BOE TECHNOLOGY GROUP CO., LTD.
SEMI-ANNUAL REPORT 2010
(Full Text)
August 20102
Contents
Section I Important Notice...….........................................................................................02
Section II Company Profile……………………………………………………......…….03
Section III Changes in Share Capital and Particulars about Shares Held by Major Shareholders....05
Section IV Particulars about Directors, Supervisors and Senior Executives…….............07
Section V Report of the Board of Directors………… …………………………… ........08
Section VI Significant Events………………………… …………………………........15
Section VII Financial Report (unaudited) ………………………… … …........23
Section VIII Documents Available for Reference……………………………………….233
Section I Important Notice
The Board of Directors, the Supervisory Committee as well as all the directors, supervisors and senior executives of BOE Technology 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 liability concerning to the authenticity, accuracy and completeness of the contents.
Independent Director Mr. Dong Ansheng was on a business trip and he entrusted Independent Director Mr. Geng Jianxin to vote on behalf of him at the board meeting. And all other directors attended the board meeting.
The Chairman of the Board Mr. Wang Dongsheng, the President of the Company Mr. Chen Yanshun, the CFO Ms. Sun Yun, and Ms. Yang Xiaoping-the person in charge of the Planning & Finance Department hereby declared that the Financial Report enclosed in this Semi-Annual Report is true and complete.
The Interim Financial Report of the Company was prepared in accordance with PRC GAAP and other relevant regulations, and has not been audited.
This Semi-Annual Report was prepared in both Chinese and English. Should there be any difference in interpretation between the two versions, the Chinese version shall prevail.4
Section II Company Profile
I. Basic information of the Company
1. Legal Name of the Company in Chinese: 京东方科技集团股份有限公司
Abbreviation in Chinese: 京东方
Legal Name of the Company in English: BOE TECHNOLOGY GROUP CO., LTD.
Abbreviation in English: BOE
2. Legal Representative: Mr. Wang Dongsheng
3. Secretary of the Board of Directors: Ms. Feng Liqiong
Securities Affairs Representative: Mr. Liu Hongfeng
Contact Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing
Telephone: 010-64318888 ext.
Fax: 010-64366264
E-mail: Fengliqiong@boe.com.cn, liuhongfeng@boe.com.cn
4. Registered Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing
Office Address: No. 10, Jiuxianqiao Road, Chaoyang District, Beijing
Postcode: 100015
Internet Website: http://www.boe.com.cn
E-mail: web.master@boe.com.cn
5. Newspapers Chosen by the Company for Disclosing the Information: Securities Times, China Securities Journal, Shanghai Securities News and Hong Kong Ta Kung Pao
Internet Website Designated by CSRC for Information Disclosure: 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 for A-share: BOE A
Stock Code for A-share: 000725
Short Form for B-share: BOE B
Stock Code for B-share: 200725
7. Other related information:
Initial Registration Date: Apr. 9, 1993
Initial Registration Place: No.10, Jiuxianqiao Road, Chaoyang District, Beijing
Registrations Date after the latest changing: Aug. 7, 2009
Registration Place after Change: No.10, Jiuxianqiao Road, Chaoyang District, Beijing
Registration Number of Enterprise Legal Person’s Business License: 110000005012597
Registration Number of Taxation: JSZZ No.110105101101660
Organization Code: 10110166-0
Certified Public Accountants engaged by the Company:
Name: KPMG Huazhen Certified Public Accountants
Office Address: the 8th Floor, Office Tower E2, Oriental Plaza, No.1 East Chang An Avenue, Beijing
II. Main financial data and indices
1. Main accounting data and financial indices
Unit: RMB Yuan
At the end of
report period
At the end of
last year
Increase/decrease compared with the end of last year (%)
Total assets
38,608,347,110.00
30,613,980,480.00
26.11%
Shareholder’s equity of listed companies
17,446,345,227.00
18,022,804,672.00
-3.20%
Share Capital
8,282,902,447.00
8,282,902,447.00
0.00%
Net asset per share attributable to shareholder of listed companies
2.11
2.18
-3.21%
In the report period (Jan-Jun 2010)
The same period of last year
Increase/decrease year-on-year (%)5
Operating income
4,186,429,883.00
2,298,113,686.00
82.17%
Operating profit
-627,515,770.00
-924,589,637.00
32.13%
Total profit
-602,694,520.00
-912,323,863.00
33.94%%
Net Profit
-540,706,227.00
-749,429,569.00
27.85%
Net profit after deducting non-recurring gains and losses
-560,272,988.00
-759,580,540.00
26.24%
Basic earnings per share
-0.070
-0.180
61.11%
Diluted earnings per share
-0.070
-0.180
61.11%
Return on equity
-3.00%
-10.00%
7.00%
Net cash flow generating from the operating activities
3,312,176.00
-175,802,392.00
101.88%
Net cash flow per share generating from the operating activities
0.00
-0.02
100.00%
Notes:
(1) The above indexes such as net profit, net profit after deducting non-recurring gains and losses, owner’s equity, basic earnings per share, diluted earnings per share as well as net asset value per share are listed based on the data that attributable to the shareholders of listed company.
(2) Increase/decrease of the return on equity on a yearly basis was the difference of the two phases.
(3) As of 30 Jun. 2010, total shares of the Company amounted to 8,282,902,447.
2. Items of non-recurring gains and losses
Unit: RMB Yuan
Items of non-recurring gains and losses
Amount
Notes (if applicable)
Gains and losses from disposal of the non-current assets
5,339,265.00
-
Government subsidies recognized in gains and losses of current period, excluding government subsidies with close relationship to the Company’s normal business, in line with government policies and granted with fixed amount or quantity according to certain standards.
16,767,145.00
-
Other non-operating income and expenses except the above
2,714,841.00
-
Impact on income tax
-1,705,262.00
-
Impact on minority interest
-3,549,228.00
-
Total
19,566,761.00
-
3. There was no difference between the financial statements prepared in line with PRC GAAP and the financial statements prepared in line with IFRS.
Unit: RMB Yuan
PRC GAAP
IFRS
Net profit attributable to parent company
-540,706,227
-540,706,227
Net assets attributable to parent company
17,446,345,227
17,446,345,227
Explanation on difference
NoneSection III Changes in Share Capital and Particulars about Shares Held by Major Shareholders
I. Structural change of the share capital
Unit: Share
Before the change
After the change
Item
Amount
Proportion
Increase/ decrease(+,-)
Amount
Proportion
I. Shares subject to trading moratorium
5,000,065,418
60.37%
-3,750,000,000
1,250,065,418
15.09%
1. State-owned shares
0
0.00%
0
0
0.00%
2. Shares held by state-owned legal-persons
2,790,000,000
33.68%
-1,540,000,000
1,250,000,000
15.09%
3. Shares held by other domestic investors
2,210,000,000
26.68%
-2,210,000,000
0
0.00%
Including: Shares held by domestic non-stated-owned legal persons
1,510,000,000
18.23%
-1,510,000,000
0
0.00%
Shares held by domestic natural persons
700,000,000
8.45%
-700,000,000
0
0.00%
4. Shares held by foreign investors
0
0.00%
0
0
0.00%
Including： Share held by foreign corporation
0
0.00%
0
0
0.00%
Shares held by foreign natural persons
0
0.00%
0
0
0.00%
5. Shares held by senior executives
65,418
0.00%
0
65,418
0.00%
II. Shares not subject to trading moratorium
3,282,837,029
39.63%
3,750,000,000
7,032,837,029
84.91%
1. RMB common shares
2,167,287,029
26.17%
3,750,000,000
5,917,287,029
71.44%
2. Domestically listed foreign shares
1,115,550,000
13.47%
0
1,115,550,000
13.47%
3．Overseas listed foreign shares
0
0.00%
0
0
0.00%
4．Others
0
0.00%
0
0
0.00%
III. Total Shares
8,282,902,447
100.00%
0
8,282,902,447
100.00%
Notes: The detailed information on the change of the company shares has been listed below:
During the reporting period, Ke Xiping, the Shanghai Nuo Da Sheng Information Technology Co., Ltd., Beijing E-Town International Investment & Development Co., Ltd., Beijing Zhi Shuai Investment Consulting Co., Ltd., HaiTong Securities Co. Limited, Aerospace Science & Technology Finance Co., Ltd, Hongta Securities Co., Ltd. and Southwest Securities Co., Ltd. had totally purchased 3,750,000,000 shares of the non-public issued A shares of the company, and the restrictions have been relieved on June 10, 2010.
II. Total number of shareholders
By 30 Jun. 2010, shareholders of the Company amounted to 373,972, of which the number of shareholders of A-share took up to 333,919 and shareholders of B-share were 40,053 .
III. Particulars about shares held by the top ten shareholders
As of 30 Jun. 2010, particulars about shares held by the top ten shareholders were as follows:
Unit: Share 6
Total number of shareholders
373,972
（among which shareholders of A share took up to333,919，which shareholder of B share took up to 40,053）
Particulars about shares held by the top ten shareholders
Name of shareholders
Nature of shareholders
Proportion
Total number of
shares
Shares subject to trading moratorium
Shares pledged or frozen
Beijing BOE Investment & Development Co., Ltd.
State-owned Corporation
8.66%
717,484,233
0
0
Ke Xiping
Domestic natural person
7.94%
657,900,000
0
310,000,000
Hefei Xincheng State-owned Assets Management Co., Ltd
State-owned Corporation
7.55%
625,000,000
625,000,000
0
Hefei Lan Ke Investment Co., Ltd
State-owned Corporation
7.55%
625,000,000
625,000,000
0
Beijing E-Town International Investment & Development Co., Ltd
State-owned Corporation
7.04%
583,333,334
0
0
Aerospace Science & Technology Financial Co., Ltd
State-owned Corporation
3.89%
322,500,000
0
0
Shanghai Nordsion Information
Technology Co., Ltd
Domestic non-state-owned Corporation
3.70%
306,300,000
0
0
Southwest Securities Co., Ltd
State-owned corporation
3.46%
286,666,666
0
0
Beijing Electronics Holding Co., Ltd
State-owned share holdings
2.77%
229,419,902
0
145,348,8387
Haitong Securities Co., Ltd
Domestic Non-State-ownedCorporation
2.41%
200,000,000
0
0
Particulars about shares held by the top ten shareholders not subject to trading restrictions
Name of the shareholders
Number of shares not subject to trading restrictions
Type of shares
Beijing BOE Investment & Development Co.,Ltd.
717,484,233
A share
Ke Xiping
657,900,000
A share
Being E-Town International Investment & Development Co., Ltd
583,333,334
A share
Aerospace Science & Technology Financial Co., Ltd
322,500,000
A share
Shanghai Nordsion Information Technology Co., Ltd
306,300,000
A share
Southwest Securities Co., Ltd
286,666,666
A share
Beijing Electronics Holding Co., Ltd
229,419,902
A share
Haitong Securities Co., Ltd
200,000,000
A share
Beijing Zhishuai Investment Consulting Co., Ltd
179,999,900
A share
Fields Pacific Limited
50,665,462
B share
Explanation on associated relationship among the aforesaid shareholders or
acting-in-concert
Beijing Electronics holding Co., Ltd takescontrol of the 66.25% shares of the Beijing BOE investment development Co., Ltd, which makes it the dominant controlling shareholder；
2Apart from the above-mentioned shareholders, the company is unaware ofany associated relationship among the top ten shareholders who are not subject to trading restrictions.
Notes:
1. During the report period, trading restriction of part of the A-shares privately issued to particular investors by the Company in 2009 had been expired on Jun 10, 2010, therefore, particulars about the top ten shareholders and their proportion of share holding had changed greatly. For details please refer to company notice (2010-029)
2. Tradable shares amounting to 310,000,000 shares held by Mr. Ke Xiping have been acclaimed as a pledge. Detailed information has been issued via public notice put up by the company. For details please refer to company notice(2009-040, 2010-003)
3. Beijing Electronic Holding Co., Ltd take the role as the actual controller of the company, who held shares outstanding 145,348,838 shares of our Company, accounting for 1.75% of total share capital of the company has been frozen by Jiangsu Zhenjiang Intermediate People's Court, should any further information needed please refer to the company notice (2009-065)
IV. Information regarding to the controlling shareholder and the actual controller
1. At the end of reporting period, Beijing BOE Investment & Development Co., Ltd is still the controlling shareholder of the company.
2. At the end of the reporting period, Beijing Electronics Holdings Co., Ltd is still the actual controller of the company.
V. Particulars about shares held by the shareholders that are subject to trading restrictions.
By the time this report released, particulars of shares that held by shareholders are subject to the trading restrictions and the specific conditions were described as below:
Unit: Share
Name of shareholders subject to trading moratorium
Number of shares subject to trading restrictions
Date to be
listed
Number of additional marketable
shares
Trading Restrictions
Hefei Xincheng State-owned Assets Management Co., Ltd
625,000,000
After T+36 months
625,000,000
Shares shall not be transferred Within 36 months since T
HEFEI LAN KE INVESTMENT CO., LTD
625,000,000
After T+36 months
625,000,000
Shares shall not be transferred Within 36 months since T
Note: “T” refers to the time when the A-shares privately issued for the year 2009 were listed for trading in Shenzhen Stock Exchange, i.e. 10 Jun. 2009.8
Section IV Particulars about Directors, Supervisors and Senior Executives
I. Particulars about shares held by directors, supervisors and senior executives
No.
Name
Office title
Number of shares held at the
period-begin(share)
Number of shares held at the
period-end (share)
1
Wang Dongsheng
Chairman of the Board, Director of Executive Committee
24,921
24,921
2
Liang Xinqing
Vice Chairman of the Board
9,969
9,969
3
Han Guojian
Executive Director, Vice President
9,968
9,968
4
Mu Chengyuan
Supervisor
2,492
2,492
5
Song Ying
Vice President
24,921
24,921
6
Wang Yanjun
Vice President
9,968
9,968
7
Sun Yun
CFO
4,984
4,984
Total
-
-
87,223
87,223
During the reporting period, no other directors, supervisors or senior executives held any share of the Company.
II. The company has not implemented an equity incentive plan. Within the reporting period, directors, supervisors and senior executives of the company neither held stock option of the Company nor were authorized restricted shares.
III. Engagement or dismissal of directors, supervisors and senior executives of the company within the report period.
During the reporting period, the Company carried an election for the Board of Directors and the Board of Supervisors at expiration of office terms.
After concluding the 40th meeting held by the 5th Board of Directors , the 14th meeting of the 5th Board of Supervisors, the meeting held on May 11, 2010 where the Employee Congress has reached an agreement on behalf of the team leaders and the 2009 Annual Shareholder’s General Meeting, the the 6th Board of Directors and the 6th Board of Supervisors were elected. Mr. Wang Dongsheng, Mr. Yuan Hanyuan, Mr. Liang Xinqing, Mr. Chen Yanshun, Mr. Han Guojian, Mr. Wang Jiaheng and Ms. Gui Jinghua were assigned as the Non-Independent Directors on the 6th Board of Directors. Mr. Dong Ansheng, Mr. Ou Yang Zhongcan, Mr. Geng Jianxin as well as Mr. Ji Guoping were assigned as the independent directors on 6th Board of Independent Directors, Mr. Wu Wenxue, Mr. Mu Chengyuan President, Mr. Zhang Jinsong were elected as the Non-employee Representative Supervisors of the 6th Board of Supervisors for the company, and Mr. Zhong Huifeng and Mr. Yang Anle were elected as employee representative supervisors of the 6th Board of Supervisors.
As reviewed and approved through the 1st meeting of the 6th Board of Directors, Mr. Wang Dongsheng was elected as Chairman of the 6th Board of Directors, Mr. Yuan Hanyuan and Mr. Liang Xinqing as Vice9
Chairman of the 6th Board of Directors respectively. As examined and approved at the 1st meeting of the 6th Supervisory Committee. The company had decided to assign the following staff as senior executives: Mr. Chen Yanshun as President, Mr. Han Guojian, Mr. Wang Jiaheng, Mr. Liu Xiaodong, Miss Song Ying, Mr. Wang Yanjun, Ms. Dong Youmei, Mr. Yue Zhanqiu, and Mr. Li Xuezheng as Vice Presidents, Ms. Sun Yun as the company's Chief Financial Officer, Ms. Feng Liqiong as Secretary of the 6th Board of Directors, Mr. Su Zhiwen as Chief Auditor for the company.
Mr. Wu Wenxue was elected as Chairman of the 6th Supervisory Committee and Convener of the Supervisory Committee.10
Section V Report of the Board of Directors
I. Operation of the Company
(1) Retrospection of the operation of the company in the report period
From a macroeconomic perspective, the global economy continued to grow during the first half of this year. However, influences included: the debt crisis in many European countries, the expectation of inflation in the Chinese real estate sector, the market demand was unable to be effectively realized combined with the foundation of economic recovery was still unstable.
The industry’s market circumstances are as follows; the new market and new application of LCD products kept emerging and the demand restrained by the financial crisis continued to increase, the price rebounded back slowly and the demand exceeded the supply in the first quarter. But the market supply and demand went towards balance in the second quarter and the price fell gradually. Meanwhile, the Company’s construction of the Generation 8 TFT-LCD Production Line in Beijing and its surpassing other advanced lines in mainland China stimulated the upsurge of investment in the front-line panel traders and intensified the competition in the industry.
In 2010, the Company put forward the guiding principles of “deepening value creation, strengthening product competitiveness, increasing income and profit, developing better and faster”. The company also is promoting the execution of “Steel-Sword Strategy” in every division which includes the following: rapidly increasing the product competitiveness, speeding up the adjustment of product structure and the optimization of the production lines, expanding the production capacity, enriching the production lines and increasing the additional value of products. As a result, the Company has made periodical results in all the business during the first half year of 2010.
