KONKA GROUP CO., LTD.
THE FIRST QUARTERLY REPORT 2009
§1. Important Notice
1.1 The Board of Directors, the Supervisory Committee, directors, supervisors and other senior
management personnel of Konka Group Co., Ltd. (hereinafter referred to as “the Company”) hereby
guarantee that this report carries no false information, misleading statements or major omissions,
and accept, individually and collectively, the responsibility for the factuality, accuracy and
completeness of the information set forth herein.
1.2 The Financial Report of this first quarterly report has not been audited by a CPA firm.
1.3 Mr. Hou Songrong (Chairman of the Board of the Company), Mr. Yang Guobin (Chief Financial
Officer of the Company) and Mr. Ruan Renzong (Person-in-charge of the accounting agency and the
accounting project) hereby confirm that the Financial Report enclosed in this quarterly report
is factual and complete.
§2. Company Profile
2.1 Main accounting data and financial indicators
Unit: (RMB) Yuan
31 Mar. 2009 31 Dec. 2008 Increase/decrease (%)
Total assets 9,870,096,644.14 10,517,285,515.63 -6.15
Equities attributable to owners of the
parent company
3,815,600,056.91 3,775,042,931.48 1.07
Share capital 1,203,972,704.00 1,203,972,704.00 0.00
Net assets per share attributable to
owners of the parent company
3.17 3.14 0.96
Jan.-Mar. 2009 Jan.-Mar. 2008 Increase/decrease (%)
Total operation income 2,611,315,292.67 3,077,167,212.95 -15.14
Net profit attributable to owners of
the parent company
40,231,160.32 47,065,384.53 -14.52
Net cash flow arising from operating
activities
802,909,498.66 -387,373,316.42 307.27
Net cash flow per share arising from
operating activities
0.67 -0.32 307.27
Basic earnings per share 0.033 0.039 -15.38
Diluted earnings per share 0.033 0.039 -15.38
Return on equity 1.05% 1.32% -0.27
Profit margin on net assets after
deducting non-recurring gains and
losses
1.00% 1.37% -0.37
Items of non-recurring gains and losses
Amount from year-begin to the
end of the reporting period
Gains from disposal of non-current assets 256,295.76
Other non-operating income and expenses besides the above items 2,731,354.13
Amount affected by income tax -362,488.79
Amount affected by minority interest -400,376.70
Total 2,224,784.40
Explanation for items of non-recurring gains and losses:
The gains from disposal of non-current assets listed under the items of non-recurring gains and
losses came from the disposal of fixed assets. Meanwhile, other non-operating income and expenses
mainly referred to the governmental reward funds and fines of the Company’s two
subsidiaries—Dongguan Konka Electronic Co., Ltd. and Dongguan Konka Mould Plastic Co., Ltd..
Notes: According to the resolutions of its 2007 Shareholders’ General Meeting, the Company
implemented the plan for turning the capital surplus to share capital in Jun. 2008. With the total
share capital (601,986,352 shares) at the end of 2007 as the equity base, the Company conducted
the conversion to all its shareholders according to the rate of 10 shares per 10 shares. After2
the conversion, the Company’s total share capital was increased to 1,203,972,704 shares. In the
table above, data of the same period of last year (including the basic earnings per share, the
diluted earnings per share, the net cash flow per share arising from operating activities and
the net assets per share attributable to the shareholders of the listed company) were all
calculated on the basis of the total share capital after the conversion.
