东旭光电(000413)宝石Ａ2002年年度报告（英文）

Shijiazhuang Baoshi Electronic Glass Co., Ltd. 2002 Annual Report Important Notes The Board of Directors of the Company hereby guarantees that there are no misstatement, misleading representation or important omissions in this report and shall assume joint and several liability for the authenticity, accuracy and completeness of the contents hereof. The board chairman of the Company Mr. Dong Qingxiang, general manager Mr. Song Hongbo and chief accountant Mr. Zhou Yumao represent and warrant the financial report in this annual report is true and complete. Table of Contents Chapter 1 Brief Introduction of the Company 1 Chapter 2 Financial Highlights 2 Chapter 3 Particulars about the Changes of Share Capital and Shareholders 4 Chapter 4 Directors, Supervisors, Senior Executives and Staff 7 Chapter 5 Control Structure of the Company 10 Chapter 6 Brief Introduction of Shareholders’ General Meeting 11 Chapter 7 Report of the Board of Directors 12 Chapter 8 Repot of the Supervisory Committee 17 Chapter 9 Important Events 18 Chapter 10 Financial Reports 22 Chapter 11 List of Documents Available for Inspection 22 Chapter 1 Brief Introduction of the Company (I) Statutory name of the Company In Chinese :石家庄宝石电子玻璃股份有限公司 In English : Shijiazhuang Baoshi Electronic Glass Co., Ltd. Short form of English Name: SJZBS (II) Legal Representative: Dong Qingxiang (III) Secretary of the Board of Directors: Luo Lina Securities affair representative: Wang Hua Contact address: No.2, Huaqing Street, Zhongshan East Road, Shijiazhuang, Hebei Province (the Securities Dept. of the Company) Tel: 0311-6044705 Fax: 0311-6041503 E-mail: bsdz@heinfo.net (IV) Registered Address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Shijiazhuang, Hebei Province Office Address: No.9, Huanghe Road, Shijiazhuang High-tech Industrial Development Area, Shijiazhuang, Hebei Province Zip Code: 050035 E-mail: :baoshi@_mx.hebei.net.cn (V) Newspapers for Information Disclosure: China Securities Daily, Hong Kong Commercial Daily Website Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn The Place for Placing the Annual Report: Securities Dept. of the Company (VI) Stock Exchange for Listing: Shenzhen Stock Exchange Stock Abbreviation: Baoshi A, Baoshi B Stock Code: 000413, 200413 (VII) Other Relevant Information 1. The date when and the place where the Company made its first registration: December 26, 1992 Shijiazhuang City 2. Registration No. of Legal Entity Business License: 1300001001778 3. Tax Registration No.: 130102104395983 4. The name and office address of the Certified Public Accountants engaged by the -1- Company: Domestic Certified Public Accountants: Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. Address: 12/F, Ruian Square, No.333 Huaihai Middle Road, Shanghai Overseas Certified Public Accountants: Pricewaterhouse Coopers China Co., Ltd. Business Address: New York, U.S.A. NY 10185 –1448 P.O Box 1448 Chapter 2 Highlights of Accounting Data and Business Data (I) Main profit indicators of the report year (consolidated financial statement) RMB Total profit 35,201,642 Net profit 29,198,154 Net profit after deducting non-recurring 31,199,627 gains and losses Profit from key business 21,720,916 Profit from other businesses 24,076,371 Operating profit 1,283,957 Investment income 36,086,888 Subsidy income - Net amount of non-operating -2,169,203 income/expenditure Net cash flow from operating activities -22,862,978 Net increase of cash and cash equivalents 51,223,401 Note: The amount of the items of non-recurring gains and losses deducted (RMB) 1. Proceeds from the disposal of fixed assets 91,533 2. Other non-operating income 31,799 3. Loss on the disposal of fixed assets 20,420 4. Provision for fixed assets depreciation 1,051,004 5. Other non-operating expenses 1,221,111 6. Amount of income tax influence - 167,730 (II) The net profit calculated pursuant to Chinese accounting standards and International Accounting Standards (IAS) and the notes to the net profit difference 2002(RMB'000) Net profit pursuant to international accounting 34,064 standards Reconciliation items: (1) Minority interests 254 (2) Amortization of good will - -2- (3) The amortization of deferred income - 3,764 (4) Proceeds from debt reorganization - 1,356 confirmed as capital common reserve Total of reconciliation items - 4,866 Net profit pursuant to Chinese accounting 29,198 standards and system (III) Main Accounting Data and Financial Indicators over the Past Three Years as at the End of the Report Period RMB Item 2002(consolid 2001(consolidat 2000(consolidate ated) ed) d) Income from key business 53,621,716 62,388,165 44,918,932 Net profit 29,198,154 39,390,980 83,961,160 Total assets 1,505,567,1 1,538,478,066 1,616,898,335 56 Shareholders’ equity 577,455,420 547,155,173 542,682,303 Earnings per share 0.076 0.103 0.219 Earnings per share after deducting non-recurring 0.081 0.109 0.217 gains and losses Net assets per share 1.51 1.43 1.42 Net assets per share after 1.49 1.41 1.40 adjustment Net cash flows per share from operating activities -0.06 -0.218 -0.497 Return on net assets (%) 5.06% 7.20% 15.47% Return on net assets 5.19% 7.41% 17.14% (%)(Weighted) (IV) Attached Schedule of Profit Statement Profit in the report period Return on net assets (%) Earnings per share (RMB) Fully Weighted Fully Weighted diluted average diluted average Profit from key business 3.76 3.86 0.057 0.057 Operating profit 0.22 0.23 0.003 0.003 Net profit 5.06 5.19 0.076 0.076 Earnings per share after deducting non-recurring 5.40 5.54 0.081 0.081 gains and losses -3- (V) Particulars about Changes of Shareholders’ Equity during the Report Period Unit: RMB Item Share Capital Surplus Statutory Retained Total capital common reserve public profit shareholde (’000 reserve welfare rs’ equity shares) fund Balance 38300 535,331,4 27,454,7 - -398,631,0 547,155,1 at 16 88 31 73 beginning of the period Increase - 1,102,093 - - 29,198,15 30,300,24 in this 4 7 period Decrease - - - - - - in this period Balance 38300 536,433,5 27,454,7 - -369,432,8 577,455,4 at end of 09 88 77 20 the period Reason Proceeds Increase for from debt of net change reorganiza profit tion Chapter 3 Particulars about Changes in Share Capital and Shareholders (I) The changes of share capital of the Company The statement of changes of share capital: (in shares) Before the Increase/decrease this time (+ , - ) After the change Shar Bon Capita Issui Ot change e us lizatio ng her allot shar n of addit s ment es comm ional on shar reserv es e fund ( ) Non-negotiable Shares 23341050 23341050 0 0 -4- 1.Promoters’ shares: 23041050 including 23041050 0 0 State-owned shares 3000000 3000000 Domestic corporate shares Foreign corporate shares Others 2. Raised corporate shares 4500000 4500000 3. Staff shares 4. Preferred shares or 17100 17100 others Total non-negotiable shares 237927 23792760 600 0 . Negotiable Shares 1. Domestically listed 45072 45072400 RMB common shares 400 2. Domestically listed 10000000 10000000 foreign-capital shares 0 0 3. Overseas listed foreign-capital shares 4. Others Total negotiable shares 14507240 14507240 0 0 . Total shares 38300000 38300000 0 0 (II) Share issuance and listing The Company did not issue new shares in the previous three years by the end of the report period. -5- III Particulars about shareholders 1. As of December 31, 2002, the Company had 25,480 shareholders of A shares and 15,320 shareholders of B shares. 2. Particulars about the shares held by the top ten shareholders (as of December 31, 2002) Name of shareholder No. of Proportion of total shares held share capital (%) 1. Shijiazhuang Baoshi Electronic Group Co., 230410500 60.16 Ltd. 2. DAIWA SECS.SMBC HONG KONG 13000000 3.39 LTD-CLIEMS 3. China Electronic Import and Export 2000000 0.52 Corporation 4. Xie Yingjun 1598500 0.42 5. CBNY S/A PNC/SKANDIA SELECT 1132500 0.30 FUND/CHINA EQUITY AC 6. Zhonghua Hebei Import and Export Co. 1000000 0.26 7. Shijiazhuang Trust Investment Co. 1000000 0.26 8. Shanghai Hong Kong Wanguo Securities 621900 0.16 9. Beijing Good Companion Ad. Co. 516791 0.13 10. Chen Yongquan 481962 0.13 Among the above ten shareholders, No.1 is the shareholder of state-owned shares. No.2, 4, 5, 8 and 10 are shareholders of domestically listed foreign investment shares. Note: 1. Shijiazhuang Baoshi Electronic Group Co., Ltd. (the Group Co.), the shareholder holding over 5% (including 5%) of the total shares of the Company, holds -6- 230.4105 million shares of the Company. Such shares were nor changed or pledged or trusted in the report year. 17 million shares of the Company held by the Group Co. were frozen by the court in June 2002 for guarantee. 2. The related relation between the top ten shareholders is unknown. They are not persons taking concerted action specified in Regulations on the Information Disclosure of the Change of Shareholding of Shareholders of Listed Companies. 