1. Realization of main operating indexes
Since the fulfillment of the Company’s overall business plans improved compared with the same period of last year, the Company realized operating income about RMB 4.19 billion in the first half year of 2010, and made a loss in main business, but made considerable improvement compared with the same period last year. Substantive progress has been made in key projects: the Generation 4.5 TFT-LCD Production line successfully entered the quantity production period while the product yield rate, operation rate and operating performance reached a good level in the same industry. As for the Generation 6 TFT-LCD Production Line, the equipment installation and debugging was accomplished as well as the operational organization and preparation has smoothly progressed. An expectation of quantity production is scheduled for October; The construction of the Generation 8 TFT-LCD Production Line was implemented as scheduled and the main structure of the factory will be completed by July, with an expectation of starting the equipment installation in October; The first model of National Engineering Laboratory Project was successfully launched on July 16.11
Details for implementation of each business
(1) TFT-LCD and relevant business
TFT-LCD used for IT and TV: The Company realized sales revenue RMB 2.9 billion in the first half year of 2010 and main indexes of the business plans were basically realized. The Company has made adjustments to the product structure, improved product quality and the reduced of cost. Meanwhile, training for the relevant personnel of key projects, product development, product transition and related client authentication were perfectly achieved.
TFT-LCD for Mobile and Application Products: Through accelerating the “Two Development” of mobile products in the first half year of 2010, the Company effectively created nine kinds of hot products and established good relationship with many domestic customers. Based on the guaranteed production yield rate and operation rate, the Company strived to reduce costs and made its best efforts to control fixed expense at the same time. Therefore, the Company acquired positive results in reducing costs.
Products of lighting display: The operating performance has considerably improved in the first half year of 2010 compared with the same period of last year and the Company had substantial results in the upgrading of comprehensive product yield rate. In addition, the product quality, service capability, developmental capability for market leading products and the development of LED back light technology have been further improved and strengthened. The proportion of LED back light products was gradually enlarged.
OEM Service of Whole Machine: The establishment of BOE Shi Xun and the move of S1 Project were finished in the first half year of 2010. The project of taking over Jean Co., Ltd. was promoted as scheduled, laying a good foundation for future development.
(2) Business of Other Display Devices and Supporting Products
Divisions dealing with precision electronic components & materials made their transition in the first half year of 2010 and accelerated the structural adjustment, gradually increasing competitiveness.
(3) International Business Park
The Company seized the chance for development and over-fulfilled the business plans. At present, market development and investment invitations are proceeding smoothly. The organization and implementation of the Park’s General Plan progress steadily, and the key projects are on schedule.
2. Orderly Advancement of Significant Projects as Scheduled
The Company’s strategic projects have been launched in succession during the past 2 years. Some of which will successively enter full operations and the Company’s strategy will continue to get improved:
1. The Generation 6 TFT-LCD Production Line Project in Hefei: The construction of the factory was accomplished and the power equipments were put into operation. The purchase of primary equipments has basically been completed and the syndicated loan was carried out. The project was expected to be under quantity production in October;12
2. National Engineering Laboratory Project: The construction of the Company’s Technology Center and the National Engineering Laboratory Building was completed. Moreover, the installation and debugging of the project equipments were completed and the first model was launched on July 16 as well.
3. The Generation 8 TFT-LCD Production Line Project in Beijing: The Company earnestly organized the construction in accordance with principle of “Five Concurrents, Five Ensures and Five Models”: the main factory was sealed to top in July; the bid inviting work of equipment purchase proceeded step by step. The key process technology and product development went through many tests and periodical results were made. The Company made great progress in customer development and established relationship with a large number of OEM customers in TV business. Currently, the construction has entered the phase of interior decoration. BOE has received RMB 8.5 billion in cash and an investment of RMB 1,671,993,000 in the form of allocated leaseholds. The registered capital and paid-in capital of the Company have changed into RMB 87,171,993.00 and the quantity production was expected to be realized in the third quarter of 2011.
4. Significant Capital and Financial Project
(1) Non-public offering A-shares: The Board of Directors, with the authorization from the General Meeting of Shareholders, actively promoted non-public offering A-share proposal which raises capital for construction of the 8th Generatio TFT-LCD Production Line in Beijing. Since great changes have taken place in the capital markets during the first half of 2010, as approved by the 2nd Meeting of the 6th Board of Directors and the 2nd Extraordinary Shareholders’ General Meeting 2010, the Company has made a corresponding adjustment in the non-public offering of A-shares. Presently, the project has been conditionally approved by CSRC.
(2) A syndication of the 6th Generation TFT-LCD Production Line in Hefei was officially set up in July, 2010 and the relevant protocols of syndicated loan have been signed as well. The organization of syndicate of Beijing the 8th Generation TFT-LCD Production Line is under active promotion.
(II) Main business scope and operation status
1. Main business scope
Business scope of the Company remained unchanged during the report period. The Company belongs to electronics and information industry; mainly engaging in manufacture, sale as well as research & development of TFT-LCD. The major business scope includes business of TFT-LCD used for IT and TV, TFT-LCD for mobile and application products, video and display system, lighting display products, PV products, precision electronic components & materials as well as international business parks.
2. Operation status of main business
(1) Classified according to industries and products
Unit: RMB ’0000
Main business classified according to industries
Industries/products
Operating income
Operating cost
Gross profit ratio (%)
Increase/decrease of operating income compared with the same period last year (%)
Increase/decrease of operating cost compared with the same period last year (%)
Increase/decrease of gross profit ratio compared with the same period last year (%)
TFT-LCD used for IT and TV
290,508.14
300,981.45
-3.48%
66.48%
41.72%
80.49%
TFT-LCD used for mobile
52,957.81
49,981.19
5.96%
383.73%
355.59%
2947.37%and application products
Other business
132,114.25
112,956.08
16.96%
53.41%
56.51%
-12.24%
Offset
-56,937.21
-51,394.87
10.78%
36.37%
43.27%
-34.20%
Total
418,642.99
412,523.85
1.48%
82.17%
58.88%
112.91%
Main business classified according to products
TFT-LCD used for IT and TV
290,508.14
300,981.45
-3.48%
66.48%
41.72%
80.49%
TFT-LCD used for mobile and application products
52,957.81
49,981.19
5.96%
383.73%
355.59%
2947.37%
Other business
132,114.25
112,956.08
16.96%
53.41%
56.51%
-12.24%
Offset
-56,937.21
-51,394.87
10.78%
36.37%
43.27%
-34.20%
Total
418,642.99
412,523.85
1.48%
82.17%
58.88%
112.91%
(2) Classified according to regions
Unit: RMB ’0000
Region
Operating income
Increase/decrease compared with the same period last year (%)
China
251,714.05
36.46%
Other Asian countries and regions
220,645.87
180.32%
Europe
3,243.21
-60.71%
America
1,122.41
703.54%
Other countries
-
-
Offset
-58,082.54
-39.11%
Total
418,642.99
82.17%
(3) There were no other operations which made great effect on net profit in the report period.
3. Analysis on financial status
1) Analysis on change in main items of balance sheet 13
(2) Analysis on Change of Assets Composition
Unit: RMB ’0000
Jun. 30, 2010
Dec. 31, 2009
Items
Amount
Proportion
Amount
Proportion
Change range
Main influencing factors
Construction in progress
611,633
15.84%
114,078
3.73%
12.11%
New project was under construction, project construction and equipment purchase increased.
Other non-current assets
176,562
4.57%
56,119
1.83%
2.74%
Advanced payment for construction project and equipment
Short-term loans
309,780
8.02%
85,591
2.80%
5.22%
New project was under construction and part of foreign currency loans was obtained.
Other payable
33,546
0.87%
22,891
0.75%
0.12%
Tender bond received was increased.
Other non-current liabilities
44,601
1.16%
20,663
0.67%
0.49%
Caused by the increase of government subsidy
Items
Jun. 30, 2010
Dec. 31, 2009
Change range
Main influencing factors
Construction in progress
611,633
114,078
436.15%
New project was in period of construction, project construction and equipment purchase increased.
Other non-current assets
176,562
56,119
214.62%
Advanced payment for construction project and equipment
Short-term loans
309,780
85,591
261.93%
New project was in period of construction and part of foreign currency loans was obtained.
Interest payable
1,430
600
138.33%
Interests were increased due to the increase of loans.
Other payable
33,546
22,891
46.55%
Tender bond received was increased.
Other non-current liabilities
44,601
20,663
115.84%
Caused by the increase of government subsidy
Unit: RMB ’000014
(3) Analysis on changes in expense and income tax during the report period
Unit: RMB ’0000
Items
Jan.-Jun. 2010
Jan.-Jun. 2009
Change range
Main influencing factors
Sales expenses
9,690
4,828
101%
During the report period, the market revived and the sales expenses increased due to the growth of sales volume.
Financial expenses
3,162
6,328
-50%
Monetary capital was increased in non-public offering A-share and interest on deposit increased compared with last year.
Loss from impairment of assets
2,653
-13,624
-119%
In the report period last year, TFT-LCD industry revived and price of products rose, which charged back stock depreciation reserve withdrew in the previous period
Investment loss
551
-12,377
-104%
On Dec. 31, 2009, Matsushita Color CRT Co., Ltd. was considered as a merger partner of the Company and the loss induced by the long-term equity investment on it was caused by the accounting method change from equity method to cost method.
(4) Change in cash flow statement of the Company
Unit: RMB ’0000
Items
Jan.-Jun. 2010
Jan.-Jun. 2009
Change range
Main influencing factors
Subtotal of cash inflow from
operating activities
331
-17,580
102%
Due to the recovery of the market and the increase of sales volume, cash flow from operating activities increased considerably compared with the same period last year.
Subtotal of cash inflow from
investing activities
-1,073,904
-209,537
-413%
Due to the successive launch of new projects, cash outflow from investing activities increased considerably compared with the same period last year.
Subtotal of cash outflow from
financing activities
759,700
1,219,960
-38%
Completion of increasing non-public offering A-share in the same period last year; cash inflow from financing activities increased considerably.
4. Problems and difficulties encountered in operation
Excellent progress has been made in the first half in terms of all businesses of the Company, especially the key projects. However, the Company has not fully avoided creating deficits. Meanwhile, further improvement of centralized management systems and product planning is needed. Especially planning for prospective products is still needed. The coordination ability and the ability to quickly response to the rapidly changing market demand specifically concerning stages of planning, R&D and marketing of new products still needs to be strengthened.
5. Business development plan for the second half of 2010
For the second half of this year, the Company will still face arduous tasks since the overall market environment is not optimistic. Therefore, the Company will continue to carry out the “Steel-Sword Strategy,” with a view to increasing product competitiveness, deeply implementing the 3V Action Plan, improving the technical managing and planning capacity and ensuring the realization of business objectives. At the same time, it will fully prepare for the transformation from construction to operation in Hefei the Generation 6 TFT-LCD Production Line and the smooth operation and quantity production of the 8th Generation Production Line in Beijing next year.
Ⅱ. Investments of the Company
(Ⅰ) Use of raised proceeds in report period
Unit: RMB ’0000
Total amount of raised proceeds
1,402,520.00
Total amount of raised proceeds changed to other purposes in report period
0.00
Total amount of raised proceeds used in report period
305,925.0015
Total amount of raised proceeds changed to other purposes accumulatively
25,444
Proportion of total amount of raised proceeds changed to other purposed accumulatively
1.81%
Total amount of raised proceeds used accumulatively
712,161.00
Committed projects
Whether or not to change the project (including partial change)
Total amount of raised proceeds investing in committed projects
Investment amount after adjustment
Amount of committed to use by the end of period (1)
Amount used in report period
Amount used accumulatively by the end of period (2)
Difference between the amount used accumulatively and the amount committed to use by the end of period (3)=(2)-(1)
Investment progress by the end of period (%) (4)=(2)/(1)
Expected available date of projects
Earnings realized in report period
Compliant with estimated earnings or not
Whether there is significant change in the project feasibility
Production Line Project of the Generation 4.5 TFT-LCD
No
220,000.00
180,545.00
138,262.00
38,222.00
138,262.00
0.00
100.00%
Nov.1, 2009
-8,762.00
Yes
No
Project of Increasing Investment in BOEOT for Bank Loan Repayment
Yes
226,800.00
0.00
0.00
0.00
0.00
0.00
0.00
Not applicable
Not applicable
Not applicable
No
Supplementing Working Capital (2008)
Yes
18,200.00
43,644.00
43,644.00
0.00
43,644.00
0.00
100.00%
Sept.30,2009
0.00
Yes
No
Production Line Project of the Generation 6 TFT-LCD
No
1,078,331.00
1,078,331.00
430,255.00
267,703.00
430,255.00
0.00
100.00%
Oct.18, 2010
0.00
Yes
No
Supplementing Working Capital (2009)
No
100,000.00
100,000.00
100,000.00
0.00
100,000.00
0.00
100.00%
Dec.31, 2009
0.00
Yes
No
Total
-
1,643,331.00
1,402,520.00
712,161.00
305,925.00
712,161.00
0.00
-
-
-8,762.00
-
-
Explanation on failing to reach
the planned progress or get the expected gains (with details down to each project)
Naught
Explanation on significant changes in project feasibility
Naught
Changes in implementation locations of the projects invested with raised proceeds
Not applicable
Adjustments in implementation way of the projects invested with raised proceeds
Not applicable
Applicable
Early investment and replacement of projects invested with raised proceeds
Before the raised proceeds arrived in 2008, the Company made an early investment in the 4.5G Project Construction with self-raised proceeds, in accordance with the Proposal on Increasing Investment in Chengdu BOE Optoelectronics Technology Co., Ltd .examined and approved by the 10th Meeting of the 5th Board of Directors on May 26, 2008. By July 4, 2008, the Company has invested the self-raised proceeds of RMB 245,454,000.00 in the 4.5G Project. After the raised proceeds arrived in 2008, according to Administrative Measures for Funds Raised by Companies Listed on the Shenzhen Stock Exchange, the Company replaced the self-raised proceeds of early investment in the 4.5G Project with the raised proceeds of RMB 245,454,000.00.
Before the raised proceeds arrived in 2009, the Company made an early investment in the 6th Generation Production Line Project Construction with self-raised proceeds, in accordance with the Proposal on Investment in Construction of the 6th Generation Production Line and the Proposal on the Offering Plan of Non-public offering A-share approved by the 17th Meeting of the 5thBoard of Directors on Nov.7, 2008 and the 2nd Provisional Shareholders’ General Meeting 2008 on Nov. 25, 2008. By May 27, 2009, the Company has invested the self-raised proceeds of RMB 1,309,500,000.00 in the Generation 6 Production Line Project. After the raised proceeds arrived in 2009, according to Administrative Measures for Funds Raised by Companies Listed on the Shenzhen Stock Exchange, the Company replaced the self-raised proceeds of early investment in the Generation 6 Production Line Project with the raised proceeds of RMB 1,309,500,000.00.
Applicable
Temporary supplement of working capital with leave unused capital
In accordance with the Proposal on Supplement of Working Capital with Part of Leave Unused Raised Proceeds by Hefei BOE Optoelectronics Technology Co., Ltd. approved by the 28th Meeting of the 5thBoard of Directors on August 21, 2009, Hefei BOE Optoelectronics Technology Co., Ltd. supplemented the working capital in other accounts of Hefei BOE with the temporarily leave unused capital, not exceeding RMB 900 million, for the purpose of daily expenses or other business with a time limit of 6 months. Hefei BOE has returned the above-mentioned raised proceeds to the special account on schedule as required.
Balance amount of raised proceeds occurred in project implementation and reasons for its occurrence
Not applicable
Use and control of the remaining raised proceeds
I. The remaining raised proceeds of 2008 will be used for the construction and operation of the Generation 4.5 Production Line in Chengdu and the proceeds are currently kept and strictly controlled in the special account for raised proceeds of Chengdu BOE Optoelectronics Technology Co., Ltd., the implementation company of the project;
II. The remaining raised proceeds of 2009 will be used for the construction and operation of the Generation 6 Production Line in Hefei and the proceeds are currently kept and strictly controlled in the special account for raised proceeds of BOE Technology Group Co., Ltd. and Hefei BOE Optoelectronics Technology Co., Ltd., the company implementation of the project;
Problems or other circumstances occurred in the using and disclosing process of raised proceeds
Naught
(2) Use of raised proceeds after change
Unit: RMB ’0000
Project after change
Project before change
Planned input into project after change
Accumulative planned input by the end of period (1)
Actual input in report period
Actual amount of accumulative input by the end of period (2)
Investment progress (%) (3)=(2)/(1)
Expected available date of projects
Earnings realized in report period
Compliant with estimated earnings or not
Whether there is significant change in project feasibility
The projects originally promised have been terminated.