2.2 Total number of shareholders at the end of the reporting period, as well as the shares held
by the top ten shareholders holding shares not subject to trading moratorium
Unit: Share
Total number of shareholders at period-end 91,579
Tradable shares held by the top ten shareholders holding shares not subject to trading moratorium
Name of shareholder (full name)
Number of tradable shares not
subject to trading moratorium held
at period-end
Type of share
GAO-LING FUND,L.P. 58,930,179
Domestically listed foreign
shares
Industrial and Commercial Bank of China—Boshi
Selected Stock Securities Investment Fund
33,368,575 RMB ordinary shares
China Construction Bank—Huabao Xingye Earnings
Growth Mixed Securities Investment Fund
29,750,838 RMB ordinary shares
GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 27,576,200
Domestically listed foreign
shares
Orient Securities—Agricultural Bank of
China—Dongfanghong No.3 Collective Assets Management
Plan
25,579,257 RMB ordinary shares
SBCI FINANCE ASIA LTD A/C SBC HONG KONG 17,817,679
Domestically listed foreign
shares
Communications Bank of China—Haifutong Selected
Securities Investment Fund
15,000,527 RMB ordinary shares
NOMURA SECURITIES CO.LTD 13,500,000
Domestically listed foreign
shares
China Construction Bank—Baokang Consumer Goods
Securities Investment Bank
12,213,505 RMB ordinary shares
Bank of China—Huabao Xingye Advance Growth Stock
Securities Investment Fund
12,000,000 RMB ordinary shares
§3. Significant Events
3.1 Particulars about major changes of items and financial indexes of the main accounting
statements, as well as the reasons for changes
√Applicable □Inapplicable
1. In the first quarter of 2009, the Company’s sales revenue and profitability of LCD TVs were
greatly affected by the short supply of LCD panels and LCD modules since the 4th quarter of 2008.
Affected by the global financial crisis, the 4th quarter of 2008 saw a sharp drop of the global
demand for LCD panels and LCD modules. The manufacturers of LCD panels and LCD modules, as well
as the relevant upstream suppliers and component suppliers, made an excessively pessimistic
estimate of the demand for the panels. As a result, they adopted such measures as reducing the
inventory at below-cost prices, as well as the staff reduction. Meanwhile, they resorted to
reducing the production, production halt or even closing down the business, which led to excessive
deinventory.
In view of the great demand for LCD panels in the market of China and other markets, the suspended
production of LCD panels and LCD modules was being gradually resumed. However, the relevant
upstream suppliers and component suppliers for LCD panels and LCD modules worried that the strong
demand would not last long. Therefore, they adopted a prudent and hesitant attitude in terms of
resuming and expanding the production, which made the rapid increase of their production capacity
almost impossible. What’s more, such an inaccurate judgment about the market spread its influence
to the upper links of the industrial chain, which caused a short supply in a larger scope. Therefore,
when the manufacturers of LCD panels purchased raw materials and components from the relevant
upstream suppliers and component suppliers, they encountered a greatly limited supply of some
key raw materials and components. The suppliers failing to provide raw materials according to3
the set time and quantity greatly affected the production of LCD panels and LCD modules.
Consequently, the domestic LCD TV makers could not purchase LCD panels and LCD modules at the
planned time and quantity, either. As a result, with a strong domestic demand for LCD TVs, the
LCD TV makers had to suffer a severely short supply of LCD panels and LCD modules, which
considerably affected the sales revenue and profitability of the domestic LCD TV makers in the
first quarter of 2009. It was estimated that it would take another 2-3 months for the upstream
suppliers and component suppliers of LCD panels and LCD modules to fundamentally resume the
production and provide sufficient raw materials to meet the market need. Therefore, the short
supply of LCD panels and LCD modules was expected to last until June or July in 2009.
Due to the short supply of LCD panels and LCD modules, the Company’s sales revenue in the first
quarter of 2009 decreased by 15.14% compared to the same period of last year, and the net profit
attributable to the owners of the parent company registered a decrease of14.52% over the same
period of last year.
2. The net inventory at the end of the reporting period decreased by 12.20% compared to that at
the end of 2008, which marked a steady decrease trend. And this was mainly due to that the Company
further strengthened its management and control of the inventory, improved the efficiency of
inventory operation, and thus further accelerated the turnover speed of the inventory.
3. The intangible assets increased by 81.25% compared to the year-begin, mainly due to the
acquisition of the certificate of land use right for the land involved in the Kunshan LCD Module
Project.
4. Non-operating income increased by 368.09% compared with the same period of last year, which
was mainly due to the Penalty Incomes and the government awards granted to the subsidiary Dong
Guan Konka Plastic Mould Co., Ltd.
5. As discount of notes receivable increased, the financial expense increased by 37.69% compared
with the same period of last year, and the cash flow from operating activities increased by 307.27%
compared with the same period of last year.
