English Translation for Reference Only
KONKA GROUP CO., LTD.
INTERIM REPORT 2011
KONKA GROUP CO., LTD.
CHAIRMAN OF THE BOARD: HOU SONG RONG
AUGUST 2011
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KONKA GROUP CO., LTD
FULL TEXT OF INTERIM REPORT 2011
Important Notice
The Board of Directors, the Supervisory Committee as well as all the directors,
supervisors and senior executives of KONKA GROUP CO., LTD (hereinafter referred
to as the Company), hereby assure that there are no false records, misleading
statements or significant omissions in this report, and they would shoulder any
individual as well as joint responsibility concerning the authenticity, accuracy and
completeness of the contents.
This Interim Report has been examined and approved by the 14th Session of the
Seventh Board of Directors of the Company.
No director, supervisor or senior executive has declared that he or she cannot
guarantee the authenticity, accuracy and completeness of this report, or that he or she
has any objections.
After careful examination, the Third Session of the Seventh Supervisory Committee
believes that the Interim Report 2011 and its Summary have faithfully, accurately and
completely reflected the financial status, business achievement, corporate
administration and business development of the Company in the interim of 2011.
Chairman of the Board of the Company Mr. Hou Songrong, Chief Financial Officer
Ms. Yang Rong and Person in Charge of Accounting work Mr. Ruan Renzong hereby
confirm that the Financial Report in the Interim Report is true and complete.
The Interim Financial Report of the Company has not been audited.
This report was prepared in both Chinese and English. Should there be any difference
in interpretation between the two versions, the Chinese version shall prevail.
Contents
I. Company Profile………………………………………………………………… .3
II. Changes in Share Capital and Shares Held by Principal Shareholders………5
III. Particulars about Directors, Supervisors and Senior Executives ……………8
IV. Report of the Board of Directors ………………………………………………8
V. Significant Events…………………………………………………………… .... 14
VI. Financial Report……………………………………………………………….25
VII. Documents Available for Reference…………………………………………..25
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I. Company Profile
(I) Basic information of the Company
1. Legal Name of the Company in Chinese: 康佳集团股份有限公司
Abbreviation in Chinese: 康佳集团
Legal Name of the Company in English: KONKA GROUP CO., LTD.
Abbreviation in English: KONKA GROUP
2. Legal Representative: Chairman of the Board, Mr. Hou Songrong
3. Secretary of Board of Directors: Mr. Xiao Qing
Securities Affairs Representative: Mr. Wu Yongjun
Contact Address: Konka Group Co., Ltd., Overseas Chinese Town, Shenzhen,
P.R.C.
Tel.: 0755-26608866
Fax: 0755-26601139
E-mail: szkonka@konka.com
4. Registered (Office) Address: Overseas Chinese Town, Nanshan District, Shenzhen
Post Code: 518053
Internet Website: http://://www.konka.com
E-mail: szkonka@konka.com
5. Newspaper Designated for Disclosing the Information of the Company: Securities
Times and etc.
Internet Website Designated by CSRC for Publishing the Interim Report:
http://www.cninfo.com.cn
The Place Where the Interim Report is Prepared and Placed: Secretariat of the
Board of Directors of the Company
6. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: Shen Konka A, Shen Konka B
Stock Code: 000016, 200016
7. Date of the Initial Registration: 1 Oct. 1980
Place of the Initial Registration: Shenzhen City
8. Registration Code of Enterprise Business License: 440301501121863
9. Registration Code of Tax: 440301618815578
10. CPA firm engaged by the Company
Name: RSM China Certified Public Accountants Co., Ltd.
Address: 8-9/F, Block A, Corporate Square, 35 Financial Street, Xicheng District,
Beijing
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(II) Main financial data and indices
1. Main accounting data and financial indices (Unit: RMB Yuan)
At the end of reporting At the end of last Increase/decrease
period year (%)
Total assets 17,272,230,545.38 16,466,895,565.00 4.89%
Owners’ equity attributable to shareholders
3,781,226,435.96 3,998,647,232.73 -5.44%
of listed company
Share capital (share) 1,203,972,704.00 1,203,972,704.00 0.00%
Net assets per share attributable to
shareholders of listed company 3.14 3.32 -5.42%
(yuan/share)
In the reporting period The same period of Increase/decrease
(Jan.-Jun.) last year (%)
Operating revenue 6,865,103,919.76 7,940,183,795.09 -13.54%
Operating profit -254,020,614.69 32,449,533.57 -882.82%
Total profit -175,902,661.96 80,297,180.96 -319.06%
Net profit attributable to shareholders of
-195,000,941.75 50,887,520.39 -483.20%
listed company
Net profit attributable to shareholders of
listed company after deducting -219,848,387.35 35,625,098.49 -717.12%
non-recurring gain and loss
Basic earnings per share (yuan/share) -0.1620 0.0423 -482.98%
Diluted earnings per share (yuan/share) -0.1620 0.0423 -482.98%
ROE (%) -5.00% 1.30% -6.30%
Net return on equity deducting
-5.64% 0.91% -6.55%
non-recurring gain and loss (%)
Net cash flows arising from operating
5,538,058.12 -1,968,450.22 381.34%
activities
Net cash flows per share arising from
0.0046 -0.0016 387.50%
operating activities (yuan/share)
2. Items of non-recurring gains and losses (Unit: RMB Yuan)
Note (if
Items Amount
applicable)
Profit and loss from disposal of non-current assets 903,069.82
Governmental grants counted into the current profit and loss, except for
the one closely related with the normal operation of the company and
13,069,367.50
gained constantly at a fixed amount or quantity according to certain
standard based on state policies
Profit or loss from change in fair value by holding tradable financial
assets and liabilities, and investment income from disposal of tradable
financial assets and liabilities as well as salable financial assets, 14,666,723.60
excluding the effective hedging businesses related with the normal
operations of the company
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Other non-operating income and expenses besides the above items 5,013,984.10
Minority interest effect -705,241.76
Income tax effect -8,100,457.66
Total 24,847,445.60 -
3. There existed no difference between the domestic and overseas financial statements
of the Company.
II. Changes in Share Capital and Shares Held by Principal
Shareholders
(I) Particular about changes in share capital
During the reporting period, the Company’s total number of shares and share
structure both remained unchanged.
(II) Time to list and trade for shares subject to moratorium
Unit: share
Number of shares can be listed Balance of shares Balance of shares
newly after expiration of subject to trading not subject to
Time Remark
moratorium moratorium trading
moratorium
30 Mar. 2010 198,381,940 198,381,940 0
Note: 1. In accordance with commitments made by OCT Group Corporation when
implemented share merger reform, the shares subject to trading moratorium can be
listed for trading or transferred since 30 Mar. 2008. While since 30 Mar. 2010, all
shares subject to trading moratorium can be listed for trading. However, by the
disclosing date of this report, OCT Group Corporation holding shares subject to
trading moratorium had never applied to Shenzhen Stock Exchange for release of
shares subject to trading moratorium.
2. Shares subject to trading moratorium in the table excluded shares subject to trading
moratorium held by senior executives.
(III) Particulars about shares held by top ten shareholders and top ten
shareholders with tradable shares
Unit: Share
Newly
Number of Number of shares increased
Time to
Name of shareholders shares held subject to trading shares to
No. be listed Moratorium
subject to moratorium subject to moratorium applied be listed
and traded
moratorium actually and
traded
Overseas Chinese Town
1 198,381,940 198,381,940 Unknown 0 Notes
Group Company
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Note: 1. The original shareholder of the Company, Overseas Chinese Town Group
Company, promised not to trade or transfer the non-tradable shares of Konka Group
within 24 months since the day those shares were authorized with listing and
circulating rights in A share market. After the expiration of the aforesaid commitment,
the total former non-circulating shares of Konka Group listing at the Stock Exchange
shall not exceed five percent of the Konka Group’s total share number within 12
months, and not exceed 10 percent within 24 months.
2. In accordance with commitments made by OCT Group Corporation (original
non-tradable shareholders of the Company) when implemented share merger reform,
the shares subject to trading moratorium can be listed for trading or transferred since
30 Mar. 2008. While since 30 Mar. 2010, all shares subject to trading moratorium can
be listed for trading. However, by the disclosing date of this report, OCT Group
Corporation holding shares subject to trading moratorium had never applied to
Shenzhen Stock Exchange for release of shares subject to trading moratorium.
3. In the table, shares subject to trading moratorium held by senior executives of the
Company were out of consideration.
(IV) Particulars about shareholders and holding shares
Unit:share
Total number of
109,913
shareholders
Particulars about shares held by top ten shareholders
Shares held subject Shares
Nature of Proportion of
Name of shareholder Total shares held to trading pledged or
shareholder share held (%)
moratorium frozen
OVERSEAS CHINESE TOWN State-owned
19.00% 228,754,783 198,381,940 0
ENTERPRISES CO. corporation
Foreign
HOLY TIME GROUP LIMITED 4.65% 55,963,774 0 Unknown
corporation
Domestic
ABC-CHINA AMC STABLE
non-state-owned 3.12% 37,609,344 0 Unknown
GROWTH FUND
corporation
Foreign
GAOLING FUND,L.P. 2.19% 26,400,625 0 Unknown
corporation
CNCA A/C COMPAGNIE
Foreign
FINANCIERE EDMOND DE 1.00% 11,999,997 0 Unknown
corporation
ROTHSCHILD
Foreign natural
NAM NGAI 0.98% 11,760,520 0 Unknown
person
Domestic
DONGGUAN HUIHUA
non-state-owned 0.35% 4,213,711 0 Unknown
GARDEN HOTEL CO., LTD.
corporation
Domestic natural
XIA RUI 0.31% 3,700,000 0 Unknown
person
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Foreign
BOCI SECURITIES LIMITED 0.29% 3,484,659 0 Unknown
corporation
Domestic
SHENZHEN ZHONGJIAYI
non-state-owned 0.26% 3,096,700 0 Unknown
INVESTMENT CO., LTD.
corporation
Particulars about shares held by the top ten shareholders not subject to moratorium
Numbers of shares not subject to
Name of shareholder Type of shares
moratorium held
HOLY TIME GROUP LIMITED 55,963,774 Domestically listed foreign shares
ABC-CHINAAMC STABLE GROWTH FUND 37,609,344 Renminbi ordinary shares
OVERSEAS CHINESE TOWN GROUP
30,372,843 Renminbi ordinary shares
COMPANY
GAOLING FUND,L.P. 26,400,625 Domestically listed foreign shares
CNCA A/C COMPAGNIE FINANCIERE
11,999,997 Domestically listed foreign shares
EDMOND DE ROTHSCHILD
NAM NGAI 11,760,520 Domestically listed foreign shares
DONGGUAN HUIHUA GARDEN HOTEL
4,213,711 Renminbi ordinary shares
CO., LTD.
XIA RUI 3,700,000 Renminbi ordinary shares
BOCI SECURITIES LIMITED 3,484,659 Domestically listed foreign shares
SHENZHEN ZHONGJIAYI INVESTMENT
3,096,700 Renminbi ordinary shares
CO., LTD.
Overseas Chinese Town Group Corporation, the first principal shareholder,
neither has any related relationship with other shareholders, nor has joined in
Explanation on associated relationship among
any consistent actions; the Company is not aware whether the other
the aforesaid shareholders or acting-in-concert
shareholders have joined in any consistent action or have related
relationships among them.
(V) Particulars about shareholders holding over 5% shares
Legal Date of Registered
Type of Nature of
Name represent foundati capital Main operations
shares held enterprise
ative on (RMB’0000)
Development and operation of real
Overseas Domestic Wholly estate and hotels; operation of tourism
Ren Nov.
Chinese Town corporate state-funde RMB 560,000 and relevant cultural industries;
Kelei 1985
Enterprises Co. shares d company manufacture of electronics and
supporting packing products.
(VI) Particulars about the controlling shareholder and actual controller
In the reporting period, the first principal shareholder and actual controller of the
Company remained unchanged, both being Overseas Chinese Town Enterprises Co..
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III. Particulars about Directors, Supervisors and Senior Executives
(I) Shares held by directors, supervisors and senior executives of the Company
1. During the reporting period, no directors or supervisors held shares of the
Company.
2. Mr. Wang Youlai, the Company’s Vice CEO, held 6,600 Shen Konka A-shares
(including 4,950 shares subject to trading moratorium). And no other senior
executives of the Company held shares of the Company. Such a situation remained
unchanged during the reporting period.
3. In the reporting period, directors, supervisors and senior executives of the
Company neither hold stock options of the Company nor be granted restricted shares.
(II) Change of directors, supervisors and senior executives of the Company in the
reporting period
1. During the reporting period, members of both the Board of Directors and the
Supervisory Committee remained unchanged.
2. During the reporting period, senior executives of the Company remained
unchanged.
IV. Report of the Board of Directors
(I) Business review for the reporting period
The Company specializes in production and operation of color TVs, digital mobile
phones, consumer appliances, set-top boxes, LED products as well as the supporting
products (such as high-frequency heads, molds, injection, packages, etc), and belongs
to the industries of electronics manufacture and telecommunication equipment
manufacture.
For the reporting period, the Company achieved a total sales income of RMB 6.865
billion, down 13.54% from a year earlier; a net profit of RMB -0.195 billion, down
483.20% as compared with the same period of last year; and an EPS of RMB -0.1620.
In the reporting period, in face of market challenges, the Company kept to the
“product first” strategy and launched the fist Android intelligent TV in China,
accelerating functional transformation and industry upgrading of color TVs.
Meanwhile, seizing opportunities arising from the rapid spread of the 3D TV, the
Company cooperated with BesTV to launch online 3D video and five major product
series (including over 30 new products with 988PD as the representative), making
breakthroughs in the intelligent operation system, intelligent human-machine
interaction and intelligent application.
At the same time, the Company achieved great results in terms of its inventories,
inventory turnover, inventory structure and its sales structure, with a spectacular
performance concerning the inventory turnover day.
1. The Company’s main business income for the reporting period showed a
year-on-year decrease of 13.54% due to the following factors:
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(1) Domestic markets became weaker and the CRT color TV business showed a sharp
decrease.
The government continued to hold down the real estate sector, which caused a distinct
slide in the commercial housing trading volume. Besides, rising living costs forced
consumers to adopt a more hesitant attitude towards purchase of bulk commodities
such as household appliances. As a result, the sales volume of household appliances
was affected to some degree. According to statistics from AVC, for the first half of
2011, the domestic color TV retail volume and retail sales value went down 0.6% and
2.6% respectively from a year earlier.
Meanwhile, affected by the general shift of picture tube TVs to flat panel TVs in the
color TV sector, the sales volume of picture tube TVs dropped rapidly. According to
statistics from AVC, the sales volume of picture tube TVs in the first half of the year
showed a considerable drop of 55.4% from a year earlier, becoming the primary factor
to pull down domestic market demands. Consequently, the Company’s picture tube
TV business dropped dramatically, with the sales income down by over RMB 0.3
billion.
(2) The rapid spread of intelligent cell phones brought challenges to the Company’s
cell phone business.
During the reporting period, under the promotion of operators, the market share of
intelligent cell phones continued to expand, bringing great challenges to the market
share of home-made cell phones (with low and middle-end products as the
mainstream). Statistics from SINO Market Research showed that the sales proportion
of intelligent cell phones increased from 29.21% in June 2010 to 49.90% in May 2011.
Intelligent cell phones spread over the market in an extremely rapid way, with a high
average unit price and a high profitability. In face of the fast spread of intelligent cell
phones, the intelligent cell phone products launched by the Company were still in a
weaker position to compete with the top brands.
(3) High-end products were lacking in the consumer appliance business.
In the Company’s consumer appliance business during the first half of 2011, some star
products worked well as the main mid-end products for sale, giving a great
performance in the sales volume and profits generated. But the lack of high-end
products prevented the sales from further growth.
(4) Export income decreased.
Due to a rising exchange rate of Renminbi against the US dollar, chaotic overseas
markets, the export environment became harsher. Consequently, export income
showed a slide as compared with the same period of last year.
All the aforesaid factors led to the year-on-year decrease of the Company’s main
business income.
2. The net profit achieved by the Company for the reporting period decreased from a
year earlier due to the following factors:
(1) The profitability of the color TV business was affected by the following elements.
A. The low-price dumping strategy of foreign brands kept pulling down prices of
home-made color TVs.
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Taking advantage of the overcapacity of domestic color TVs, foreign brands adopted
the OEM strategy in China, squeezing manufacturing costs with a great number of
orders and then carrying out an aggressive low-price dumping strategy in the domestic
market to enlarge their market shares in China. With a squeezed market share,
domestic brands were forced to follow the price reduction strategy, which led to a
lower profitability for domestic brands.
B. The production capacity for all-in-one TVs was insufficient, which affected the
manufacturing efficiency.
The system that the Company currently adopts for color TV manufacturing is a
traditional one with three separate manufacturing links, namely, back lighting, liquid
crystal models (LCM), and whole LCD TVs. The system has flaws of high labor
demand, high production costs and high expenses on packing and transportation.
However, an all-in-one plant can organically integrate the manufacturing techniques
of back lighting, LCMs and whole LCD TVs, effectively integrate the production
layout, and ensure a smooth flow of labor and materials, which thus increased the
overall production efficiency of the three manufacturing links. But currently, the
Company only has a small all-in-one production capacity in Kunshan Konka
Electronic Co., Ltd.. The insufficient all-in-one TV production capacity led to a
relatively high cost and low profitability, affecting the Company’s overall efficiency
and profitability.
C. Sales costs increased.
In order to maintain and enlarge the market share under fierce competition, the input
for sales promotion in the color TV business was increased in the first half of the year.
Meanwhile, sales rebates for customers in some major chain marketing channels
increased year by year, working as another force to pull down the gross profit rate of
products.
D. Inventory falling price losses affected the Company’s overall profitability.
The Company had an optimistic expectation towards the peak selling season of the
spring of 2011 and thus held good stocks for the season. However, as a matter of fact,
the market weakened sharply in the first quarter of 2011. The stocks were high and
prices for the upstream product—panels—kept decreasing, which led to great losses
of the Company on falling prices and inventory disposal for the reporting period.
(2) In terms of the cell phone business, due to the fact that the intelligent cell phone
products launched by the Company were not competitive enough, its low and mid-end
cell phone products encountered great challenges, which led to the decrease of the
sales income and profitability of the cell phone business.
(3) In terms of the consumer appliance business, the lack of high-end products
seriously affected the profitability for the first half of 2011. Meanwhile, in order to
expand the consumer appliance business, the Company started to set up subsidiaries
for the business during the reporting period, which increased operating expenses on
the business, as well as affecting its profitability.
(4) Rising costs of raw materials and labor kept narrowing the room for gross profit.
This year, international prices for bulk raw materials soared to high levels, of which
prices for main raw materials for manufacturing color TV—oil, copper, tin, steel,
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etc.—showed particularly huge increases. Rising prices of raw materials brought up
the manufacturing cost for whole TVs while retail prices for whole TVs kept
decreasing. As a result, the gross profit room for products became smaller and smaller.
At the same time, due to the general rise of minimum wage levels throughout the
country, the rise of CPI, the implementation of the housing accumulation fund
mechanism in Shenzhen and other factors, salaries for employees (excluding the staff
for manufacturing) and expenses on housing accumulation funds increased in the first
half of the year, which led to a year-on-year increase of the labor cost.
(5) Financial expenses, as well as taxes and fares paid, increased.
As at 30 Jun. 2011, the short-term borrowings of the Company stood at RMB 7.745
billion. Along with the increase of the total financing and the financing cost, the
financial expense of the Company for the first half of 2011 increased by RMB 48.90
million from a year earlier.
During the reporting period, favor obtained by the Company on the city maintenance
tax on foreign-invested enterprises and educational surcharges was cancelled, and
therefore the said taxes paid by the Company increased over the same period of last
year.
3. Analysis to monetary funds
As at 30 Jun. 2011, the monetary funds balance of the Company stood at RMB 5.952
billion, of which cash and bank deposits were RMB 1.24 billion while other monetary
funds were RMB 4.712 billion. Other monetary funds referred to marginal deposits
for security that could not be drawn at any time such as the pledged deposits for the
Company’s NDF business and the term-deposits for international trade financing. To
be specific, the pledged deposits for NDF transactions stood at RMB 3.639 billion and
those for US dollar loans and wealth management transactions stood at RMB 1.073
billion. After making various pledged deposits, term deposits and marginal deposits
for security, the Company obtained foreign-currency borrowings from banks through
financing and wealth management transactions for supplementing funds needed in the
Company’s import business.
(II) Analysis on financial indices of the Company
Unit: RMB Yuan
Increase/decrease
Items Jan.– Jun. 2011 Jan.–Jun. 2010
year-on-year (%)
Operating income 6,865,103,919.76 7,940,183,795.09 -13.54%
Operating cost 5,836,932,046.71 6,700,253,316.40 -12.88%
Administrative expense 248,089,584.88 246,449,124.58 0.67%
Selling expense 961,655,238.85 927,839,634.02 3.64%
Financial expense 71,427,282.01 22,524,675.26 217.11%
Operating profit -254,020,614.69 32,449,533.57 -882.82%
Net profit attributable to owners of the
-195,000,941.75 50,887,520.39 -483.20%
Company
Net cash flows from operating 5,538,058.12 -1,968,450.22 381.34%
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activities
Increase/decrease
Items 30 Jun. 2011 31 Dec. 2010
(%)
Total assets 17,272,230,545.38 16,466,895,565.00 4.89%
Owners’ equity attributable to
3,781,226,435.96 3,998,647,232.73 -5.44%
shareholders of the Company
Accounts receivable 1,641,154,052.09 1,971,135,371.91 -16.74%
Fixed assets 1,518,309,751.12 1,488,368,667.79 2.01%
Retained profit 489,705,628.97 696,746,297.76 -29.72%
Explanation and analysis on changes of some main items:
(1) Monetary funds stood at RMB 5,951,638,518.24 as at 30 Jun. 2011, up 58.1% as
compared with the opening amount, which was mainly because NDF transactions
increased and marginal deposits for security increased accordingly.
(2) Interest receivable stood at RMB 17,784,105.49 as at 30 Jun. 2011, down 29.7%
as compared with the opening amount, which was mainly because interest received
offset against receivable items.
(3) Long term equity investment stood at RMB 221,462,840.44 as at 30 Jun. 2011, up
94.69% as compared with the opening amount, which was mainly due to the new
equity investment in Yingrui Optoelectronic Technology (Shanghai) Co., Ltd. during
the reporting period.
(4) Short-term borrowings stood at RMB 7,745,543,756.64 as at 30 Jun. 2011, up
30.9% as compared with the opening amount, which was mainly because overseas
payments increased and NDF transactions and overseas advances increased
accordingly.
(5) Notes payable stood at RMB 1,378,401,734.05 as at 30 Jun. 2011, down 32.16%
as compared with the opening amount, which was mainly domestic purchases
decreased and notes payable decreased accordingly.
(6) Long-term borrowings stood at RMB 610,000,000.00 as at 30 Jun. 2011, up
19.61% as compared with the opening amount, which was mainly fixed assets,
construction in process and purchases increased and long-term borrowings were
obtained for satisfying relevant capital needs.
(7) Business taxes and surtaxes for the first half of 2011 were RMB 17,163,873.16, up
1058.56% from a year earlier, which was mainly due to the increase of the city
maintenance tax on foreign-invested enterprises and educational surcharges.
(8) Financial expense for the first half of 2011 was RMB 71,427,282.01, up 217.11%
from a year earlier, which was mainly due to the increase of interest expense for new
borrowings obtained by the Company.
(9) Income from fair value changes for the first half of 2011 was RMB 14,666,723.60,
up 374.92% from a year earlier, which was mainly because for unsettled NDF
contracts, the fair value changes arising from the NDF exchange rate for the period
from the balance sheet date to the settlement date being lower than the original NDF
contractual exchange rate were recorded into income from fair value changes.
(10) Investment income for the first half of 2011 was RMB -79,052.57, down
102.38% from a year earlier, which was mainly due to the decrease of long-term
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equity investment income measured at the equity method.
(11) Non-business income for the first half of 2011 was RMB 81,233,539.84, up
55.13% from a year earlier, which was mainly due to the increase of income from tax
rebates on embedded software.
(12) Non-business expense for the first half of 2011 was RMB 3,115,587.11, down
31.02% from a year earlier, which was mainly due to the decrease of losses on fixed
asset disposal.
(13) Income tax expense for the first half of 2011 was RMB 14,971,357.93, down
24.33% from a year earlier, which was mainly due to the decrease of profits.
(III) Particulars about main operations classified according to industries,
products and regions and statement of their comparison with those of the same
period of last year
1. Main operations classified according to industries and products
Unit: RMB Ten thousand
Main operations classified according to industries
YoY YoY YoY
Gross profit increase/decreas increase/decrea increase/decr
Industry/product Operating income Operating cost
rate e of operating se of operating ease of gross
income cost profit rate
Electronics 681,510.91 578,935.27 15.05% -13.61% -13.21% -0.39%
Main operations classified according to products
Color TVs 509,959.65 435,570.17 14.59% -15.63% -14.68% -0.96%
Cell phones 64,431.36 55,210.94 14.31% -33.75% -35.35% 2.12%
Consumer
appliances 65,801.83 52,960.36 19.52% 1.86% 3.97% -1.63%
Other 41,318.07 35,193.79 14.82% 82.85% 73.87% 4.40%
Total 681,510.91 578,935.27 15.05% -13.61% -13.21% -0.39%
2. Main operations classified according to regions
Unit: RMB Ten thousand
YoY increase/decrease of operating
Region Operating income
income
Domestic 533,786.30 -7.86%
Overseas 147,724.62 -29.52%
Total 681,510.91 -13.61%
(IV) Operation of shareholding companies whose earnings influenced over 10%
of the net profit of the Company
No shareholding company with earnings influencing over 10% of the net profit of the
Company existed in the reporting period.
(V) Major problems and difficulties met in operation during the first half of the
year
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1. Due to the facts that the government’s continuous restrictive policy on real estate
restrained the rigid demand for household appliances and that the picture tube TV
business showed sharp weakness, the domestic sales volume and value for color TVs
decreased from a year earlier.
2. Due to chaotic overseas markets, the export environment became harsher.
Consequently, export income showed a slide as compared with the same period of last
year.
3. The low-price dumping strategy adopted by foreign brands kept pulling down the
prices for home-made products. Meanwhile, the expense on chain marketing channels,
as well as the R&D and manufacturing costs, kept rising. As a result, the profitability
of the Company’s products registered some decrease.
(Ⅵ) Investments made by the Company
1. In the reporting period, the Company neither raised funds nor made significant
investments with raised funds.
2. Particulars about significant projects invested with non-raised funds
In the reporting period, the Company did not invest in any significant project with
non-raised funds.
(VII) Fair value measurement
At the end of the reporting period, the Company’s assets measured at fair values were
financial assets available for sale, i.e. Vanke A shares held by the Company.
As for a financial asset available for sale, the Company initially measured it in
accordance with its fair value when it was obtained. The relevant trading expense was
recorded into the initially recognized amount. The gain/loss arising from its fair value
changes was directly recorded into owners’ equity and transferred into current
gains/losses when the financial asset was de-recognized. The fair value of a financial
asset available for sale was its market value.
For details of the influence on owners’ equity measured at fair value during the
reporting period, please refer to the Notes to the Financial Statements.
V. Significant Events
(I) Corporate governance
In the reporting period, in strict compliance with the Company Law, the Securities
Law and other relevant laws, regulations and rules governing corporate governance of
listed companies, as well as the Company’s Articles of Association, the Company
kept optimizing its corporate governance structure, promoted compliance with
applicable laws and regulations in its operation, and performed the information
disclosure duty strictly in accordance with the Stock Listing Rules of the Shenzhen
Stock Exchange. All directors, supervisors and senior executives of the Company
performed their duties diligently. The Shareholders’ General Meeting, the Board of
Directors and the Supervisory Committee all operated in compliance with relevant
laws and regulations. The Company’s existing internal control rules played the role of
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supervision, control and guidance effectively in its production and operation.
Independence and transparency of the Company, together with a professional board of
directors, ensured that every decision of the Company was made in a scientific
procedure. The actual corporate governance situation of the Company was in line with
regulatory documents issued by the CSRC governing corporate governance of listed
companies.
(Ⅱ) Progress of the implementation of internal control regulations
In accordance with the Announcement on Conducting Experimental Work of Internal
Control Standards of Listed Companies in Shenzhen Administration Area
(Shen-Zheng-Ju-Gong-Si-Zi [2011] No.31), the Company was listed as one of the key
experimental companies to carry out internal control standards in Shenzhen
Administration Area. As required by the announcement, the Company arranged
activities of internal control at once, and reported the progress of internal control to
Shenzhen Securities Regulatory Bureau.
On 26 Apr. 2011, the 9th Session of the 7th Board of Directors of the Company
reviewed and passed the Work Plan on Conducting Internal Control Standards of
Konka Group Co., Ltd. for Y2011. In the reporting period, the construction of internal
control of the Company went smoothly, with no difference from the scheduled
progress in the work plan. Details about the implementation of internal control are as
below:
1. For the purpose of carrying forward the construction of internal control, the
Company set up a leading group, a work group, a special department for internal
control, as well as internal control work groups of all related subordinate companies,
and defined duties of the aforesaid organs.
2. The Company engaged a management consulting organ to assist in construction of
internal control.
3. The Company laid down the Work Plan on Conducting Internal Control Standards
of Konka Group Co., Ltd. for Y2011, which was reviewed and passed by the session
of the Board of Directors on 26 Apr., and was publicly announced on 28 Apr.
4. The Company conducted plenty of trainings for related staffs of the Company in
terms of the content, meaning, implementing procedures and measures of internal
control standards.
5. As reviewed and passed by the Board session and the Shareholders’ General
Meeting, the Company decided to engage RSM China Certified Public Accountants to
audit on internal control of the Company in 2011.
6. The Company combed procedures, identified risks, compiled the manuscript for
internal control work, searched defects, and reported defects for departments in
functional center of the headquarters, Dongguan Konka Electronic Co., Ltd., Anhui
Konka Electronic Co., Ltd., Kunshan Konka Electronic Co., Ltd., Dongguan Konka
Mould Plastic Co., Ltd., Konka Household Appliances International Trading Co., Ltd.,
Shenzhen Konka Telecommunications Technology Co., Ltd., and Anhui Konka
Electronic Co., Ltd. By now, the Summary of Defects in Internal Control and
Rectification Plan (for Y2011) has been submitted to the leading group of internal
15
English Translation for Reference Only
control of the Company for deliberation.
7. The Company is preparing and improving descriptions of key businesses and the
control matrix.
(III) Particulars about profit distribution, capitalization and share issuance
Examined and approved at the 2010 Annual Shareholders’ General Meeting, the
Company’s profit distribution plan for the year 2010 was detailed as follows:
Plan of profit distribution: based on the total shares of 1,203,972,704 shares at the end
of 2010, a cash dividend of RMB 0.1 (tax included) was distributed for every 10
shares to all the shareholders. And a total dividend of RMB 12,039,727.04 was
distributed, with the rest of the retained profit carried forward for distribution in the
future years.
The said profit distribution plan had been implemented, with the date of record and
the ex-dividend date for A shares respectively on 8 Jul. 2011 and 11 Jul. 2011, and the
last trading date, the ex-dividend date and the date of record for B shares respectively
on 8 Jul. 2011, 11 Jul. 2011 and 13 Jul. 2011.
(IV) Significant lawsuits and arbitrations
In the reporting period, the Company was not involved in any significant lawsuits or
arbitrations.
(V) Other significant events, as well as analysis and explanation on their
influence and relevant solutions
1. Equity of other listed companies held by the Company
Unit: RMB
Proportion Gains and
Changes in owners’
Short form of Initial investment in the equity Book value at losses in Accounting Source of
Stock code equity in reporting
stock amount of the said period-end reporting entry stock
period
company period
Financial Subscript
assets ion of
000002 Vanke 2,311,748.07 0.00％ 991,269.50 0.00 38,712.30
available for new
sale stock
Financial Subscript
assets ion of
600891 ST CHURIN 866,310.16 0.00％ 866,310.16 0.00 0.00
available for corporate
sale shares
Total - 3,178,058.23 - 1,857,579.66 0.00 38,712.30 - -
Notes: 1. The equities of other listed companies held by the Company as shown in the
table above were those included in the accounting items of long-term equity
investment and financial assets available for sale.
2. The gains and losses in the reporting period in the table above referred to the effect
of an investment on the consolidated net profit of the Company in the reporting
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period.
2. Statement on derivatives investment
For each NDF portfolio transaction conducted by the company, the yield
to maturity is fixed, so no risk will occur.
The major risks that may arise from the NDF portfolio transactions
conducted by the Company include:
1. The risk due to the possible bankruptcy of the deposit pledge bank. If
Analysis on Risks of Positions of Derivatives
the deposit pledge bank becomes bankrupt, the deposit pledged in such
Held and Explanations on Control Measures
bank may be difficult to be recovered in full.
during the Period of Report (including but not
2. The risk due to the possible bankruptcy of the bank engaging in
limited to the market risk, liquidity risk, credit
overseas NDF portfolio business. In case of the bankruptcy, the earnings
risk, operational risk, legal risk, etc).
on NDF portfolio business may not be paid.
The Company always engages in NDF transactions with large-sized
banks such as Bank of China, which have steady operations and sound
credit standing with a low possibility of becoming bankrupt, so we do not
consider the loss arising from the possible bankruptcy of such banks.
The changes to the market prices and the fair
value of the derivatives invested in the Period of
As the yield to maturity is fixed for the NDF portfolio business conducted
Report, and the methods and setting of relevant
by the Company, no changes have taken place to the fair value.
assumptions and parameters to be disclosed in
the analysis on the fair value of the derivatives.
Notes on any major change in the basic
Up to the Date of Announcement, there is no special accounting method
principals of accounting policies and accounting
applicable to the NDF portfolio business conducted by the Company, and
of the Company’s derivatives comparing with
the accounting principles are subject to the Accounting Standards for
those of last reporting period in this reporting
Business Enterprises.
period
Notes on whether there is any significant change
to the accounting policies and principles The Company’s independent director believes that conducting the NDF
applicable to the derivatives invested by the business is necessary for the Company because it can benefit the
Company during the Period of Report, and the Company from RMB floating exchange rates, enabling the Company to
specific opinions of the independent director(s), achieve the risk-free fixed income, and that as the Company is improving
the sponsor or the financial consultant on the its internal control system for the derivatives investment, the specific risk
Company’s derivatives investments and the risk control measures taken are enforceable.
control.
Positions of derivatives investments held at the end of the reporting period
Unit: RMB
Percentage of
amount of
Amount of contract at the Amount of contract at end Profit & loss during
Type of contract contract at
beginning of the Period reporting period
end of period
to the net
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assets at end
of the period
NDF Portfolio Business 4,179,146,301.79 4,423,375,536.73 5,449,989.72 116.98%
Total 4,179,146,301.79 4,423,375,536.73 5,449,989.72 116.98%
3. In the reporting period, the Company held no equities of financial enterprises such
as commercial banks, securities banks, insurance companies, trust companies and
futures companies, as well as companies to be listed.
(VI) Significant asset acquisition, sale and reorganization
1. In the reporting period, the Company did not conduct any significant asset
acquisition, swap-in, sale, swap-out or reorganization.
2. In the reporting period, there existed no transferring of property rights or creditor’s
rights and liabilities, for the Company did not conduct any significant asset
acquisition, swap-in, sale or swap-out.
(VII) Significant related transactions
1. Related transactions with the principal shareholder and its subsidiaries
During the first half of 2011, there existed some related transactions between the
Company and its controlling shareholder—Overseas Chinese Town Enterprises
Co.—and its subsidiaries, mainly involving payments for property management fee,
water and electricity charges, land use fee and purchasing fee for goods. All the
involved transactions were conducted fairly based on normal market prices, with no
harm done to the Company and the other shareholders of the Company. For more
details, please refer to “5. Transactions with related parties” in the “Note VIII:
Related parties and related transactions" in the accounting statements of the financial
report.
2. Implementation of related transactions arising from routine operation (Unit: RMB)
Notes: Proportion in the same type of transaction refers to the proportion in raw
Further
Total
Type of classification
implemented Proportion in the same
related according to Related parties
amount in the kind of transactions (%)
transactions product or
first half of 2011
labor service
Anhui Huali Packaging Co., Ltd. 13,753,884.21 0.24
Purchase of Raw material
Huali Packaging (Huizhou) Co., Ltd. 3,906,092.28 0.07
raw for color TV
Shanghai Huali Packaging Co., Ltd 12,903,160.58 32,091,327.37 0.22
materials
Instruction Guangzhou Panyu Hualiyoude Color Printing
1,528,190.30 0.03
books & Packaging Co., Ltd.
materials for color TV use.
