English Translation for Reference Only
BOE TECHNOLOGY GROUP CO., LTD.
SEMI-ANNUAL REPORT 2011
(Full Text)
August 2011
1
English Translation for Reference Only
Contents
Section I Important Notice...…......................................................................................... 03
Section II Company Profile……………………………………………………......……. 04
Section III
Changes in Share Capital and Particulars about Shares Held by Major Shareholders
……………………………………………………………………………………………07
Section IV Particulars about Directors, Supervisors and Senior Executives…….............11
Section V Report of the Board of Director…………………………………………........12
Section VI Significant Events………………………………………………………........25
Section VII Financial Report (has not been audited) ………………………………........33
Section VIII Documents Available for Reference………………………………………. 34
2
English Translation for Reference Only
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.
All the directors have attended the Board meeting.
The Chairman of the Board Mr. Wang Dongsheng, the President 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.
3
English Translation for Reference Only
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: 23 Jun. 2011
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
4
English Translation for Reference Only
II. Main financial data and indices
1. Main accounting data and financial indices
Unit: RMB Yuan
Increase/decrease
At the end of At the end of
Item compared with the end
reporting period last year
of last year (%)
Total assets 63,752,747,065 54,229,952,769 17.56%
Shareholder’s equity of listed
23,718,541,750 24,955,013,046 -4.95%
companies
Share Capital 13,521,542,341 11,267,951,951 20.00%
Net asset per share attributable to
shareholder of listed companies 1.75 2.21 -20.81%
(yuan/share)
In the reporting period The same period of Increase/decrease
Item
(Jan-Jun 2011) last year year-on-year (%)
Operating income 4,940,033,997 4,186,429,883 18.00%
Operating profit -1,394,938,605 -627,515,770 -122.30%
Total profit -1,329,248,016 -602,694,520 -120.55%
Net profit attributable to shareholder
-1,215,484,477 -540,706,227 -124.80%
of listed companies
Net profit attributable to shareholder
of listed companies deducting -1,272,107,385 -560,272,988 -127.05%
non-recurring gains and losses
Basic earnings per share
-0.090 -0.065 -38.46%
(yuan/share)
Diluted earnings per share
-0.90 -0.065 -38.46%
(yuan/share)
Weighted return on equity (%) -4.99% -3.05% -1.94%
Weighted average return on equity
deducting non-recurring gains and -5.23% -3.16% -2.07%
losses (%)
Net cash flow generating from the
-614,189,947 3,312,176 --18,643.40%
operating activities
Net cash flow per share generating
from the operating activities -0.05 -0.0003 -16,566.67%
(yuan/share)
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.
2. Items of non-recurring gains and losses
Unit: RMB Yuan
Items of non-recurring gains and losses Amount
Gains and losses from disposal of the non-current assets 10,460,991
Government subsidy recognized in gains and losses of current period, excluding
government subsidies with close relationship to the Company’s normal business,
43,299,784
in line with government policies and granted with fixed amount or quantity
according to certain standards
Impairment reserves reversal of account receivables individually taking the 3,000
5
English Translation for Reference Only
impairment tests
Gains/losses on fair value changes of transactional financial assets and liabilities,
as well as investment gains on disposing transactional financial assets and
-8,670,137
liabilities and available-for-sale financial assets, excluding the valid hedging
business related to the Company’s normal operation
Other non-operating income and expenses except the above 11,929,814
Impact on income tax -116,181
Impact on minority interest -284,363
Total 56,622,908
3. There was no difference between the financial statements prepared in line with PRC
GAAP when compared with the financial statement prepared in line with IFRS.
Unit: RMB Yuan
Net profit attributable to parent
Net assets attributable to parent company
company
Item
The same period of
Current period Current period Last period
last year
IFRS -1,215,484,477 -540,706,227 23,718,541,750 24,955,013,046
PRC GAAP -1,215,484,477 -540,706,227 23,718,541,750 24,955,013,046
Explanation on
None
difference
6
English Translation for Reference Only
Section 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 Increase/ decrease After the change
Items
Amount Proportion (+, -) (Note) Amount Proportion
I. Shares
subject to
4,235,114,922 37.59% 847,022,984 5,082,137,906 37.59%
trading
moratorium
1. Shares held
330,000,000 2.93% 66,000,000 396,000,000 2.93%
by the State
2. Shares held
by state-owned 3,305,049,504 29.33% 661,009,901 3,966,059,405 29.33%
corporation
3. Shares held
by other
600,000,000 5.33% 120,000,000 720,000,000 5.33%
domestic
investors
Including:
Shares held by
domestic 600,000,000 5.33% 120,000,000 720,000,000 5.33%
non-stated
corporation
Shares held by
domestic 0 0.00% 0 0 0.00%
natural person
4. Shares held
by foreign 0 0.00% 0 0 0.00%
investors
Including:
Shares held by
0 0.00% 0 0 0.00%
foreign
corporation
Shares held by
foreign natural 0 0.00% 0 0 0.00%
person
5. Shares held
by senior 65,418 0.00% 13,083 78,501 0.00%
executives
II. Shares not
subject to
7,032,837,029 62.41% 1,406,567,406 8,439,404,435 62.41%
trading
moratorium
1. RMB
ordinary 5,917,287,029 52.51% 1,183,457,406 7,100,744,435 52.51%
shares
2.
Domestically
1,115,550,000 9.90% 223,110,000 1,338,660,000 9.90%
listed foreign
shares
7
English Translation for Reference Only
3. Overseas
listed foreign 0 0.00% 0 0 0.00%
shares
4. Other 0 0.00% 0.00%
III. Total
11,267,951,951 100.00% 2,253,590,390 13,521,542,341 100.00%
shares
Note: During the reporting period, Shareholders’ General Meeting for Y2010 of the Company reviewed
and approved Pre-plan on Profit Distribution and Capitalization of Capital Reserve, that is, the Company
distributed additional two shares for every ten shares held by shareholders of A shares and shareholders of
B shares with capital reserve, of which based on total shares of 11,267,951,951 shares at 31 Dec. 2010.
Now the preplan has been conducted and completed.
II. Total number of shareholders
As to 30 Jun. 2011, shareholders of the Company amounted to 431,560 of which number of
shareholders of A shares takes up to 391,445 while 40,115 of B-share.
III. Particulars of shares held by the top ten shareholders as at 30 Jun. 2011 were as
follows:
Units: share
Total number of
431,560 (including 391,445 A-share holders and 40,115 B-share holders)
shareholders
Particulars about shares held by the top ten shareholders
Shares subject
Total number Shares
Nature of Shareholding to trading
Name of shareholder of pledged or
shareholder percentage moratorium
shares held frozen
held
BEIJING E-TOWN
INTERNATIONAL State-owned
9.57% 1,294,059,406 594,059,405 647,029,502
INVESTMENT & Corporation
DEVELOPMENT CO., LTD
BEIJING BOE INVESTMENT State-owned
6.37% 860,981,080 0 0
& DEVELOPMENT CO., LTD. Corporation
BEIJING
ECONOMIC-TECHNOLOGIC State-owned
6.27% 847,650,000 840,000,000 0
AL INVESTMENT & Corporation
DEVELOPMENT CORP.
HEFEI RONGKE PROJECT State-owned
5.86% 792,000,000 792,000,000 0
INVESTMENT CO., LTD. Corporation
HEFEI LAN KE State-owned
5.55% 750,000,000 750,000,000 0
INVESTMENT CO., LTD. Corporation
HEFEI XINCHENG
State-owned
STATE-OWNED ASSETS 5.55% 750,000,000 750,000,000 0
Corporation
MANAGEMENT CO., LTD
BEIJING JIAHUI DEXIN Domestic
INVESTMENT CENTER general 4.44% 600,000,000 600,000,000 600,000,000
(LIMITED PARTNERSHIP) corporation
BEIJING INDUSTRY
DEVELOPMENT &
The state 3.27% 442,016,711 396,000,000 0
INVESTMENT
MANAGEMENT CO., LTD.
BEIJING ELECTRONICS
The state 2.04% 275,303,883 0 168,418,605
HOLDING CO., LTD
8
English Translation for Reference Only
Domestic
KE XIPING natural 1.98% 267,900,000 0 252,000,000
person
Particulars of shares held by the top ten shareholders not subject to trading restrictions
Number of shares not subject to
Name of the shareholders Type of shares
trading restrictions held
BEIJING BOE INVESTMENT &
860,981,080 A shares
DEVELOPMENT CO., LTD.
BEIJING E-TOWN INTERNATIONAL
INVESTMENT & DEVELOPMENT 700,000,001 A shares
CO., LTD
BEIJING ELECTRONICS HOLDING
275,303,883 A shares
CO., LTD
KE XIPING 267,900,000 A shares
HUITAI SECURITIES CO., LTD. 68,382,601 A shares
BEIJING ZHISHUAI INVESTMENT
66,579,642 A shares
CONSULTING CO., LTD
BEIJING INDUSTRY DEVELOPMENT
& INVESTMENT MANAGEMENT CO., 46,016,711 A shares
LTD.
FIELDS PACIFIC LIMITED 43,781,561 B shares
HUANG YINGBIN 43,157,394 B shares
CHENGDU HI-TECH INVESTMENT
40,765,635 A shares
GROUP LTD.
1. Beijing Electronics Holdings Corporation holds 66.25% shares of Beijing
BOE Investment & Development Co., Ltd. and is its controlling shareholder.
2. When the Company completed private offering of shares in 2010, Beijing
E-TOWN International Investment & Development Co., Ltd. transferred all
shares directly held to Beijing BOE Investment & Development Co., Ltd. for
Explanation on associated
management, then BOE Investment acquired the attached rights of the shares
relationship among the top
attributable to other shareholders in accordance with current effective laws
ten shareholders or
and rules, excluding right of disposition such as transfer, donation, mortgage
action-in-concert
etc. and usufruct (including claim for profit distribution and claim for
retained assets distribution).
3. Except for relationship among the above shareholders, the Company is not
aware of whether there is any associated relationship or not among top ten
shareholders holding shares not subject to trading moratorium.
IV. Particulars regarding on the controlling shareholder and the actual controller
1. At the end of reporting period, Beijing BOE Investment & Development Co., Ltd is still
the actual 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 end of the reporting period, particulars of shares that held by shareholders are subject
to the trading restrictions and the specific conditions were described as below:
9
English Translation for Reference Only
Unit: Share
Number of
Number of shares
Name of shareholders Date to be additional
subject to trading Trading Restrictions
subject to moratorium listed marketable
restrictions
shares
Shares shall not be
HEFEI XINCHENG After T1+36
750,000,000 750,000,000 transferred within 36
STATE-OWNED ASSETS months
months since T1
Shares shall not be
HEFEI LAN KE After T1+36
750,000,000 750,000,000 transferred within 36
INVESTMENT CO., LTD months
months since T1
Beijing E-Town Shares shall not be
After T2+36
International Investment & 594,059,405 594,059,405 transferred within 36
months
Development Co., Ltd months since T2
Shares shall not be
Southwest Securities After T2+12
240,000,000 240,000,000 transferred within 12
Company Ltd. months
months since T2
Shares shall not be
Sinotrans Air Transportation After T2+12
120,000,000 120,000,000 transferred within 12
Development Co., Ltd. months
months since T2
Beijing Jiahui Dexin Shares shall not be
After T2+12
Investment Center (limited 600,000,000 600,000,000 transferred within 12
months
partnership) months since T2
Beijing Industry Shares shall not be
After T2+12
Development & Investment 396,000,000 396,000,000 transferred within 12
months
Management Co., Ltd. months since T2
Beijing Shares shall not be
After T2+12
Economic-Technological 840,000,000 840,000,000 transferred within 12
months
Investment & Development months since T2
Corp. Shares shall not be
Hefei Rongke Project After T2+12
792,000,000 792,000,000 transferred within 12
Investment Co., Ltd. months
months since T2
Note: 1. T1 refers to the date when the A-shares privately issued for the year 2009 were listed for trading in
Shenzhen Stock Exchange, that is 10 Jun. 2009.
2. T2 refers to the date when the A-shares privately issued for the year 2010 were listed for trading in
Shenzhen Stock Exchange, that is 13 Dec. 2010.