3.2 Explanation and analysis on the progress of significant events as well as their influence
and solution
□Applicable √Inapplicable
3.3 Fulfillment of commitments made by the Company, shareholders and actual controller
√Applicable □Inapplicable
Commitments Contents of commitments Execution
Commitments concerning share
merger reform
（1）To promise that all non-tradable shares of KONKA GROUP CO.,
LTD held by it will not be listed for trading or transferring within
24 months since the date when it acquires the right to list in A
share market. (2) At the expiration of the aforesaid commitment
period, the original non-tradable shares of KONKA GROUP CO., LTD
sold through listing at Stock Exchange shall take up less than 5%
of total shares of KONKA GROUP CO., LTD within 12 months, and less
than 10% within 24 months.
Up to now, there
was no share
subject to
moratorium
listed for
trading or
transferring.
Commitments concerning share
trading moratorium
- -
Commitments made in the purchase
report or the report on equity
changes
- -
Commitments made in major assets
reorganization
- -
Commitments made in stock
issuance
- -
Other commitments (including
supplementary commitments)
- -
3.4 Warnings of possible losses or significant changes of the accumulative net profit during the
period from the year-begin to the end of the next reporting period compared with the same period
of last year according to prediction, as well as explanations on the reasons
□Applicable √Inapplicable
3.5 Other significant events
3.5.1 Securities Investment4
□Applicable √Inapplicable
3.5.2 Interviews and visits in the reporting period
Date Place
Way of
communication
Visitors Topics discussed and materials provided
Jan. 21,
2009
Meeting room of
the Company
Field research
CITIC Securities, Changsheng Fund
Management Co., Ltd
Development trend of color TV industry, competitiveness of
LCD TV products, the Company’s status in color TV industry
Feb. 5, 2009
Meeting room of
the Company
Field research Ping An Securities
Development strategy of the Company’s color TV business, new
products of LCD TV, status quo of LCD TV industry
Feb. 18,
2009
Meeting room of
the Company
Field research CCB International
Status quo and development trend of color TV industry, the
Company’s development concept of the LCD TV business
Feb. 19,
2009
Meeting room of
the Company
Field research
SYWG BNP Paribas, Bosera Fund,
Fullgoal Fund Management, Yinhua
Fund Management, CCB Principal
Asset Management etc.
Competitiveness of the Company’s color TV products,
development strategy, market prospect of new products, and
progress of relevant work
Feb. 20,
2009
Meeting room of
the Company
Field research China Securities Co., Ltd
Investment in LCD module projects, basic information of the
Company’s business of color TV and mobile phone
Feb. 23,
2009
Meeting room of
the Company
Field research Sinolink Securities
Construction of KONKA GROUP R & D Building, development trend
of color TV industry
Feb. 25,
2009
Jining Branch Field research
Shenyin Wanguo Securities,
Tianhong Asset Management, Fortune
SGAM Management, Harfor Funds,
POWER PACIFIC CORPORATION LTD
Particulars about promoting application of electrical home
appliance in the countryside
Mar. 5, 2009
Meeting room of
the Company
Field research
Penghua Fund Management, United
Securities, China Jianyin
Investment Securities, Yingda
Securities
Investment in 2009, construction of LCD module project,
competitive strategy of color TV
Mar. 5, 2009
Meeting room of
the Company
Field research
Guosen Securities, Rongtong Fund
Management, ABC-CA Fund
Management, China Merchants Fund
Development trend of color TV industry, particulars about
reducing of expenses of the Company, investment in 2009
Mar. 16,
2009
Meeting room of
the Company
Field research CITIC Securities
Development trend of color TV industry, competitiveness of
the Company’s color TV products
3.5.3 Other significant events
√Applicable □Inapplicable
(1) Up to the end of reporting period, the Company did not provide capital to controlling
shareholders or other affiliated parties, nor provide any external guarantee against prescribed
procedures.
(2) In the reporting period, the Company had no significant contract which shall be disclosed.
