd.”. The change has been examined and approved by National Administration on Industry and Commerce with (G)MCBHWZ [2001] No. 38 Documents and the changing registration has been finished in Shenzhen Municipal Administration on Industry and Commerce on March 27, 2001. (2) Approved by Shareholders’ General Meeting 2000, the 2000 profit distribution plan was to distribute the cash dividend to the whole shareholders at the rate of RMB 1.2 for 10 shares (including tax) based on the total share capital of 676,975,416 shares at the end of 2000. 2000 profit distribution was totally completed in June 2001. (VIII) Profit distribution preplan 1. Profit distribution preplan for the year 2001 As audited by Arthur Andersen﹒Hua Qiang Certified Public Accountants, the net profit of the Company as of the year 2001 was RMB 151,297,232. The Board of Directors proposed to make profit distribution as follows: 10% of the net profit is to allotted as statutory public reserve amounting to RMB 15,129,723 and 5% of the net profit is to allotted as statutory public welfare fund amounting to RMB 7,564,862. In addition to RMB 16,921,217 retained profit carried down from the previous year, profit attributable for shareholders amounts to RMB 145,523,864. Based on the total share capital of 676,975,416 shares at the end of year 2001, the dividends would be distributed to the whole shareholders in cash at the rate of RMB 1.30 for every 10 shares (including tax). 16 The aforesaid profit distribution preplan shall be implemented subject to the approval by 2001 Shareholders’ General Meeting. 2. Estimated profit distribution policy for the year 2002 (1) Distribution plan: the Company shall implement profit distribution in the year 2002 once. (2) Distribution proportion: 20%~ 50% of the net profit to be realized in the year 2002 shall be used for distribution; 50% of the undistributed profit at the end of 2001 shall be used for profit distribution in the year 2002. (3) Distribution form: mainly in form of cash. (4) Note: The Board of Directors shall submit a profit distribution proposal to the shareholders’ general meeting for examination and approval before the aforesaid profit distribution policy for the year 2002 is implemented. In addition, the Board of Directors reserves the power to make adjustment based on the situation of the development and profit earning of the Company. (IX) Other events Securities Times, China Securities Journal and Ta Kung Pao were the publications chosen by the Company for disclosing the information in the year 2001. IX. Report of the Supervisory Committee (I) Particulars about work of the Supervisory Committee In the report period, the Supervisory Committee held altogether 4 meetings The 8th meeting of the 2nd Supervisory Committee was held on April 6, 2001 at the 5th floor meeting room of CSG Building. The meeting discussed and adopted the following documents: (1) 2000 Report of the Supervisory Committee (2) 2000 Annual Report and its Summary (3) 2000 Financial Settlement Report (4) Proposal on Change of Part of Supervisors (5) Announcement of Supervisory Committee The resolutions of the said meeting were published on Securities Times, China Securities Journal and Ta Kung Pao dated April 7, 2001. The 9th meeting of the 2nd Board of Directors was held on May 12, 2001 at the 7th floor meeting room of CSG Technology Building. At the meeting, Mr. Hao Hongbo was elected Chairman of the Supervisory Committee. The resolution of the meeting was published on Securities Times, China Securities Journal and Ta Kung Pao dated May 15, 2001. The 10th meeting of the 2nd Supervisory Committee was held on July 25, 2001 at the 5th floor meeting room of CSG Building. The meeting discussed and adopted the following documents: 17 (1) Work Summary of the First Half Year of 2001; (2) Report on Provision for Devaluation of Fixed Assets; (3) The Effect of Implementing Accounting Regulations for Enterprise on Undistributed Profit and Corresponding Suggestions; (4) 2001 Interim Report and its Summary; (5) 2001 Interim Profit Distribution Preplan. 2001 Interim profit Distribution Preplan: conduct neither profit distribution nor capitalization of the public reserve. The resolutions of the meeting were published on Securities Times, China Securities Journal and Ta Kung Pao dated July 27, 2000. (II) Independent Opinion of the Supervisory Committee In the year 2001, the Supervisory Committee understood the operation and financial situation of the Company by attending the shareholders’ general meeting, the board meetings and operation and management meetings as non-voting delegates, implemented effective supervision over the Company, directors and senior executives. Here is the brief report: 1. Operation according to the Laws In the year 2001, the Board of Directors seriously implemented the resolutions of the Shareholders’ General Meeting, carried out the operation in a standardized way strictly according to the national laws and regulations, the Articles of Association. The directors made operation decisions in compliance with the specified procedures and established complete internal control mechanism. The Company management seriously implemented the resolutions of the Board of Directors, carried out the operation strictly by the authority of the Board of Directors and in according to the Articles of Association. They managed affairs of the Company in a scientific and reasonable way and acquired good operation result. No directors or senior executives has been found to be involved in any actions against the laws, rules and regulations, the Articles of Association, the resolutions of the shareholders’ general meeting or harmful to the Company’s interest. 2. Financial Inspection In the year 2001, the Supervisory Committee conducted the business and financial inspection by checking the books and other accounting documentation, and had found nothing against the concerned regulations and the Articles of Association of the Company. The auditors’ reports produced by both Arthur Andersen﹒Hua Qiang Certified Public Accountants and Arthur Andersen & Co. were true and reliable. The Company’s financial report and auditors’ opinion have truly reflected the financial status and operation achievements of the Company. 3. In the report period, there was no application of the proceeds as raised through share offering. 4. In the report period, the Company’s purchase and sale of the assets had been conducted in a fair and reasonable way and there existed no inside transaction or action harmful to the 18 shareholders’ right or interest. 5. In the report period, there was no material related transaction. X Significant Events 1. Material Lawsuits and Arbitration (1) The case of the “Home of Overseas Chinese” between Hainan CSG Industrial Development Co. (Development Co.), the Company’s wholly owned subsidiary, and Hainan Yuehai Construction Economic Development Co. (Yuehai Company) was judged on Nov. 26, 1999 at Hainan Provincial Interim People’s Court with (1999) HNMCZ No. 12 Civil Judgment. The judgement demanded Yuehai Company repays RMB 17,153,423.36 house payment and 70% of relevant losses of interest to Development Co., whereas Development Co. returns unsold houses of Home of Overseas Chinese. The Company pleaded to Hainan Provincial High People’s Court due to dissatisfaction to the initial judgment. But the High People’s Court stood the initial judgment on Aug. 30, 2000 with (2000) QMZZ No. 28 Civil Judgment. Development Co. still believed that the judgment was unfair and interest of the company was harmed, so pleaded to the Supreme People’s Court of the People’s Republic of China in Dec. 2000. The case was judged on Sept. 6, 2001 at the Supreme People’s Court of the People’s Republic of China with (2000) MJZ No. 568 Judgment, quashing the judgement of Hainan Provincial Interim and High People’s Court and demanding retrial at Hainan Provincial High People’s Court. (2) The case on MLCI/SMD Turn-key Project Contract between American Electronic Material Company (AEM) and the Company came to a out-of-court settlement successfully on May 21, 2001. 2. In the report period, the Company conducted neither sales and purchase of assets nor consolidation and merge. 3. Related transactions: for the detail, please refer to the notes of the Auditor’s Report. 