(1) The Company has published the Forecasting Public Notice on Routine Affiliated
Transaction (public notice No. 2011-12) on Securities Times, Shanghai Securities
News, China Securities Journal and Hong Kong Ta Kung Pao as well as the Internet
website designated by CSRC http://www.cninfo.com.cn on 28 Apr. 2011. In the
reporting period, the basis for pricing, transaction price, transaction amount and
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settlement methods of raw packaging material purchased by the Company from Anhui
Huali Packaging Co., Ltd, Huali Packaging (Huizhou) Co., Ltd., Shanghai Huali
Packaging Co., Ltd. and Guangzhou Panyu Hualiyoude Color Printing & Packaging
Co., Ltd., were basically in accordance with the forecast.
(2) Business transactions between the Company and the above affiliated enterprises
were carried out based on the general market operation rules and the principle of
fairness and justice. The Company treated such enterprises as equally as other
transaction enterprises, and there was no damage to interests of the Company and all
of its shareholders.
(3) Associated transactions of the Company with the above affiliated parties occurred
in daily operation of the Company. They were carried out based on the principle of
public bidding, and were necessary. The Company would continue the cooperation of
fairness and mutual benefits with them, given the operation and development of the
Company was stable. The aforesaid associated transactions were beneficial for
maintaining the long-term cooperation between the Company and affiliated parties as
well as promoting development of the Company’s production and operation.
3. In order to cut down fund cost, since 2010, the Company has borrowed capital at
call totaling to RMB 900 million from its principal shareholder, Overseas Chinese
Town Enterprises Co., by means of entrusted loans. Interest rate of the aforesaid loans
was lower than the one-year interest rate of bank loans. It was beneficial for the
Company to reduce fund cost and realize sustainable development of the Company’s
businesses.
4. Guarantees between the Company and the affiliated parties
In the reporting period, no guarantee occurred between the Company and the
affiliated parties.
5. Joint external investment between the Company and the affiliated parties
In the reporting period, the Company did not involve in joint external investment with
affiliated parties.
6. In the reporting period, the Company did not conduct any other significant related
transactions.
(VIII) Significant contracts and their implementation
1. In the reporting period, the Company did not hold in trust, contract or lease assets
of other companies, or vice versa.
2. In the reporting period, the Company did not entrust others with financial affairs.
(IX) Commitments made by shareholders
Commitment Promisor Contents of commitment Implementation
(1) No trading or transferring of the non-tradable shares of Konka Group held Up until now, no
by OCT Group would be conducted within 24 months since the date when shares subject to
Overseas
Commitment made those shares became tradable in the A-share market. trading
Chinese Town
in the share reform (2) After the expiration of the aforesaid commitment, the originally moratorium have
Enterprises Co.
non-tradable shares of Konka Group sold by OCT Group through listing at the been traded or
stock exchange would not exceed 5% of Konka Group’s total shares within 12 transferred.
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English Translation for Reference Only
months, and not exceed 10% within 24 months.
Commitment
concerning share Naught Naught Naught
trading moratorium
Commitment in the
acquisition report or
Naught Naught Naught
the report on equity
changes
Commitment made
in the significant Naught Naught Naught
asset reorganization
Commitment made
Naught Naught Naught
in the issuance
Other commitments
(including Naught Naught Naught
supplementary ones)
(X) Particulars about reception of visit and investigation of the Company in the
reporting period
In the reporting period, the Company enthusiastically listened to the phone calls and
accepted the visits and investigations from the investors, as well as answered their
questions. During the reception, the Company provided materials, which had been
disclosed, to the visitors, in accordance with provisions in Guidelines of Fair
Information Disclosure for Companies Listed on the Shenzhen Stock Exchange,
Administrative Methods for Information Disclosure of Konka Group Co., Ltd. and
Investor Relations Management System of Konka Group Co., Ltd. Besides, the
Company provided objective, true, accurate and complete information for visitors,
which reflected actual operation and management; meanwhile, no significant
non-public information was disclosed or leaked out. In the reporting period, the main
particulars about reception of visit and investigation of the Company were as follows:
Reception Reception
Reception time Visitor Main discussion and materials provided by the Company
place way
Conference BOC
Field Development tendency of color TV industry in 2011, and
5 Jan. 2011 room of the International
research market situation of color TV business
Company (China) Limited
Conference Market situation of color TV business, mobile phone
Field Fortune SG
17 Feb. 2011 room of the business, and consumer appliance business, and export
research Fund
Company information of Y2010
Conference
Field CITIC Sales channel of TV in countryside, and sales prospect of
22 Feb. 2011 room of the
research Securities 3D TV
Company
Conference
Field Industrial Market competition of color TV business, and
15 Mar. 2011 room of the
research Securities commissioning of LCM project
Company
16 May 2011 Conference Field CICC Particulars about the Company’s color TV business, the
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room of the research development of its LED business, and the sales prospect
Company of its 3D TV.
(XI) Other significant events
In the reporting period, the Company, its Board of Directors and directors received no
investigations, administrative punishment or criticism by circular from CSRC, as well
as no punishment from other administrative authorities or open criticism from the
stock exchange.
(XII) Index for information disclosed
1. Public Notice on Resolutions of the Fourth Session of the Seventh Board of
Directors; Public Notice No.: 2011-01, Disclosure Date: 23 Feb. 2011.
2. Public Notice on Resolutions of the Sixth Session of the Seventh Board of
Directors; Public Notice No.: 2011-03, Disclosure Date: 5 Mar. 2011.
3. Public Notice on Resolutions of the Seventh Session of the Seventh Board of
Directors; Public Notice No.: 2011-05, Disclosure Date: 16 Mar. 2011.
4. Public Notice on Earnings Forecast for the First Quarter of 2011; Public Notice No.:
2011-08, Disclosure Date: 15 Apr. 2011.
5. Public Notice on Receiving the Tax Rebate; Public Notice No.: 2011-09, Disclosure
Date: 21 Apr. 2011.
6. Public Notice on Work Plan for the Implementation of Internal Control Rules in
2011; Disclosure Date: 28 Apr. 2011.
7. Public Notice on Changes of Partial Accounting Policies; Public Notice No.:
2011-14, Disclosure Date: 28 Apr. 2011.
8. Public Notice on Receiving the Tax Rebate; Public Notice No.: 2011-23, Disclosure
Date: 22 Jun. 2011.
9. Public Notice on Implementation of Dividends Distribution Plan for Y2010; Public
Notice No.: 2011-24, Disclosure Date: 2 Jul. 2011.
10. Public Notice on Earnings Forecast for the First Half of 2011; Public Notice No.:
2011-28, Disclosure Date: 15 Jul. 2011.
All the said public notices were disclosed on Securities Times, Shanghai Securities
News, China Securities Journal, Hong Kong Ta Kung Pao and www.cninfo.com.cn.
(XIII) Explanation on capital flows and guarantees between the Company and its
related parties
1. Capital flows between the Company and its related parties by 30 Jun. 2011
(Unit: RMB’0000)
Whether or
not an
irregular
Relationship
Name of Accounting Opening Closing Occupation Repayment capital
with the Debit Credit
related party entry balance balance way way occupation
Company
prohibited
by document
No. 56
Shenzhen OCT Subsidiary
Other
Real Estate and affiliated 121.22 4.13 0.64 124.71 Operating Cash No
receivables
Co., Ltd. company of
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the
controlling
shareholder
Subsidiary
Shenzhen OCT and affiliated
Property company of Other
7.74 0.00 0.00 7.74 Operating Cash No
Management the receivables
Co., Ltd. controlling
shareholder
Subsidiary
Shenzhen OCT and affiliated
Water and company of Other
103.34 446.80 423.34 126.80 Operating Cash No
Power Co., the receivables
Ltd. controlling
shareholder
Overseas
Chinese Town Controlling Other
0.00 65.43 0.43 65.00 Operating Cash No
Enterprises shareholder receivables
Co.
Subsidiary
Shenzhen
and affiliated
Overseas
company of Other
Chinese Town 8.00 0.00 0.00 8.00 Operating Cash No
the receivables
Service Station
controlling
Co., Ltd.
shareholder
Subsidiary
and affiliated
Anhui Huali
company of Other
Packing Co., 1.00 0.00 1.00 0.00 Operating Cash No
the receivables
Ltd.
controlling
shareholder
Subsidiary
and affiliated
Shenzhen OCT company of Accounts
380.80 579.11 409.85 550.06 Operating Cash No
East Co., Ltd. the receivable
controlling
shareholder
Shanghai Subsidiary
Overseas and affiliated
Chinese Town company of Accounts
55.07 0.00 0.00 55.07 Operating Cash No
Investment the receivable
Development controlling
Co., Ltd. shareholder
Chengdu Subsidiary
Tianfu and affiliated
Overseas company of Accounts
361.72 0.00 214.60 147.12 Operating Cash No
Chinese Town the receivable
Industry Co., controlling
Ltd. shareholder
Beijing Subsidiary
Century and affiliated
Overseas company of Accounts
6.25 90.00 173.94 -77.69 Operating Cash No
Chinese Town the receivable
Industry Co., controlling
Ltd. shareholder
Subsidiary
Taizhou and affiliated
Overseas company of Accounts
-68.40 123.00 0.00 54.60 Operating Cash No
Chinese Town the receivable
Co., Ltd. controlling
shareholder
2. Guarantee events
(1) In order to cut down fund cost, the Company convened the Second Special
Shareholders’ General Meeting for Y2010 on 17 Dec. 2010 to decide on financing for
its wholly owned subsidiary (Konka Household Appliances International Trading Co.,
Ltd. or Hongkong Konka Co., Ltd.) in overseas with the financing line of USD 100
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million, and adopting the USD exchange rate forward lock-up instrument to lock up
the maturity exchange rate, the Company could circularly use the financing line
within five years; in accordance with the requirements of the bank, it was approved at
the session that the Company provided guarantee to the contracted bank (including
contracted bank at home and abroad), which provided capital for the Company’s
overseas wholly owned subsidiary.
(2) In order to meet the requirements of Anhui Konka Tongchuang Household
Appliances Co., Ltd. on routine operating capital and maintain its normal operation,
after the review and approval from the Second Special Shareholders’ General Meeting
for Y2011 held by the Company on 25 Jul. 2011, Anhui Konka Tongchuang
Household Appliances Co., Ltd. planned to apply to the bank for a credit line not
exceeding RMB 410 million, and the Company would provide the credit guarantee of
this credit line for it, with the guarantee term of one year. Meanwhile, Chuzhou
Tongchuang Investment and Construction Co., Ltd. provided counter-guarantee for
50% of this credit guarantee line (as RMB 205 million) to Konka Group.
Other than the above guarantee events, the Company and its controlling subsidiaries
had no other external guarantees.
3. Special explanation and independent opinion of independent directors on the
Company’s provision of external guarantees and executing the Circular of CSRC on
Certain Issues Regarding Regulating Capital Flows between Listed Companies and
Related Parties and Regarding Provisional of External Guarantees by Listed
Companies (ZJF [2003] No. 56)
According to the Circular of CSRC on Certain Issues Regarding Regulating Capital
Flows between Listed Companies and Related Parties and Regarding Provisional of
External Guarantees by Listed Companies (ZJF [2003] No. 56), as the independent
directors of Konka Group Co., Ltd. (hereinafter referred to as “the Company”), we
conducted specific examinations on the capital flows between the Company and its
related parties, as well as on the external guarantees provided by the Company. And
we hereby express our independent opinions as follows:
1. Up to 30 Jun. 2011, the principal shareholder of the Company had not occupy any
capital of the Company; and the capital occupation by some related parties of the
principal shareholder (Shenzhen OCT Real Estate Co., Ltd., Shenzhen OCT Property
Management Co., Ltd., Shenzhen OCT Water & Power Co., Ltd., etc.) was mainly
resulted from the deposit collection and other timing differences arising from routine
business contacts.
2. Since 2010, in order to cut down fund cost, the Company borrowed capital totaling
to RMB 900 million from the principal shareholder (Overseas Chinese Town
Enterprises Co.) by means of entrusted loans successively. Interest rate of the
aforesaid loans was lower than the one-year interest rate of bank loans. It was
beneficial for the Company to reduce fund cost and realize sustainable development
of the Company’s businesses.
3. The operational capital flows between the Company and its principal shareholder
and the related parties of the principal shareholder during the first six months of 2011
were specified as follows:
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English Translation for Reference Only
(1) There were related transactions concerning the Company’s purchase of raw
materials from Anhui Huali Packing Co., Ltd., Shanghai Huali Packing Co., Ltd., and
Guangzhou Panyu Hualiyoude Color Printing & Packing Co., Ltd., which were
subsidiaries indirectly controlled by the principal shareholder of the Company. The
said related transactions had been submitted to and approved by the relevant board
meetings, which were later disclosed to the public.
(2) There were related transactions concerning sales of LCD between the Company’s
subsidiaries and the subsidiaries of the principal shareholder (Shenzhen Overseas
Chinese Town East Co., Ltd. and Chengdu Tianfu OCT Industry Development Co.,
Ltd., etc.).
As for the related transactions above, the Company conducted settlements with the
affiliated parties at regular intervals according to the agreement in contracts, and the
Company had no non-operating capital flows.
4. Particulars about external guarantees
(1) In order to cut down fund cost, the Company convened the Second Special
Shareholders’ General Meeting for Y2010 on 17 Dec. 2010 to decide on financing for
its wholly owned subsidiary (Konka Household Appliances International Trading Co.,
Ltd. or Hongkong Konka Co., Ltd.) in overseas with the financing line of USD 100
million, and adopting the USD exchange rate forward lock-up instrument to lock up
the maturity exchange rate, the Company could circularly use the financing line
within five years; in accordance with the requirements of the bank, it was approved at
the session that the Company provided guarantee to the contracted bank (including
contracted bank at home and abroad), which provided capital for the Company’s
overseas wholly owned subsidiary.
(2) In order to meet the requirements of Anhui Konka Tongchuang Household
Appliances Co., Ltd. on routine operating capital and maintain its normal operation,
after the review and approval from the Second Special Shareholders’ General Meeting
for Y2011 held by the Company on 25 Jul. 2011, Anhui Konka Tongchuang
Household Appliances Co., Ltd. planned to apply to the bank for a credit line not
exceeding RMB 410 million, and the Company would provide the credit guarantee of
this credit line for it, with the guarantee term of one year. Meanwhile, Chuzhou
Tongchuang Investment and Construction Co., Ltd. provided counter-guarantee for
50% of this credit guarantee line (as RMB 205 million) to Konka Group.
As at 30 Jun. 2011, except the above guarantee events, the Company hadn’t provided
any external guarantee, and operated in a standard way.
To sum up, we believed that there was no breach of the regulation of Zheng-Jian-Fa
[2003] No. 56 Document in the Company.
Independent Director: Feng Yutao, Yang Haiying and Zhang Zhong
(XIV) Significant asset mortgages
As approved at the 12th Session of the 7th Board of Directors and the 2nd Special
Shareholders’ General Meeting for Y2011, the Company applied to Bank of China for
a comprehensive credit line not exceeding RMB 5.3 billion with a term of one year.
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English Translation for Reference Only
At the same time, the Company provided a bank acceptance bill of RMB 1.3 billion
for Bank of China as pledge:
VI. Financial Report
The semi-annual financial report 2011 of the Company (unaudited) is attached behind.
VII. Documents Available for Reference
1. Text of the semi-annual report 2011 carrying the signature of Chairman of the
Board of Directors;
2. Text of financial report carrying the signatures and seals of person in charge of the
Company, chief in charge of accounting and person in charge of the accounting organ;
3. Texts of all documents disclosed on newspapers designated by CSRC during the
reporting period;
4. Text of the Company’s Articles of Association;
5. Other relevant materials.
Board of Directors
Konka Group Co., Ltd.
27 Aug. 2011
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Konka Group Co., Ltd.
FINANCIAL REPORT
For the Six Months Ended 30 June 2011
（Un-audited）
Contents
Balance Shhet
Income Statement
Cash Flow Statement
Statement of Changes in Owners' Equity
Notes to Accounting Statements
Legal representative: Hou Songrong
Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
English Translation for Reference Only. Should there be any discrepancy between the
two versions, the Chinese version shall prevail.
26
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Balance Sheet
Prepared by: Konka Group Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Closing balance Opening balance
Items
Consolidation The Company Consolidation The Company
Current Assets:
Monetary funds 5,951,638,518.24 5,188,512,419.35 3,764,409,203.04 3,409,946,242.24
Settlement reserves
Intra-group lendings
Transactional financial assets
Notes receivable 3,345,905,625.57 3,008,868,154.27 4,149,313,159.56 4,068,533,543.35
Accounts receivable 1,641,154,052.09 1,071,287,083.86 1,971,135,371.91 1,312,217,694.50
Accounts paid in advance 396,372,477.91 893,694,466.85 446,971,672.32 347,600,391.31
Premiums receivable
Reinsurance premiums
receivable
Receivable reinsurance
contract reserves
Interest receivable 17,784,105.49 17,768,393.82 25,298,029.66 24,924,331.91
Dividend receivable
Other accounts receivable 97,710,248.56 767,953,425.81 92,135,651.57 574,826,602.17
Financial assets purchased
under agreements to resell
Inventories 3,318,187,450.20 2,469,702,993.38 3,723,636,130.09 2,974,345,102.16
Non-current assets due within
1 year
Other current assets
Total current assets 14,768,752,478.06 13,417,786,937.34 14,172,899,218.15 12,712,393,907.64
Non-current assets:
Loans by mandate and
advances granted
Available-for-sale financial
1,857,579.66 1,857,579.66 1,830,598.36 1,830,598.36
assets
Held-to-maturity investments
Long-term accounts receivable
Long-term equity investment 221,462,840.44 1,653,402,169.87 113,754,190.13 1,653,402,169.87
Investing property
Fixed assets 1,518,309,751.12 365,671,823.43 1,488,368,667.79 375,450,201.99
Construction in progress 297,643,887.39 231,479,801.44 231,508,246.34 149,152,895.63
Engineering materials
Disposal of fixed assets
Production biological assets
Oil-gas assets
Intangible assets 197,378,996.37 26,006,703.52 191,483,451.66 18,318,487.30
R&D expense
Goodwill 3,943,671.53 3,943,671.53
Long-term deferred expenses 10,713,219.90 4,171,440.38 11,480,636.02 4,206,829.66
27
English Translation for Reference Only
Deferred income tax assets 252,168,120.91 193,324,595.73 251,626,885.02 193,331,071.24
Other non-current assets
Total of non-current assets 2,503,478,067.32 2,475,914,114.03 2,293,996,346.85 2,395,692,254.05
Total assets 17,272,230,545.38 15,893,701,051.37 16,466,895,565.00 15,108,086,161.69
Legal representative: Hou Songrong
Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
Balance Sheet (Continued)
Prepared by: Konka Group Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Current liabilities:
Short-term borrowings 7,745,543,756.64 5,264,368,730.52 5,917,298,397.16 4,777,121,394.26
Borrowings from Central
Bank
Customer bank deposits and
due to banks and other financial
institutions
Intra-group borrowings
Transactional financial
50,290,398.26 49,939,747.92 64,957,121.86 64,606,471.52
liabilities
Notes payable 1,378,401,734.05 2,268,457,408.36 2,031,883,915.56 1,788,018,888.54
Accounts payable 2,148,401,471.83 1,999,120,590.67 2,390,131,711.56 2,039,562,054.50
Accounts received in advance 272,113,130.89 1,107,461,440.46 316,613,909.66 973,828,552.00
Financial assets sold for
repurchase
Handling charges and
commissions payable
Employee’s compensation
171,524,366.14 63,665,190.49 218,113,645.42 82,383,027.98
payable
Tax payable -151,413,271.59 -135,968,301.46 -170,794,740.44 -148,912,324.33
Interest payable 17,727,760.76 17,634,688.45 26,751,070.30 25,983,184.76
Dividend payable 22,186,063.56 12,039,727.04 7,976,122.23
Other accounts payable 865,962,566.92 1,030,294,103.47 798,367,146.17 1,127,044,568.53
Reinsurance premiums
payable
Insurance contract reserves
Payables for acting trading of
securities
Payables for acting
underwriting of securities
28
English Translation for Reference Only
Non-current liabilities due
within 1 year
Other current liabilities
Total current liabilities 12,520,737,977.46 11,677,013,325.92 11,601,298,299.48 10,729,635,817.76
Non-current liabilities:
Long-term borrowings 610,000,000.00 600,000,000.00 510,000,000.00 500,000,000.00
Bonds payable
Long-term payables 30,000,000.00 30,000,000.00
Specific payables
Estimated liabilities
Deferred income tax
563,067.21 563,067.21
liabilities
Other non-current liabilities 102,256,145.11 58,990,005.14 100,896,753.51 65,493,757.54
Total non-current liabilities 742,819,212.32 658,990,005.14 641,459,820.72 565,493,757.54
Total liabilities 13,263,557,189.78 12,336,003,331.06 12,242,758,120.20 11,295,129,575.30
Owners’ equity (or
shareholders’ equity)
Paid-up capital (or share
1,203,972,704.00 1,203,972,704.00 1,203,972,704.00 1,203,972,704.00
capital)
Capital reserves 1,272,260,192.91 1,249,130,026.33 1,272,239,687.12 1,249,109,520.54
Less: Treasury stock
Specific reserves
Surplus reserves 809,307,995.80 809,307,995.80 809,307,995.80 809,307,995.80
Provisions for general risks
Retained profits 489,705,628.97 295,286,994.18 696,746,297.76 550,566,366.05
Foreign exchange difference 5,979,914.28 16,380,548.05
Total equity attributable to
3,781,226,435.96 3,557,697,720.31 3,998,647,232.73 3,812,956,586.39
owners of the Company
Minority interests 227,446,919.64 225,490,212.07
Total owners’ equity 4,008,673,355.60 3,557,697,720.31 4,224,137,444.80 3,812,956,586.39
Total liabilities and owners’
17,272,230,545.38 15,893,701,051.37 16,466,895,565.00 15,108,086,161.69
equity
Legal representative: Hou Songrong
Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
29
English Translation for Reference Only
Income Statement
Prepared by: Konka Group Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Total operating revenues 6,865,103,919.76 6,784,805,647.51 7,940,183,795.09 7,565,353,506.27
Including: Sales income 6,865,103,919.76 6,784,805,647.51 7,940,183,795.09 7,565,353,506.27
Interest income
Premium income
Handling charge and
commission income
II. Total operating cost 7,133,712,205.48 7,106,721,568.81 7,905,714,013.79 7,632,624,904.44
Including: Cost of sales 5,836,932,046.71 6,096,290,932.02 6,700,253,316.40 6,686,604,551.61
Interest expenses
Handling charge and
commission expenses
Surrenders
Net claims paid
Net amount withdrawn
for the insurance contract
reserve
Expenditure on policy
dividends
Reinsurance premium
Taxes and associate
17,163,873.16 12,534,755.83 1,481,488.39 422,417.70
charges
Selling and distribution
961,655,238.85 755,344,777.49 927,839,634.02 786,219,597.76
expenses
Administrative expenses 248,089,584.88 193,040,863.60 246,449,124.58 139,578,001.27
Financial expenses 71,427,282.01 49,510,239.87 22,524,675.26 16,253,542.17
Asset impairment loss -1,555,820.13 7,165,775.14 3,546,793.93
Add: Gain/(loss) from change
14,666,723.60 14,666,723.60 -5,334,908.00 -4,190,488.00
in fair value (“-” means loss)
Gain/(loss) from
-79,052.57 3,314,660.27 19,103,481.38
investment (“-” means loss)
Including: share of profits in
3,304,130.92
associates and joint ventures
Foreign exchange gains (“-”
means loss)
III. Business profit (“-” means
-254,020,614.69 -307,249,197.70 32,449,533.57 -52,358,404.79
loss)
Add: non-operating 81,233,539.84 67,048,288.03 52,364,509.45 38,868,524.81
30
English Translation for Reference Only
income
Less: non-operating
3,115,587.11 977,614.17 4,516,862.06 1,693,970.37
expense
Including: loss from
1,166,107.60 704,953.24 283,324.10 212,460.68
non-current asset disposal
IV. Total profit (“-” means loss) -175,902,661.96 -241,178,523.84 80,297,180.96 -15,183,850.35
Less: Income tax expense 14,971,357.93 2,061,120.99 19,784,172.49 3,273,079.51
V. Net profit (“-” means loss) -190,874,019.89 -243,239,644.83 60,513,008.47 -18,456,929.86
Attributable to owners of
-195,000,941.75 -243,239,644.83 50,887,520.39 -18,456,929.86
the Company
Minority shareholders’
4,126,921.86 9,625,488.08
income
VI. Earnings per share
(I) Basic earnings per
-0.1620 -0.2020 0.0423 -0.0153
share
(II) Diluted earnings per
-0.1620 -0.2020 0.0423 -0.0153
share
Ⅶ. Other comprehensive
-10,380,127.980 20,505.79 4,422,665.48 -368,752.26
incomes
Ⅷ. Total comprehensive
-201,254,147.87 -243,219,139.04 64,935,673.95 -18,825,682.12
incomes
Attributable to owners of
-205,381,069.73 -243,219,139.04 55,310,185.87 -18,825,682.12
the Company
Attributable to minority
4,126,921.86 0.00 9,625,488.08 0.00
shareholders
Legal representative: Hou Songrong
Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
Cash Flow Statement
Prepared by: Konka Group Co., Ltd. Jan.-Jun. 2011 Unit: (RMB) Yuan
Reporting period Same period of last year
Items
Consolidation The Company Consolidation The Company
I. Cash flows from operating activities:
Cash received from sale of
8,347,235,513.35 7,297,760,150.20 9,468,101,045.07 7,778,062,165.90
commodities and rendering of service
Net increase of deposits from
customers and dues from banks
Net increase of loans from the
central bank
Net increase of funds borrowed
31
English Translation for Reference Only
from other financial institutions
Cash received from premium of
original insurance contracts
Net cash received from reinsurance
business
Net increase of deposits of policy
holders and investment fund
Net increase of disposal of tradable
financial assets
Cash received from interest,
handling charges and commissions
Net increase of intra-group
borrowings
Net increase of funds in repurchase
business
Tax refunds received 171,455,747.39 77,270,969.80 141,105,164.31 30,175,004.83
Other cash received relating to
117,213,527.35 364,345,701.19 147,423,140.63 425,771,643.58
operating activities
Subtotal of cash inflows from
8,635,904,788.09 7,739,376,821.19 9,756,629,350.01 8,234,008,814.31
operating activities
Cash paid for goods and services 6,659,586,300.84 5,267,876,797.16 7,753,978,854.62 6,844,247,948.81
Net increase of customer lendings
and advances
Net increase of funds deposited in
the central bank and amount due from
banks
Cash for paying claims of the
original insurance contracts
Cash for paying interest, handling
charges and commissions
Cash for paying policy dividends
Cash paid to and for employees 616,159,060.44 339,639,511.81 548,892,574.34 309,818,063.70
Various taxes paid 652,198,342.60 513,248,833.19 776,122,648.52 612,827,937.88
Other cash payment relating to
702,423,026.09 870,706,065.78 679,603,722.75 576,323,747.24
operating activities
Subtotal of cash outflows from
8,630,366,729.97 6,991,471,207.94 9,758,597,800.23 8,343,217,697.63
operating activities
Net cash flows from operating
5,538,058.12 747,905,613.25 -1,968,450.22 -109,208,883.32
activities
II. Cash flows from investing
activities:
Cash received from retraction of
95,940.00 95,940.00
investments
32
English Translation for Reference Only
Cash received from return on
10,529.35 10,529.35
investments
Net cash received from disposal of
fixed assets, intangible assets and 1,803,291.38 1,260,901.38 30,098,396.52 26,603,217.52
other long-term assets
Net cash received from disposal of
subsidiaries or other business units
Other cash received relating to
investing activities
Subtotal of cash inflows from
1,803,291.38 1,260,901.38 30,204,865.87 26,709,686.87
investing activities
Cash paid to acquire fixed assets,
intangible assets and other long-term 204,047,766.40 87,909,071.33 170,905,523.41 77,165,340.26
assets
Cash paid for investment 107,787,702.88 20,000,000.00
Net increase of pledged loans
Net cash paid to acquire subsidiaries
and other business units
Other cash payments relating to
69,000,000.00 69,000,000.00
investing activities
Subtotal of cash outflows from
311,835,469.28 87,909,071.33 239,905,523.41 166,165,340.26
investing activities
Net cash flows from investing
-310,032,177.90 -86,648,169.95 -209,700,657.54 -139,455,653.39
activities
III. Cash Flows from Financing
Activities:
Cash received from capital
4,919,598.14
contributions
Including: Cash received from
minority shareholder investments by 4,919,598.14
subsidiaries
Cash received from borrowings 4,233,076,590.37 2,627,255,835.43 1,231,028,524.94 1,003,818,000.00
Cash received from issuance of
bonds
Other cash received relating to
1,269,634,401.11 1,225,182,395.05 1,599,292,865.39 1,458,579,686.30
financing activities
Subtotal of cash inflows from
5,507,630,589.62 3,852,438,230.48 2,830,321,390.33 2,462,397,686.30
financing activities
Repayment of borrowings 1,601,003,120.78 1,364,191,120.50 1,896,587,469.09 1,630,445,526.14
Cash paid for interest expenses and
63,150,611.44 49,063,483.40 7,815,231.89 3,095,860.70
distribution of dividends or profit
Including: dividends or profit
paid by subsidiaries to minority
shareholders
33
English Translation for Reference Only
Other cash payments relating to
2,859,728,837.35 2,814,264,619.68 500,024,110.99 479,005,766.00
financing activities
Sub-total of cash outflows from
4,523,882,569.57 4,227,519,223.58 2,404,426,811.97 2,112,547,152.84
financing activities
Net cash flows from financing
983,748,020.05 -375,080,993.10 425,894,578.36 349,850,533.46
activities
IV. Effect of foreign exchange rate
-8,858,781.80 -2,935,845.02 -5,576,575.02 -3,777,925.59
changes on cash and cash equivalents
V. Net increase in cash and cash
670,395,118.47 283,240,605.18 208,648,895.58 97,408,071.16
equivalents
Add: Opening balance of cash
569,524,994.01 255,364,835.76 749,501,416.29 341,440,119.99
and cash equivalents
VI. Closing balance of cash and cash
1,239,920,112.48 538,605,440.94 958,150,311.87 438,848,191.15
equivalents
Legal representative: Hou Songrong
Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
34
English Translation for Reference Only
Consolidated Statement of Changes in Owners’ Equity
Prepared by: Konka Group Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Reporting period
Equity attributable to owners of the Company
Spe
Less: Gener
Items Paid-up capital cifi Total owners’
treasu al risk Minority interests
(or share Capital reserve c Surplus reserve Retained profit Others equity
ry reserv
capital) rese
stock e
rve
I. Balance at the end of the previous year 1,203,972,704.00 1,272,239,687.12 809,307,995.80 696,746,297.76 16,380,548.05 225,490,212.07 4,224,137,444.80
Add: change of accounting policy
Correction of errors in previous periods
Other
II. Balance at the beginning of the year 1,203,972,704.00 1,272,239,687.12 809,307,995.80 696,746,297.76 16,380,548.05 225,490,212.07 4,224,137,444.80
III. Increase/ decrease of amount in the year (“-”
20,505.79 -207,040,668.79 -10,400,633.77 1,956,707.57 -215,464,089.20
means decrease)
(I) Net profit -195,000,941.75 4,126,921.86 -190,874,019.89
(II) Other comprehensive incomes 20,505.79 -10,400,633.77 -10,380,127.98
Subtotal of (I) and (II) 20,505.79 -195,000,941.75 -10,400,633.77 4,126,921.86 -201,254,147.87
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments
recognized in owners’ equity
3. Others
(IV) Profit distribution -12,039,727.04 -2,170,214.29 -14,209,941.33
35
English Translation for Reference Only
1. Appropriations to surplus reserves
2. Appropriations to general risk provisions
3. Appropriations to owners (or
-12,039,727.04 -2,170,214.29 -14,209,941.33
shareholders)
4. Other
(V) Internal carry-forward of owners’ equity
1. New increase of capital (or share capital)
from capital public reserves
2. New increase of capital (or share capital)
from surplus reserves
3. Surplus reserves for making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the period
2. Used in the period
(Ⅶ) Other
IV. Closing balance 1,203,972,704.00 1,272,260,192.91 809,307,995.80 489,705,628.97 5,979,914.28 227,446,919.64 4,008,673,355.60
Legal representative: Hou Songrong Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
36
English Translation for Reference Only
Consolidated Statement of Changes in Owners’ Equity (Continued)
Prepared by: Konka Group Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Last year
Equity attributable to owners of the Company
Les
s: Spe
Gener
Items Paid-up capital trea cifi
al risk Minority interests Total owners’ equity
(or share Capital reserve sur c Surplus reserve Retained profit Others
reserv
capital) y rese
e
stoc rve
k
I. Balance at the end of the previous year 1,203,972,704.00 1,257,449,727.58 809,307,995.80 613,778,898.84 -9,141,464.66 230,900,111.89 4,106,267,973.45
Add: change of accounting policy 11,059,264.64 -11,059,264.64
Correction of errors in previous periods
Other
II. Balance at the beginning of the year 1,203,972,704.00 1,257,449,727.58 809,307,995.80 624,838,163.48 -9,141,464.66 219,840,847.25 4,106,267,973.45
III. Increase/ decrease of amount in the year (“-”
14,789,959.54 71,908,134.28 25,522,012.71 5,649,364.82 117,869,471.35
means decrease)
(I) Net profit 83,947,861.32 17,241,633.63 101,189,494.95
(II) Other comprehensive incomes -210,040.46 25,522,012.71 25,311,972.25
Subtotal of (I) and (II) -210,040.46 83,947,861.32 25,522,012.71 17,241,633.63 126,501,467.20
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments
recognized in owners’ equity
37
English Translation for Reference Only
3. Others
(IV) Profit distribution -12,039,727.04 -11,592,268.81 -23,631,995.85
1. Appropriations to surplus reserves
2. Appropriations to general risk provisions
3. Appropriations to owners (or
-12,039,727.04 -11,592,268.81 -23,631,995.85
shareholders)
4. Other
(V) Internal carry-forward of owners’ equity
1. New increase of capital (or share capital)
from capital public reserves
2. New increase of capital (or share capital)
from surplus reserves
3. Surplus reserves for making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the period
2. Used in the period
(Ⅶ) Other 15,000,000.00 15,000,000.00
IV. Closing balance 1,203,972,704.00 1,272,239,687.12 809,307,995.80 696,746,297.76 16,380,548.05 225,490,212.07 4,224,137,444.80
Legal representative: Hou Songrong Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
38
English Translation for Reference Only
Statement of Changes in Owners’ Equity of the Company
Prepared by: Konka Group Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Reporting period
Spe
Less:
cifi General
Items Paid-up capital (or treasu
Capital reserve c Surplus reserve risk Retained profit Total owners’ equity
share capital) ry
rese reserve
stock
rve
I. Balance at the end of the previous year 1,203,972,704.00 1,249,109,520.54 809,307,995.80 550,566,366.05 3,812,956,586.39
Add: change of accounting policy
Correction of errors in previous periods
Other
II. Balance at the beginning of the year 1,203,972,704.00 1,249,109,520.54 809,307,995.80 550,566,366.05 3,812,956,586.39
III. Increase/ decrease of amount in the year (“-”
20,505.79 -255,279,371.87 -255,258,866.08
means decrease)
(I) Net profit -243,239,644.83 -243,239,644.83
(II) Other comprehensive incomes 20,505.79 20,505.79
Subtotal of (I) and (II) 20,505.79 -243,239,644.83 -243,219,139.04
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments
recognized in owners’ equity
3. Others
(IV) Profit distribution -12,039,727.04 -12,039,727.04
1. Appropriations to surplus reserves
39
English Translation for Reference Only
2. Appropriations to general risk provisions
3. Appropriations to owners (or
-12,039,727.04 -12,039,727.04
shareholders)
4. Other
(V) Internal carry-forward of owners’ equity
1. New increase of capital (or share capital)
from capital public reserves
2. New increase of capital (or share capital)
from surplus reserves
3. Surplus reserves for making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the period
2. Used in the period
(Ⅶ) Other
IV. Closing balance 1,203,972,704.00 1,249,130,026.33 809,307,995.80 295,286,994.18 3,557,697,720.31
Legal representative: Hou Songrong Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
40
English Translation for Reference Only
Statement of Changes in Owners’ Equity of the Company (Continued)
Prepared by: Konka Group Co., Ltd. 30 Jun. 2011 Unit: (RMB) Yuan
Last year
Spe
Less:
cifi General
Items Paid-up capital (or treasu
Capital reserve c Surplus reserve risk Retained profit Total owners’ equity
share capital) ry
rese reserve
stock
rve
I. Balance at the end of the previous year 1,203,972,704.00 1,249,319,561.00 809,307,995.80 568,427,245.02 3,831,027,505.82
Add: change of accounting policy
Correction of errors in previous periods
Other
II. Balance at the beginning of the year 1,203,972,704.00 1,249,319,561.00 809,307,995.80 568,427,245.02 3,831,027,505.82
III. Increase/ decrease of amount in the year (“-”
-210,040.46 -17,860,878.97 -18,070,919.43
means decrease)
(I) Net profit -5,821,151.93 -5,821,151.93
(II) Other comprehensive incomes -210,040.46 -210,040.46
Subtotal of (I) and (II) -210,040.46 -5,821,151.93 -6,031,192.39
(III) Capital paid in and reduced by owners
1. Capital paid in by owners
2. Amounts of share-based payments
recognized in owners’ equity
3. Others
(IV) Profit distribution -12,039,727.04 -12,039,727.04
1. Appropriations to surplus reserves
41
English Translation for Reference Only
2. Appropriations to general risk provisions
3. Appropriations to owners (or
-12,039,727.04 -12,039,727.04
shareholders)
4. Other
(V) Internal carry-forward of owners’ equity
1. New increase of capital (or share capital)
from capital public reserves
2. New increase of capital (or share capital)
from surplus reserves
3. Surplus reserves for making up losses
4. Other
(Ⅵ) Specific reserve
1. Withdrawn for the period
2. Used in the period
(Ⅶ) Other
IV. Closing balance 1,203,972,704.00 1,249,109,520.54 809,307,995.80 550,566,366.05 3,812,956,586.39
Legal representative: Hou Songrong Head of the accounting work: Yang Rong
Head of the accounting department: Ruan Renzong
42
English Translation for Reference Only
Konka Group Co., Ltd.