§4. Appendix
4.1 Balance sheet
Prepared by Konka Group Co., Ltd 31 Mar. 2009 Unit: RMB Yuan
Balance at period-end Balance at year-begin
Items
Consolidation Parent company Consolidation Parent company
Current assets:
Monetary funds 2,625,039,024.05 1,811,084,602.16 2,066,252,494.08 1,475,666,531.16
Settlement fund reserve
Dismantle fund
Transaction financial asset
Notes receivable 2,084,457,468.28 1,965,019,668.55 2,602,862,135.40 2,490,683,124.51
Account receivable 946,296,277.40 869,677,311.87 1,326,261,316.54 1,047,632,207.37
Account paid in advance 213,548,919.16 99,062,162.21 258,992,334.73 202,116,433.21
Premium receivables
Receivables from reinsurers
Reinsurance contract reserve
receivables5
Interest receivable 27,889,244.98 25,600,002.68 19,905,867.09 17,616,624.79
Dividend receivable
Other account receivable 70,416,042.76 1,037,334,585.23 81,299,762.88 1,069,914,747.28
Financial assets purchased under
agreements to resell
Inventories 2,259,818,250.19 1,550,409,704.48 2,573,776,867.13 1,914,848,396.91
Non-current assets due within 1 year
Other current assets
Total current assets 8,227,465,226.82 7,358,188,037.18 8,929,350,777.85 8,218,478,065.23
Non-current assets:
Loans and advance
Available for sale financial assets 9,756,649.50 9,756,649.50 9,756,649.50 9,756,649.50
Held to maturity investments
Long-term account receivable
Long-term equity investment 21,610,338.75 1,149,511,669.87 21,610,338.75 1,149,511,669.87
Investing property
Fixed asset 1,330,396,838.27 405,167,171.17 1,344,177,898.16 417,114,182.46
Project in construction 38,315,930.57 25,420,810.93 27,331,613.11 17,412,689.40
Engineering material
Fixed asset disposal
Bearer biological asset
Oil assets
Intangible assets 125,468,483.29 18,915,459.13 69,223,899.60 19,277,794.23
Development expense
Goodwill 3,943,671.53 3,943,671.53
Long-term expense to be apportioned 21,145,962.40 7,799,147.82 19,897,124.12 5,970,948.27
Deferred tax assets 91,993,543.01 91,053,354.87 91,993,543.01 91,053,354.87
Other non-current assets
Total of non-current assets 1,642,631,417.32 1,707,624,263.29 1,587,934,737.78 1,710,097,288.60
Total assets 9,870,096,644.14 9,065,812,300.47 10,517,285,515.63 9,928,575,353.83
Current liabilities:
Short-term loans 1,137,865,688.39 894,989,338.95 1,346,375,610.78 1,094,765,111.29
Loans from central bank
Deposits received and hold for others
Placements From Banks Other Financial
Institutions
Transaction financial liabilities 12,481,880.16 10,623,434.10 12,481,880.16 10,623,434.10
Notes payable 2,354,993,325.80 2,053,930,270.22 2,637,681,947.36 2,441,813,730.21
Account payable 1,289,984,939.88 1,269,203,834.09 1,571,761,341.98 1,640,897,495.08
Account received in advance 157,949,732.79 88,746,466.71 179,376,510.50 110,769,256.44
Financial assets sold under
agreements to repurchase
Handling charges and commission6
payable
Employee’s compensation payable 97,357,533.30 28,595,344.70 168,838,494.96 81,507,222.39
Tax payable 46,644,789.70 68,846,475.44 14,263,975.12 27,855,510.51
Interest payable 14,114,956.66 11,379,527.97 8,247,223.62 5,511,794.93
Dividend payable 8,939,567.97 7,108,659.46
Other account payable 660,746,542.94 719,763,350.67 527,535,236.31 628,707,957.85
Due to reinsurers
Insurance contract reserve
Customer deposits
Amount payables under security
underwriting
Non-current liabilities due within 1
year
Other current liabilities
Total current liabilities 5,781,078,957.59 5,146,078,042.85 6,473,670,880.25 6,042,451,512.80
Non-current liabilities:
Long-term borrowings
Bonds payable
Long-term payables
Specific purpose account payables 54,080,690.14 49,942,369.62 43,578,369.62 39,442,369.62
Deferred income
Provisions for contingent
liabilities
Deferred tax liabilities 563,067.21 563,067.21
Other non-current liabilities
Total non-current liabilities 54,643,757.35 49,942,369.62 44,141,436.83 39,442,369.62