4. Material contracts and the implementation (1) In the report period, neither the Company trusted, contracted and leased other Company’s assets nor its assets were trusted, contracted and leased by other companies. (2) Material guarantees: In the report period, the Company had never offered guarantee to any companies other than the Company’s subsidiaries. The guarantees offered to the subsidiaries are as follows: Amount (In 0’000) Company USD RMB Shenzhen Wellight Coating Company Limited 1,500 Shenzhen Wellight Conductive Coating Company Limited 1,500 Shenzhen Southern Glass Display Technology Company Limited 200 Shenzhen Benxun Autoglass Company Limited 100 2,200 Shenzhen CSG Architectural Glass Company Limited 1,000 Shenzhen Southern Float Glass Company Limited 200 15,000 Southern Glass (Tianjin) Industrial Development Company Limited 655 Total 500 21,855 19 (3) In the report period, the Company did not entrust others to manage its cash assets. Also, there was no plan of finance entrustment at the end of year 2001. 5. Shareholders holding over 5% shares of the Company made no commitment on the designated newspaper or web site in the report period. The profit distribution policy for 2001 was disclosed in 2000 annual report of the Company. The details is as follows: 20%~ 50% of the net profit to be realized in the year 2001 shall be used for profit distribution; 50% of the undistributed profit at the end of 2000 shall be used for profit distribution in the year 2001. Actual distribution preplan for 2001 proposed by the Board of Directors is in conformity with the Company’s commitment as stated above, with actual distribution proportion exceeding the expected proportion. 6. In the year 2001, the Company dismissed Shenzhen Zhongtianqin Certified Public Accountants and instead engaged Arthur Andersen﹒Hua Qiang Certified Public Accountants as audit organization of A share. The audit organization of B share, Arthur Andersen & Co, remained unchanged. In the year 2001, remuneration paid to the audit organizations of A share and B share were RMB 500,000 and RMB 650,000 respectively (including travel expenses). 7. The Company, its directors or senior executives had never been checked and given administrative punishment or circular notices of criticism by the China Securities Regulatory Commission nor been condemned publicly by the Stock Exchange in the report period. 8. The proposal on Changing the Company Name was approved at 2000 Extraordinary Shareholders’ General Meeting. The change has been examined and approved by National Administration on Industry and Commerce with (G)MCBHWZ [2001] No. 38 Documents and the changing registration has been finished in Shenzhen Municipal Administration on Industry and Commerce on March 27, 2001. 20 XI. Financial Reports CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 TOGETHER WITH AUDITORS’ REPORT The reader is advised that this report has been prepared originally in Chinese. In the event of a conflict between this report and the original Chinese version or difference in interpretation between the versions of the report, the Chinese language report shall prevail. 21 AUDITORS’ REPORT TO THE SHAREHOLDERS OF CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. (Incorporated in the People’s Republic of China with limited liability) We have audited the accompanying consolidated balance sheet of China Southern Glass Technology Holding Co., Ltd. (the “Company”) and its subsidiaries (the “Group”) as of December 31, 2001 and the related consolidated statements of income, changes in equity and cash flows for the year then ended. These financial statements set out on pages 2 to 31 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 give a true and fair view of the financial position of the Group as of December 31, 2001, and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as published by the International Accounting Standards Board. Certified Public Accountants Hong Kong April 25, 2002 22 CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2001 (Expressed in Renminbi) Note 2001 2000 (Note 35) ASSETS Current assets Cash and cash equivalents 3 182,168,597 198,497,208 Pledged bank deposits 4 18,586,984 41,854,261 Trade receivables, net 5 154,602,191 210,316,529 Due from related company 31 37,085,084 26,569,803 Inventories, net 6 87,978,096 117,131,807 Properties for sale, net 7 279,333,111 304,006,428 Other current assets 8 11,797,865 6,566,076 771,551,928 904,942,112 Non-current assets Long-term investments 9 9,117,958 8,218,759 Property, plant and equipment, net 10 1,652,667,275 1,725,644,130 Construction-in-progress 11 169,755,254 26,334,095 Land use rights 12 86,424,323 83,110,058 Intangible assets 13 (6,637,521) 1,743,423 Deferred tax assets 21 5,032,727 5,825,579 1,916,360,016 1,850,876,044 Total Assets 2,687,911,944 2,755,818,156 LIABILITIES AND EQUITY Current liabilities Trade and other payables 14 292,326,684 306,528,474 Due to related company 31 18,769,551 48,708,437 Taxes payable 15 4,218,580 15,887,595 Short-term bank loans 16 401,762,800 451,550,000 Current portion of long-term bank loans - 10,000,000 717,077,615 832,674,506 Non-current liabilities Other non-current liabilities - 163,603 - 163,603 Minority interests 34,066,484 58,087,824 Capital and reserves Share capital 18 676,975,416 676,975,416 Reserves 19 1,121,452,271 1,106,164,661 Retained earnings 138,340,158 81,752,146 1,936,767,845 1,864,892,223 Total Liabilities and Equity 2,687,911,944 2,755,818,156 The accompanying notes are an integral part of this financial statement. 23 CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2001 (Expressed in Renminbi) Note 2001 2000 Sales 22, 31 1,021,424,418 1,163,618,332 Cost of sales (652,220,296) (733,163,867) Gross profit 369,204,122 430,454,465 Distribution and selling expenses (72,769,352) (79,253,860) General and administrative expenses (136,037,634) (116,343,242) Write-back of net realisable value provision (Net realisable value provision) for properties for sale 18,897,557 (3,269,040) Other operating income, net 7,521,297 11,821,322 Profit from operations 186,815,990 243,409,645 Financial expenses, net (28,372,215) (39,929,669) Profit before tax 23 158,443,775 203,479,976 Income tax 24 (4,265,025) (6,666,798) Profit after tax 154,178,750 196,813,178 Minority interests (971,370) (7,453,725) Net profit 153,207,380 189,359,453 Earnings per share - Basic 25 0.23 0.28 - Diluted Not Applicable Not Applicable The accompanying notes are an integral part of this financial statement. 24 CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001 (Expressed in Renminbi) Reserves Retained Statutory Cumulative earnings Revaluation Statutory common welfare translation (Accumulated Note Share capital Share premium reserve revenue reserve fund reserve deficit) Total (Note 19) (Note 19) Balances as of January 1, 2000 676,975,416 920,559,397 7,338,068 89,124,481 63,350,587 624,340 (82,972,992) 1,674,999,297 Currency translation differences - - - - - 533,473 - 533,473 Net profit for the year - - - - - - 189,359,453 189,359,453 Profit appropriation to 19 statutory reserves - - - 16,422,877 8,211,438 - (24,634,315) - Balances as of December 31, 2000 676,975,416 920,559,397 7,338,068 105,547,358 71,562,025 1,157,813 81,752,146 1,864,892,223 Dividends declared 20 - - - - - - (81,237,050) (81,237,050) Currency translation differences - - - - - (94,708) - (94,708) Net profit for the year - - - - - - 153,207,380 153,207,380 Inter-transfer of reserves 19 (4,874,845) (2,437,422) - 7,312,267 - Profit appropriation to statutory reserves 19 - - - 15,129,723 7,564,862 - (22,694,585) - Balances as of December 31, 2001 676,975,416 920,559,397 7,338,068 115,802,236 76,689,465 1,063,105 138,340,158 1,936,767,845 The accompanying notes are an integral part of this financial statement. 