10
English Translation for Reference Only
Section IV. Particulars about Directors, Supervisors and Senior Executives
I. Particulars about shares held by directors, supervisors and senior executives
Number of shares Number of shares
No. Name Office title held at the held at the
period-begin(share) period-end (share)
Chairman of the Board,
Wang Director of
1 Dongsheng Executive Committee 24,921 29,905
Liang
2 Xinqing Vice Chairman of the Board 9,969 11,963
Executive Director,
3 Han Guojian Executive Vice President 9,968 11,962
Mu
4 Chengyuan Supervisor 2,492 2,991
5 Song Ying Vice President 24,921 29,905
Wang
6 Yanjun Vice President, 9,968 11,962
7 Sun Yun CFO, Senior Vice president 4,984 5,981
Total - - 87,223 104,669
Note: In the reporting period, Shareholders’ General Meeting for Y2010 of the Company reviewed and
approved Pre-plan on Profit Distribution and Capitalization of Capital Reserve，that is, the Company
distributed additional two shares for every ten shares held by shareholders of A shares and shareholders of
B shares with capital reserve, of which based on total shares of 11,267,951,951 shares at 31 Dec. 2010.
Now the preplan has been conducted and completed that shares of the Company held by directors,
supervisors and senior executives listed above increased accordingly.
In the reporting period, other directors, supervisors and senior executives of the Company
didn’t hold shares 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.
In the reporting period, Mr. Su Zhiwen no longer took post of Chief Risk Control Officer and
Chief Auditor of the Company due to other engagement. With review and approval of the
Eighth Session of the Sixth Board of Directors, the Company decided to engage Mr. Xie
Zhongdong as Chief Risk Control Officer and Chief Auditor of the Company. Mr. Xie
Zhongdong’s work term is from the approval of the proposal on this Board meeting to the
expiration of the term of the Sixth Board of Directors.
11
English Translation for Reference Only
Section V Report of the Board of Directors
I. Operation of the Company
(1) Business review for the reporting period
Judging from the overall situation of the industry, weakness continued from the year 2010 to
the first half of this year in the industry and markets. Market growth was not as good as
expected and product prices struggled to rebound. As advanced lines continued to be put into
use in China Mainland, it became the spotlight of the global panel industry, signaling the start
of a new round of fierce competition. The market environment for LCD makers was
extremely harsh. In view of the external environment, this year marked the kick-off year for
the country’s twelfth five-year plan for economic and social development. With help from the
government’s industrial development strategy of ―means transformation and restructuring‖, as
well as the generally favorable macro-policies, the Company was given new development
opportunities to optimize its business layout, expand its scale and increase its competitiveness
over products and technologies. In view of the internal environment, with the twelfth
five-year strategic plan and the business goals for 2011 as the guidance, the Company
thoroughly carried out the SOPIC (Strategy, Organization, Process, IT and Control) project,
increasing its product competitiveness and production line profitability through centralization,
specialization, process standardization and delicacy management so as to pave the way for
the Company’s further development.
1. Accomplishment of major business indexes
With the weakening market and the fast-growing competitors, the Company was under a
great deal of pressure from the Beijing 5G production line’s small-sized transformation, the
accelerating Hefei 6G production line, the operation of the Beijing 8G line and sharp increase
of staff, growing input for products and technologies, etc.. For the first half of 2011, the
Company achieved operating revenues about RMB 4.90 billion, up 18% from a year earlier.
In the past more than three years, the Company designed, constructed and successfully
operated the Chengdu 4.5G line, the Hefei 6G line and the Beijing 8G line. It was expected
that upon the mass production of the 8G line, the production capacity of the Company would
rank No. 6 worldwide, narrowing the gap between the Company and the top manufacturers
step by step. Along with the production line expansion, the Company increased its input for
technical innovation, established a sound technical innovation system, set up the 2.5G
12
English Translation for Reference Only
experimental line to support R&D, and accumulated lots of experiences and talents in
products and technologies, production techniques and new display technologies. In the first
half of the year, the Company carried out 51 new technology development projects and
accomplished 14 of them. Meanwhile, it applied for 521 patents, and took charge of/took part
in revising/formulating display technical norms for 20 times. Its ability of technical
innovation was recognized in the sector. And its core technology—ADSDS (ADS for
short)—was well received among big names. In the reporting period, the Company greatly
increased its capital scale while enhancing its ability to resist risks. As at 30 Jun. 2011, total
assets of the Company reached RMB 63.75 billion, and owners’ equity amounted to RMB
32.93 billion. Despite investments in quite a few production lines at the same time, the
Company still managed to keep its asset-liability ratio under the safe level. Meanwhile, those
core projects boosted the supporting industries in the upstream and downstream, stimulating
development of the domestic semi-conductive material and precision device industry. All
these laid a solid foundation for the future integration development and the long-term stable
profit strategy of the Company.
Performance of specific business units:
(1) TFT-LCD
After the launch of the SOPIC project, the Company enhanced its management over the main
business of TFT-LCD and allocated resources in a unified manner. COO organization
organized and coordinated equipment purchase, production, sale, operating planning and
production development and management in the TFT business while other departments
worked with COO organization with high efficiency, so as to give full play to the competitive
edge of professional and centralized management.
Global manufacturing: For the first half of the year, the Company focused on the 5G line’s
small-sized transformation, the implementation of the added value strategy, production
transformation, and acceleration of the 6G line, yield rate increase and launch of new
products, which all produced good results. Firstly, in terms of improving the product structure,
eight small-sized products were introduced for the 5G line to enrich the product range, and
the coordination and cooperation between the 5G line and the mobile and application
business was enhanced in products and production lines. Meanwhile, 17 new products were
also rapidly introduced for the 6G line. Secondly, in terms of production capacity expansion,
the production of small-sized basic panels of the 5G line increased steadily. The production
13
English Translation for Reference Only
capacity expansion of the 6G line was accomplished three months ahead of the schedule.
Thirdly, the comprehensive yield rate of the 6G line increased quickly. Currently, the average
yield rate is over 95% and remains stable. Finally, the Company thoroughly carried out the
SOPIC spirit, strengthened delicacy management and took lots of measures to reduce costs.
Global marketing: In application and tablet products, the Company actively expanded new
markets and new clients, making itself one of the few panel suppliers in the new and
fast-growing tablet sector and creating a good start for subsequent cooperation with other
clients. Meanwhile, it stuck to the client-oriented principle, ensured the smooth transition
from the 5G line to the 6G line in the display business, and rapidly accomplished strategic
relocation of some products while maintaining stability in its relationship with key clients and
market share.
Global supply chain: Overcoming difficulties brought by rising raw material prices and labor
cost caused by the inflation, as well as the short supply of some raw materials after the
earthquake in Japan, the Company ensured a stable supply of materials and equipments,
actively promoted localization of key materials, formulated a supplier competition
mechanism, and further enhanced supply chain analysis and management. As a result,
substantial progress was made in cost reduction.
Product development: In the first half of the year, the Company beefed up product
development and mass production while enhancing development of advanced technologies.
For the reporting period, the Company accomplished 15 product development projects and 10
technology development projects. At the same time, under guidance of the SOPIC spirit,
product development standardization was further deepened, BOM cost decreased
continuously, and the Company also tried to make itself a learning-oriented organization to
improve the quality of its talent team.
Mobile and application business: The Company thoroughly carried out the strategy of ―three
innovations and two expansions‖, continued to optimize its product structure, and increased
the production line utilization rate, as well as the technological strength. As a result, the
profitability of production lines kept rising, and the Company achieved sales earnings of
RMB 0.84 billion in the business segment for the first half of the year, successfully fulfilling
the profit goal. Meanwhile, the Company expanded through innovation and actively carried
on with the key projects of the second-phase production capacity expansion and LTPS. The
second-phase production capacity expansion project, in particular, was expected to be
14
English Translation for Reference Only
completed and realize mass production in the third quarter of this year.
(2) Other business lines
In the back light product business, the Company sought for development through innovation
and took customer needs as the guidance, which helped optimize both the product and client
structures. At the same time, it beefed up development of new strategic clients, strengthened
development of core advanced technologies, and kept increasing its market share. In terms of
the whole-machine business, great progress was made in both whole-machine OEM and
cooperation with many top brands. All LED products were introduced. Mass production of
all-in-one-machine products was realized, which started to be supplied to clients. The sales
volume of brand name products grew considerably as compared with both the same period of
last year and the second half of the previous year. The network layout was further improved,
breakthroughs were made in overseas sale, and the national customer service system was
basically in shape. During the reporting period, all units in the vacuum and molding business
actively carried out the strategy to ―adjust steadily, optimize resources and upgrade products‖,
kept coming up with innovations in terms of transforming the traditional business and
adjusting the product structure, and carried out various work in an orderly manner. As for the
new energy business, the Company steadily carried forward the photovoltaic application
business based on the strategy of ―application + technology‖, carried out R&D in a deeper
manner, and achieved breakthroughs in many business segments. Spectacular results were
achieved in the building of the international business park, quite a few international clients
signed to join in, and key projects moved on rapidly and smoothly.
2. Major projects moved on smoothly.
1. The SOPIC project: Since 2010, with formulating a client-oriented mechanism and
increasing product competitiveness and production line profitability as the objectives, and
with specialization, centralization, process standardization and informatization as the means,
the SOPIC project has been carried out within the Group. Up to the end of this June, upon
common efforts of all units, phasic progress was made in organizational transformation,
process standardization, informatization, improvement of internal control rules, etc.
2. The Hefei 6G line project: The 6G line was able to produce in the full capacity at the end
of this April, reaching a monthly capacity of 90,000 pieces of glass basic panels three months
ahead of the schedule. This represented another phasic progress since the mass production in
Nov. 2010.
15
English Translation for Reference Only
3. The Beijing 8G line project: Keeping to the objective to ―rapidly build the most
competitive 8G TFT-LCD production line in the world‖, as well as the principle of ―five
meantimes, five ensures and five models‖, crucial breakthroughs were made in the first half
of the year for the Beijing 8G line. The worker housing project was fully accomplished and
all workers officially moved into the factory area for work. The first-phase technical
equipments—30K—were all moved in and installed, and main equipments for the second
phase were being moved in and installed. Meanwhile, the 8G line was put into use on 29 Jun.
2011 as scheduled. The successful switch-on of the relevant product made it the first
over-40-inch LCD in China that was not imported and laying a solid foundation for the
successful operation of the whole project. The project was expected to realize mass
production in this third quarter.
4. The Company disclosed in the Announcement No. 2010-058 on 22 Nov. 2010 that its
subsidiary Hefei BOE Optoelectronics Technology Co., Ltd. was qualified to apply for the
refund of the excess VAT paid for imported equipments. As at 30 Jun. 2011, Hefei BOE
Optoelectronics Technology Co., Ltd. had received a total refund of RMB 1.252 billion of the
excess VAT paid for imported equipments.
(II) Main business scope and performance
1. Main business scope
The business scope of the Company remained unchanged during the reporting period. The
Company belongs to the electronics and information industry; mainly engaging in
manufacture, sale and R&D of TFT-LCD. The major business scope covers TFT-LCD, back
light products, whole machines, new energy, vacuum and molding, and international business
parks.
2. Performance of main business
(1) Classification as below according to industries and products
Unit: RMB ’0000
Main business classified according to industries
Increase/decrease Increase/decrease Increase/decrease
Jan.-Jun. 2011
of operating income of operating cost of gross profit ratio
Industries/products Gross compared with the compared with the compared with the
Operating Operating same period of last same period of last same period of last
profit
income cost year (%) year (%) year (%)
ratio (%)
TFT-LCD used for IT and
TV 304,857 364,496 -19.56% 4.94% 21.10% -15.96%
TFT-LCD used for mobile 101,818 91,634 10.00% 92.26% 83.34% 4.38%
16
English Translation for Reference Only
and application products
Back light products
business 74,382 71,241 4.22% 5.52% 7.00% -1.33%
Other business 164,261 143,589 12.58% 166.56% 209.61% -12.15%
Internal offset -151,314 -136,488 9.80% 165.76% 165.57% 0.06
Total 494,004 534,472 -8.19% 18.00% 29.56% -9.65%
(2) Classified according to regions
Unit: RMB ’0000
Operating income
Region YoY increase/decrease (%)
Jan.-Jun. 2011
China 353,093 42.69%
Other countries and regions in Asia 272,144 21.63%
Europe 9,479 192.29%
America 9,893 780.94%
Other countries 709 -
Offset -151,314 165.76%
Total 494,004 18.00%
(3) There were no other operations which made great effect on net profit in the reporting
period.