Project of Increasing Investment in BOEOT for Bank Loan Repayment
0.00
0.00
0.00
0.00
0.00%
Not applicable
Not applicable
Not applicable
No16
Supplementing Working Capital (2008)
Supplementing Working Capital (2008)
43,644.00
43,644.00
0.00
43,644.00
100.00%
Sept.30, 2009
0.00
Yes
No
Total
-
43,644.00
43,644.00
0.00
43,644.00
-
-
0.00
-
-
Explanation on reasons for changes, decision procedures and information disclosure (with Not applicable
details down to each project)
Because fund-raising of 2008 failed to reach its expected outcome, considering the actual circumstances of all projects, the use of raised funds are adjusted as below according to the Proposal on Adjusting and Changing the Use of Partial Raised Funds discussed and passed by the 12th meeting of the 5th Board of Directors on July 28th, 2008 and the 1st Provisional Shareholders’ Meeting on August 15th, 2008. ;
(1) Because the previous fund-raising failed to reach expected outcome, and considering BOEOT has repaid part of the Syndicated Loan by June 30th, 2008, the Company decided to terminate the project of increasing fund for loan repayment in BOEOT;
(2) In order to gain competitive advantage during the period when changes occur within the industry and boost the fulfillment the Company’s general goal, the Company decided to use all but the 4.5G Project funds of RMB 436, 443, 495. 37 and the derivative interest from fund-raising special accounts to replenish the Company’s working capital.
Explanation on
failing to reach the
planned progress or
get the expected
gains (with details
down to each
project)
Naught
Explanation on significant changes in feasibility of projects after change
Naught
(Ⅱ) Significant investments with non-raised proceeds in report period
Unit: RMB ’0000
Name of project
Amount
Progress
Gains
The Generation 8 TFT-LCD Production Line of BOE Electronics Co., Ltd.
83,170
5%
-
State Engineering Lab for TFT-LCD Technologies
6,282
63%
-
UP3 Factory Reconstruction
889
99%
-
Total
90,341
-
-17
Section VI Significant Events
Ⅰ. Corporate governance
During the report period, the Company enjoyed a mature corporate governance structure by having established the Management System for Insiders and Inside Information, the Management System for Outer Information Users and the Accountability System for Significant Errors on Information Disclosure of Annual Report, with its actual corporate governance in line with requirements of relevant regulatory documents.
Ⅱ. Implementation on the plans of Profit Distribution, Capitalization of Public Reserves and New Stock Release
(Ⅰ) During the report period, the Company did not carry out any plans on distributing profits or turning public reserves into share capital.
(Ⅱ) The Company did not come up with any plans on profit distribution or capitalization of public reserves for the first half of 2010.
(Ⅲ) Implementation on New Stock Releasing Plan
1. On Nov. 26, 2009, the Proposal on Plan for A-share Private Placement was reviewed and approved at the 36th Meeting of the 5th Board of Directors;
2. On Dec. 16, 2009, the Proposal on Plan for A-share Private Placement was reviewed and approved at the 2nd Provisional Shareholders’ General Meeting in 2009;
3. On Dec. 23, 2009, the application documents for the Company’s A-share private placement was officially acknowledged by CSRC;
4. On Jun. 25, 2010, the Proposal on the Plan of Adjusting the Company’s A-share Private Placement was reviewed and approved at the 2nd Meeting of the 6th Board of Directors;
5. On Jul. 21, 2010, the Proposal on the Plan of Adjusting the Company’s A-share Private Placement was reviewed and approved at the 2nd Provisional Shareholders’ General Meeting in 2010.
6. On 25 Aug. 2010, the A-share issuance project was conditionally approved by CSRC.
(Ⅳ) At present, the Company has no plans of equity incentive.
Ⅲ. During the report period, the Company was not involved in any arbitrations, nor there existed such lawsuits or arbitrations carried down from previous periods.18
Ⅳ. The Company was not involved in any circumstances of holding shares of commercial banks, securities companies, insurance companies, trust companies, futures companies or any other financial enterprises, nor was it involved in investments of listed companies.
Ⅴ. Significant asset acquisition, sale and reorganization
(Ⅰ) Significant asset acquisition of the Company during the report period.
On March 15, 2010, in order to implement the products optimization strategy, the company has signed an Property Transaction Contract with JEAN Co., Ltd (Taiwan) (hereinafter referred to as JEAN), planning to acquire computer monitors, TV business as well as associated asset of JEAN with the price of 290 million RMB from its subsidiary company (hereinafter referred to as “the acquisition”).
The acquisition has been reviewed and approved at the 37th Meeting of the 5th Board of Directors and the 1st Provisional Shareholders’ General Meeting in 2010. So far, the project has been proceeding according to plan.
(Ⅱ) During the report period, there are no significant sales of assets.
(Ⅲ) Consolidation occurred during the report period
Beijing BOE Vision-electronic Technology Co., Ltd. is a subsidiary of the Company newly established in 2010 and was incorporated into consolidated financial statement of the Company.
Ⅵ. Related transactions
(Ⅰ) Related transactions arising from routine operation
The Proposal on Routine Related Transactions in 2010 was reviewed and approved at the Company’s 2009 Annual Shareholders’ General Meeting and the execution of relevant routine related transactions are specified as below:
Unit: RMB’0000
Items
Related Party
Transaction Items
Estimated
Transaction
Amount in
2010
Actual Amount
at the interim of 2010
Beijing Electronics Holding Co., Ltd. and
its affiliated companies
Products, power, energy, etc.
520
32
Beijing Nissin Electronic Precision Parts
Co., Ltd
Products, power, energy, etc.
500
83
Beijing Nittan Electronics Co., Ltd
Products, power, energy, etc.
200
144
Sale
Subtotal:
1,220
934
Beijing Electronics Holding Co., Ltd. and
its affiliated companies
Spare parts for equipment
assembling, etc.
5,000
721
Purchase
Beijing Nissin Electronic Precision Parts
Spare parts for equipment
3,000
61219
Co., Ltd
assembling, etc.
Beijing Nittan Electronics Co., Ltd
Spare parts for equipment
assembling, etc.
200
28
Subtotal:
8,200
1,574
Beijing Electronics Holding Co., Ltd. and
its affiliated companies
Leasing income
35
39
Beijing Nissin Electronic Precision Parts
Co., Ltd
Leasing income
220
88
Beijing Nittan Electronics Co., Ltd
Leasing income
250
100
Leasing
Subtotal:
505
227
Beijing Electronics Holding Co., Ltd. and
its affiliated companies
Receive or provide labor services
6,000
335
Beijing Nissin Electronic Precision Parts
Co., Ltd
Provide labor services
20
5
Beijing Nittan Electronics Co., Ltd
Provide labor services
30
5
Other
major
related
Transactions
Subtotal:
6,050
315
Total
15,975
2,290
(Ⅱ) Capital flows between the Company and its related parties
Unit: RMB’0000
Capital
flows with
related
parties
Name of
transaction party
Relationship
between the
Company and
transaction party
Accounting
entry
Beginning
balance of
transaction
amount in 2010
Closing
balance of
transaction
amount in Jun. 2010
Cause of
transaction
Nature of
transaction
Final controller
and its affiliated
companies
Accounts
receivable
113
87
Routine operation activities
Operational
capital flows
Final controller
and its affiliated
companies
Accounts
receivable
368
436
Routine
operation activities
Operational
capital flows
Beijing Electronics Holding Co., Ltd. and
its affiliated companies
Final controller
and its affiliated
companies
Other Payments
65
65
Routine operation activities
Operational
capital flows
Affiliated company
Accounts
receivable
20
34
Routine operation activities
Operational
capital flows
Affiliated company
Accounts
receivable
51
342
Routine operation activities
Operational
capital flows
Beijing Nissin Electronic Precision Parts
Co., Ltd
Affiliated company
Other Payments
-
2
Routine operation activities
Operational
capital flows
Affiliated company
Accounts
receivable
85
66
Routine operation activities
Operational
capital flows
Affiliated company
Accounts
receivable
29
15
Routine operation activities
Operational
capital flows
Beijing Nittan Electronics Co., Ltd
Affiliated company
Other payments
-
7
Routine operation activities
Operational
capital flows
Related
parties of the
Company
Total
-
-
731
1054
-
-
The independent directors of the Company believe that capital flows incurred with related parties during the report period were generated from operation activities, with no capital occupation by controlling shareholders or other related parties.20
(Ⅲ) Related transactions arising from joint external investments of the company and its related parties
“The proposal on investing and constructing a production line for G8 TFT-LCD” was reviewed and approved at the 29th Meeting of the 5th Board of Directors. The company has signed the Agreement on Capital Increase in Beijing BOE Display Technology Co., Ltd. with Beijing International Trust Co. Ltd. and Beijing E-Town International Investment & Development Co., Ltd (hereinafter referred to as the “E-Town international”) and Beijing Economic Technology Investment Development Corp.. With “E-Town international” holding 7.04% shares of the Company, the transaction is regarded as related transactions
During the report period, the Proposal on the Company and E-Town international Signing supplemental Agreement for the Subscription Agreement Concerning BOE Technology Group Co., Ltd Privately Releasing A-Share was reviewed and approved at the 2nd Meeting of the 6th Board of Directors. Regarding The Base Day of the Private Release Pricing and The Private Base Releasing Price that were signed previously, the Company and E-Town international has agreed to implement both according to the adjusted content approved by the Company’s statutory procedures. Currently, the private A-share issuance project has been conditionally approved by CSRC.
(IV) Liabilities and guarantees between the Company and its related parties
The actual controller of the Company—Beijing Electronics Holdings Co., Ltd.—took on joint and guarantee responsibilities for the syndicated loan of USD 740 million of the Company’s wholly-owned subsidiary—BOE Optoelectronic Technology Co., Ltd.. The relevant guarantee fee was not paid during the report period.21
Ⅶ. Significant contracts and their execution
(Ⅰ) Guarantees during the report period
1. Guarantees for external parties
On Jun. 30 2010, according to the guaranty agreement, Zhejiang BOE Display Technology Co., Ltd, one of the Company’s subsidiaries, provided the maximum amount of guarantee of RMB 40,000,000（RMB 40,000,000 as on Dec. 31, 2009）for the loan of Zhejiang Huanyu Construction Group Co., Ltd., while the actual balance of this amount is RMB 10,000,000 on Jun.30, 2010 (RMB 20,000,000 as on 31 Dec. 2009); Zhejiang BOE Display Technology Co., Ltd provided both maximum and actual amount of guarantee of RMB 15,000,000（RMB10,000,000 as on Dec. 31, 2009）for the loan of Shaoxing Huijin Automobile Co. ltd. The above guarantees will be expired on Nov. 2010. According to the agreement, Zhejiang BOE Display Technology Co., Ltd provided both maximum and actual amount of guarantee of RMB 5,000,000（RMB 0 as on Dec. 31, 2009） for the loan of Shaoxing Huijin Automobile Co. Ltd. The above guarantee will be expired in Sep. 2010.
2. Guarantees for internal parties
On Jun. 30 2010, the Company provided the maximum amount of guarantee of RMB 45,000,000 (RMB 47,000,000 as on Dec. 31, 2009) for the loan of its subsidiary—Zhejiang BOE. On Jun. 30 2010, the actual guarantee amount provided by the Company stood at RMB 40,400,000(RMB 45,000,000 as on Dec. 31, 2009). The above guarantees will be expired in Mar. 2011. In addition, the Company also provided a guarantee for the long-term borrowings of its subsidiary—BOE Electronic Technology Co., Ltd. According to relevant guarantee terms, the actual amount of guarantee provided by the Company stood at RMB 2,613,306,663 (RMB 2,692,183,600 as on Dec. 31, 2009).
On Jun. 30 2010, Zhejiang BOE provided a guarantee for the loan, which amounted to RMB 28,000,000 (RMB 28,000,000 as on Dec. 31, 2009), of its subsidiary—Shaoxing BOE Ueno Electronic Components Co., Ltd.
(Ⅱ) During the report period, the Company did not entrust others with financial affairs, or asset custody, contracting or leasing.
Ⅷ. Commitments made by the Company or shareholders whoever holds over 5% shares of the Company
(Ⅰ) Commitments concerning split share structure reform
During the report period, there existed no commitments on the split share structure reform of the Company.
(Ⅱ) Commitments on private release22
For details of the Company’s private release, please refer to “Ⅴ. Particulars about shares subject to restrictions held by the shareholders and trading restrictions” of “Section Ⅲ Changes in Share Capital and Particulars about Shares Held by Major Shareholders” of this report.
(Ⅲ) For details of other commitments of the Company, please refer to the annexed notes attached to financial statement
Ⅸ. Other significant events, as well as analysis and explanation on their influence and
relevant solutions
(Ⅰ) The Company did not make any securities investment during the report period.
(Ⅱ) Shares of other listed companies held by the Company
Unit: RMB Yuan
Stock code
Short form
of stock
Initial investment amount
Proportion of shares in the company
Book value at period-end
Gains or losses in report period
Changes of Owners’ equity in report period
HK0903
TPV Technology
134,658,158
1.15%
99,033,531
-
-3,491,069
SH600658
BEZ
90,160,428
1.69%
55,712,268
-
-25,672,681
224,818,586
-
154,745,799
-
-29,163,750
Note: the above shares are held by the Company and accounted in the tradable financial assets by employing the Fair Value Measurement methodology. Among which, the price of TPV Technology will be calculated according to the closing price on Jun. 30 2010. While the BEZ shares would come to a value of RMB 86,510,000, if following after the closing price on Jun. 30 2010; since it is under the Restricted Trading Period, the Company will set its restricted discount rate by adopting the same assessment methods in line with the date of balance sheet. That is, determining its book value based on the closing price on Jun. 30 2010 and taking the restricted discount rate into account.
(Ⅲ) During the report period, shareholders holding over 5% shares of the Company did not make such commitments as prolonging trading restrictions, setting or increasing the lowest price to reduce shareholding.
Ⅹ. Specific explanation and independent opinion from independent directors on capital occupation by related parties and external guarantees by the Company
According to the Circular on Certain Issues Regarding Regulating Capital Flows between Listed Companies , Related Parties and Provision of External Guarantees by Listed Companies, the Circular on Regulating Provision of External Guarantees by Listed Companies, and the Guiding Opinions on Establishment of Independent Director System by Listed Companies issued by CSRC, as well as the Stock-listing Rules of Shenzhen Stock Exchange and other relevant laws and regulations, as the independent directors of the Company, we conducted a careful examination on capital occupation by the Company’s controlling shareholders and other related parties, as well as on the external guarantees by listed companies, and expressed our independent opinions as follows:
During the report period, the capital flows between the Company and its related parties were generated from operation activities and there are no capital occupation circumstances by the controlling shareholder or other related parties; and the Company did not provide guarantees for its controlling shareholders, actual controller or other related parties. The23
total guarantee amount did not exceed 50% of the net assets value as audited by the latest period, with no single guarantee amount exceeding 10% of the net assets value as audited at the latest. The Company’s external guarantees were totally in line with relevant laws and regulations, with no harm done to the legitimate rights and interests of shareholders.
Ⅺ. The Financial Report for the report period has not been audited and the CPA firm remained the same.
Ⅻ. During the report period, the Company, its directors, supervisors and senior management staff neither received any administrative punishment or criticism by circular from CSRC, nor received any punishment from other administrative authorities or any open criticism from the stock exchange.
ⅩⅢ. Researches, interviews and visits received by the Company in report period
Reception date
Reception place
Reception way
Visitor
Main content of discussion and materials provided by the Company
12 Jan. 2010
Meeting Room ofthe Company
Field research
Industrial Securities Co.,LTD
13 Jan. 2010
Meeting Room ofthe Company
Field research
New Times Securities Co.Ltd, Harvest Fund Management Co.,Ltd., Huatai Securities Co.，Ltd.
14 Jan. 2010
Meeting Room of the Company
Field research
GF Fund Management Co.,Ltd.
19 Jan. 2010
Meeting Room of the Company
Field research
Aerospace Science & Technology Financial Co., Ltd
20 Jan. 2010
Meeting Room of the Company
Field research
Industrial Securities Co.,LTD
21 Jan. 2010
Meeting Room of the Company
Field research
Yinhua Fund Management Co., Ltd., TX Investment Consulting Co., Changsheng Fund Management Co.,Ltd. Huaxia Fubang (Shanhai) Credit Asset Management Co. ltd , etc.
5 Feb. 2010
Meeting Room of the Company
Field research
Bohai Securities Co., Ltd.; Gf Fund Management Co.,Ltd; China Merchants securities Co., LTD; Xin Jiang Hong Tai Mining Co., Ltd.; ICBC Credit Suisse Asset Management Co. Ltd.
25 Feb. 2010
Meeting Room of the Company
Field research
Shanghai Communications Technology Development Co., LTD; CITIC Trust Co.,Ltd.; Yinhua Fund Management Co., Ltd.; TX Investment Consulting Co.)
1 Mar. 2010
Meeting Room of the Company
Field research
Wedge MKI LLC、
Wedge partners Corp.
19 Mar. 2010
Meeting Room of the Company
Field research
Merrill Lynch Securities Co.Ltd.; Bank of Amercia Merrill Lynch、UG invest
2 Apr. 2010
Meeting Room of the Company
Field research
NAITO Securities CO.,LTD; China Resources SZITIC Trust Co., Ltd.; China Securities Co., Ltd.; Shanghai Congrong Investment Management Co., Ltd., etc.
1. Operation status and future development strategies
of the Company;
2. Present status and development trends in the
industry; 3. Particulars about Chengdu 4.5G Project, Hefei
6G Project and Beijing 8G Project;
4. Issues concerning the non-pubic stock placement of the
Company;
Materials provided by the Company:
2008 Annual Report of the Company, company
brochure and other disclosed materials
4 May 2010
Meeting Room of the Company
Field research
Morgan Stanley Taiwan Ltd.
12 May 2010
Meeting Room of the Company
Field research
Southwest Securities Co., Ltd.; Hongta Securities Co., Ltd
24 May 2010
Meeting Room of the Company
Field research
Hangzhou Qualcomm Investment Co, Ltd
27 May 2010
On the phone
Field research
East Money Information Co., Ltd., etc.