3. Brief Introduction of the controlling shareholder of the Company and the actual controller of the controlling shareholder The controlling shareholder of the Company is Shijiazhuang Baoshi Electronic Group Co., Ltd. (Baoshi Group Co.) It holds 60.16% equity of the Company. Date of establishment: October 10, 1997. Nature: Wholly state-owned enterprise. Registered capital: RMB 0.9 billions, Legal representative: Dong Qingxiang. Business scope: Dealing in state-owned capital within authorized scope, color cathode-ray tube series products and supporting electronic components, etc. The actual controller of the controlling shareholder is Shijiazhuang State-owned Asset Management Committee. Chapter 4 Particulars about Directors, Supervisors, Senior Executives and Staff of the Company (I) Directors, Supervisors and Senior Executives 1. Basic information Name Sex Ag Position Term of office No. of shares e held Dong Male 64 Chairman of 2000.6-2003.6 2000 Qingxiang Board of Directors Gao Tiezhan Male 59 Deputy 2000.6-2003.6 500 Chairman of Board of Directors Wang Male 58 Deputy 2000.6-2003.6 1500 Rongxian Chairman of Board of Directors Wang Xi Male 57 Director 2000.6-2003.6 500 Lu Fengyi Male 56 Director 2000.6-2003.6 1600 Song Hongbo Male 47 Director & GM 2000.6-2003.6 0 -7- Zhou Bo Male 37 Director 2000.6-2003.6 6800 Luo Lina Female 47 Director, 2000.6-2003.6 0 secretary of the Board of Directors Gao Dacai Female 57 Director, deputy 2000.6-2003.6 0 GM Ye Huifen Female 44 Director 2000.6-2003.6 0 Hu Shouling Male 67 Independent 2002.6-2003 0 Director .6 Ma Chao Male 37 Independent 2002.6-2003 0 Director .6 Li Male 59 Supervisor 2000.6-2003.6 0 Zhenzhong Fan Male 46 Supervisor 2000.6-2003.6 1000 Zhenping Li Huiming Male 48 Supervisor 2000.6-2003.6 2400 Zhang Female 52 Supervisor 2000.6-2003.6 0 Yanqiao Li Hong Male 48 Supervisor 2000.6-2003.6 800 Yao Junting Male 33 Supervisor 2000.6-2003.6 0 Zhang Male 41 Supervisor 2002.6-2003 0 Zhaishuan .6 Zhou Yumao Male 50 Chief 2000.6-2003.6 0 accountant Zhang Male 51 Deputy GM 2000.6-2003.6 0 Wenhai Gao Male Deputy GM 35 2002.1-2003.6 0 Yanxiong Yang Guang Male 50 Deputy GM 2000.6-2003.6 0 Note: The shares held by the above personnel did not change in the report period. 2. The positions held by the directors and supervisors of the Company at the shareholder companies: Name Company Position Dong Shijiazhuang Baoshi Electronic Chairman of board of Qingxiang Group Co., Ltd. directors and GM -8- Gao Tiezhan Shijiazhuang Baoshi Electronic Director, chief accountant Group Co., Ltd. and deputy GM Wang Shijiazhuang Baoshi Electronic Deputy GM Rongxian Group Co., Ltd. Wang Xi Shijiazhuang Baoshi Electronic Chief mechanist Group Co., Ltd. Lu Fengyi Shijiazhuang Baoshi Electronic Director and chairman of Group Co., Ltd. Labor Union Song Hongbo Shijiazhuang Baoshi Electronic Director Group Co., Ltd. Zhou Bo Shijiazhuang Baoshi Electronic Director Group Co., Ltd. Ye Huifeng Shijiazhuang Baoshi Electronic Manager of Sales Dept. Group Co., Ltd. Li Shijiazhuang Baoshi Electronic Chairman of the Zhenzhong Group Co., Ltd. supervisory committee Fan Shijiazhuang Baoshi Electronic Deputy director of Public Zhenping Group Co., Ltd. Security Section Yao Junting China Electronic Import and Export Deputy GM of Finance Corporation Management Dept. Zhang Zhonghua Hebei Import and Export Deputy Manager of Zhanshuan Co. Comprehensive Management Dept. 3. Annual remuneration In the report period, the total annual remuneration of the directors, supervisors and senior executives of the Company was RMB 291936.42. Annual remuneration of RMB 20,000 - RMB 30,000: 6 persons. Annual remuneration of RMB 30,000 - RMB 40,000: 3 persons. Annual remuneration of over RMB 40,000: 1 person. The total remuneration of the top three directors receiving the remuneration of the highest amount was RMB 99779.60. The total remuneration of top three senior executives receiving the remuneration of the highest amount was RMB 107725. The directors and supervisors not receiving remuneration from the Company include Dong Qingxiang, Gao Tiezhan, Wang Rongxian, Wang Xi, Lu Fengyi, Zhou Bo, Ye Huifen, Li Zhenzhong, Fan Zhenping, Yao Junting and Zhang Zhanshuan. Except that director Zhou Bo received remuneration from the associated company of the Company, all other above-mentioned personnel received remuneration from corporate shareholders. 4. Change in directors, supervisors and senior executives in the report period (1) The Company held 2001 annual shareholders' general meeting in the report period and elected Mr. Hu Shouling and Mr. Mao Chao as independent directors of the third board of directors of the Company. (2) The Company held 2001 annual shareholders' general meeting in the report -9- period, approved Ms Feng Guoqing's resignation from the office of supervisor due to retirement and elected Mr. Zhang Zhanshuan as a member of the third supervisory committee of the Company. (3) The Company held the 12th meeting of the third board of directors in the report period. The meeting examined and approved Mr. Mao Shuzhi's application for resignation from the office of deputy general manager due to retirement and appointed Mr. Gao Yanxiong as the deputy general manager of the Company. (II) Particulars about staff As of December 31, 2002, the Company has 1148 staff members in total, including 570 production staff, 24 sales staff, 95 technical staff, 17 financial staff, 90 administrative staff and 361 other staff. The personnel with university, college and secondary specialized school education accounted for 37% of the total staff and workers. 25.22% of the staff had professional technical titles. The number of the retired staff whose retirement pension is paid by the Company is 28. Chapter 5 Company Administration Structure I. Particulars about company administration In the report period, the Company organized directors, supervisors and senior executives to seriously study relevant documents including the Standards of Administration of Listed Companies issued by CSRC and State Economic and Trading Commission on January 7, 2002 and Guiding Opinions on the Establishment of Independent Director System at Listed Companies issued by CSRC, thoroughly inspected the status of its establishment of modern enterprise system according to the relevant requirements of the Notice of Inspecting the Establishment of Modern Enterprise System by Listed Companies issued by CSRC and State Economic and Trading Commission and made self inspection report. The Company summarized the past experience in respect of company administration, affirmed achievements and found out deficiencies through self inspection. It put forward solutions and endeavored to implement them. In the report period the Company established independent director system and appointed two independent directors according to specified requirements. It supplemented and revised rules and regulations including the Articles of Association of the Company, Rules of Procedure of Shareholders' General Meeting, Rules of Procedure of the Board of Directors, Rules of Procedure of the Supervisory Committee and Detailed Working Rules of General Manager according to the requirements of the Company Law, the Securities Law and relevant laws and regulations of CSRC and Listing Rules of Shenzhen Stock Exchange, implemented them in practice and enhanced its administration level. The Company and its controlling shareholder have done a lot of work relating to separation in respect of personnel, assets and finance and independence in respect of internal structure and business according to the requirements of CSRC. The Company has complete and independent assets, independent financial department, financial management system, sound financial and accounting systems and independent -10- business and ability of production and operation. For continuing to enhance its administration level and further improving its administration structure, the Company will constantly revise relevant documents including the Articles of Association of the Company according to the requirements of laws and regulations including Standards of Administration of Listed Companies at appropriate time, make improvement in respect of separation and independence by referring to the experience of relevant companies and actively explore the establishment of the standards and procedure of performance appraisal of directors, supervisors and executives and stimulation and restriction mechanism. II. Particulars about duty performance of independent directors In the report period the independent directors of the Company seriously performed their duties according to relevant provisions of the Articles of Association of the Company, attended board meetings on time, investigated the proposals examined at meetings and fully expressed their own opinions. They expressed independent opinions on important events including related transactions and gave play to their due function. Chapter 6 Brief Introduction of Shareholders' General Meeting The Company held 2001 annual shareholders' general meeting in the report period. The Company published the announcement of holding 2001 Annual Shareholders' General Meeting on June 26, 2002 on China Securities Daily and Hong Kong Commercial Daily on April 26, 2002. The Company held 2001 Annual Shareholders' General Meeting at the meeting room of the office building of the Company in the morning of June 26, 2002. The meeting examined and passed the following resolutions: 1. 2001 Work Report of the Board of Directors of the Company; 2. 2001 Annual Report of the Company; 3. 2001 Work Report of the Supervisory Committee of the Company; 4. 2001 Final Accounting Report of the Company; 5. 