3. Analysis on financial status
(1) Analysis on changes in main items of the balance sheet
Unit: RMB ’0000
Change
Items 30 Jun. 2011 31 Dec. 2010 Main influencing factors
range
Some forward exchange contracts
Transactional signed last year for the purpose of
financial -100.00% avoiding foreign exchange risks
- 6,779
assets caused by exchange rate fluctuations
were settled in the reporting period.
Increase of goods payments
Accounts
42.50% receivable from customers after the
receivable 180,009 126,320
mass production of the new projects
Accounts paid Increase of prepayments for power in
184.14%
in advance 11,445 4,028 the reporting period
Interest Increase of monetary funds from the
39.22%
receivable 8,054 5,785 private issue of A-shares
Export VAT rebates receivable last
Other
-58.54% year were called back in the reporting
receivables 13,811 33,313
period.
Inventories 68.20% Increase of inventories after the mass
17
English Translation for Reference Only
218,747 130,048 production of the new projects
Other current Increase of overpaid VAT in the
101.48%
assets 71,079 35,278 reporting period
Increase of expenses on construction
Construction
79.59% and equipment purchase for projects
in process 1,454,394 809,845
in the construction phase
Other
Increase of prepayments for
non-current 81.65%
31,565 17,377 construction in the reporting period
assets
Short-term Some foreign-currency borrowings
55.39%
borrowings 771,427 496,441 for projects in the construction phase
Accounts
46.15% Increase of payables to suppliers
payable 331,335 226,711
Accounts
Increase of amounts prepaid by
received in 172.00%
22,478 8,264 customers for goods
advance
Interest
89.63% Increase of borrowings
payable 10,593 5,586
Non-current
Increase of long-term borrowings due
liabilities due 271.03%
96,495 26,007 within 1 year this year
within 1 year
Long-term Increase of borrowings for
77.54%
borrowings 1,332,437 750,483 construction of the new projects
(2) Analysis on Changes of Assets Composition
:
Unit: RMB ’0000
30 Jun. 2011 31 Dec. 2010 Change
range of
Proporti Proporti the
Items on in on in Main influencing factors
Amount Amount proportion
total total in total
assets assets assets
Increase of inventories
Inventories 218,747 3.43% 130,048 2.40% 1.03% after the mass production
of the new projects
Increase of expenses on
construction and
Construction
1,454,394 22.81% 809,845 14.93% 7.88% equipment purchase for
in process
projects in the
construction phase
Some foreign-currency
Short-term
771,427 12.10% 496,441 9.15% 2.95% borrowings for projects in
borrowings
the construction phase
Accounts Increase of payables to
331,335 5.20% 226,711 4.18% 1.02%
payable suppliers
Increase of borrowings
Long-term
1,332,437 20.90% 750,483 13.84% 7.06% for construction of the
borrowings
new projects
18
English Translation for Reference Only
(3) Analysis on changes in period expense and income tax
Unit: RMB ’0000
Jan.-Jun. 20 Change
Items Jan.-Jun. 2010 Main influencing factors
11 range
Selling New production lines were put into use and the
16,976 9,690 75.19%
expense consolidation scope expanded.
Administrati New production lines were put into use and the
81,795 52,999 54.33%
ve expense consolidation scope expanded.
Financial Exchange earnings due to exchange rate fluctuations
-7,528 3,162 -338.08%
expense in the reporting period
Asset Impairment provisions for inventories and other assets
impairment 5,878 2,653 121.56%
were made according to market conditions.
loss
Non-busines Increase of government subsidies in the reporting
7,324 3,071 138.49%
s income period
(4) Changes in cash flows of the Company
Unit: RMB ’0000
Change
Items Jan.-Jun. 2011 Jan.-Jun. 2010 Main influencing factors
range
Net cash flows
from operating Fluctuations of main product markets
-60,972 331 -18,520.54%
activities during the reporting period
Net cash flows Increase of expenses on construction and
from investing 1,663,039 -1,073,904 -54.86% equipment purchase for projects in the
activities construction phase
(5) Business performance and results of main subsidiaries and joint ventures
Unit: RMB ’0000
Main Registered Total Net Operating Operating
Name Net profit
products capital assets assets income profit
Beijing BOE
Optoelectronics
TFT-LCD US$ 649,110,000 535,798 110,780 163,105 -72,196 -71,416
Technology
Co., Ltd.
Hefei BOE
Optoelectronics
TFT-LCD RMB 9 billion 1,976,751 822,951 141,752 47,337 -45,686
Technology
Co., Ltd.
4. Problems and difficulties encountered in operation
Despite pressures from an adverse overall economic situation and environment in the industry
in the first half of the year, the Company accomplished quite a few tasks and gave a good
19
English Translation for Reference Only
performance. However, the Company was still in deficit. Therefore, the Company should
enhance value innovation in a more advanced manner in product planning, closely connecting
product development, production and supply chain management with marketing. Meanwhile,
it will further deepen delicacy management and keep enhancing its ability to reduce costs.
5. Business development plan for the second half of the year
The general deficit in the TFT-LCD industry in the first half of the year shows that the
industry has entered another cyclic low. On one hand, the market environment is harsh. On
the other, top enterprises give play to their competitive edges of advanced technologies and
years of accumulation, continuously launching new technologies and products. As a result,
the technological upgrading in the TFT industry is accelerated, giving birth to new
application markets. In the coming six months, the Company will continue to thoroughly
carry out the operating guideline for 2011, keep to the client-oriented principle, implement
the SOPIC project in a deeper manner, beef up production and technology innovation, and
increase product competitiveness and production line profitability. Meanwhile, the Company
will seize market opportunities to achieve rapid development.
Ⅱ. Investments made by the Company
(Ⅰ) Use of raised proceeds in the reporting period
1. Previously planned use of raised proceeds
Unit: RMB ’0000
Total raised proceeds 2,296,886
Total raised proceeds invested
Total raised proceeds with usage 633,915
0 in the reporting period
altered in the reporting period
Accumulative raised proceeds with
240,810
usage altered Accumulative raised proceeds
1,432,783
Proportion of accumulative raised invested
10.48%
proceeds with usage altered
Accu
Chan
mulati
ged Total Investme
ve nt Significa
proje comm
invest progress Reach nt
Committed cts or itted Total Invested Date when Benefit
ed as at the ed change
investment projects not invest investmen amount in the project realized
amou end of project in
and investment (parti ment t after the reached in the
nt as the ed feasibilit
direction of extra al of adjustmen reporting serviceable reportin
at the benefit y of the
raised proceeds chang raised t (1) period period condition g period
end of or not project
e procee (%)(3)＝
the or not
inclu ds (2)/(1)
period
ded)
(2)
20
English Translation for Reference Only
Committed
investment projects
Production line
project of the 4.5G
Yes 220,00 180,546 11,808 180,1 99.79% 1 Nov. 2009 91 Yes No
TFT-LCD (4.5G
0 59
Project)
Project of increasing
capital to Beijing
BOE
Optoelectronics
Technology Co.,
Ltd. and repaying its
syndicated loans Yes 226,80 0 0 0 0% N/A N/A N/A No
(Project of Capital 0
Increase for Debt
Clearing of BOE
Optoelectronics
Technology Co.,
Ltd.)
Project of
supplementing
Yes 43,644 0 43,64 100% N/A N/A N/A No
current capital 18,200
4
(2008)
Production line
project of the 6G 1,078, 18 Nov.
Yes 895,950 197,184 684,0 76% -45,686 Yes No
TFT-LCD (6G Line 331 2010
57
Project)
Project of
supplementing
No 100,00 100,000 0 100,0 100% N/A N/A N/A No
current capital
0 00
(2009)
Production line
project of the 8G
No 850,00 850,000 198,177 198,1 23% 1 Oct. 2011 0 Yes No
TFT-LCD (8G Line
0 77
Project)
Project of
supplementing
No 44,365 44,365 44,36 100% N/A N/A N/A No
current capital 44,365
5
(2010)
Subtotal of
2,537, 1,250,
committed - 2,114,505 451,534 N/A N/A -45,595 N/A N/A
696 402
investment projects
Situation and reason
on failing to catch
up with the planned
progress or achieve
N/A
the estimated
earnings (with
details of each
involved project)
Explanation on
significant change of N/A
project feasibility
Change of N/A
21
English Translation for Reference Only
implementation
place of raised
proceeds investment
projects
Adjustment in
implementation way
N/A
of raised proceeds
investment projects
Before raised funds of Y2008 were available, the Company, in accordance with Proposal on
Increasing Capital to Chengdu BOE Optoelectronics Technology Co., Ltd. passed by the 10th
Session of the 5th Board of Directors on 26 May 2008, preliminarily input self-raised funds of
RMB 245,454,000.00, which were deposited in China Construction Bank Chengdu West
District Branch, to construction of 4.5G Project. After raised funds of Y2008 became
available, based on the Management Method of Raised Funds of Listed Companies of
Shenzhen Stock Exchange, and as reviewed and passed by the 12th Session of the 5th Board of
Directors on 28 Jul. 2008, the Company replaced the preliminary self-raised funds put into
Preliminary input
4.5G Project by raised funds of RMB 245,454,000.00 of Y2008.
and replacement of
Before raised funds of Y2009 were available, in accordance with Proposal on Investing and
raised proceeds
Establishing 6G TFT-LCD Production Line Project and Proposal on Issuance Scheme of
investment projects
Private Offering of A stock approved by voting at the 17th Session of the 5th Board of
Directors on 7 Nov. 2008 and the 2nd Shareholders’ interim General Meeting 2008 on 25 Nov.
2008, the Company preliminarily input self raised funds of RMB 1,309,500,000.00 to
construction of 6G Project. After raised funds of Y2009 became available, based on the
Management Method of Raised Funds of Listed Companies of Shenzhen Stock Exchange, and
as reviewed and passed by the 26th Session of the 5th Board of Directors on 23 Jun. 2009, the
Company replaced the preliminary self-raised funds put into 6G Project by raised funds of
RMB 1,309,500,000.00.
Project of
temporarily
supplementing N/A
current capital with
idle raised proceeds
The mass production of the 6G project was successfully realized in Nov. 2010, the production
capacity expansion progress was good, and the full capacity was realized at the end of this
Balance of raised April. The project subsidiary—Hefei BOE Optoelectronics Technology Co., Ltd.—had a
proceeds during the rational financial structure, as well as sufficient and stable operating funds, to satisfy routine
implementation of operating needs. According to the original commitment, the investment amount for the project
projects and reason was RMB 10,783,310,000 and was later changed to RMB 8,959,500,000. As reviewed and
thereof approved at the 2010 Annual Shareholders’ General Meeting of the Company, the outstanding
raised funds of RMB 1,910,190,000 (including the corresponding interest of the special
account for the raised funds) were used for supplementing working capital.
I. The remaining raised proceeds in 2008 would be used for construction and operation of the
Use and Chengdu 4.5G Line, which are currently put into the special account for raised proceeds and
whereabouts of the strictly managed by Chengdu BOE Optoelectronics Technology Co., Ltd.—the company in
remaining raised charge of the project implementation;
capital II. The remaining raised proceeds in 2009 would be used for construction and operation of the
Hefei 6G Line, which are currently put into the special accounts for raised proceeds and
22
English Translation for Reference Only
strictly managed by Hefei BOE Optoelectronics Technology Co., Ltd.—the company in
charge of the project implementation.
III. The remaining raised proceeds in 2010 would be used for construction and operation of
the Beijing 8G Line, which are currently put into the special accounts for raised proceeds and
strictly managed by the Company—the company in charge of the project implementation.
Existing problems or
other conditions
during the use and None
disclosure of raised
proceeds
2. Use of raised proceeds after change
Unit: RMB ’0000
Com
Investme plian Whether
Planned Actual Earning
nt t there is
input amount of s
progress Expected with significa
into accumulati realized
Project after Project before Actual input in at the available estim nt
project ve input in
change change reporting period period-en date of ated change
after by the reportin
d (%) projects earni in project
change period-end g
(3)=(2)/(1 ngs feasibilit
(1) (2) period
) or y
not
The 6G
TFT-LCD
Supplementin
production
g Working 182,381 182,381 100% N/A - N/A No
line project 182,381
Capital (2011)
(the 6G
project)
Total - 182,381 182,381 - - - - -
182,381
Explanation
on reasons for
changes,
decision-maki
ng procedures As reviewed and approved at the Fourth Session of the Sixth Board of Directors on 25 Apr. 2011 and
and later at the 2010 Annual Shareholders’ General Meeting on 30 May 2011, the outstanding funds raised
information in the private issue in 2009 (including the corresponding derivative interesting income of the raised
disclosure funds account before its cancellation) would be used for supplementing the working capital.