25 CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2001 (Expressed in Renminbi) Note 2001 2000 Net cash inflow from operating activities 27 364,574,016 340,193,261 Interest paid (30,466,518) (42,064,385) Income taxes paid (4,835,062) (5,548,464) Net cash provided by operating activities 329,272,436 292,580,412 Net cash outflow from investing activities Purchase of property, plant and equipment (191,037,854) (64,896,099) Increase in intangible assets and other long-term assets (4,807,583) (154,200) Purchase of share from minority shareholder of a subsidiary (14,980,000) - Proceeds from disposal of investment - 444,998 Interest received 2,807,074 3,216,753 Net cash used in investing activities (208,018,363) (61,388,548) Net cash outflow from financing activities Repayment of short-term bank loans (49,787,200) (210,654,453) Repayment of long-term bank loans (10,000,000) (19,946,970) Decrease in other long-term liabilities (163,603) (1,160,580) Dividends paid to minority shareholders (5,611,590) - Dividends paid to shareholders (81,237,050) (2,896,105) Capital contributed by the minority shareholder of subsidiary 9,311,467 - Net cash used in financing activities (137,487,976) (234,658,108) Net decrease in cash and cash equivalents (16,233,903) (3,466,244) Cash and cash equivalents at beginning of year 198,497,208 201,370,870 Adjustment for foreign currency translation difference (94,708) 592,582 Cash and cash equivalents at end of year 3 182,168,597 198,497,208 The accompanying notes are an integral part of this financial statement. 26 CHINA SOUTHERN GLASS TECHNOLOGY HOLDING CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 (Amounts expressed in Renminbi (“RMB”) unless otherwise stated) 1. ORGANISATION AND OPERATIONS China Southern Glass Technology Holding Co., Ltd. (the “Company”) was incorporated on September 10, 1984 in the People’s Republic of China (the “PRC”) as a joint venture enterprise under the laws of the PRC and was reorganised as a joint stock limited company registered in the PRC in 1991. The Company’s ordinary shares (“A Shares”) and domestically listed foreign shares (“B shares”) have been listed on the Shenzhen Stock Exchange since February 28, 1992. The Company and its subsidiaries (the “Group”) are principally engaged in the manufacture and sales of glass and ceramics products, property development and leasing and interior decoration design and installation services. The activities of its subsidiaries are shown in Note 34. The registered office address of the Group is located at CSG Building, No. 1 of the 6th Industrial Road, Shekou, Shenzhen, China. The total number of employees of the Group as of December 31, 2001 was approximately 2,401 (2000: approximately 2,387). 2. PRINCIPAL ACCOUNTING POLICIES The principal accounting policies adopted in preparing the financial statements of the Group are as follows: (a) Basis of presentation The accompanying consolidated financial statements are prepared under the historical cost convention, and in accordance with International Financial Reporting Standards (“IFRS”), issued by the International Accounting Standards Board (“IASB”). This basis of accounting differs from that used in the management accounts of the Company and its main subsidiaries which were prepared in accordance with generally accepted accounting principles and relevant financial regulations applicable to enterprises in the PRC (“PRC GAAP”). The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The impact of IFRS adjustments on consolidated profit attributable to shareholders and consolidated net assets are set forth in Note 32. 27 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (b) Measurement currency Based on the economic substance of the underlying events and circumstances relevant to the Company, the measurement currency of the Company has been determined to be Renminbi. To consolidate the Company and each of its subsidiaries, the financial statements of foreign consolidated subsidiaries are translated at year-end exchange rates with respect to the consolidated balance sheet, and at the average exchange rate for the year with respect to the consolidated income statement. All resulting translation differences are included in a cumulative translation reserve in equity. (c) Principles of consolidation The consolidated financial statements include those financial statements of the Company and its subsidiaries on the basis as set out in Notes 2(d) below. The purchase method of accounting is used for acquired businesses. Companies acquired or disposed of during the year are included in the consolidated financial statements from the date of acquisition or to the date of disposal. The equity and net income attributable to minority shareholders’ interests are shown separately in the consolidated balance sheet and consolidated income statement, respectively. Intercompany balances and transactions, including intercompany profits and unrealized profits and losses are eliminated on consolidation. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. (d) Subsidiaries A subsidiary is a company in which the Company controls. This control is normally evidenced when the Company owns, either directly or indirectly, more than 50% of the voting rights of a company’s share capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. (e) Cash and cash equivalents Cash represents cash in hand and deposits with banks which are repayable on demand. Cash equivalents represent short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less and that are subject to an insignificant risk of change in value. (f) Receivables Receivables are stated at face value, after provision for doubtful accounts. 28 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (g) Inventories Inventories are valued at the lower of cost and net realisable value, after provision for obsolete items. Cost, calculated on the weighted average basis, comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. For processed inventories, cost includes the applicable allocation of fixed and variable overhead costs based on a normal operating capacity. Net realisable value is the selling price in the ordinary course of business less the estimated costs of completion, marketing and distribution. When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. (h) Properties for sale Properties for sale are stated at the lower of cost and net realisable value. Cost of properties for sale comprises cost and interest of borrowings for the purpose of financing the construction for the period prior to their being in a condition to enter into service. Net realisable value is calculated based on the estimated selling price less all further cost of construction and the related marketing, selling and distribution expenses. (i) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. When assets are sold or retired, their costs and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting form their disposal is included in the consolidated income statement. The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, are normally charged to income in the period in the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditures are capitalised as an additional cost of property, plant and equipment. 29 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (i) Property, plant and equipment (Cont’d) Depreciation is calculated using the straight-line method to write off the cost, after taking into account the estimated residual value, of each asset over its expected useful life. The expected useful lives are as follows: Buildings 20 - 35 years Machinery and equipment 10 - 20 years Motor vehicles 10 years Office equipment 8 years The useful lives of assets and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment. (j) Construction-in-progress Construction-in-progress represents plant and properties under construction and is stated at cost. This includes cost of construction, plant and equipment and other direct costs. Construction-in-progress is not depreciated until such time as the relevant assets are completed and put into its intended use. (k) Operating leases Leases of assets under which substantially all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. Assets subject to operating leases income in their consolidated balance sheet are presented according to the nature of the assets. Lease income from operating leases is recognised in income on a straight-line basis over the lease term. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income over the lease term on a straight-line basis. Initial direct cost incurred specifically to earn revenues from an operating lease are recognised as an expense in the consolidated income statement in the period in which they are incurred. (l) Long-term investments Long-term investments represent available-for-sale investments and are initially measured at cost, which is the fair value of the consideration given for them, including transaction costs. Long-term investments are subsequently carried at cost subject to impairment review. 