Notes to Financial Statements
For the First Half of 2011
(All currency amounts are expressed in RMB Yuan unless otherwise stated)
(English Translation for Reference Only)
I. Company Profile
1. Establishment
Konka Group Co., Ltd. (hereinafter referred to as “Company” or “the Company”), is a
joint-stock limited company reorganized from the former Shenzhen Konka Electronic Co.,
Ltd. in August 1991 upon approval of the People’s Government of Shenzhen Municipality,
and has its ordinary shares (A-share and B-share) listed on Shenzhen Stock Exchange with
prior consent from the People’s Bank of China Shenzhen Special Economic Zone Branch. On
August 29, 1995, the Company, renamed to “Konka Group Co., Ltd.”, obtained corporate
business license (registration No.: 440301501121863) with its main business falling into
electronic industry.
2. Share Capital Changes upon Establishment
On November 27, 1991, with approval from the SRYFZ No. 102 [1991] document as issued
by the People’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka
Electronic Co., Ltd., during December 8—December 31, 1991, has issued 128,869,000 RMB
ordinary shares (A-share) at a par value of RMB1.00 per share, of which the original net
assets were converted into 98,719,000 state-owned institutional shares, 30,150,000 new
shares were issued, including 26,500,000 circulating shares issued to the public and
3,650,000 staff shares issued to the staff of the Company.
On January 29, 1992, with approval from the SRYFZ No. 106 [1991] document as issued by
the People’s Bank of China Shenzhen Special Economic Zone Branch, Shenzhen Konka
Electronic Co., Ltd., during December 20, 1991— January 31, 1992, has issued to investors
abroad 58,372,300 RMB special shares (B-share) at a par value of RMB1.00 per share, of
which 48,372,300 shares held by the former foreign investor and founder—Hong Kong
Ganghua Electronic Group Co., Ltd. are converted into foreign legal person’s shares, and
10,000,000 B-shares are issued additionally.
On April 10, 1993, the Proposal on Profit Distribution and Dividend Payout 1992 was
adopted at the second general meeting of shareholders of the Company. With approval from
the SZBF No. 2 [1993] document as issued by Shenzhen Securities Regulatory Office, the
Company began to perform dividend policy for FY 1992 as of April 30, 1993: distributing
RMB 0.90 in cash plus 3.5 bonus shares for every 10 shares to all shareholders. The total
capital stock reached 187,473,150 shares after this distribution.
On April 18, 1994, the Proposal on Profit Distribution and Dividend Payout 1993 was
adopted at the third general meeting of shareholders of the Company. With approval from the
SZBF No. 115 [1994] document as issued by Shenzhen Securities Regulatory Office, the
Company began to perform dividend policy for FY1993 as of June 10, 1994: distributing
RMB 1.10 in cash plus 5 bonus shares (including 4.4 profit bonus shares and 0.6 bonus share
capitalized from capital public reserve) for every 10 shares to all shareholders. The total
capital stock reached 281,209,724 shares after this distribution and capitalization from capital
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public reserve.
On June 2, 1994, in accordance with the provisions that “staff shares could go public and be
transferred six months after listing”, as jointly promulgated by the State Commission for
Restructuring the Economic System and the State Council’s Securities Commission, the staff
shares of the Company was planned to be listed on the flow on June 6, 1994, with the prior
consent of Shenzhen Securities Regulatory Office and Shenzhen Stock Exchange.
On October 8, 1994, the Proposal on Negotiable Bonus Shares of B-Share Corporate
Shareholders 1992 was adopted at the 1994 interim general meeting of shareholders of the
Company. With approval from the SZBF No. 224 [1994] document as issued by Shenzhen
Securities Regulatory Office, the 16,930,305 bonus shares for FY 1992 granted to foreign
legal persons were listed and negotiated at B-share market on October 26, 1994.
On February 6, 1996, the Proposal on Share Allotment Modes 1996 was adopted at the 1996
interim general metering of shareholders of the Company. With approval from the SZBF No.
5 [1996] document as issued by Shenzhen Securities Regulatory Office, and reexamination
from the ZJPSZ No. 16 [1996] document and ZJGZ No. 2 [1996] document as issued by
China Securities Regulatory Commission, on July 16, 1996 and October 29, 1996, all
shareholders were respectively allotted three shares for every ten existing shares held at
RMB 6.28/A-share and HKD 5.85/B-share. Corporate shareholders took their respective
existing shares as bases for full subscription of the allocable shares. The total capital stock
reached 365,572,641 shares after this allotment.
On January 25, 1998, the Plan on Share Allotment 1998 was adopted at the 1998 interim
general meeting of shareholders of the Company. With approval from the ZZBZ No. 29
[1998] document as issued by Shenzhen Securities Regulatory Office, and ZJSZ No.64 [1998]
document as issued by China Securities Regulatory Commission, on July 15, 1998,
negotiable A-shares were allotted in proportion of 3:10 at RMB 10.50/A-share. For such
reasons as continued weakness in B-share secondary market (lower than share allotment
price), B-share negotiation and allotment plan was canceled, and the corporate shareholders
of the Company waived the preemptive right. The total capital stock reached 389,383,603
shares after this allotment.
On June 30, 1999, the Proposal on Profit Distribution and Capitalization from Capital Public
Reserve 1998 was adopted at the eighth general meeting of shareholders of the Company. On
August 20, 1999, the profit distribution for FY 1998 was carried out: all shareholders were
presented RMB3.00 in cash for every 10 shares, plus 2 shares capitalized from capital public
reserve. The total capital stock reached 467,260,323 shares after this capitalization.
On June 30, 1999, the Plan on A-Share Issue for Capital Increase was adopted at the eighth
general meeting of shareholders of the Company. With approval from the ZJFXZ No.140
[1999] document as issued by China Securities Regulatory Commission, on November 1,
1999, 80,000,000 A-shares were additionally issued to the public at RMB15.50/share. The
total capital stock reached 547,260,323 shares after this additional issue.
On May 30, 2000, the Plan on Profit Distribution and Dividend Payout 1999 was adopted at
the ninth general meeting of shareholders of the Company. On July 25, 2000, the profit
distribution for FY 1999 was carried out: all shareholders were distributed RMB4.00 in cash
plus 1 bonus shares for every 10 shares. The total capital stock reached 601,986,352 shares
after this distribution.
On April 3, 2008, the 7th meeting of the sixth Board of Directors was convened, during
which the following resolutions were discussed and adopted: based on the total capital stock
of 601,986,352 shares for the year ended December 31, 2007, capitalization from capital
public reserve was made to all shareholders at a proportion of 1:1, namely 10 new shares for
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every 10 existing shares. And the said resolution was subject to approval by the 2007 annual
general meeting of shareholders convened on May 26, 2008. The Company, in June 2008,
implemented the capitalization from capital public reserve and went through the formalities
for transfer registration with China Securities Depository and Clearing Corporation Limited.
On December 16, 2008, with approval from the SMGZF No. 2662 [2008] document as
issued by Shenzhen Bureau of Trade and Industry, the Company was agreed to increase its
share capital, and went through the formalities for registration of changes with the
administration for industry and commerce on April 10, 2009. The total capital stock reached
1,203,972,704 shares after change.
3. Approved business scope: research and development, production and operation of such
household appliances as televisions, refrigerators, washing machines, and personal electronic
appliances; manufacturing and application of home AV, IPTV set-top boxes, digital TV
receivers, digital products, cell phones, mobile communication equipments and terminal
products, daily-use electronic products, automotive electronic products, satellite navigation
systems, satellite television receiving system, intelligent transportation systems, fire-fighting
and security systems, office equipments, computers, displays, large screen display systems;
LED (OLED) back light, illumination, light-emitting devices, and packaging thereof;
electronic parts and components, moulds, plastic and rubber products, and packing materials,
and technical consultancy and after-sale paid services of related products; wholesale, retail,
import & export and relevant support services of the aforesaid products (including after-sale
spare parts) (Commodities subject to state trading management are not involved. Products
involved in quota, license management and other specified management shall be subject to
the relevant state provisions.); sale of self-developed technological achievements; provision
of maintenance services for electronic products; domestic freight forwarding; warehousing
services; consultancy on enterprise management; and self-owned property leasing and
management services, recovery of waste electrical appliances and electronic products
(excluding dissembling) (operated by branch offices), and outsourcing services of
information technology and business procedures by means of undertaking services in the way
of outsourcing, including management and maintenance of system application, management
of information technology, bank background service, financial settlement, human resource
service, software development, call center, and data processing.
4. The parent company, as well as the actual controller of the Company is Overseas Chinese
Town Group Co., Ltd., and the ultimate controller is the State-owned Assets Supervision and
Administration Commission of the State Council.
5. The financial statements of the Company have been approved for issue by the Board of
Directors on 25Aug. 2011.
6. A check list of corporate names and their abbreviations mentioned in this Report
Corporate name Abbreviation
Shenzhen Konka Telecommunications Technology Co., Ltd. Telecommunication Technology
Shenzhen Konka Video & Communication Systems Engineering Co., Video & Communication Systems
Ltd. Engineering
Shenzhen Konka Precision Mold Manufacturing Co., Ltd. Precision Mold
Shenzhen Konka Electronic Co., Ltd. Konka Electronic
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Corporate name Abbreviation
Shenzhen Konka Information Network Co., Ltd. Information Network
Shenzhen Konka Plastic Products Co., Ltd. Plastic Products
Shenzhen Shushida Electronic Co., Ltd. Shushida
Shenzhen Electronic Fittings Technology Co., Ltd. Fittings Technology
Mudanjiang Arctic Ocean Appliances Co., Ltd. Mudanjiang Appliances
Shaanxi Konka Electronic Co., Ltd. Shaanxi Konka
Chongqing Konka Electronic Co., Ltd. Chongqing Konka
Chongqing Konka Automotive Electronic Co., Ltd. Chongqing Electronic
Chongqing Qingjia Electronics Co., Ltd. Chongqing Qingjia
Anhui Konka Electronic Co., Ltd. Anhui Konka
Anhui Konka Household Appliances Co., Ltd. Anhui Household Appliances
Changshu Konka Electronic Co., Ltd. Changshu Konka
Kunshan Konka Electronic Co., Ltd. Kunshan Konka
Dongguan Konka Electronic Co., Ltd. Dongguan Konka
Dongguan Konka Packing Materials Co., Ltd. Dongguan Packing
Dongguan Konka Mould Plastic Co., Ltd. Dongguan Mould Plastic
Boluo Konka PCB Co., Ltd. Boluo Konka
Boluo Konka Precision Technology Co., Ltd. Boluo Precision
Konka (Nanhai) Development Center Nanhai Institute
Hongkong Konka Co., Ltd. Hongkong Konka
Konka Household Appliances
Konka Household Appliances Investment & Development Co., Ltd.
Investment
Konka Household Appliances
Konka Household Appliances International Trading Co., Ltd.
International Trading
KONKA AMERICA,INC. KONKA AMERICA
Konka (Europe) Co., Ltd. Konka Europe
Konka (Kunshan) Real Estate Investment Co., Ltd. Kunshan Real Estate
Dongguan Xutongda Mould Plastic Co., Ltd. Xutongda
Shenzhen Konka Optoelectronic Technology Co., Ltd. Konka Optoelectronic
Shenzhen Wankaida Science and Technology Co., Ltd. Wankaida
Kunshan Kangsheng Investment Development Co., Ltd. Kunshan Kangsheng
Indonesia Konka Electronics Co., Ltd. Indonesia Konka
Anhui Konka Tongchuang Household Appliances Co., Ltd. Anhui Tongchuang
II. Basis for the preparation of financial statements
With the going-concern assumption as the basis, the Group prepared its financial statements
in light of the actual transactions and events, as well as the Basic Standard and 38 specific
standards of Accounting Standards for Business Enterprises issued by the Ministry of
Finance of the PRC on 15 Feb. 2006, the Application Guidance of Accounting Standards for
Business Enterprises, the Interpretation of Accounting Standards for Business Enterprises
and other regulations issued thereafter (jointly referred to as “the Accounting Standards for
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Business Enterprises”), and the Rules for Preparation Convention of Disclosure of Public
Offering Companies No.15—General Regulations for Financial Reporting (revised in 2010)
by China Securities Regulatory Commission (CSRC).
In accordance with the Accounting Standards for Business Enterprises, accounting activities
of the Group were conducted on the accrual basis. Except for some financial instruments, the
financial statements were prepared on the basis of historical costs. Where impairment
occurred in an asset, the corresponding impairment provision was withdrawn according to
relevant rules.
III. Statement of Compliance with the Accounting Standards for Business Enterprises
The financial statements prepared by the Group are in compliance with the requirements of
the Accounting Standards for Business Enterprises, factually and completely presenting the
Company’s and the Group’s financial positions as at 30 Jun. 2011, and operating results, cash
flows and other relevant information for the six months then ended. Furthermore, these
financial statements, in all material respects, are also in line with relevant disclosure
requirements for financial statements and notes thereof stipulated in the Rules for Preparation
Convention of Disclosure of Public Offering Companies No.15—General Regulations for
Financial Reporting (revised in 2010) by CSRC.
IV. Major accounting policies and accounting estimates
1. Fiscal period
The Group’s accounting periods are divided into annual periods (yearly) and interim periods.
The interim period is a reporting period which is shorter than a full fiscal year. Gregorian
calendar is adopted for fiscal year of the Company, namely from 1 Jan. to 31 Dec. every
year.
2. Recording currency
Renminbi (RMB) is the prevailing currency used in the main economic circumstances of the
Company and its domestic subsidiaries. The Company and its domestic subsidiaries adopt
RMB as the recording currency. When preparing the financial statements for Y2010, the
Group adopted RMB as the recording currency.
3. Accounting methods for business combinations
A business combination refers to a transaction or event bringing together two or more
separate enterprises into one reporting entity. Business combinations are divided into
business combinations under the same control and those not under the same control.
(1) Business combinations under the same control
A business combination under the same control is a business combination in which all the
enterprises involved in the combination are ultimately controlled by the same party or parties
both before and after the business combination and on which the control is not temporary. In
a business combination under the same control, the party which obtains control of other
enterprise(s) involved in the business combination on the combining date is the combining
party, and the other enterprise(s) involved in the business combination is (are) the combined
party. The "combining date" refers to the date on which the combining party obtains actual
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control on the combined party.
The assets and liabilities that the combining party obtains in a business combination shall be
measured on the basis of their carrying amount in the combined party on the combining date.
As for the balance between the carrying amount of the net assets obtained by the combining
party and the carrying amount of the consideration paid by it (or the total par value of the
shares issued), the additional paid-in capital shall be adjusted. If the additional paid-in capital
is not sufficient to be offset, the retained earnings shall be adjusted.
The direct cost for the business combination of the combining party shall be recorded into the
profits and losses at the current period.
(2) Business combinations not under the same control
A business combination not under the same control is a business combination in which the
combining enterprises are not ultimately controlled by the same party or the same parties
both before and after the business combination. In a business combination not under the same
control, the party which obtains the control on other combining enterprise(s) on the purchase
date is the acquirer, and other combining enterprise(s) is (are) the acquiree. The "acquisition
date" refers to the date on which the acquirer actually obtains the control on the acquiree.
As for business combinations not under the same control, the combination costs shall be the
fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and
the equity securities issued by the acquirer in exchange for the control on the acquiree, and
intermediary agency fees for auditing, legal, consulting services, etc. and other administrative
expenditures incurred for the business combination, which were recorded in the profits and
losses at the current period when incurred. The trading expenditures arising from the
acquirer’s issuance of equity or liabilities securities as the consideration for the business
combination are recorded in the initial recognition amount for the equity or liabilities
securities. Where an adjustment to the combination costs is likely to occur and can be
measured reliably, the contingent consideration is recognized and the subsequent
measurement has an influence on business reputation. The contingent consideration involved
is recorded in the combination costs according to its fair value on the acquisition date. Where
new or further evidence against the existing circumstances on the acquisition date occurs
within 12 months after the acquisition date, which makes it necessary to adjust the contingent
consideration, the combined business reputation is adjusted accordingly. For a business
combination realized by two or more transactions of exchange, in the Group’s consolidated
financial statements, as for the equity interests of the acquiree held by the Group before the
acquisition date, they are re-measured according to their fair value on the acquisition date.
The difference between their fair value and their carrying amount is recorded in investment
gains for the period comprising the acquisition date. Other comprehensive incomes arising
from the equity interests of the acquiree held by the Group before the acquisition date are
transferred to investment gains at the current period. The combination costs are the
summation of the fair value on the acquisition date of the equity interests of the acquiree held
by the Group before the acquisition date and the fair value on the acquisition date of the
equity interests of the acquiree acquired by the Group on the acquisition date.
The combination costs of the acquirer and the identifiable net assets obtained in the
combination are both measured at their fair values on the acquisition date. The positive
balance between the combination costs and the fair value of the identifiable net assets the
acquirer obtains from the acquiree is recognized as business reputation. The acquirer shall,
pursuant to the following provisions, treat the balance between the combination costs and the
fair value of the identifiable net assets it obtains from the acquiree: a. it shall reexamine the
measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it
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obtains from the acquiree as well as the combination costs; b. if, after the reexamination, the
combination costs are still less than the fair value of the identifiable net assets it obtains from
the acquiree, it shall record the balance into the profits and losses of the current period.
As for the unrecognized deductible temporary differences of the acquiree obtained by the
acquirer due to their not satisfying the recognition criteria for deferred income tax assets on
the acquisition date, if new or further information within 12 months after the acquisition date
shows that the relevant circumstances on the acquisition date has existed and that the
economic benefits arising from the deductible temporary differences of the acquiree on the
acquisition date are expected to be realized, the corresponding deferred income tax assets are
recognized and the business reputation is written down in the mean time. If the business
reputation is not sufficient to offset, the difference is recognized in the profits and losses at
the current period. Except for the aforesaid circumstance, the recognized deferred income tax
assets in relation to the business combination are recorded in the profits and losses at the
current period.
4. Preparation of consolidated financial statements
(1) Ascertainment of the consolidation scope
The scope of consolidated financial statements shall be confirmed based on the control.
Control means the Company can decide the financial and manage policy of investee entity
and have authority to earn the benefit from the investee entity. The consolidation scope
includes the Company and all its subsidiaries. The Company’s subsidiaries refer to the
enterprises or entities controlled by the Company.
(2) Preparation methods for consolidated financial statements
The Group consolidates a subsidiary from the date when the Group obtains actual control
over the subsidiary’s net assets and production and operation decision-making and
de-consolidates it from the date when such control ceases. As for a disposed subsidiary, its
operating results and cash flows before the disposal date are properly included in the
consolidated income statement and the consolidated cash flow statement. As for a subsidiary
disposed in the current period, the opening accounts in the consolidated balance sheet are not
restated. For a subsidiary acquired in a business combination not under the same control, its
operating results and cash flows after the acquisition date are properly included in the
consolidated income statement and the consolidated cash flow statement, and the opening
accounts and comparative accounts in the consolidated financial statements are not restated.
For a subsidiary acquired in a business combination under the same control or a merged party
under merge and consolidation, its operating results and cash flows for the period from the
beginning of the reporting period to the combination date are properly included in the
consolidated income statement and the consolidated cash flow statement, and the
comparative accounts in the consolidated financial statements are restated in the mean time.
In the preparation of the consolidated financial statements, where a subsidiary adopts
different accounting policies or accounting periods from those of the Company, the
subsidiary’s financial statements are adjusted according to the Company’s accounting policy
and accounting periods. For a subsidiary obtained in a business combination not under the
same control, its financial statements are adjusted on the basis of the fair value of its
identifiable net assets on the acquisition date.
All significant balances, transactions and unrealized profits within the Group are offset in the
preparation of the consolidated financial statements.
The portions in a subsidiary’s shareholders’ equity and net current profits and losses that are
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not attributable to the Company are separately presented, as minority interests and minority
shareholder gains and losses respectively, under the shareholders’ equity item and the net
profit item in the consolidated financial statements. The portion in the subsidiary’s current
net gains and losses that belongs to minority interests is presented as “minority shareholder
gains and losses” under the net profit item in the consolidated income statement. Where the
subsidiary’s losses attributable to minority shareholders exceed the portion in the subsidiary’s
opening owners’ equity attributable to minority shareholders, minority interests are offset.
Where the Company loses control over a former subsidiary due to disposal of some equity
investment or other reasons, the residual equity interests are re-measured according to the fair
value on the date when such control ceases. The summation of the consideration obtained
from the equity disposal and the fair value of the residual equity interests, minus the portion
in the former subsidiary’s net assets measured on a continuous basis from the acquisition date
that is attributable to the Company according to its former shareholding ratio in the
subsidiary, is recorded in the investment gains for the reporting period when the Company’s
control over the subsidiary ceases. Other comprehensive incomes in relation to the former
equity investment in the subsidiary are transferred to the investment gains at the current
period when the Company’s control over the subsidiary ceases. Later on, subsequent
measurement is carried out on the residual equity interests in accordance with the
“Accounting Standards for Business Enterprises No.2—Long-term Equity Investment” or the
“Accounting Standards for Business Enterprises No.22—Recognition and Measurement of
Financial Instruments” and other relevant regulations. For more details, please refer to “10.
Long-term Equity Investment” or “7. Financial Instruments” under the Note IV.
5. Recognition standard for cash and cash equivalents
The term “cash” refers to cash on hand and deposits that are available for payment at any
time. The term “cash equivalents” refers to short-term ( within 3 months from the purchase
date) and highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of change in value.
6. Foreign currency businesses and translation of foreign currency financial statements
(1) Translation of foreign currency transactions
At the time of initial recognition of a foreign currency transaction, the Group shall convert
the amount in a foreign currency into amount in its Renminbi at the spot exchange rate
(generally refer to the middle price of market exchange rate published by the People’s Bank
of China, the same below) on the day the transaction is occurred. Of which, as for such
transactions as foreign exchange or involving in foreign exchange, the Company shall
converted into amount in the Renminbi at actual exchange rate the transaction is occurred.
(2) Treatment method for the foreign currency monetary items and foreign currency
non-monetary items:
On the balance sheet date, the foreign currency monetary items are translated at the spot
exchange rate on the date. Exchange differences are recorded in the profits and losses at the
current period except for the following circumstances: ① Exchange differences arising from
the special foreign currency borrowings for the acquisition and construction of assets eligible
for capitalization are treated in accordance with the principle of borrowing cost capitalization;
② Exchange differences arising from the net investment hedging instruments in an overseas
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operation are recorded in other comprehensive incomes and can be recognized in the profits
and losses at the current period only when the net investment is disposed; and ③ Exchange
differences arising from changes in the carrying balances other than the amortized costs of
foreign currency monetary items available for sale are recorded in other comprehensive
incomes.
Foreign currency non-monetary items measured at historical costs are translated into RMB at
the spot exchange rate on the transaction date. The foreign currency non-monetary items
measured at the fair value are translated at the spot exchange rate on the fair value
confirming date, from which the exchange difference is treated as change in fair value
(including change in exchange rate) and recorded in the profit and loss of the current period,
or treated as other comprehensive incomes and recorded in the capital reserves.
(3) Translation of foreign currency financial statements
Where the consolidated financial statements involve an overseas operation and foreign
currency monetary items form in a substantial basis on the net investment in the overseas
operation, exchange differences arising from exchange rate changes are recorded in the
“translation difference of foreign currency statements” item under the owners’ equity item;
and recorded in the profits and losses at the reporting period of the disposal when the
overseas operation is disposed.
The foreign currency financial statements of an overseas operation are translated in RMB in
accordance with the following methods: The asset and liability items in the balance sheets
shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s
equity items, except the ones as “retained profits”, others shall be translated at the spot
exchange rate at the time when they are incurred. The income and expense items in the
profits statements shall be translated at the average exchange rate of the current period on
transaction date. The opening retained profit is the closing retained profit as of the previous
year after translation; The closing retained profit is measured and stated according to profit
distribution items after translation; And the difference between the asset items and the
summation of the liability and shareholders’ equity items after translation, as the translation
difference of foreign currency statements, is recognized in other comprehensive incomes and
is presented separately under the shareholders’ equity item in the balance sheet. Where an
overseas operation is disposed and the Group’s control on the overseas operation ceases, the
foreign currency statement translation difference in relation to the overseas operation and
presented under the shareholders’ equity items in the balance sheet is, all or according to the
disposal rate of the overseas operation, transferred to the profits and losses at the reporting
period comprising the disposal.
Foreign currency cash flows and cash flows generated by overseas subsidiaries are translated
at the average exchange rate for the current period on the date when the cash flow is
generated. The influence on cash due to change of exchange rate shall be presented
separately under the cash flow statement.
The opening amounts and the actual amounts in the previous year are presented on the basis
of the translated financial statements for the previous year.
7. Financial instruments
(1) Ascertainment of fair values of financial assets and liabilities
The “fair value” refers to the amount, at which both parties to a transaction who are familiar
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with the condition exchange assets or clear off debts under fair conditions. As for the
financial instrument for which there is an active market, the Group determines its fair value
using the quoted price in the active market. The quoted prices in the active market refer to the
prices, which are easily available from the stock exchange, brokers, industry associations,
pricing service institutions, etc. at a fixed term, and which represent the prices at which
actually incurred market transactions are made under fair conditions. Where there is no active
market for a financial instrument, the Group adopts value appraisal techniques to determine
its fair value. The value appraisal techniques mainly include the prices adopted by the parties,
who are familiar with the condition, in the latest market transaction upon their own free will,
the current fair value obtained by referring to other financial instruments of the same
essential nature, the cash flow capitalization method and the option pricing model, etc..
(2) Classification, recognition and measurement of financial assets
Financial assets bought in and sold out in the conventional way are recognized and
de-recognized in accordance with the transaction dates. In the initial recognition, financial
assets are divided into financial assets measured at fair values and whose changes are
recorded in current profits and losses, held-to-maturity investments, loans and accounts
receivables, and available-for-sale financial assets. In the initial recognition, a financial asset
is measured at its fair value. For a financial asset measured at fair value and whose changes
are recorded in current gains and losses, the relevant trading expenditures are directly
recorded in the gains and losses at the current period. And the trading expenditures for the
other financial assets are recorded in the initially recognized amount.
① Financial assets measured at fair values and whose changes are recorded in current profits
and losses
Such financial assets include transactional financial assets and financial assets designated to
be measured at fair values and whose changes are recorded in current gains and losses.
A transactional financial asset refers to a financial asset meeting any of the following
requirements: A. The purpose to acquire the financial asset is mainly for selling in the near
future; B. Forming a part of the identifiable combination of financial instruments which are
managed in a centralized way and for which there are objective evidences proving that the
Group may manage the combination by way of short-term profit making in the near future;
and C. Being a derivative instrument, excluding the designated derivative instruments which
are effective hedging instruments, or derivative instruments to financial guarantee contracts,
and the derivative instruments which are connected with the equity instrument investments
for which there is no quoted price in the active market, whose fair value cannot be reliably
measured, and which shall be settled by delivering the said equity instruments.
Financial asset complying with one of following conditions can be measured at fair value
when being initially recognized and changes in that financial asset are recorded in gains and
losses of the current period: A. The designation can eliminate or greatly reduce situations
where related profits or losses were in inconformity due to different measurement base of the
financial asset; B. The formal written document of concerning risk management or
investment strategy of the Group has stated that the Group shall manage and assess on
financial asset group and financial asset and financial liability group on the basis of fair value,
and report to key management staffs.
A transactional financial asset, which is measured at the fair value and changes thereof are
recorded in gains and losses of the current period, is subsequently measured at the fair value.
The gains and losses arising from the fair value changes, as well as the dividend and interest
incomes from the financial asset, are recorded in the gains and losses for the current period.
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② Held-to-maturity investments
A held-to-maturity investment refers to a non-derivative financial asset with a fixed date of
maturity, a fixed or determinable amount of repo price and which the Group holds for a
definite purpose or the Group is able to hold until its maturity.
A held-to-maturity investment is subsequently measured according to the amortized cost
using the actual interest rate method. The gains or losses arising from de-recognition,
impairment or amortization of the investment are recorded in the profits and losses for the
current period.
The actual interest rate method refers to the method by which the post-amortization costs and
the interest incomes of different installments or interest expenses are calculated in light of the
actual interest rates of the financial assets or financial liabilities (including a set of financial
assets or financial liabilities). The actual interest rate refers to the interest rate adopted to
cash the future cash flow of a financial asset or financial liability within the predicted term of
existence or within a shorter applicable term into the current carrying amount of the financial
asset or financial liability.
When calculating the actual interest rate, the Group predicts the future cash flow (not taking
into account the future credit losses) on the basis of taking into account all the contractual
provisions concerning the financial asset or financial liability. The various fee charges,
trading expenses, reduced values, premiums, etc., which are paid or collected by the parties
to a financial asset or financial liability contract and which form a part of the actual interest
rate, are also taken into account in the determination of the actual interest rate.
③ Loans and accounts receivable
Loans and accounts receivable refer to the non-derivative financial assets for which there is
no quoted price in the active market and of which the repo amount is fixed or determinable.
The financial assets defined by the Group as loans and accounts receivable include notes
receivable, accounts receivable, interest receivable, dividend receivable, other receivables,
etc..
Loans and accounts receivable are subsequently measured according to the amortized cost
using the actual interest rate method. The gains or losses arising from de-recognition,
impairment or amortization of the loans and accounts receivable are recorded in the profits
and losses for the current period.
④ Available-for-sale financial assets
Available-for-sale financial assets include the non-derivative financial assets which are
designated as available for sale when they are initially recognized, as well as the financial
assets other than the financial assets measured at fair values and whose changes are recorded
in current gains and losses, loans and accounts receivable and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at their fair values. Impairment
losses and the exchange differences of foreign currency monetary financial assets in relation
to the amortized cost are recorded in the profits and losses for the current period. Other gains
or losses arising from fair value changes are recognized as other comprehensive incomes and
recorded in the capital reserves, and transferred out and recorded in the profits and losses for
the current period when the financial asset is de-recognized.
Interest obtained during the period of holding an available-for-sale financial asset and the
cash dividends declared and distributed by an invested party are recorded in investment
gains.
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(3) Impairment of financial assets
For the financial assets other than the financial assets measured at fair values and whose
changes are recorded in current gains and losses, the Group runs a check on their carrying
amounts on every balance sheet date. Where there is any objective evidence proving that
such a financial asset has been impaired, an impairment provision is made.
The Group carries out a separate impairment test for every financial asset which is
individually significant. As for a financial asset which is individually insignificant, an
impairment test is carried out separately or in the financial asset group with similar credit risk.
Where the financial asset (individually significant or insignificant) is found not impaired
after the separate impairment test, it is included in the financial asset group with similar
credit risk and tested again on the group basis. Where the impairment loss is recognized for
an individual financial asset, it is not included in the financial asset group with similar credit
risk for an impairment test.
①Impairment of held-to-maturity investments, loans and accounts receivable
Where a financial asset measured on the basis of costs or amortized costs is impaired, the
carrying amount of the said financial asset is written down to the current value of the
predicted future cash flow. The amount written down is recognized as the impairment loss of
the asset and is recorded in the profits and losses for the current period. Where a financial
asset is recognized as having suffered from any impairment loss, if there is any objective
evidence proving that the value of the said financial asset has been restored, and it is
objectively related to the events that occur after such loss is recognized, the impairment
losses as originally recognized are reversed. The reversed carrying amount of the said
financial asset does not exceed the amortized cost of the said financial asset on the day of
reverse under the assumption that no provision is made for the impairment.
② Impairment of available-for-sale financial assets
Where an available-for-sale financial asset is impaired, the accumulative losses arising from
the decrease of the fair value of the capital reserve which is directly included are transferred
out and recorded in the profits and losses for the current period. The accumulative losses
transferred out are the balance obtained from the initially obtained cost of the said financial
asset after deducting the principals as taken back, the amortized amount, the current fair
value and the impairment loss originally recorded in the profits and losses.
Where the impairment loss has been recognized for an available-for-sale financial asset, if,
within the accounting periods thereafter, there is any objective evidence proving that the
value of the said financial asset has been restored and the restoration is objectively related to
the events that occur after the impairment loss was recognized, the originally recognized
impairment loss is reversed. The impairment losses on the available-for-sale equity
instrument investments are reversed and recognized as other comprehensive incomes, and the
impairment losses on the available-for-sale liability instruments are reversed and recorded in
the profits and losses for the current period.
The impairment loss incurred to an equity instrument investment for which there is no quoted
price in the active market and whose fair value cannot be reliably measured, or incurred to a
derivative financial asset which is connected with the said equity instrument investment and
which must be settled by delivering the said equity investment, is not reversed.
(4) Recognition and measurement of financial asset transfers
Where a financial asset satisfies any of the following requirements, the recognition of it is
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terminated: ① The contractual rights for collecting the cash flow of the said financial asset
are terminated; ② The said financial asset has been transferred and nearly all of the risks and
rewards related to the ownership of the financial asset to the transferee; or ③ The said
financial asset has been transferred. And the Group has ceased its control on the said
financial asset though it neither transfers nor retains nearly all of the risks and rewards
related to the ownership of the financial asset.
Where the Group neither transfers nor retains nearly all of the risks and rewards related to the
ownership of a financial asset, and it does not cease its control on the said financial asset, it
recognizes the relevant financial asset and liability accordingly according to the extent of its
continuous involvement in the transferred financial asset. The term "continuous involvement
in the transferred financial asset" refers to the risk level that the enterprise faces resulting
from the change of the value of the financial asset.
If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the
difference between the amounts of the following 2 items is recorded in the profits and losses
of the current period: (1) The book value of the transferred financial asset; and (2) The sum
of consideration received from the transfer, and the accumulative amount of the changes of
the fair value originally recorded in other comprehensive incomes.
If the transfer of partial financial asset satisfies the conditions to stop the recognition, the
book value of the transferred financial asset is apportioned between the portion whose
recognition has been stopped and the portion whose recognition has not been stopped
according to their respective relative fair value, and the difference between the amounts of
the following 2 items is included into the profits and losses of the current period: (1) The
summation of the consideration received from the transfer and the portion of the
accumulative amount of changes in the fair value originally recorded in other comprehensive
incomes which corresponds to the portion whose recognition has been stopped; and (2) The
amortized carrying amounts of the aforesaid amounts.
(5) Classification and measurement of financial liabilities
In the initial recognition, financial liabilities are divided into the financial liabilities measured
at fair values and whose changes are recorded in current gains and losses and other financial
liabilities. Financial liabilities are initially recognized at their fair values. As for a financial
liability measured at fair value and whose changes are recorded in current gains and losses,
the relevant trading expense is directly recorded in the profits and losses for the current
period. As for other financial liabilities, the relevant trading expenses are recorded in the
initially recognized amounts.
① Financial liabilities measured at fair values and whose changes are recorded in current
gains and losses
Such financial liabilities are divided into transactional financial liabilities and financial
liabilities designated to be measured at fair values and whose changes are recorded in current
gains and losses in the initial recognition under the same conditions where such financial
assets are divided into transactional financial assets and financial assets designated to be
measured at fair values and whose changes are recorded in current gains and losses in the
initial recognition.