2001 Profit Distribution Preplan of the Company; 6. The Proposal for Recommending Candidates for Independent Directors of the Third Board of Directors of the Company; 7. The Proposal Concerning the Subsidy of Independent Directors of the Third Board of Directors of the Company; 8. The Proposal for Changing Members of the Third Supervisory Committee of the Company; 9. The proposal for the amendment of the Articles of Association of the Company; 10. The proposal for continuing the engagement of Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. as the financial auditing organ of the Company inside and outside China in 2002. -11- 11. The Proposal for the Signing of Agreement by Shijiazhuang Baoshi Color Bulb Co., Ltd., Shijiazhuang Representative Office of China Great Wall Asset Management Co. and Shijiazhuang Baoshi Electronic Group Co., Ltd. in Respect of the Transfer of Debts of RMB 50 million. The announcement of the resolutions of this meeting was published on China Securities Daily and Hong Kong Commercial Daily on June 27, 2002. Chapter 7 Report of the Board of Directors I. Business highlights 1. The Scope of the Company's key business and its operation status: The Company is engaged in the electronic parts and components industry, mainly in the manufacturing and sales of electronic vacuum glass devices and supporting electronic parts and components. In the report period the status of the Company's production and operation was on the rise under the influence of color TV market. In the first half year of 2002, the price of upstream products of color TV including color glass bulb continued to lower based on the depression of the previous year, which seriously affected the Company's economic results. With China's entry to WTO, the export volume of color TV increased sharply and the domestic color TV market turned for the better. The price of the upstream products including color kinescope and color glass bulb was stabilized and somewhat rose. Facing market changes, the Company actively took corresponding measures and adjusted its operation strategy at appropriate time. Through the measures including technical renovation, expansion of production capacity, quickening of new product development, increase of product variety, strengthening of marketing and active enlargement of market share, the Company overcame many difficulties including price lowering and fulfilled annual task satisfactorily. In the report period, the Company earned income of RMB and profit of RMB from key business. The output and sales volume of pins and anode caps were 120 million and 100.7344 million. 2. The share-held subsidiaries of the Company and the results of their operation With registered capital of RMB 540.68 million, Shijiazhuang Baoshi Color Glass Bulb Co., Ltd. (Color Bulb Co.) is a share-holding subsidiary of the Company. The Company owns 81.26% equity of Color Bulb Co. Shijiazhuang Baoshi Electrical Nitre Glass Co., Ltd. (the Joint Venture Co.) establish by Color Bulb Co. and Electrical Nitre Kaisha and Nissho-Iwai Kaisha of Japan is mainly engaged in production, processing and sales of glass bulb for color kinescope and display. Color Bulb Co. owns 49% equity of the Joint Venture Co. In 2002, the Joint Venture Company produced 9.54 million color screens (21") and 15.22 million color cones (21"), sold 9.7615 million color screens (21") and -12- 15.3269 million color cones (21"). The output-sales ratio was 102% and 101% respectively. In the report period, the sales income, sales profit and investment income earned by the Company were RMB 1201.56 million, The Company earned investment income of RMB 36.09 million. 3. Main suppliers and customers The total amount of purchase from the top five suppliers accounted for % of the total purchase amount of the year. The total amount of sales to the top five customers accounted for 100% of the total sales amount of the Company. 4. Problems and difficulties occurred in operation and their solutions 2002 is a year in which domestic color TV market had keen competition and ups and downs. In the first half year of 2002, the price of upstream products of color TV including color glass bulb continued to lower based on the depression of the previous year, which seriously affected the Company's economic results. Meanwhile, color TV and supporting electronic component industry entered new stage of product structure adjustment. Color TV market has developed toward the direction of large size, planarization, digitization, intellectualization, high resolution and high-definition. The board of directors and management of the Company realized and overcame difficulties, enhanced confidence, seriously analyzed market and the Company's actual conditions and took the following measures: (1) Thoroughly carrying out technical renovation and technology innovation, quickening completing the production capacity expansion of the Component Factory of the Company and phase-II technical renovation project for increasing product varieties and further increasing market share. (2) Strengthening new product development. In the report period, the Component Factory of the Company developed seven kinds of new products. Philip-typed pins and anode caps mainly developed are being certified. The scale of batch production of pins for color bulbs (29",34") of planar large screen has been formed. As of the end of report period, the number of variety of pins of the Component Factory reached 31 and that of anode cap reached 10. The annual production capacity reached 150 million. As a result, it realized high output, great variety and low-cost operation and enhanced its market competitiveness. In the report period, the project of renovating and constructing L-35 glass tube production line was preliminarily completed. The trial run has been basically completed and the project has entered the stage of trial production. (3) The Joint Venture Co. quickened the renovation of color bulb planarization. In the report period, color bulb planarization renovation project was fully completed. 5 kinds of planar color screen products and 9 kinds of color cone products were increased in the year. Series color bulb products were transformed from super-plane to large screen and planar ones. The number of product variety has exceeded 50. The Company had certain competing strength in the industry and seized market initiative. (4) To seize the opportunities brought by China's entry to WTO, strengthen marketing, actively occupy market share based on consolidating the existing users, make efforts to develop sales market of new products by various channels and means -13- and enlarge products' market share. II. Investment of the Company in the report period 1. Investment projects utilizing raised funds The Company did not raise funds in the report period. The funds raised previously were not carried forward into the report period for utilization. 2. Important projects utilizing non-raised funds in the report period The 9th meeting of the third Board of Directors of the Company was held on November 6, 2001, which examined and adopted the resolution for the project of renovating and constructing L-35 glass tube production line. The total investment of the project is RMB 59.78 million, which will be totally raised by the Company itself. The Company will renovate relevant equipment of the original black-and-white glass bulb production line, import key equipment and use some homemade supporting equipment based on making use of the existing factory buildings and public facilities of the Company. The planned term of construction is two years. The funds needed are to be raised by the Company itself. After the project is completed and put into production, the annual output of L-35 glass tube will be 5800 tons. At present, this project has preliminarily been completed. The trial run has been basically completed and the project has entered the stage of trial production. III. Financial status of the Company in the report period Item 2002 (RMB) 2001 (RMB) Increase/dec rease (%) Total assets 1,505,567,156 1,538,478,066 -2.14 Shareholders' 577,455,420 547,155,173 5.54 equity Profit from key 21,720,916 24,380,361 -10.91 business Total profit 35,201,642 51,326,150 -31.42 Net profit 29,198,154 39,390,980 -25.88 Net increase of 51,223,401 -28,017,615 282.83 cash and cash equivalents Main reason for change: 1. Shareholders' equity increased due to the increase of net profit and capital common reserve; 2. Profit from key business decreased due to the decrease of income from key business; 3. Total profit and net profit decreased mainly due to the decrease of investment income; -14- 4. The net increase of cash and cash equivalents rose sharply mainly because large amount of cash was used to repay debts in 2001 as compared with 2002. IV. The influence of the change of production environment and macro-economic policies, laws and regulations on the Company Pursuant to the approval of Hebei Science and Technology Department with JKGZ (2002) No.9 Document, the Company was certified as a high-tech enterprise. Its products including pins, anode caps and tubes for glass bulb of color kinescope were certified as high-tech products. The valid term is from January 1, 2002 to December 31, 2003. (this matter was announced on China Securities Daily and Hong Kong Commercial Daily on August 1, 2002)According to relevant national policy, the income tax rate of 15% is applicable to the Company during this period. V. Business development plan for the next year Domestic color TV industry introduced competition mechanism early and operated according to market principles to the greatest extent. Especially, with China's entry to WTO and the proceeding of new technological revolution initiated by color TV industry, the competition of domestic color TV market will be increasingly fierce while the opportunities brought to enterprises will also increase. Facing complicated business environment, the Company will be open-minded, enterprising and innovative, keep abreast of times, establish new result-oriented operation conceptions with capital as link, profit making as purpose and modern management as means and focus on the following work in the next year: 1. The Component Factory of the Company should keep track of domestic and international market demands and product development direction, actively develop new products, increase best-selling varieties, develop new users, quicken the certification of Philip-type pins and anode caps and realize batch production and delivery as soon as possible. 2. To arrange the progress of the phase-II technical renovation project of Component Factory for increasing product variety according to market demand at appropriate time so as to expand production capacity and enhance market competitiveness. 