(with
details down
to each
project)
Explanation
on
failing to
reach the
planned N/A
progress or
get the
expected
gains (with
23
English Translation for Reference Only
details
down to each
project)
Explanation
on significant
changes in
N/A
feasibility of
projects after
change
Note: The currency amounts carried in the statement above do NOT include the corresponding interest of
the special account for the raised funds.
(Ⅱ) Significant investments with non-raised proceeds in the reporting period
Unit: RMB ’0000
Total Investment
Name of project amount until the Progress Gains
end of the period
National Engineering Laboratory for
23,935.85 92% Good
TFT-LCD Process Technology
Equipment installation and
3921.09 100% Good
transformation of Hebei BOE
Auxiliary plant of BOE Electronics 18307.71 100% Good
Total 46,164.65 - -
24
English Translation for Reference Only
Section VI Significant Events
Ⅰ. Corporate governance
During the reporting period, the Company enjoyed a mature corporate governance structure.
The Company established 2 new rules related to corporate governance, including
Management Method on Capital Flow to Related Parties and Specific Rules on Work of the
Board Secretary, and revised 16 rules related to corporate governance in compliance with the
latest standards and the Company’s actual situation, which were Articles of Association,
Rules of Procedure of the Shareholders’ General Meeting, Rules of Procedure of the Board of
Directors, Rules of Procedure of the Supervisory Committee, Rules of Procedure of the
Executive Committee under the Board of Directors, Rules of Procedure of the Nomination
Committee, Remuneration Committee, as well as the Appraisal Committee under the Board
of Directors, Rules of Procedure of the Audit Committee under the Board of Directors, Rules
for Independent Directors, Specific Rules on Work of the President, Management Method on
Related Transactions, Management Method on External Guarantee, Management Method on
External Investment, Management Method on Information Disclosure, Management Method
on Fund Raising, Management Method on Investor Relationship, and Management Method
on Shares and Changes in Shares Held by Directors, Supervisors, and Senior Executives. The
actual corporate governance was in line with requirements of relevant documents issued by
regulatory institutions.
Up to 30 Jun. 2011, as one of the experimental listed companies for implementing internal
control standards in Beijing administration area, the Company, in the progress of constructing
internal control standards, had finished the compilation of the Internal Control Manual (Trial
Version I in 2011), including the Manual on Administration of Internal Control (1 book), the
Manual on Internal Control System (16 books), as well as the Manual on Appraisal of
Internal Control (1 book). In the second half year, the Company will put the Internal Control
Manual into trial operation, appraise, and revise the manual. At the end of the year, the
Company will promulgate the formal version of the Internal Control Manual, issue and
disclose the Self-appraisal Report on Internal Control of Y2011 as required.
Ⅱ. Implementation on the plans of profit distribution, capitalization of public reserves
and new stock release
(I) Plans on profit distribution and capitalization of public reserves carried out by the
Company in the reporting period
The 8th Session of the 6th Board of Directors of the Company reviewed and passed the
Preplan on Profit Distribution and Capitalization of Public Reserves for Y2010, which was
voted for approval at the Annual Shareholders’ General Meeting for Y2010. Based on the
total 11,267,951,951 shares of the Company as at 31 Dec. 2010, the Company distributed 2
shares capitalized from public reserves for every 10 shares to all shareholders. The
capitalized shares totalled to 2,253,590,390. After the capitalization, total share capital of the
Company amounted to 13,521,542,341.
(II) In the 1st half year of 2011, the Company didn’t draw up any preplan for profit
distribution and capitalization of public reserves.
(III) In the reporting period, there’s no new stock release of the Company.
(IV) At present, the Company is not involved in any stock incentive scheme.
Ⅲ. During the reporting period, the Company was not involved in any lawsuits or
25
English Translation for Reference Only
arbitrations, nor there existed such lawsuits or arbitrations carried down from previous
periods.
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 involved in investments of listed
companies.
Ⅴ. Significant asset acquisition, sale and reorganization
(I) In the reporting period, the Company was not involved in any significant asset
acquisition.
(II) In the reporting period, the Company was not involved in any significant asset sale.
(III) Consolidation occurred during the reporting period
Beijing Zhongxiangying Technology Co. Ltd. and Beijing Zhongpingxun Technology Co.
Ltd. , newly established subsidiaries of the Company in 2011, were included into the
consolidated statement by the Company in 2011.
Ⅵ. Related transactions
(Ⅰ) Related transactions relevant to routine operation
The Proposal on Routine Related Transactions in 2011 was reviewed and approved at the
Company’s Annual Shareholders’ General Meeting for Y2010 and the execution of relevant
routine related transactions is specified as below:
Unit: RMB’0000
Further
Type of Actual amount
classified by Estimate
related Related party in the middle
products or for Y2011
transaction of Y2011
services
Beijing Electronics Holding Co., Ltd. and
312 65
Selling its affiliated companies
products, Beijing Nissin Electronic Precision Parts
Selling 216 65
power, and Co., Ltd
goods
energy to Beijing Nittan Electronics Co., Ltd 120 30
related parties
Subtotal: 648 160
Beijing Electronics Holding Co., Ltd. and
4,500 1591
its affiliated companies
Purchasing Beijing Nissin Electronic Precision Parts
Purchasing 3,000 292
auxiliary Co., Ltd
raw
materials from
materials Beijing Nittan Electronics Co., Ltd 100 1
related parties
Subtotal: 7,600 1,884
Beijing Electronics Holding Co., Ltd. and
20 6
its affiliated companies
Beijing Nissin Electronic Precision Parts
Leasing 200 87
Rental Co., Ltd
revenue
Beijing Nittan Electronics Co., Ltd 260 100
Subtotal: 480 193
26
English Translation for Reference Only
Receiving
services of
Receiving repairing, Beijing Electronics Holding Co., Ltd. and
1,150 285
labor reconstruction, its affiliated companies
service processing, and
etc.; accepting
guarantees Subtotal: 1,150 285
Beijing Electronics Holding Co., Ltd. and
Providing 50 2
its affiliated companies
services of Beijing Nissin Electronic Precision Parts
Providing 20 5
repairing, Co., Ltd
labor
reconstruction,
service Beijing Nittan Electronics Co., Ltd 30 6
processing, and
etc. Subtotal: 100 13
Total: 9,978 2,535
(Ⅱ) Capital flows between the Company and its related parties
Unit: RMB’0000
Relationship Beginning Closing
Capital
between the balance of balance of
flows with Name of Accounting Cause of Nature of
Company and transaction transaction
related transaction party entry transaction transaction
transaction amount in amount in
parties
party 2011 Jun. 2011
Ultimate
Routine
controller and Accounts Operational
36 95 operation
its affiliate receivable capital flows
activities
enterprise
Ultimate
Routine
controller and Operational
Prepayments 394 64 operation
Beijing Electronics its affiliate capital flows
activities
Holding Co., Ltd. enterprise
and its affiliated Ultimate
Routine
companies controller and Accounts Operational
506 698 operation
its affiliate payable capital flows
activities
enterprise
Ultimate
Routine
controller and Other Operational
622 629 operation
its affiliate payables capital flows
activities
Related enterprise
parties of Affiliated Routine
Accounts Operational
the company 77 70 operation
receivable capital flows
Company activities
Beijing Nissin Affiliated Routine
Accounts Operational
Electronic Precision company 270 215 operation
payable capital flows
Parts Co., Ltd activities
Affiliated Routine
Other Operational
company 2 2 operation
payables capital flows
activities
Beijing Nittan Affiliated Routine
Accounts Operational
Electronics Co., Ltd company 113 54 operation
receivable capital flows
activities
Affiliated Routine
Accounts Operational
company 9 3 operation
payable capital flows
activities
Affiliated Routine
Other Operational
company 5 5 operation
payables capital flows
activities
27
English Translation for Reference Only
Total - - 2034 1835 - -
The independent directors of the Company believe that, in the reporting period, the
controlling shareholders of the Company repaid RMB 430,000, which was previously prepaid
by the Company, to the Company. As at the end of the reporting period, there’s no capital of
the Company occupied by controlling shareholders or other related parties.
(Ⅲ) 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 the Company’s controlled
subsidiary—Beijing BOE Optoelectronic Technology Co., Ltd. The guarantee fee of the first
half of the year was not paid during the reporting period.
Ⅶ. Significant contracts and their execution
(Ⅰ) Guarantees during the reporting period
Unit: RMB’0000
Guarantees provided for external parties (excluding guarantees provided for subsidiaries)
Date of
Date and No. of Implementati
occurrence Actual Guarantee for
Name of the public notice Guarantee Type of on
(Date of amount of Term of guarantee related parties
guaranteed related to line guarantee accomplishe
signing guarantee or not
guarantee line d or not
agreement)
Shaoxing BOE
Ueno Electronic 2010-055， General 15 Oct. 2010 – 15 Oct.
1,940.12 15 Oct. 2010 1,940.12 No No
Components 29 Oct. 2010 guarantee 2011
Co., Ltd.
Zhejiang
Tongxiang 2010-056， Mutual 18 Apr. 2011 – 7 Dec.
1,385.80 18 Apr. 2011 1,385.80 No No
Textile & 29 Oct. 2010 guarantee 2012
Dyeing Co., Ltd.
Shaoxing Huijin
2011-014, Mutual 16 Sep. 2010 – 15 Sep.
Automobile 346.45 16 Sep. 2010 311.81 No No
26 Apr. 2011 guarantee 2011
Sales Co. ltd.
Shaoxing
Huifeng 2011-014， Mutual 16 Apr. 2011 – 16 Apr.
2,425.15 16 Apr. 2011 1,039.35 No No
Automobile 26 Apr. 2011 guarantee 2012
Sales Co., Ltd.
Total external guarantees lines Total external guarantees
examined and approved in the 2,771.60 occurred in the reporting period 2,425.15
reporting period (A1) (A2)
Total external guarantee lines Balance of actual external
examined and approved at the period 6,097.52 guarantees at the period end 4,677.08
end (A3) (A4)
Guarantees provided for subsidiary companies
Date of
Date and No. of
occurrence Actual Implementation Guarantee for
Name of the public notice Guarantee Type of Term of
(Date of amount of accomplished or related parties or
guaranteed related to line guarantee guarantee
signing guarantee not not
guarantee line
agreement)
Beijing BOE
Optoelectronics 2005-007， General 8 Apr. 2005 –
490,079.80 31 Mar. 2005 252,876.20 No No
Technology Co., 8 Apr. 2005 guarantee 13 Apr. 2014
Ltd.
General 25 Sep. 2010 –
25 Sep. 2010 800.00 No No
Zhejiang BOE guarantee 19 Sep. 2011
Display General 27 May 2011 –
2011-013, 27 May 2011 1600 No No
Technology Co., 3,500.00 guarantee 7 Nov. 2011
25 Apr. 2011
Ltd. General 15 Mar. 2011
15 Mar. 2011 1500 No No
guarantee –28 Nov. 2011
28
English Translation for Reference Only
Total guarantees lines for Total guarantees for subsidiaries
subsidiaries examined and approved 3,500.00 occurred in the reporting period 3,100.00
in the reporting period (B1) (B2)
Total guarantee lines for subsidiaries Balance of actual guarantees for
examined and approved at the period 493,579.80 subsidiaries at the period end 256,776.20
end (B3) (B4)
Total guarantees of the Company (Total of the two above)
Total guarantees lines examined and
Total guarantees occurred in the
approved in the reporting period 6,271.60 5,525.15
reporting period (A2+B2)
(A1+B1)
Total guarantees lines examined and Total balance of actual
approved at the reporting period 499,677.32 guarantees at the period end 261,453.28
(A3+B3) (A4+B4)
Proportion of total actual guarantee amount (A4+B4) in net assets of the
11.02%
Company
Among which:
Amount of guarantees provided for shareholders, actual controller and
0
related parties (C)
Amount of debt guarantees provided directly or indirectly for parties with
256,776.20
asset-liability ratio exceeding 70% (D)
Proportion of total guarantee amount exceeding 50% of the Company’s net
0
assets (E)
Total amount of the above three guarantees (C+D+E) 256,776.20
Explanation on possibility of taking several and joint liability involving
none
immature guarantees
(Ⅱ) During the reporting 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 reporting period, there existed no commitments on the split share structure reform
of the Company.