Financial liabilities measured at fair values and whose changes are recorded in current gains
and losses are subsequently measured at their fair values. Gains or losses arising from the fair
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value changes, as well as the dividend and interest expenses in relation to the said financial
liabilities, are recorded in the profits and losses for the current period.
② Other financial liabilities
As for a derivative financial liability connected to an equity instrument for which there is not
quoted price in an active market and whose fair value cannot be reliably measured and which
must be settled by delivering the equity instrument, it is subsequently measured on the basis
of costs. Other financial liabilities are subsequently measured according to the amortized cost
using the actual interest rate method. Gains or losses arising from de-recognition or
amortization of the said financial liabilities is recorded in the profits and losses for the
current period.
③ Financial guarantee contract
For the financial guarantee contracts which are not designated as a financial liability
measured at its fair value and the variation thereof is recorded into the profits and losses of
the current period, which shall be initially recognized by fair value, and the subsequent
measurement shall be made after they are initially recognized according to the higher one of
the following: a. the amount as determined according to the Accounting Standards for
Enterprises No. 13 – Contingencies; b. the surplus after accumulative amortization as
determined according to the principles of the Accounting Standards for Enterprises No. 14 -
Revenues is subtracted from the initially recognized amount.
(6) De-recognition of financial liabilities
Only when the prevailing obligations of a financial liability are relieved in all or in part may
the recognition of the financial liability be terminated in all or partly. Where the Group
(debtor) enters into an agreement with a creditor so as to substitute the existing financial
liabilities by way of any new financial liability, and if the contractual stipulations regarding
the new financial liability is substantially different from that regarding the existing financial
liability, it terminates the recognition of the existing financial liability, and at the same time
recognizes the new financial liability.
Where the recognition of a financial liability is totally or partially terminated, the enterprise
concerned shall include into the profits and losses of the current period for the gap between
the book value which has been terminated from recognition and the considerations it has paid
(including the non-cash assets it has transferred out and the new financial liabilities it has
assumed).
(7) Derivative instrument and embedded derivative instrument
Derivative instrument shall be initially measured at its fair value on the signing date for
relevant contracts, and made the follow-up measurement at fair value. The changes in the fair
value of the derivative instrument shall be recorded into gain/loss at current period.
Where a mixed instrument including an embedded derivative instrument fails to be
designated as a financial asset or financial liability measured at its fair value and of which the
variation is included in the current profits and losses, and it can simultaneously meet the two
conditions that there is no close relationship between it and the principal contract in terms of
economic features and risks, as well as there is no close relationship between it and the
principal contract in terms of economic features and risks. Then the embedded derivative
instrument shall be separated from the mixed instrument and treated as an independent
derivative instrument. Where it is impossible to make an independent measurement when it is
obtained or subsequently on the balance sheet date, the mixed instrument shall be designated
entirely as a financial asset or financial liability measured at its fair value and of which the
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variation is included in the current profits and losses.
(8) The offset of financial assets and financial liabilities
When the Group has the legal right to offset the confirmed financial assets and financial
liabilities, and can execute this legal right now, meanwhile, the Group plans to settle them at
their net amount or realize the financial assets and pay off the financial liabilities at the same
time, the financial assets and financial liabilities should be listed in the balance sheet by the
amount after their offset with each other. Apart from this, the financial assets and financial
liabilities should be listed in the balance sheet respectively and should not offset with each
other.
(9) Equity instruments
The "equity instruments" refers to the contracts which can prove that the Group holds the
surplus equities of the assets after the deduction of all the debts. For equity instruments, the
consideration received in the issuance of equity instruments after deducting the transaction
cost shall be recorded in the owners’ equity.
The owners’ equity decreased from the Group’s various distributions (excluding the dividend
distribution) to the owners of equity instruments, the Group shall not make it as the change in
the fair value of equity instruments.
8. Receivables
Receivables include account receivables and other accounts receivables.
(1) Recognition of provision for bad debts:
The Group shall test the carrying amount of receivables on the balance sheet date. Where
there is any objective evidence proving that such receivables have been impaired, an
impairment provision shall be made.
① Debtor has serious financial difficult;
② Debtor goes against the contract clause (for instance, breach of faith or overdue paying
interests or principal);
③ Debtors has a great probability of bankruptcy or other financial reorganization;
④ Other objective evidence proving such accounts receivable has been impaired;
(2) Withdraw method of provision for bad debts
① The recognition criteria and method of individual provision for bad debts of receivables
that are individually significant
The Group recognized the receivables with amount above RMB 20 million and other
receivables above 10 million as receivables with significant single amounts and withdrawn
the provision for bad debts.
The Group made an independent impairment test on receivables with significant single
amounts, the financial assets without impairment by independent impairment test should be
included in financial assets portfolio with similar credit risk to take the impairment test.
Receivables was recognized with impairment should no longer be included in receivables
portfolio with similar credit risk to take the impairment test.
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② The recognition and method of provision for bad debts of receivables by credit risk
portfolio
A. Recognition of credit risk group
Receivables that are not individually significant, and individually significant but without
impairment by independent impairment test, are grouped on the basis of similarity and
relevance of credit risk. This credit risk usually reflects the debtor’s ability to repay all the
due accounts in accordance with contract for such assets, which also are related with the
measurement on future cash flow of the examined assets.
Recognition of different groups:
Item Recognition basis of group
Aging group Age of accounts receivable
The group of related parties of
Whether the debtor is the related party among the group or not
the Group
B. Withdrawal method of provision for bad debts recognized by credit risk group
For the impairment test implemented by groups, the amount of provision for bad debts was
appraised and recognized in accordance with the structure of accounts receivable group and
similar characteristics of credit risk (the debtor’s ability to pay off the loans in accordance
with the provisions of contract), experience of losses, current economic status and the
predicted losses in the accounts receivable group.
Withdrawal methods of provision for bad debts on different groups
Item Withdrawal method
Age group Aging analysis
Related parties groups within the
No withdrawal
Group
In the group, withdrawal method for provision for bad debts by aging analysis
Proportion of provision for bad
Proportion of provision for bad
Age debts of other accounts
debts of accounts receivable（%）
receivable（%）
Within 1 year（including 1 year, the
2 2
same below）
1-2 years 5 5
2-3 years 20 20
3-5 years 50 50
Over 5 years 100 100
Impairment of prepayment: The prepayment shall be subject to the individual impairment test
on the balance sheet date. The provision for bad debts should be measured as per the balance
between the carrying amount and the present value of the cash flow in future if there is an
objective evidence for the impairment occurrence.
③ Receivables with insignificant amount but being individually withdrawn the provision for
bad debts
The Group made independent impairment test on receivables with insignificant amount but
with the following characteristics, if any objective evidence shows that the accounts
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receivable has been impaired, impairment loss shall be recognized on the basis of the gap
between the current values of the future cash flow lower than its book value so as to
withdraw provision for bad debts:
A. Receivables existing dispute with the other parties or involving lawsuit and arbitration;
B. Receivables exist obvious indication showing that the debtors are likely to fail to perform
the duty of repayment, etc..
(3) Reversal of provision for bad debts
If there is any objective evidence proving that the value of the said receivables has been
restored, and it is objectively related to the events occurred after such loss is recognized, the
impairment-related losses as originally recognized shall be reversed and be recorded into the
profits and losses of the current period. However, the reversed carrying amount shall not be
any more than the post-amortization costs of the said accounts receivable on the day of
reverse under the assumption that no provision is made for the impairment.
9. Inventory
(1) Classification
Inventories are classified as: raw materials, goods in process, merchandise on hand, goods
delivered, circulating materials and etc.
(2) Pricing method of outgoing and obtaining inventories
The inventories shall be measured in light of their cost when obtained. The cost of inventory
consists of purchase costs, processing costs and other costs. Inventory is accounted by weight
average method upon receiving and giving. For merchandise on hand shall be accounted by
planned cost, if the difference between planned cost of and actual cost of raw materials is
accounted through the cost variance item, and the planned cost is adjusted to the actual cost
according to the cost difference which the carryover and given-out inventory should shoulder
in the period.
(3) Recognition standard of net realizable value and withdrawal method of depreciation
reserves for inventories
The net realizable value refers, in the ordinary course of business, to the account after
deducting the estimated cost of completion, estimated sale expense and relevant taxes from
the estimated sale price of inventories. The net realizable value of inventories shall be fixed
on the basis of valid evidence as well as under consideration of purpose of inventories and
the effect of events after balance-sheet-date.
On the balance sheet date, the inventories shall be measured according to the cost or the net
realizable value, whichever is lower. If the net realizable value is lower than the cost, it shall
withdraw the depreciation reserves for inventories, which was withdrawn in accordance with
the balance that the cost of individual inventory item exceeding the net realizable value.
After withdrawing the depreciation reserves for inventories, if the factors, which cause any
write-down of the inventories, have disappeared, causing the net realizable value of
inventories is higher than its carrying amount, the amount of write-down shall be reversed
from the original amount of depreciation reserve for inventories. The reversed amount shall
be included in the profits and losses of the current period.
(4) Inventory system for inventories: Perpetual inventory system.
(5) Amortization method of the low-value consumption goods and packing articles
The Company shall amortize the low-value consumption goods and packing through the
one-off amortization method.
10. Long-term equity investment
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(1) Recognition of investment cost
The initial cost of the long-term equity investment formed in business combination shall be
ascertained in accordance with the following provisions: For the business combination under
the same control, it shall regard the share of the carrying amount of the owner's equity of the
combined party on the date of combination as the initial cost of the long-term equity
investment. For the business combination under different control, the combination costs shall
be the sum of the fair values of the assets paid, the liabilities incurred or assumed and the
equity securities issued by the Company; the commission fees for audit, law services,
assessment & consultancy services and other relevant expenses occurred in the business
combination by the combining party, shall be recorded into current profits and losses upon
their occurrence; the transaction expense from the issuance of equity securities or bonds
securities which are as consideration for combination by the combining party, should be
recorded as the initial amount of equity securities and bonds securities.
Besides the long-term equity investments formed by business combination, the other
long-term equity investments shall be initially measured by cost, the cost is fixed in
accordance with the ways of gaining, such as actual cash payment paid by the Group, the fair
value of equity securities issued by the Group, the agreed value of the investment contract or
agreement, the fair value or original carrying amount of exchanged assets from non-monetary
assets exchange transaction, the fair value of the long-term equity investments, etc. The
expenses, taxes and other necessary expenditures directly related with gaining the long-term
equity investments shall also be recorded into investment cost.
(2) Follow-up measurement of long-term equity investment and recognized method of profits
and losses
The long-term equity investment that the Company does not have joint control or significant
influences on the invested entity, and has no offer in the active market and its fair value
cannot be reliably measured, it shall be measured by adopting the cost method; a long-term
equity investment that the Company has joint control or significant influences over the
invested entity shall be measured by employing the equity method; a long-term equity
investment that the Company does not have control, joint control or significant influence on
the invested entity, as well as its fair value can be reliably measured, it shall be accounted as
financial assets available-for-sale.
Moreover, long-term equity investment adopting the cost method in the financial statements,
and which the Company has control on invested entity.
① Long-term equity investment measured by adopting cost method
The price of a long-term equity investment measured by adopting the cost method shall be
included at its initial investment cost, the return on investment at current period shall be
recognized in accordance with the cash dividend or profit announced to distribute by the
invested entity, except the announced but not distributed cash dividend or profit included in
the actual payment or consideration upon gaining the investment.
②Long-term equity investment measured by adopting equity method
If the initial cost of a long-term equity investment is more than the Company's attributable
share of the fair value of the invested entity's identifiable net assets for the investment, the
initial cost of the long-term equity investment may not be adjusted. If the initial cost of a
long-term equity investment is less than the Company's attributable share of the fair value of
the invested entity's identifiable net assets for the investment, the difference shall be included
in the current profits and losses and the cost of the long-term equity investment shall be
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adjusted simultaneously.
When measured by adopting equity method, the investment profits or losses at current period
shall be the attributable share of the net profits or losses of the invested entity. The investing
enterprise shall, on the ground of the fair value of all identifiable assets of the invested entity
when it obtains the investment, and in accordance with the accounting policies and
accounting periods, recognize the attributable share of the net profits and losses of the
invested entity after it adjusts the net profits of the invested entity. For the profits and losses
of unrealized insider dealing between the Group and joint-operative enterprise or
co-operative enterprise, the investment profits and losses shall be recognized after the part
attributable to the Group calculated by proportion of shares held being offset. However, if the
losses of unrealized insider dealing between the Group and joint-operative enterprise or
co-operative enterprise was attributed to the impairment losses of the transferred assets in
accordance with the Accounting Standards for Enterprises No. 8— Asset Impairment, which
shall not be offset. The other comprehensive profits from invested entity shall be recognized
as other comprehensive profits after adjusting the book value of long-term equity investment,
and then recorded into capital reserves
The Group shall recognize the net losses of the invested enterprise until the book value of the
long-term equity investment and other long-term rights and interests which substantially
form the net investment made to the invested entity are reduced to zero. However, if the
Group has the obligation to undertake extra losses, it shall be recognized as the estimated
liabilities in accordance with the estimated duties and then recorded into investment losses at
current period. If the invested entity realizes any net profits later, the Group shall, after the
amount of its attributable share of profits offsets against its attributable share of the
un-recognized losses, resume to recognize its attributable share of profits.
For the long-term equity investment on joint-enterprise and co-operative enterprise held by
the Group before the initial execution of New Accounting Standards for Enterprise, if there
existed the balance of debtor for equity investment related with such long-term equity
investment, which shall be recorded into current profits and losses with the amount by
straight-line amortization in the remained period.
③ Acquiring shares of minority interest
In the preparation for the financial statements, the balance existed between the long-term
equity investment increased by acquiring shares of minority interest and the attributable net
assets on the subsidiary calculated by the increased shares held since the purchase date (or
combination date), the capital reserves shall be adjusted, if the capital reserves are not
sufficient to offset, the retained profits shall be adjusted.
④ Disposal of long-term equity investment
In the preparation of financial statements, the Company disposed part of the long-term equity
investment on subsidiaries without losing its controlling right on them, the balance between
the disposed price and attributable net assets of subsidiaries by disposing the long-term
equity investment shall be recorded into owners’ equity; where the Company losses the
controlling right by disposing part of long-term equity investment on such subsidiaries, it
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shall treated in accordance with the relevant accounting policies in Note IV. 4 (2) “Method on
preparation of combined financial statements”.
For other ways on disposal of long-term equity investment, the balance between the book
value of the disposed equity and its actual payment gained shall be recorded into current
profits and losses; for the long-term equity investment measured by adopting equity method,
the other comprehensive income originally recorded into owners’ equity shall be transferred
into current profits and losses by proportions upon the disposal. The remained equity shall be
recognized as long-term equity investment or other relevant financial assets in accordance
with the book value, and carried out the follow-up measurement in accordance with the
above accounting policies for the long-term equity investment or financial assets. If the
measurement method of remained equity is transferred from cost method to equity method, it
shall be subject to retrospective adjustment in accordance with relevant rules and
stipulations.
(3) Recognition basis of joint control and significant influences
The term "control" refers to the power to determine the financial and operating polices of an
enterprise and obtain benefits from its operating activities of the enterprise. The term "joint
control" refers to the control over an economic activity in accordance with the contracts and
agreements, which does not exist unless the investing parties of the economic activity with
one an assent on sharing the control power over the relevant important financial and
operating decisions. The term "significant influences" refers to the power to participate in
making decisions on the financial and operating policies of an enterprise, but not to control
or do joint control together with other parties over the formulation of these policies. When
ascertaining whether or not it is able to control or have significant influences on an invested
entity, an enterprise shall take into consideration the invested enterprises' current convertible
corporate bonds and current executable warrants held by the investing enterprise and other
parties, as well as other potential factors concerning the voting rights.
(4) Testing method of impairment and withdrawal method of provision for impairment
The Group shall, on the day of balance sheet, make a judgment on whether there is any sign
of possible impairment of the long-term equity investment. Where there is sign of
impairment, the Group shall estimate the recoverable amount of the long-term equity
investment. Where the recoverable amount of the long-term equity investment is lower than
its book value, which balance shall be withdrawn the provision for impairment and recorded
into current profits and losses.
Once any loss of impairment of the long-term equity investment is recognized, it shall not be
switched back in the future accounting periods.
11. Fixed assets
(1)Recognized standard of fixed assets
The term "fixed assets" refers to the tangible assets that simultaneously possess the features
as follows: they are held for the sake of producing commodities, rendering labor service,
renting or business management; and their useful life is in excess of one fiscal year.
(2) Category of fixed assets and depreciation
The initial measurement of a fixed asset shall be made at its cost after considering the effect
of expected discard expenses. The Group shall withdraw the depreciation of fixed assets by
adopting the straight-line method since the second month of its useful life. Useful life,
expected net salvage value and annual depreciation rate of each fixed assets are as below:
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Expected net Annual
Category of fixed assets Useful life (Y) salvage value deprecation rate
（%） （%）
Houses and buildings 20-40 10.00 2.25-4.50
Machinery equipments 10 10.00 9.00
Transportation vehicle 5 10.00 18.00
Electronic equipments other 5 10.00 18.00
Other equipments 555 10.00 18.00
55
The "expected net salvage value" refers to the expected amount that the Group may obtain
from the current disposal of a fixed asset after deducting the expected disposal expenses at
the expiration of its expected useful life.
(3) Testing method of impairment and withdrawal method of provision for impairment on
fixed assets
For details, please refer to Note IV. 16 “Impairment of non-current non financial assets”.
(4) Recognition basis and pricing method of fixed assets by finance lease
The "finance lease" shall refer to a lease that has transferred in substance all the risks and
rewards related to the ownership of an asset. Its ownership may or may not eventually be
transferred. The fixed assets by finance lease shall adopt the same depreciation policy for
self-owned fixed assets. If it is reasonable to be certain that the lessee will obtain the
ownership of the leased asset when the lease term expires, the leased asset shall be fully
depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain
the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully
depreciated over the shorter one of the lease term or its useful life.
(5) Other explanations
The follow-up expenses related to a fixed asset, if the economic benefits pertinent to this
fixed asset are likely to flow into the enterprise and its cost can be reliably measured, shall be
recorded into cost of fixed assets and ultimately recognized as the book value of the replaced
part; otherwise, they shall be included in the current profits and losses.
When the Group sells, transfers or discards any fixed assets, or when any fixed assets of the
Group is damaged or destroyed, the Group shall deduct the book value of the fixed assets as
well as the relevant taxes from the disposal income, and include the amount in the current
profits and losses.
The Group shall check the useful life, expected net salvage value and depreciation method of
the fixed assets at the end of the year at least, if there is any change, it shall be regarded as a
change of the accounting estimates.
12. Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises construction costs,
borrowing costs that are eligible for capitalization before the fixed assets being ready for
their intended us and other relevant costs. Construction in progress is transferred to fixed
assets when the assets are ready for their intended use
For details of the testing method of impairment and withdraw method of impairment
provision on construction in progress, please refer to Note IV. 16 “Impairment of non-current
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non financial assets”.
13. Borrowing costs
The borrowing costs shall include interest on borrowings, amortization of discounts or
premiums on borrowings, ancillary expenses, and exchange balance on foreign currency
borrowings. Where the borrowing costs incurred to an enterprise can be directly attributable
to the acquisition and construction or production of assets eligible for capitalization, it shall
start to be capitalized when the asset disbursements have already incurred, the borrowing
costs has already incurred and the acquisition and construction or production activities which
are necessary to prepare the asset for its intended use or sale have already started; When the
qualified asset under acquisition and construction or production is ready for the intended use
or sale, it shall stop to be capitalized. Other borrowing costs shall be recognized as costs
upon their occurrence.
The to-be-capitalized amount of interests shall be determined in light of the actual interests
incurred of the specially borrowed loan at the present period minus the income of interests
earned on the unused borrowing loans as a deposit in the bank or as a temporary investment;
the enterprise shall calculate and determine the to-be-capitalized amount on the general
borrowing by multiplying the weighted average asset disbursement of the part of the
accumulative asset disbursements minus the general borrowing by the capitalization rate of
the general borrowing used. The capitalization rate shall be calculated and determined in
light of the weighted average interest rate of the general borrowing.
During the period of capitalization, the exchange balance on foreign currency special
borrowings shall be capitalized; the exchange balance on foreign currency general
borrowings shall be recorded into current profits and losses.
The term “assets eligible for capitalization” refers to the fixed assets, investment real estate,
inventories and other assets, of which the acquisition and construction or production may
take quite a long time to get ready for its intended use or for sale.
Where the acquisition and construction or production of a qualified asset is interrupted
abnormally and the interruption period lasts for more than 3 months, the capitalization of the
borrowing costs shall be suspended until the acquisition and construction or production of a
qualified asset resume again
14. Intangible assets
(1) Intangible assets
The term "intangible asset" refers to the identifiable non-monetary assets possessed or
controlled by enterprises which have no physical shape.
The intangible assets shall be initially measured according to its cost. The costs related with
the intangible assets, if the economic benefits related to intangible assets are likely to flow
into the enterprise and the cost of intangible assets can be measured reliably, shall be
recorded into the costs of intangible assets; otherwise, it shall be recorded into current profits
and losses upon the occurrence.
The use right of land gained is usually measured as intangible assets. For the self-developed
and constructed factories and other constructions, the related expenditures on use right of
land and construction costs shall be respectively measured as intangible assets and fixed
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assets. For the purchased houses and buildings, the related payment shall be distributed into
the payment for use right of land and the payment for buildings, if it is difficult to be
distributed, the whole payment shall be treated as fixed assets.
For intangible assets with a finite service life, from the time when it is available for use, the
cost after deducting the sum of the expected salvage value and the accumulated impairment
provision shall be amortized by straight line method during the service life. While the
intangible assets without certain service life shall not be amortized.
At the end of period, the Group shall check the service life and amortization method of
intangible assets with finite service life, if there is any change, it shall be regarded as a
change of the accounting estimates. Besides, the Group shall check the service life of
intangible assets without certain service life, if there is any evidence showing that the period
of intangible assets to bring the economic benefits to the enterprise can be prospected, it shall
be estimated the service life and amortized in accordance with the amortization policies for
intangible assets with finite service life.
(2) Expenditures for research and development
The expenditures for its internal research and development projects of the Company shall be
classified into research expenditures and development expenditures.
Expenditures for research and development shall be recorded into current profits and losses
upon the occurrence.
The development expenditures for its internal research and development projects of an
enterprise may be confirmed as intangible assets when they satisfy the following conditions
simultaneously, otherwise，it shall be recorded into current profits and losses.
① It is feasible technically to finish intangible assets for use or sale;
② It is intended to finish and use or sell the intangible assets;
③ The usefulness of methods for intangible assets to generate economic benefits shall be
proved, including being able to prove that there is a potential market for the products
manufactured by applying the intangible assets or there is a potential market for the
intangible assets itself or the intangible assets will be used internally;
④ It is able to finish the development of the intangible assets, and able to use or sell the
intangible assets, with the support of sufficient technologies, financial resources and other
resources; and
⑤ The development expenditures of the intangible assets can be reliably measured.
If the expenditures for research and expenditures for development can not be distinguished
from each other, all the expenditures for research and development shall be recorded into
current profits and losses.
(3) Testing method of impairment and withdraw method of impairment provision for
intangible assets
For details, please refer to Note IV. 16 “Impairment of non-current non financial assets”.
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15. Long-term deferred expenses
Long-term deferred expenses refer to general expenses with the apportioned period over one
year that have occurred but attributable to the current and future periods. Long-term deferred
expense shall be amortized averagely within benefit period.
16. Impairment of non-current non-financial assets
For the non-current non-financial assets, such as fixed assets, construction in progress,
intangible assets with finite service life, investment real assets measured by cost mode as
well as long-term equity investment on subsidiaries, co-operative enterprise and
joint-operative enterprise, etc., are tested for impairment if there is any indication that an
asset may be impaired at the balance date. If there is any sign of possible assets impairment,
the Group shall estimate the recoverable amount and made the impairment tests. No matter
whether there is any sign of possible assets impairment, the good will, intangible assets
without certain service life, intangible assets not ready for use shall be subject to impairment
test every year.
If the result of the impairment test indicates that the recoverable amount of the asset is less
than its book value, a provision for impairment and an impairment loss are recognized for the
amount by which the asset’s book value exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and the present value of the
future cash flows expected to be derived from the asset. The fair value of an asset shall be
determined in light of the basis of the price as stipulated in the sales agreement. Where there
is no sales agreement but there is an active market of assets, the fair value of the asset shall
be determined according to the price bidden by the buyer of the asset; Where there is no sales
agreement and no active market of assets, the fair value of an asset shall be estimated in light
of the best information available. The disposal expenses shall include the relevant legal
expenses, relevant taxes, trucking charge as well as the direct expenses for bringing the assets
into a marketable state. The current value of the expected future cash flow of an asset shall be
determined by the discounted cash with an appropriate discount rate, on the basis of the
expected future cash flow generated during the continuous use or final disposal of an asset. A
provision for asset Impairment is determined and recognized on an individual asset basis. If it
is not possible to estimate the recoverable amount of an individual asset, the recoverable
amount of the group of assets to which the asset belongs is determined. A group of assets is
the smallest group of assets that is able to generate independent cash inflows.
For the goodwill separately listed in the financial statements, during the impairment test, the
book value of this goodwill is allocated to the related asset group or groups of asset group
which is expected to benefit from the synergies of the business combination. If the result of
the test indicates that the recoverable amount of an asset group or groups of asset group
including the goodwill allocated is lower than its book value, the corresponding impairment
loss is recognized. The impairment loss is first deducted from the book value of goodwill
allocated to the asset group or groups of asset group, and then deducted from the book value
of the remaining assets of the asset group or groups of asset group pro rata with goodwill.
Once the asset impairment loss mentioned above is recognized, it is not allowed to be
reversed even if the value is recovered in the subsequent periods.
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17. Estimated liabilities
The obligation pertinent to a Contingencies shall be recognized as an estimated liability when
the following conditions are satisfied simultaneously: (1)That obligation is a current
obligation of the enterprise; (2)It is likely to cause any economic benefit to flow out of the
enterprise as a result of performance of the obligation; and (3)The amount of the obligation
can be measured in a reliable way.
On the balance sheet date, an enterprise shall take into full consideration of the risks,
uncertainty, time value of money, and other factors pertinent to the Contingencies to
measured the estimated liabilities in accordance with the best estimate of the necessary
expenses for the performance of the current obligation.
When all or some of the expenses necessary for the liquidation of an estimated liabilities of
an enterprise is expected to be compensated by a third party, the compensation should be
separately recognized as an asset only when it is virtually certain that the reimbursement will
be obtained. Besides, the amount recognized for the reimbursement should not exceed the
book value of the estimated liabilities.
18. Revenue
(1) Revenue from selling goods
No revenue from selling goods may be recognized unless the following conditions are met
simultaneously: the significant risks and rewards of ownership of the goods have been
transferred to the buyer by the enterprise; the enterprise retains neither continuous
management right that usually keeps relation with the ownership nor effective control over
the sold goods; the relevant amount of revenue can be measured in a reliable way; the
relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to
be incurred can be measured in a reliable way. The recognition of revenue from exported
goods: For good exported by way of FOB, the revenue shall be recognized once the goods
were delivered to the carrier designated by the purchaser; for goods exported by way of CIF,
the revenue shall be recognized once the goods reach the port of the purchase.
(2) Revenue from providing labor services
No revenue from providing labor services may be recognized unless the labor has been
provided and the relevant payment has been received and gained the proof of collection. No
revenue from property management may be recognized unless the property management
service has been provided, and the economic interest related with such service can flow into
the enterprise, as well as the cost related with such service can be reliably measured.
Where a contract or agreement signed between Group and other enterprises concerns selling
goods and providing of labor services, if the part of sale of goods and the part of providing
labor services can be distinguished from each other and can be measured respectively, the
part of sale of goods and the part of providing labor services shall be treated respectively. If
the part of selling goods and the part of providing labor services can not be distinguished
from each other, or if the part of sale of goods and the part of providing labor services can be
distinguished from each other but can not be measured respectively, both parts shall be
conducted as selling goods.
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(3) Royalty revenue
In accordance with relevant contract or agreement, the amount of royalty revenue should be
recognized as revenue on accrual basis.
(4) Interest revenue
The amount of interest revenue should be measured and confirmed in accordance with the
length of time for which the Group’s monetary fund is used by others and the agreed interest
rate;
19. Government subsidies
A government subsidy means the monetary or non-monetary assets obtained free by the
Group from the government, but excluding the capital invested by the government as the
owner of the enterprise. Government subsidies consist of the government subsidies pertinent
to assets and government subsidies pertinent to income.
If a government subsidy is a monetary asset, it shall be measured in the light of the received
or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured
at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at
its nominal amount. The government subsidies measured at their nominal amounts shall be
directly included in the current profits and losses.
The government subsidies pertinent to assets shall be recognized as deferred income, equally
distributed within the useful lives of the relevant assets, and included in the current profits
and losses. The government subsidies pertinent to incomes shall be treated respectively in
accordance with the circumstances as follows: those subsidies used for compensating the
related future expenses or losses of the enterprise shall be recognized as deferred income and
shall included in the current profits and losses during the period when the relevant expenses
are recognized; or those subsidies used for compensating the related expenses or losses
incurred to the enterprise shall be directly included in the current profits and losses.
Where it is necessary to refund any government subsidy which has been recognized, it shall
be treated respectively in accordance with the circumstances as follows: if there is the
deferred income concerned, the book balance of the deferred income shall be offset against,
but the excessive part shall be included in the current profits and losses; or if there is no
deferred income concerned to the government subsidy, it shall be directly included in the
current profits and losses.
20. Deferred income tax assets and deferred income tax liabilities
(1) Current income tax
On the balance sheet date, the current income tax liabilities (or assets) incurred in the current
period or prior periods shall be measured on the basis of the expected payable (refundable)
amount of income tax, which is calculated according to the tax law. The taxable income
which is the basis to calculate current income tax is the pre-tax accounting profits at the
period after adjustment in accordance with the stipulations of relevant tax laws
(2) Deferred income tax assets and deferred income tax liabilities
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The balance between the book value of deferred tax assets and deferred tax liabilities and its
taxable amount, as well as the temporary difference between the book value of those
unrecognized as assets and liabilities but with clear taxable amount and the taxable amount
should adopt law of liabilities for balance sheet to recognize deferred income tax assets and
deferred income tax liabilities.
No deferred tax liability is recognized for a temporary difference arising from the initial
recognition of goodwill, the initial recognition of assets or liabilities due to a transaction
other than a business combination, which affects neither accounting profit nor taxable profit
(or deductible loss). Besides, no deferred tax assets is recognized for the taxable temporary
differences related to the investments of subsidiary companies, associated enterprises and
joint enterprises, and the investing enterprise can control the time of the reverse of temporary
differences as well as the temporary differences are unlikely to be reversed in the excepted
future. Otherwise, the Group should recognize the deferred income tax liabilities arising form
other taxable temporary difference.
No deferred taxable assets should be recognized for the deductible temporary difference of
initial recognition of assets and liabilities arising from the transaction which is not business
combination, the accounting profits will not be affected, nor will the taxable amount or
deductible loss be affected at the time of transaction. Besides, no deferred taxable assets
should be recognized for the deductible temporary difference related to the investments of
the subsidiary companies, associated enterprises and joint enterprises, which are not likely to
be reversed in the expected future or is not likely to acquire any amount of taxable income
tax that may be used for making up such deductible temporary differences. Otherwise, the
Company shall recognize the deferred income tax assets arising from a deductible temporary
difference basing on the extent of the amount of the taxable income that is likely to be
acquired to make up such deductible temporary differences
For any deductible loss or tax deduction that can be carried forward to the next year, the
corresponding deferred income tax asset shall be determined to the extent that the amount of
future taxable income to be offset by the deductible loss or tax deduction to be likely
obtained.
On the balance sheet date, the deferred income assets and deferred income tax liabilities shall
be measured at the tax rate applicable to the period during which the assets are expected to be
recovered or the liabilities are expected to be settled.
The book value of deferred income tax assets shall be reviewed at each balance sheet date. If
it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred
income tax asset, the book value of the deferred income tax assets shall be written down. Any
such write-down should be subsequently reversed where it becomes probable that sufficient
taxable income will be available.
(3) Income tax expense
Income tax expense includes current income tax and deferred income tax.
Except the current income tax and deferred income tax, which was recognized as other
comprehensive income or related with the transactions or events directly recorded in the
owner's equities, should be recorded in other comprehensive income or owners’ equity, and
the book value of deferred income tax from business combination after adjusting the good
will, the other expenses or income of current income tax and deferred income tax should be
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recorded into current profits and losses.
(4) The offset of income tax
When the Group has the legal right to settle with net amount, and intends to settle, purchase
assets, liquidate liabilities with net amount at the same time, the current income tax assets
and current income tax liabilities of the Group shall be listed by the net amount after the
offset.
When the Group has the legal right to settle current income tax assets and current income tax
liabilities with net amount, as well as the deferred income tax assets and deferred income tax
liabilities are related with the income tax that the same taxation authority collects towards the
same tax payer or different tax payer, but during every period of reversal for significant
deferred income tax assets and liabilities in the future, if the tax payer intends to settle the
current income tax assets and liabilities or purchase assets and liquidate liabilities with the
net amount, the Group’s deferred income tax assets and deferred income tax liabilities shall
be listed as the net amount after offset.
21. Leasing
The “finance lease” shall refer to a lease that has transferred in substance all the risks and
rewards related to the ownership of an asset. The ownership of it may or may not eventually
be transferred. Except financial lease, the other leases are operating lease.
22. Employee compensation
The Group recorded the employee compensation payables as liabilities during the service
period of employee.
The Group joins in the employee social security system established by the government
institution in accordance with relevant rules and laws, which includes the basic retirement
insurance, medical insurance and other social insurances, as well as the housing
accumulation fund, and the relevant expenditures should be recorded into cost of relevant
assets or current profits and losses upon the occurrence.
If an enterprise cancels the labor relationship with any employee prior to the expiration of the
relevant labor contract or brings forward any compensation proposal for the purpose of
encouraging the employee to accept a layoff, and the following conditions are met
concurrently, the enterprise shall recognize the expected liabilities incurred due to the
compensation for the cancellation of the labor relationship with the employee, and shall
simultaneously record them into the profit or loss for the current period: the enterprise has
formulated a formal plan on the cancellation of labor relationship or has brought forward a
proposal on voluntary layoff and will execute it soon; and the enterprise is unable to
unilaterally withdraw the plan on the cancellation of labor relationship or the layoff proposal.
The inside employee retirement plan is treated by adopting the same principle with the above
dismission welfare. The group would recorded the salary and the social security insurance
fees paid and so on from the employee’s service terminative date to normal retirement date
into current profits and losses (dismission welfare) under the condition that they meet the
recognition conditions of estimated liabilities.
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23. Change in major accounting policies and accounting estimates
(1) Change in accounting policies
No accounting policy changed in the Group in the reporting period.
(2) Change in accounting estimates
No accounting estimates changed in the Group in the reporting period..
24. Corrections of prior accounting errors
In this period, the Group has no matter related to correction of prior-period errors.
25. Critical accounting judgments and estimates
Due to the inside uncertainty of operating activity, the Group needed to make judgments,
estimates and assumption on the book value of the accounts without accurate measurement
during the employment of accounting policies. And these judgments, estimates and
assumption were made basing on the prior experience of the senior executives of the Group,
as well as in consideration of other factors. These judgments, estimates and assumption
would also affect the report amount of income, costs, assets and liabilities, as well as the
disclosure of contingent liabilities on balance sheet date. However, the uncertainty of these
estimates were likely to cause significant adjustment on the book value of the affected assets
and liabilities.
The Group would check periodically the above judgments, estimates and assumption on the
basis of continuing operation. For the changes in accounting estimates only affected on the
current period, the influence should be recognized at the period of change occurred; for the
changes in accounting estimates affected the current period and also the future period, the
influence should be recognized at the period of change occurred and future period.
On the balance sheet date, the Group needed to make judgments, estimates and assumption
on the accounts in the following important items:
(1) Categorization of leasing
In accordance with Accounting Standards for Enterprises No. 21 – Leasing, the Group
categorized the leasing into operating lease and finance lease. During the categorization, the
management level needed to make analysis and judgment on whether all the risk and
compensation related with the leased assets had been transferred to the leasee, or whether the
Group had already undertaken all the risk and compensation related with the leased assets.
(2) Provision for bad debts
In accordance with the accounting policies of accounts receivable, the Group measured the
losses for bad debts by adopting allowance method. The impairment of accounts receivable
was based on the appraisal of the recoverability of accounts receivable. The impairment of
accounts receivable was dependent on the judgment and estimates. The actual amount and
the difference of previous estimates would affect the book value of accounts receivable and
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the withdrawal and reversal on provision for bad debts of accounts receivable during the
period of estimates being changed.