3. The Company will arrange the trial production of products while completing the adjustment and trial run of L-35 glass tube production line, strive to realize scale operation and form new channel for profit growth. 4. The Joint Venture Co. strengthen basic management, actively cut cost, stabilize and enhance production efficiency, output and price competitiveness based on realizing the transformation of series color bulb products from super plane to planarization. Meanwhile, it will conform to market development trend and timely adjust product structure. 5. To continue to thoroughly study and explore means of capital operation including enhancing the Company's strength through asset reorganization and improving its asset-liability structure through debt reorganization. -15- VI. Routine Work of the Board of Directors 1. Board meetings and resolutions in the report period 1 The 12th meeting of the third board of directors was held on January 15, 2002. The meeting examined and adopted the following: A. Approving Mr. Mao Shuzhi's application for resignation from the office of deputy general manager of the Company due to retirement; B. Approving engaging Mr. Gao Yanxiong as the deputy general manager of the Company according to the proposal of the general manager Song Hongbo. (2) The 13th meeting of the third board of directors was held on April 17, 2001. The meeting examined and adopted the following: A. 2001 work report of the board of directors of the Company; B. 2001 Annual Report of the Company and its Summary; C. 2001 final accounting report of the Company; D. 2001 profit distribution preplan of the Company; E. 2002 policy for profit distribution; F. The proposal for separate announcement of the holding of 2001 annual shareholders' general meeting of the Company. (3) The 14th meeting of the third board of directors was held on April 25, 2002. The meeting examined and adopted the following: A. Quarterly report of the Company for the first quarter of 2002; B. The Proposal for Recommending Candidates for Independent Directors of the Third Board of Directors of the Company; C. The Proposal Concerning the Subsidy of Independent Directors of the Third Board of Directors of the Company; D. The Proposal for Changing Members of the Third Supervisory Committee of the Company; E. Proposal for the amendment of the Articles of Association of the Company; F. The proposal for continuing the engagement of Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. as the financial auditing organ of the Company inside and outside China in 2002. G. Relevant matters concerning the holding of 2001 annual shareholders' general meeting; (4) The 15th meeting of the third board of directors was held on June 28, 2002. The meeting examined and adopted the Self Inspection Report on the Establishment of Modern Enterprise System by Listed Company; (5) The 16th meeting of the third board of directors was held on August 27, 2002. The meeting examined and adopted the following: A. 2002 semiannual report of the Company and its summary; B. The 2002 semiannual profit distribution preplan of neither distributing profit nor capitalizing capital common reserve fund. C. Rules of Procedure of the Board of Directors revised by the Company ; (6) The 17th meeting of the third board of directors of the Company was held on -16- September 4, 2002. The meeting discussed the agreement signed by Color Bulb Co., a share-held subsidiary of the Company, Shijiazhuang representative office of China Great Wall Asset Management Co., a creditor of the Company, and Baoshi Group Co., the controlling shareholder of the Company in respect of the transfer of debts of RMB 40 million and unanimously agreed to submit the proposal to shareholders' general meeting for examination and adoption. (7) The 18th meeting of the third board of directors was held on October 28, 2002. The meeting examined and adopted the quarterly report of the Company for the third quarter of 2002. 2. Implementation by the board of directors of the resolutions of the shareholders' general meeting The board of directors duly implemented all resolutions of Shareholders' General Meeting in the report period. VII. Profit distribution preplan As audited by Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd., the net profit of the Company in 2002 was RMB 29,198,154. As the cash flow from operating activities of the Company is negative and the Company still has uncovered losses, the Board of Directors of the Company has decided neither to distribute profit nor capitalize any capital common reserve fund for the report year. This preplan is to be submitted to 2002 annual shareholders' general meeting for examination. VIII. Miscellaneous The newspapers selected by the Company for information disclosure remained China Securities Daily and Hong Kong Commercial Daily in the report period. Chapter 8 Report of the Supervisory Committee I. The meetings of supervisory committee In the report period, the supervisory committee held two meetings in total. The particulars of the meetings are as follows: 1. The 6th meeting of the third supervisory committee of the Company was held on April 17, 2002. The contents of the meeting are as follows: 2001 work report of the supervisory committee of the Company; 2001 annual report of the Company; 2001 final accounting report of the Company; 2. The 7th meeting of the third supervisory committee of the Company was held on August 27, 2002. The contents of the meeting are as follows: -17- (1) Examining and adopting 2002 semiannual report of the Company; (2) Examining and adopting the Rules of Procedure of the Supervisory Committee revised by the Company. II. The independent opinions of the supervisory committee of the Company (1) The operation of the Company according to law In 2002, the Company was able to operate in accordance with relevant laws and regulations of the state, the Articles of Association of the Company and the resolutions of shareholders' general meeting. Its decision making procedure was legal. The Company established corresponding internal control system while gradually perfecting its corporate administration structure. No act of the directors and managers of the Company was found to violate the laws, regulations and the Articles of Association or harm the Company's interests when they performed their duties. 2. The 2002 financial reports of the Company truly reflected the financial status and operating results of the Company. The standard unqualified auditors' report issued by Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. was objective and fair. 3. The related transactions were fairly conducted without harming the interests of the Company. Chapter 9 Important Events (I) Material lawsuits and arbitration The Company did not get involved in any material lawsuit or arbitration in the report period. (II) Material Related Transactions 1. The related transactions in respect of purchase and sales of commodities and provision of labor service -18- Related Contents of Transaction Pricin Mod Proportio Influence parties transactions amount g e of n of the on the (RMB) princip settl same kind profit of le eme of the nt transactio Compan n y Baoshi Group Sales of Agree Curr Co. power 8,390,859 d price ency 10.28% Profit increase The Joint Sales of Agree Curr Profit Venture Co. finished 23,644,600 d price ency 37.90% increase products Sales of 98,182,571 Agree Curr Profit power d price ency increase Provision of 27,347,447 Agree Curr 79.53% Profit labor service d price ency increase 2. The current debts and creditor’s rights between the Company and related parties Related parties Amount (RMB) Reason of formation Influence on the Company The Group Co. 68,512,567 Normal transaction The Company collected reasonable fund occupation fee from the Group Co. The Joint Venture 265,482,108 According to the Color Bulb Co. Co. agreement between collected reasonable Color Bulb Co. and fund occupation fee the Joint Venture from the Joint Co., the Joint Venture Co. Venture Co. The development of borrowed the money color bulb project by from Color Bulb Co. the Joint Venture Co. to develop the increased the project of color investment income of bulb. the Company 3. Other material related transactions (1) Color Bulb Co., the share-held subsidiary of the Company signed agreement with creditor Great Wall Asset Management Co. and Boashi Group Co. on June 28, 2002 and December 30, 2002 respectively. Great Wall Asset Management Co. agreed that two loans with total amount of RMB 80 million borrowed by Color Bulb Co. would be borne by Boashi Group Co. Boashi Group Co. will repay the loan. Color -19- Bulb Co. will no longer assume this obligation to Great Wall Asset Management Co. The two agreements will be submitted to 2002 annual shareholders' general meeting for examination and adoption. (2) Baoshi Group Co., the controlling shareholder of the Company and Color Bulb Co., a share-held subsidiary of the Company, signed the agreement for interests related to the conversion of debts into shares: A. According to the national preferential policy on conversion of debts into shares that is applicable to state-owned enterprise, both parties agreed to transfer part of interest of RMB 32.64 million accrued from the limit of conversion of debts into shares of Color Bulb Co. to Baoshi Group Co. under the premise of not harming the interests of shareholders. B. If new situation or new change in respect of the work of conversion of debts into shares of Baoshi Group Co. occurs and the said interest is involved, Baoshi Group Co. shall be responsible for solving the problem and it has nothing to do with Color Bulb Co. C. As for the interests corresponding to the total debts of RMB 280 million (within the limit of conversion of debts into shares) transferred to Baoshi Group Co. in four installments according to the agreement signed by Baoshi Group Co., Color Bulb Co. and creditor China Great Wall Asset Management Co. during the period from December 20, 2000 to December 30, 2002,if new situation or new change in respect of the work of conversion of debts into shares of Baoshi Group Co. occurs and the said interest is involved, Baoshi Group Co. shall be responsible for solving -20- the problem and it has nothing to do with Color Bulb Co The above agreements were examined and adopted at the 20th meeting of the third board of directors. III. Important contracts and their performance 1. The Company did not hold in trust or contract for or lease the assets of other companies nor did other companies hold in trust, contract for or lease the assets of the Company in the report period. 