Total liabilities 5,835,722,714.94 5,196,020,412.47 6,517,812,317.08 6,081,893,882.42
Owner’s equity (or shareholders’
equity)
Paid-in capital (or share capital) 1,203,972,704.00 1,203,972,704.00 1,203,972,704.00 1,203,972,704.00
Capital surplus 1,256,138,295.21 1,248,889,511.18 1,256,138,295.21 1,248,889,511.18
Less: Treasury Stock
Reserved fund 804,896,533.82 804,896,533.82 804,896,533.82 804,896,533.82
General risk provision
Retained earnings 540,869,285.43 612,033,139.00 500,638,125.11 588,922,722.41
Foreign exchange difference 9,723,238.45 9,397,273.34
Total owners' equity attributable to
holding company
3,815,600,056.91 3,869,791,888.00 3,775,042,931.48 3,846,681,471.41
Minority interest 218,773,872.29 224,430,267.07
Total owner’s equity 4,034,373,929.20 3,869,791,888.00 3,999,473,198.55 3,846,681,471.41
Total liabilities and owner’s equity 9,870,096,644.14 9,065,812,300.47 10,517,285,515.63 9,928,575,353.83
4.2 Income Statement
Prepared by Konka Group Co., Ltd Jan.-Mar. 2009 Unit: RMB
Yuan7
Amount in this period Amount in the previous period
Items
Consolidation Parent company Consolidation Parent company
I. Total sales 2,611,315,292.67 2,215,990,440.32 3,077,167,212.95 2,577,779,919.45
Including: Sales 2,611,315,292.67 2,215,990,440.32 3,077,167,212.95 2,577,779,919.45
Interests income
Premium income
Handling charges and commission income
II. Total cost of sales 2,573,658,346.25 2,193,140,792.45 3,012,786,557.91 2,499,648,765.11
Including: Cost of sales 2,156,286,288.52 1,855,513,841.46 2,532,855,151.60 2,119,365,397.45
Interests expenses
Service charge and commission income
Cash surrender value
Claim expenses-net
Provision for insurance contract reserves-net
Insurance policy dividend paid
Reinsurance expense
Business taxes and surcharges 335,691.09 32,243.60 195,727.01 20,245.65
Distribution expenses 307,567,109.71 267,162,582.20 366,688,602.40 309,226,186.32
Administrative expenses 100,666,366.22 65,200,389.93 106,469,084.66 73,024,942.88
Financial costs 12,951,059.59 9,783,944.26 9,406,100.05 808,970.61
Impairment loss -4,148,168.88 -4,552,209.00 -2,828,107.81 -2,796,977.80
Add: gain/(loss) from change in fair value (“-” means loss)
Gain/(loss) from investment (“-” means loss) 1,562,074.13 1,562,074.13
Including: income form investment on affiliated enterprise
and jointly enterprise
Foreign exchange difference (“-” means loss)
III. Business profit (“-” means loss) 37,656,946.42 22,849,647.87 65,942,729.17 79,693,228.47
Add: non-business income 3,805,441.94 1,776,910.89 812,974.34 637,030.96
Less: non-business expense 817,792.05 475,236.05 2,566,534.89 467,226.59
Including: loss from non-current asset disposal 366,211.13 204,163.93 1,843,266.05 94,252.05
IV. Total profit (“-” means loss) 40,644,596.31 24,151,322.71 64,189,168.62 79,863,032.84
Less: Tax expense 4,062,155.42 1,040,906.12 15,935,133.79 14,299,759.84
V. Net profit (“-” means loss) 36,582,440.89 23,110,416.59 48,254,034.83 65,563,273.00
-Attributable to parent company 40,231,160.32 23,110,416.59 47,065,384.53 65,563,273.00
-Minority interest -3,648,719.43 1,188,650.30
VI. Earnings per share
(I) Basic earnings per share 0.033 0.019 0.039 0.054
(II) Diluted earnings per share 0.033 0.019 0.039 0.054
4.3 Cash Flow Statement
Prepared by Konka Group Co., Ltd Jan.-Mar. 2009 Unit: RMB
Yuan
Amount in this period Amount in the previous period
Items
Consolidation Parent company Consolidation Parent company
I. Cash flows from operating activities
Cash received from sales of goods or rending of services 3,776,653,886.48 3,235,207,703.10 3,455,576,827.85
2,796,668,751.268
Net increase of deposits received and held for others
Net increase of loans from central bank
Net increase of inter-bank loans from other financial assets
Cash received against original insurance contract
Net Cash received from reinsurance