(3) Provision for falling price of inventories
In accordance with the accounting policies of inventories, for the inventories that the costs
were more than the net realizable value as well as out-of-date and dull-sale inventories, the
Group withdrew the provision for falling price of inventories on the lower one between costs
and net realizable value. Evaluating the falling price of inventories needed the management
level gain the valid evidence and take full consideration of the purpose of inventories,
influence of events after balance sheet date and other factors, and then made relevant
judgments and estimates. The actual amount and the difference of previous estimates would
affect the book value of inventories and the withdrawal and reversal on provision for bad
debts of inventories during the period of estimates being changed.
(4) The fair value of financial instrument
For the financial instruments without active market, the Group recognized the fair value by
various method. These evaluation methods included discounted cash flow mode analysis, etc..
The Group needed to estimate the future cash flow, credit risk, fluctuation rate of market and
relativity and other factors, as well as choose the property discount rate. Due to the
uncertainty of relevant assumptions, so their changes would affect the fair value of financial
instrument.
(5) The impairment of financial assets available for sale
The Group judged whether the financial assets available for sale were impaired relying
heavily on the judgment and assumption of the management team, so as to decide whether
recognized the impairment losses in the income statement. During the process of making the
judgment and assumption, the Group needed to appraise the balance of the cost of the
investment exceeding its fair value and the continuous period, the financial status and
business forecast in a short period, including the industrial situation, technical reform, credit
level, default rate and risk of counterparty.
(6) Provision for impairment of non-financial non-current assets
The Group made a judgment on the non-current assets other than financial assets whether
they had any indication of impairment on the balance sheet date. For the intangible assets
without finite service life, other than the annual impairment test, they should be subject to the
impairment test when there was any indication of impairment. For other non-current
non-financial assets, which should subject to impairment test when there was indication of
impairment showing that the book value can’t be recoverable.
When the book value of the assets or assets portfolio was more than the recoverable amount,
which was the higher one between the net amount of fair value after deducting the disposal
expenses and the discounted amount of the estimated future cash flow, it means impairment
incurred.
The net amount of fair value after deducting the disposal expenses should be fixed the price
in the sale agreement for similar assets in the fair transaction minus the increased costs
directly attributable to the assets disposal.
When estimated the discounted value of future cash flow, the Group needed to make
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important judgment on the output, selling price, relevant costs and the discount rate for
calculating the discounted amount, etc. When estimated the recoverable amount, the Group
would adopt all the available documents, including the predicts for relevant output, selling
price and relevant operating costs arising from reasonable and supportive assumptions.
The Group made the impairment test on goodwill at least one time per year, which required
to predict the discounted amount of the future cash flow of the assets or assets portfolio with
the distributed good will, for which, the Group needed to predict the future cash flow of the
assets or assets portfolio, and adopt the property discounted rate to decide the discounted
amount of future cash flow.
(7) Depreciation and amortization
For the investment real estate, fixed assets and intangible assets, the Group withdrew the
depreciation and amortization by adopting the straight-line method during the service life
after full consideration of the salvage value. The Group checked the service life periodically
so as to decide the amount of depreciation and amortization at each reporting period. The
service life was fixed by the Group in accordance with the previous experience of the similar
assets and the expected technical update. If there was any significant change on the previous
estimates, the depreciation and amortization expenses should be adjusted.
(8) Expenditures for development
When fixing the amount of capitalization, the management level of the Group needed to
make assumption on the predicted future cash flow, property discounted rate and estimated
beneficiary period for relevant assets.
(9) Deferred income tax assets
Within the limit that it was likely to have sufficient taxable profits to offset the losses, the
Group recognized the deferred income tax assets by all the unused tax losses, which needed
the management level of the Group to estimate time and amount of the future taxable profits
incurred with many judgments, as well as integrate strategy of tax payment, to decide the
amount of deferred income tax assets which should be recognized.
(10) Income tax
During the routine operating activities, there were some uncertainty in the ultimate tax
treatment and calculation for parts of transactions. Some accounts of such transaction could
be listed as pre-tax expenditures only after the approval of taxation authorities. If there were
any differences between the ultimate result of recognition for these taxation maters and their
initial estimates, the differences would affect the current income tax and deferred income tax
at the period of ultimate recognition.
(11) Estimated liabilities
The Group made the estimation on product quality guarantee, predicted loss of contract and
the fine for delayed delivery, etc. and withdrew the relevant provision for estimated liabilities
in accordance the provisions of contract, current knowledge and experience. Under the
condition that the contingent event has formed a current duty and fulfilling the duty is likely
to cause the economical interest outflow the Group, the Group measures the estimated
liabilities in accordance with the best estimate of the necessary expenses for the performance
of the current duty. The recognition and measurement of estimated liabilities were heavily
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relied on the judgment of the management team. During the process of making judgment, the
Group needed to appraise the relevant risks, uncertainty and the time value of money and
etc..
Of which, the Group estimated the liabilities basing on the after-sale services commitments
to the customers upon the sale, repair and reform of goods. When estimating the liabilities,
the Group has fully taken the consideration of the latest repair experience, but which may not
reflect the repair situation in the future. Any increase / decrease of the provision for estimated
liabilities may affect the profits and losses in the future periods.
V. Taxation
1. Main taxes and tax rate
Category of taxes Particulars on tax rates
Calculated the output tax at 17% of taxable income and paid the VAT
VAT by the amount after deducting the deductable withholding VAT at
current period.
Business tax Paid by 5% of taxable business income
Urban maintenance and
Paid at 7% of the circulating tax actually paid
construction tax
In the year of 2011, 24% for the companies incorporated in
Shenzhen except Shenzhen Konka Telecommunications Technology
and Shenzhen Konka Video & Communication Systems Engineering
Enterprise income tax
with the income tax of 15%; 25% for the companies incorporated in
other places; 16.5% for Hongkong Konka; 15% for Dongguan
Konka Mould Plastic and Dongguan Konka.
Remark: According to the relevant stipulations by the Interim Measures for the
Administration of Collection of Business Income Tax for Trans-regional Business Operations,
where a resident enterprise sets up a business institution or establishment without the
qualification of legal person across the regions within the territory of China, this resident
enterprise shall be a consolidated taxpayer enterprise, and shall be governed by the
administrative measures for enterprise income tax, namely “uniform calculation,
level-by-level administration, pre-payment in place, consolidated settlement, and transfer to
treasury”. These measures shall be implemented as from the date of 1 Jan. 2008.
In accordance with the measures mentioned above, the sales branches of the Company in all
parts of the country shall, as from the date of 1 Jan. 2008, prepay the business income tax,
and the Company shall make the uniform settlement in the yearend.
2. Tax preference and approved document
On 16 Dec. 2008, the wholly-owned subsidiary of the Company-Shenzhen Konka
Telecommunications Technology Co., Ltd. obtained the Certificate of High-Tech Enterprise
jointly issued by Shenzhen Bureau of Science Technology & Information, Shenzhen
Financial Bureau, Shenzhen Municipal State Taxation Bureau, and Shenzhen Municipal
Local Taxation Bureau, valid for three years. In light of the relevant tax regulations,
Shenzhen Konka Telecommunications Technology Co., Ltd. would be entitled to the relevant
preferential policies concerning the hi-tech enterprise for three years in succession since 2008,
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and be levied the business income tax at the preferential tariff of 15%.
The company and subsidiary companies incorporated in Shenzhen except Konka
Telecommunication Technology Co., Ltd gradually implemented the legal tax rate five years
after the implementation of the new tax law and implemented the tax rate of 24% in 2011
according to the relevant regulations in GF No. 39 (2007) Notice by the PRC State Council
on the Implementation of the Grandfathering Preferential Policies under the PRC Enterprise
Income Tax Law.
On 10 Nov. 2009, the subsidiary company Dongguan Konka Mould Plastic of the Company
was filed for the high-tech enterprise certification by Ministry of Science and Technology,
valid for three years. According to relevant taxation regulations, Dongguan Konka Mould
Plastic would enjoy relevant preferential policies for high-tech enterprises for successive
three years since 2009 and was levied at the preferential corporate income tax rate of 15%.
On 8 Oct. 2008, Guangdong Boluo Office of State Administration of Taxation approved the
application of Bokang Precision Electronics for tax preferential in BGSH No. (2008) 94 and
thus Bokang Precision Electronics was exempted from the corporate income tax in year 2008
and 2009 and will be levied at 50% of the corporate income tax rate from year 2010 to year
2012.
On December 31, 2009, subsidiary of the Company- Konka Video & Communication
Systems Engineering obtained the Certificate of High-Tech Enterprise jointly issued by
Science Industry Trade and Information Technology Commission of Shenzhen Municipality,
Finance Commission of Shenzhen Municipality, Shenzhen Municipal State Taxation Bureau,
and Shenzhen Municipal Local Taxation Bureau, valid for three years. In light of the relevant
tax regulations, Konka Video & Communication Systems Engineering would be entitled to
the relevant preferential policies concerning the hi-tech enterprise for three years in
succession since 2009, and be levied the business income tax at the preferential tariff of 15%.
On 26 Sep. 2010, Dongguan Konka Co., Ltd., the Company’s subsidiary gained the
Certificate of Hi-tech Enterprise jointly issued by Department of Science & Technology,
Finance Bureau, National Taxation Bureau and Local Taxation Bureau of Guangdong
province with valid term of three years. In accordance with relevant stipulations of taxation,
Konka will enjoy relevant preferential policies for high-tech enterprises for successive three
years since 2010 and was levied at the preferential corporate income tax rate of 15%.
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Ⅵ. Business Combination and Consolidated Financial Statements
1. Subsidiaries
Subsidiaries obtained through establishment or investment
Monetary unit：RMB 0000
Net Investment
End. actual Balance for
Organization
Name of subsidiary Enterprise nature Registration place Business nature Registered capital investment Subsidiary
code
amount Materially
Constituted
Telecommunication Limited Shenzhen Mobile communication
RMB12,000.00 70848057-2 12,000.00 ---
Technology company Guangdong products
Video &
Communication Limited Shenzhen Development and sales of
RMB1,500.00 72858645-4 ---
Systems company Guangdong commercial televisions 900.00
Engineering
Limited Shenzhen
Precision Mold Moulds RMB1,596.88 61881661-8 ---
company Guangdong 739.50
Limited Shenzhen
Konka Electronic Electronic equipment RMB830.00 61881678-1 ---
company Guangdong 1,073.25
Information Limited Shenzhen Manufacturing and selling
RMB3,000.00 73416472-5 ---
Network company Guangdong digital network products 3,000.00
Limited Shenzhen Plastic product
Plastic Products RMB950.00 61881662-6 ---
company Guangdong manufacturing 950.00
Limited Shenzhen Video and audio products
Shushida RMB4,200.00 70841244-9 ---
company Guangdong and components 4,200.00
Fittings Limited Shenzhen Technological R&D of
RMB6,500.00 793892132 ---
Technology company Guangdong electronic components 6,500.00
Mudanjiang Limited Mudanjiang
Electronic equipment RMB6,000.00 60610286-1 ---
Electronic company Heilongjiang 3,600.00
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Monetary unit：RMB 0000
Net Investment
End. actual Balance for
Organization
Name of subsidiary Enterprise nature Registration place Business nature Registered capital investment Subsidiary
code
amount Materially
Constituted
Limited
Shaanxi Konka Xianyang Shaanxi Color television products RMB6,950.00 62310230-2 ---
company 5,529.48
Limited
Chongqing Konka Chongqing Color television products RMB4,500.00 62192098-5 ---
company 2,700.00
Development and sales of
Chongqing Limited
Chongqing automotive electronic RMB3,000.00 78155925-2 ---
Electronic company 1,710.00
equipment
Limited Electronic frequency
Chongqing Qingjia Chongqing RMB1,500.00 62192187-3 ---
company modulators and tuners 600.00
Limited
Anhui Konka Chuzhou Anhui Color television products RMB14,000.00 61056872-8 12,278.09 ---
company
Anhui Household Limited Manufacturing and selling
Chuzhou Anhui RMB7,819.00 74890634-7 ---
Appliances company household appliances 8,087.17
Limited Manufacturing and selling
Changshu Konka Changshu Jiangsu RMB2,465.00 62822347-X ---
company electronic products 2,027.89
Researching, designing and
Limited manufacturing liquid
Kunshan Konka Kunshan Jiangsu RMB35,000.00 68053275-5 35,000.00 ---
company crystal modules and flat
panel television
Limited Dongguan Television and audio
Dongguan Konka RMB26,667.00 61811698-8 26,667.00 7,478.40
company Guangdong products
Limited Dongguan Plastic product
Dongguan Packing RMB1,000.00 722456042 ---
company Guangdong manufacturing 1,000.00
77
English Translation for Reference Only
Monetary unit：RMB 0000
Net Investment
End. actual Balance for
Organization
Name of subsidiary Enterprise nature Registration place Business nature Registered capital investment Subsidiary
code
amount Materially
Constituted
Dongguan Mould Limited Dongguan Manufacturing moulds and
RMB1,000.00 75109846-7 ---
Plastic company Guangdong plastic products 1,000.00
Limited Manufacturing and selling
Boluo Konka Bolo Guangdong RMB4,000.00 72112128-3 ---
company electronic products 2,428.52
Limited Manufacturing and selling
Boluo Precision Bolo Guangdong RMB1,500.00 79931620-8 ---
company electronic products 1,125.00
Limited Foshan R&D of flat panel display
Nanhai Institute RMB50.00 68243005-8 ---
company Guangdong technologies and products 50.00
Exporting and importing
Limited
Hongkong Konka Hong Kong China machinery and electronic HKD50.00 --- ---
company 78.18
products
Konka Household
Limited Investment and
Appliances Hong Kong China HKD50.00 --- ---
company shareholding 53.06
Investment
Konka Household
Appliances Limited
Hong Kong China International trade HKD50.00 --- ---
International company 53.31
Trading
KONKA Limited
USA Selling electronic products USD100.00 --- ---
AMERICA company 806.25
Limited
Konka Europe Europe Selling electronic products EUR2.50 --- ---
company 26.15
Kunshan Real Limited
Kunshan Jiangsu Real estate investment RMB20,000.00 69670961-5 20,000.00 ---
Estate company
78
English Translation for Reference Only
Monetary unit：RMB 0000
Net Investment
End. actual Balance for
Organization
Name of subsidiary Enterprise nature Registration place Business nature Registered capital investment Subsidiary
code
amount Materially
Constituted
Limited Dongguan Manufacturing moulds and
Xutongda RMB500.00 69649113-4 ---
company Guangdong plastic products 500.00
Technology development,
Konka Limited Shenzhen
sales and maintenance of RMB1,000.00 55719393-8 ---
Optoelectronic company Guangdong 1,000.00
liquid crystal mode
Limited Shenzhen Development and
Wankaida RMB1,000.00 55718505-7 ---
company Guangdong maintenance of software 1,000.00
Kunshan Limited Kunshan
Real estate investment RMB35,000.00 55806907-4 35,000.00 ---
Kangsheng company Jiangsu
Limited Selling electronic
Indonesia Konka Djakarta Indonesia USD150.00 --- 974.85 ---
company products
Limited Chuzhou Manufacture of house
Anhui Tongchuang RMB18,000.00 55922811-0 ---
company Anhui appliances in refrigeration 6,970.26
(Continued)
Is consolidated Amount of equity of the minority
Share holding Equity of the Amount of equity of the
Voting proportion financial shareholders used to offset
Name of subsidiary proportion minority minority shareholders used Note
(%) statement income/loss of the minority
(%) shareholders to offset minority interest
applied? shareholder
Telecommunication
100.00 100.00 Yes --- --- ---
Technology ---
Video & Communication
60.00 60.00 Yes --- --- ---
Systems Engineering 711.62
Precision Mold 46.31 52.49 Yes 1,765.19 --- --- ①
Konka Electronic 51.00 51.00 Yes -963.22 --- --- ---
79
English Translation for Reference Only
Is consolidated Amount of equity of the minority
Share holding Equity of the Amount of equity of the
Voting proportion financial shareholders used to offset
Name of subsidiary proportion minority minority shareholders used Note
(%) statement income/loss of the minority
(%) shareholders to offset minority interest
applied? shareholder
Information Network 100.00 100.00 Yes - --- --- ---
Plastic Products 100.00 100.00 Yes - --- --- ---
Shushida 100.00 100.00 Yes - --- --- ---
Fittings Technology 100.00 100.00 Yes - --- --- ---
Mudanjiang Electronic 60.00 60.00 Yes 1,819.20 --- --- ②
Shaanxi Konka 60.00 60.00 Yes 4,304.74 --- --- ---
Chongqing Konka 60.00 60.00 Yes 617.97 --- --- ---
Chongqing Electronic 57.00 57.00 Yes -548.86 --- --- ---
Chongqing Qingjia 40.00 40.00 Yes 1,620.51 --- --- ③
Anhui Konka 78.00 78.00 Yes 6,068.26 --- --- ---
Anhui Household
96.46 97.45 Yes --- --- ---
Appliances 232.19
Changshu Konka 60.00 60.00 Yes 818.28 --- --- ---
Kunshan Konka 100.00 100.00 Yes - --- --- ---
Dongguan Konka 100.00 100.00 Yes - --- --- ---
Dongguan Packing 100.00 100.00 Yes - --- --- ---
Dongguan Mould Plastic 59.73 100.00 Yes 4,562.99 --- --- ---
Boluo Konka 51.00 51.00 Yes 980.53 --- --- ---
Boluo Precision 100.00 100.00 Yes - --- --- ---
Nanhai Institute 100.00 100.00 Yes - --- --- ---
Hongkong Konka 100.00 100.00 Yes - --- --- ---
Konka Household
100.00 100.00 Yes --- --- ---
Appliances Investment -
80
English Translation for Reference Only
Is consolidated Amount of equity of the minority
Share holding Equity of the Amount of equity of the
Voting proportion financial shareholders used to offset
Name of subsidiary proportion minority minority shareholders used Note
(%) statement income/loss of the minority
(%) shareholders to offset minority interest
applied? shareholder
Konka Household
Appliances International 100.00 100.00 Yes --- --- ---
Trading -
KONKA AMERICA 100.00 100.00 Yes - --- --- ---
Konka Europe 100.00 100.00 Yes - --- --- ---
Kunshan Real Estate 100.00 100.00 Yes --- --- ---
Xutongda 46.31 100.00 Yes 772.62 --- --- ④
Konka Optoelectronic 100.00 100.00 Yes - --- --- ---
Wankaida 100.00 100.00 Yes - --- --- ---
Kunshan Kangsheng 100.00 100.00 Yes - --- --- ---
Indonesia Konka 51.00 51.00 Yes -17.32 --- --- ⑤
Anhui Tongchuang 100.00 100.00 Yes --- --- ⑥
81
English Translation for Reference Only
Note: ① The Company holds 46.31% of shares of Dongguan Konka Mould Plastic
Co., Ltd. Konka Household Appliances Investment & Development Co., Ltd, a
subsidiary company of the Company, is entrusted to manage 6.18% shares held by
Shenzhen Dingshengxin Mould Technology Consultation Co., Ltd. After the
entrustment, the percentage of voting rights of the Company increases to 52.49%.
Therefore, the financial statements of Dongguan Konka Mould Plastic Co., Ltd are
combined into the consolidated financial statements. Xutongda is a wholly funded
subsidiary of Dongguan Konka Mould Plastic Co., Ltd and is also combined into the
consolidated financial statements.
② The original Chinese name of Mudanjiang Konka Industrial Co., Ltd. has been
changed to Mudanjiang Arctic Ocean Electrical Appliances Co., Ltd. since 1 Jun.
2011.
③The Company holds 40.00% shares of Chongqing Qingjia Electronic Co., Ltd that
all senior managers of Chongqing Qingjia Electronic Co., Ltd are appointed and
dismissed by the Company. 70 to 80% of its products are sold to the Company and
thus the Company has absolute influence and control over the production and
operation of Chongqing Qingjia Electronic Co., Ltd.
④The Company directly holds 46.31% shares of Dongguan Xutongda Mould Plastic
Co., Ltd. and its controlling company Shenzhen Konka Precision Mold
Manufacturing Co., Ltd. is actual controlled by the Company that the Company
combined Dongguan Xutongda Mould Plastic Co., Ltd. into the consolidated financial
statements.
⑤ Indonesia Konka was established through joint investment by the Company’s
wholly-owned subsidiary Hong Kong Konka and Mr. Chen Yongyuan, with the
registration capital amounting to USD 1.5 million, of which Hongkong Konka
invested USD 765,000 in cash and thereby owned 51% equity; Mr. Chen Yongyuan
invested USD 735,000 in cash and thereby owned 49% equity.
⑥Anhui Tongchuang is a limited company jointly invested and established by the
Group and Chuzhou Tongchuang Construction Investment Co., Ltd. (hereinafter refer
to as “Tongchuang Construction”) with registration capital of RMB 180 million, of
which each party invested in RMB 90 million repectively on contract. As to 31 Dec.
2010, Anhui Tongchuang with a paid-up capital of RMB120 million (including
paid-up capital of RMB 90 million of the Company, 75.00% of total paid-up capital;
and paid-up capital of RMB 30 million of Tongchuang Construction, 25.00% of total
paid-up capital ). According to contract sign by two parties, Tongchuang Construction
has the rights of transferring stock ownership three years after the establishment of
Anhui Tongchuang Company. Meanwhile, the Company can repurchase the said stock
ownership and contracted with Tongchuang Investement Company that the Group
shall receive fixed investment gains at 2% of actual capital invested by the Group
annually. As the Group holds 100% voting rights that the Group can be able to
conduct actual control to Anhui Tongchuang Company, so the Group combines it into
82
English Translation for Reference Only
consolidation scope.
2. Entities newly combined into consolidation in the reporting period
Subsidiaries newly combined into consolidation in this period:
Method of Net profit of this
Name Closing net assets
establishment period
Indonesia Konka Newly established 9,456,136.78 -353,552.83
Ⅶ. Notes to Items in the Consolidated Financial Statements
Unless otherwise specified, in the following notes to the items in the consolidated
financial statements (including notes to main items in the financial statements of the
parent company), the beginning of the period refers to the day of 31 Dec. 2010; the
end of the period refers to the day of 30 Jun. 2011; the previous period refers to the 1st
half of Y2010; and the current period refers to the 1st half of Y2011.
1. Monetary funds
Closing balance Opening balance
Translated Amount in Translated
Items
Amount in exchange Amount in foreign exchange Amount in
foreign currency rate renminbi (yuan) currency rate renminbi (yuan)
Cash on hand: 6,652.03 583,655.56
RMB 5,759.41 1.0000 5,759.41 --- --- 582,654.78
HKD 845.17 0.8316 702.84 777.10 0.8509 661.25
USD 14.86 6.4716 96.17 37.97 6.6227 251.46
EUR 10.00 9.3612 93.61 10.00 8.8065 88.07
Bank deposit: --- --- 1,239,913,460.45 --- --- 568,941,338.45
RMB --- 1.0000 961,917,312.14 --- --- 422,170,009.56
HKD 27,042,865.10 0.8316 22,488,846.62 66,928,338.25 0.8509 56,951,315.68
USD 39,441,120.24 6.4716 255,247,153.75 13,189,441.25 6.6227 87,323,581.81
JPY --- --- --- --- --- ---
EUR 27,790.03 9.3612 260,147.94 283,476.00 8.8065 2,496,431.40
Others --- --- --- --- --- ---
Other monetary
--- --- 4,711,718,405.76 --- --- 3,194,884,209.03
funds:
RMB --- --- 4,711,718,405.76 --- --- 3,194,884,209.03
HKD --- --- --- --- --- ---
Total 5,951,638,518.24 3,764,409,203.04
Remark: The balance of other monetary funds at the end of the period includes
marginal deposits that cannot be withdrawn freely, totaling RMB 4,711,718,405.76, of
which RMB 3,638,619,336.40 is used as USD loan pledge for NDF service; RMB
1,071,634,544.94 is used as USD loan pledge.
83
English Translation for Reference Only
2. Transactional financial assets
Item Closing fair value Opening fair value
Derivative financial instruments (NDF) --- ---
3. Notes receivable
(1) Category of notes receivable
Category Closing balance Opening balance
Banker's acceptance bill 3,344,005,625.57 4,147,113,159.56
Commercial acceptance bill 1,900,000.00 2,200,000.00
Total 3,345,905,625.57 4,149,313,159.56
(2) The balance of notes used as pledge in the accounts receivable at the end of the
period amounts to RMB 1,742,860,618.53.
(3) Particulars on top five largest amount of mortgaged notes receivable at period-end
Issuing entity Issuing date Maturity date Amount Remark
Gansu GOME Logistics
2010.12.29 2011.06.29 10,000,000.00
Co., Ltd.
Gansu GOME Logistics
2010.12.29 2011.06.29 10,000,000.00
Co., Ltd.
GOME Electrical
Appliances Holding 2011.01.24 2011.07.24 10,000,000.00
Limited
GOME Electrical
Appliances Holding 2011.01.24 2011.07.24 10,000,000.00
Limited
Shaanxi Suning
2010.01.06 2011.01.06 10,000,000.00
Appliance Co., Ltd.
Total 50,000,000.00
(4) There was no particulars occurred as the issuing entity failed to accomplish
commitment so coverts notes receivable into accounts receivable.
(5) Notes that are endorsed but not due at the end of the period (top five in amount)
Whether
Issuing entity Issuing date Maturity date Amount confirm Remark
or not
Changsha Tongcheng Holdings
2011.01.20 2011.07.20 6,000,000.00 Yes
CO., Ltd.
Jiangsu Pengrun GOME
2011.05.19 2011.11.18 5,000,000.00 Yes
Electrical Appliances Co., Ltd.
Jiangsu Pengrun GOME
2011.05.19 2011.11.18 5,000,000.00 Yes
Electrical Appliances Co., Ltd.
84
English Translation for Reference Only
Whether
Issuing entity Issuing date Maturity date Amount confirm Remark
or not
Hefei Department Store Group
2011.01.21 2011.07.21 5,000,000.00 Yes
Co., Ltd.
Wuhan Industrial and Trading
2011.01.24 2011.07.24 3,100,000.00 Yes
Co., Ltd.
Total 24,100,000.00
4. Accounts receivable
(1) Accounts receivable listed by category
Category Closing balance
Book balance Bad debt reserves
Amount Proportion (%) Amount Proportion (%)
Accounts receivable, of which single
item is large in amount and is 266,739,847.88 14.23 8,435,515.96 3.16
individually allotted for bad debt
provision
Accounts receivable, of which bad --- --- --- ---
debt provision is allotted in group
Aging groups 1,607,709,297.22 85.77 224,859,577.05 13.99
Subtotal of groups 1,607,709,297.22 85.77 224,859,577.05 13.99
Accounts receivable, of which single
item is not large in amount but is --- --- --- ---
individually allotted for bad debt
provision
Total 1,874,449,145.10 100.00 233,295,093.01 12.45
（Con）
Opening balance
Category Book balance Bad debt reserves
Amount Proportion (%) Amount Proportion (%)
Accounts receivable, of which single
item is large in amount and is 103,357,300.00 4.68 5,167,865.00 5.00
individually allotted for bad debt
provision
Accounts receivable, of which bad debt --- --- --- ---
provision is allotted in group
85
English Translation for Reference Only
Aging groups 2,104,326,025.58 95.32 231,380,088.67 11.00
Subtotal of groups 2,104,326,025.58 95.32 231,380,088.67 11.00
Accounts receivable, of which single
item is not large in amount but is --- --- --- ---
individually allotted for bad debt
provision
Total 2,207,683,325.58 100.00 236,547,953.67 10.71
(2) Accounts receivable listed by aging
Closing balance Opening balance
Age
Amount Proportion (%) Amount Proportion (%)
Within one year 1,530,872,384.53 81.67 1,867,472,155.11 84.59
One to two years 32,532,270.41 1.74 20,118,124.36 0.91
Two to three years 111,418,356.17 5.94 114,150,283.43 5.17
Three to four years 6,425,979.91 0.34 19,447,783.10 0.88
Four to five years 28,658,428.46 1.53 22,281,946.29 1.01
Over five years 164,541,725.62 8.78 164,213,033.29 7.44
Total 1,874,449,145.10 100.00 2,207,683,325.58 100.00
（3）Provision for bad debt
①Provision for bad debt of accounts receivable, of which single item is large in
amount and is individually allotted for bad debt provision
Provision for bad Withdrawal
Content Book amount Reason
debt proportion
Beijing Pangu Investment 103,357,300.00 5,167,865.00 5% Involved in lawsuit
Co., Ltd. Significant individual
Other clients 163,382,547.88 3,267,650.96 2%
amount
Note: For details please refer to No. 1 (1) in Note Ⅸ.
②Accounts receivable, of which bad debt provision is allotted in group
Accounts receivable, of which bad debt provision is allotted in group by aging
analysis method
Closing balance Opening balance
Book balance Book balance
Age Provision for Provision for
Proportion Proportion
Amount bad debt Amount bad debt
(%) (%)
Within one year 1,367,489,836.65 85.06 37,534,335.81 1,867,472,155.11 88.75 37,502,391.30
One to two years 32,532,270.41 2.02 759,911.21 20,118,124.36 0.96 4,146,452.11
Two to three years 8,061,056.17 0.50 1,582,176.40 10,792,983.43 0.51 2,089,786.34
Three to four years 6,425,979.91 0.40 4,735,740.45 19,447,783.10 0.92 6,649,923.67
Four to five years 28,658,428.46 1.78 15,705,687.56 22,281,946.29 1.06 16,778,501.96
86
English Translation for Reference Only
Over five years 164,541,725.62 10.24 164,541,725.62 164,213,033.29 7.80 164,213,033.29
Total 1,607,709,297.22 100.00 224,859,577.05 2,104,326,025.58 100.00 231,380,088.67
③There are no accounts receivable, of which single item is not large in amount but is
individually allotted for bad debt provision, at the period-end.
(4) There were no accounts receivables from shareholder entities holding more than
5% (including 5%) voting shares of the Company in the reporting period.
(5) The top five accounts receivable in amount totaled to RMB 246,258,147.88,
accounting for 13.14% of accounts receivable.
(6) For accounts receivable from related parties, please refer to Note VIII. 6.
(7) List of original amount of foreign accounts receivable and its exchange rate:
Closing balance Opening balance
Foreign Foreign
Items Exchange RMB Exchange RMB
currency currency
rate (Converted) rate (Converted)
amount amount
USD 57,826,082.15 6.4716 374,227,273.24 47,209,951.11 6.6227 312,657,343.22
HKD 1,199,298.30 0.8316 997,336.47 929,998.16 0.8509 791,363.33
AU 49,764.00 6.9276 344,745.09 49,764.00 6.7139 334,110.52
CAD 41,500.29 6.6160 274,565.92
5. Advance Payment
(1) The advance payment is listed on the basis of account age
Closing balance Opening balance
Proportion Provision for Proportion Provision for
Age Amount Amount
(%) bad debt (%) bad debt
Within one year 392,642,513.13 97.46 --- 441,765,887.67 97.37 195,841.84
One to two years 4,387,143.05 1.09 1,692,023.36 6,607,994.99 1.46 1,692,023.37
Two to three years 2,447,659.42 0.61 1,927,640.73 1,927,640.73 0.43 1,927,640.73
Over three years 3,403,748.44 0.84 2,888,922.04 3,374,576.91 0.74 2,888,922.04
Total 402,881,064.04 100.00 6,508,586.13 453,676,100.30 100.00 6,704,427.98
Note: ① The Company prepaid an account on material purchase for Changsha
LG-Philips Shuguang Electronic Co., Ltd (hereinafter refer to as “LG.Philips”), but
LG. Philips defaulted on advance payment of RMB 8,575,429.64 for the Company
that the Company sued LG. Philips before Peoples’ Court of Shenzhen Nanshan
District for civil suit on 11 Jun. 2009. The Company requested judgement against LG.
Philips for paying overdue RMB 8,575,429.64 and shoulder all lawsuit expenses.
After mediation, there still left RMB 1.48 million accounts behind up to the approval
for publication date of this financial report.
(2) Five entities with the highest amount of advance payments
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English Translation for Reference Only
Relationship
Name with the Amount Age Reason
Company
People’s Government of
Non-related Within the term of
Zhouzhuang Town, 171,264,786.20 Within one year
party contract
Kunshan
Anhui Construction Fourth Non-related
45,450,600.00 Within one year Unfulfilled project
Engineering Co., Ltd party
China Tenth Metallurgy
Non-related
Group Limited 11,210,500.00 Within one year Unfulfilled project
party
Corporation
Huai’an Zhenhuai
Non-related
Construction 5,000,600.00 Within one year Unfulfilled project
party
Engineering Co., Ltd.
Shenzhen Luyao
Non-related
Industrial Equipment 3,360,000.00 Within one year Unfulfilled project
party
Co., Ltd.
Total 236,286,486.20
(3) In the advance payment in the reporting period, no shareholder entity that
holds 5% or more shares of the Company owes debts to the Company.
(4) List of original amount of foreign advance payment and its exchange rate:
Closing balance Opening balance
Items
Foreign currency Exchange RMB (Converted) Foreign currency Exchange RMB (Converted)
USD amount
596,724.61 rate
6.4716 3,861,762.99 amount
596,724.61 rate
6.6227 3,951,928.07
HKD 2,033.95 0.8316 1,691.43 2,033.95 0.8509 1,730.75
JPY 0.0802 1,717,136.00 21,400,000.00 0.0788 1,686,320.00
21,400,000.00
6. Interest receivable
Increase in this Decrease in this
Item Opening balance Closing balance
period period
Income from
NDF portfolio
25,298,029.66 --- 10,529,923.40 14,768,106,26
renminbi pledge
deposits
Interest income
from fixed --- 3,015,999.23 --- 3,015,999.23
deposits
Total 25,298,029.66 3,015,999.23 10,529,923.40 17,784,105.49
7. Other receivables
88
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(1) Other receivables are listed below as per category
Closing balance
Book balance Provision for bad debt
Category
Proportion Proportion
Amount (%) Amount (%)
Other receivables, of which single item
is large in amount and is individually --- --- --- ---
allotted for bad debt provision
Other receivables, of which bad debt --- --- --- ---
provision is allotted in group
Aging group 112,586,240.16 100.00 14,875,991.60 13.26
Subtotal of groups 112,586,240.16 100.00 14,875,991.60 13.26
Other receivables, of which single item
is not large in amount but is individually --- --- --- ---
allotted for bad debt provision
Total 112,586,240.16 100.00 14,875,991.60 13.22
（Con）
Opening balance
Book balance Provision for bad debt
Category
Proportion Proportion
Amount (%) Amount (%)
--- --- --- ---
Other receivables, of which single item
is large in amount and is individually
allotted for bad debt provision
--- --- --- ---
Other receivables, of which bad debt
provision is allotted in group
Aging group 107,061,884.75 100.00 14,926,233.18 13.94
Subtotal of groups 107,061,884.75 100.00 14,926,233.18 13.94
Other receivables, of which single item
is not large in amount but is individually --- --- --- ---
allotted for bad debt provision
Total 107,061,884.75 100.00 14,926,233.18 13.94
(2) Other receivables are listed on the basis of account age
Closing balance Opening balance
Age Proportion Proportion
Amount Amount
(%) (%)
Within one year 92,324,008.27 82.00 88,894,214.40 83.03
One to two years 2,925,045.82 2.60 1,210,980.97 1.13
Two to three years 1,275,057.82 1.13 3,231,043.54 3.02
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English Translation for Reference Only
Closing balance Opening balance
Age Proportion Proportion
Amount Amount
(%) (%)
Three to four years 3,333,703.27 2.96 1,241,520.17 1.16
Four to five years 2,125,913.23 1.89 1,878,381.78 1.75
Over five years 10,602,511.75 9.42 10,605,743.89 9.91
Total 112,586,240.16 100.00 107,061,884.75 100.00
(3) Provision for bad debt
①As at the period-end, there were no other receivables, of which single item is large
in amount and is individually allotted for bad debt provision.
②Other receivables, of which bad debt provision is allotted in group
Other receivables, of which bad debt provision is allotted in group by aging analysis
method:
Closing balance Opening balance
Book balance Book balance
Age Provision for Provision for
Proportion Proportion
bad debt bad debt
Amount (%) Amount (%)
Within one year 92,324,008.27 82.00 1,138,162.98 88,894,214.40 83.03 1,142,249.64
One to two years 2,925,045.82 2.60 208,116.54 1,210,980.97 1.13 214,684.49
Two to three years 1,275,057.82 1.13 660,853.32 3,231,043.54 3.02 646,208.71
Three to four years 3,333,703.27 2.96 765,107.28 1,241,520.17 1.16 827,733.79
Four to five years 2,125,913.23 1.89 1,501,239.73 1,878,381.78 1.75 1,489,612.66
Over five years 10,602,511.75 9.42 10,602,511.75 10,605,743.89 9.91 10,605,743.89
Total 112,586,240.16 100.00 14,875,991.60 107,061,884.75 100.00 14,926,233.18
③As at the period-end, there were no other receivables, of which single item is not
large in amount but is individually allotted for bad debt provision.