2. The Company did not provide guarantee to others in the report period. 3. The Company did not entrust others to management its cash assets in the report period. IV. The commitments made by the Company and shareholders holding over 5% of the total shares of the Company in the report period 1. The Company published the announcement of the resolutions of the 9th meeting of the third Board of Directors on China Securities Daily and Hong Kong Commercial Daily on November 7, 2001. The Board of Directors of the Company and Baoshi Group Co. has reached agreement on the competition between the Company and Baoshi Group Co. in the same industry arising from the project of renovating and constructing L-35 glass tube production line and will properly solve this issue by the means of asset exchange or other means. This matter is still in the period of commitment. 2. The Company published the announcement of the resolutions of the 11th meeting of the third board of directors on China Securities Daily and Hong Kong Commercial Daily on December 14, 2002. The Company planned to solve part of accounts payable by Baoshi Group Co. to Color Bulb Co. formed during business transaction by debt reorganization or assets reorganization. Color Bulb Co. signed debt transfer agreement with creditor Great Wall Asset Management Co. and Boashi Group Co. twice in 2002. Great Wall Asset Management Co. agreed that the loan of RMB 80 million borrowed by Color Bulb Co. would be borne by Boashi Group Co. Boashi Group Co. will repay the loan. Color Bulb Co. will no longer assume this obligation to Great Wall Asset Management Co., which settled part of the accounts payable by Baoshi Group Co. to Color Bulb Co. As for the remaining accounts payable by Baoshi Group Co. to Color Bulb Co., the Company will continue to settle them by means including debt reorganization. As of October 31, 2001, the Joint Venture Co. borrowed funds of RMB 0.26 billion from Color Bulb Co. It plans to fully repay the loan in the next two years. The Company will urge both parties to implement the plan. This matter is still in the period of commitment. In the report period, the Joint Venture Co. repaid RMB 55.97 million according to plan. At the end of the report period, the balance of the funds borrowed by the Joint Venture Co. from Color Bulb Co. was RMB 209.51 million. V. The engagement of certified public accountants and the payment of -21- remuneration 1. Engagement of certified public accountants 2001 annual shareholders' general meeting of the Company examined and adopted the proposal for continuing the engagement of Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. as the financial auditing organ of the Company inside and outside China in 2002. 2. Payment of remuneration The Company paid remuneration of RMB 1 million in total to Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. in the report period. The traveling expenses were borne by the audit bodies themselves. 3. Pricewaterhouse Coopers Zhongtian Certified Public Accountants Co., Ltd. and Pricewaterhouse Coopers China Co., Ltd. had provided audit services to the Company for 8 consecutive years. VI. In the report period, the Company, its board of directors and its directors were not investigated by CSRC, administratively punished or publicly criticized by CSRC or publicly condemned by stock exchange. Chapter 10 Financial Report I. Auditor's report (attached hereinafter) II. Financial statements (attached hereinafter) III. Notes to financial statements (attached hereinafter) Chapter 11 List of Documents Available for Inspection 1. Financial statements bearing the seal and signature of the Company's legal representative, financial controller and the person in charge of accounting organ. 2. The original of the auditors' report bearing the seal of the certified public accountants and the seal and signature of C.P.A. 3. The original of all Company's documents and the original manuscripts of announcements publicly disclosed on China Securities Daily and Hong Kong Commercial Daily in the report period. Shijiazhuang Baoshi Electronic Glass Co., Ltd. April 16, 2003 -22- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED (Incorporated in the People’s Republic of China with limited liability) FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 Mailing Address: 12th Floor Shui On Plaza 333 Huai Hai Zhong Lu Shanghai 200021 People’s Republic of China Telephone: +86 (21) 6386 3388 Facsimile: +86 (21) 6386 3300 Report of the Auditors TO THE SHAREHOLDERS OF SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED We have audited the accompanying consolidated balance sheet of Shijiazhuang Baoshi Electronic Glass Company Limited (the Company) and its subsidiary (the Group) as at 31 December 2002 and the related consolidated income and cash flows statements for the year then ended. These consolidated financial statements set out on pages 2 to 24 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2002, and the consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers China Limited Shanghai, People’s Republic of China 13 April 2003 SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 2002 2001 Notes Sales 1 53,622 62,388 Cost of sales (31,245) (37,158)   Gross profit 22,377 25,230 Other operating income 27,963 29,859 Distribution costs (1,222) (1,470) Administrative expenses (27,982) (70,590) Other operating expenses (2,293) (6,401)   Profit/(loss) from operations 2 18,843 (23,372) Finance costs - net 3 (15,965) (18,537) Share of result of associate before tax 11 36,087 58,318   Profit before tax 38,965 16,409 Income tax expense 5 (1,963) (5,157)   Profit from ordinary activities after tax 37,002 11,252 Extraordinary items 6 1,356 2,701   Group profit before minority interest 38,358 13,953 Minority interest 23 (4,294) (5,565)   Net profit 34,064 8,388   Earnings per share (Rmb Yuan per share) -basic 7 Rmb0.09 Rmb 0.02   Earnings per share excluding extraordinary items (Rmb Yuan per share) 7 Rmb0.09 Rmb 0.01   -2- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 2002 2001 Notes ASSETS Non-current assets Property, plant and equipment 8 161,516 164,044 Construction in progress 9 57,073 44,149 Land use right 10 14,431 14,757 Investment in associate 11 869,944 886,544   1,102,964 1,109,494   Current assets Inventories 12 24,276 23,261 Receivables and prepayments 13 67,810 76,717 Amount due from the holding company 14 40,977 68,827 Amount due from associate 11 138,392 174,039 Amounts due from related parties 15 4,794 11,009 Other long-term assets receivable within one year 16 58,000 58,000 Cash and cash equivalents 68,669 17,446   402,918 429,299   Total assets 1,505,882 1,538,793   EQUITY AND LIABILITIES Capital and reserves Ordinary shares 22 383,000 383,000 Reserves 24 569,399 568,296 Accumulated loss (374,625) (407,586)   577,774 543,710   Minority interest 23 92,184 87,889   Non-current liabilities Deferred income 21 - 3,764   - 3,764   Current liabilities Trade and other payables 17 216,446 203,326 Amount due to related parties 15 876 3,055 Current tax liabilities 8,721 7,415 Short-term borrowings 18 15,404 15,403 Long-term borrowings due within one year 19 511,477 591,231 Other long-term liabilities due within one year 20 83,000 83,000   835,924 903,430   Total liabilities 835,924 907,194   Total equity and liabilities 1,505,882 1,538,793   These financial statements have been approved by the Board of Directors on 15 April 2003. -3- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) Capital Statutory Statutory Share accumulation accumulated welfare Capital fund fund fund Balance at 1 January 2001 383,000 504,203 41,265 20,634 Profit for the year - - - - Minority share in profit of subsidiary - - - - Gain arising from liabilities waived and appropriated to reverse (note 24) - 2,194 - -      Balance at 31 December 2001 383,000 506,397 41,265 20,634      Balance at 1 January 2002 383,000 506,397 41,265 20,634 Profit for the year - - - - Minority share in profit of subsidiary - - - - Gain arising from liabilities waived and appropriated to reverse (note 24) - 1,103 - -      Balance at 31 December 2002 383,000 507,500 41,265 20,634      -4- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 2002 2001 Notes Cash flows from operating activities Cash used in operations 25 (8,515) (71,911) Tax paid (14,348) (14,017)   Net cash used in operating activities (22,863) (85,928)   Cash flows from investing activities Purchase of property, plant and equipment (28,760) (55,549) Proceeds from sales of property, plant and equipment 90 2,252 Repayment of loans to SBEG 55,210 122,020 Proceeds from sale of other investment - 5,000 Interest received 15,180 21,014 Dividends received 32,366 34,833   Net cash from investing activities 74,086 129,570   Cash flows from financing activities Repayments of borrowings - (71,659)   Net cash used in financing activities - (71,659)   Increase /(decrease) in cash and cash equivalents 51,223 (28,017) Cash and cash equivalents at