(Ⅱ) Commitments on private release
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 reporting period.
(Ⅱ) Shares of other listed companies held by the Company
Unit: RMB Yuan
Changes of
Proportion Gains or
Initial Owners’
Short form of shares in Book value losses in the Content of Source of
Stock code investment equity in the
of stock the at period-end reporting account share
amount reporting
company period
period
29
English Translation for Reference Only
TPV Available-for-
Subscripti
HK0903 Technology 134,658,158 1.04% 80,223,351 2,202,597 sale financial
-22,591,584 on
assets
Available-for-
Stock-for-
SH600658 BEZ 90,160,428 1.69% 72,375,604 1,227,437 sale financial
1,290,640 Stock
assets
Total 224,818,586 - 152,598,955 3,430,034 -21,300,944 - -
(III) During the reporting 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 specific explanation and independent opinions as follows:
1. Up to the period end, the capital flows between the Company and its related parties were
generated from operation activities and there are no capital occupation situations by the
controlling shareholder or other related parties;
2. Up to the period end, the Company did not provide guarantees for its controlling
shareholders, actual controller or other related parties. The 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 period. 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 reporting period has not been audited and the CPA
firm remained the same.
XII. During the reporting 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 the reporting period
Reception Main content of discussion and
Reception date Reception way Visitor
place materials provided by the Company
Meeting Room ABC-CA Fund, China Nature 1. Operation status and future
5 Jan. 2011 of the Field research Asset Management, SWS development strategies of the
Company Research Company;
Telephone 2. Present status and development
6 Jan. 2011 On the phone Huatai Securities
communication trends in the industry;
Meeting Room 3. Particulars about Chengdu 4.5G
13 Jan. 2011 of the Field research Dongxing Securities Project, Beijing 5G Project, Hefei
Company 6G Project and Beijing 8G Project;
14 Jan. 2011 Meeting Room Field research Sinolink Securities
30
English Translation for Reference Only
of the Materials provided by the Company:
Company 2009 Annual Report of the
Meeting Room Avic Securities, Zexi Company, company
19 Jan. 2011 of the Field research Investment Management Co., brochure and other disclosed
Company Ltd. materials
Meeting Room Morgan Stanley Securities Co.,
9 Feb. 2011 of the Field research Ltd., Morgan Stanley Asia
Company Limited
Meeting Room
25 Feb. 2011 of the Field research China Galaxy Securities
Company
Meeting Room
3 Mar. 2011 of the Field research KGI Surities, KGI Asia Ltd.
Company
China AMC, Beijing Longrising
Asset Management Co., Ltd.,
Meeting Room China International Fund
9 Mar. 2011 of the Field research Management, New China Asset
Company Management Co., Ltd., HSBC
Jintrust Fund Management,
SWS Research
Meeting Room
10 Mar. 2011 of the Field research Caida Securities
Company
Meeting Room
17 Mar. 2011 of the Field research Haitong Securities
Company
CongRong Investment
Management, Changsheng Fund
Management, HFT Investment
Management, Lord ABBETT
Meeting Room
China Asset Management,
18 Mar. 2011 of the Field research
Minsheng Royal Fund
Company
Management, First-Trust Fund
Management, E Fund
Management, Haitong
Securities, Zhonghai Fund
BOC International Research
Co., Ltd., BOC International
Meeting Room (China) Limited, Genesis
20 May 2011 of the Field research Capital Co., Ltd.
Company Keywise Capital Management
(Beijing) Ltd., Haoyuan 1. Operation status and future
Industrial Co., Ltd. development strategies
of the Company;
Meeting Room
Guoshi Investment, Guosen 2. Present status and development
24 May 2011 of the Field research trends in the industry;
Securities
Company 3. Particulars about Chengdu 4.5G
Meeting Room Project, Beijing 5G Project, Hefei
25 May 2011 of the Field research GF Securities 6G Project and Beijing 8G Project;
Company
Telephone Materials provided by the Company:
31 May 2011 On the phone Huatai Securities
communication 2010 Annual Report of the
Telephone Company, company
7 Jun. 2011 On the phone Yunjin Fund Co., Ltd.
communication brochure and other disclosed
Meeting Room
Fubon Asset Management Co., materials
8 Jun. 2011 of the Field research
Ltd.
Company
Meeting Room
17 Jun. 2011 of the Field research HuaChuang Securities Co., Ltd.
Company
31
English Translation for Reference Only
XIV. Index of special public notices disclosed in the reporting period
No Date of
Name of public notice
. disclosure
1 24 Jan. 2011 Public Notice on Resolutions of the Sixth Session of the Sixth Board of Directors
Public Notice on Resolutions of Increasing Investment on Beijing BOE Display Technology Co., Ltd.
2 24 Jan. 2011
3 29 Jan. 2011 Public Notice on Revising Earnings Forecast
4 30 Mar. 2011 Public Notice on Resolutions of the Seventh Session of the Sixth Board of Directors
5 15 Apr. 2011 Public Notice on Earnings Forecast for Y2010
6 15 Apr. 2011 Public Notice on Earnings Forecast for the First Quarter of 2011
7 26 Apr. 2011 Public Notice on Resolutions of the Eighth Session of the Sixth Board of Directors
8 26 Apr. 2011 Public Notice on Resolutions of the Fourth Session of the Sixth Supervisory Committee
9 26 Apr. 2011 Public Notice on Annual Report for Y2010 (the Summary)
10 26 Apr. 2011 Public Notice on the Routine Related Transaction for Y2011
11 26 Apr. 2011 Public Notice on the Company’s Derivatives Trading Plan in the Next Twelve Years
12 26 Apr. 2011 Public Notice on Using the Surplus Privately Raised Funds in 2009 to Supplement the Current Capital
13 26 Apr. 2011 Public Notice on Providing Guarantee for Zhejiang BOE Display Technology Co., Ltd.
Public Notice on the Reciprocal External Guarantee Provided by Zhejiang BOE Display Technology
14 26 Apr. 2011
Co., Ltd.
15 27 Apr. 2011 Public Notice on the Text of the First Quarterly Report for Y2011
16 27 Apr. 2011 Public Notice on the Earnings Forecast for the First Half of 2011
17 28 Apr. 2011 Public Notice on Convening the Shareholders’ General Meeting for Y2010
18 21 May 2011 Suggestive Notice on Convening the Shareholders’ General Meeting for Y2010
19 31 May 2011 Public Notice on Resolutions of the Shareholders’ General Meeting for Y2010
20 14 Jun. 2011 Public Notice on Implementation of Capitalization of Public Reserves for Y2010
32
English Translation for Reference Only
Section VII Financial Report (Un-audited)
1. Accounting statements (See the attachments)
(1) Balance sheet
(2) Income statement
(3) Cash flow statement
(4) Statement of changes in owners’ equity
2. Notes to the accounting statements
33
English Translation for Reference Only
Section VIII Documents Available for Reference
1. Text of the Semi-annual Report with signature of Legal Representative;
2. Text of Financial Report with signatures and seals of Legal Representative, CEO,
CFO and person-in charge of accounting agency;
3. Original of all documents and public notices ever disclosed on newspapers
designated by CSRC in the reporting period.
Chairman of the Board of Directors (Signature): Wang Dongsheng
Board of Directors
BOE Technology Group Co., Ltd.
26 Aug. 2011
34
English Translation for Reference Only
35
English Translation for Reference Only
36
English Translation for Reference Only
37
English Translation for Reference Only
38
English Translation for Reference Only
39
English Translation for Reference Only
40
English Translation for Reference Only
41
English Translation for Reference Only
42
BOE Technology Group Co., Ltd.
Notes to the Financial Statements
(All Currency Amounts Expressed in RMB Yuan)
(English Translation for Reference Only)
I. Company profile
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 First Special Shareholders’ 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 agreed 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 Forth Board of Directors and the Special Shareholders’ 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 Third Session of the Fifth Board of Directors and the 2007 Forth Special Shareholders’ 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.
43
Pursuant to the 17th Session of the Fifth Board of Directors and the 2008 Second Special 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.
Pursuant to the Second Session of the Sixth Board of Directors and the 2010 Second Special Shareholders’ General Meeting
held on 21 Jul. 2010 as well as approval from the CSRC through document ZJFXZ [2010]1324 No. 1324, the Company
issued 2,985,049,504 non-public targeted RMB-denominated ordinary share with a face value of RMB 1. On 7 Dec. 2010,
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 11,267,951,951.
Pursuant to the 2010 Shareholders’ General Meeting held on 30 May 2011, the Company implemented its plan of
transferring capital reserve into share capital at the rate of ―2 shares for every 10 shares‖ to all shareholders in Jun. 2011.
Upon the completion of the transfer, the Company’s total share capital increased to RMB 13,521,542,341.
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.
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
44
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.
When the Group acts as the combination party, the cost of a business combination paid by the acquirer is the aggregate of
the fair value at the acquisition date of assets given (including share equity of the acquiree held before the combination date),
liabilities incurred or assumed, and equity securities issued by the acquirer. 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), while 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. The cost of equity securities or liability securities as on
combination consideration offering is recognised in initial recording capital on equity securities or liability securities. Other
direct expenses occur when the Group conducting business combinations is recognised in current profit and loss. 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.
The temporary deductible differences the Group acquired from acquiree in business combination can be recognized if it
cannot fits recognition conditions of deferred income assets at the acquisition date. Within 12 months after the business
combination, if any new or further information can prove the existence of related conditions occurred at the acquisition date,
and it is estimated that profit arising from deductible temporary differences at the acquisition date can be realized, recognize
relevant deferred income tax asset and cut down goodwill. If goodwill is inefficient, the difference part is recognized as
profit or loss. Except the above conditions, deferred income tax asset relevant to business combination is recognised as
profit or loss.
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 based
on their carrying amounts; while results of operations are included in the consolidated income statement, 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, adjustment shall be made to financial statements of subsidies based on the fair value of the identifiable
assets, liabilities at the acquisition date, while the identifiable assets, liabilities and results of operations of the subsidiaries
are combined into consolidated financial statements of the Company from the acquisition date.
Where a business combination involving entities not under common control was realized through two or more transactions
and by several steps, for equity held by acquiree before the acquisition date, the Group will re-account the equity according
to fair value at the acquisition date and the difference between the fair value and its carrying value is recognized as
investment income. If the said equity is involving in other comprehensive income, other relevant comprehensive income is
transferred into investment income 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.
Where the control of former subsidy was lost for disposal of part of equity investment or other reasons, for remaining equity
45
investment after disposal, the Group will re-account it according to the fair value at the date the control was lost. The
aggregation of consolidation acquired from disposal of equity and the fair value of remaining equity, over net assets which
was accounted at original holding proportion in subsidies that consistently enjoyed from the acquisition date, the difference
is recognized as investment income. Other comprehensive income relevant to equity investment of original subsidy was
transferred into investment profit or loss when the control was lost.
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.
If current loss shoulder by minority shareholders of a subsidy over the proportion enjoyed by minority shareholders in a
subsidy at owners’ equity at period-begin, its balance still offset minority shareholders’ equity.
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. Standards in recognizing cash and cash equivalents
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) 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.
46
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, 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 attributed 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 held by the Group 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. Interest on available-for-sale financial assets calculated using the
effective interest method is recognised in profit or loss. (See Note II. 22(3))
– 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
47
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.
Financial assets and financial liabilities are listed in balance sheet statements respectively without countervailing. However,
net amount of them after countervail are listed in balance sheet statements when they meets with the following conditions:
– The Group has legal rights to offset amounts that has recognized, and the said rights is available to execution.
– The Group plan to make settlements at net amounts or liquidate a financial asset and clear a financial liability at the same
time.
(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 assets
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.