Net increase of client deposit and investment
Net increase of disposal of tradable financial assets
Cash received as Interests, fees and commissions received
Net increase of inter-bank fund received
Cash received under repurchasing, net
Tax returned 18,717,923.13 8,178,612.00 18,888,492.40 28,341.28
Other cash received from operating activities 93,669,493.85 24,642,501.83 38,943,463.46 7,201,134.50
Sub-total of cash inflow from operating activities 3,889,041,303.46 3,268,028,816.93 3,513,408,783.71
2,803,898,227.04
Cash paid for goods and services 2,317,602,968.35 2,183,739,659.17 3,087,839,189.28 2,663,212,127.81
Net increase of loans and advances
Net increase of deposit in central bank, banks and other
financial institutions
Cash paid for original contract claim
Cash paid for interests, fees and commission
Cash paid for policy dividend
Cash paid to and for employees 250,408,626.70 152,092,114.26 244,695,606.46 139,806,591.65
Cash paid for all types of taxes 294,783,090.76 248,019,254.34 232,373,904.83 192,982,773.22
Other cash paid relating to operating activities 223,337,118.99 162,218,767.69 335,873,399.56
242,478,793.06
Sub-total of cash outflows 3,086,131,804.80 2,746,069,795.46 3,900,782,100.13 3,238,480,285.74
Net cash outflow in operating activities 802,909,498.66 521,959,021.47 -387,373,316.42 -434,582,058.70
II. Cash Flows from Investing Activities
Cash received from return of investments 1,193,806.00 1,193,806.00
Cash received from investment income 1,531,852.15 1,531,852.15
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets
1,908,031.60 1,115,630.21 105,937.67 118,566.88
Net cash received from disposal of subsidiaries and other
operating units
Other cash received relating to investing activities
Sub-total of cash inflows of investing activities 1,908,031.60 1,115,630.21 2,831,595.82 2,844,225.03
Cash paid for acquisition of fixed assets, intangible assets
and other long-term assets
61,725,365.97 624,304.48 42,318,907.25 14,054,162.11
Cash paid for acquisition of investments 84,360.00 84,360.00
Net increase of pledge loans
Net cash paid for acquisition of subsidiaries and other
operating units
Other cash paid relating to investing activities
Sub-total of cash outflows of investing activities 61,725,365.97 624,304.48 42,403,267.25 14,138,522.11
Net cash inflow from investing activities -59,817,334.37 491,325.73 -39,571,671.43 -11,294,297.089
III. Cash Flows from Financing Activities:
Cash received from investment
Including: Cash received from minority shareholders of
subsidiaries
Cash received from borrowings 3,000,000.00 150,000,000.00 150,000,000.00
Cash received from bonds issuing
Cash received relating to financing activities 938,373,800.28 901,296,005.42
Sub-total of cash inflows of financing activities 941,373,800.28 901,296,005.42 150,000,000.00
150,000,000.00
Cash paid for repayments of borrowings 211,509,922.39 199,775,772.34
Cash paid for dividends, profit distribution or interest 3,597,978.03 8,340.00 2,545,403.57
Including: dividends or profits paid to minority shareholders
by subsidiaries
Other cash paid relating to financing activities 709,534,561.56 709,533,838.65 1,550.97
Sub-total of cash outflows of financing activities 924,642,461.98 909,317,950.99 2,546,954.54
Net cash inflow from financing activities 16,731,338.30 -8,021,945.57 147,453,045.46 150,000,000.00
IV. Effect of foreign exchange rate changes -171,373.86 -4,666,295.01
V. Net decrease in cash and cash equivalents 759,652,128.73 514,428,401.63 -284,158,237.40 -295,876,355.78
Add : Opening amount of cash and cash equivalents 845,026,867.06 358,631,499.14 752,558,414.47
556,082,988.52
VI. Closing balance of cash and cash equivalents 1,604,678,995.79 873,059,900.77 468,400,177.07
260,206,632.74
4.4 Auditor’s report
Audit opinion: Un-audited
Board of Directors of
Konka Group Co., Ltd
Apr. 30, 2009