30 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (m) Intangible assets Intangible assets are measured initially at cost. Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and the cost of the asset can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets are amortised on a straight-line basis over the best estimate of their useful lives. The amortisation period and the amortisation method are reviewed annually at each financial year-end. i. Patents, trademarks and licenses Amounts paid for patents, trademarks, licenses are capitalised and amortised on a straight-line basis over the expected useful lives. The expected useful lives of patents, trademarks and licenses are 15 years. ii. Software The cost of acquisition of new software is capitalised and treated as an intangible asset if these costs are not an integral part of the related hardware. Software is amortised on a straight-line basis over 10 years. (n) Negative goodwill Negative goodwill is recognised in the consolidated income statement as follows: i. To the extent that negative goodwill relates to expected future losses and expenses that are identified in the company’s plan for the acquisition and can be measured reliably but which cannot be accrued for the date of acquisition, that portion of negative goodwill is recognised as income when the future losses and expenses are recognised. ii. The amount of negative goodwill not exceeding the fair values of acquired identifiable non-monetary assets is recognised as income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable assets. iii. The amount of negative goodwill in excess of the fair values of acquired identifiable non-monetary assets is recognised as income immediately. The negative goodwill is amortised on a straight-line basis over 10 years, which approximates the weighted average useful life of the identifiable depreciable assets acquired. Negative goodwill is presented as a deduction from intangible assets. Amortisation of negative goodwill is offset against general and administrative expenses in the consolidated income statement. 31 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (o) Provisions A provision is recognised when, and only when, an enterprise has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each consolidated balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. (p) Minority interests Minority interests include their proportion of the fair values of identifiable assets and liabilities recognised upon acquisition of a subsidiary. The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in the equity of the subsidiary. The excess, and any further losses applicable to the minority, are charged against the majority interest except to the extent that the minority has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently reports profits, the majority interest is allocated all such profits until the minority’s share of losses previously absorbed by the majority has been recovered. If a subsidiary or an associate has outstanding cumulative preferred shares which are held outside the group, the company computes its share of profit or losses after adjusting for the preferred dividends, whether or not the dividends have been declared. (q) Revenue recognition Revenue is recognised when it is probable that the economic benefit associated with the transaction will flow to the Company and the amount of the revenue can be measured reliably. Revenue is recognised on the following basis: (i) Sales of goods Revenue from sales of goods are recognised when delivery has taken place and transfer of risks and rewards has been completed. (ii) Properties for sale Revenue is recognised when the significant risks and rewards of ownership of the properties for sale have been transferred to customers and the bill of settlement has been submitted and confirmed by customers. (iii) Rental income Rental income is recognised when the right to receive payment is established. (iv) Interest income Interest income is recognised on a time proportion basis that reflects the effective yield on the asset. 32 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (r) Foreign currencies (i) Foreign currency transactions The Company and its subsidiaries maintain its books and records in RMB, except for Standard Glass Corporation and China Southern Glass (Australia) Pty Limited (“Overseas subsidiaries”) which maintain their books and records in USD and Australian dollars respectively. Transactions in other currencies are translated into the measurement currency at the applicable rates of exchange prevailing at the time of the transactions. Exchange rate differences arising on the settlement of monetary items or on reporting monetary items at rates different from those at which they were initially recorded during the period or reported in previous financial statements are recognised in the consolidated income statement in the period in which they arise. Non-monetary assets and liabilities in other currencies are translated at historical rates. Exchanges differences, other than those capitalised in fixed assets, are recognised in the consolidated income statement in the period in which they arise. (ii) Foreign entities The foreign consolidated subsidiaries are regarded as foreign entities since they are financially, economically and organizationally autonomous. Their measurement currencies are the respective local currencies. Financial statements of foreign consolidated subsidiaries are translated into RMB at the year end applicable rates, quoted by the People’s Bank of China (“PBOC”) with respect to the consolidated balance sheet, and at the average applicable PBOC rates during the year in the transactions occurred with respect to the consolidated income statement. All resulting translation differences are included in a cumulative translation reserve in equity. On the disposal of a foreign entity the cumulative amount of exchange rate differences that relate to the foreign entity, are recognised as income or as expenses in the same period in which the gain or loss on disposal is recognised. (s) Pension scheme Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Company’s local staff employed by the Company and its subsidiaries established in the PRC are to be made monthly to a government agency based on 13% of the standard salary set by the provincial government, of which 8% is borne by the Company and its subsidiaries in PRC and the remainder is borne by the staff. The government agency is responsible for the pension liabilities relating to such staff on their retirement. The Company and its subsidiaries in PRC account for these contributions on an accrual basis and charge the related contributions to income in the year to which the contributions relate. 33 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (t) Borrowings Borrowing costs generally are expensed as incurred. Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalization of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs are capitalised until the assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded. (u) Taxation The Group companies provide for taxation on the basis of its income for financial reporting purpose, adjusted for income and expense items which are not assessable or deductible for income tax purposes. Deferred taxation is provided under the balance sheet liability method in respect of significant temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. (v) Financial instruments Financial assets and financial liabilities carried on the consolidated balance sheet include cash and cash equivalents, trade and notes receivable, due from related company, other receivables, long-term investments, trade and notes payable, due to related company, other payables and borrowings. The accounting policies on recognition and measurement of these items are disclosed in the respective accounting policies. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains, and losses relating to a financial instrument classified as a liability are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group companies have a legally enforceable right to offset and intend to settle either on a net basis or to realize the asset and settle the liability simultaneously. 