Objective evidence of impairment includes but not is limited to the followings:
(a) A serious financial difficulty occurs to the issuer or debtor;
(b) The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or
the principal, etc.;
(c) The debtor will probably become bankrupt or carry out other financial reorganizations;
(d) The financial asset can no longer continue to be traded in the active market due to serious financial difficulties of the
issuer;
(e) Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. wherein
the issuer of instruments operates its business, which makes the investor of an equity instrument unable to take back its
investment;
(f) Where the fair value of the equity instrument investment drops significantly or not contemporarily;
For methods relevant to impairment of accounts receivable, see Note II. 10, the impairment of other financial assets is
48
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. The reversed carrying amount shall not be any
more than the post-amortization costs of the said financial asset on the day of reverse under the assumption that no
provision is made for the impairment.
– 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 receivables
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. The reversed carrying amount shall not be any more than the
post-amortization costs of the said financial asset on the day of reverse under the assumption that no provision is made for
the impairment.
11. Inventories
49
(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 realizable 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 realizable 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 realizable 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 realizable value of each class of inventories is recognised as a provision for diminution
in the value of inventories.
(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.
– For long-term equity investment obtained through a business combination involving entities not under common control by
two or more transactions and by several steps, the initial investment cost is recognized as the aggregation of the carrying
value of acquirees’ equity investment held by the Company and newly investment cost at the acquisition date. For the said
equity is involving in other comprehensive income, other relevant comprehensive income is transferred into investment
income when the Company conduct disposal of investment.
– For other long-term equity investment obtained through entities not under common control, the fair values, on the
acquisition date, of the assets given, the liabilities incurred or assumed and the equity securities issued by the acquirer in
exchange for the control on the acquiree shall be recognized as initial investment cost of the long-term equity investment.
50
(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 initial
investment 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.
(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 recognizes 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 recognizes 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.
– 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
51
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 by the Group. 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;
interchange of managerial personnel; or
provision of essential technical information.
(4) Method of impairment testing and measuring
For the method of impairment testing and measuring for subsidiaries, jointly controlled enterprises and associates, refer to
Note II.20.
For other long-term equity investments, the carrying amount is required to be tested for 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.
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 amortized 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:
52
Useful life (years) Residual value rate Depreciation rate
(%) (%)
Buildings 25 -35years 3%-10% 2.6%-3.9%
Land use rights 34 -50years 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:
Depreciation period Residual value rate Depreciation rate
Classes (years) (%) (%)
Plants and buildings 20-40years 3%-10% 2.3%-4.9%
Machinery and
equipment
2-15years 0-10% 6%-50%
Others 2-10years 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
Where a fixed asset meets either of the conditions as follows, the recognition of it as a fixed asset shall be terminated:
The fixed asset is in a state of disposal; or
The fixed asset is unable to generate any economic benefits through use or disposal as expected.
53
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 expense 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 capitalized on such borrowings is determined by applying a capitalization rate to the weighted average of the excess
amounts of cumulative expenditures on the asset over the above amounts of specific borrowings. The capitalization 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 capitalization period, exchange differences related to the principal and interest on a specific-purpose borrowing
denominated in foreign currency are capitalized 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 capitalizations period is the period from the date of commencement of capitalization of borrowing costs to the date of
cessation of capitalization, excluding any period over which capitalization is suspended. Capitalization 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. Capitalization 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
54
(years)
Land use rights 40-50 years
Technology rights 9-20 years
Patent 3-10 years
Computer software 5-10 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.
Expenditures on an internal research and development project of the Group 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 3-10years
Others 3-10years
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. 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.
55
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.
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, its is not reserved 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 buyer;
–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.
56
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 benefit
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 insurances
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
57
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 utilized.
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 neither accounting profit nor taxable profit (or deductible 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
58
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 payments 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. (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 Group
(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, including subsidies of joint ventures
(g) associates of the Group, including subsidies of associates
(h) principal individual investors and close family members of such individuals
59
(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; and
(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
When the Group drafts the report of an operating segment, transaction income from operating segments is measured at the
basis of actual transaction price. Policies adopts in preparing the report of an operating segment shall in accordance with
accounting policies adopted in the preparation of financial statements of the Group.
31. Significant accounting estimates and judgments
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.
Except information on Note V. 17. and Note X. 2. 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:
60
(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 judgments 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
As it’s stated in Note V. 33., 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 agreement
As it is stated in Note V. 35., the Group ceased to produce several products and stopped fulfilling the purchase contract
related to production in Y2009. 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 13% or 17%
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.
Business tax Based on taxable revenue 5%
City Based on business tax paid and VAT payable 7%
maintenance and
61
construction tax
Education Based on business tax paid and VAT payable 1%,3%
surcharge
Land Appreciation amount in transferring property 30%
appreciation tax and applicable tax rate
0-25%
2. Corporate income tax
The corporate income tax rate applicable to the Company for the year is 15% (2010: 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.
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
Name of company rate Reason
Beijing BOE 15% The Company obtained the certificate of high-tech enterprise
Optoelectronics numbered GR200811000214 on 28 December 2008, which was
Technology Co., Ltd. entitled jointly by Beijing Municipal Science & Technology
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.
Chengdu BOE 15% The Company obtained the certificate of high-tech enterprise
Optoelectronics number GR201051000051 on 28 Jul. 2010, which was entitled
Technology Co., Ltd. jointly by Science & Technology Department of Sichuan Province,
Finance Bureau of Sichuan Province, Sichuan Provincial Office,
SAT and Sichuan Local Taxation Bureau, subject to a preferential
enterprise income tax rate of 15% within the valid period three
years.
Hefei BOE 15% The Company obtained the certificate of high-tech enterprise
Optoelectronics number 201034000024 on 28 May 2010, which was entitled
Technology Co., Ltd jointly by Science & Technology Bureau of An’hui Province,
Anhui Provincial Department of Finance, Anhui Provincial Office
of SAT and Local Taxation Bureau of Anhui Province, subject to a
preferential enterprise income tax rate of 15% within the valid
period three years.
62
Preferential
Name of company rate Reason
Suzhou BOE Chatani 15% The foreign investment enterprise is exempted from income tax
Electronics Co., Ltd. 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. 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. The enterprise
began to enjoy High-tech Enterprises preferential policies since
2010.
BOE (Hebei) Mobile 12.5% The foreign investment enterprise is exempted from income tax
Technology Co., Ltd. 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 is the second entitlement year for 50% reduction of
enterprise income tax respectively.
Beijing BOE Special 15% Obtained High-tech Enterprises Certificate No GR200911000685
Display Technology Co., jointly issued by Beijing Municipal Science & Technology
Ltd. 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.
Beijing BOE Vacuum 15% Obtained High-tech Enterprises Certificate No GR200811000215
Electronics Co., Ltd. jointly issued by Beijing Municipal Science & 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.
BOE Semi-conductor Co., 15% Obtained High-tech Enterprises Certificate No GR200811001006
Ltd. jointly issued by Beijing Municipal Science & 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 Asahi Electron 15% Obtained High-tech Enterprises Certificate No GR200911000589
Glass Co., Ltd. jointly issued by Beijing Municipal Science & 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.
BOE Hyundai LCD 15% Obtained High-tech Enterprises Certificate No GR200911002274
63
Preferential
Name of company rate Reason
(Beijing) Display jointly issued by Beijing Municipal Science & Technology
Technology Co., Ltd. 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 Chatani 15% Obtained High-tech Enterprises Certificate No GR200911000684
Electronics Co., Ltd. jointly issued by Beijing Municipal Science & 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 15% Obtained High-tech Enterprises Certificate No GR200911000084
Technology Co., Ltd. jointly issued by Beijing Municipal Science & 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.
64
IV. Business combinations and the consolidated financial statements
1. Major subsidiaries
(1) Subsidiaries acquired through establishment or investment
Closing amount of Direct and Whether
actual investment / indirect included in
Registered capital Actual net shareholding / consolidated
Registration investment voting right financial
Name Type place Business nature and scope percentage statements
Zhejiang BOE Display Technology Company Limited Shaoxing, Research and development of small size RMB RMB 69.29% Yes
Co., Ltd. (ZJBOE) China electronic display components, display module 129,194,000 106,391,635
and related fittings
Beijing BOE Vacuum Electronics Limited Liability Beijing, Manufacture and sale of vacuum electronic RMB RMB 55% Yes
Co., Ltd. (Vacuum Electronics) Company China products 35,000,000 19,250,000
Beijing BOE Vacuum Technology Limited Liability Beijing, Manufacture and sale of electronic tubes RMB RMB 100% Yes
Co., Ltd. (Vacuum Company China 32,000,000 32,000,000
Technology) (Solely-owned by
legal person)
Beijing BOE Special Display Limited Liability Beijing, Development of display products and sale of RMB RMB 100% Yes
Technology Co., Ltd. (Special Company China electronic products 60,000,000 60,000,000
Display) (Solely-owned by
legal person)
Beijing Yinghe Century Co., Ltd. Other Limited Beijing, Lease and operation of offices and middle RMB RMB 100% Yes
(Yinghe Century) Liability Company China grade hotel houses; business and entertainment 233,105,200 333,037,433
service; toll parking lots
Suzhou BOE Chatani Electronics Limited Liability Suzhou, Development and manufacture of backlight RMB RMB 90.51% Yes
Co., Ltd. (Suzhou Chatani) Company China and related parts and components for LCD 186,485,134 193,087,904
(Sino-foreign joint
venture)
BOE Hyundai LCD (Beijing) Limited Liability Beijing, Development, manufacture and sale of liquid USD RMB 75% Yes
Display Technology Co., Ltd. Company China display for mobile termination 5,000,000 31,038,525
(BOE Hyundai) (Sino-foreign joint
venture)
Beijing BOE Optoelectronics Limited Liability Beijing, Research, development, design and USD RMB 82.49% Yes
Technology Co., Ltd. (BOEOT) Company China manufacture of TFT-LCD 649,110,000 4,172,288,084
(Sino-foreign joint
venture)
BOE (Hebei) Mobile Technology Limited Liability Langfang, Manufacture and sale of mobile flat screen USD RMB 75% Yes
Co., Ltd. (BOE Hebei) Company China display technical products and related services 20,000,000 120,307,500
(Sino-foreign joint
venture)
Beijing BOE Display Technology Other Limited Beijing, Development of TFT-LCD, manufacture and RMB RMB 50.09% Yes
65
Closing amount of Direct and Whether
actual investment / indirect included in
Registered capital Actual net shareholding / consolidated
Registration investment voting right financial
Name Type place Business nature and scope percentage statements
Co., Ltd. (BOE Display) Liability Company China sale of LCD 17,377,199,300 8,705,000,000
Beijing BOE Multimedia Limited Liability Beijing, Sale of computer software and hardware、the RMB RMB 100% Yes
Technology Co. Ltd. Company China numeral regards the audio frequency 200,000,000 200,000,000
(Multimedia BOE) (Solely-owned by technology
legal person)
Beijing BOE Energy Technology Limited Liability Beijing, Integration and application of photovoltaic RMB RMB 100% Yes
Co., Ltd. (BOE Energy) Company China system sale of photovoltaic system and 29,000,000 29,000,000
(Solely-owned by ancillary facilities
legal person)
Beijing BOE Video Technology Limited Liability Beijing, Manufacture of LCD TV, LCD; technology RMB RMB 100% Yes
Co., Ltd. (BOE Video) Company China development of terminal products and systems 500,000,000 500,000,000
(Solely-owned by such as TFT-LCD display and TV
legal person)
Limited Liability Beijing, Technology promotion, property management, RMB RMB 100% Yes
Beijing Zhongpingxun Technology
Company China and sale of electronic products 10,000,000 10,000,000
Co., Ltd. (Beijing Zhongpingxun)
(Solely-owned by
legal person)
Beijing Zhongxiangying Limited Liability Beijing, Technology promotion, property management, RMB RMB 100% Yes
Technology Co., Ltd. (Beijing Company China and sale of electronic products 10,000,000 10,000,000
Zhongxiangying) (Solely-owned by
legal person)
(a) As reviewed and passed by the 6th Session of the 6th Board of Directors of the Company in 2011, the Company increased RMB 8.66 billion in cash in BOE Display in Jan. 2011,
which was verified by Beijing Dezhong Accounting Firm with the issuance of the Capital Verification Report (De-Zhong-Yan-Zi [2010] No.2010).
(b) As reviewed and passed by the 10th Session of the 6th Board of Directors of the Company in 2011, the Company increased RMB 300 million in cash in BOE Video in Jun. 2011,
which was verified by Beijing Hantang Guotai Accounting Firm with the issuance of the Capital Verification Report (Han-Tang-Guo-Tai-Yan-Zi [2011] No.018).