28 May 2010
Meeting Room of he Company
Field research
Daiwa Securities Co. Ltd.; Samsung Life Insurance Co., Ltd.; Nissay-Greatwall Life Insurance Co., Ltd.; Nikko Asset Management Co., Ltd, etc.
7 Jun. 2010
Meeting Room of he Company
Field research
Shanghai Branch of Pengyuan (Beijing) Marketing Consulting Co., Ltd., KGI Securities (Korea) Co., Ltd. etc.
11 Jun 2010
Meeting Room of the Company
Field research
Huatai Securities CO.,LTD.
29 Jun. 2010
Meeting Room of he Company
Zhong De Securities
Main content of discussion 1. Operation status and future development strategies
of the Company;
2. Present status and development trends in the
industry; 3. Particulars about Chengdu 4.5G Project, Hefei
6G Project and Beijing 8G Project;
4. Issues concerning the non-pubic stock placement of the
Company;
Materials provided by the Company:
2009 Annual Report of the Company, company
brochure and other disclosed materials24
ⅩⅣ. Index of provisional public notices disclosed in report period
Sequence No.
Date of disclosure
Name of public notice
1
6 Jan. 2010
Indicative Notice
2
15 Jan. 2010
Public Notice on the Revising of Business Achievement Announcement
3
5 Feb. 2010
Public Notice on the Pledge of Company’s Partial Stocks Rights Held by the Shareholders
4
5 Feb. 2010
Public Notice on Returning the Collecting Fund
5
12 Feb. 2010
Public Notice on the Termination of Transferring the Shares of BOE Co., Ltd.
6
27 Feb. 2010
Public Notice on the Pledge of Company’s Partial Stocks Rights Held by the Shareholders
7
16 Mar. 2010
Public Notice on Resolutions Made at the 37th Meeting of the 5th Board of Directors
8
16 Mar. 2010
Public Notice on Merging the Computer Machine Assembling Business of Jean Co., Ltd.(Taiwan)
9
16 Mar. 2010
Public Notice on the 1st Provisional Shareholders’ General Meeting in 2010
10
26 Mar. 2010
Public Notice on the Election of Board of Directors
11
26 Mar. 2010
Public Notice on the Election of Board of Supervisors
12
1 Apr. 2010
Public Notice on Resolutions of the 38th
Meeting of the 5th Board of Directors
13
14 Apr. 2010
Public Notice on Resolutions of 1st Provisional Shareholders’ General Meeting in 2010
14
20 Apr. 2010
Public Notice on Resolutions of the 39th
Meeting of the 5th Board of Directors
15
20 Apr. 2010
Public Notice on Resolutions of the 13th
Meeting of the 5th Board of Supervisors
16
20 Apr. 2010
Public Notice on Providing Loans for Zhejiang BOE Display Technology Co., Ltd.
17
20 Apr. 2010
Public Notice on Routine Related Transactions in 2010
18
20 Apr. 2010
Summary of 2009 Annual Report (Chinese Version) of BOE Technology Group Co., Ltd
19
29 Apr. 2010
Public Notice on Resolutions of the 40th
Meeting of the 5th Board of Directors
20
29 Apr. 2010
Public Notice on Resolutions of the 14th
Meeting of the 5th Board of Supervisions
21
29 Apr. 2010
The 1st Quarterly Report 2010 (Official Text)
22
29 Apr. 2010
Public Notice on the Business Achievement Announcement
23
29 Apr. 2010
Public Notice for the Shareholders' Annual Meeting in 2009
24
30 Apr. 2010
Public Notice on the Project Progress of Beijing TFT-LCD G8
25
13 May 2010
Public Notice on electing Supervisors that Representing the Staff
26
22 May 2010
Public Notice on Resolutions of the Shareholders’ Meeting in 2009
27
22 May 2010
Public Notice on Resolutions of the 1st
Meeting of the 6th Board of Directors
28
22 May 2010
Public Notice on Resolutions of the 1st
Meeting of the 6th Board of Supervisions
29
8 Jun. 2010
Indicative Notice on Removing the Restriction of A-share Private Placement
30
8 Jun. 2010
Public Notice on Merging the Computer Machine Assembling Business of Jean Co., Ltd.(Taiwan)
31
12 Jun. 2010
Public Notice on the Pledge of Company’s Partial Stocks Rights Held by the Shareholders
32
19 Jun. 2010
Public Notice on the Project Progress of Beijing TFT-LCD G8
33
26 Jun. 2010
Public Notice on Resolutions of the 2nd Meeting of the 6th Board of Directors
34
26 Jun. 2010
Public Notice on Related Transactions25
Section VII Financial Report (Un-audited)
I. The interim financial report has not been audited.
II. Accounting statements (See the attachments)
1. Balance sheet
2. Income statement
3. Cash flow statement
4. Statement of changes in owners’ equity
III. Notes on the accounting statements
Section VIII Documents Available for Reference
I. Text of Interim Report with signature of Legal Representative;
II. Text of Financial Report with signatures and seals of Legal Representative, CEO, CFO and person-in charge of accounting agency;
III. Original of all documents and public notices ever disclosed on newspapers designated by CSRC in report period.
Chairman of Board of Directors (Signature): Wang Dongsheng
Board of Directors
BOE Technology Group Co., Ltd.
August 26, 2010Balance Sheet
26Balance Sheet (Continued)
27Income Statement
2829
Cash Flow StatementStatement of Changes in Owners' Equity of Parent Company
30Statement of Changes in Owners' Equity of Parent Company (Con.)
31Consolidated Statement of Changes in Owners' Equity
3233
Consolidated Statement of Changes in Owners' Equity (Con.)34
BOE Technology Group Company Limited
Notes to the financial statements
(Expressed in Renminbi yuan)
Ⅰ. Company status
BOE Technology Group Company Limited (the “Company”) is a company limited by shares established on 9 April 1993 at Beijing, with its head office located in Beijing. The parent of the Company is Beijing Electronic Tube Factory (after “debt-equity swap” restructuring converted to “Beijing Orient Investment and Development Company Limited” (“BOID”)). The Company’s ultimate holding company is Beijing Electronics Holdings Co., Ltd. (“Electronics Holdings”).
The Company was established with the approval of the Office of Economic Restructuring of Beijing Municipality JTGBZ [1992] No. 22, founded by the former Beijing Electronic Tube Factory as the main promoter by way of directional stock flotation. The former Beijing Electronic Tube Factory transferred its related assets and liabilities to the Company. Such assets and liabilities had been valued by the State-owned Assets Supervision and Administration Commission. The Company used the revaluation amount as the initial value for Company’s accounting records.
As approved by the State Council Securities Commission through document ZWF [1997] No. 32, the Company issued 115,000,000 B shares on 19 May 1997 at the Shenzhen Stock Exchange, with a face value of RMB 1.00 each, getting listed on 10 June 1997 at the Shenzhen Stock Exchange. As approved by the China Securities Regulatory Commission (“CSRC”) through document ZJGSZ [2000] No. 197, the Company issued 60,000,000 ordinary shares denominated in Renminbi on 23 November 2000 at Shenzhen Stock Exchange, with a face value of RMB 1.00 each, getting listed on 12 January 2001 at the Shenzhen Stock Exchange.
As approved by the CSRC through document ZJFXZ [2004] No. 2, “The Notice on approving BOE Technology Group Company Limited’s further share offering”, the Company additionally issued 316,400,000 B shares on 16 Jan 2004, with a face value of RMB 1.00 each and issuing value of HKD 6.32, which raised capital amounting to HKD 1,999,648,000. After accounting for all the relevant issuance fees, the B shares further offering raised capital of HKD 1,922,072,431 (RMB 2,048,160,383), with total share capital increasing to RMB 975,864,800.
Pursuant to the resolution approved by the 2003 Annual General Meeting held on 28 May 2004, the Company implemented its plan of transferring capital reserve into share capital at the rate of “5 shares for every 10 shares” to all shareholders in June 2004. Upon the completion of the transfer, the Company’s total share capital increased to RMB 1,463,797,200.
Pursuant to the resolution passed by the 2005 1st Extraordinary General Meeting held on 5 July 2005, based on the total share capital of 1,463,797,200 shares as at 31 December 2004, the Company transferred capital reserve into share capital at the rate of “5 shares for every 10 share” to all shareholders on 19 July 2005. Upon completion of the transfer, the Company’s total share capital increased to RMB 2,195,695,800.
In accordance with “The Approval Notice on BOE’s State-owned Share Reform Plan” issued by Stated-owned Assets Supervision and Administration Commission of Beijing Municipality (JGZCQZ [2005] No. 119), the Company implemented its state-owned share reform plan agreed35
by the shareholders on 24 November 2005. According to the plan, those registered tradable RMB-denominated ordinary share shareholders on 29 November 2005 would receive 4.2 shares for every 10 listed shares. This had contributed to the change in percentage of tradable and non-tradable shares of the Company.
Pursuant to the 21st session of the 4th directors meeting and the Extraordinary General Meeting held on 18 April 2006 and 19 May 2006 respectively, and the approval from the CSRC through document ZJFXZ [2006] No. 36, the Company issued 675,872,095 non-public targeted ordinary shares (A shares) with face value of RMB 1. On 9 October 2006, the Company completed shares registration and escrow in China Securities Depository and Clearing Corporation Limited Shenzhen branch. Upon completion of the issuance, the Company’s total share capital increased to RMB 2,871,567,895.
Pursuant to the 3rd session of the 5th directors meeting and the 2007 4th Extraordinary General Meeting held on 29 August 2007 and 26 September 2007 respectively, and the approval from the CSRC through document ZJFXZ [2008] No. 587, the Company issued 411,334,552 non-public targeted RMB-denominated ordinary share with a face value of RMB 1. On 16 July 2008, the Company completed shares registration and escrow in China Securities Depository and Clearing Corporation Limited Shenzhen branch. Upon completion of the issuance, the Company’s total share capital increased to RMB 3,282,902,447.
Pursuant to the 17th session of the 5th directors meeting and the 2008 2nd Extraordinary General Meeting held on 7 November 2008 and 25 November 2008 respectively, and approval from the CSRC through document ZJFXZ [2009] No. 369, the Company issued 5,000,000,000 non-public targeted RMB-denominated ordinary share with a face value of RMB 1. On 4 June 2009, the Company completed shares registration and escrow in China Securities Depository and Clearing Corporation Limited Shenzhen branch. Upon completion of the issuance, the Company’s total share capital increased to RMB 8,282,902,447. The Company revised its Articles of Association on June 2009, and obtained the renewed the business license as legal person with No. 110000005012597 on 7 August 2009.
The Company and its subsidiaries (“the Group”) comprise three main business segments on a worldwide basis: TFT-LCD business for IT and TV products, TFT-LCD business for Mobile and Application products and other business. Other business includes back light products business, display system and solution business, other display components and parts and international business park, etc.
.Ⅱ Significant accounting policies, accounting estimates
1. Basis of preparation
The financial statements have been prepared on the basis of going concern.
2. Statement of compliance
The financial statements have been prepared in accordance with the requirements of “Accounting Standards for Business Enterprises—Basic Standard” and 38 Specific Standards issued by the Ministry of Finance (MOF) on 15 February 2006, and application guidance, bulletins and other relevant accounting regulations issued subsequently (collectively referred to as “Accounting Standards for Business Enterprises” or “CAS”). These financial statements present truly and completely the consolidated financial position and financial position, the consolidated results of operations and results of operations and the consolidated cash flows and cash flows of the Company.36
These financial statements also comply with the disclosure requirements of “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” as revised by the China Securities Regulatory Commission (CSRC) in 2010.
3. Accounting period
The accounting year of the Group is from 1 January to 31 December.
4. Functional currency
The Company’s functional currency is renminbi. These financial statements are presented in renminbi. The Company translates the financial statements of subsidiaries from their respective functional currencies into renminbi (see Note II.8) if the subsidiaries’ functional currencies are not renminbi.
5. Accounting treatments for a business combination involving entities under and those not under common control
(1) Business combination involving entities under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of consideration paid for the combination (or the total face value of shares issued) is adjusted to share premium in the capital reserve. If the balance of share premium is insufficient, any excess is adjusted to retained earnings. The combination date is the date on which one combining enterprise effectively obtains control of the other combining enterprises.
(2) Business combinations involving entities not under common control
A business combination involving entities not under common control is a business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the business combination. The cost of a business combination paid by the acquirer is the aggregate of the fair value at the acquisition date of assets given, liabilities incurred or assumed, and equity securities issued by the acquirer, in exchange for control of the acquiree plus any cost directly attributable to the business combination. The difference between the fair value and the carrying amount of the assets given is recognised in profit or loss. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
The acquirer, at the acquisition date, allocates the cost of the business combination by recognising the acquiree’s identifiable asset, liabilities and contingent liabilities at their fair value at that date.
Any excess of the cost of a business combination over the acquirer’s interest in the fair value of the acquiree’s identifiable net assets is recognised as goodwill (see Note II.18).
Any excess of the acquirer’s interest in the fair value of the acquiree’s identifiable net assets over the cost of a business combination is recognised in profit or loss.37
6. Preparation of consolidated financial statements
The consolidated financial statements comprise the Company and its subsidiaries. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Where a subsidiary was acquired during the reporting period, through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at the date that common control was established. Therefore the opening balances and the comparative figures of the consolidated financial statements are restated. In the preparation of the consolidated financial statements, the subsidiary’s assets, liabilities and results of operations are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts, from the date that common control was established.
Where a subsidiary was acquired during the reporting period, through a business combination involving entities not under common control, the identifiable assets, liabilities and results of operations of the subsidiaries are combined into consolidated financial statements from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date.
Where the Company acquires a minority interest from a subsidiary’s minority shareholders or disposes of a portion of an interest in a subsidiary without a change in control, the difference between the amount by which the minority interests are adjusted and the amount of the consideration paid or received is adjusted to the capital reserve in the consolidated balance sheet. If the credit balance of capital reserve is insufficient, any excess is adjusted to retained earnings.
Minority interest is presented separately in the consolidated balance sheet within shareholders’ equity. Net profit or loss attributable to minority shareholders is presented separately in the consolidated income statement below the net profit line item.
Where losses attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ interest in of the equity of the subsidiary, the excess, and any further losses attributable to the minority shareholders, are allocated against the equity attributable to the Company except to the extent that the minority shareholders have a binding obligation under the articles of association or an agreement and are able to make additional investment to cover the losses. If the subsidiary subsequently reports profits, such profits are allocated to the equity attributable to the Company until the minority shareholders' share of losses previously absorbed by the Company has been recovered.
When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on the Company’s own accounting period or accounting policies. Intra-group balances and transactions, and any unrealized profit or loss arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized losses resulting from intra-group transactions are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment.
7. Cash and Cash equivalents38
Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments, which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.
8. Foreign currency transactions and translation of financial statements denominated in foreign currency
When the Group receives capital in foreign currencies from investors, the capital is translated to renminbi at the spot exchange rate at the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to renminbi at the spot exchange rates at the dates of the transactions.
A spot exchange rate is an exchange rate quoted by the People’s Bank of China, the State Administration of Foreign Exchanges or a cross rate determined based on quoted exchange rates. A rate that approximates the spot exchange rate is a rate determined under a systematic and rational method, normally the average exchange rate of the current period or the weighted average exchange rate.
Monetary items denominated in foreign currencies are translated to renminbi at the spot exchange rate at the balance sheet date. The resulting exchange differences are recognised in profit or loss, except those arising from the principals and interests on foreign currency borrowings specifically for the purpose of acquisition, construction of qualifying assets (see Note II.16). Non-monetary items denominated in foreign currencies that are measured at historical cost are translated to renminbi using the foreign exchange rate at the transaction date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the foreign exchange rate at the date the fair value is determined; the exchange differences are recognised in profit or loss, except for the differences arising from the translation of available-for-sale financial assets, which is recognised in capital reserve.
The assets and liabilities of foreign operation are translated to renminbi at the spot exchange rate at the balance sheet date. The equity items, excluding “Retained earning”, are translated to renminbi at the spot exchange rates at the transaction dates. The income and expenses of foreign operation are translated to renminbi at rates that approximate the spot exchange rates at the transaction dates. The resulting exchange differences are recognised in a separate component of equity. Upon disposal of a foreign operation, the cumulative amount of the exchange differences recognised in equity which relates to that foreign operation is transferred to profit or loss in the period in which the disposal occurs.
9. Financial instruments
Financial instruments comprise cash at bank and on hand, investments in debt and equity securities other than long-term equity investments (see Note II.12), receivables, payables, loans and borrowings, debentures payable and share capital, etc.
(1) Classification, recognition and measurement of financial assets and financial liabilities
A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of a financial instrument.
The Group classifies financial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets or assuming liabilities: financial assets and financial liabilities at fair value through profit or loss, loans and receivables,39
held-to-maturity investments, available-for-sale financial assets and other financial liabilities.
Financial assets and liabilities are measured initially at fair value. For financial assets and liabilities at fair value through profit or loss, any directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any attributable transaction costs are included in their initial costs. Subsequent to initial recognition financial assets and liabilities are measured as follows:
– Financial assets and financial liabilities at fair value through profit or loss (including financial assets or financial liabilities held for trading)
A financial asset or financial liability is classified as at fair value through profit or loss if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is a derivative.
Subsequent to initial recognition, financial assets and financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.
– Receivables
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Subsequent to initial recognition, receivables are subsequently stated at amortized cost using the effective interest method.
– Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity.