(4) There were no other receivables from shareholder entities holding more than 5%
(including 5%) voting shares of the Company in the reporting period.
(5) Five entities owing the highest amount of other receivables
Relationship Proportion in
Name with the Amount Age other receivables
Company (%)
Shenzhen Social
Non-related Within
Insurance Fund
party one year
Management Bureau 2,284,428.33 2.03
Deposit for the activity
of “promoting home Non-related One to
appliances to party four years
countryside” 2,100,000.00 1.87
90
English Translation for Reference Only
Related party
not within One to
OCT Water and Power consolidation five years
Co., Ltd scope 1,893,600.81 1.68
Related party
Shenzhen OCT Real not within One to
Estate Co., Ltd consolidation five years
scope 1,216,264.86 1.08
Shenzhen Municipal Non-related One to
Bureau of Finance party 1,114,965.00 two years 0.99
Total 8,609,259.00 7.65
(6) For details about accounts receivable from related parties please refer to No. 6 in
Note. Ⅷ.
8. Inventories
(1) Categories of inventories
Closing balance
Item
Book balance Impairment reserve Book value
Raw materials 1,700,506,262.25 128,001,903.17 1,572,504,359.08
Semi-finished products 315,673,383.62 122,027,301.36 193,646,082.26
Stock 1,962,360,420.74 419,997,626.81 1,542,362,793.93
Goods in transit 4,234,896.72 --- 4,234,896.72
Turnover materials 6,100,572.01 661,253.80 5,439,318.21
Total 3,988,875,535.34 670,688,085.14 3,318,187,450.20
（Con）
Opening balance
Item
Book balance Impairment reserve Book value
Raw materials 1,406,355,293.86 128,296,659.30 1,278,058,634.56
Semi-finished
336,279,067.87 122,027,301.36 214,251,766.51
products
Stock 2,637,517,152.90 419,890,224.45 2,217,626,928.45
Goods in transit 4,967,594.35 --- 4,967,594.35
Turnover materials 9,392,460.02 661,253.80 8,731,206.22
Total 4,394,511,569.00 670,875,438.91 3,723,636,130.09
(2) Changes in impairment provision of inventories
Decrease in this period
Allotment of the
Item Opening balance Recovered Write-off Closing balance
period
amount amount
Raw materials 128,296,659.30 --- --- 294,756.13 128,001,903.17
Semi-finished products 122,027,301.36 --- --- --- 122,027,301.36
Stock 419,890,224.45 251,637.09 --- 144,234.73 419,997,626.81
91
English Translation for Reference Only
Turnover materials 661,253.80 --- --- --- 661,253.80
Total 670,875,438.91 251,637.09 --- 438,990.86 670,688,085.14
(3) Provision for impairment of inventories and reason for recovery
Proportion of recovered
Basis for allotting provision
Reason for recovery in provision in closing
Item for impairment of
this period balance of the inventory
inventories
in this period (%)
Raw Net realizable value is --- ---
materials lower than cost
Semi-finished Net realizable value is --- ---
products lower than cost
Net realizable value is --- ---
Stock
lower than cost
9. Financial assets available for sale
Item Closing fair value Opening fair value
Equity instruments available
1,857,579.66 1,830,598.36
for sale
10. Long-term equity investment
Increase Decrease
Item Opening balance Closing balance
in this period in this period
Investment on jointly funded enterprises --- --- --- ---
Investment on affiliated enterprises 93,178,765.30 107,787,702.88 79,052.57 200,887,415.61
Other equity investments 21,975,424.83 --- --- 21,975,424.83
Less: provisions for depreciation of
1,400,000.00 --- --- 1,400,000.00
long-term equity investments
Total 113,754,190.13 107,787,702.88 79,052.57 221,462,840.44
(1) Categories of long-term equity investment
(2) List of long-term equity investment
Initial
Accounting Opening Closing
Invested entity investment Increase/decrease
method balance balance
costs
Chongqing Jingkang Plastic
Equity method 3,750,000.00 977,160.30 -79,052.57 898,107.73
Products Co., Ltd
Shenzhen Refond
Equity method 36,923,786.00 48,303,426.94 --- 48,303,426.94
Optoelectronics Co., Ltd
Enray Tek Optoelectronic
Equity method 148,036,152.86 40,248,449.98 107,787,702.88 148,036,152.86
Co., Ltd
Shenzhen Konka Energy Equity method 5,983,965.19 3,649,728.08 --- 3,649,728.08
92
English Translation for Reference Only
Initial
Accounting Opening Closing
Invested entity investment Increase/decrease
method balance balance
costs
Technology Co., Ltd
Shenzhen Dekon Electronic
Cost method 3,000,000.00 7,137,424.83 --- 7,137,424.83
Co., Ltd
Fehong Electronics Co.,
Cost method 1,300,000.00 1,300,000.00 --- 1,300,000.00
Ltd.
Shenzhen Association of
Enterprises with Foreign Cost method 100,000.00 100,000.00 --- 100,000.00
Investment
Shenzhen Make-plan
Investment Development Cost method 485,000.00 485,000.00 --- 485,000.00
Co., Ltd
IGRS Information
Technology Engineering Cost method 5,000,000.00 5,000,000.00 --- 5,000,000.00
Center Co., Ltd
Shenzhen Julong
Cost method 2,000,000.00 2,000,000.00 --- 2,000,000.00
Optoelectronics Co., Ltd
Shenzhen CTU Hi-tech Ltd Cost method 1,153,000.00 1,153,000.00 --- 1,153,000.00
Shenzhen Digital TV
National Engineering Lab Cost method 2,400,000.00 2,400,000.00 --- 2,400,000.00
Co., Ltd.
Shanghai Digital TV
National Engineering R&D Cost method 2,400,000.00 2,400,000.00 --- 2,400,000.00
Center Co., Ltd.
Total 115,154,190.13 107,708,650.31 222,862,840.44
（Con）
Interpretations
of difference
Percentage
Proportion between the Impairment Cash
of voting
of shares equity provision dividends
rights in Impairment
Invested entity held in the percentage allotted of of the
the provision
invested and vote right the current current
invested
entity (%) percentage in period period
entity (%)
the invested
entity
Chongqing Jingkang Plastic
31.25 31.25 --- --- ---
Products Co., Ltd
Shenzhen Refond
25.87 25.87 --- --- ---
Optoelectronics Co., Ltd
Shenzhen Konka Energy
30.00 30.00 --- --- ---
Technology Co., Ltd
93
English Translation for Reference Only
Interpretations
of difference
Percentage
Proportion between the Impairment Cash
of voting
of shares equity provision dividends
rights in Impairment
Invested entity held in the percentage allotted of of the
the provision
invested and vote right the current current
invested
entity (%) percentage in period period
entity (%)
the invested
entity
Shenzhen Dekon Electronic
30.00 --- --- --- ---
Co., Ltd
Fehong Electronics Co., Ltd. 8.33 8.33 1,300,000.00 --- ---
Shenzhen Association of
Enterprises with Foreign --- --- 100,000.00 --- ---
Investment
Shenzhen Julong
10.00 10.00 --- --- ---
Optoelectronics Co., Ltd
Shenzhen Make-plan
Investment Development 1.00 1.00 --- --- ---
Co., Ltd
IGRS Information
Technology Engineering 9.62 9.62 --- --- ---
Center Co., Ltd
Shenzhen CTU Hi-tech Ltd 11.50 11.50 --- --- ---
Shenzhen Digital TV
National Engineering Lab 6.00 6.00 --- --- ---
Co., Ltd.
Shanghai Digital TV
National Engineering R&D 4.26 4.26 --- --- ---
Center Co., Ltd.
Enray Tek Optoelectronic
36.00 36.00 --- --- ---
Co., Ltd
Total 1,400,000.00 --- ---
(3) Particulars about affiliated entities
Proporti
on of
Percentage
Regis shares
Legal of voting
Nature of tratio Business held in
Invested entity represen Registered capital rights in the
enterprise n nature the
tative invested
place invested
entity (%)
entity
(%)
Chongqing Company Chon Wang Manufacture RMB12,000,000.00 31.25 31.25
94
English Translation for Reference Only
Proporti
on of
Percentage
Regis shares
Legal of voting
Nature of tratio Business held in
Invested entity represen Registered capital rights in the
enterprise n nature the
tative invested
place invested
entity (%)
entity
(%)
Jingkang Plastic of limited gqing Xiaoyon and process
Products Co., Ltd liability g of mode
products
Shenzhen Refond Company Manufacturin
Shenz Gong
Optoelectronics of limited g and selling RMB35,566,667.00 25.87 25.87
hen Weibin
Co., Ltd liability LEDs
Shenzhen Konka New energy
Company
Energy Shenz Dong products for
of limited RMB20,000,000.00 30.00 30.00
Technology Co., hen Yaping mobile
liability
Ltd equipment
EnRayTek Company Manufacturin
Shang Zhang
Optoelectronics of limited g and selling USD20,833,333.33 36.00 36.00
hai Rujing
Co., Ltd. liability LEDs
（Con）
Total Total net Total
Total assets Net Profit of
liabilities at assets at the operating
Invested entity at the end of the current
the end of end of the income of
the period period
the period period the period
(RMB’0000) (RMB’0000)
(RMB’0000) (RMB’0000) (RMB’0000)
Chongqing Jingkang Plastic
500 184 316 --- -25
Products Co., Ltd
Shenzhen Refond Optoelectronics Co., Ltd 34,151 12,442 21,709 14,451 2,051
Shenzhen Konka Energy Technology Co., Ltd 1,378 164 1,214 --- ---
EnRayTek Optoelectronics Co., Ltd. 33,201 1,381 31,820 2 -896
(4) Breakdown of provision for impairment of long-term equity investment
Opening Increase of the Decrease of the Closing
Item
balance period period balance
Other long-term equity
investment:Electronics Co., Ltd
Feihong 1,300,000.00 --- --- 1,300,000.00
Shenzhen Association of
100,000.00 --- --- 100,000.00
Enterprises with Foreign
Investment
Total 1,400,000.00 --- --- 1,400,000.00
95
English Translation for Reference Only
11. Fixed asset
(1) Particulars on fixed asset
Increase of Decrease of current
Item Beg. balance End. balance
current period period
I. Total original book value 2,793,552,964.23 107,115,532.10 53,323,476.89 2,847,345,019.44
Including: housings and buildings 1,226,527,835.11 2,860,585.56 1,260,346.97 1,228,128,073.70
Mechanical equipment 1,006,503,214.65 69,293,234.63 17,654,465.15 1,058,141,984.13
Electronic equipment 308,850,848.89 21,639,860.38 6,828,916.87 323,661,792.40
Vehicles 61,459,703.12 5,253,059.94 1,245,390.72 65,467,372.34
Other equipment 190,211,362.46 8,068,791.59 26,334,357.18 171,945,796.87
II. Accumulated depreciation
Total accumulated depreciation 1,285,561,193.31 61,815,036.49 37,831,098.43 1,309,545,131.37
Including: housings and buildings 279,739,482.55 15,523,519.40 348,611.95 294,914,390.00
Mechanical equipment 596,149,730.71 29,625,527.87 10,178,857.85 615,596,400.73
Electronic equipment 231,712,489.41 7,800,114.24 6,549,877.98 232,962,725.67
Vehicles 40,975,001.12 3,549,649.71 905,129.97 43,619,520.86
Other equipment 136,984,489.52 5,316,225.27 19,848,620.68 122,452,094.11
III. Total net book value 1,507,991,770.92 1,537,799,888.07
Including: housings and buildings 946,788,352.56 933,213,683.70
Mechanical equipment 410,353,483.94 442,545,583.40
Electronic equipment 77,138,359.48 90,699,066.73
Vehicles 20,484,702.00 21,847,851.48
Other equipment 53,226,872.94 49,493,702.76
IV. Total provisions for
19,623,103.13 132,966.18 19,490,136.95
depreciation
Including: housings and buildings 1,247,805.91 --- 1,247,805.91
Mechanical equipment 13,590,767.05 39,858.46 13,550,908.59
Electronic equipment 2,328,124.26 75,584.52 2,252,539.74
Vehicles 954,364.64 --- 954,364.64
Other equipment 1,502,041.27 17,523.20 1,484,518.07
V. Total book value 1,488,368,667.79 1,518,309,751.12
Including: housings and buildings 945,540,546.65 931,965,877.79
Mechanical equipment 396,762,716.89 428,994,674.81
Electronic equipment 74,810,235.22 88,446,526.99
Vehicles 19,530,337.36 20,893,486.84
Other equipment 51,724,831.67 48,009,184.69
Note: Depreciation amount in current period was RMB 61,815,036.49. Original value
of fixed assets transferred from project in process in current period was RMB
32,210,141.53.
(2) For details about fixed assets mortgaged, please refer to 6 in Note. Ⅻ.
(3) Details of fixed assets whose certificates of title are not prepared
96
English Translation for Reference Only
Reason for the absence of Estimated time for winding up
Items Book value
certificate of title the certificate of title
Dongguan Konka Mould The winding up time cannot be
9,111,856.61
Plastic Co., Ltd. estimated
Main plant of The license for using The winding up time cannot be
Mudangjiang electric state-owned land has not estimated
appliances etc. been obtained and the
15,737,850.52
certificate of title to house
property cannot be
handled temporarily.
The license for using The winding up time cannot be
state-owned land has not estimated
Office building of
been obtained and the
Changshu Konka Color 1,826,104.32
certificate of title to house
TV etc.
property cannot be
handled temporarily.
Yikang building of The license for using The winding up time cannot be
Konka Group state-owned land has not estimated
been obtained and the
65,876,354.02
certificate of title to house
property cannot be
handled temporarily.
Jingyuan office building The winding up time cannot be
14,919,537.00
estimated
Office building in Xi’an The winding up time cannot be
6,732,101.62
ect. estimated
Total 114,203,804.09
12. Construction in progress
(1) Information about construction in progress
End. balance Beg. balance
Items Impairment Impairment
Book balance Book value Book balance Book value
provision provision
R&D building
215,425,720.48 --- 215,425,720.48 146,372,908.92 --- 146,372,908.92
of Konka Group
Module assembly line engineering
--- --- --- 6,425,000.00 --- 6,425,000.00
of Kunshan Konka Electronics Co., Ltd
Equipments pending for installment --- --- --- 15,991,356.88 --- 15,991,356.88
1# supplimental plant projectof Kunkang 24,250,295.74 --- 24,250,295.74 14,503,292.40 --- 14,503,292.40
Second phase of No. D warehouse
24,978,875.15 --- 24,978,875.15 24,587,544.15 --- 24,587,544.15
project
Other projects 32,988,996.02 --- 32,988,996.02 23,628,143.99 --- 23,628,143.99
Total 297,643,887.39 --- 297,643,887.39 231,508,246.34 --- 231,508,246.34
97
English Translation for Reference Only
(2) Change of significant construction in progress
Amount of
Increase of the construction-in-progress Other
Name Budget Beg. balance End. balance
current period transferred to fixed assets decrease
in the current period
R&D
building
566.56 million 146,372,908.92 69,052,811.56 --- --- 215,425,720.48
of Konka
Group
Module
assembly line
engineering
of Kunshan 15.03million 6,425,000.00 --- 6,425,000.00 --- ---
Konka
Electronics
Co., Ltd
Equipments
pending for 20.13million 15,991,356.88 --- 15,991,356.88 --- ---
installment
1#
supplimental
plant 46.90million 14,503,292.40 9,747,003.34 --- --- 24,250,295.74
projectof
Kunkang
Second phase
of No. D
38.08million 24,587,544.15 391,331.00 --- --- 24,978,875.15
warehouse
project
Other
45.48million 23,628,143.99 19,154,636.68 9,793,784.65 --- 32,988,996.02
projects
Total 231,508,246.34 98,345,782.58 32,210,141.53 --- 297,643,887.39
13. Intangible assets
(1) Details of intangible assets
Beg. Book Increase of the Decrease of the End. Book
Item
balance period period balance
I. Total original book value 250,165,101.54 9,774,525.58 142,727.55 259,796,899.57
Land use right 198,051,739.09 --- 142,727.55 197,909,011.54
98
English Translation for Reference Only
Beg. Book Increase of the Decrease of the End. Book
Item
balance period period balance
Trademark registration costs in
2,861,026.61 146,315.00 --- 3,007,341.61
foreign countries
Patents and proprietary
39,751,497.52 1,206,349.58 --- 40,957,847.10
technologies
Others 9,500,838.32 8,421,861.00 --- 17,922,699.32
II. Total accumulated damage 55,780,567.27 3,736,253.32 --- 59,516,820.59
Land use right 18,686,525.98 1,984,537.02 --- 20,671,063.00
Trademark registration costs in
2,590,934.66 67,382.50 --- 2,658,317.16
foreign countries
Patents and proprietary
27,885,150.82 767,024.87 --- 28,652,175.69
technologies
Others 6,617,955.81 917,308.93 --- 7,535,264.74
III. Total provisions for
2,901,082.61 --- --- 2,901,082.61
depreciation
Land use right --- ---
Trademark registration costs in
--- ---
foreign countries
Patents and proprietary
2,901,082.61 2,901,082.61
technologies
Others --- ---
IV. Total book value 191,483,451.66 197,378,996.37
Land use right 179,365,213.11 177,237,948.54
Trademark registration costs in
270,091.95 349,024.45
foreign countries
Patents and proprietary
8,965,264.09 9,404,588.80
technologies
Others 2,882,882.51 10,387,434.58
(2) The amortized amount of the current period is renminbi 3,736,253.32.
(3) The increase of intangible assets of the Company in the current period is caused
by the purchase of software equipments and special technique.
(4) For pledges with intangible assets, see No. 6 in Note Ⅻ.
14. Goodwill
(1) Particulars about goodwill
Name of invested entity Impairment
Increase of Decrease of
or items forming Beg. balance End. balance provision at the
the period the period
goodwill end of the period
Purchase of shares of
3,943,671.53 --- --- 3,943,671.53 ---
subsidiary companies
(2) For details about method to test goodwill impairment and provision for
impairment, please refer to No. 16 in Note Ⅳ.
99
English Translation for Reference Only
(3) By 30 Jun. 2011, the book value of the goodwill of the Company is not higher than
the amount that can be recovered.
15. Long-term expenses to be apportioned
Increase of Amortization Reason for
Other
Item Beg. balance the current of the current End. balance other
decrease
period period decrease
Decoration 5,724,919.14 1,227,933.40 1,241,082.77 --- 5,711,769.77
Development
platform 2,040,117.94 --- 670,154.76 --- 1,369,963.18
expenses
Other 3,715,598.94 2,135,309.31 2,219,421.30 --- 3,631,486.95
Total 11,480,636.02 3,363,242.71 4,130,658.83 --- 10,713,219.90
16. Deferred income tax assets/Deferred income tax liabilities
(1) Recognized deferred income tax assets
End. balance Beg. balance
Deductible
Deductible temporary
Items Deferred income temporary Deferred income
differences and
tax assets differences and tax assets
deductible losses
deductible losses
Provision for
183,120,654.12 846,358,008.18 182,572,942.72 846,105,110.44
impairment
Change of the fair
value of the financial
assets that are recorded 316,914.86 1,320,478.57 323,390.37 1,347,459.87
into the capital reserves
and available for sale
Warranty expenses 4,266,660.83 28,444,405.52 4,266,660.83 28,444,405.52
Other non-current
liabilities-deferred 21,866,001.81 88,883,757.54 21,866,001.81 90,883,757.54
income
Estimation by
transactional financial
instruments and 15,505,553.16 64,606,471.52 15,505,553.16 64,606,471.52
derivative financial
instruments
Other 27,092,336.13 119,858,978.14 27,092,336.13 119,858,978.14
Total 252,168,120.91 1,149,472,099.47 251,626,885.02 1,151,246,183.03
(2) Recognized deferred income tax liabilities
End. balance Beg. balance
Itemes
Deferred income tax Deductible temporary Deferred income Deductible
100
English Translation for Reference Only
assets differences and tax assets temporary
deductible losses differences and
deductible losses
Appreciation of
563,067.21 2,252,268.84 563,067.21 2,252,268.84
fixed assets
Fair value change
in transactional --- --- --- ---
financial assets
Total 563,067.21 2,252,268.84 563,067.21 2,252,268.84
17. Particulars about assets impairment
Decrease in current period
Allotment of
Items Beg. balance Recovered Write-off End. Balance
the current period
amount amount
I. Bad debt reserves 258,178,614.83 1,497,537.25 3,359,301.73 1,637,179.61 254,679,670.74
Including: Accounts receivable 236,547,953.67 1,411,416.41 3,060,281.22 1,603,995.85 233,295,093.01
Other receivables 14,926,233.18 86,120.84 103,178.66 33,183.76 14,875,991.60
Advance payments 6,704,427.98 195,841.85 6,508,586.13
II. Inventory falling price reserves 670,875,438.91 251,637.09 438,990.86 670,688,085.14
Including: Raw materials 128,296,659.30 294,756.13 128,001,903.17
Stock 419,890,224.45 251,637.09 144,234.73 419,997,626.81
Semi-finished products 122,027,301.36 122,027,301.36
Turnover materials 661,253.80 661,253.80
III. Provisions for depreciation of
1,400,000.00 1,400,000.00
long-term equity investments
IV. Provision for impairment of fixed assets 19,623,103.13 132,966.18 19,490,136.95
Including: Housings and buildings 1,247,805.91 1,247,805.91
Machinery equipment 13,590,767.05 39,858.46 13,550,908.59
Vehicles 954,364.64 0.00 954,364.64
Electronic equipment 2,328,124.26 75,584.52 2,252,539.74
Other equipment 1,502,041.27 17,523.20 1,484,518.07
V. Provision for impairment
2,901,082.61 2,901,082.61
of intangible assets
Including: Patent rights 2,901,082.61 2,901,082.61
Total 952,978,239.48 1,749,174.34 3,359,301.73 2,209,136.65 949,158,975.44
(1) Recovered amount of bad debt withdrawals deducting bad debt reserves in the
current period decreased Renminbi 54,307.26 compared with bad debt loss occurred
under assets impairment on Note Ⅶ. 42, for the following reason: there were gains
and losses of foreign currency exchange when made bad debt reserves for Hongkong
Konka, KONKA AMERICA, Konka Europe and Konka Household Appliances
International Trading.
101
English Translation for Reference Only
18. Assets with restricted proprietary rights or use rights
Item End. Book value Reason of restriction
Subtotal of assets for guarantee 53,934,264.56
Including: Fixed assets 48,132,884.10 Applied for guaranteed loan
Intangible assets 5,801,380.46 Applied for guaranteed loan
Subtotal of assets with
restricted proprietary rights
of use rights caused by other
reasons 6,454,579,024.29
Including: Notes receivable 1,742,860,618.53 Applied for comprehensive credit and NDF pledge
Bank deposit 4,711,718,405.76 Applied for NDF service
Total 6,508,513,288.85
19. Short-term borrowings
Item End. balance Beg. balance
Pledged borrowings 5,981,644,344.93 5,526,633,513.58
Collateral borrowings 58,000,000.00 20,000,000.00
Assigned borrowings 306,768,842.04 ---
Credit borrowings 1,399,130,569.67 370,664,883.58
Total 7,745,543,756.64 5,917,298,397.16
(1) Collateral borrowings are USD loans obtained with the pledge of bank deposit and
notes accountable to develop NDF service. For details about pledged renminbi
deposits, see No. 1 of Note Ⅶ and about notes accountable see No. 3 of Note Ⅶ.
(2) For pledges for pledge borrowings, see No. 5 in Note Ⅴ.
20. Transactional financial liabilities
Item End. fair value Beg. fair value
Derivative financial liabilities (NDF) 50,290,398.26 64,957,121.86
21. Notes payable
Category End. balance Beg. balance
Banker's acceptance bill 1,378,401,734.05 2,031,883,915.56
Total 1,378,401,734.05 2,031,883,915.56
Note: The amount due in the next accounting period is renminbi 1,378,401,734.05, or
accounts payable to related parties, see No. 6 in Note Ⅷ.
22. Accounts payable
(1) Particulars about accounts receivable
Account age End. balance Beg. balance
Within one year 2,078,295,220.18 2,298,501,841.00
One to two years 7,794,483.97 61,574,962.37
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English Translation for Reference Only
Two to three years 34,691,335.15 16,406,384.70
Three years or longer 27,620,432.53 13,648,523.49
Total 2,148,401,471.83 2,390,131,711.56
(2) In the accounts payable in the current reporting period, no account is payable to
shareholder entity that holds 5% or more voting shares of the Company.
(3) Accounts payables with more than one year are unsettled purchase accounts.
(4) For information about accounts payable to related parties, see No. 6 of Note Ⅷ.
(5) Balance of foreign currency included in accounts payable:
End. amount Beg. amount
Foreign Exchange Renminbi Foreign Exchange Renminbi
Items
currency rate (converted) currency rate (converted)
amount amount
USD 90,447,194.21 6.4716 585,338,062.06 92,534,827.16 6.6227
612,830,399.83
HKD 4,764,901.37 0.8316 3,962,491.98 76,673,420.46 0.8509
65,241,413.47
Total 589,300,554.04 678,071,813.30
23. Advance receipts
(1) List of advance receipts
Account age End. balance Beg. balance
Within one year 232,018,477.59 271,284,966.30
One to two years 12,426,029.82
8,332,672.12
Two to three years 3,493,440.95 9,833,590.12
Three years or longer 24,175,182.53 27,162,681.12
Total 272,113,130.89 316,613,909.66
(2) In the advance receipts in the current reporting period, no advance payment is
received from shareholder entity that holds 5% or more voting shares of the Company.
(3) Advance receipts with more than one year is unsettled sales expense.
(4) For information about advance receipts from other related parties in the current
reporting period, see No. 6 of Note Ⅷ.
(5) Balance of foreign currency under advance receipts:
End. amount Beg. amount
Foreign Exchange Renminbi Foreign Exchange Renminbi
Items
currency rate (converted) currency rate (converted)
amount amount
USD 8,004,107.98 6.4716 51,799,385.20 9,414,588.34 6.6227 62,349,994.20
HKD 1,997,081.68 0.8316 1,660,773.13 1,222,035.83 0.8509 1,039,830.29
Euro 109,910.68 9.3612 1,028,895.86 146,902.62 8.8065 1,293,697.92
CAD 105,073.30 6.6160 695,164.95
24. Accrued payroll
103
English Translation for Reference Only
Increase of the Decrease of the
Item Beg. balance End. balance
period period
I. Payroll, bonus,
allowance and 189,882,636.03 462,936,988.51 515,531,826.05 137,287,798.49
subsidies
II. Welfare expenses 2,932,052.61 38,489,284.05 33,468,690.68 7,952,645.98
III. Social insurance
12,677,250.70 69,623,068.49 66,058,950.49 16,241,368.70
expenses
Including: 1. Medical
5,680,401.21 14,839,576.50 13,779,801.82 6,740,175.89
insurance
2. Basic endowment
6,018,728.14 49,446,920.48 47,120,307.26 8,345,341.36
insurance
3. Pension expense 11,491.31 37,186.98 32,053.21 16,625.08
4. Unemployment
564,224.67 2,702,340.97 2,643,216.93 623,348.71
insurance
5. Maternity insurance 57,401.66 977,099.53 905,498.21 129,002.98
6. Insurance against
345,003.71 1,619,944.03 1,578,073.06 386,874.68
injuries at work
IV. Public reserve for
1,802,999.29 14,406,145.88 13,820,173.95 2,388,971.22
housing construction
V. Labor union
expenditure and
7,078,281.24 3,897,859.44 6,406,341.38 4,569,799.30
expenses for education
of employees
VI. Non-monetary
--- --- --- ---
welfare
VII. Welfare for
779,514.48 212,967.36 190,561.50 801,920.34
dismissing
VIII. Other 2,960,911.07 14,981,615.96 15,660,664.92 2,281,862.11
Total 218,113,645.42 604,547,929.69 651,137,208.97 171,524,366.14
Note: There isn’t any accrued payable unpaid.
25. Tax payable
Item End. balance Beg. balance
VAT -168,605,177.09 -226,624,340.63
Business tax 588,961.73 818,857.23
Corporate income tax 10,660,814.12 46,752,828.32
Urban maintenance and construction
497,736.35 1,967,787.42
tax
Educational Surtax 352,708.61 894,134.87
Personal income tax 1,950,532.37 2,745,496.03
Flood control fund, fund for
1,336,693.13 718,715.04
embankment, fund for water
104
English Translation for Reference Only
Item End. balance Beg. balance
conservancy and fund for river
management
Others 1,804,459.19 1,931,781.28
Total -151,413,271.59 -170,794,740.44
Note: Income tax belongs to subordinated subsidies of the Company is taxed by
locating area, and makes final accounts and clearance by the Company at the end of
the year. For details please refer to No. 1 of Note. Ⅴ.
26. Interest payable
Items End. balance Beg. balance
Expense for interest on NDF USD loans 15,635,151.61 25,401,955.85
Loan fees 2,092,609.15 1,349,114.45
Total 17,727,760.76 26,751,070.30
27. Dividends payable
Reason for fail to make
Item End. balance Beg. balance
payment over 1 years
Shenzhen
Shangyongtong
804,527.20 804,527.20 Temporarily unpaid
Investment
Development Co., Ltd
OCT Group 2,287,547.83 ---
Dividends fund 9,752,179.21 ---
Chongqing Machinery
& Electronics Holding 1,446,809.53 ---
(Group) Co., Ltd
NEOSKY GROUP
723,404.76 ---
LIMTED
Dongyangyi Industry
7,171,595.03 7,171,595.03 Temporarily unpaid
Co., Ltd
Total 22,186,063.56 7,976,122.23
28. Other payables
(1) Particulars about other payables
Item End. balance Beg. balance
Within one year 742,036,252.22 689,387,503.18
One to two years 64,695,341.01 46,835,446.09
Two to three years 27,103,554.35 28,907,765.32
Three years or longer 32,127,419.34 33,236,431.57
Total 865,962,566.92 798,367,146.16
(2) In other payables in the current reporting period, no other payables to shareholder
entity that holds 5% or more voting shares of the Company.
105
English Translation for Reference Only
(3) For other payables to related parties, see No. 6 in Note Ⅷ.
(4) Other significant payables aging more than one year are mainly guarantees
payable.
(5) Explanation for other payables with large amount
Creditor End. balance Type or content
China Construction Fourth
20,000,000.00 Guarantee money
Engineering Division Cop., Ltd.
Jiangsu Jiangong Construction
4,908,500.01 Guarantee money
Group
Total 24,908,500.01
29. Long-term borrowings
(1) Categories of long-term borrowings
Items End. balance Beg. balance
Credit borrowings① 10,000,000.00 10,000,000.00
Entrust loans② 600,000,000.00 500,000,000.00
Total 610,000,000.00 510,000,000.00
Explanation①: On 10 Dec. 2010, Konka (Kunshan) Real Estate Investment Co., Ltd.,
subsidy of the Company signed a contract with long-term borrowings of renminbi 10
million with Jiangsu International Trust Corporation Ltd., of which the borrowings
would be use for integrated development of LED Backlight of large size LCD TV,
mode and whole set, and technology performance commercialization project.
②: On 15 Apr. 2010, OCT Group entrusted CCB Shenzhen Branch to allot an
assigned loan of RMB 100 million to the Company, as a supplement of the Group’s
current capital. On 16 Sep. 2010, OCT Group entrusted CCB Shenzhen Branch to
allot an assigned loan of RMB 100 million to the Company, as a supplement of the
Group’s current capital. On 13 Dec. 2010, Chinese Town Group entrusted CCB
Shenzhen Branch to allot an assigned loan of RMB 300 million to the Company, as a
supplement of the Group’s current capital. On 17 Mar. 2011, OCT Group entrusted
CCB Shenzhen Branch to allot an assigned loan of RMB 100 million to the Company,
as for supplement of the Group’s current capital. Please refer to No. 5(3) in Note Ⅷ
for details.
(2) Particulars about long-term borrowings
End. balance Beg. date
End. date
Beg. date Foreign Foreign
Creditor of Rate Currency
borrowings currency RMB amount currency RMB amount
borrowings
amount amount
CCB
1 Aug.
Shenzhen 16 Sep. 2010 3.7% RMB --- 100,000,000.00 --- 100,000,000.00
2013
Branch
CCB 16 Nov.
13 Dec. 2010 3.93% RMB --- 300,000,000.00 --- 300,000,000.00
Shenzhen 2013
106
English Translation for Reference Only
End. balance Beg. date
End. date
Beg. date Foreign Foreign
Creditor of Rate Currency
borrowings currency RMB amount currency RMB amount
borrowings
amount amount
Branch
CCB
31 Jul.
Shenzhen 15 Apr. 2010 5.68% RMB --- 100,000,000.00 --- 100,000,000.00
2013
Branch
CCB
4 Mar.
Shenzhen 17 Mar. 2011 5.67% RMB --- 100,000,000.00 --- ---
2016
Branch
Jiangsu
International
10 Dec. 2010 10 Dec.
Trust 0.30% RMB --- 10,000,000.00 --- 10,000,000.00
2013
corporation
Ltd.
Total 610,000,000.00 510,000,000.00
30. Long-term payable accounts
(1) Long-term payable accounts listed by category
Items End. balance Beg. Balance
Chuzhou Tongchuang Construction
30,000,000.00 30,000,000.00
Investment Co., Ltd.
(2) Particulars about long-term payable accounts
Rate Accrued Condition of
Entity Term Initial amount End. balance
(%) interest loan
Chuzhou
Tongchuang
Construction 30,000,000.00 2.00
Investment Co.,
Ltd.
31. Other non-current liabilities
Item Content End. balance Beg. balance
Deferred income Government subsidy 102,256,145.11 100,896,753.51
Of which, details of deferred income is as follows:
Item End. balance Beg. balance
(1) Government subsidy relevant to assets
Subsidies for supporting equipment of Kunshan
22,590,000.00 22,590,000.00
liquid crystal module project
Fund for flat panel display industry in year 2008 10,000,000.00 10,000,000.00
107
English Translation for Reference Only
Item End. balance Beg. balance
Development of new type display technologies
such as liquid crystal module (Ministry of 10,000,000.00
10,000,000.00
Industry and Information Technology)
R&D and industrialization of large size liquid
7,000,000.00 7,000,000.00
crystal display module
Key technology and industrialization of LED
5,000,000.00 5,000,000.00
Backlight of flat TV set
Others 34,539,699.14 40,093,757.54
(2) Government subsidy relevant to earnings
Government subsidy on R&D of white goods 11,913,450.00 5,000,000.00
Other 1,212,995.97 1,212,995.97
Other 102,256,145.11 100,896,753.51
32. Share capital
Beg. balance Increase/decrease of the current period (+/-) End. balance
Shares
Gift
Proport Newly converte Proport
Items ed
Amount ion issued d from Others Subtotal Amount ion
shar
(%) shares public (%)
es
reserves
I. Shares subject to
trading moratorium
1. Shares held by
--- --- --- --- --- --- --- --- ---
state
2. Shares held by
state-owned 198,381,940.00 16.48 --- --- --- --- --- 198,381,940.00 16.48
corporation
3. Shares held by
4,950.00 --- --- --- --- --- --- 4,950.00 ---
domestic investors
Total shares subject
to trading 198,386,890.00 16.48 --- --- --- --- --- 198,386,890.00 16.48
moratorium
II. Shares not
subject to trading
moratorium
1. RMB ordinary
599,910,010.00 49.83 --- --- --- --- --- 599,910,010.00 49.83
shares
2. Domestically
405,675,804.00 33.69 --- --- --- --- --- 405,675,804.00 33.69
listed foreign shares
3. Overseas listed
--- --- --- --- --- --- --- --- ---
foreign shares
4. Others --- --- --- --- --- --- --- --- ---
108
English Translation for Reference Only
Beg. balance Increase/decrease of the current period (+/-) End. balance
Shares
Gift
Proport Newly converte Proport
Items ed
Amount ion issued d from Others Subtotal Amount ion
shar
(%) shares public (%)
es
reserves
Total shares not
subject to trading 1,005,585,814.00 83.52 --- --- --- --- --- 1,005,585,814.00 83.52
moratorium
III. Total shares 1,203,972,704.00 100.00 --- --- --- --- --- 1,203,972,704.00 100.00
33. Capital surplus
Increase of the Decrease of
Item Beg. balance End. balance
period the period
Capital premium 1,211,366,082.55 --- --- 1,211,366,082.55
Other capital surpluses 60,873,604.57 20,505.79 --- 60,894,110.36
Total 1,272,239,687.12 20,505.79 --- 1,272,260,192.91
34. Surplus reserve
Increase of the Decrease of the
Item Beg. balance End. balance
period period
Statutory surplus public reserves 555,245,730.23 --- --- 555,245,730.23
Discretionary surplus public
254,062,265.57 --- --- 254,062,265.57
reserves
Total 809,307,995.80 --- --- 809,307,995.80
Note: In accordance with regulations of Company Law, Articles of Association, the
Company withdraws surplus reserve at a rate of 10% of net profit. When the statutory
surplus public reserves accumulated to over 50% of the registered capital of the
Company, then the withdrawal can be ceased.