34 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (w) Impairment of assets (i) Financial instruments Financial instruments are reviewed for impairment at each balance sheet date. For financial assets carried at amortised cost, whenever it is probable that the Group will not collect all amounts due according to the contractual terms of loans, receivables, an impairment or bad debt loss is recognised in the consolidated income statement. Reversal of impairment losses previously recognised is recorded when the decrease in impairment loss can be objectively related to an event occurring after the write- down. Such reversal is recorded in income. However, the increased carrying amount is only recognised to the extent it does not exceed what amortised cost would have been had the impairment not been recognised. (ii) Other assets Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in income. The recoverable amount is the higher of an asset’s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction less the cost of disposal while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs. (iii) Reversal of impairment losses Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the asset no longer exist or has decreased. The reversal is recorded in the consolidated income statement. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for that asset in prior years. (x) Segments Business segments: for management purposes the Group is organized into three major operating businesses. The divisions are the basis upon which the Group reports its primary segment information. Financial information on business and geographical segments is presented in Note 26. Intersegment transactions: segment revenue, segment expenses and segment performance included transfers between business segments and between geographical segments. Such transfers are accounted for at competitive market prices charged to unaffiliated customers for similar services. Those transfers are eliminated on consolidation. 35 2. PRINCIPAL ACCOUNTING POLICIES (Cont’d) (y) Contingencies Contingent liabilities are not recognised in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the consolidated financial statements but disclosed when an inflow of economic benefits is probable. (z) Subsequent events Post-year-end events that provide additional information about a company’s position at the balance sheet date (adjusting events) are reflected in the consolidated financial statements. Post-year-end events that are not adjusting events are disclosed in the notes when material. (aa) New accounting development In 2001, the Group adopted IFRS 39 “Financial Instruments: Recognition and Measurement” which are effective for financial statements covering periods beginning on or after January 1, 2001. The adoption of this accounting policy did not have a material impact on the reported financial position or results of the Group and the Company. 3. CASH AND CASH EQUIVALENTS 2001 2000 Cash in hand 300,788 580,196 Cash at banks 181,867,809 197,917,012 182,168,597 198,497,208 4. PLEDGED BANK DEPOSITS Bank deposits of RMB18,586,984 (2000: RMB23,854,261) were pledged as guarantee for property sales mortgage granted to its customers. The remaining deposits in 2000 of RMB18,000,000 were used for the bank acceptance draft issued by relevant financial institutions on behalf of the Group. 5. TRADE RECEIVABLES, NET 2001 2000 Accounts receivable 164,662,656 220,932,822 Notes receivable 4,371,777 2,224,110 Less: provision for doubtful accounts (14,432,242) (12,840,403) 154,602,191 210,316,529 36 6. INVENTORIES, NET 2001 2000 Finished goods 37,103,670 54,416,712 Work-in-progress 8,386,149 7,574,024 Raw materials 45,317,488 55,914,949 90,807,307 117,905,685 Less: provision for obsolescence (2,829,211) (773,878) 87,978,096 117,131,807 7. PROPERTIES FOR SALE, NET 2001 2000 Properties for sale, at cost 467,521,548 510,180,970 Less: provision for net realisable value (188,188,437) (206,174,542) 279,333,111 304,006,428 The provision for net realisable value of properties for sale was determined by the directors based on the net selling price of similar properties with reference to the property market. 8. OTHER CURRENT ASSETS 2001 2000 Other receivables 7,771,134 771,083 Prepaid expenses 3,043,424 3,530,969 Deferred charges 983,307 2,264,024 11,797,865 6,566,076 9. LONG-TERM INVESTMENTS 2001 2000 Unlisted investment in the PRC, at cost 26,308,927 26,053,584 Less: provision for impairment in value (17,190,969) (17,834,825) 9,117,958 8,218,759 No quoted market prices as of year end are available for the above unlisted companies. The directors of the Company are of the opinion that the carrying value of the long-term investment approximated the recoverable amount of the long-term investment as of year end. 37 10. PROPERTY, PLANT AND EQUIPMENT, NET 2001 2000 Machinery (Note 35) and Motor Buildings equipment vehicles Office equipment Total Total Cost Beginning of year 492,233,847 1,465,930,215 65,321,051 54,839,861 2,078,324,974 2,045,587,786 Additions 3,665,377 14,851,949 3,185,162 5,813,419 27,515,907 21,686,285 Transfer from CIP 350,181 12,555,739 290,750 79,073 13,275,743 28,395,830 Disposals - (4,095,779) (2,087,072) (4,207,384) (10,390,235) (17,344,927) End of year 496,249,405 1,489,242,124 66,709,891 56,524,969 2,108,726,389 2,078,324,974 Accumulated depreciation Beginning of year (51,897,382) (248,100,650) (28,144,372) (24,538,440) (352,680,844) (259,880,449) Charges for the year (17,523,345) (74,304,086) (5,301,536) (5,896,776) (103,025,743) (99,105,275) Impairment losses (2,437,502) (2,363,849) - - (4,801,351) - Disposals - 2,022,718 782,712 1,643,394 4,448,824 6,304,880 End of year (71,858,229) (322,745,867) (32,663,196) (28,791,822) (456,059,114) (352,680,844) Net book value End of year 424,391,176 1,166,496,257 34,046,695 27,733,147 1,652,667,275 1,725,644,130 Beginning of year 440,336,465 1,217,829,565 37,176,679 30,301,421 1,725,644,130 1,785,707,337 (i) Fully depreciated property, plant and equipment Certain machinery and equipment, motor vehicles and office equipment items with gross carrying amounts of RMB10,409,239 and RMB8,339,823 are fully depreciated, as of 31 December 2001 and 2000, respectively, but these items are still in active use. (ii) Impairment loss According to inspections and assessment on property, plant and equipment made by management, certain buildings, machinery and equipment was impaired mainly due to the change of the property market and the rapid improvement of glass-manufacturing technologies. The impaired assets including buildings, and the machinery and equipment used to process glass-related products were written down to their recoverable amount which is their net selling price. Net selling price is determined using the best estimate available for the disposal of these assets on an arm’s length basis between knowledgeable willing parties, after deducting costs of disposal. An impairment loss has been recognised as general and administrative expenses in the consolidated income statement for assets carried at cost. 11. CONSTRUCTION-IN-PROGRESS 2001 2000 Beginning of year 26,334,095 11,520,111 Additions 163,521,947 43,209,814 Transferred out to land use rights (6,825,045) - Transferred out to property, plant and equipment (13,275,743) (28,395,830) End of year 169,755,254 26,334,095 38 12. LAND USE RIGHTS 2001 2000 (Note 35) Cost Beginning of year 102,528,315 102,528,315 Transfer from CIP 6,825,045 - End of year 109,353,360 102,528,315 Cumulative amount charged to consolidated income statement Beginning of year (19,418,257) (16,055,299) Charges for the year (3,510,780) (3,362,958) End of year (22,929,037) (19,418,257) Net carrying value End of year 86,424,323 83,110,058 Beginning of year 83,110,058 86,473,016 Land use rights comprised fees paid to Shenzhen National Real Estate Management Bureau for the right to use the land where the Company’s factory buildings in Shenzhen are located. Payments for land use rights represent prepaid lease payments for the land and are recognised as an expense on a straight-line basis over the estimated period of use of the land use rights of 27-50 years. Estimated period of use of a land use right is the shorter of the land use period according to the land use right certificate and the approved operating period of the company holding the land use right. As of December 31, 2001, the Group had no future lease payment obligations in respect of the above land use rights. 13. INTANGIBLE ASSETS 2001 2000 Patents, trademarks and Negative Software licenses goodwill Total Total Cost Beginning of year 3,043,694 - - 3,043,694 2,889,494 Additions - 4,552,240 (13,712,589) (9,160,349) 154,200 End of the year 3,043,694 4,552,240 (13,712,589) (6,116,655) 3,043,694 Accumulated amortisation Beginning of year (1,300,271) - - (1,300,271) (1,011,322) Amortisation for the year (440,110) (151,743) 1,371,258 779,405 (288,949) End of the year (1,740,381) (151,743) 1,371,258 (520,866) (1,300,271) Net book value End of year 1,303,313 4,400,497 (12,341,331) (6,637,521) 1,743,423 Beginning of year 1,743,423 - - 1,743,423 1,878,172 The negative goodwill was arisen from the acquisition of additional shares of Shenzhen Wellight Coating Company Limited during the year. (Note 34) 39 14. TRADE AND OTHER PAYABLES 2001 2000 (Note 35) Trade payable 82,485,989 133,683,652 Notes payable 37,783,937 66,431,862 Advance from customers 26,429,936 25,399,223 Salary payable and welfare payable 2,236,010 2,349,076 Accruals 22,679,584 15,928,593 Payable for construction work and equipment purchase 63,666,302 11,690,834 Others 57,044,926 51,045,234 292,326,684 306,528,474 15. TAXES PAYABLE 2001 2000 Provision for income tax 262,908 1,625,799 Provision for value added tax 1,114,594 10,278,059 Provision for business tax 1,991,638 3,092,154 Others 849,440 891,583 4,218,580 15,887,595 16. SHORT-TERM BANK LOANS As of December 31, 2001, all short-term bank loans were unsecured. These loans bear interest ranging from 3.190% to 6.435% (2000: from 5.850% to 8.190%) per annum. 17. EMPLOYEE SOCIAL INSURANCE SCHEMES The Company participates in certain employee social insurance schemes in respect of pension insurance and medical insurance and other insurance managed by governmental organization. According to the relevant provisions, the Company and its employees are required to make contributions to Shenzhen Municipal Social Security Administration Bureau at specified rates based on the basic salaries of the employees. The portion of insurance expenses contributed by the Company and its subsidiaries is included in the consolidated statement of income. The Company paid monthly pension insurance and medical insurance premium to Shenzhen Municipal Social Security Administration Bureau at the rates of 13% and 9% respectively based on the basic salaries of the employees. The portion contributed by the Company are 61.5% and 78% respectively and the employees pay for the remaining contribution. All the Group’s PRC subsidiaries have already participated in certain employee social insurance schemes managed by local Social Security Administration Bureau. For the year ended December 31, 2001, total social insurance expenses amounted to approximately RMB5,307,311 (2000: RMB4,824,828). 40 18. SHARE CAPITAL The share capital of the Company comprised ordinary shares of RMB1 each. The details are set out as follows: As of December 31 As of December 31 2001 2000 2001 2000 Authorized, issued and fully paid Number of shares RMB Unlisted shares Shares owned by domestic legal persons 270,756,873 270,756,873 270,756,873 270,756,873 Shares owned by foreign legal persons 76,044,590 76,044,590 76,044,590 76,044,590 Shares owned by employees 580,989 580,989 580,989 580,989 Subtotal 347,382,452 347,382,452 347,382,452 347,382,452 Listed shares A shares 106,585,008 106,585,008 106,585,008 106,585,008 B shares 223,007,956 223,007,956 223,007,956 223,007,956 Subtotal 329,592,964 329,592,964 329,592,964 329,592,964 676,975,416 676,975,416 676,975,416 676,975,416 19. RESERVES According to the Company Laws of the PRC and Articles of Association of the Company, the Company is required to provide certain statutory reserves which are appropriated from the net profit as reported in the statutory accounts. Accordingly, the Company shall set aside 10% of its net profit for statutory revenue reserve (except where the reserve balance has reached 50% of the Company’s registered capital) and 5% to 10% for the statutory common welfare fund. The Company may make appropriations from its net profit to the discretionary revenue reserve upon approval by shareholders. These reserves cannot be used for purposes other than those of which they are created and are not distributed as cash dividends without the prior approval by shareholders under certain conditions. When the statutory revenue reserve is not sufficient to cover the prior years’ losses, the current year’s net profit will first be used to compensate the previous losses before the appropriations to the statutory revenue reserve and statutory common welfare fund. The statutory common welfare fund is designated for the purpose of collective welfare of the employees. The statutory revenue reserve, discretionary revenue reserve and capital reserve fund as approved by shareholders may be converted into share capital provided that the balance of the statutory reserve does not fall below 25% of the registered share capital. The Company can issue bonus shares and increase par value of each share to the existing shareholders in proportion to their original shareholders. 41 19. RESERVES (Cont’d) For the year ended December 31, 2001, the directors of the Company proposed that 10% and 5% (2000: 10% and 5%) of the net profit as reported in the statutory accounts be appropriated to statutory reserve fund and statutory common welfare fund respectively totalling RMB22,694,585 (2000: RMB24,634,315). The resolution is subject to approval by shareholders in the annual general meeting. Inter-transfer of reserves as of December 31, 2001 was arisen from the prior year adjustment of the profit appropriation of management accounts under PRC GAAP for adapting the new generally accepted accounting principles of the PRC. 20. DIVIDENDS Cash dividends declared and authorised in 2001 were as follows: 2001 2000 Dividends declared before year end 81,237,050 - Dividends declared after year end (Note 33) 88,006,804 81,237,050 In accordance with the Articles of Association of the Company, the Company declares dividends based on the lower of retained earnings as reported in the statutory accounts prepared in accordance with PRC GAAP and the financial statements prepared in accordance with IFRS. As the statutory accounts have been prepared in accordance with PRC GAAP, the retained earnings as reported in the statutory accounts is different from the amount reported in the accompanying consolidated statement of changes in equity. As of December 31, 2001, the retained earnings before final dividends reported in the financial statements in accordance with PRC accounting standards and IFRS were RMB145,523,864 (2000: RMB98,158,267) and RMB138,340,158 (2000: RMB81,752,146), respectively. 21. DEFERRED TAX ASSETS Components of deferred tax assets are as follows: 2001 2000 Provision for doubtful accounts 868,538 679,995 Provision for impairment of long-term investments 2,067,927 2,326,326 Write off of long-term deferred expenses - 752,406 Write off of pre-operating expenses 1,955,213 2,066,852 Provision for impairment of fixed assets 141,049 - 5,032,727 5,825,579 Certain companies of the Group had unused tax losses of RMB1,133,596 (2000: RMB2,016,000) for which no deferred tax asset is recognised in the consolidated balance sheet due to uncertainty of its recoverability. Except for the above, there is no material unprovided deferred tax assets and liabilities of the Group to be recognised for the year ended December 31, 2001. 42 21. DEFERRED TAX ASSETS (Cont’d) Movement of deferred tax assets are as follows: Credit (charged) to consolidated January 1, statement of December 31, 2001 income 2001 Provision for doubtful accounts 679,995 188,543 868,538 Provision for impairment loss of long-term investments 2,326,326 (258,399) 2,067,927 Write off of long-term deferred expenses 752,406 (752,406) - Write off of pre-operating expenses 2,066,852 (111,639) 1,955,213 Provision for impairment of fixed assets - 141,049 141,049 5,825,579 (792,852) 5,032,727 22. SALES 2001 2000 Sales of products 992,421,857 1,084,339,372 Sales of properties 24,139,575 73,507,669 Rental income 4,862,986 5,771,291 1,021,424,418 1,163,618,332 Detail analysis on operating activities categorized by businesses and geographical locations are set out in Note 26 to the accompanying financial statements. 43 23. PROFIT BEFORE TAX Profit before tax was determined after crediting and charging the following: 2001 2000 (Note 35) Crediting: Rental income 4,862,986 5,771,291 Interest income 2,807,074 3,216,753 Exchange gain 1,487,257 - Amortization of negative goodwill 1,371,258 - Write-back of provision for impairment losses for long- term investments 643,856 - Write-back of the net realisable value provision charged against income for properties for sales 17,986,105 - Charging: Staff costs - Salaries and wages 57,248,438 67,990,536 - Provision for staff and workers’ welfare fund 4,667,294 6,461,677 - Provision for social insurance scheme 9,746,471 9,397,015 Cost of inventories 652,220,296 733,163,867 Depreciation of property, plant and equipment 103,025,743 99,105,275 Amortization of other intangible assets 591,853 288,949 Prepaid lease payments for land use right charged against income 3,510,780 3,362,958 Loss on disposal of properly, plant & equipment 5,941,411 11,040,047 Provision for doubtful accounts 1,591,839 7,954,146 The net realisable value provision charged against income for properties for sales - 3,269,040 Impairment losses for long-term investments - 2,057,525 Impairment losses for fixed assets 4,801,351 - Interest expenses 30,466,518 42,064,385 Exchange loss - 1,080,536 Provision for obsolescence of inventories 2,055,333 773,878 44 24. INCOME TAXES In accordance with the prevailing Enterprise Income Tax (“EIT”) laws, the Company and its subsidiaries in the PRC are subject to income tax at rates of 15% or 33%, determined by their respective place of incorporation. Subsidiaries located abroad are subject to tax rates of their place of incorporation. Besides, some subsidiaries are enterprises with foreign investment in the PRC and are entitled to full exemption from EIT for the first two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous years. 2001 2000 Income tax – current year - PRC 3,472,173 6,362,738 - Overseas - 20,150 3,472,173 6,382,888 Deferred tax assets relating to the origination and reversal of temporary differences 792,852 - Deferred tax assets relating to changes in accounting policies - 283,910 4,265,025 6,666,798 The reconciliation of the statutory tax rate to the effective tax rate is as follows: 2001 2000 Accounting profit 153,207,380 100.0% 189,359,453 100.0% Tax at the statutory tax rate of 15.0% (2000: 15.0%) 22,981,107 15.0% 28,403,918 15.0% Tax benefit arising from preferential policy (22,356,100) (14.6%) (26,023,107) (13.7%) Tax effect of expenses that are not deductible in determining taxable profit 1,713,548 1.1% 1,986,077 1.0% Deferred tax assets of the unused tax losses on certain subsidiaries of the Group not recognised ( Note 21) 1,133,596 0.7% 2,016,000 1.1% Changes in deferred taxes (Note 21) 792,852 0.5% 283,910 0.1% 4,265,025 2.8% 6,666,798 3.5% Since the subsidiaries outside Shenzhen had no material amount of taxable profit during year of 2001, the national income tax rate of 15% for enterprises incorporated in Shenzhen (2000: 15%) is deemed as the statutory tax rate for the Group. 25. EARNINGS PER SHARE The calculation of basic earnings per share is based on the net profit for the year attributable to ordinary shareholders of RMB153,207,380 (2000: RMB189,359,453), divided by the weighted average number of ordinary shares issued during the year of 676,975,416 shares (2000: 676,975,416 shares). Diluted earnings per share is not presented as there is no potential dilutive ordinary shares outstanding during the years. 45 26. SEGMENT INFORMATION Segment information is prepared on the following bases: (a) Business segments The Group conducts the majority of its business activities in the areas of production of glass, property develop sand mining and provision of decoration services operations. An analysis by business segment is as follows: Production of glass products Property development Other businesses E 2001 2000 2001 2000 2001 2000 2001 (Note 35) (Note 35) (Note 35) TURNOVER Sales to external customers 963,412,702 1,057,726,315 29,799,061 79,278,960 28,212,655 26,613,057 Inter-segment sales - - - - 20,664,016 14,240,932 (20,664,01 Total turnover 963,412,702 1,057,726,315 29,799,061 79,278,960 48,876,671 40,853,989 (20,664,01 RESULTS Gross profit (loss) 348,532,738 394,621,907 2,102,700 22,560,556 18,582,016 16,296,978 (13,33 Interest expense (29,915,736) (38,406,508) (511,893) (3,580,022) (38,889) (77,855) Interest income 2,434,244 2,872,451 291,591 318,814 81,239 25,488 Income taxes (4,227,610) (6,630,541) - - (37,415) (36,257) Minority interests (971,370) (7,453,725) - - - - Net profit (loss) 160,637,177 190,628,716 (10,235,564) 1,120,092 835,061 (424,936) 1,970,70 OTHER INFORMATION Segment assets 2,706,324,549 2,257,654,803 335,064,396 417,289,142 73,957,101 92,105,708 (436,552,06 Long-term investments 53,004,799 52,292,263 69,000 - - - (43,955,84 Total assets 2,759,329,348 2,309,947,066 335,133,396 417,289,142 73,957,101 92,105,708 (480,507,90 Total liabilities 687,292,566 730,344,934 438,235,425 513,142,840 28,102,233 32,357,681 (436,552,60 Capital expenditure 190,167,953 63,786,197 182,069 146,515 687,832 963,387 Depreciation and amortisation (102,172,438) (99,229,381) (1,309,715) (1,322,015) (2,274,965) (2,205,786) Impairment loss recognised in the income statement (2,153,191) (2,057,525) (2,437,502) (3,269,040) (210,658) - 46 26. SEGMENT INFORMATION (Cont’d) (b) Geographical segments The Group’s activities are conducted predominantly in the PRC, and other parts of the United States and Austra is as follows: PRC United States Australia 2001 2000 2001 2000 2001 2000 (Note 35) (Note 35) (Note 3 External sales 1,002,831,529 1,112,498,447 5,942,202 20,500,530 12,650,687 30,619 Total assets 2,679,683,299 2,738,554,354 1,542,461 7,766,018 6,686,184 9,497 Capital expenditure 191,037,854 64,878,779 - 17,320 - Contribution to net income 156,390,298 189,274,234 (3,370,132) (159,559) 187,214 244 (c) Cash flow segments Production of Property glass development Other businesses Total Cash flow from: Operating activities 316,497,484 3,490,064 9,284,888 329,272,436 Investing activities (199,804,760) (2,410,958) (5,802,645) (208,018,363) Financing activities (134,932,857) (2,371,602) (183,517) (137,487,976) (18,240,133) (1,292,496) 3,298,726 (16,233,903) 47 27. NET CASH INFLOW FROM OPERATING ACTIVITIES Reconciliation from consolidated profit before tax and minority interests to net cash inflow from operating activities: 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Profit before tax and minority interests 158,443,775 203,479,976 Adjustments for: Provision for doubtful accounts 1,591,839 7,954,146 Depreciation 103,025,743 99,105,275 Loss on disposal of fixed assets 5,941,411 11,040,047 Impairment losses for fixed assets 4,801,351 - (Write back of net realisable value provision) net realisable value provision for properties for sale (17,986,105) 3,269,040 (Write back of impairment losses) Impairment losses for long-term investments (643,856) 2,057,525 Provision for obsolescence of inventories 2,055,333 773,878 Interest expenses 30,466,518 42,064,385 Interest income (2,807,074) (3,216,753) Prepaid lease payments for land use rights charged against income 3,510,780 3,362,958 Amortisation of intangible assets (779,405) 288,949 Operating profit before working capital changes 287,620,310 370,179,426 Decrease (Increase) in inventories 27,098,378 (2,975,540) Decrease in properties for sale 42,659,422 67,570,470 Decrease (Increase) in trade and notes receivable 54,122,499 (68,728,144) (Increase) Decrease in other current assets (5,231,789) 23,711,376 Decrease (Increase) in pledged bank deposits 23,267,277 (41,854,261) Increase in the due from related company (37,085,084) - Decrease in trade and other payables (14,201,790) (10,506,867) Decrease in due to related companies (3,369,083) (17,922,319) (Decrease) Increase in other current liabilities (10,306,124) 20,719,120 Net cash inflow from operating activities 364,574,016 340,193,261 28. FINANCIAL INSTRUMENTS The carrying amounts of the Group’s cash and cash equivalents, short-term bank deposits over three months, trade and notes receivables, other receivables, trade and notes payable, due to related company, other payables and borrowings approximate their fair values because of the short maturity of these instruments. The Group did not enter into any foreign exchange forward contracts to hedge against fluctuations. 48 FINANCIAL RISK MANAGMENT (a) Credit risk The carrying amount of cash and cash equivalents, trade receivables and other current assets represented the Group’s maximum exposure to credit risk in relation of financial assets. Cash is placed with reputable banks and the weighted average effective interest rate on deposits was 0.99%. Majority of the Group’s trade receivables relate to sales of goods to third party customers. The Group performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on trade receivables. The Group maintains a provision for doubtful debts and actual losses have been within management’s expectation. No other financial assets carry a significant exposure to credit risk. (b) Currency risk Substantially all of the revenue-generating operations of the Group are transacted in Renminbi, which is not freely convertible into foreign currencies. On 1st January, 1994, the Mainland China government abolished the dual rate system and introduced a single rate of exchange as quoted by the People’s Bank of China. However, the unification of the exchange rate does not imply convertibility of Renminbi into other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorised to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. (c) Interest rate risk The interest rates of short-term loans of the Group are disclosed in Note 16. The directors of the Company and its subsidiaries believe that the exposure to interest rate risk of financial assets and liabilities as of December 31, 2001 was minimum since their deviation from their respective fair values was not significant. 29. COMMITMENTS Capital commitments outstanding at December 31, 2001 not provided from in the accounts are summarised as follows: 2001 2000 Contracted 196,450,000 74,492,100 Authorised but not contracted 39,070,000 - 235,520,000 74,492,100 49 30. RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. (a) Relationship Name Relationship Hong Kong South Bright Limited Controlled by one of the promoters of the Company (b) Transactions The Company has entered into a variety of transactions with its associates. The Company enters into transactions in the normal course of business on an arm’s length basis. The most significant of these transactions are as follows: 2001 2000 Sales of goods Hong Kong South Bright Limited 22,596,562 10,847,689 (c) Balances with related party All the balances with related company as of December 31, 2001 were unsecured, interest free and repayable on demand. 31. IMPACT OF IFRS ADJUSTMENTS ON NET PROFIT/NET ASSETS Net profit Net assets 2001 2000 2001 2000 (Note 35) (Note 35) As reported in the statutory accounts 151,297,232 184,998,326 1,846,507,758 1,782,946,208 Impact of adjustments: Real estate sales recognition, net (7,407,793) 1,967,833 (5,439,960) 1,967,833 Deferred tax (792,852) (283,910) 5,032,727 5,825,579 Long-term deferred expenses 9,325,981 1,314,921 (2,134,748) (11,258,820) Profit appropriation – dividends - - 88,006,804 81,237,050 Others 784,812 1,362,283 4,795,264 4,174,373 As stated under IAS 153,207,380 189,359,453 1,936,767,845 1,864,892,223 50 32. SUBSEQUENT EVENTS Pursuant to the board resolution on April 25, 2002, the directors recommended the payment of a final dividend of RMB0.13 per share, totalling RMB88,006,804. 33. INVESTMENT IN SUBSIDIARIES As of December 31, 2001, the Company directly/indirectly held the following subsidiaries: Percentage Place of Registered of equity Name incorporation capital Principal activities interest held Directly held Shenzhen Southern Star Glass Processing Shenzhen, PRC 23,100,000 Placing, cutting, edging and 100% Company Limited drilling of glass Shenzhen Nanfeng Glass Machinery Company Shenzhen, PRC 12,000,000 Production of glass 100% Limited manufacturing machinery and related equipment Shenzhen CSG Architectural Glass Company Shenzhen, PRC 32,000,000 Production of engraved glass 100% Limited (Formerly known as Shenzhen Southern Insulating Glass Company Limited) Hainan Southern Glass Development Company Haikou, PRC 30,000,000 Property development and 100% Limited investment Southern Glass (Wuhan) Industrial Wuhan, PRC 40,000,000 Property development and 100% Development Company Limited investment Standard Glass Corporation USA USD200,000 Distribution of glass products 100% China Southern Glass (Australia) Pty Limited Australia AUD500,000 Glass trading 100% Shenzhen Nanbo Spandrel and Tempglass Shenzhen, PRC 15,000,000 Production of colour-coated 100% Company Limited glass Shenzhen Nanbo Structure Ceramics Company Shenzhen, PRC 30,000,000 Production of structural 100% Limited ceramic products Shenzhen Nanbo Curtain Wall Engineering Shenzhen, PRC 12,000,000 Interior decoration, design 100% Co., Ltd. and installation Shenzhen Nanhong Electronic Ceramics Shenzhen, PRC 50,000,000 Production of electronic 100% Company Limited ceramic products Shenzhen Southern Float Glass Company Shenzhen, PRC 605,736,250 Production of ultra-thin 100% Limited coated glass Shenzhen Benxun Autoglass Company Shenzhen, PRC 100,000,000 Production of car windows 100% Limited Sichuan Southern Glass Development Chengdu, PRC 40,000,000 Property development and 100% Company Limited investment 51 34. INVESTMENT IN SUBSIDIARIES (Cont’d) Percentage Place of Registered of equity Name incorporation capital Principal activities interest held Wen Chang CSG Silica Sand Mine Company Wenchang, PRC 40,000,000 Production of silica sand 100% Beihai Southern Glass Real Estate Beihai, PRC 20,000,000 Property development and 100% Development Company Limited ("Beihai") investment Southern Glass (Tianjin) Industrial Tianjin, PRC 20,000,000 Property development 100% Development Company Limited ("Southern Glass Tianjin") Shenzhen Wellight Coating Company Limited Shenzhen, PRC USD8,000,000 Production of coated glass 100% and mirrors Shenzhen Southern Glass Display Technology Shenzhen, PRC USD9,000,000 Production of monitors 75% Company Limited Shenzhen Hong Da Mirrors Company Limited Shenzhen, PRC 6,780,000 Production of glass mirrors 75% Shenzhen Xinhongda Safety Glass Company Shenzhen, PRC 10,080,000 Production of safety glass 75% Limited Shenzhen Wellight Conductive Coating Shenzhen, PRC USD5,000,000 Production of conductive 70% Company Limited glass products Indirectly held Hainan First International Tourism Haikou, PRC HKD10,000,000 Automotive hotel service and 100% Development Co. Ltd. tourism guide Hainan Southern Glass Property Management Haikou, PRC RMB5,000,000 Property management 100% Co., Ltd. On December 28, 2000, a shares Assignment Agreement (the “Agreement”) was signed in relation to acquistion of additional shares of Shenzhen Wellight Coating Company Limited (“Shenzhen Wellight”). According to the Agreement, 20% and 10% of the shares in Shenzhen Wellight held by Wah Loon Mechanical & Electrical Co., Ltd. were assigned to the Company and Shenzhen Southern Star Glass Processing Company Limited, the Company’s wholly-owned subsidiary, respectively, with a total cash consideration of RMB14,980,000. After the assignment, the Company effectively owns 100% of the shares of Shenzhen Wellight. 34. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the current year’s presentation in accordance with the new presentation and disclosure requirements. 35. APPROVAL OF FINANCIAL STATEMENTS The financial statements set out on pages 2 to 31 were approved by the board of directors on April 25, 2002. 52 XII. Documents for Reference 1. 2001 Annual Report carried with the original signature of Chairman of the Board and general manager. 2. Accounting statements carried with the personal signatures and seals of legal representative, chief accountants and person in charge of accounting affairs; 3. Original of Auditors’ Report carried with the seal of Arthur Andersen﹒Hua Qiang Certified Public Accountants as well as personal signatures and seals of certified public accountants; 4. Original of Auditors’ Report carried with the seal of Arthur Andersen & Co. as well as personal signatures and seals of certified public accountants; 5. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public on the newspapers designated by CSRC in the report period; 6. The Articles of Association approved by latest Shareholders’ General Meeting. Board of Directors of CSG Technology Holding Co., Ltd. April 27, 2002 53