Subsequent to initial recognition, held-to-maturity investments are stated at amortized cost using the effective interest method.
– Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are designated upon initial recognition as available for sale and other financial assets which do not fall into any of the above categories.
An investment in equity instrument which does not have a quoted market price in an active market and whose fair value cannot be reliably measured is measured at cost subsequent to initial recognition.
Other than investments in equity instruments whose fair value cannot be measured reliably as described above, subsequent to initial recognition, other available-for-sale financial assets are measured at fair value and changes therein, except for impairment losses and foreign exchange gains and losses from monetary financial assets, which are recognised directly in profit or loss, are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is removed from equity and recognised in profit or loss. Dividend income from these equity instruments is recognised in profit or loss when the investee declares the dividends.40
Interest on available-for-sale financial assets calculated using the effective interest method is recognised in profit or loss.41
– Other financial liabilities
Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities.
Other financial liabilities include the liabilities arising from financial guarantee contracts. Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails to make payment when due, in accordance with the terms of a debt instrument. Where the Group issues a financial guarantee, subsequent to initial recognition, the guarantee is measured at the higher of the amount initially recognised less accumulated amortisation and the amount of a provision determined in accordance with the principles of contingent liabilities (see Note II.21).
Except for the liabilities arising from financial guarantee contracts described above, subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
(2) Determination of fair values
If there is an active market for a financial asset or financial liability, the quoted price in the active market without adjusting for transaction costs that may be incurred upon future disposal or settlement is used to establish the fair value of the financial asset or financial liability. For a financial asset held or a financial liability to be assumed, the quoted price is the current bid price and, for a financial asset to be acquired or a financial liability assumed, it is the current asking price.
If no active market exists for a financial instrument, a valuation technique is used to establish the fair value. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties; reference to the current fair value of another instrument that is substantially the same; or discounted cash flow analysis and option pricing models. The Group calibrates its valuation technique and tests it for validity periodically.
(3) Derecognition of financial assets and financial liabilities
A financial asset is derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group transfers substantially all the risks and rewards of ownership of the financial asset to another party.
Where a transfer of a financial asset in its entirety meets the criteria of the derecognition, the difference between the two amounts below is recognised in profit or loss:
– carrying amount of the financial asset transferred
– the sum of the consideration received from the transfer and any cumulative gain or loss that has been recognised directly in equity.
The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged.
(4) Impairment of financial assets42
The carrying amounts of financial assets (other than those at fair value through profit or loss) are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. For the calculation method of impairment of receivables, refer to Note.10. The impairment Ⅱof other financial assets is measured as follows:
– Held-to-maturity investments
Held-to-maturity investments are assessed for impairment on an individual basis. An impairment loss in respect of a held-to-maturity investment is calculated as the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognised in profit or loss.
If, after an impairment loss has been recognised on held-to-maturity investments, there is objective evidence of a recovery in value of the financial asset which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss. A reversal of an impairment loss will not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.
– Available-for-sale financial assets
Available-for-sale financial assets are assessed for impairment on an individual basis. When an available-for-sale financial asset is impaired, the cumulative loss arising from a decline in fair value that has been recognised directly in equity is removed from equity and recognised in profit or loss even though the financial asset has not been derecognised.
If, after an impairment loss has been recognised on an available-for-sale debt instrument, the fair value of the debt instrument increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. An impairment loss recognised for an investment in an equity instrument classified as available-for-sale is not reversed through profit or loss.
(5) Equity instrument
An equity instrument is a contract that proves the ownership interest of the assets after deducting all liabilities in the Company.
The consideration received from the issuance of equity instruments net of transaction costs is recognised in share capital and capital reserve.
Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from shareholders’ equity.
10. Impairment of receivables43
Receivables are assessed for impairment both on an individual basis and on a collective group basis.
Where impairment is assessed on an individual basis, an impairment loss in respect of a receivable is calculated as the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognised in profit or loss.
The assessment is made collectively where receivables share similar credit risk characteristics (including those having not been individually assessed as impaired), based on their historical loss experiences, and adjusted by the observable figures reflecting present economic conditions.
If, after an impairment loss has been recognised on receivables, there is objective evidence of a recovery in value of the financial asset which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss. A reversal of an impairment loss will not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.
11. Inventories
(1) Classification
Inventories include raw materials, work in progress, finished goods and reusable materials. Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets.
(2) Cost of inventories
Cost of inventories is calculated using the weighted average method.
(3) The underlying factors in the determination of net realizable value of inventories and the basis of provision for decline in value of inventories
Inventories are carried at the lower of cost and net realisable value.
Cost of inventories comprises all costs of purchase, costs of conversion and other costs. Inventories are initially measured at their actual cost. In addition to the purchasing cost of raw materials, work in progress and finished goods include direct labour costs and an appropriate allocation of production overheads.
Net realisable value is the estimated selling price in the normal course of business less the estimated costs to completion and the estimated expenses and related taxes necessary to make the sale. The net realisable value of materials held for use in the production of inventories is measured based on the net realizable value of the finished goods in which they will be incorporated. The net realizable value of the quantity of inventory held to satisfy sales or service contracts is based on the contract price. If the quantities of inventories specified in sales contracts are less than the quantities held by the Group, the net realizable value of the excess portion of inventories shall be based on general selling prices.
Any excess of the cost over the net realisable value of each class of inventories is recognised as a provision for diminution in the value of inventories.44
(4) Inventory system
The Group maintains a perpetual inventory system.
(5) Amortisation of reusable material including low-value consumables and packaging materials
Reusable materials including low-value consumables and packaging materials are amortized in full when received for use. The amounts of the amortisation are included in the cost of the related assets or profit or loss.
12. Long-term equity investments
(1) Initial investment cost
(a) Long-term equity investments acquired through a business combination
– The initial investment cost of a long-term equity investment obtained through a business combination involving entities under common control is the Company’s share of the subsidiary’s equity at the combination date. The difference between the initial investment cost and the carrying amounts of the consideration given is adjusted to share premium in capital reserve. If the balance of the share premium is insufficient, any excess is adjusted to retained earnings.
– The initial investment cost of a long-term equity investment obtained through a business combination involving entities not under common control is the cost of acquisition determined at the acquisition date.
(b) Long-term equity investments acquired otherwise than through a business combination
– An investment in a subsidiary acquired otherwise than through a business combination is initially recognised at actual payment cost if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by shareholders.
(2) Subsequent measurement
(a) Investments in subsidiaries
In the Company’s financial statements, investments in subsidiaries are accounted for using the cost method. Cash dividends or profit distributions declared by subsidiaries and attributed to the Company shall be recognised as investment income, except those that have been declared but unpaid at the time of acquisition and therefore included in the price paid or consideration. The investments are stated at cost less impairment losses in the balance sheet.
In the Group’s consolidated financial statements, investments in subsidiaries are accounted for in accordance with the principles described in Note II.6.45
(b) Investment in jointly controlled enterprises and associates
A jointly controlled enterprise is an enterprise which operates under joint control (see Note II.12 (3)) in accordance with a contractual agreement between the Group and other parties.
An associate is an enterprise over which the Group has significant influence (see Note II.12 (3)).
An investment in a jointly controlled enterprise or an associate is accounted for using the equity method, unless the investment is classified as held for sale (see Note II.27).
The Group makes the following accounting treatments when using the equity method:
. Where the initial investment cost of a long-term equity investment exceeds the Group’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is less than the Group’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, the investment is initially recognised at the investor’s share of the fair value of the investee’s identifiable net assets, and the difference is charged to profit or loss.
. After the acquisition of the investment, the Group recognises its share of the investee’s net profits or losses after deducting the amortisation of the debit balance of equity investment difference, which was recognised by the Group before the first-time adoption of CAS, as investment income or losses, and adjusts the carrying amount of the investment accordingly. The debit balance of the equity investment difference is amortized using the straight-line method over a period which is determined in accordance with previous accounting standards. Once the investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the Group.
The Group recognises its share of the investee’s net profits or losses after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair values of the investee’s identifiable net assets at the date of acquisition. Unrealised profits and losses resulting from transactions between the Group and its associates or jointly controlled enterprises are eliminated to the extent of the Group’s interest in the associates or jointly controlled enterprises. Unrealised losses resulting from transactions between the Group and its associates or jointly controlled enterprises are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.46
?
. The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that in substance forms part of the Group’s net investment in the associate or the jointly controlled enterprise is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. Where net profits are subsequently made by the associate or jointly controlled enterprise, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
(c) Other long-term equity investments
Other long-term equity investments refer to investments where the Group does not have control, joint control or significant influence over the investees, and the investments are not quoted in an active market and their fair value cannot be reliably measured.
Other long-term equity investments are accounted for using the cost method. Cash dividends or profit distributions declared by subsidiaries and attributed to the Company shall be recognised as investment income, except for those that have been declared but unpaid at the time of acquisition and therefore included in the price paid or consideration.
(3) Basis for determining the existence of joint control or significant influence over an investee
Joint control is the contractually agreed sharing of control over an investee’s economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing the control. The following evidences shall be considered when determining whether the Group can exercise joint control over an investee:
?no single venturer is in a position to control the operating activities unilaterally;
?operating decisions relating to the investee’s economic activity require the unanimous consent of the parties sharing control;
?if the parties sharing control appoint one venturer as the operator or manager of the joint venture through the contractual arrangement, the operator must act within the financial and operating policies that have been agreed by the venturers in accordance with the contractual arrangement.
Significant influence is the power to participate in the financial and operating policy decisions of an investee but is not control or joint control over those policies. The following one or more evidences shall be considered when determining whether the Group can exercise significant influence over an investee:
?representation on the board of directors or equivalent governing body of the investee;
?participation in policy-making processes, including participation in decisions about dividends or other distributions; material transactions between the investor and the investee;47
on.
(4)
easuring for subsidiaries, jointly controlled
ying amount is required to be tested for
?interchange of managerial personnel; or
?provision of essential technical informati
ethod of impairment testing and measuring
M
or the method of impairment testing and m
F
enterprises and associates, refer to Note II.20. or other long-term equity investments, the carr
F
impairment at the balance sheet date. If there is objective evidence that the investments may be impaired, the impairment shall be assessed on an individual basis. The impairment loss is measured as the amount by which the carrying amount of the investment exceeds the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed. The other long-term equity investments are stated at cost less impairment losses in the balance sheet.48
13. Investment property
An investment property is a property held either to earn rental income or for capital appreciation or both. Investment property is accounted for using the cost model and stated in the balance sheet at cost less accumulated depreciation, amortisation and impairment loss. Investment property is depreciated or amortised using the straight-line method over its estimated useful life, unless the investment property is classified as held for sale (see Note II.27). For the method of impairment testing and measuring, refer to Note II.20.
The useful lives and estimated residual values of each class of investment property are as follows:
Useful life (years)
Residual value rate (%)
Depreciation rate (%)
Buildings
25 -35 years
3%-10%
2.6%-3.9%
Land use rights
34 -50 years
0%
2%-2.9%
14. Fixed assets
(1) Recognition
Fixed assets represent the tangible assets held by the Group for use in the production of goods or supply of services for rental to others or for operation and administrative purposes with useful lives over one year.
The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of self-constructed assets is measured in accordance with the policy set out in Note II.15.
Where parts of an item of fixed assets have different useful lives or provide benefits to the Group in different patterns thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset.
The subsequent costs, including the cost of replacing part of an item of fixed assets, are recognised in the carrying amount of the item if the recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed assets are recognised in profit or loss as incurred.
Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses.
(2) Depreciation
Fixed assets are depreciated using the straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale ( see note II.27).
The depreciation period and estimated residual value of each class of fixed assets are as follows:49
Classes
Depreciation period (years)
Residual value rate (%)
Depreciation rate (%)
Plants and buildings
20-40 years
3%-10%
2.3%-4.9%
Machinery and
equipment
2-15 years
0-10%
6%-50%
Others
2-10 years
0-10%
9%-50%
Useful lives, estimated residual values and depreciation methods are reviewed at least each year-end.
(3) For the method of impairment testing and measuring, refer to Note II.20.
(4) Recognition and measurement of fixed assets acquired under finance leases
For the recognition and measurement of fixed assets acquired under finance leases, refer to the accounting policy set out in Note II 26(3).
(5) Disposal
The carrying amount of a fixed asset shall be derecognised on disposal, or when no future economic benefits are expected to be generated from its use or disposal.
Gains or losses arising from the retirement or disposal of an item of fixed assets are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.
15. Construction in progress
The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs (see Note II.16), and any other costs directly attributable to bringing the asset to working condition for its intended use.
A self-constructed asset is included construction in progress before it is transferred to fixed asset when it is ready for its intended use. No depreciation is provided against construction in progress. Construction in progress is stated in the balance sheet at cost less impairment losses (Note II.20).
16. Borrowing costs
Borrowing costs incurred directly attributable to the acquisition, construction of a qualifying asset are capitalised as part of the cost of the asset.
Except for the above, other borrowing costs are recognised as financial expenses in the income statement when incurred.
During the capitalisation period, the amount of interest (including amortisation of any discount or premium on borrowing) to be capitalised in each accounting period is determined as follows:
. Where funds are borrowed specifically for the acquisition, construction of a qualifying asset, the amount of interest to be capitalised is the interest expense50
calculated using effective interest rates during the period less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before being used on the asset.
. Where funds are borrowed generally and used for the acquisition, construction of a qualifying asset, the amount of interest to be capitalised on such borrowings is determined by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset over the above amounts of specific borrowings. The capitalisation rate is the weighted average of the interest rates applicable to the general-purpose borrowings.
The effective interest rate is determined as the rate that exactly discounts estimated future cash flow through the expected life of the borrowing or, when appropriate, a shorter period to the initially recognised amount of the borrowings.
During the capitalisation period, exchange differences related to the principal and interest on a specific-purpose borrowing denominated in foreign currency are capitalised as part of the cost of the qualifying asset. The exchange differences related to the principal and interest on foreign currency borrowings other than a specific-purpose borrowing are recognised as a financial expense in the period in which they are incurred.
The capitalisation period is the period from the date of commencement of capitalisation of borrowing costs to the date of cessation of capitalisation, excluding any period over which capitalisation is suspended. Capitalisation of borrowing costs commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities of acquisition, construction or production that are necessary to prepare the asset for its intended use or sale are in progress, and ceases when the assets become ready for their intended use or sale. Capitalisation of borrowing costs is suspended when the acquisition, construction or production activities are interrupted abnormally and the interruption lasts over three months.
17. Intangible assets
Intangible assets are stated in the balance sheet at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses ( see note II.20). For an intangible asset with finite useful life, its cost less residual value and impairment loss is amortised on the straight-line method over its estimated useful life, unless the intangible asset is classified as held for sale ( see note II.27).
The respective amortisation periods for such intangible assets are as follows:
Item
Amortisation periods (years)
Land use rights
40-50 years
Technology rights
9-20 years
Patent
5-10 years
Computer software
3-10 years
An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the period over which the asset is expected to generate economic benefits for the Group. At the balance sheet date, the Group doesn’t have any intangible assets with indefinite useful lives.51
Expenditures on an internal research and development project are classified into expenditures on the research phase and the development phase. Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products or processes before the start of commercial production or use.
Expenditures on the research phase are recognised in profit or loss when incurred. Expenditures on the development phase are capitalised if development costs can be measured reliably, the product or process is technically and commercially feasible, and the Group intends to and has sufficient resources to complete development. Capitalised development costs are stated at cost less impairment losses ( see note II.20). Other development expenditures are recognised as expenses in the period in which they are incurred.
18. Goodwill
Goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair value of the identifiable net assets of the acquiree under the business combination involving entities not under common control.
Goodwill is not amortised and is stated at cost less accumulated impairment losses (see note II.20). On disposal of an asset group or a set of asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal.
19. Long-term deferred expenses
Long-term deferred expenses are amortised on a straight-line method within the benefit period:
Item
Amortisation period (years)
Cost of operating lease assets improvement
3-10 years
Others
3-10 years
20. Impairment of assets other than inventories, financial assets and other long-term investments
The carrying amounts of the following assets are reviewed at each balance sheet date based on the internal and external sources of information to determine whether there is any indication of impairment:
. fixed assets
. construction in progress
. intangible assets
. investment property measured using a cost model
. long-term equity investments in subsidiaries, associates and jointly controlled entities
. goodwill
If any indication exists that an asset may be impaired, the recoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill at no later than each year-end, irrespective of whether there is any indication of impairment or not.52
Goodwill is allocated to each asset group or set of asset groups, which is expected to benefit from the synergies of the combination for the purpose of impairment testing.
The recoverable amount of an asset, asset group or set of asset groups is the higher of its fair value less costs to sell and its present value of expected future cash flows.53
An asset group is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups. An asset group is composed of assets directly relating to cash-generation. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash inflows from other assets or asset groups. In identifying an asset group, the Group also considers how management monitors the Group’s operations and how management makes decisions about continuing or disposing of the Group’s assets.
An asset’s fair value less costs to sell is the amount determined by the price of a sale agreement in an arm’s length transaction, less the costs that are directly attributable to the disposal of the asset. The present value of expected future cash flows of an asset is determined by discounting future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the result of the recoverable amount calculation indicates that the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss and charged to profit or loss for the current period. A provision for impairment loss of the asset is recognised accordingly. For impairment losses related to an asset group or a set of asset groups, first reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair value less costs to sell (if determinable), the present value of expected future cash flows (if determinable) and zero.
Once an impairment loss is recognised, it is not reversed in a subsequent period.