66
（2）Subsidiaries acquired through business combinations not under the same control
Direct and Whether
Closing amount of indirect included in
Registration
Name Type
place
Business nature and scope Registered capital actual investment / shareholding consolidated
Actual net investment / voting right financial
percentage statements
Chengdu BOE. Other Limited Liability Chengdu, Development manufacture and sale of TFT-LCD and RMB RMB 100% Yes
Optoelectronics. Technology company China related parts
1,830,000,000 1,833,149,991
Co., Ltd. (Chengdu BOE.)
Beijing Asahi Electron Glass Limited Liability Beijing, Sale of Supports and glass bar for TV and CTV low RMB RMB 100% Yes
Co., Ltd. (BeiAsahi Glass ) Company (Solely-owned China melting sealing frit
by legal person)
61,576,840 30,888,470
Hefei BOE Optoelectronics One-person Limited Hefei, Development manufacture and sale of TFT-LCD RMB RMB 100% Yes
Technology Co., Ltd.( Hefei Liability Company China
BOE)
9,000,000,000 9,000,000,000
BeijingMatsushita Color CRT Co., Other Limited Liability Beijing, Coloured TV, cathode-ray tube of display, projection RMB RMB 80% Yes
Ltd.( Matsushita) company China cathode ray tube of coloured RPTV and materials of
1,240,754,049 361,304,288
electronic parts， property management service,
parking service
K-Tronics (Suzhou) Technology Other Limited Liability Suzhou, Production of new electronic communication USD USD 100% Yes
Co., Ltd. company China products, including display (panel display),
compatible digital TV, high-class
17,700,000 32,460,260
liquid-crystal-display microcomputer, as well as
large-screen liquid-crystal projection TV, and spare
part of the aforesaid products
2. Changes of the consolidation scope
（1）Beijing Zhongpingxun and Beijing Zhongxiangying are newly founded subsidiaries of the Company in 2011 and have been included in the consolidated
financial statements by the Company in 2011.
67
V. Notes to the consolidated financial statements
1. Monetary capital
(1) Breakdown of monetary capital of the Group as at 30 Jun. 2011:
As at 30 June 2011, the other monetary funds have been pledged by the Group amounting to RMB
6,108,796,257 for a loan amounting to RMB 109,219,742, JPY 72,935,904,579 and USD 1,474,492. The
other monetary funds have been pledged by the Group amounting to RMB 15,972,211 for bank acceptance
bills amounting to RMB 15,972,211. The other monetary funds amounting to RMB 5,111,032,393 are the
deposits in commercial banks as security (31 Dec. 2010: RMB 1,198,273,277).
(2) Breakdown of monetary capital of the Company as at 30 Jun. 2011:
68
As at 30 June 2011, the other monetary funds have been pledged by the Company amounting to RMB
64,822,000 for short-term loan amounting to JPY 697,850,000. The other monetary funds amounting RMB
8,890,000 are the deposits in commercial banks as security.
2. Transactional financial assets
The Group signed some forward foreign-currency agreements in 2010 to avoid foreign-currency exchange
risks caused by fluctuations of exchange rates. The delivery of risks was completed in the reporting period.
3. Bills receivable
(1) Bills receivable of the Group and the Company classified by categories:
All of the above bills are due within one year.
69
As at 30 June 2011, no bank acceptance bills were pledged by the Group. (2010: Nil). No bank acceptance
bills were pledged by the Company. (2010: Nil).
As at 30 June 2011, the Group’s outstanding endorsed and discounted bank acceptance bills (with recourse)
amount to RMB 184,017,718 (2010: RMB 168,327,430), all of which will be due by 31 Dec. 2011. The
Company has no outstanding endorsed and discounted bank acceptance bills (with recourse).
During the year, there is no amount transferred to accounts receivable from acceptance bills due to
non-performance of the issuers by the Group and the Company (2010: 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.
4. Accounts receivable
(1) The Group’s accounts receivable by currency type:
（2）The ageing analysis of accounts receivable of the Group is as follows:
The ageing is counted starting from the date accounts receivable is recognized.
As at 30 June 2011, 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.
As at 30 June 2011, the accounts receivable that has been pledged by the Group are amounting to USD
6,663,173 (2010: USD 14,656,261) for short-term loans amounting to USD 5,663,697 (2010: USD
12,285,327) respectively.
70
（3） As at 30 June 2011, the total amount of accounts receivable due from the top five debtors of the Group
are as follows:
（4）During the year, 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 of the Company is as follows:
The ageing is counted starting from the date accounts receivable is recognized.
As at 30 June 2011, 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 2011, the total amount of accounts receivable due from the top five debtors of the
Company are as follows:
5. Prepayments
(1) The Group’s prepayments by category:
71
(2) The ageing analysis of prepayments of the Group is as follows:
The ageing is counted starting from the date prepayments is recognized.
As at 30 June 2011, the Group’s prepayments with ageing more than one year are mainly prepayments in
relation to the purchasing activities which have yet to be settled.
As at 30 June 2011, the balance of the Group’s prepayments to related parties amounted to RMB 642,081 (as
at 31 December 2010: RMB 3,940,000).
（3）The Company’s prepayments by category:
（4）The ageing analysis of prepayments of the Company is as follows:
72
The ageing is counted starting from the date prepayments is recognized.
As at 30 Jun. 2011, the balance of the Company’s prepayments to related parties amounted to RMB
1,009,272 (as at 31 Dec. 2010: RMB 4,380,624)
As at 30 Jun. 2011, among the aforesaid balance, the individual prepayment accounting for over 30% of the
total balance of the Company’s prepayments was the prepayment for purchasing inventories and amounted
to RMB 1,800,000 (as at 31 Dec. 2010: RMB 3,940,000)
6. Interests receivable
（1）Analysis of the Group’s and the Company’s interests receivable are as follows:
As at 30 June 2011, 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 (2010: nil).
At 30 June 2011, no significant amount of interest receivable of the Group is denominated in foreign
currency (2010: nil).
7. Dividends receivable
73
8. Other receivables
（1）The Group’s other receivables by currency type:
（2）The ageing analysis of other receivables of the Group is as follows:
The ageing is counted starting from the date other receivable is recognized.
As at 30 June 2011, 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 2011, 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 of the Company is as follows:
74
The ageing is counted starting from the date other receivable is recognized.
As at 30 June 2011, 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 2011, the total amounts of other receivables due from the top five debtors of the
Company are as follows:
9. Inventories
(1) Analysis of change in the Group’s inventories during the year:
（2）Analysis of change in the Company’s inventories during the year:
75
As at 30 June 2011, the Group and the Company had no inventory used as collateral (2009: nil).
（3）Provision for diminution in value of inventories of the Group:
（4）Provision for diminution in value of inventories of the Company:
76
10. Other current assets
（1）Analysis of the Group’s and the Company’s other current assets:
11. Available-for-sale financial assets
The aforesaid equity held by the Company was accounted in the item of available-for-sale financial assets
and measured by fair value. Among that, the equity of TPV Technology Limited was calculated according to
the closing price on 30 Jun. 2011; and, if calculated according to the closing price on 30 Jun. 2011, the
equity of C & W Technology Co., Ltd. amounted to RMB 99.67 million – however, due to that the equity of
C & W Technology Co., Ltd. was still restricted for trading, the Company adopted the appraisal method
which accorded with the method on the balance sheet date of last year, which was to recognize the carrying
value by calculating the discount rate affected by trading restriction on the basis of the closing price on 30
Jun. 2011.
77
12. 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.
As at 30 June 2011, 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.
13. Long-term equity investment
(1) The Group’s long-term equity investments by category:
78
（2）The Group’s investments in subsidiaries are as follows:
79
（3）The Group’s investments in associates are as follows:
80
（4）The Group’s investments in joint venture are as follows:
（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.
81
（5）Other significant long-term equity investments are as follows:
As at 30 June 2011, The Group's long-term equity investments are calculated under cost method.
During the year 2011, the investees above did not distribute cash dividends.
82
14. Investment property
(1) Analysis on investment property of the Group:
(2) Analysis on investment property of the Company:
As at 30 June 2011, the Group collateralized the houses and other buildings in investment property with a
carrying amount of RMB 207,650,852 (31 December 2010: RMB 275,705,396) and land use rights with a
carrying amount of RMB 3,424,906 (31 December 2010: RMB 10,765,921) for short-term loans, long-term
loans and non-current liabilities due within one year.
83
15. Fixed assets
(1) The Group
As at 30 Jun. 2011, the Group mortgaged plants and buildings with carrying amounts of RMB 3,595,344,547
(2010: RMB 3,591,949,469), machinery equipment of RMB 13,788,299,319 (2010: RMB 10,527,548,123)
for short-term loans, non-current liabilities due within one year and long-term loans. As at 30 Jun. 2011,
there is no restriction placed on the ownership of fixed assets of the Company. (2010：nil).
The Group mortgaged plants and buildings with carrying amount of RMB 33,970,650 (2010: RMB
35,774,413) for the export Letter of Credit with maximum amount of RMB 50 million.
(2) The Company
84
85
16. Construction in process
(1) The Group and the Company
As at 30 Jun. 2011, the Group mortgaged the construction in process with carrying amount of RMB
14,462,740,009 (2010: 4,341,516,358) as security for long-term loans. As at 30 Jun. 2011, there is no
restriction placed on the ownership of construction in process of the Company.
86
(2) As at 30 Jun. 2011, the group’s major construction projects in process are set out as follows:
87
17. Intangible assets
(1) The Group
(2) The Company
(a) As at 30 Jun. 2011, the Group mortgaged land use rights in intangible assets with carrying amounts of
RMB 351,850,474 (2010: RMB 136,642,270) as security for short-term loans, long-term loans and
88
non-current liabilities due within one year. The Group mortgaged land use right with carrying amounts of
RMB 892,361 (2010: RMB 902,778) for the export Letter of Credit with maximum amount of RMB 50
million. As at 30 Jun. 2011, there is no restriction placed on the ownership of intangible assets of the
Company.
(b) As at 30 Jun. 2011, the carrying amounts of the Group’s and the Company’s intangible assets did not
include capitalised borrowing cost (2010: nil).
18. Goodwill
19. Long-term deferred expenses
20. Deferred tax assets /deferred tax liabilities
(1) The Group’s deferred tax assets/deferred tax liabilities
89
21. Other non-current assets
(1) The Group’s other non-current assets are set out by category as follows;
(2) As at 30 Jun. 2011, the Group’s and the Company’s other non-current assets are mainly prepayment in
relation to non-current assets.
22. Details of assets impairment provision
(1) The Group
90
(2) The Company
23. Restricted assets
(1) The Group
Please refer to the respective notes of the assets for reasons of restrictions on the assets.
(2) The Company’s restricted assets
91
24. Short-term loans
(1) The Group
92
(2) The Company
(a) The guaranteed short-term loan of Zhejiang BOE, amounting to RMB 54,000,000, was guaranteed by
Shaoxing Lucky Textiles Trade Co., Ltd., Shaoxing Huifeng Automobile Sales Co., Ltd., Zhejiang
Tongxiang Textile & Dyeing Co., Ltd., Zhejiang (Shaoxing) Homda Real Estate Development Co. Ltd. and
Shaoxing County Yian Knitting & Weaving Co., Ltd. The other guaranteed short-term loans of RMB
23,000,000 were guaranteed by the entities within the Group.
(b) The Group’s short-term loans amounting to RMB 106,219,742, JPY 68,135,904,579 and USD 7,138,189
were gained by pledging the notes receivable with a carrying amount of RMB 6,339,742, accounts
receivable of USD 6,663,173 and fixed-term deposit of RMB 10,000,000 and security deposit of RMB
5,652,132,777.
(c) The Group’s short-term loans amounting to RMB 100,000,000 and USD 18,999,875 were gained by
mortgaging the plants and buildings with a carrying amount of RMB 316,066,147, land use right of RMB
93
60,334,693 and investment property of RMB 12,727,088.
(d) The Group’s short-term loan amounting to RMB 3,000,000 was gained by mortgaging the machinery
equipments with a carrying amount of RMB 11,834,173 and pledging the fixed-term deposit with a carrying
amount of RMB 1,500,000.