beginning of year 17,446 45,463   Cash and cash equivalents at end of year 68,669 17,446   -5- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 1 GENERAL INFORMATION THE COMPANY The Company, Shijiazhuang Baoshi Electronic Glass Company Limited, was incorporated on 26 December 1992 in Shijiazhuang, Hebei Province, the People’s Republic of China (the “PRC”) as a joint stock limited company. The address of the Company’s registered office is No.9 Yellow River Road, High-technological development zone, Shijiazhuang. The principal activities of the Company and its subsidiaries and associates (collectively known as the “Group” ), were the manufacture and sale of black and white television bulbs (“BW Bulbs”) and black and white television cathode ray tubes (“BW CRTs”). In June 1997, the Company suspended production of its primary products due to a significant adverse change in market demand for black and white television sets. On 30 March 2000, the shareholders approved and authorised the sale of all plant and machinery relating to production of BW Bulbs and BW CRTs together with part of the associated liabilities to the holding company, Shijiazhuang Baoshi Electronic Group Company Limited, in exchange for certain assets and liabilities of a division of the holding company with the principal activities of manufacturing colour television tube components. The Company’s principal activities therefore become the manufacture and sale of components for colour television cathode ray tubes. THE SUBSIDIARY AND THE ASSOCIATED UNERTAKINGS At 31 December 2002, the Company had the following interests in a subsidiary and an associate. Attributable Year of equity Principal Name incorporation interest activities Subsidiary Shijiazhuang Baoshi Colour 1994 81.26% Investment holding Bulb Company Limited (“SBCB”) of SBEG Associate Manufacture and Shijiazhuang Baoshi Electric 1997 39.82% sale of colour Glass Company Limited (“SBEG”) television bulbs On 3 July 1997, SBEG was established as a Sino-foreign investment enterprise between SBCB, Nippon Electric Glass Co., Ltd. and Nissho Iwai Corporation. SBCB holds 49% equity interests of SBEG. -6- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 2 BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and interpretations issued by the International Accounting Standards Board. The consolidated financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates. The Company’s directors represent that an understanding have been agreed with China Great Wall Asset Administration Company and China Oriental Asset Administration Company that the repayment of loans of Rmb 521,477 thousand (Note 18) as at 31 December 2002 will be appropriately arranged so that the Company will not have issue of cash flow and difficulties in repaying short term debts. 3 GROUP REPORTING (1) Subsidiaries Subsidiaries, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies are consolidated. The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. (2) Associates Associates are entities over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Investments in associates are accounted for by the equity method of accounting. Under this method the company’s share of the post-acquisition profits or losses of associates is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not to recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associates. -7- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 4 FOREIGN CURRENCY TRANSLATION (1) Measurement currency Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (“the measurement currency”).The consolidated financial statements are presented in Renminbi, which is the measurement currency of the parent. (2) Transactions and balances Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. 5 PROPERTY, PLANT AND EQUIPMENT All property, plant and equipment is stated at historical cost less depreciation Depreciation is calculated on the straight-line method to write off the cost or revalued amount of each asset to their residual values over their estimated useful lives as follows: Years Buildings 20-21 Plant and machinery 11-12 Motor vehicles 11-12 Office equipment 11-12 Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed. Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. 6 LAND USE RIGHT Land use rights are stated at cost less amortisation. Amortisation is provided to write off the cost of land use rights over the approved use period of 50 years on a straight-line basis. -8- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 7 IMPAIRMENT OF LONG LIVED ASSETS Property, plant and equipment and other non-current assets, including intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. 8 INVESTMENTS The Group classified its investments in debt and equity securities into the following categories: trading, held-to-maturity and available-for-sale. The classification is dependent on the purpose for which the investments were acquired. Management determines the classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments and included in current assets; for the purpose of these financial statements short term is defined as 3 months. Investments with a fixed maturity that management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets, except for maturities within 12 months from the balance sheet date which are classified as current assets; during the period the Group did not hold any investments in this category. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; and are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. 9 INVENTORIES Inventories comprise raw materials, work in progress, finished goods, spare parts and low cost consumables for use in the production process. Inventories are stated at the lower of cost or net realisable value. Cost is determined using weighted average basis. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. 10 TRADE RECEIVABLES Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. -9- SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 11 CASH AND CASH EQUIVALENTS Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. 12 SHARE CAPAITAL Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. 13 BORROWINGS Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. 14 TAXATION PRC income taxes are provided for based on the estimated assessable profits and tax rates applicable to the Company and other companies comprising the Group. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 15 EMPLOYEE BENEFITS The Group participates in a government defined contribution retirement pension scheme to which it is required to pay monthly retirement contributions at the rate of 20% (2001: 20%) of the wages of existing employees. Under the scheme, retirement benefits of existing and retired employees are provided by the government - managed pension fund and the Group has no further obligations beyond the monthly contributions. The Group’s contributions are charged to income statement in the period to which they relate. - 10 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 16 REVENUE RECOGNITION Revenue comprises the invoiced value for the sale of goods and services net of value-added tax, rebates and discounts, and after eliminating sales within the Group. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. Revenue from rendering of services is based on the stage of completion determined by reference to services performed to date as a percentage of total services to be performed. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. 17 FINANCIAL INSTRUMENTS Financial assets and financial liabilities carried on the balance sheet include cash and bank balances, trade receivables, trade payables and borrowings. 18 COMPARATIVES Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 19 FINANCIAL RISK The Group’s activities expose it to a variety of financial risks, including: (1) Foreign exchange risk Most of the transactions of the Group were settled in Renminbi. In the opinion of the directors, the Group do not have significant foreign currency exposure. (2) Interest rate risk The interest rates and terms of repayment of borrowings are disclosed in Note 18. Other financial assets and liabilities do not have material interest rate risk. (3) Credit risk At 31 December 2002, the trade receivables of the Group were spread among a number of customers in the PRC. Details of amounts due from the holding company and related companies are included in Note 14 and Note 15. The other financial assets of the Group do not represent a concentration of risk. 20 FAIR VALUE ESTIMATION The Group’s investments in associated undertakings are investments in unlisted companies. As there is no market value available, their fair values are based on directors’ best estimate of their net assets, profit generating ability and other circumstances as considered appropriate. The fair values of cash and bank, trade receivables and payables, amounts due from and to related companies, and borrowings are not materially different from their carrying amounts. - 11 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 1 SALES Sales represent revenues from sales of components for colour television cathode ray tube. 2002 2001 Sales of components 53,622 62,388   2 OPERATING ITEMS The following items have been included in arriving at operating loss/(profit): 2002 2001 Depreciation on property, plant and equipment (Note 8) 17,338 18,132 Impairment of property, plant and equipment (Note 8) 1,051 2,400 Loss /(profit) on disposal of property, plant and equipment (included in “Other operating expenses”, Note 25) (70) 1,662 Amortisation of: - land use rights (included in “Administrative expenses”; Note 10) 326 315 Trade receivables – impairment charge for bad and doubtful debts (included in “Administrative expenses”) (469) (105) Provision for inventory obsolescence (included in “Administrative expenses”) (2,317) (6,970) Costs of inventories recognised as expense (included in ‘Cost of Sales’) 18,690 20,437 Amortisation of deferred income (included in “Other operating expenses”; Note 21) (3,764) (6,452) Staff costs (Note 4) 20,936 57,855 3 FINANCE COSTS - NET 2002 2001 Interest expense on borrowings 36,660 42,362 Interest income (20,961) (24,891) Net foreign exchange transaction losses 247 1,055 Others 19 11   Finance costs, net 15,965 18,537   - 12 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 4 STAFF COSTS 2002 2001 Wages and salaries 12,444 12,031 Retirement benefits 3,628 2,815 Housing fund loss - 38,832 Others 4,864 4,177   20,936 57,855   Average number of full time people employed by the Group during the year 1,158 1,189   5 INCOME TAX EXPENSE 2002 2001 Current tax 1,963 5,157   Taxable income is calculated based on total revenue less deductible cost of goods sold, expenses and other non-operating gains (losses) under the existing tax regulations. As the Group was qualified as a high-technological enterprise in 2002 and was established in a high-technological development zone, the prevailing enterprise income tax rate is 15%. (2001:33%) As of 31 December 2002 and 2001, there was no material deferred tax asset and liability was included in the consolidated financial statements. 