21. Provisions
A provision is recognised for an obligation related to a contingency if the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows.
22. Revenue recognition
Revenue is the gross inflow of economic benefit arising in the course of the Group’s ordinary activities when the inflows result in increase in shareholder’s equity, other than increase relating to contributions from shareholders. Revenue is recognised in profit or loss when it is probable that the economic benefits will flow to the Group, the revenue and costs can be measured reliably and the following respective conditions are met:
(1) Sale of goods
Revenue from sale of goods is recognised when all of the general conditions stated above and following conditions are satisfied:
. The significant risks and rewards of ownership of goods have been transferred to the buyer54
. The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.
Revenue from the sale of goods is measured at the fair value of the considerations received or receivable under the sales contract or agreement.
(2) Rendering of services
Revenue from rendering of services is measured at the fair value of the considerations received or receivable under the contract or agreement.
At the balance sheet date, where the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from the rendering of services is recognised in the income statement by reference to the stage of completion of the transaction based on the proportion of services performed to date to the total services to be performed.
Where the outcome of rendering of services cannot be estimated reliably, if the costs incurred are expected to be recoverable, revenues are recognised to the extent that the costs incurred that are expected to be recoverable, and an equivalent amount is charged to profit or loss as service cost; if the costs incurred are not expected to be recoverable, the costs incurred are recognised in profit or loss and no service revenue is recognised.
(3) Interest income
Interest income is recognised on a time proportion basis with reference to the principal outstanding and the applicable effective interest rate.
(4) Royalties from intangible assets
Royalty income from intangible assets is determined according to the period and method of charging as stipulated in the relevant contract or agreements.
23. Employee benefits
Employee benefits are all forms of consideration given and other relevant expenditures incurred in exchange for services rendered by employees. Except for termination benefits, employee benefits are recognised as a liability in the period in which the associated services are rendered by employees, with a corresponding increase in cost of relevant assets or expenses in the current period.
(1) Pension benefits
Pursuant to the relevant laws and regulations of the PRC, the Group has bought basic pension insurance for the employees, arranged by local Labour and Social Security Bureaus. The Group makes contributions to the pension insurance at the applicable rates based on the amounts stipulated by the government organization. The contributions are recognised as cost of assets or charged to profit or loss on an accrual basis. When employees retire, the local Labour and Social Security Bureaus are responsible for the payment of the basic pension benefits to the retired employees. The Group does not have any other obligations in this respect.
(2) Housing fund and other social insurances55
Besides the pension benefits, pursuant to the relevant laws and regulations of the PRC, the Group has provided defined social security contributions for employees, such as a housing fund, basic medical insurance, unemployment insurance, injury insurance and maternity insurance. The Group makes contributions to the housing fund and other social insurances mentioned above at the applicable rate(s) based on the employees’ salaries. The contributions are recognised as cost of assets or charged to profit or loss on an accrual basis.
(3) Termination benefits
When the Group terminates the employment relationship with employees before the employment contracts have expired, or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided, is recognised in profit or loss when both of the following conditions have been satisfied:
. The Group has a formal plan for the termination of employment or has made an offer to employees for voluntary redundancy, which will be implemented shortly.
. The Group is not allowed to withdraw from termination plan or redundancy offer unilaterally.
24. Government grants
Government grants are transfers of monetary assets or non-monetary assets from the government to the Group at no consideration except for the capital contribution from the government as an investor in the Group. Special funds such as investment grants allocated by the government, if clearly defined in official documents as part of “capital reserve” are dealt with as capital contributions, and not regarded as government grants.
A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions attaching to the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount that is received or receivable. If a government grant is in the form of a transfer of a non-monetary asset, it is measured at its fair value.
A government grant related to an asset is recognised initially as deferred income and amortised to profit or loss on a straight-line basis over the useful life of the asset. A grant that compensates the Group for expenses to be incurred in the subsequent periods is recognised initially as deferred income and recognised in profit or loss in the same periods in which the expenses are recognised. A grant that compensates the Group for expenses incurred is recognised in profit or loss immediately.
25. Deferred tax assets and liabilities
Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include the deductible losses and tax credits carrying forward to subsequent periods. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is not recognised for the temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither56
accounting profit nor taxable profit (or tax loss). Deferred tax is not recognised for taxable temporary differences arising from the initial recognition of goodwill.
At the balance sheet date, the amount of deferred tax recognised is measured based on the expected manner of recovery or settlement of the carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is recovered or the liability is settled in accordance with tax laws.
The carrying amount of a deferred tax asset is reviewed at each balance sheet date. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefit of the deferred tax asset to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.
At the balance sheet date, deferred tax assets and liabilities are offset if all the following conditions are met:
. the taxable entity has a legally enforceable right to set off current tax assets against current tax liabilities, and
. they relate to income taxes levied by the same tax authority on either, the same taxable entity, different taxable entities which either to intend to settle the current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
26. Operating and finance leases
A lease is classified as either a finance lease or an operating lease. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of a leased asset to the lessee, irrespective of whether the legal title to the asset is eventually transferred or not. An operating lease is a lease other than a finance lease.
(1) Operating lease charges
Rental payments under operating leases are recognised as costs or expenses on a straight-line basis over the lease term.
(2) Assets leased out under operating leases
Fixed assets leased out under operating leases, except for investment property (see note II.13), are depreciated in accordance with the Group’s depreciation policies described in Note II.14(2). Impairment losses are provided for in accordance with the accounting policy described in Note II.20. Income derived from operating leases is recognised in the income statement using the straight-line method over the lease term. If initial direct costs incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised in profit or loss over the lease term on the same basis as the lease income. Otherwise, the costs are charged to profit or loss immediately.
(3) Assets acquired under finance leases
When the Group acquires an asset under a finance lease, the asset is measured at an amount equal to the lower of its faire values and the present value of the minimum lease payments, each determined at the inception of the lease. The minimum lease payments57
are recorded as long-term payables. The difference between the value of the leased assets and the minimum lease payments is recognised as unrecognised finance charges. Initial direct costs that are attributable to a finance lease incurred by the Group are added to the amounts recognised for the leased asset. Depreciation and impairment losses are accounted for in accordance with the accounting policies described in Note II.14 (2) and II.20, respectively.
If there is reasonable certainty that the Group will obtain ownership of a leased asset at the end of the lease term, the leased asset is depreciated over its estimated useful life. Otherwise, the leased asset is depreciated over the shorter of the lease term and its estimated useful life.
Unrecognised finance charge under finance lease is amortised using an effective interest method over the lease term. The amortisation is accounted for in accordance with policies of borrowing costs (see note II.16).
At the balance sheet date, long-term payables arising from finance leases, net of the unrecognised finance charges, are presented into long-term payables and non-current liabilities due within one year, respectively in the balance sheet.
27. Assets held for sale
A non-current asset is classified as held for sale when the Group has made a decision and signed a non-cancellable agreement on the transfer of the asset with the transferee, and the transfer is expected to be completed within one year. Such non-current assets may be fixed assets, intangible assets, and investment property subsequently measured using the cost model, long-term equity investment etc. but not include deferred tax assets. Non-current assets held for sale are stated at the lower of carrying amount and net realisable value. Any excess of the carrying amount over the net realisable value is recognised as impairment loss. At balance sheet date, non-current assets held for sale are still presented under corresponding asset classification as they were.
28. Dividends appropriated to investors
Dividends or distributions of profits proposed in the profit appropriation plan which will be authorized and declared after the balance sheet date, are not recognised as a liability at the balance sheet date but disclosed in the notes separately.
29. Related parties
If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties are subject to common control, joint control, or significant influence from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Company is under common control only from the State and that have no other related party relationships are not regarded as related parties of the Group. Related parties of the Group and the Company include, but are not limited to:
(a) the Company’s parent
(b) the Company’s subsidiaries
(c) enterprises that are controlled by the Company’s parent
(d) investors that have joint control or over exercise significant influence over the Group58
(e) enterprise or individuals if a party has control, joint control or significant influence over both the enterprises or individuals and the Group
(f) joint ventures of the Group
(g) associates of the Group
(h) principal individual investors and close family members of such individuals
(i) key management personnel of the Group and close family members of such individuals
(j) key management personnel of the Company’s parent
(k) close family members of key management personnel of the Company’s parent; and
(l) other enterprises that are jointly controlled or significantly influenced by principal individual investors, key management personnel of the Group, and close family members of such individuals.
Besides the related parties stated above determined in accordance with the requirements of CAS, the following enterprises and individuals are considered as (but not restricted to) related parties based on the disclosure requirements of “Administrative Procedures on the Information Disclosures of Listed Companies” issued by the CSRC:
(m) enterprises, or persons that act in concert, that hold 5% or more of the Company’s shares
(n) individuals and close family members of such individuals who directly or indirectly hold 5% or more of the Company’s shares
(o) enterprises that satisfy any of the aforesaid conditions in (a), (c) and (m) during the past 12 months or will satisfy them within the next 12 months pursuant to a relevant agreement
(p) individuals who satisfy any of the aforesaid conditions in (i), (j) and (n) during the past 12 months or will satisfy them within the next 12 months pursuant to a relevant agreement
(q) enterprises, other than the Company and subsidiaries controlled by the Company, which are controlled directly or indirectly by an individual defined in (i), (j), (n) or (p), or in which such an individual assumes the position of a director or senior executive.
30. Segment reporting
Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internal organization, management requirements and internal reporting system. An operating segment is recognised when all of the following conditions have been satisfied:
. the component engages in business activities from which it may earn revenues and incur expenses;
. whose operating results are regularly reviewed by the Group’s management to make decisions about resource to be allocated to the segment and assess its performance; and
. for which financial information regarding financial position, results of operations and cash flows is available.
Two or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, and are similar in respect of the following conditions:
. the nature of products and services
. the nature of production processes
. the type or class of customers for the products and services
. the methods used to distribute the products or provide the services
. the nature of the regulatory environment
31. Significant accounting estimates and judgments59
The preparation of financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Information about the assumptions and their risk factors relating to impairment of goodwill and fair value of financial instruments. Other key sources of estimation uncertainty are as follows:
(1) Impairment of receivables
As described in Note II.10, receivables that are measured at amortisation cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. Objective evidence of impairment includes observable data that comes to the attention of the Group about loss events such as a significant decline in the estimated future cash flow of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. If there is an indication that there has been a change in the factors used to determine the provision for impairment, the impairment loss recognised in prior years is reversed.
(2) Impairment of other assets excluding inventories, financial assets and other long-term equity investments
As described in Note II.20, other assets excluding inventories, financial assets and other long-term equity investments are reviewed at each balance sheet date to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, impairment loss is provided.
The recoverable amount of an asset (asset group) is the greater of its net selling price and its present value of expected future cash flows. Since a market price of the asset (the asset group) cannot be obtained reliably, the fair value of the asset cannot be estimated reliably. In assessing value in use, significant judgements are exercised over the asset’s production, selling price, related operating expenses and discounting rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonable and supportable assumption.
(3) Depreciation and amortisation
As described in Notes II.13, 14, 17, investment property, fixed assets and intangible assets are depreciated and amortised using the straight-line method over their useful lives after taking into account residual value. The estimated useful lives are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The useful lives are determined based on historical experiences of similar assets and the estimated technical changes. If there is an indication that there has been a change in the factors used to determine the depreciation or amortisation, the amount of depreciation or amortisation is revised.
(4) Warranty provisions
The Group makes provisions under the warranties it gives on sale of its products taking into account the group’s recent claim experience. Any increase or decrease in the provision will affect profit or loss in future years.
(5) Pending implementation of the agreement60
The Group ceased to produce several products and stopped fulfilling the purchase contract related to production. Due to the indemnity incurred accordingly, the Group accrued provisions according to reasonable estimation of loss. As the amount of provision has uncertainty, the profit and loss will be affected if the estimation of the provision changes.
.Ⅲ Taxation
1. Main types of taxes and corresponding rates
Tax Name
Tax basis
Tax rate
VAT
Output VAT is calculated on product sales and taxable services revenue, based on tax laws. The remaining balance of output VAT, after subtracting the deductible input VAT of the period, is VAT payable.
13% or 17%
Business tax
Based on taxable revenue
5%
City maintenance and construction tax
Based on business tax paid and VAT payable
7%
Education surcharge
Based on business tax paid and VAT payable
3%
Land appreciation tax
Appreciation amount in transferring property and applicable tax rate
30%
Corporate income tax
Based on taxable profits
0-25%
2. Corporate income tax
The corporate income tax rate applicable to the Company for the year is 15% (2009: 15%).
According to the Corporate Income Tax Law of the People’s Republic of China (“new tax law”) treatment No.28, corporate income tax for key advanced and high-tech enterprises supported by the State shall be at a preferential tax rate of 15%.
According to State Council, Notice of the State Council on the Implementation of the Transitional Preferential Policies in respect of corporate Income Tax (Guofa (2007) No.39), certain entities previously taxed at a preferential rate are subject to a transition period during which their tax rate will gradually be increased to the unified rate of 25% over a five year period starting from 1 January 2008. The enterprises that previously enjoy “2-year exemption and 3-year 50% reduction”, “5-year exemption and 5 year 50% reduction” of the enterprise income tax may, after the implementation of the new tax law, continue to enjoy the relevant preferential treatments under the preferential measures and the time period prescribed in the former tax law, administrative regulations and relevant documents until the expiration of the said time period. However, if such an enterprise has not enjoyed the preferential treatments yet because of its failure to make profits, its preferential time period shall be calculated from 2008.
Pursuant to the Administration and Measures on the Recognition of High-tech Enterprises and the Guidelines for the Administration of the Recognition of High-tech Enterprises, the Company was recognised as a high-tech enterprise and obtained No. GR200811000615 High-tech Enterprise Certificate on 18 December 2008 after applied to and assessed by the experts of Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation. The Company is subject to corporate income tax rate of 15% since the date of certification with the valid period of three years.61
Pursuant to the new tax law, the income tax rate applicable to other subsidiaries of the Group is changed to 25% apart from the following subsidiaries.
The subsidiaries that are entitled to preferential tax treatments are as follows:
Preferential rate
Reason
Beijing BOE
Optoelectronics
Technology Co., Ltd.
15%
The Company obtained the certificate of high-tech enterprise numbered GR200811000214 on 28 December 2008, which was entitled jointly by Beijing Municipal Science & Economic Commission, Finance Bureau of Beijing, Beijing Municipal Office of State Administration of Taxation, and Beijing Local Taxation Bureau, subject to a preferential enterprise income tax rate of 15% within the valid period three years.
Suzhou BOE Chatani Electronics Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200832000180 jointly issued by Jiangsu Science and Technology Department, Jiangsu Provincial Financial Department, Jiangsu Provincial Office of State Administration of Taxation and Jiangsu Provincial Local Administration of Taxation on 24 September 2008. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
BOE (Hebei) Mobile Technology Co., Ltd.
11%
The foreign investment enterprise is exempted from income tax payment for its first and second year of making profits, and entitled to a 50% reduction of income tax from the third to the fifth year. Further pursuant to Notice of the State Council on the Implementation of the Transitional Preferential Policies in respect of corporate Income Tax, because the enterprise has not yet taken the benefit because of its failure to make profits, its preferential time period is calculated from 2008 and 2009 is the second entitlement year for exemption of enterprise income tax, 2010 is the first entitlement year for 50% reduction of enterprise income tax, the preferential corporate income tax rate is 22% in 2010, 2011 and 2012 is respectively the second and third entitlement year for 50% reduction of enterprise income tax respectively.
Beijing BOE Chatani Electronics Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200911000684 jointly issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 26 June 2009. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
Beijing BOE Vacuum Electronics Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200811000215 jointly issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 18 December 2008. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
Beijing BOE Special Display Technology Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200911000685 jointly issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 26 December 2009. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
BOE Semi-conduct
15%
Obtained High-tech Enterprises Certificate No GR200811001006 jointly issued by Beijing Municipal Science and Technology62
Preferential rate
or Co., Ltd.
Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 18 December 2008. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
Beijing Asahi Electron Glass Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200911000589 jointly issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 26 June 2009. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
Beijing BOE Vacuum Technology Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200911000084 jointly issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 27 May 2009. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.
BOE Hyundai LCD (Beijing) Display Technology Co., Ltd.