(e) The Group’s short-term loan amounting to RMB 23,000,000 was gained by mortgaging the plants and
buildings with a carrying amount of RMB 6,536,620 and the land use right of RMB 2,617,500, and was
guaranteed by Zhejiang BOE.
(f) 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.
25. Notes payable
(1) The Group
The above notes payable were all due within one year.
As at 30 Jun. 2011, no amount due to shareholders who hold 5% or more of the voting rights of the Company was included
in the above balance of notes payable.
26. Accounts payable
(1) The Group’s accounts payable by currency are as follows:
(2) The Company’s accounts payable by currency are as follows:
As at 30 Jun. 2011, no amount due to shareholders who hold 5% or more of the voting rights of the
Company was included in the above balance of accounts payable (31 Dec. 2010: Nil)., and the Group had no
individually significant accounts payable ageing more than one year (31 Dec. 2010: Nil).
27. Employee benefits payable
(1) The Group
94
(2) The Company
As at 30 Jun. 2011, no arrear was included in the Group’s or the Company’s balance of employee benefits payable.
28. Taxes payable
(1) The Group and the Company:
95
29. Dividends payable
(1) The Group and the Company
As at 30 Jun. 2011, dividends payable were mainly from the unclaimed dividends for non-public
shareholders.
As at 30 Jun. 2011, the Group had no individually significant dividends payable denominated in foreign
currency.
30. Other payables
(1) The Group’s other payables are as follows:
As at 30 Jun. 2011, 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 (31 Dec. 2010: Nil).
96
(2) The Company’s other payables are listed by currency as follows:
As at 30 Jun. 2011, the Company had no other payables in foreign currency (31 Dec. 2010: JPY 184,000,000,
which was translated into RMB 14,951,863).
As at 30 Jun. 2011, 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 (31 Dec. 2010: Nil).
31. Non-current liabilities due within one year
(1) The Group’s long-term loans due within one year are set out as follows:
97
(2) The Company’s long-term loans due within one year are set out as follows:
(a) For the information of the Group’s mortgaged non-current liabilities due within one year, please refer to
Note V. 32.
(b) The Group’s non-current liabilities due within one year of JPY 4,800,000,000 was gained by mortgaging
the Renminbi guarantee deposit with the net value of RMB 445,163,480
(c) 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.
32. Other current liabilities
The provision for warranties mainly related to the TFT-LCD products after-sales repair warranty to the
customers. The provision of such estimated liabilities was reasonably estimated by the Management, based
on historical actual repair expenses and current actual sales outcomes.
33. Long-term loans
(1) The Group
98
As at 30 Jun. 2011:
(a) The Group’s long-term loans, amounting to RMB 717,879,039 and USD 228,841,869, and non-current
liabilities due within one year, amounting to RMB 97,324,252 and USD 35,939,437, were gained by
mortgaging the plants and buildings with a carrying amount of RMB 618,733,558, machinery equipment of
RMB 2,831,227,140 and land use right of RMB 9,339,892, which were partially guaranteed by Beijing
Electronics Holding Co., Ltd.
(b) The Group’s long-term loans, amounting to RMB 550,000,000 and USD 144,000,000, and non-current
liabilities due within one year, amounting to RMB 15,000,000 and USD 3,000,000, were gained by
mortgaging the plants and buildings with a carrying amount of RMB 145,312,916, machinery equipment of
RMB 1,883,735,292, construction in process of RMB 45,154,242 and land use right of RMB 14,429,431, of
which the Renminbi loans were guaranteed by CDHT Investment Group Co., Ltd., while the U.S. Dollar
loans were guaranteed by Chengdu Industry Investment Group Co., Ltd. and CDHT Investment Group Co.,
Ltd..
(c) The Group’s long-term loans, amounting to RMB 5,926,010,000 and USD 574,317,079, and non-current
liabilities due within one year, amounting to RMB 15,000,000, were gained by mortgaging the plants and
buildings with a carrying amount of RMB 2,508,695,306, machinery equipment of RMB 9,061,502,714,
investment properties of RMB 198,348,670, construction in process of RMB 14,417,585,767 and land use
right of RMB 265,128,958.
(d) The long-term bank loans with the amount of RMB 1,309,091 transferred from state bond was provided
to Zhejiang BOE by Shaoxing Municipal Government in 2003, with a maturity term of ten years and bearing
annual interest of 2.55%.
(e) 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.
34. Estimated liabilities
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 withdrew the relevant estimated liabilities
according to reasonable estimation of loss. As the amount of estimated liabilities has uncertainty, the profit
99
and loss might be affected if the estimation of the estimated liabilities changes.
35. Other non-current liabilities
As at 31 Dec. 2010 and 30 Jun. 2011, the non-current liabilities were mainly from the government grants
received but not meet revenue recognition.
(1) The Group:
(2) The Company
100
36. Share capital
(1) The structure of share capital as at 30 Jun. 2011 is as follows:
37. Capital reserve
(1) The Group
101
(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 arose from price differences of related party transactions in
previous years.
38. Surplus reserve
(1) The Group and the Company
As at 30 Jun. 2011, the Group suffered losses accumulatively, so it was not required to appropriate the
statutory surplus reserve and discretionary surplus reserve.
39. 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 in Note X (2).
40. Operating cost
Operating cost of the Group is from costs for production and sales of TFT-LCD and other business. The
102
relevant data has been listed in Note X (2).
41. Financial expense
(1) The Group and the Company
42. Impairment losses
(1) The Group
(2) The Company
43. Investment losses
(1) The Group’s and the Company’s investment (losses)/income by item
(2) Income of long-term equity investments by main invested entities are as follows:
103
(a) The Company’s investment income received from available-for-sale financial assets is mainly dividends
from TPV technology Co., Ltd. and C & W Technology Co., Ltd..
44. Non-operating income
(1) The Group’s and the Company’s non-operating income by item is as follows:
45. Non-operating expenses
(1) The Group’s and the Company’s non-operating expenses are as follows:
46. Other comprehensive income
(1) The Group
104
47. Particulars about cash flow statement
(1) Supplementary information of cash flow statement
(2) Net increase/ (decrease) in cash and cash equivalents
(3) Details of cash and cash equivalents
105
VI. Related parties and related transactions
1. The Company’s parent company
2. For information of the Company’s subsidiaries, please refer to Note IV. 1
3. For information of the Company’s associates, please refer to Note V. 12 (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.
Investors that exercise significant influence over the
(―BSOAMC‖)
Group
Being E-TOWN International Investment & Development Co.,
Ltd. Enterprise that holds over 5% equity of the Company
Beijing Economic Technology Investment Development Corp. Enterprise that holds over 5% equity of the Company
Hefei Rongke Project Investment Co., Ltd. Enterprise that holds over 5% equity of the Company
Hefei Xincheng State-Owned Assets Management Co., Ltd. Enterprise that holds over 5% equity of the Company
Hefei Lan Ke Investment Co., Ltd. Enterprise that holds over 5% equity of the Company
C & W Technology Co., Ltd. Enterprises that are controlled by the Company’s
ultimate holding 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 The Company’s associates
Nittan The Company’s associates
Julong Optoelectronics The Company’s associates
5. Particulars about related transaction
(1) The Group’s and the Company’s transactions with related parties were conducted under normal
commercial terms, as follows:
106
6. The accounts receivable from related parties
(1) The Group and the Company’s balances of related transactions are as follows:
VII. Contingencies
1. Contingencies of pending lawsuits and arbitration as well as their financial influences:
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.
2. Contingent liabilities of guarantees provided for other entities and their financial influences
(1) The Group’s guarantees provided for external entities
As at 30 Jun. 2011, pursuant to the guarantee agreements, a Group subsidiary, Zhejiang BOE Display
Technology Co., Ltd., provided a maximum guarantee of RMB 5,000,000 (31 Dec. 2010: RMB 5,000,000)
to Shaoxing Huijin Automobile Sales Co., Ltd. and the actual balance of the guaranteed loan was RMB
4,500,000 (31 Dec. 2010: RMB 4,500,000) as at 30 Jun. 2011, and the above guarantee would be due on 15
Sep. 2011; Zhejiang BOE Display Technology Co., Ltd. provided a maximum guarantee of RMB
15,000,000 (31 Dec. 2010: RMB 25,000,000) to Shaoxing Huifeng Automobile Sales Co., Ltd. and the
actual balance of the guaranteed loan was RMB 15,000,000 (31 Dec. 2010: RMB 7,900,000) as at 30 Jun.
2011, and the above guarantee would be due on 16 Apr. 2012; Zhejiang BOE Display Technology Co., Ltd.
provided a maximum guarantee of RMB 20,000,000 (31 Dec. 2010: RMB 35,000,000 ) to Zhejiang
107
Tongxiang Textile & Dyeing Co., Ltd. with equivalent balance of the guaranteed loan, with the latest
expiration month in Dec. 2012.
(2) Guarantees provided for internal entities
As at 30 Jun. 2011, the Company provided a maximum guarantee of RMB 39,000,000 (31 Dec. 2010: RMB
40,000,000) for its subsidiaries Zhejiang BOE Display Technology Co., Ltd. and the actual amount of the
guaranteed loan was RMB 39,000,000 (31 Dec. 2010: RMB 24,000,000) as at 30 Jun. 2011, with the latest
expiration month in Nov. 2011. Furthermore, the Company and Beijing Electronics Holding Co., Ltd.
provided a joint guarantee for the long-term loan which was borrowed by a subsidiary of the Company,
BOEOT, with the committed guarantee amount of USD 740,000,000 (In 2010: USD 740,000,000). Pursuant
to the guarantee agreement, as at 30 Jun. 2011, the guarantee amount actually provided by the Company was
RMB 2,528,761,992 (31 Dec. 2010: RMB 2,568,770,448).
As at 30 Jun. 2011, Zhejiang BOE provided guarantee for a loan of RMB 28,000,000 (31 Dec. 2010: RMB
28,000,000) which was borrowed by its subsidiary, Shaoxing BOE Ueno Electronic Components Co., Ltd.
VIII. Commitments
1. Capital commitments
(1) The Group and the Company
2. Operating lease commitments
(1) The Group and the Company
IX. Post balance sheet events
Nil
108
X. Other significant events
1. Segment reporting
(1) Segment reporting considerations
The Group’s main operating decision maker 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,
etc.
(b) TFT-LCD Business for Mobile and Application products–The products are mainly used for mobile
electronic products.
(c) Display light source products business–The products are mainly used for LCD.
(d) Others- Except the aforesaid business, the others include display system and solution business, other
display components and parts and international business park, etc..
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, Business for Display
Light Source products and other businesses. Because the business segments manufacture and/or distribute
different products, apply different manufacturing processes and specifies in gross profit, the business
segments are managed independently.
The Group’s main operating decision maker evaluates the performance and allocates resources according to
the profit of each business segment and does not take financing cost or investment income into account.
109
(2) Primary segment statement (business segments)
110
(3) Secondary segment statement (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 risk management and relevant measurement method of risks,
etc.
The Group’s risk management policies are established to identify and analysis the risks the Group faces, to
set appropriate risk limits and controls, and to monitor risks and adhere 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’s interest rate policy is to ensure that the risk of change in interest rates of 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 Jun. 2011, the Group and the Company held the following interest-measuring financial
instruments:
Fixed-rate financial instrument
111
Floating-rate financial instrument:
(b) Sensitivity analysis:
As at 30 Jun. 2011, 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 46.83
million.
As at 30 Jun. 2011, 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
610,000.
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.
2011 to 31 Dec. 2011.
(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 30 Jun. 2011 to currency risk arising from recognized assets or liabilities
denominated in foreign currencies and listed in Renminbi is given in the table below.
The Group:
112
The Company:
(b) The applicable foreign currency exchange rates of the Group and the Company are as follows:
(c) Sensitivity analysis
A 0.05 percent strengthening of the Renminbi against the US dollar, Korean Won and Japanese Yen at 30 Jun.
2011 would have increased/ (decreased) equity and net profit by the amount shown below：
113
Assuming all other risk variables remained constant, a 0.05 percent depreciation of the renminbi against the
US dollar, Korean Won and Japanese Yen at 30 Jun. 2011 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 Jun. 2011 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. 2011 to 31 Dec.
2011. The analysis is performed on the same basis for 2010.
114
Supplementary information
1. Details of extraordinary gains and losses in the first half of 2011
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:
(3) The Group’s return on net assets:
115
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:
116