6 EXTRAORDINARY ITEMS 2002 2001 Waive of debts 1,356 2,701   During the current year, several creditors agreed to waive a portion of trade payables owed by the Group. 7 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit for the year by the number of shares in issue during the year: 2002 2001 Net profit for the year 34,064 8,388 Number of shares in issue 383,000 383,000 Basic earnings per share (Rmb Yuan) Rmb0.09 Rmb0.02   - 13 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 7 EARNINGS PER SHARE (Continued) Earnings per share excluding extraordinary items is calculated by dividing the net profit before extraordinary items for the year by the number of shares in issue during the year: 2002 2001 Net profit for the year 34,064 8,388 Less: Extraordinary items (Note 6) (1,356) (2,701)   Net profit before extraordinary items 32,708 5,687   Number of shares in issue 383,000 383,000 Earnings per share excluding extraordinary items (Rmb Yuan) Rmb0.09 Rmb 0.01   8 PROPERTY, PLANT AND EQUIPMENT Plant and Motor Office Buildings machinery vehicles equipment Total Year ended 31 December 2001 Opening net book amount 119,692 50,655 1,522 2,800 174,669 Additions 3,942 9,481 265 134 13,822 Disposals (1,246) (1,920) (416) (333) (3,915) Impairment charge (note 2) - (2,385) (12) (3) (2,400) Depreciation charge (note 2) (7,379) (10,049) (248) (456) (18,132)      Closing net book amount 115,009 45,782 1,111 2,142 164,044      At 31 December 2001 Cost 163,454 120,946 2,985 5,339 292,724 Accumulated depreciation (48,445) (75,164) (1,874) (3,197) (128,680)      Net book amount 115,009 45,782 1,111 2,142 164,044      Year ended 31 December 2002 Opening net book amount 115,009 45,782 1,111 2,142 164,044 Additions 12,360 3,095 197 249 15,901 Disposals - (21) (9) (10) (40) Impairment charge (note 2) - (472) - (579) (1,051) Depreciation charge (note 2) (7,619) (9,012) (262) (445) (17,338)      Closing net book amount 119,750 39,372 1,037 1,357 161,516      At 31 December 2002 Cost 175,814 123,548 3,173 4,999 307,534 Accumulated depreciation (56,064) (84,176) (2,136) (3,642) (146,018)      Net book amount 119,750 39,372 1,037 1,357 161,516      (i) The impairment charge of Rmb1,051 thousand principally relates to certain plant and machinery which are not used. (ii) As at 31 December 2002, fixed assets with an original cost of Rmb170,000 thousand has been pledged to State-owned Assets Administration Companies for loans.(2001: Rmb170,000 thousand) - 14 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 9 CONSTRUCTION IN PROGRESS 2002 2001 At beginning of year 44,149 3,285 Additions 21,860 44,254 Transfer to PPE (8,936) (3,390)   At end of year 57,073 44,149   10 LAND USE RIGHT 2002 2001 Opening net book amount 14,757 15,072 Less: Amortisation charge (326) (315)   Closing net book amount 14,431 14,757   Cost 15,997 15,997 Accumulated amortisation (1,566) (1,240)   Net book amount 14,431 14,757   11 INVESTMENT IN ASSOCIATES 2002 2001 Share of net assets of SBEG 798,821 795,100 Amount due from SBEG 209,515 265,483   1,008,336 1,060,583 Less: Amount due from SBEG within one year (138,392) (174,039)   869,944 886,544   Amount due from SBEG is unsecured, and bears interest at 6.21% from January to June and 5.76% from July to December in the year of 2002. (2001: 6.21%). 2002 2001 At beginning of year 795,100 771,070 Decrease in investment (32,366) (34,288) Share of result of SBEG 36,087 58,318   At end of year 798,821 795,100   - 15 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 12 INVENTORIES 2002 2001 At net realisable value - Raw materials 6,257 3,423 Finished goods 14,814 10,703 Spare parts and low cost consumables 3,205 9,135   24,276 23,261   Provisions have been made based on the difference between cost of individual items and its net realisable value. 13 RECEIVABLES AND PREPAYMENTS 2002 2001 Trade receivables 33,148 34,132 Less : Provision for impairment of receivables (13,799) (14,268)   Trade receivables - net 19,349 19,864 Notes receivable 31,223 41,283 Prepayments 2,809 2,478 Other receivables 14,345 13,077 Deferred and prepaid expenses 84 15   67,810 76,717   14 AMOUNTS DUE FROM THE HOLDING COMPANY Amount due from the holding company are unsecured and have no fixed terms of repayment. The related interest is calculated at a rate equivalent to the interest rates of the short-term bank loans. 15 AMOUNTS DUE FROM / DUE TO RELATED PARTIES These are amounts due from/due to subsidiaries of the holding company. The balances are unsecured, no interest free and have no fixed terms of repayment. 16 OTHER LONG-TERM ASSETS RECEIVABLE WITHIN ONE YEAR Other long-term assets receivable within one year represents the amount receivable under a foreign currency swap transaction entered into by SBCB in 1993. This amount was due to be received in November 1998 (see Note 20). - 16 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 17 TRADE AND OTHER PAYEBLES 2002 2001 Accrued interest 133,107 133,180 Trade payables 22,792 28,371 Payables to contractors 14,042 16,595 Accrued utility expenses 4,547 2,113 Notes payable 15,686 7,182 Advances from customers 514 511 Staff welfare funds 5,884 3,958 Staff welfare 8,065 2,467 Audit fee payable 1,000 550 Others 10,809 8,399   216,446 203,326   18 BORROWINGS 2002 2001 Short-term borrowings-other borrowings (Note iii & Note iv) 15,404 15,403 Long-term other borrowings due within one year (Note iii) 511,477 591,231   526,881 606,634   (i) The borrowings include secured liabilities in a total amount of Rmb300,228 thousand (2001: Rmb 379,991 thousand). The borrowings are secured over certain fixed assets of the Group in a total amount of Rmb170,000 thousand (2001: Rmb170,000 thousand). (ii) The weighted average effective interest rates at the balance sheet date were as follows: 2002 2001 Bank and other borrowings 5.4% 5.97%   - 17 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 18 BORROWINGS (Continued) (iii) In accordance with the relevant circulars issued by the State Council and the People’s Bank of China, the borrowings from the original lenders listed below have been transferred to the State Assets Administration Companies. The details are tabulated below: Original lender Current lender Principal terms of Interest rate under Collateral original agreement original contract Agriculture Bank of China China Great Wall Assets Shijiazhuang Hua’an sub-branch Administration Company 45,703 1999.12.31-2001.12.31 6.56% Agriculture Bank of China China Great Wall Assets Shijiazhuang Hua’an sub-branch Administration Company 300,228 1995.3.23-2001.12.31 Floating rate Secured over fixed assets with an original cost amounting to Rmb170,000,000 and guaranteed by a third-party.  345,931  Bank of China Shijiazhuang China Orient Asset Zhongshan sub-branch Administration Company 165,546 1996.2.15-2001.2.15 Floating rate Bank of China Shijiazhuang China Orient Asset Yuhua sub-branch Administration Company 10,000 1997.1.21-1998.1.21 11.1%  175,546  521,477  According to the relevant circulars of the State Council and the “Regulation for the Financial Assets Management Companies”, after the above borrowings transfers, the Company shall comply with the conditions stipulated by the original agreements with respect to China Great Wall Asset Administration Company and China Oriental Asset Administration Company from 1 April 2000. (iv) Borrowings owed to other lenders were overdue as at 31 December 2002. Up till 31 December 2002, extensions had still not been formally granted by lenders. The Company’s Board of Directors had obtained the confirmation from the lenders that no additional interest will be charged on these overdue borrowings. The details of the borrowings are listed below: Lender Principal Period Interest rate Hebei Finance Bureau 404 1995.6.1-1995.11.30 7.2% Financing Bureau of Shijiazhuang 1995.3.1-1997.3.1 12.8% Finance Bureau 5,000  5,404  Short-term borrowings included borrowings dominated in foreign currency amounting to US$48,795, with the Rmb equivalent of 403,892. - 18 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 19 LONG-TERM BORROWINGS DUE WITHIN ONE YEAR 2002 2001 Secured 300,228 379,991 Unsecured 211,249 211,240   511,477 591,231   Long-term borrowings due within one year are all dominated in US dollars amounting to US$ 61,793 thousand (2001: US$71,431 thousand), equivalent to Rmb511,477 thousand (2001: Rmb591,231 thousand). All these borrowings have been transferred from original lenders to the State-owned Assets Administration Companies. Please refer to note 18 for details. 