15%
Obtained High-tech Enterprises Certificate No GR200911002274 jointly issued by Beijing Municipal Science and Technology Commission, Beijing Municipal Financial Bureau, Beijing Municipal State Administration of Taxation and Beijing Municipal Local Administration of Taxation on 26 June 2009. Subject to a preferential enterprise income tax rate of 15% within the valid period of three years.63
IV. Business combinations and the consolidated financial statements
1、 Background of major subsidiaries
(1) Subsidiaries acquired through establishment or investment
Name
Type
Registration place
Business nature and scope
Registered capital
Closing amount of investment
Direct and indirect votingright percentage
Whether included in consolidated financial statements
Zhejiang BOE Display Technology Co., Ltd. (ZJBOE)
Company Limited
Shaoxing, China
Research, development, manufacture and sale of small size electronic display components, display module and related fittings; engaged
in import and export business
RMB
129,194,000
RMB
106,391,635
69.29%
Yes
Beijing BOE Vacuum Electronics Co., Ltd. (Vacuum Electronics)
Limited Liability Company
Beijing, China
Manufacture and sale of vacuum electronic products
RMB
35,000,000
RMB
19,250,000
55%
Yes
Beijing BOE Vacuum Technology Co., Ltd. (Vacuum Technology)
Limited Liability Company (Solely-owned by legal person)
Beijing, China
Manufacture and sale of vacuum products
RMB
32,000,000
RMB
32,000,000
100%
Yes
Beijing BOE Special Display Technology Co., Ltd. (Special Display)
Limited Liability Company (Solely-owned by legal person)
Beijing, China
Development of display products and sale of electronic products
RMB
60,000,000
RMB
60,000,000
100%
Yes
Beijing Yinghe Century Co., Ltd. (Yinghe Century)
Other Limited Liability Company
Beijing, China
Lease and operation of offices and middle grade hotel houses; business and entertainment service; toll parking lots
RMB
233,105,200
RMB
333,037,433
100%
Yes
Suzhou BOE Chatani Electronics Co., Ltd. (Suzhou Chatani)
Limited Liability Company (joint venture)
Suzhou, China
Development and manufacture of backlight and related parts and components for LCD
USD
8,552,000
RMB
53,087,904
75%
Yes
BOE Hyundai LCD (Beijing) Display Technology Co., Ltd. (BOE Hyundai)
Limited Liability Company (joint venture)
Beijing, China
Development, manufacture and sale of liquid display for mobile termination
USD
5,000,000
RMB
31,038,525
75%
Yes
Beijing BOE Optoelectronics Technology Co., Ltd. (BOEOT)
Limited Liability Company (joint venture)
Beijing, China
Research, development, design and manufacture of TFT-LCD
USD
649,110,000
RMB
4,172,288,085
82.49%
Yes
Beijing BOE Chatani Electronics Co., Ltd. (Beijing Chatani)
Limited Liability Company
Beijing, China
Manufacture of flat screen display products and related parts.
RMB
37,244,248
RMB
372,443
100%
Yes
BOE (Hebei) Mobile Technology Co., Ltd. (BOE Hebei)
Limited Liability Company (joint venture)
Langfang, China
Manufacture and sale of mobile flat screen display technical products and related services
USD
20,000,000
RMB
120,307,500
75%
Yes64
Name
Type
Registration place
Business nature and scope
Registered capital
Closing amount of investment
Direct and indirect votingright percentage
Whether included in consolidated financial statements
Beijing BOE Display Technology Co., Ltd. (BOE Display) (d)
Other Limited Liability Company
Beijing, China
Development of TFT-LCD, manufacture and sale of LCD
RMB
8,717,199,300
RMB
45,000,000
0.52%
Yes
Beijing BOE multimedia technology Co. Ltd. (Multimedia BOE)
Limited Liability Company (Solely-owned by legal person)
Beijing, China
Sale of computer software and hardware、the numeral regards the audio frequency technology
RMB
200,000,000
RMB
200,000,000
100%
Yes
Beijing BOE Energy Technology Co., Ltd. (BOE Energy)
Limited Liability Company (Solely-owned by legal person)
Beijing, China
Integration and application of photovoltaic system sale of photovoltaic system and ancillary facilities
RMB
29,000,000
RMB
29,000,000
100%
Yes
Beijing BOE Video Technology Co., Ltd. (BOE Video)
Limited Liability Company (Solely-owned by legal person)
Beijing, China
Manufacture of LCD TV, LCD; technology development of terminal products and systems such as TFT-LCD display and TV
RMB
200,000,000
RMB
200,000,000
100%
Yes
（a）In February 2010, the Company acquired 0.82% equity of Chengdu Industry Investment & Management Co., Ltd. and 0.52% equity of Chengdu Hi-tech Invstment Group Ltd., the minority shareholders of Chengdu BOE, with RMB 27.70 million. Hereto, the shares held by BOE in Chengdu BOE increased to 100% from 98.66%.
（b）Pursuant to the resolution of the 38th meeting of the BOD, the Company made integration to backlight business. In May 2010, the Company transferred its 100% equities of Xiamen BOE to Suzhou Chatani. Hereto Xiamen BOE became a wholly-owned subsidiary company of Suzhou Chatani. Beijing Chatani’s 1% equity held by the Company is still under integration.
（c） On 6 January 2009, the Company and Beijing Economic-Technological Investment & Development Co., Ltd (BETIDC) co-founded BOE Display, whose registered capital is RMB 50 million, of which the Company invested RMB 45 million contributions with a 90% share and BETIDC invested RMB 5 million contributions with a 10% share.
Pursuant to the agreement of injecting capital into BOE Display (the injection agreement) signed by the Company, BETIDC, Beijing International Trust Co., Ltd. (Beijing Trust) and Being E-TOWN International Investment & Development Co., Ltd.65
(E-TOWN International), the Company will increase capital to BOE Display in an amount of RMB 8.5 billion; BETIDC will give up pre-emptive rights; Beijing Trust will increase capital by RMB 8.5 billion; E-TOWN International will increase capital with land property (whose amount was temporarily calculated as RMB 167,199,300, but will be decided by the final investment; if the estimated value doesn’t reach the price above, E-TOWN International will provide the remainder with cash; if the estimated value is more than the price above, the project company will refund the rest of the investment). The injection is expected to be completed before 31 December 2010. When the injection is completed, the Company will hold 49.631% of the total equity, and Beijing Trust, BETIDC and E-TOWN International will hold 49.369%, 0.029% and 0.971% equity, respectively.
On 26 November 2009, pursuant to the capital injection agreement, Beijing Trust increased capital to BOE Display by RMB 3 billion, and the Company’s shareholding ratio decreased to 1.48%. Beijing Runfa Certified Public Accountants has verified the capital injection and issued the capital verification report RUNFAYAN (2009) No. 2006.
On 30 March 2010, Beijing International Trust Co., Ltd. invested in BOE Display with money of RMB 1.5 billion, on 12 April 2010, Being E-TOWN International Investment & Development Co., Ltd. invested in BOE Display with RMB 167.1993 million worth of land, on 10 June 2010, Beijing International Trust Co., Ltd. invested again in BOE Display with RMB 4 billion. Hereto, BOE Display’s registered capital reached to RMB 8,717,199,300. BOE holds 0.52% equity of BOE Display.
As at 30 June 2010, pursuant to the capital injection agreement and the Article of BOE Display, the Company has taken more than 50% of the board representation of BOE Display and thus has controlling rights, so BOE Display has been included in the consolidated financial statements.
（d）The company holds 1% equity of Beijing Chatani and holds the remaining 99% through its 75% shareholding subsidiary, Suzhou Chatani;
（2） Subsidiaries acquired through business combinations under common control
Name
Type
Registration place
Business nature and scope
Registered capital
Closing amount of investment
Direct and indirect voting right percentage
Whether included in consolidated financial statements
Chengdu BOE. Optoelectronics. Technology Co., Ltd. (Chengdu BOE.)
Other Limited Liability company
Chengdu,
China
Development manufacture and sale of TFT-LCD and related parts
RMB
1,830,000,000
RMB
1,833,149,991
100%
Yes
Beijing Asahi Electron Glass
Limited Liability
Beijing,
Sale of Supports and glass bar for TV and CTV low
RMB
RMB
100%
Yes66
Co., Ltd. (BeiAsahi Glass )
Company (Solely-owned by legal person)
China
melting sealing frit
61,576,840
30,888,470
Hefei BOE Optoelectronics Technology Co., Ltd.( Hefei BOE)
One-person Limited Liability Company
Hefei,
China
Development manufacture and sale of TFT-LCD
RMB
9,000,000,000
RMB
9,000,000,000
100%
Yes
Beijing·Matsushita Color CRT Co., Ltd.( Matsushita)
Other Limited Liability Company
Beijing,
China
Colored TV, cathode-ray tube of display, projection cathode ray tube of colored RPTV and materials of electronic parts， property management service.
RMB
1,240,754,049
RMB
361,304,288
80%
Yes
2、 Changes of the consolidation scope
（1） BOE Video is newly founded subsidiaries of the Company and has been included in the consolidated financial statements in 2010.V. Notes to the consolidated financial statements
1. Cash at bank and on hand
(1) Breakdown of cash at bank and on hand as at 30 June 2010:
The Group
As at 30 June 2010, the other monetary funds have been pledged by the Group amounting to RMB 2,764,376,229 for short-term loan amounting to RMB 34,200,000, USD 35,828,862 and JPY 28,652,112,523. The other monetary funds have been pledged by the Group amounting to RMB 26,684,209 for bank acceptance bills amounting to RMB 26,684,209. The other monetary funds amounting RMB 2,578,482,643 are the deposits in commercial banks as security (2008: RMB 345,421,418).
(2) Breakdown of cash at bank and on hand as at 30 June 2010:
The Company
67As at 30 June 2010, the other monetary funds have been pledged by the Company amounting to RMB 52,800,000 for short-term loan amounting to JPY 601,750,000. The other monetary funds amounting RMB 7,348,856 are the deposits in commercial banks as security.
2. Bills receivable
(1) Classification of bills receivable
The Group and the Company
All of the above bills are due within one year.
As at 30 June 2010, no bank acceptance bills were pledged by the Group. (2009: Nil). As at 30 June 2010, no bank acceptance bills were pledged by the Company. (2009: Nil).As at 30 June 2010, the Group’s outstanding endorsed and discounted bank acceptance bills (with recourse) amount to RMB 191,559,053 (2009: RMB 89,404,709), all of which will be due by 22 December 2010. The Company has no outstanding endorsed and discounted bank acceptance bills (with recourse).
During the year ended 30 June2010, there is no amount transferred to accounts receivable from acceptance bills due to non-performance of the issuers by the Group (2009: nil).
No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of bills receivable.
3. Accounts receivable
(1) The Group’s accounts receivable by currency type:
（2） The ageing analysis of accounts receivable is as follows:
The Group
The ageing is counted starting from the date accounts receivable is recognised.
As at 30 June 2010, receivables are assessed for impairment both on an individual basis and on a collective group basis. All impairment losses are recognized in loss, when its present value of the estimated future cash flows is less than the carrying amount.
69As at 30 June 2010, the accounts receivable that has been pledged by the Group are amounting to USD 10,088,053 and RMB 49,836,256 (2009: USD 23,119,968 and RMB 21,195,449) for short-term loans amounting to USD 10,184,934 and RMB 12,098,475 (2009: USD 18,571,164 and RMB 6,636,819) respectively.
（3） As at 30 June 2010, the total amount of accounts receivable due from the top five debtors of the Group are as follows:
（4） During the year ended 30 June 2010, the Group had no individually significant write-off or recovery of doubtful debts which had been fully or substantially provided for in prior years.
（5） The ageing analysis of accounts receivable is as follows:
The Company
The ageing is counted starting from the date accounts receivable is recognised.
As at 30 June 2010, receivables are assessed for impairment both on an individual basis and on a collective group basis. All impairment losses are recognized in loss, when its present value of the estimated future cash flows is less than the carrying amount.
（6） As at 30 June 2010, the total amount of accounts receivable due from the top five debtors of the Company are as follows:
704. Prepayments
(1) The Group’s prepayments by category:
(2) The ageing analysis of prepayments is as follows:
The Group
The ageing is counted starting from the date prepayments is recognised.
As at 30 June 2010, the Group’s prepayments with ageing more than one year are mainly prepayment in relation to the purchasing activities which has yet to be settled.
As at 30 June 2010, the Group has no prepayments due to related parties are (as at 31 December 2009: RMB 320,929).
（3） The Company’s prepayments by category:
（4） The ageing analysis of prepayments is as follows:
The Company
71The ageing is counted starting from the date prepayments is recognised.
As at 30 June 2010, the Company has no prepayments due to related parties are (as at 31 December 2009: RMB 3,516).
5. Interests receivable
（1）Analysis of the Group’s and the Company’s interests receivable are as follows:
As at 30 June 2010, no amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of interests receivable (2009: nil).
At 30 June 2010, no significant amount of interest receivable of the Group is denominated in foreign currency (2009: nil).
6. Dividends receivable
7. Other receivables
（1） The Group’s other receivables by currency type:（2） The ageing analysis of other receivables is as follows:
The Group
The ageing is counted starting from the date other receivable is recognised.
As at 30 June 2010, receivables are assessed for impairment both on an individual basis and on a collective group basis. All impairment losses are recognized in loss, when its present value of the estimated future cash flows is less than the carrying amount.
(3) As at 30 June 2010, the total amounts of other receivables due from the top five debtors of the Group are as follows:
(4) The ageing analysis of other receivables is as follows:
The CompanyThe ageing is counted starting from the date other receivable is recognised.
As at 30 June 2010, receivables are assessed for impairment both on an individual basis and on a collective group basis. All impairment losses are recognized in loss, when its present value of the estimated future cash flows is less than the carrying amount.
（5） As at 30 June 2010, the total amounts of other receivables due from the top five debtors of the Company are as follows:
8. Inventories
(1) Analysis of change in the Group’s inventories during the reporting period:
（2）Analysis of change in the Company’s inventories during the reporting period:As at 30 June 2010, the Group and the Company had no inventory used as collateral (2009: nil).
（3）Provision for diminution in value of inventories:
The Group
（4）Provision for diminution in value of inventories:
The Company
9. Other current assets（1）Analysis of the Group’s and the Company’s other current assets:
10. Available-for-sale financial assets
As at 30 June 2010, the available-for-sale financial asset held by the Group and the Company represented stock investment in TPV Technology Limited (“TPV Technology”) and Beijing C & W Technology Co., Ltd. (“C & W Technology”), which were measured at fair value at year end.
(1) TPV Technology is listed on the Stock Exchange of Hong Kong (Stock code: 0903). As at 30 June 2010, the fair value of the investment in TPV Technology held by the Group and the Company was HKD 113,518,490, which is equivalent to RMB 99,033,531 (2009: HKD 116,441,713, which is equivalent to RMB 102,524,600).
(2) C & W Technology is listed on the Shanghai Stock Exchange (Stock code: 600658). As at 30 June 2010, according to the closing price and discounted rate 35.6%, the fair value of share held by the Group and the Company amounting RMB 55,712,268 (2009: RMB 81,384,949). In February 2010, C & W Technology had renamed for Beijing Electric Zone Investment and Development Co., Ltd.
11. Held-to-maturity investments
The Group and the Company’s held-to-maturity investments represented the convertible bonds of Hyundai LCD Inc. (“Hyundai LCD”). Due to business operation difficulties, Hyundai LCD could not pay back the convertible bond. Thus, the Company provided full impairment losses for the convertible bond balances amounting to USD 2,170,000 (RMB 17,960,946) in 2005. 76(1) The Group’s long-term equity investments by category:
As at 30 June 2010, the Company had not received the equity nor interest, and the Group and the Company retained the previous provision since the recoverability of this claim is uncertain.
12. Long-term equity investment
7778
（2）The Group’s investments in subsidiaries are as follows:（3） The Group’s investments in associates are as follows:
（4） The Group’s investments in joint venture are as follows:
7980
（a）The Company owned 50% shares of Orient Heng Tong by subsidiary BOE Land Co., Ltd. (BOE land) which was owned by the Company for 70% shares.As at 30 June 2010, The Group's long-term equity investments are calculated under cost method. 81
（5）Other long-term equity investments of the Group are as follows:
During the year 2010, the investees above did not distribute cash dividends.13. Investment property
(1) The Group
（2）The Company
As at 30 June 2010, the Group collateralized the buildings in investment property with a carrying amount of RMB 271,009,317 (31 December 2009: RMB 72,096,910) and land use rights with a carrying amount of RMB 10,904,585 (31 December 2009: RMB 7,457,050) for short-term loans, long-term loans and non-current liabilities due within one year.
14. Fixed assets
82(1) The Group
As at 30 June 2010, the Group collateralized plants and buildings with carrying amounts of RMB 824,898,440 (2009: RMB 982,536,304), machinery equipment with carrying amounts of RMB 5,676,177,687 (2009: RMB 6,304,991,916) and other fixed assets with carrying amounts of RMB 98,235,732 (2009: nil) for short-term loans, non-current liabilities due within one year and long-term loans. As at 30 June 2010, there is no restriction placed on the ownership of fixed assets of the Company. (2008：nil).
The Group collateralized buildings with carrying amount of RMB 36,998,015 (2009: RMB 38,761,457) for the export Letter of credit with maximum amount of RMB 50 million.
（2）The Company
8315. Construction in progress
(1) The Group85
As at 30 June 2010, the Group mortgaged construction in process with carrying amount of RMB 3,419,243 (2009: 1,431,813) as security for long-term loans. As at 30 June 2010, there is no restriction placed on the ownership of construction in progress of the Company.（a）The Group has made provision of impairment loss amounting to RMB 21,628,995 for BOE Electronic workshop project.
(2) As at 30 June 2010, the group’s major construction projects in progress were set out as follows: 8616. Intangible assets
(1) The Group
(2) The Company
87(a) As at 30 June 2010, the Group collateralized land use rights in intangible assets with carrying amounts of RMB 30,080,596 (2009: RMB 41,483,803) as security for short-term loans, long-term loans and non-current liabilities due within one year. The Group collateralized land use right with carrying amounts of RMB 913,194 (2009: RMB 923,611) for the export Letter of credit with maximum amount of RMB 50 million. As at 30 June 2010, there is no restriction placed on the ownership of intangible assets of the Company.
(b) As at 31 December 2009, the carrying amounts of the Group’s and the Company’s intangible assets did not include capitalised borrowing cost (2009: nil).
17. Goodwill
18. Long-term deferred expenses
19. Deferred tax assets /deferred tax liabilities
(1) The Group’s deferred tax assets/deferred tax liabilities:
8820. Other non-current assets
(1) The Group's other non-current assets by category are as follows:
(2) As at 30 June 2010, the Group’s and the Company’s other non-current assets are mainly prepayment in relation to non-current assets.