After the withdrawal of statutory surplus public reserves, the Group can withdraw
discretionary surplus public reserves. With approval, discretionary surplus public
reserves can be used to compensate prior year’s losses or increase share capital.
35. Undistributed profits
(1) Change of undistributed profits
Withdrawal or
Amount in current Amount in previous
Items distributed
period period
proportion
Undistributed profits at the end of the
696,746,297.76 613,778,898.84
previous period before adjustment
Total of undistributed profits at the
beginning of the adjustment period --- ---
(+/-)
109
English Translation for Reference Only
Withdrawal or
Amount in current Amount in previous
Items distributed
period period
proportion
Undistributed profits at the beginning
696,746,297.76 613,778,898.84
of the period after adjustment
Add: Net income attributed to the
-195,000,941.75 50,887,520.39
parent company
Making up losses with surplus public
--- ---
reserves
Other transfer-ins --- ---
Less: Allotted statutory surplus public
--- ---
reserve
Allotted discretionary surplus public
--- ---
reserves
Payable dividends for ordinary stocks 12,039,727.04 12,039,727.04
Dividends of ordinary stock that are
--- ---
converted into capital shares
Undistributed profits at the end of the
489,705,628.97 652,626,692.19
period
Note: According to resolutions made on Shareholders’ General Meeting for Y2010 of
the Company, the Company decided to distributed cash dividends of RMB 0.10 (taxed)
to every ten shares for all shareholders based on total share capital of 1,203,972,704
shares of the Company shares as at the end of 2010.
(2) Particulars about subsidy withdrawing surplus reserves in the reporting period
There was no subsidy withdrawing surplus reserves in the reporting period.
36. Revenues and operating costs
(1) Revenues and operating costs
Item Amount of the current period Amount of the previous period
Revenues from main operations 6,815,109,144.09 7,889,140,439.34
Revenues from other operations 49,994,775.67 51,043,355.75
Total revenues 6,865,103,919.76 7,940,183,795.09
Costs of main operations 5,789,352,688.21 6,670,792,642.95
Costs of other operations 47,579,358.50 29,460,673.45
Total costs 5,836,932,046.71 6,700,253,316.40
(2) Main operations (by industries)
Industry Amount of the current period Amount of the previous period
Revenues Operating costs Revenues Operating costs
Electronic
6,815,109,144.09 5,789,352,688.21 7,889,140,439.34 6,670,792,642.95
industry
(3) Main operations (by products)
Product category Amount of the current period Amount of the previous period
110
English Translation for Reference Only
Revenues Operating costs Revenues Operating costs
Color television
5,099,596,529.67 4,355,701,727.30 6,044,594,174.81 5,104,973,696.12
business
Mobile phone business 644,313,624.57 552,109,424.39 972,561,524.29 854,009,795.45
White goods business 658,018,271.84 529,603,595.74 646,013,862.15 509,390,405.51
Others 413,180,718.01 351,937,940.78 225,970,878.09 202,418,745.87
Total 6,815,109,144.09 5,789,352,688.21 7,889,140,439.34 6,670,792,642.95
(4) Main operations (by regions)
Amount of the current period Amount of the previous period
Region
Revenues Operating costs Revenues Operating costs
Domestic sales 5,337,862,953.94 4,419,402,806.41 5,793,254,880.74 4,623,405,503.47
Overseas sales 1,477,246,190.15 1,369,949,881.80 2,095,885,558.60 2,047,387,139.48
Total 6,815,109,144.09 5,789,352,688.21 7,889,140,439.34 6,670,792,642.95
(5) Revenues from the top five customers
Revenues from the top five Proportion to current
Period
customers operating revenue (%)
Jan. to Jun. 2011 1,497,073,082.59 21.81
Jan. to Jan. 2010 2,005,136,373.82 25.42
37. Taxes and surtax
Items Amount of the current period Amount of the previous period
Business tax 494,366.82 723,818.88
Urban maintenance and
10,672,073.33 258,052.35
construction tax
Educational Surtax 5,519,410.83 268,742.95
Others 478,022.18 230,874.21
Total 17,163,873.16 1,481,488.39
Note: For accounting standard for all taxes and surtax please refer to Note Ⅴ. Tax.
38. Marketing expense
Items Amount of the current period Amount of the previous period
Payroll 111,918,458.59 96,853,082.98
Expenses for promotion activities 312,446,053.61 284,885,620.52
Expenses for logistics 143,478,420.25 154,253,697.05
Advertising expense 134,941,309.89 141,386,288.63
Maintenance charges 113,834,903.13 120,058,137.75
Travel charge 22,712,553.53 21,014,087.01
Rental charges 9,002,877.33 8,157,309.34
Entertainment expense 16,178,947.72 16,441,438.66
Employees welfare cost 10,208,702.21 9,164,329.30
111
English Translation for Reference Only
Items Amount of the current period Amount of the previous period
Other 86,933,012.59 75,625,642.78
Total 961,655,238.85 927,839,634.02
39. Administrative expense
Items Amount of the current period Amount of the previous period
R & D expenses 74,459,950.67 69,910,330.14
Payroll 55,057,937.39 49,819,743.70
Depreciation expense 14,859,533.60 15,726,148.30
Entertainment expense 10,539,232.68 9,811,466.53
Taxes and fund 8,497,974.68 6,167,390.04
Travel charge 7,383,977.68 5,115,461.44
Consulting fees 4,310,479.16 9,699,469.30
Labor union expenditure 3,995,506.04 3,506,907.83
Patent fee 3,405,123.93 4,525,872.40
Other 65,579,869.05 72,166,334.90
Total 248,089,584.88 246,449,124.58
40. Financial expenses
Items Amount of the current period Amount of the previous period
Interest expense 94,460,660.38 45,407,795.02
Less: Interest income 22,000,778.53 17,312,267.96
Less: Capitalization of interest amount --- ---
Gains or losses on exchange -10,539,580.86 -14,070,868.38
Less: Capitalization of gains or losses
--- ---
on interest amount
Other 9,506,981.02 8,500,016.58
Total 71,427,282.01 22,524,675.26
41. Assets impairment loss
Amount of the current Amount of the previous
Items
period period
Loss of bad debts -1,807,457.22 6,528,387.45
Loss of inventory falling price 251,637.09 410,409.19
Loss of impairment of fixed assets --- 226,978.50
Total -1,555,820.13 7,165,775.14
42. Income from change of fair value
Amount of the current Amount of the
Source of income from change of fair value
period previous period
Derivative financial instruments (NDF) 14,666,723.60 -5,334,908.00
112
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43. Investment income
(1) Particulars about income items
Amount of the current Amount of the previous
Items
period period
Income from long-term equity investment measured
-79,052.57 3,304,130.92
by employing the equity method
Investment income from disposing transactional
--- ---
financial assets
Investment income from financial assets available for
--- 10,529.35
sale
Total -79,052.57 3,314,660.27
(2) Income from long-term equity investment measured by employing the equity
method
Amount of the Amount of the
Invested entity Reason for change
current period previous period
Chongqing Jingkang Plastic Products
-79,052.57 -362,925.26
Co., Ltd
Shenzhen Refond Optoelectronics
--- 3,667,056.18
Co., Ltd
Total -79,052.57 3,304,130.92
Note: No significant restriction is imposed on repatriation of the investment income of
the Company.
44. Non-operating income
Amount recorded
Amount of the Amount of the into current
Items
current period previous period non-recurred
gains or losses
Total revenue from disposing non-current assets 2,892,290.40 16,504,673.61 2,892,290.40
Including: Revenue from disposal of fixed assets 2,892,290.40 16,504,673.61 2,892,290.40
Revenue from disposal of intangible assets --- --- ---
Revenue from compensation --- --- ---
Revenue from penalty 2,180,265.38 2,304,406.68 2,180,265.38
Government grants ( please refer to the following
72,266,954.72 30,041,542.90 13,069,367.50
sheet: particulars about government grants)
Other 3,894,029.34 3,513,886.26 3,894,029.34
Total 81,233,539.84 52,364,509.45 22,035,952.62
Of which, particulars about government grants
Amount of the Amount of the
Item Explanation
current period previous period
Refund on tax from Chuzhou Finance
232,900.00
Bureau
113
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Amount of the Amount of the
Item Explanation
current period previous period
Government subsidy 1,426,642.00
Finance subsidy and social securities
3,103,035.46
subsidy
Grants for the top ten entities with big
790,000.00
tax payment
R&D subsidy 1,500,000.00
Establishment of development center
800,000.00
for signal TV
Grants of Ministry of Industry and
Information Technology for IPv6
899,100.00
high-definition multi-functional
displays
Grants of Infrastructure Office of
Shenzhen Finance Bureau for IPv6 1,347,992.75
high-definition displays
Support for patent 618,000.00
Refund on embedded software 59,197,587.22 22,810,484.54
Other 9,404,274.75 178,480.90
Total 72,266,954.72 30,041,542.90
45. Non-operating expenses
Amount recorded into
Amount of the current Amount of the previous
Item current non-recurred
period period
gains or losses
Total loss on disposal of
1,989,220.58 2,091,536.04 1,989,220.58
non-current assets
Including: Loss of disposal on
1,989,220.58 2,091,536.04 1,989,220.58
fixed assets
Losses on intangible assets --- --- ---
Penalty expenses 470,922.65 554,882.88 470,922.65
Loss on restructuring liabilities --- --- ---
Loss on exchange of non-monetary
--- --- ---
assets
External donation expense 1,829.06 1,534,878.00 1,829.06
Other 653,614.82 335,565.14 653,614.82
Total 3,115,587.11 4,516,862.06 3,115,587.11
46. Income tax expense
Amount of the current Amount of the previous
Item
period period
Income tax of the current period calculated as per
14,864,929.85 19,067,278.11
the tax law and relevant regulations
114
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Amount of the current Amount of the previous
Item
period period
Adjustment of deferred income tax 106,428.08 716,894.38
Total 14,971,357.93 19,784,172.49
47. Basic earnings per share and diluted earnings per share
For the Company, the basic earnings per share shall be calculated by dividing the
current net profits belonging to the shareholders of ordinary shares by the weighted
average number of ordinary shares issued to the public. In accordance with the
specific terms and clauses of the issuance contract, the number of newly issued
ordinary shares shall be calculated and decided as of the date of receivable
consideration (generally the date of issuance of stocks).
Based on net profit attributable to ordinary shareholders of the Company of the
current period, numerators of diluted earnings per share shall be determined after
adjusting the following factors: (1) Interests of diluted potential ordinary shares
recognized as expenses at the current period; (2) Incomes or expenses arising from the
transfer of diluted potential ordinary shares; and (3) Income tax influence related to
the aforesaid adjustment.
Denominators of diluted earnings per share equal to the sum of the following two
items: (1) The weighted average number of ordinary shares issued by the parent
company in basic earning per share; and (2) The weighted average number of ordinary
shares which are newly added due to the transfer of the assumed diluted potential
ordinary shares to ordinary shares.
When calculating the weighted average number of increased ordinary shares resulted
from that the diluted potential ordinary shares convert into ordinary shares already
issued, the diluted potential ordinary shares issued in prior periods shall be supposed
to be converted at the beginning of the current period. The diluted potential ordinary
shares issued in the current period shall be supposed to be converted on the date of
issuance.
(1) Basic earnings per share and diluted earnings per share of each period
Jan.-Jun. 2011 Jan.-Jun. 2010
Profits of the reporting
period Basic earning per Diluted earnings Basic earning per Diluted earnings
share per share share per share
Net profit attributable to
shareholder of ordinary -0.1620 -0.1620 0.0423 0.0423
shares of the Company
Net profit attributable to
shareholders of ordinary
shares of the Company after -0.1826 -0.1826 0.0296 0.0296
deducting non-recurring
gains and losses
(2) Process of calculating basic earnings per share and diluted earnings per share
①Basic earnings per share corresponding to the net profits attributed to shareholders
115
English Translation for Reference Only
of common shares of the Company
= Net profits attributed to shareholders of common shares of the Company / weighted
mean of issued common share =-195,000,941.75÷1,203,972,704=-0.1620
②Basic earnings per share corresponding to the net profits of non-recurring gains and
losses attributed to shareholders of common shares of the Company
= Net profits of non-recurring gains and losses attributed to shareholders of common
shares of the Company / weighted mean of issued common share =（-195,000,941.75
－24,847,445.6）÷1,203,972,704=-0.1826
③The diluted earnings per share is calculated by dividing the consolidated net profits
attributed to shareholders of common shares of the company adjusted according to the
dilutive potential common share by the weighted mean of the adjusted issued common
shares of the Company. In current period, no dilutive potential common share exists in
the company; thus the diluted earnings per share is equal to the basic earnings per
share.
A When basic earnings per share are being calculated, the net profits attributable to
shareholders of ordinary shares are:
RMB Yuan
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Net profits attributable to shareholders of ordinary
-195,000,941.75 50,887,520.39
shares of the current period
Of which: net profits attributable to sustainable
-195,000,941.75 50,887,520.39
operation
Net profits attributable to terminated operation
Net profits attributable to shareholders of ordinary
shares of the Company after deducting -219,848,387.35 35,625,098.49
non-recurring profits and losses
Of which: net profits attributable to sustainable
-219,848,387.35 35,625,098.49
operation
Net profits attributable to terminated operation
B. While basic earnings per share are being calculated, the denominator is the average
weighted number of ordinary shares issued publicly, and the calculation is as the
following:
RMB Yuan
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Ordinary shares publicly issued at the beginning of
1,203,972,704 1,203,972,704
the period
Add: Weighted average number of ordinary shares
issued at the current period
Less: Weighted average number of ordinary share
repurchased at the current period
Weighted average number publicly issued at the end
1,203,972,704 1,203,972,704
of the period
48. Other comprehensive income
116
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Item Jan.-Jun. 2011 Jan.-Jun. 2010
1. Gains (losses) from available-for-sale financial assets 26,981.30 -472,759.30
Less: Income tax influence of available-for-sale financial assets 6,475.51 -104,007.04
Net amount written into other gains and transferred into
--- ---
gain/loss in previous terms
Subtotal 20,505.79 -368,752.26
2. Shares in other gains of investees on equity basis --- ---
Less: Income tax influence of shares in other gains of investees on
--- ---
equity basis
Net amount written into other gains and transferred into
--- ---
gain/loss in previous terms
Subtotal --- ---
3. Amount of gains (or losses) from cash flow hedge instrument --- ---
Less: Income tax influence of cash flow hedge instruments --- ---
Net amount written into other gains and transferred
--- ---
into gain/loss in previous terms
Adjusted amount transferred to initial amount of the target
--- ---
project
Subtotal --- ---
4. Difference from translating of foreign currency financial statements -10,400,633.77 4,791,417.74
Less: Net amount of disposing overseas business and transferred to
---
current gain/loss
Subtotal -10,400,633.77 4,791,417.74
5. Others --- ---
Less: Income tax influence by other accounted into other misc.
--- ---
incomes
Net amount accounted into other misc. income and transferred
--- ---
into current gain/loss in previous terms
Subtotal --- ---
Total -10,380,127.98 4,422,665.48
49. Notes to the cash flow statement
(1) Other cash received related with operating activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Mortgage-secured deposits --- ---
Temporary received repair fund 241,414.40 ---
Interest income from bank deposits 7,267,814.80 2,669,219.35
Bargain money and deposit 10,034,963.98 37,451,891.50
Income from fine and penalty 755,110.29 529,741.52
Repayment of individual borrowing 5,126,585.03 4,698,037.40
Subsidies 21,570,900.00 59,143,601.52
117
English Translation for Reference Only
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Income from scrap 6,951,774.10 3,177,410.03
Other capital flow 65,264,964.75 39,753,239.31
Total 117,213,527.35 147,423,140.63
(2) Other cash paid related to operating activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Cash paid for administration expenses 70,642,640.86 67,931,157.18
Cash paid for operating expenses 452,749,226.72 421,857,012.79
Mortgage-secured deposits --- ---
Payment for pledges, guarantee and repair 18,724,270.46 12,775,467.92
Employee reserve fund 20,754,058.65 17,759,859.20
Donation expense 674,553.00 1,279,373.20
Advanced payment 28,965,067.41 16,210,104.64
Penalty expense 27,598.19 196,832.36
Interest and handling fee 13,908,188.76 11,371,720.86
Other expenses and capital flow 95,977,422.04 130,222,194.60
Total 702,423,026.09 679,603,722.75
(3) Other cash receipts relating to investment activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Total
(4) Other cash payments relating to investment activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Payment of deposit for land bidding --- 69,000,000.00
Total --- 69,000,000.00
(5) Other cash receipts relating to financing activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Receipt and return of pledged renminbi fixed deposits upon
1,175,727,195.79 1,599,167,652.02
maturity
Receipt of pledged security deposits 93,900,000.00 ---
Discounted notes --- ---
Receipt from loans of other enterprises --- ---
Other 7,205.32 125,213.37
Total 1,269,634,401.11 1,599,292,865.39
(6) Other cash payments relating to financing activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
Pledged RMB deposits 889,118,060.15 ---
Pledged RMB fixed deposit 1,962,489,705.57 499,338,600.00
Other 8,121,071.63 685,510.99
118
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Item Jan.-Jun. 2011 Jan.-Jun. 2010
Total 2,859,728,837.35 500,024,110.99
50. Supplementary information about the cash flow statements
(1) Information about converting net profits into cash for operating activities
Item Jan.-Jun. 2011 Jan.-Jun. 2010
1. Information about converting net profits into cash
for operating activities:
Net income / loss -190,874,019.89 60,513,008.47
Add: Asset impairment reserves -1,555,820.13 7,165,775.14
Depreciation of fixed assets, oil and gases and production
61,815,036.49 46,375,575.29
materials
Amortization of intangible assets 3,736,253.32 3,807,056.42
Amortization of long-term expenses to be apportioned 4,130,658.83 3,837,916.14
Loss on disposal of fixed assets, intangible assets and
-2,367,987.15 -15,090,395.07
other long-term assets (or deduct: gains)
Losses on scrapping of fixed assets (or deduct: gains) 641,804.35 677,257.50
Losses on change of fair value (or deduct: gains) -14,666,723.60 5,334,908.00
Financial expenses (or deduct: gains) 50,373,009.18 10,435,209.21
Investment losses (or deduct: gains) 79,052.57 -3,314,660.27
Decrease in deferred income tax assets (or deduct:
-541,235.89 -3,947,149.58
increase)
Increase of deferred income tax liabilities (or deduct:
--- ---
decrease)
Decrease in inventories (or deduct: increase) 405,636,033.66 -633,578,753.55
Decrease in operating receivables (or deduct: increase) 588,457,586.06 375,059,094.98
Increase of operating payables (or deduct: decrease) -899,325,589.68 140,756,707.10
Other --- ---
Net cash flows from operating activities 5,538,058.12 -1,968,450.22
2. investing and financing activities that do not involve
cash receipts and payments:
Conversion of debt into capital --- ---
Convertible bonds to be expired within one year --- ---
Fixed assets under finance lease --- ---
3. Net increase in cash and cash equivalents
Cash at the end of the period 1,239,920,112.48 958,150,311.87
Less: Cash at the beginning of the period 569,524,994.01 749,501,416.29
Add: Cash equivalents at the end of the period --- ---
Less: Cash equivalents at the beginning of the period --- ---
Net increase in cash and cash equivalents 670,395,118.47 208,648,895.58
（2）Constitution of cash and cash equivalents
119
English Translation for Reference Only
Item Closing amount Opening amount
I. Cash 1,239,920,112.48 958,150,311.87
Of which: cash in hand 6,652.03 7,625.43
Bank deposits available for payment at any
1,239,913,460.45
time 958,142,686.44
Other monetary capital available for
--- ---
payment at any time
Accounts deposited in the Central Bank
--- ---
available for payment
II. Cash equivalents
Of which: Bond investment due with 3 months --- ---
III. Balance of cash and cash equivalents at the
1,239,920,112.48 958,150,311.87
period-end
Note: The Company measured bank insurance balance as other monetary capital and
this type of security deposit shall not be used for payment before due, then the
Company make relevant deduction in cash flow statement.
Ⅷ. Related parties and related transactions
1. Parent company of the Company
Name of the
Nature of Registration Legal
parent Relationship Business nature
enterprise place representative
company
Tourism, real
The parent of the State-owned estate and
OCT Group Shenzhen Ren Kelei
Company holdings electronic
industry
（Con）
Proportion of
Proportion of The final
Name of the voting shares
Registered shares held by holding Organization
parent held by the
capital the parent party of the code
company parent company
company (%) Company
(%)
RMB
OCT Group 19.00 19.00 OCT Group 19034617-5
5,450,000,000
2. For information about subsidiary companies of the Company, see No. 1. Subsidies
in Note. Ⅵ.
3. Information about joint ventures and affiliated enterprises of the Company
Please see No. 10(3) of Note. Ⅶ.
4. Information about other related parties of the Company
Name of other related party Relationship with the Company Organization code
Shenzhen OCT East Co., Ltd Same actual controller 75252879-9
Shanghai OCT Investment Development
Same actual controller 78589775-0
Co., Ltd
120
English Translation for Reference Only
Chengdu Tianfu OCT Industrial
Same actual controller 78012858-1
Development Co., Ltd
Beijing Century OCT Industrial Co., Ltd Same actual controller 74005033-7
Taizhou OCT Co., Ltd Same actual controller 79457788-X
Shanghai Tianxiang OCT Investment Co.,
Same actual controller 74805502-8
Ltd
Guangzhou Panyu Huali Youde Printing
Same actual controller 72378549-7
and Packing Co., Ltd
Anhui Huali Packaging Co., Ltd Same actual controller 76276957X
Chongqing Machinery & Electronics
Shareholder of subsidiary 45041726-8
Holding (Group) Co., Ltd
OCT Hotel Group Same actual controller 71524077-X
Shenzhen OCT Water and Power Co., Ltd Same actual controller 19217869-7
Shanghai Huali Packaging Co., Ltd Same actual controller 60737971-5
Shenzhen Huayou Packaging Co., Ltd Same actual controller 76198355-8
Shenzhen Huali Packing & Trading Co., Ltd Same actual controller 618816546
Huali Packaging (Huizhou)Co.,Ltd. Same actual controller 68061271-2
Shenzhen Window of the World Co., Ltd Same actual controller 618845275
Changsha Window of the World Co., Ltd. Same actual controller 616601592
Shenzhen Overseas Chinese Town Gas
Same actual controller 70849783-3
Station Co., Ltd.
Dongyangyi Industry Co., Ltd Shareholder of subsidiary ---
Shenzhen OCT Economic Development
Same actual controller ---
Company
5. Transactions among related parties
(1) Transactions of buying commodities and accepting labor services
Transactio Jan.-Jun. 2011 Jan.-Jun. 2010
n pricing
Percentage Percentage
Related Transactio principle
in the same in the same
party n content and Amount Amount
transactions transaction
decision
(%) s (%)
procedure
Buying
Anhui Huali Negotiated
package 13,753,884.21 0.24 15,088,297.02 0.28
Packaging Co., Ltd price
materials
Buying
Shanghai Huali Negotiated
package 12,903,160.58 0.22 6,193,885.44 0.11
Packaging Co., Ltd price
materials
Buying
Shenzhen Huayou Negotiated
package --- --- --- ---
Packaging Co., Ltd price
materials
Shenzhen Huali Buying Negotiated --- --- 559,711.13 0.01
121
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Transactio Jan.-Jun. 2011 Jan.-Jun. 2010
n pricing
Percentage Percentage
Related Transactio principle
in the same in the same
party n content and Amount Amount
transactions transaction
decision
(%) s (%)
procedure
Packing & Trading package price
Co., Ltd materials
Guangzhou Panyu Buying
Negotiated
Huali Youde Printing package 1,528,190.30 0.03 2,229,370.73 0.04
price
and Packing Co., Ltd materials
Buying
Huali Packaging Negotiated
package 3,906,092.28 0.07 4,415,621.43 0.08
(Huizhou)Co.,Ltd. price
materials
Shenzhen Overseas Hotel
Market
Chinese Town Hotel room 1,062,529.69 0.02 1,433,646.22 0.03
price
Group Co., Ltd. repast
Water and
Shenzhen OCT Water Negotiated
electric 2,967,794.10 0.05 3,918,027.40 0.07
and Power Co., Ltd price
power
(2) Transactions of selling commodities and providing labor services
Transactio Jan.-Jun. 2011 Jan.-Jun. 2010
n pricing
Percentage in Percentage
Related Transactio principle
the same in the same
party n content and Amount Amount
transactions transaction
decision
(%) s (%)
procedure
Shenzhen OCT East Co., Selling Negotiated
1,256,410.26 3.22 4,949,658.12 18.97
Ltd LCDs price
Shanghai OCT Investment Selling Negotiated
--- --- --- ---
Development Co., Ltd LCDs price
Chengdu Tianfu OCT
Negotiated
Industrial Development Co., Selling 1,435,897.44 3.68 --- ---
price
Ltd LCDs
Selling Negotiated
Taizhou OCT Co., Ltd --- --- 1,051,282.05 4.03
LCDs price
Shanghai Tianxiang OCT Selling Negotiated
--- --- --- ---
Investment Co., Ltd LCDs price
Beijing Century OCT Selling Negotiated
--- --- 769,230.77 2.95
Industrial Co., Ltd LCDs price
Shenzhen Window of the Selling Negotiated
--- --- --- ---
World Co., Ltd. LCDs price
Changsha Window of the Selling Negotiated
--- --- --- ---
World Co., Ltd. LCDs price
122
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(3) Capital loaned of related parties
Amount
Starting
Related party borrowed and Due date Explanation Remark
date
loaned
Borrowed:
Overseas Chinese Town 2010.04. 2011.03. Extended to 1
100,000,000.00 Entrust loans
Enterprises Co. Ltd. 15 25 Aug. 2013
Overseas Chinese Town 2010.04. 2013.07.
100,000,000.00 Entrust loans
Enterprises Co. Ltd. 15 31
Overseas Chinese Town 2010.12. 2013.11.
300,000,000.00 Entrust loans
Enterprises Co. Ltd. 13 16
Overseas Chinese Town 2011.03. 2012.03.
300,000,000.00 Entrust loans
Enterprises Co. Ltd. 01 03
Overseas Chinese Town 2011.03. 2016.03.
100,000,000.00 Entrust loans
Enterprises Co. Ltd. 17 04
Note: On 3 Mar. 2011, the 6th Session of the 7th Board of Directors reviewed and
approved Proposal on Loan Capital to Overseas Chinese Town Enterprises Co., Ltd.
and extended entrust loans due in 25 Mar. 2011 to 31 Jul. 2013.
6. Receivables and payables of related parties
(1) Receivables and accounts paid in advance of related parties
Closing amount Opening amount
Item Book Provision for Book Provision for
balance bad debt balance bad debt
Accounts receivable:
Shenzhen OCT East Co., Ltd 1,107,015.00 22,140.30 3,184,517.00 63,690.34
Beijing Century OCT Industrial Co., Ltd 104,805.00 2,096.10 104,805.00 2,096.10
Chengdu Tianfu OCT Industrial Development Co., Ltd 1,608,200.00 32,164.00 768,200.00 15,364.00
Shanghai OCT Investment Development Co., Ltd 550,665.00 11,013.30 579,245.00 11,584.90
Taizhou OCT Co., Ltd 546,000.00 10,920.00 546,000.00 10,920.00
Shenzhen Window of the World Co., Ltd. 13,000.00 260.00 18,300.00 366.00
Changsha Window of the World Co., Ltd. 20,000.00 400.00 20,000.00 400.00
Total 3,949,685.00 78,993.70 5,221,067.00 102,325.24
Notes receivable：
Shenzhen OCT East Co., Ltd --- --- 900,000.00 ---
Total --- --- 900,000.00 ---
Other receivables：
Anhui Huali Packaging Co., Ltd --- --- --- ---
Shenzhen OCT Gas Station Co., Ltd 80,000.00 16,000.00 80,000.00 16,000.00
Shenzhen OCT Real Estate Co., Ltd 1,216,264.86 897,825.32 1,228,504.86 897,825.32
Shenzhen OCT Property Management Co., Ltd 77,402.65 77,402.65 77,402.65 77,402.65
Dongyangyi Industry Co., Ltd 490,000.00 24,500.00 490,000.00 24,500.00
Shenzhen OCT Water and Power Co., Ltd 1,893,600.81 37,872.02 785,798.74 15,715.97
Total 3,757,268.32 1,053,599.99 2,661,706.25 1,031,443.94
123
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(2) Accounts payable to and received in advance from related parties
Item Closing amount Opening amount
Accounts payable:
Chongqing Jingkang Plastic Products Co.,
Ltd 202,407.08 56,188.95
Shenzhen Dekon Electronic Co., Ltd 356,545.32 356,545.32
Anhui Huali Packaging Co., Ltd 7,174,874.99 4,595,847.13
Shenzhen Huali Packing and Trading Co.,
Ltd 13,957.02 15,461.79
Guangzhou Panyu Huali Youde Printing
and Packing Co., Ltd 365,248.61 650,767.53
Shenzhen Huayou Packaging Co., Ltd 169.91 169.91
Huali Packaging (Huizhou)Co.,Ltd. 612,534.76 994,049.02
Huizhou Huali Packaging Co., Ltd. 782,519.85 ---
Shanghai Huali Packaging Co., Ltd 3,310,928.22 328,134.65
Total 12,819,185.76 6,997,164.30
Accounts received in advance:
Taizhou OCT Co., Ltd --- ---
Total --- ---
Other payables:
Guangzhou Panyu Huali Youde Printing
--- ---
and Packing Co., Ltd
Chongqing Machinery & Electronics
--- ---
Holding (Group) Co., Ltd
Anhui Huali Packaging Co., Ltd 50,000.00 50,000.00
Shanghai Huali Packaging Co., Ltd 480,000.00 200,000.00
Shenzhen OTC Economic Development
105,000.00 105,000.00
Company
Total 635,000.00 355,000.00
Notes payable
Guangzhou Panyu Huali Youde Printing
1,067,826.58 2,286,302.79
and Packing Co., Ltd
Huali Packaging (Huizhou)Co.,Ltd. 3,947,693.21 5,039,323.50
Anhui Huali Packaging Co., Ltd 12,791,354.08 16,530,210.02
Shanghai Huali Packaging Co., Ltd 11,782,209.64 21,198,235.01
Shenzhen Huali Packaging Co., Ltd --- 44,201.73
Total 29,589,083.51 45,098,273.05
IX. Contingent events
1. Contingent liabilities and financial effects caused by pending litigation or
arbitration
(1) As of 19 Dec. 2007, the Design, Manufacture and Erection Contract for the
Beijing Pangu Large-scale Outdoors Full-Color LED Display Screen (Turn-key
124
English Translation for Reference Only
Project) (hereinafter referred to as the “Contract Agreement”) was made by and
between the subsidiary of Company-Shenzhen Konka Video & Communication
Systems Engineering Co., Ltd., (hereinafter referred to as Shenzhen Konka Video &
Communication) and Beijing Pangu Investment Co., Ltd. (hereinafter referred to as
the “Pangu Company”), stipulating that the total project period shall be 120 days, the
contracted budget price of total engineering payment shall be RMB 103,357,500.
With six apartments, hotels and commercial houses of 3,707.70 ㎡ at a total price of
RMB 103,357,500 located at Beisihuan M. Road, Chaoyang District, Beijing in
pledge, Pangu Company and Konka Video & Communication entered into the
Advance Sale for Beijing Commercial Building (hereinafter referred to as the
“Advance Sale Contract”) numbered [Y581455], [Y581458], [Y581459], [Y581460],
[Y581461] and [Y581462]. Meanwhile, both parties have entered into the
Supplementary Agreement with provisions as follows: ① Beijing Pangu, prior to 30
Mar. 2009, shall pay the total construction cost amounting to RMB 103,357,500 in a
lump sum to Shenzhen Konka Video & Communication. ② Termination of the
Advance Agreement: The agreement terminates automatically where Beijing Pangu
deposits the payment of RMB 103,357,500 to the account of Shenzhen Konka Video
& Communication prior to 30 Mar. 2009. Shenzhen Konka Video & Communication
returns pledged apartments and receipts to Beijing Pangu and assists Beijing Pangu in
canceling the Advance Agreement. The responsibilities and obligations of both parties
arising from the Advance Agreement are terminated.
After the completion of the project, Shenzhen Konka Video & Communication
delivered LED displays to Beijing Pangu in Jul. 2008 prior to the start of Beijing
Olympic Games. In Mar. 2009, the project was accepted after the joint acceptance
inspection by the involved engineering supervision entity, design entity, Beijing
Pangu and Shenzhen Konka Video & Communication and Shenzhen Konka Video &
Communication delivered all engineering documents to Beijing Pangu. Shenzhen
Konka Video & Communication performed all its responsibilities under the agreement,
however Beijing Pangu failed to perform its responsibilities. As of the date when the
financial report was approved to issue, Shenzhen Konka Video & Communication did
not receive the account receivable from Beijing Pangu amounting to RMB
103,357,500 and the Advance Agreement is not terminated.
Shenzhen Konka Video & Communication raised a civil litigation to Beijing Higher
People’s Court on 13 Jul. 2009 and submitted an application for attachment at the
same day to seal up Apartment 1001, 1101, 1201, 1501, 1601 and 1701 in Unit 5 and
Apartment 1001, 1101 and 901 in Unit 6 in Beijing Mogan 7 Star Plaza at Beisihuan
M. Road, Chaoyang District, Beijing or freeze properties or assets of the respondent,
amounting to RMB 150,609,219.00.
On 17 Aug. 2009, Beijing Higher People’s Court issued GMCZ (2009) No. 4237 Civil
Ruling Paper and sealed up the property amounting to RMB 150,609,219 owned by
Beijing Pangu.
As of the date when the financial report was approved to issue, Beijing Higher
People’s Court did not make the first-instance judgment on the litigation.
(2) The Company purchased color picture tunes from Shanghai Novel Color Picture
Tube Co., Ltd. (hereinafter referred as “Shanghai Novel”) between late 1980s and
early 1990s. As to 1 Jul. 2009, the Company had an accounts receivable of RMB
125
English Translation for Reference Only
4,808,998.23 due from Shanghai Novel, of which, both parties had discrepancy on
nature of a payment for goods with RMB 4,168,825.44: The Company was of the
opinion that the account was the payment for goods paid in advance to Shanghai
Novel, but due to the production halt of Shanghai Novel, thus have not received the
goods so far; however, Shanghai Novel believed that the account was the payment for
goods in previous period but not payment in advance, so rejected to return the
payment in advance of the Company. For which, the Company had filed a lawsuit to
People’ Court of Nanshan District, Shenzhen, on 20 Nov. 2010, the court decreed that
Shanghai Novel return the payment for goods with RMB 4,808,998.23, and pay the
interest for the goods payment (The interest is calculated at the same level loan rate of
the People’s Bank of China at the same period, and paid from 22 Jul. 2009 to the due
date of payment fixed by the Court.). The defendant Shanghai Novel appealed to
Shenzhen Intermediate People’s Court against its sentence. On 13 May 2011,
Shenzhen Intermediate People’s Court made the final sentence of remaining the
original sentence.
2. Use of letters of credit
In the first half of 2011, the Company issued letters of credit with the total amount of
RMB 1.738 billion, of which the amount of RMB 1.2 billion was paid, while the other
amount of RMB 0.686 billion was not paid.
3. Other contingent liabilities and the effects on financial affairs
As of 30 Jun. 2011, the Group had no other significant contingent events that need to
be disclosed.
X. Commitments
As of 30 Jun. 2011, the Group has no significant commitments that need to be
disclosed.
XI. Events after balance sheet date
Explanation on significant events after balance sheet date
1. In Aug. 2011, the Company signed a Comprehensive Credit Contract with
Shenzhen Development Bank OCT Branch, agreed that the total credit line of load
from Aug. 2011 to Jul. 2012 shall not exceed RMB 0.3 billion. As at the balance sheet
date, such contract was approved by the Bank, which was under the procedure of the
Company.
2. Aug. 2011, the Company continued to sign the Bank Credit Contract with
Shenzhen Branch of HSBC Bank (China), agreed that the total line of financing shall
not exceed USD 35 million from Aug. 2011 to Jul. 2012. (Of which, Credit for import
not exceed USD 30 million or line of circulating loan not exceed USD 10 million,
credit line for foreign currency not exceed USD 5 million). As at the balance sheet
date, such contract was approved by the Bank, which was under the procedure of the
Company.
XII. Other significant events
126
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1 .Assets and liabilities measured in fair value
Change in
fair value
that is
Item Opening balance Increase Decrease recorded Closing balance
into equity
at current
period
Financial assets available for
1,830,598.36 --- --- 26,981.30 1,857,579.66
sale
Tradable financial assets --- --- --- --- ---
Total financial assets 1,830,598.36 --- --- 26,981.30 1,857,579.66
Financial liabilities measured at
fair value and of which the
64,957,121.86 --- 14,666,723.60 --- 50,290,398.26
change was recorded into
current period
Other --- --- --- --- ---
Total financial liabilities 64,957,121.86 --- 14,666,723.60 --- 50,290,398.26
2. Foreign currency financial assets and liabilities
Accumulated change in
Withdrawal of
Gain/loss from the fair value which was
impairment in
Item Opening balance change of fair value recorded in the gain/loss Closing balance
the period
in the period from the change of fair
value
Financial assets
Monetary funds 146,772,329.67 --- --- --- 277,997,040.93
Loans and accounts
314,057,382.99 --- --- --- 375,569,354.80
receivable
Transactional
--- --- --- --- ---
financial assets
Accounts paid in
5,639,978.82 --- --- --- 5,639,978.82
advance
Subtotal of financial
466,469,691.48 --- --- --- 659,206,374.55
assets
Financial liabilities
Accounts payable 678,071,813.30 --- --- --- 589,300,554.04
Derivative financial
64,957,121.86 -14,666,723.60 --- --- 50,290,398.26
liabilities (NDF)
Subtotal of financial
743,028,935.16 -14,666,723.60 --- --- 639,590,952.30
liabilities
3. Losses have occurred in Chongqing Electronic, Chongqing Konka and Mudanjiang
Konka, subsidiary companies of the Company, in successive years and their operating
activities are virtually stopped. As of the date of the financial report was approved to
127
English Translation for Reference Only
issue, the Company has not made any decision to stop operating activities of these
companies.
4. Changshu Konka Electronic Co., Ltd., the Company’s subsidiary, is under the
liquidation.
5. Shenzhen Konka Communication Technology Co., Ltd., the Company’s subsidiary,
has finished the registration on changes with Administration of Industry and
Commerce, which business scope was changed from “Development & production &
operation of video telephone, wireless telephone ( not introducing assembly line),
digital mobile communication apparatus and mobile phone, multi-media
communication terminal equipment with 70% products sold in foreign market;
providing after-sale repair service, service for designing the outlook, structure and
electrical circuit.” to “Development & production & operation of communication
product, digital product, computer and auxiliary products as well as the after-sale
repair service; sales of self-developed software; providing technical consultant and
service for relevant products; wholesale, retail, import & export and relevant support
services of the aforesaid products (including spare parts) (Commodities subject to
state trading management are not involved. Products involved in quota, license
management and other specified management shall be subject to the relevant state
provisions.)”.
6. The subsidiary of the Company-Anhui Konka Household Appliance Co., Ltd.
signed the Ceiling Amount of Mortgage Contract numbered 2011 CZYD Zi No. 003
with Chuzhou Branch of Bank of China on 10 Jan. 2011. As stipulated, the business
for loan, trade financing, Guarantee, financial and other credit business (collectively
called “Single contract”) as well as the amended or supplemented parts signed from
10 Jan. 2011 to 10 Jan. 2014 were the main contracts under that contract. The
maximum principal balance of the secured debt of the contract was RMB 55,000,000,
with the following guaranties: the land tenancy numbering CGY (2007) No. 00144 at
original carrying value of RMB 3,357,100, net carrying value of RMB 3,049,300 and
assessed value of RMB 19,133,500; the land tenancy numbering CGY (2007) No.
00464 at original carrying value of RMB 2,996,800, net carrying value of RMB
2,752,100 and assessed value of RMB 17,244,900; the No. 00886 building of CFQZ
2008 Zi at original carrying value of RMB 15,250,600, net carrying value of RMB
13,929,200 and assessed value of RMB 27,108,800; the No. 20100006538 building of
FDQZC Zi at original carrying value of RMB 2,836,700, net carrying value of RMB
2,762,300 and assessed value of RMB 3,505,900; the No. 201000006539 building of
FDQZC Zi at original carrying value of RMB 21,620,000, net carrying value of RMB
21,052,500 and assessed value of RMB 27,461,200; the No. 009579 building of
CFQZ 2008 Zi at original carrying value of RMB 11,850,500, net carrying value of
RMB 10,388,900 and assessed value of RMB 23,717,000. Up to 30 Jun. 2011, the
mortgaged loan under the Ceiling Amount of Mortgage Contract of Anhui Household
Appliances was RMB 55 million.
7. On 28 Jun. 2011, the Company, Shenzhen Konka Communication Technology Co.,
Ltd. and Shenzhen Branch of Bank of China entered into the Credit Line Agreement
numbered “2011 ZZYEX Zi No. 000050”, stipulating that the loan amount valid from
128
English Translation for Reference Only
28 Jun. 2011 to 28 Jun. 2012 shall not exceed the comprehensive credit line of RMB
5,300,000,000 (Of which, line of bank acceptance bill as RMB 2.4 billion, line of
trading financing as RMB 2.5 billion, line of L/C without guarantee as RMB 0.3
billion, line of foreign currency transaction as RMB 0.1 billion). According to the
Agreement, the Company shall be the accredited party, and Shenzhen Konka
Communication Technology Co., Ltd. shall be the authorized withdrawer. On 28 Jun.
2011, the Ceiling Amount Mortgage Contracts numbered ZZYSZE Zi [2011] No.
0005 and No. 0006 were made between the Company and Shenzhen Branch of Bank
of China, the Company’s subsidiary Konka Communication and Shenzhen Branch of
Bank of China respectively. As stipulated, the Company’s banker’s acceptance bill of
not less than RMB 1.3 billion and its margin account with No. 82100364308401001,
shall be pledged to secure all liabilities incurred under the Credit Line Agreement.
8. On 15 Apr. 2010, the Company and Shenzhen Branch of China Construction Bank
entered into the Comprehensive Financing Line Contract numbered “Loan 2010 No.
Zong 181 JTR”, stipulating that the loan amount valid from 15 Apr. 2010 to 14 Apr.
2012 shall not exceed the total amount of RMB 1.33 billion (Of which, loan line of
current capital is RMB 0.8 billion, guarantee line is RMB 0.8 billion, bank acceptance
bill line of commercial bank is RMB 0.8 billion and the loan line for trade financing is
RMB 1.33 billion).
9. On 14 Apr. 2010, the company signed a Comprehensive Financing Line Contract
numbered as “JYS 2010 OCT Zong Shou Zi No. 001” with Bank of Communications
Co., Ltd., Shenzhen Branch, and agreed the total amount of credit line dated from 2
Apr. 2010 to 8 Dec. 2011 not exceed RMB 1 billion ( Of which, loan line of current
capital is RMB 0.15 billion, line of bank acceptance bill is RMB 0.2 billion, line of
import documentary bill is RMB 0.15 billion, line of import letter of credit is RMB 1
billion and import factoring financing is RMB 35 million)
XIII. Note to the Financial Statements of the Company
1. Accounts receivable
(1) Accounts receivable are listed below as per category
Closing. balance
Category Book balance Bad debt reserves
Amount Proportion (%) Amount Proportion (%)
Accounts receivable that are
individually significant and individually 1,242,508.13 2.00
withdrawn bad debt reserves 62,125,406.53 4.88
Accounts receivable withdrawn the bad
--- ---
debt reserves by groups --- ----
Age group 1,074,915,694.16 84.50 199,593,563.52 18.57
Related parties group within the Group 135,082,054.82 10.62 --- ---
Subtotal of group 1,209,997,748.98 95.12 199,593,563.52 16.50
Accounts receivable that are not
individually significant but individually --- ---
withdrawn bad debt reserves --- ---
129
English Translation for Reference Only
Total 1,272,123,155.51 100.00 200,836,071.65 15.79
（Continued）
Opening balance
Category Book balance Bad debt reserves
Amount Proportion (%) Amount Proportion (%)
Accounts receivable that are
individually significant and individually --- --- --- ---
withdrawn bad debt reserves
Accounts receivable withdrawn the bad
--- --- --- ---
debt reserves by groups
Age groups 1,497,280,646.94 98.96 200,836,071.65 13.41
Related parties group within the Group 15,773,119.21 1.04 --- ---
Subtotal of group 1,513,053,766.15 100.00 200,836,071.65 13.27
Accounts receivable that are not
individually significant but individually --- --- --- ---
withdrawn bad debt reserves
Total 1,513,053,766.15 100.00 200,836,071.65 13.27
(2) Accounts receivable listed by age
Closing balance Opening balance
Age
Amount Proportion (%) Amount Proportion (%)
Within 1
1,073,925,146.30 84.42 1,316,746,315.99 87.03
year
1-2 years 7,085,003.59 0.56 6,175,906.25 0.41
2-3 years 6,399,959.47 0.50 5,418,497.77 0.36
3-4 years 983,979.54 0.08 983,979.54 0.06
4-5 years 22,905,288.68 1.80 22,905,288.68 1.51
Over 5 years 160,823,777.93 12.64 160,823,777.93 10.63
Total 1,272,123,155.51 100.00 1,513,053,766.16 100.00
(3) Withdrawal of bad debt reserves
① No accounts receivable that are individually significant and individually
withdrawn bad debt reserves at the end of reporting period.
② Accounts receivable withdrawn the bad debt reserves by groups
In the group, accounts receivable withdrawn bad debt reserves by aging analysis
Closing balance Opening balance
Book balance Book balance
Age
Proportion Bad debt reserves Proportio Bad debt reserves
Amount Amount
(%) n (%)
Within 1 year 876,717,684.95 81.56 25,432,656.61 1,300,973,196.78 86.89 26,675,164.74
1-2 years 7,085,003.59 0.66 308,795.31 6,175,906.25 0.41 308,795.31
2-3 years 6,399,959.47 0.60 1,083,699.56 5,418,497.76 0.36 1,083,699.56
130
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3-4 years 983,979.54 0.09 491,989.77 983,979.54 0.07 491,989.77
4-5 years 22,905,288.68 2.13 11,452,644.34 22,905,288.68 1.53 11,452,644.34
Over 5 years 160,823,777.93 14.96 160,823,777.93 160,823,777.93 10.74 160,823,777.93
Total 1,074,915,694.16 100.00 199,593,563.52 1,497,280,646.94 100.00 200,836,071.65
③ Accounts receivable that are not individually significant but individually
withdrawn bad debt reserves at the end of the reporting period
(4) No accounts receivable were due from the shareholders of the Company who held
over 5% (including 5%) shares with voting rights during the reporting period.
(5) The total amount of the top five accounts receivable at the end of the current
period is RMB 233,183,662.84, about 21.69% of the total accounts receivable.
(6) Accounts receivable from related parties
Percentage in the
Relationship with the Bad debts
Name Amount total accounts
Company provision
receivable（%）
Anhui Konka Tongchuang
Household Appliances Co., Subsidiary company 135,082,054.82 10.62 ---
Ltd.
Total 135,082,054.82 10.62 ---
(7) Amount of foreign currency accounts receivable and the exchange rate
Closing balance Opening balance
Item Amount in Exchange Amount in Exchange
Amount in RMB Amount in RMB
foreign currency rate foreign currency rate
USD 29,652,393.35 6.4716 191,898,428.80 2,048,936.67 6.6227 13,569,492.88
HKD 1,005,690.54 0.8316 836,332.25 914,592.71 0.8509 778,226.94
AUD 49,764.00 6.9276 344,745.09 49,764.00 6.7139 334,110.52
2. Other receivables
(1) Other receivables are listed below as per category
Closing balance
Category Book balance Bad debt reserves
Amount Proportion（%） Amount Proportion（%）
Other accounts receivable that are
individually significant and individually --- --- --- ---
withdrawn bad debt reserves
Other accounts receivable withdrawn
--- --- --- ---
the bad debt reserves by groups
Age groups 88,664,479.75 10.97 13,224,860.18 14.92
Related parties group within the Group 719,894,483.27 89.03 27,380,677.03 3.80
131
English Translation for Reference Only
Subtotal of group 808,558,963.02 100.00 40,605,537.21 5.02
Other accounts receivable that are not
individually significant but individually --- --- --- ---
withdrawn bad debt reserves
Total 808,558,963.02 100.00 40,605,537.21 5.02
(Continued)
Opening balance
Category Book balance Bad debt reserves
Amount Proportion（%） Amount Proportion（%）
Other accounts receivable that are
individually significant and individually --- --- --- ---
withdrawn bad debt reserves
Other accounts receivable withdrawn
--- --- --- ---
the bad debt reserves by groups
Age groups 69,779,069.95 11.34 13,224,860.18 18.95
Related parties group within the Group 545,653,069.43 88.66 27,380,677.03 5.02
Subtotal of group 615,432,139.38 100.00 40,605,537.21 6.60
Other accounts receivable that are not
individually significant but individually --- --- --- ---
withdrawn bad debt reserves
Total 615,432,139.38 100.00 40,605,537.21 6.60
(2) Other accounts receivable listed by age
Closing balance Opening balance
Age Proportion Proportion
Amount Amount
（%） （%）
Within 1
775,914,188.58 95.95 486,611,491.75 79.07
year
1-2 years 1,737,583.57 0.21 53,712,406.01 8.73
2-3 years 591,837.60 0.07 33,321,103.09 5.41
3-4 years 2,639,172.32 0.33 15,402,853.82 2.50
4-5 years 1,061,053.23 0.13 7,077,979.70 1.15
Over 5
26,615,127.72 3.29 19,306,305.01 3.14
years
Total 808,558,963.02 100.00 615,432,139.38 100.00
(3) Withdrawal of bad debt reserves of other accounts receivable
①There was no other accounts receivable that are individually significant and
individually withdrawn bad debt reserves at the end of the reporting period.
② Other accounts receivable withdrawn bad debt reserves by group
In the group, other accounts receivable withdrawn bad debt reserves by aging analysis
Age Closing balance Opening balance
132
English Translation for Reference Only
Book balance Book balance
Proportion Bad debt reserves Proportion Bad debt reserves
Amount Amount
（%） （%）
Within 1 year 56,019,705.31 63.18 852,152.49 40,747,903.51 58.40 852,152.49
1-2 years 1,737,583.57 1.96 149,174.74 2,983,494.75 4.28 149,174.74
2-3 years 591,837.60 0.67 533,535.26 2,667,676.29 3.82 533,535.26
3-4 years 2,639,172.32 2.98 247,538.29 495,076.58 0.71 247,538.29
4-5 years 1,061,053.23 1.20 1,239,112.66 2,478,225.32 3.55 1,239,112.66
Over 5 years 26,615,127.72 30.01 10,203,346.74 20,406,693.50 29.24 10,203,346.74
Total 88,664,479.75 100.00 13,224,860.18 69,779,069.95 100.00 13,224,860.18
③ No other accounts receivable that are not individually significant but individually
withdrawn bad debt reserves at the end of the reporting period
(4) No other accounts receivable were due from the shareholders of the Company who
held over 5% (including 5%) shares with voting rights during the reporting period.
(5) Other accounts receivable from related parties
Percentage in total
Relationship with the Bad debt
Name Amount other account
Company reserves
receivables (%)
Kunshan Kangsheng Subsidiary company 41,834,967.10 5.17
Konka Electronic Subsidiary company 6,606,133.04 0.82
Information Network Subsidiary company 235,034,422.91 29.07
Chongqing Konka Subsidiary company 14,804,339.18 1.83 14,804,339.18
Chongqing Electronic Subsidiary company 12,399,284.71 1.53 12,399,284.71
Video & Communication
Subsidiary company 99,590,585.85 12.32
Systems Engineering
Anhui Household Appliances Subsidiary company 63,110,344.36 7.81
Dongguan Konka Subsidiary company 149,439,162.40 18.48
Dongguan Mould Plastic Subsidiary company 18,654,164.70 2.31
Boluo Konka Subsidiary company 21,798,173.99 2.70
Boluo Precision Subsidiary company 54,780,795.66 6.78
Nanhai Institute Subsidiary company 636,352.34 0.08 177,053.14
Xutongda Subsidiary company 1,125,757.03 0.14
Shenzhen Overseas Chinese Subsidiary company of
80,000.00 0.01 16,000.00
Town Service Station Co., ultimate controller
Ltd.
Shenzhen OCT Real Estate Subsidiary company of
1,216,264.86 0.15 897,825.32
Co., Ltd. ultimate controller
Shenzhen OCT Property Subsidiary company of
77,402.65 0.01 77,402.65
Management Co., Ltd. ultimate controller
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Percentage in total
Relationship with the Bad debt
Name Amount other account
Company reserves
receivables (%)
Dongyangyi Industry Co., Subsidiary company of
490,000.00 0.06 24,500.00
Ltd. ultimate controller
OCT Water and Power Co., Subsidiary company of
1,893,600.81 0.23 15,715.97
Ltd. ultimate controller
Total 723,571,751.59 89.50 28,412,120.97
Note: Chongqing Konka and Chongqing Electronic, the Company’s subsidiaries, had
not enough funds to pay off the arrearage, thus totally withdrew the bad debt reserves.
(6) The top five other receivables are all subsidiary companies of the Company.
3. Long-term equity investment
(1) Category of long-term equity investment
Increase in Decease in this
Item Opening balance Closing balance
this period period
Investment on subsidiary
1,744,259,154.56 --- --- 1,744,259,154.56
companies
Investment on joint ventures --- --- --- ---
Investment on associated
--- --- ---
enterprises ---
Other equity investments 14,838,000.00 --- --- 14,838,000.00
Less: provisions for
depreciation of long-term 105,694,984.69 --- --- 105,694,984.69
equity investments
Total 1,653,402,169.87 --- --- 1,653,402,169.87
(2) Breakdown of long-term equity investment
Initial
Accounting Increase/decrease
Invested entity investment Opening balance Closing balance
method amounts
costs
Mudanjiang Konka Cost method 36,000,000.00 36,000,000.00 --- 36,000,000.00
Shaanxi Konka Cost method 44,869,809.80 44,869,809.80 --- 44,869,809.80
Anhui Konka Cost method 122,780,937.98 122,780,937.98 --- 122,780,937.98
Dongguan Konka Cost method 274,783,988.91 274,783,988.91 --- 274,783,988.91
Hongkong Konka Cost method 781,828.61 781,828.61 --- 781,828.61
Chongqing Konka Cost method 27,000,000.00 27,000,000.00 --- 27,000,000.00
Anhui Household
Cost method 5,278,509.85 5,278,509.85 --- 5,278,509.85
Appliances
Konka Europe Cost method 261,482.50 261,482.50 --- 261,482.50
134
English Translation for Reference Only
Initial
Accounting Increase/decrease
Invested entity investment Opening balance Closing balance
method amounts
costs
Nanhai Konka Cost method 500,000.00 500,000.00 --- 500,000.00
Kunshan Konka Cost method 350,000,000.00 350,000,000.00 --- 350,000,000.00
Plastic Products Cost method 4,655,000.00 4,655,000.00 --- 4,655,000.00
Konka Electronic Cost method 10,732,484.69 10,732,484.69 --- 10,732,484.69
Telecommunication
Cost method 90,000,000.00 90,000,000.00 --- 90,000,000.00
Technology
Konka America Cost method 8,062,500.00 8,062,500.00 --- 8,062,500.00
Information Network Cost method 22,500,000.00 22,500,000.00 --- 22,500,000.00
Shushida Cost method 31,500,000.00 31,500,000.00 --- 31,500,000.00
Video &
Communication Cost method 9,000,000.00 9,000,000.00 --- 9,000,000.00
Systems Engineering
Chongqing Electronic Cost method 17,100,000.00 17,100,000.00 --- 17,100,000.00
Fittings Technology Cost method 48,750,000.00 48,750,000.00 --- 48,750,000.00
Kunshan Real Estate Cost method 200,000,000.00 200,000,000.00 --- 200,000,000.00
Kunshan Kangsheng Cost method 350,000,000.00 350,000,000.00 --- 350,000,000.00
Anhui Tongchuang Cost method 69,702,612.22 69,702,612.22 --- 69,702,612.22
Konka Optoelectronic Cost method 10,000,000.00 10,000,000.00 --- 10,000,000.00
Wankaida Cost method 10,000,000.00 10,000,000.00 --- 10,000,000.00
Shenzhen Julong
Optoelectronics Co., Cost method 2,000,000.00 2,000,000.00 --- 2,000,000.00
Ltd.
Feihong Electronics
Cost method 1,300,000.00 1,300,000.00 --- 1,300,000.00
Co., Ltd.
Shenzhen Association
of Enterprises with Cost method 100,000.00 100,000.00 --- 100,000.00
Foreign Investment
Shenzhen Make-plan
Investment
Cost method 485,000.00 485,000.00 --- 485,000.00
Development Co.,
Ltd.
IGRS Information
Technology
Cost method 5,000,000.00 5,000,000.00 --- 5,000,000.00
Engineering Center
Co., Ltd.
Shenzhen CTU
Cost method 1,153,000.00 1,153,000.00 --- 1,153,000.00
Hi-tech Ltd.
Shenzhen Digital TV
National Engineering Cost method 2,400,000.00 2,400,000.00 --- 2,400,000.00
Lab Co., Ltd.
135
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Initial
Accounting Increase/decrease
Invested entity investment Opening balance Closing balance
method amounts
costs
Shanghai Digital TV
National Engineering Cost method 2,400,000.00 2,400,000.00 --- 2,400,000.00
R&D Center Co., Ltd.
Total 1,759,097,154.56 --- 1,759,097,154.56
(Continued)
Impairm
ent
Explanations on
Proportion provisio
Proportion of difference between the
of shares n Cash dividends
voting rights in shareholding proportion Impairment
Invested entity held in the withdra at the current
the invested and voting rights provision
invested wn at period
entity (%) proportion in the
entity (%) the
invested entity
current
period
Mudanjiang
60.00 60.00 --- 36,000,000.00 --- ---
Konka
Shaanxi Konka 60.00 60.00 --- --- --- ---
Anhui Konka 78.00 78.00 --- --- --- ---
Dongguan
100.00 100.00 --- --- --- ---
Konka
Hongkong
100.00 100.00 --- --- --- ---
Konka
Chongqing
60.00 60.00 --- 27,000,000.00 --- ---
Konka
Anhui Konka indirectly
held 4.48% equities of
Anhui Household
Anhui
Appliances, while
Household 6.55 97.45 --- --- ---
Aahui Tongchuang
Appliances
indirectly held 86.42%
shares of Anhui
Household Appliances.
Konka Europe 100.00 100.00 --- --- --- ---
Nanhai Konka 100.00 100.00 --- --- --- ---
Kunshan
100.00 100.00 --- --- --- ---
Konka
Plastic
100.00 100.00 --- --- --- ---
Products
Konka
51.00 51.00 --- 10,732,484.69 --- ---
Electronic
136
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Impairm
ent
Explanations on
Proportion provisio
Proportion of difference between the
of shares n Cash dividends
voting rights in shareholding proportion Impairment
Invested entity held in the withdra at the current
the invested and voting rights provision
invested wn at period
entity (%) proportion in the
entity (%) the
invested entity
current
period
Telecommunic
ation 75.00 100.00 --- --- --- ---
Technology
Konka
100.00 100.00 --- 8,062,500.00 --- ---
America
Information
100.00 100.00 --- 22,500,000.00 --- ---
Network
Shushida 100.00 100.00 --- --- --- ---
Video &
Communicatio
60.00 60.00 --- --- --- ---
n Systems
Engineering
Chongqing
57.00 57.00 --- --- --- ---
Electronic
Fittings
100.00 100.00 --- --- --- ---
Technology
Kunshan Real
100.00 100.00 --- --- --- ---
Estate
Kunshan
100.00 100.00 --- --- --- ---
Kangsheng
Anhui
100.00 100.00 --- --- --- ---
Tongchuang
Konka
100.00 100.00 --- --- --- ---
Optoelectronic
Wankaida 100.00 100.00 --- --- --- ---
Shenzhen
Julong
10.00 10.00 --- --- --- ---
Optoelectronic
s Co., Ltd.
Feihong
Electronics 8.33 8.33 --- --- --- ---
Co., Ltd.
137
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Impairm
ent
Explanations on
Proportion provisio
Proportion of difference between the
of shares n Cash dividends
voting rights in shareholding proportion Impairment
Invested entity held in the withdra at the current
the invested and voting rights provision
invested wn at period
entity (%) proportion in the
entity (%) the
invested entity
current
period
Shenzhen
Association of
Enterprises --- --- --- --- --- ---
with Foreign
Investment
Shenzhen
Make-plan
Investment 10.00 10.00 --- --- --- ---
Development
Co., Ltd.
IGRS
Information
Technology
9.62 9.62 --- --- --- ---
Engineering
Center Co.,
Ltd.
Shenzhen CTU
11.50 11.50 --- --- --- ---
Hi-tech Ltd.
Shenzhen
Digital TV
National 6.00 6.00 --- --- --- ---
Engineering
Lab Co., Ltd.
Shanghai
Digital TV
National
4.26 4.26 --- --- --- ---
Engineering
R&D Center
Co., Ltd.
Total 105,694,984.69 --- ---
Note: The reason for the difference between the investment ratio and voting rights of
Anhui Tongchuang was that the Company signed a cooperative agreement with
Administrative Committee of Chuzhou Economic Development Zone (hereinafter
referred as “Administrative Committee”), agreeing on that the Administrative
Committee could transfer its equities of Anhui Tongchuang after three years since
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English Translation for Reference Only
Anhui Tongchuang’s establishment, besides, the Company could repurchase the
equities with Administrative Committee gaining 2% of its investment amount as the
fixed income.
4. Operating revenues and operating costs
(1) Operating revenues and operating costs
Item Amount at this period Amount at last period
Revenues from main business 5,750,983,910.22 6,524,311,285.69
Revenues from other business 1,033,821,737.29 1,041,042,220.58
Total operating revenues 6,784,805,647.51 7,565,353,506.27
Costs of main business 5,049,104,547.63 5,651,885,943.38
Costs of other business 1,047,186,384.39 1,034,718,608.23
Total operating costs 6,096,290,932.02 6,686,604,551.61
(2) Main business (by industries)
Amount at this period Amount at last period
Industry
Operating revenues Operating cost Operating revenues Operating cost
Electronic industry 5,750,983,910.22 5,049,104,547.63 6,524,311,285.69 5,651,885,943.38
(3) Main business (by products)
Amount at this period Amount at last period
Name of product
Operating revenues Operating cost Operating revenues Operating cost
Color TV business 5,199,165,989.17 4,558,502,708.98 5,908,583,213.90 5,171,044,861.97
Consumer appliances 545,724,450.62 484,589,423.88 605,118,826.33 469,960,034.65
Other 6,093,470.43 6,012,414.77 10,609,245.46 10,881,046.76
Total 5,750,983,910.22 5,049,104,547.63 6,524,311,285.69 5,651,885,943.38
(4) Main business (by regions)
Amount at this period Amount at last period
Name of region
Operating revenues Operating cost Operating revenues Operating cost
Domestic revenues 4,827,253,844.09 4,131,840,812.79 5,302,820,965.52 4,432,876,169.99
Overseas revenues 923,730,066.13 917,263,734.84 1,221,490,320.16 1,219,009,773.39
Total 5,750,983,910.22 5,049,104,547.63 6,524,311,285.68 5,651,885,943.38
(5) Operating revenues from the top five customers
Total operating revenues from Proportion in the total operating
Period
the top five customers revenue at the same period（%）
2011 1,825,651,639.09 26.91
2010 2,373,699,674.51 31.38
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5. Investment income
(1) List of investment income items
Invested entity Amount at this period Amount at last period
Income from long-term equity investment measured by adopting
--- 19,092,952.03
the cost method
Income from long-term equity investment measured by adopting
--- ---
the equity method
Investment income from holding transactional financial assets --- ---
Investment income from holding financial assets available for
--- 10,529.35
sale
Total --- 19,103,481.38
Remark: No significant restriction is imposed on repatriation of the investment
income of the Company.
(2) Income from long-term equity investment measured by adopting the cost method
Invested entity Amount at this period Amount at last period
Anhui Household Appliances --- 19,092,952.03
Shaanxi Konka --- ---
Total --- 19,092,952.03
6. Supplementary information to cash flow statement
Item Amount at this period Amount at last period
I. Reconciliation of net profit to net cash flows generated
from operating activities
Net profit -243,239,644.83 -18,456,929.86
Add: Provision for assets impairment --- 3,546,793.93
Depreciation of fixed assets, of oil-gas assets, of productive
14,902,230.74 15,906,582.84
biological assets
Amortization of intangible assets 879,959.78 1,132,162.65
Amortization of long-term deferred expense 1,068,304.61 995,701.01
Losses on disposal of property, plant and equipment,
-2,367,987.15 -15,090,395.07
intangible assets and other long-term assets (gains: negative)
Loss on retirement of fixed assets (gains: negative) 685,174.12 221,059.86
Losses from variation of fair value (gains: negative) -14,666,723.60 4,190,488.00
Financial cost (gains: negative) 38,821,080.62 8,513,441.54
Investment loss (gains: negative) --- -19,103,481.38
Decrease in deferred income tax assets (gains: negative) 6,475.51 614,963.92
Increase in deferred income tax liabilities (decrease:
--- ---
negative)
Decrease in inventory (gains: negative) 504,642,108.78 -582,628,647.84
Decrease in accounts receivable from operating activities
575,743,550.67 799,754,696.60
(gains: negative)
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English Translation for Reference Only
Item Amount at this period Amount at last period
Increase in payables from operating activities (decrease:
-128,568,916.00 -308,805,319.52
negative)
Other --- ---
Net cash flows generated from operating activities 747,905,613.25 -109,208,883.32
II. Investing and financing activities that do not involving
cash receipts and payment:
Conversion of debt into capital --- ---
Convertible bond due within one year --- ---
Fixed assets financed by finance leases --- ---
III. Changes in cash and cash equivalents
Closing balance of cash 538,605,440.94 438,848,191.15
Less: Opening balance of cash 255,364,835.76 341,440,119.99
Add: Closing balance of cash equivalents --- ---
Less: Opening balance of cash equivalents --- ---
Net increase in cash and cash equivalents 283,240,605.18 97,408,071.16
XIV. Supplementary Information
1. Non-recurring gains and losses
Unit: RMB Yuan
Amount at this Amount at last
Item
period period
Gains and losses on disposal of non-current assets 903,069.82 14,413,137.27
Return reduction and exemption of taxes surpassing approval or without
--- ---
official approval document
Government grant recognized in current year, except for those acquired in the
ordinary course of business or granted continuously in certain standard quota 13,069,367.50 7,373,346.55
according to relevant national laws and regulations
Included in current profit and loss against the non-financial enterprises funds
--- ---
occupation fee collected
Profits and losses arising from business combination when the combined cost
--- ---
is less than the recognized fair value of net assets of the combined company
Profit and loss of non monetary asset exchange --- ---
Gains and losses from consigned others to invest or manage the assets --- ---
Allotted asset depreciation reserves incurred by occasional cause such as
--- ---
natural calamities
Debt restructuring gains and losses --- ---
Enterprise restructured expenses such as employee relocating compensation
--- ---
and integration expense, etc.
Profit and loss from transactions with obvious unfair transaction price --- ---
Subsidiaries' Year-to-Date net profit/loss arising from business combination of
--- ---
entities controlled by a same company
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English Translation for Reference Only
Profits and losses arising from other accrued liabilities which are not related to
--- ---
company's main business
Gains and losses on change in fair value from tradable financial assets and
tradable financial liabilities, as well as investment income from disposal of
tradable financial assets and tradable financial liabilities and financial assets 14,666,723.60 -5,324,378.65
available for sales except for effective hedging related with normal businesses
of the Company
Impairment reserves reversal of account receivables individually taking the
--- ---
impairment tests
Gains and losses from outside entrusted loans --- ---
Gains and losses from change in fair value of investment real estate adopting
--- ---
the fair value mode to do the follow-up measurement
The influence of the once-off adjustment of current period gains and losses on
the gains and losses in current period in accordance with the laws and rules of --- ---
tax and accounting
Fee and commission incomes arising from trusted customer asset management
--- ---
business
Other non-operating income and expense other than above mentioned 5,013,984.10 3,392,967.22
Other non-recurring gains and losses in line with the definition of profit and
---
loss items
Subtotal of non-recurring gains and losses 33,653,145.02 19,855,072.39
Effect on income tax 8,100,457.66 4,324,623.39
Effect on minority interest（After tax） 705,241.76 268,027.10
Total 24,847,445.60 15,262,421.90
Note: In the above table, “+” means gains or income, “-” means losses or expenditure.
The recognition of the items of non-recurring gains and losses by the Company is in
accordance with Explanatory Public Notice on Information Disclosure Of Companies
Issuing Securities Publicly No. 1 — Non-recurring gains and losses of CSRC (ZJH
Public Notice [2008] No. 43).
2. Return on equity (ROE) and earnings per share (EPS)
Profit as of the reporting EPS (RMB/share)
Weighted average ROE
period Basic EPS Diluted EPS
Net profit attributable to
common share holders of -5.00% -0.1620 -0.1620
the Company
Net profit attributable to
common share holders of
the Company after -5.64% -0.1826 -0.1826
deducting non-recurring
gains and losses
Notes: (1) Weighted average ROE based on the net profit attributable to common
share holders of the Company = -195,000,941.75 ÷
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English Translation for Reference Only
（3,998,647,232.73-195,000,941.75÷2+20,505.79×2÷6-12,039,727.04×1÷6）
(2) Weighted average ROE based on the net profit attributable to common share
holders of the Company after deducting non-recurring gains and losses =
(-195,000,941.75-24,847,445.6) ÷ （ 3,998,647,232.73-195,000,941.75 ÷
2+20,505.79×2÷6-12,039,727.04×1÷6）
(3) See Note VII 48 for calculation of basic and diluted EPS.
3. Abnormities of main items in the financial statements and explanation of
relevant reasons
(1) Monetary funds stood at RMB 5,951,638,518.24 as at 30 Jun. 2011, up 58.1% as
compared with the opening amount, which was mainly because NDF transactions
increased and marginal deposits for security increased accordingly.
(2) Interest receivable stood at RMB 17,784,105.49 as at 30 Jun. 2011, down 29.7%
as compared with the opening amount, which was mainly because interest received
offset against receivable items.
(3) Long term equity investment stood at RMB 221,462,840.44 as at 30 Jun. 2011, up
94.69% as compared with the opening amount, which was mainly due to the new
equity investment in Yingrui Optoelectronic Technology (Shanghai) Co., Ltd. during
the reporting period.
(4) Short-term borrowings stood at RMB 7,745,543,756.64 as at 30 Jun. 2011, up
30.9% as compared with the opening amount, which was mainly because overseas
payments increased and NDF transactions and overseas advances increased
accordingly.
(5) Notes payable stood at RMB 1,378,401,734.05 as at 30 Jun. 2011, down 32.16%
as compared with the opening amount, which was mainly domestic purchases
decreased and notes payable decreased accordingly.
(6) Long-term borrowings stood at RMB 610,000,000.00 as at 30 Jun. 2011, up
19.61% as compared with the opening amount, which was mainly fixed assets,
construction in process and purchases increased and long-term borrowings were
obtained for satisfying relevant capital needs.
(7) Business taxes and surtaxes for the first half of 2011 were RMB 17,163,873.16, up
1058.56% from a year earlier, which was mainly due to the increase of the city
maintenance tax on foreign-invested enterprises and educational surcharges.
(8) Financial expense for the first half of 2011 was RMB 71,427,282.01, up 217.11%
from a year earlier, which was mainly due to the increase of interest expense for new
borrowings obtained by the Company.
(9) Income from fair value changes for the first half of 2011 was RMB 14,666,723.60,
up 374.92% from a year earlier, which was mainly because for unsettled NDF
contracts, the fair value changes arising from the NDF exchange rate for the period
from the balance sheet date to the settlement date being lower than the original NDF
contractual exchange rate were recorded into income from fair value changes.
(10) Investment income for the first half of 2011 was RMB -79,052.57, down
102.38% from a year earlier, which was mainly due to the decrease of long-term
equity investment income measured at the equity method.
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English Translation for Reference Only
(11) Non-business income for the first half of 2011 was RMB 81,233,539.84, up
55.13% from a year earlier, which was mainly due to the increase of income from tax
rebates on embedded software.
(12) Non-business expense for the first half of 2011 was RMB 3,115,587.11, down
31.02% from a year earlier, which was mainly due to the decrease of losses on fixed
asset disposal.
(13) Income tax expense for the first half of 2011 was RMB 14,971,357.93, down
24.33% from a year earlier, which was mainly due to the decrease of profits.
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