20 OTHER LONG-TERM LIABILITIES DUE WITHIN ONE YEAR Other long-term liabilities due within one year represent US$10,000,000 payable under a foreign currency swap transaction entered into by SBCB in 1993. This amount was payable in November 1998 (see Note 16). The Company is still in a process of negotiating the settlement of this swap transaction. 21 DEFERRED INCOME Deferred income represents the premium arising from a transfer of assets to SBEG as capital contribution in 1997. This premium has been deferred and is being amortised to the income statement over a period of five years. The movement of the deferred income is as follows: 2002 2001 Opening net book amount 3,764 10,216 Less: Amortisation charge (3,764) (6,452)   Closing net book amount - 3,764   Original amount 32,256 32,256 Accumulated amortisation (32,256) (28,492)   Net book amount - 3,764   - 19 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 22 SHARE CAPITAL The par value of the shares of the Company is Rmb 1 Yuan each. 2002 2001 Category of shares: Unlisted shares State 230,411 230,411 Legal persons 7,500 7,500   237,911 237,911   Listed shares A shares 45,089 45,089 B shares 100,000 100,000   145,089 145,089   383,000 383,000   23 MINORITY INTEREST 2002 2001 At beginning of year 87,889 82,324 Share of net profit of subsidiary 4,295 5,565   At end of year 92,184 87,889   - 20 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 24 RESERVES (a) Capital accumulation fund Transactions of the following nature are recorded in the Capital accumulation fund: (i) share premium arising from the issue of shares at a price in excess of their par value; (ii) donations received; (iii) surplus arising from the revaluation of assets; (iv) any other items required by PRC regulations to be so treated. In accordance with the Enterprise Accounting Standards regarding debt restructure promulgated by the Ministry of Finance of the People’s Republic of China on 18 January 2001, the Group has appropriated the gain arising from trade payables waived by debtors in 2002 to capital accumulation fund. The details are as follows: 2002 Attributable Appropriations equity interest Amount to Reserve Waive of SBCB’s trade payables in 2002 81.26% 1,356 1,103   2001 Attributable Appropriations equity interest Amount to Reserve Waive of SBCB’s trade payables in 2001 81.26% 2,701 2,194   Amounts in the Capital accumulation fund can be utilised to offset prior years' losses or for issue of bonus shares. (b) Statutory accumulation and welfare funds The PRC Company Law requires a company to appropriate ten percent of its profit after taxation for the year computed in accordance with PRC accounting regulations (after offsetting any prior years' losses) to the Statutory accumulation fund. When the balance of such fund reaches 50 percent of the company's share capital, any further appropriation is optional. The Statutory accumulation fund can be utilised to offset prior years' losses or for issuance of bonus shares. However, the fund shall be maintained at a minimum amount equivalent to 25 percent of share capital after any such issuance. The PRC Company Law also requires a company to appropriate between five percent and ten percent of profit after taxation for the year to the Statutory welfare fund computed in accordance with PRC accounting regulations. The fund shall be utilised for the collective benefits of the workforce, including the provision of staff quarters or housing. No other distribution shall be made from the fund other than upon liquidation of the company. The Statutory accumulation and welfare funds represent amounts appropriated in accordance with the PRC accounting regulations in previous years. - 21 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 25 CASH USED IN OPERATIONS Reconciliation of profit before tax and extraordinary items to cash used in operations: 2002 2001 Net profit 34,064 8,388 Adjustments for: Minority interest (Note 23) 4,294 5,565 Extraordinary item (Note 6) (1,356) (2,701) Income tax expense (Note 5) 1,963 5,157   Profit before tax and extraordinary items 38,965 16,409   Adjustments for: Depreciation (Note 8) 17,338 18,132 Impairment charge (Note 8) 1,051 2,400 Amortisation of goodwill - 2,537 Amortisation of land use rights (Note 10) 326 315 Amortisation of deferred assets - 1,257 Loss /(Profit) on disposal of property, plant and equipment (Note 2) (70) 1,662 Amortisation of deferred income (Note 21) (3,764) (6,452) Interest expense (Note 3) 36,660 42,362 Interest income (Note 3) (20,962) (24,891) Share of result of associate (Note 11) (36,087) (58,318) Other investment income - (546) Housing fund loss - 38,832 Changes in working capital - trade and other receivables (76,051) (116,126) - inventories (1,016) 5,828 - trade and other payables 35,095 4,688   Cash used in operations (8,515) (71,911)   - 22 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 26 RELATED PARTY TRANSACTIONS The ultimate parent of the Group is Shijiazhuang Baoshi Electronic Group Company Limited(“The holding company”), a company incorporated in the People’s Republic of China. The associate of the Group is Shijiazhuang Baoshi Electric Glass Company Limited (“SBEG”), a company incorporated in the People’s Republic of China. In addition to the related party balances and transactions described elsewhere in this report, the following significant transactions were carried out with related parties: Related party transactions were carried out on commercial terms and conditions and at market prices. i) Sale of goods and services 2002 2001 Sale of goods to: The holding company 1,179 813 SBEG 20,962 24,557   22,141 25,370   Services and energy rendered to: The holding company 16,180 12,805 SBEG 115,612 111,836   131,792 124,641   ii) Purchase of goods and services 2002 2001 Rental for assets leased from the holding company 3,242 6,972   iii) Interest earned 2002 2001 Interest earned from the holding company 3,569 2,668 Interest earned from SBEG 15,181 18,552   18,750 21,220   - 23 - SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (All amounts are shown in Rmb thousands unless otherwise stated) 26 RELATED PARTY TRANSACTIONS(Continued) v) Other transactions with the holding company 2002 Notes receivable transferred and cash paid to the holding company 87,580 Accounts receivable of related party transferred to the holding company 13,170 Loans transferred to the holding company (80,000) Notes receivable transferred and cash paid to the Group (16,709) Loan interests transferred to the holding company (32,639)  (a) In accordance with the agreements reached on 28 June 2002 and 30 December 2002 amongst SBCB, the Company and China Great Wall Assets Administration Company, Rmb 80,000 thousand of loans which was previously payable to China Great Wall Assets Administration Company was transferred and payable to the holding company. (b) In accordance with the agreement reached by SBCB and the holding company, SBCB transferred Rmb32,639 thousand of accrued interests to the holding company. The Group charges interests on the amount due from the holding company, the related interest is calculated at a rate equivalent to the interest rates of the short-term bank loans and the average monthly outstanding balance due from the holding company. The Group has charged interests of Rmb3,569 thousand from the holding company in 2002 (2001: Rmbs2,668 thousand). - 24 - APPENDIX SHIJIAZHUANG BAOSHI ELECTRONIC GLASS COMPANY LIMITED RECONCILIATION OF GROUP PROFIT BEFORE TAX BETWEEN PRC REPORTING AND IFRS REPORTING FOR THE YEAR ENDED 31 DECEMBER 2002 All amounts are shown in Rmb thousands unless otherwise stated) 2002 2001 As reported in the consolidated financial statements prepared in accordance with PRC requirements 35,201 51,326   Adjustments for: 1. Amortization of goodwill - (2,537) 2. Amortization of deferred income 3,764 6,452 3. Waive of debts and interest expenses which is recogniszed as capital accumulation fund in accordance with PRC requirements 1,356 2,701 4. Use reserves to compensate housing fund loss transferred from Group in accordance with PRC requirements - (38,832)   Subtotal 5,120 (32,216)   As stated in the consolidated financial statements prepared in accordance with IFRS 40,321 19,110   DOCUMENT CONTROL FORM Doc. Name: 2002 B share report-Baoshi_E Doc. Locat : Operator : Input Date : Audit Group : Correction Checked Correction Checked date by date by Document type ________ _______ ________ _______ ________ _______ ________ _______ SHIJIAZHUANG BAOSHI ELECTRONICS GLASS ________ _______ ________ _______ CO., LTD. ________ _______ ________ _______ ________ _______ ________ _______ Financial Statements ________ _______ ________ _______ for the year ended 31 December 2002 ________ _______ ________ _______ ________ _______ ________ _______ 1 CALL OVER Initials Sent to KWX 1st 2nd Final Called over by _____ to_____ _____ to _____ ______ to ______ Additions checked by ______ ______ ______ Cross referenced by ______ ______ ______ Cross-checked to Chinese version by ______ ______ ______ Proofread by (Manager) ______ ______ ______ 2 REVIEWED AND APPROVED FOR PRINTING BY __________ _________ Manager Partner 3 TO PRINTING ROOM Accounts Letterhead Auditors’ copy _________ PWDH _________ Tax copy _________ PW ASIA _________ AGM copy _________ Other _________ Additional copy _________ Tech Dept copy _________ Total No. of pages _________ Type of Binding Staple ________ Plastic _________ Required by: Date ________ Time _________ ***** This page is generated by the word processing ***** centre and is not part of the report. The accounting policies on pages [ ] to [ ] and the notes on page [ ] To [ ] form an integral part of these consolidased financial statements