21. Details of provisions for impairment
(1) The Group(2) The Company
22. Restricted assets
(1) The GroupPlease refer to the respective notes of the assets for reasons of restrictions on the assets.
(2) The Company
As at 30 June 2010, the margin deposit for security due from commercial bank was RMB 60,148,856 (see Note XI. 1 for details). In addition, there is no restriction placed on the ownership of assets of the Company.
23. Short-term loans
(1) The Group 91(2) The Company
(a) As at 30 June 2010, the secured short-term loans of ZJBOE and its subsidiaries, amounting to RMB 58,000,000, were guaranteed by Zhejiang Huanyu Construction Company Limited and Shaoxing JinbaoliTextile Dyeing and Printing Co., Ltd. The other guaranteed short-term loans were guaranteed by the entities within the Group.
(b) As at 30 June 2010, the Group’s short-term loans amounting to RMB 141,900,000 was collateralized by plants and buildings with a net value of RMB 76,659,290, investment property of RMB 2,953,234 and land use right of RMB 5,724,068.
(c) As at 30 June 2010, the Group’s short-term loans amounting to RMB 147,717,627 was collateralized by notes receivable of RMB 95,341,275, accounts receivablesof RMB 15,123,095 and Renminbi marginal deposit for security of RMB 41,337,887.
(d) As at 30 June 2010, the Group’s short-term loans amounting to JYE 28,652,112,523 was collateralized by Renminbi marginal deposit for security of RMB 2,502,932,714.
(e) As at 30 June 2010, the Group’s short-term loans amounting to USD 46,013,796 was collateralized by accounts receivable with a net value of USD 10,088,053 and RMB 34,713,161 and Renminbi marginal deposit for security of RMB 226,183,515.
(f) As at 30 June 2010, no amount due to shareholders who hold 5% or more of the voting rights of the Company was included in the above balance of short-term loans.
24. Bills payable
(1) The Group
The above bills are due within one year.
As at 30 June 2010, no amount due to shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of bills payable.
25. Accounts payable
(1) The Group’s accounts payable by currency are as follows:
93(2) The Company’s accounts payable by currency are as follows:
As at 30 June 2010, no amount due to shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of accounts payable.
As at 30 June 2010, the Group had no individually significant accounts payable ageing more than one year.
26. Employee benefits payable
(1) The GroupAs at 30 June 2010, no arrear is included in the above balance of employee benefits payable.
(2) The Company27. Taxes payable
(1) The Group and the Company:
28. Dividends payable
(1) The Group and the Company
As at 30 June 2010, dividends payable mainly represented the unclaimed dividends for non-public shareholders.
As at 30 June 2010, the Group had no individually significant dividends payable denominated in foreign currency.
29. Other payables
(1) The Group’s other payables are as follows: 96As at 30 June 2010, no amount due to shareholders who hold 5% or more of the voting rights of the Company was included in the balance of other payables.
(2) The Company’s other payables by currency are as follows:
As at 30 June 2010, the Company had no other payables in foreign currency.
As at 30 June 2010, no amount due to shareholders who hold 5% or more of the voting rights of the Company was included in the balance of other payables.
30. Non-current liabilities due within one year
(1) The Group(2) The Company
(a) Among the Group’s long-term loans due within one year, for details of collaterals amounting to RMB 40,200,000 and USD 3,000,000, please refer to Note V. 31.(b) No amount due to the shareholders who hold 5% or more of the voting rights of the Company was included in the above balance of loans due within one year.
As at 30 June 010, the information of the collateralized and guaranteed non-current liabilities due within one year refers to Note V. 32.
31. Other current liabilities
The provision for warranties mainly relates to the TFT-LCD products after-sales repair warranty to the customers. The provision is estimated by the Management, based on historical claim experience and current actual sales outcomes.
32. Long-term loans
(1) The Group 99(2) The Company
(a) As at 30 June 2010, the Group’s long-term bank loans, amounting to RMB 815,203,291 and USD 264,781,306, was collateralized by fixed assets with the net amount of RMB 4,258,848,902 and land use right of RMB 9,620,088.
(b) As at 30 June 2010, the Group’s long-term bank loans, amounting to RMB 565,000,000 and USD 147,000,000, and non-current liabilities due within one year, amounting to RMB 15,000,000 and USD 3,000,000, were collateralized by construction in progress with the book value of RMB 3,419,243 and land use right of RMB 14,736,440, as well as fixed assets of RMB 2,263,803,667.
(c) The entrust loans of the Group amounting to RMB 125,000,000 was provided by Beijing Economic Technological Development Area Branch of China Construction Bank Corporation and Economic Technological Development Area Branch of Bank of Beijing.
(d) As at 30 June 2010, the Group’s long-term bank loans, amounting to RMB 109,650,000, and non-current liabilities due within one year, amounting to RMB 25,200,000, was collateralized by investment property with the book value of RMB 278,960,668.
(e) As at 30 June 2010, the long-term bank loans with the amount of RMB 1,800,000 transferred from state bond was provided to ZJBOE by Shaoxing Municipal Government in 2003, with a maturity of ten years and bearing annual interest of 2.55%.
(f) As at 30 June 2010, no amount due to shareholders who hold 5% or more of the voting rights of the Company was included in the above balance of long-term loans.
33. Provisions
In 2009, the Group ceased producing several products and stopped fulfilling the purchase contract related to production. Due to the indemnity incurred accordingly, the Group accrued provisions according to reasonable estimation of loss. As the amount of provision has uncertainty, the profit and loss might be affected if the estimation of the provision changes.
34. Other non-current liabilities
100As at 31 December 2009 and 30 June 2010, the balance of non-current liabilities represents government grants received but not meet revenue recognition.
(1) The Group:
(i) The balance of R&D fees refers to the Group’s and the Company’s unfinished technical R&D fees.
(ii) The payment for plant construction refers to a financial support obtained by BOE Hebei.
(2) The Company
35. Share capital
(1) The structure of share capital as at 30 June 2010 is as follows:
10136. Capital reserve
(1) The Group
(2) The Company
(a) In other capital reserves, the available-for-sale financial assets arose from the change in the fair value of the equity interest in TPV Technology and Beijing C&W Technology.(b) Transfer from previous capital reserves arises from price differences of related party transactions in previous years.
(c) The other capital reserves arose from the difference between consideration of acquisition and the net assets acquired in the acquisition of Chengdu BOE.
37. Surplus reserve
(1) The Group
As at 30 June 2010, the Group is at accumulated losses, and it was not required to appropriate the statutory surplus reserve and discretionary surplus reserve.
38. Operating income
Operating income of the Group is from revenue for production and sales of TFT-LCD and other business. The relevant data has been listed, please refer to Note X (2).
39. Operating cost
Operating cost of the Group is from costs for production and sales of TFT-LCD and other business. The relevant data has been listed, please refer to Note X (2).
40. Financial expense
(1) The Group
41. Impairment losses
(1) The Group
103(2) The Company
42. Investment losses
(1) The Group’s and the Company’s investment (losses)/income by item
(2) (Losses)/ Income of long-term equity investments under equity method are as follows:(a) The Company’s income received from available-for-sale financial assets is mainly dividends from TPV technology in 2009 and 2010.
43. Non-operating income
(1) The Group’s and the Company’s non-operating income by item is as follows:
44. Non-operating expenses
(1) The Group’s and the Company’s non-operating expense is as follows:
45. Other comprehensive income
(1) The Group 10546. Notes to cash flow statement
(1) Supplement to cash flow statement
(2) Net increase/(decrease) in cash and cash equivalents(3) Details of cash and cash equivalentsⅥ. Related party relationships and transactions
1、 Parent of the Company
2、 For information on the Company’s subsidiaries, refer to Note IV. 1
3、 For information on the Company’s associates, refer to Note V. 11 (3)
4、 Other related parties other than key management personnel
Name of other related parties
Related party relationship
Beijing State-owned Assets Management Co., Ltd. (“BSOAMC”)
Investors that exercise significant influence over the Group
Being E-TOWN International Investment & Development Co., Ltd.
Enterprise that holds over 5% equity of the Company
Beijing Sevenstar Huasheng Electronics&Machinery Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Sevenstar Front Electronics Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Sevenstar-hitech Electronics Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Sevenstar Electronics Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Sevenstar Flight Electronics Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Jile Electronics Group Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing BBEF Science Technology Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Zhengdong Electronic Power Group Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Orient Electronics Material Corp.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Dongdian Industrial Development Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Beijing Jiuxin Property Management Co., Ltd.
Enterprises that are controlled by the Company’s ultimate holding company
Nissin
Associates
Nittan
Associates
5、 Transaction amounts with the related parties: 108(1) The Group’s and the Company’s transactions with related parties were conducted under normal commercial terms or relevant agreements, as follows:
6、 The balances of transactions with related parties as at 30 June 2010 are set out as follows:
(1) The Group and the Company:
Ⅶ. Contingencies
1. Outstanding litigations and arbitration
The Group is a defendant in certain lawsuits as well as the plaintiff in other proceedings arising in the ordinary course of business. Although the outcomes of such contingencies, lawsuits or other proceedings cannot be determined at present, management believes that any resulting liabilities will not have a material adverse impact on the financial position or operating results of the Group.
109
2. Guarantees provided for other entities(1) The Group’s guarantees provided for external entities
As at 30 June 2010, pursuant to the guarantee agreements, a Group subsidiary, ZJBOE, provided a maximum guarantee of RMB 40,000,000 (31 December 2009: RMB 40,000,000) to Zhejiang Huanyu Construction Co., Ltd. and the actual balance of the security loan was RMB 10,000,000 (31 December 2009: RMB 20,000,000) as at 30 June 2010. ZJBOE provided a maximum guarantee of RMB 15,000,000 (31 December 2009: RMB 10,000,000) to Shaoxing Huijin Vehicle Sales Service Co., Ltd. with equivalent balance of the security loan, with the latest expiration month in November 2010. pursuant to the guarantee agreements, ZJBOE provided a maximum guarantee of RMB 5,000,000 (31 December 2009: nil) to Shaoxing Huifeng Vehicle Sales Service Co., Ltd. with equivalent balance of the security loan, with the latest expiration month in September 2010.
(2) Guarantees provided for internal entities
As at 30 June 2010, the Company provides maximum guarantees for loans amounting to RMB 45,000,000 (31 December 2009: RMB 47,000,000), which was borrowed by its subsidiaries ZJBOE, and the actual balance of security loan was RMB 40,400,000 (31 December 2009: RMB 45,000,000) as at 30 June 2010, with the latest expiration month in March 2011. Furthermore, the Company provided guarantee for the long-term loans which were borrowed by a subsidiary of the Company, BOEOT. Pursuant to the guarantee agreement, as at 30 June 2010, the guarantee amount actually provided by the Company is RMB 2,613,306,663 (31 December 2009: 2,692,183,600).
As at 30 June 2010, ZJBOE provided guarantee for a loan of RMB 2,8000,000 (31 December 2009: RMB 2,8000,000) which was borrowed by a subsidiary of ZJBOE, Shaoxing BOE Shangye Electronic Devices Co., Ltd.
VIII. Commitments
1. Capital commitments
(1) The Group and the Company:
2. Operating lease commitments
110(1) The Group and the Company
IX. Post balance sheet events
1. On 21 July 2010, the Company held the 2nd extraordinary shareholders’ general meeting for 2010, at which the Proposal on Adjusting Scheme concerning Private Offering of A Shares and the Proposal on Signing the Supplemental Agreement of Subscription Agreement on Private Offering of A Shares of BOE between the Company and E-Town Investment were examined and approved, adjusting some contents related to the number of share offered and offering base price and etc. in the Scheme concerning Private Offering of A Shares.
2. On 23 March 2010, the Company held its 38th meeting of the 5th Board of Directors, at which the Proposal on Making Integratoin to Backlight Business was examined and approved, and the Company intended to increase capital of RMB 140 million to Suzhou BOE Chatani Electronics Co., Ltd. (hereinafter referred to as “Suzhou BOE”) for the integration of backlight business, and obtained the renewed the business license as legal person with QDJZ Zi No. XXX issued by Beijing Municipal Administrative Bureau of Industry and Commerce on X August 2010. Subsequent to increase of capital, Suzhou BOE’s registered capital increased to RMB 186,485,134, at the same time, the Company holds 90.51% equities of Suzhou BOE.
3. On 15 March 2010, the Assets Purchse Agreement was singed between the Company and JEAN Co., Ltd. (hereinafter referred to as JEAN), in which the Company would merger the businesses such as computer monitors and TV and relevant assets through its subsidiary. Pursuant to arrangement on merger transaction, the Company had to submit an application that the Company would set up a wholly-owned subsidiary for purchasing JEAN’s businesses relating to computer monitors and TV in Taiwan to Investment Commission, MOEA. At present, the Company had received an official correspondence with JSS Zi. No. 09920611700 from Investment Commission, MOEA, in which the Company’s application was approved. Up till now, the said merger had been approved by the National Development and Reform Commission, the department in charge of business of Beijing Municipality and Investment Commission, MOEA. The Company has yet to handle such procedures as registration of incorporation of Taiwan
111112
subsidiary and the examination and approval of equity transfer of Gaochuang (Suzhou) Electronics Co., Ltd.113
Ⅹ. Other significant events
1、 Segment reporting
(1) Segment reporting considerations
The Group management reviews the operation performance and allocates resources according to the business segments below.
(a) TFT-LCD Business for IT and TV products-The products are mainly used for display, laptop and LCD.
(b) TFT-LCD Business for Mobile and Application products–The products are mainly used for mobile electronic products.
(c) Others- Except the aforesaid business, the others include backlight products business, display system and solution business, other display components and parts and international business park.
The main reason to separate the segments is that the Group independently manages the TFT-LCD Business for IT and TV products, TFT-LCD Business for Mobile and Application products and other businesses. Because the business segments manufacture and distribute different products, apply different manufacturing processes and specifies in gross profit, the business segments are managed independently.
The management evaluates the performance and allocates resources according to the profit of each business segment and does not take financing cost and investment income into account. The accounting policy applicable to each segment is the same as the significant accounting policy (Notes II) stated.114
（2） Primary segment reporting (business segments)（3） Secondary segment reporting (geographical segments)
(i) Divided based on the location at which the services were provided or the goods delivered.
The information of the Group's external transactions is as follows
2、 Risk analysis, sensitivity analysis, and determination of fair values for financial instruments
The Group has exposure to the following risks from its use of financial instruments:
?Interest rate risk
?Foreign currency risk
This note presents information about the Group’s exposure to each of the above risks and their sources, the Group’s objectives, policies and processes for measuring and managing risks, etc.
The Group’s risk management policies are established to identify and analyse the risks Group faces, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The internal audit of the Group undertakes both regular and random reviews of risk management controls and procedures.
(1) Interest rate risk
The Group interest rate policy is that change risk in interest rates on borrowings is controlled within the reasonable scope. The Group had established appropriate fixed and floating interest rate risk combination for the purpose of being in line with the Group interest rate policy.
(a) As at 30 June 2010, the Group and the Company held the following interest-bearing financial instruments:
115Fixed rate of financial instrument
Floating rate of financial instrument:
（b）Sensitivity analysis:
As at 30 June 2010, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would decrease/increase the Group’s net profit and equity by RMB 28,780,000.
As at 30 June 2010, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would decrease/increase the Company’s net profit and equity by RMB 200,000.
The sensitivity analysis above assumes that the change in interest rates at the balance sheet date have been applied to all derivative instruments and non-derivative financial instrument of the Group. The change of 100 basis points results from the rational expectation of change in interest rates of the Group during 1 Jan. 2010 to 31 Dec. 2010.
116(2) Foreign currency risk
In respect of accounts receivable and payables denominated in foreign currencies other than the functional currency, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
(a) The Group’s exposure as at 31 December to currency risk arising from recognised assets or liabilities denominated in foreign currencies is given in the table below.
The Group:
The Company:
（b）The applicable foreign currency risk of the Group and the Company is as follows:
（c）Sensitivity analysis
A 0.05 percent strengthening of the renminbi against the US dollar, Korean Won and JPD at 30 June 2010 would have increased/ (decreased) equity and net profit by the amount shown below： 117Assuming all other risk variables remained constant, a 0.05 percent depreciation of the renminbi against the USD, Korean Won and JPD at 30 June 2010 would have increased/ (decreased) equity and net profit by the opposite amount shown above.
The sensitivity analysis above assumes that the change in interests rates at 30 June 2010 have been applied to all derivative instruments and non-derivative financial instrument of the Group. The change of 0.05 percent results from the rational expectation of change in foreign exchange rates during 30 Jun. 2010 to 31 Dec. 2010. The analysis is performed on the same basis for 2009.Supplements
1、 Details of extraordinary gain and loss in the first half of 2010
Notes: The extraordinary gains and losses above are before-tax values.
2、 Earnings per share and return on net assets
（1）Basic earnings/ (losses) per share and diluted earnings/ (losses) per share
Basic earnings per share is calculated by dividing consolidated net profit or loss of the Company attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding; diluted earnings per share is calculated by dividing adjusted consolidated net profit or loss of the Company attributable to ordinary shareholders by the adjusted weighted average number of ordinary shares outstanding:
The Group does not have any potential dilutive ordinary shares among the shares stated above.
（2）Calculation of weighted average number of the Company’s ordinary shares:
1（3）The Group’s return on net assets:
In accordance with “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares No. 9 - Calculation and Disclosure of the Return on Net Assets and Earnings Per Share” (2010 revised) issued by the CSRC, the Group’s return on net assets and earning per share are calculated as follows:
