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Transcend Progress Venture
Corporate Information 01 Financial Highlights 02 Chairmans Statement 04 Management Discussion and Analysis 08 Report of the Directors 13 Auditors Report 25 Consolidated Profit and Loss Account 26 Consolidated Balance Sheet 27 Balance Sheet 28 Consolidated Statement of Changes in Equity 29 Consolidated Cash Flow Statement 30 Notes to the Accounts 31 Five-Year Financial Summary 65 Notice of Annual General Meeting 66

Contents

Corporate Information

Directors

Executive Directors Dr Hsuan, Jason (Chairman and Chief Executive Officer) Mr Houng Yu-Te Mr Pen Tseng-Kwan Mr Yang Hsing-Nang Mr Djuhar, Johny Non-executive Directors Mr Pen, Stanley (also known as Pan Fang-Jen) Mr Djuhar, Sutanto Independent Non-executive Directors Mr Chan Boon-Teong Dr Ku Chia-Tai Mr Cheung Doi Shu

Legal Advisors

D.S. Cheung & Co. Appleby Spurling & Kempe

Company Secretary

Ms Chung Wing Yee, Zoe

Auditors

PricewaterhouseCoopers Certified Public Accountants
Principal Share Registrar Registered Office
Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda Reid Management Limited 4th Floor, Windsor Place 22 Queen Street Hamilton HM 11 Bermuda

Hong Kong Office

Room 2108, 21st Floor Harcourt House 39 Gloucester Road Wanchai, Hong Kong
Hong Kong Branch Share Registrar
Standard Registrars Limited Ground Floor Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai, Hong Kong

Principal Bankers

Bank of China China Construction Bank The Hongkong and Shanghai Banking Corporation Limited China Merchants Bank
Singapore Share Transfer Office
Lim Associates (Pte) Limited 10 Collyer Quay #19-08 Ocean Building Singapore 049315

TPV Technology Limited

annual report 2002

Financial Highlights

TURNOVER (US$ MILLION)
388.9 612.2 961.7 1,246.0

1,506.2

PROFIT ATTRIBUTABLE TO SHAREHOLDERS (US$ MILLION)

14.0 22.1 33.3 43.3

PERCENTAGE TURNOVER BY GEOGRAPHICAL AREA PERCENTAGE TURNOVER BY GEOGRAPHICAL AREA
Europe The PRC North America Others
1.0% South America 13.5% 22.8% 27.5%
2000 Operating Results (US$000)
Turnover Profit attributable to shareholders Basic earnings per share (US cents)

961,701 33,268 2.77

1,246,040 43,346 3.57

1,506,236 51,099 3.99

Financial Position (US$000)
Total assets Bank balances and cash Bank debts Shareholders funds Capital expenditure
501,646 60,884 80,965 123,534 26,392
562,227 86,021 26,461 158,735 16,848
773,798 254,765 60,928 244,106 12,751

Financial Ratios

Inventory turnover (days) Accounts receivable turnover (days) Accounts payable turnover (days) Net profit margin (%) Return on average equity (%) Return on average total assets (%) Current ratio (%) Gearing ratio (%) Interest coverage (times) Dividend payout ratio (%)
57.6 59.5 94.9 3.5 30.6 7.7 114.8 16.1 4.9 23.6
48.1 61.6 92.4 3.5 30.7 8.1 121.9 4.7 7.6 20.7
40.0 56.0 95.8 3.4 25.4 7.6 147.5 7.9 15.4 21.0

Chairmans Statement

Dr Hsuan, Jason
Chairman and Chief Executive Officer
F iscal 2002 was a challenging one for many of us in the information technology industry.
The year had begun with the shocks of September 11 still fresh in our minds and it ended with a cauldron of economic woes aggravated by geopolitical tensions in the Middle East. The inherent volatile nature of the industry collided with a difficult business environment had left many of our customers, suppliers and peers unsettled and nonplussed. Despite the difficulties, TPV managed to buck the trend and ended the year with a strengthened balance sheet.

Results

For the fourth consecutive year since our dual listing in Hong Kong and Singapore, TPV has achieved record turnover and profit. Spurred by the growth in TFT-LCD monitor sales and original design manufacturing (ODM) contracts, consolidated turnover for the year rose 20.9 percent to reach US$1.5 billion. Profit attributable to shareholders grew proportionately to US$51.1 million, a commendable feat in this tough time. less than two years time. According to the latest MIC* research, worldwide demand for TFT-LCD monitors is projected to increase by more than 50 percent to 48.0 million units in 2003 after gaining 104 percent to reach 31.4 million units last year. On the other hand, the CRT monitor market is projected to decline by more than 10 percent to around 75.0 million units this year as the shift to TFT-LCD monitors is accelerating in todays price environment. That said, we shall continue to nurture our CRT business until it is no longer economically viable to do so. From a geographical perspective, penetration rate of TFTLCD monitors is higher in developed economies. Demand for CRT monitors, however, remains brisk in developing countries where our marketing strengths lie. Last year, our CRT monitor shipment of 9.1 million units represented 81 percent of total unit sales and 58.5 percent of revenue. This year, we target to ship as many CRT monitors as last year despite a shrinkage in demand. With CRT business generating stable income and cash flows, we are well-prepared to compete in the growing yet challenging TFT-LCD monitor sector. Last year, we sold approximately 2.0 million units of TFT-LCD monitors. If we include the 0.2 million units shipped from our Beijing

Another important task for us this year is to solidify our stronghold in China, which is less impacted by the current global economic downturn. At the 16th Peoples Congress held last year, the Chinese government announced its directive to speed up the modernization of the whole nation through information technology. On the back of this favourable government policy, both PC and PC peripheral sectors are forecasted to grow by about 20 percent in 2003 (Source: CCID * annual industry review). To better serve this vast market, we have brought in our renowned retail brand Envision from the US to meet the needs of high-end professionals and specialized industries; we have introduced a new brand Topview to compete in the highly price-sensitive DIY (Do-It-Yourself) market; and, we have reinvented the AOC brand image to captivate consumers in the mid-tier market. A branding initiative that includes the setting up of new AOC image shops across the nation in conjunction with aggressive advertising campaigns on the Internet, billboards and other electronic media is implemented to promote brand awareness and loyalty. Over the years, TPVs emphases on technology, scale, cost and quality have established itself as a world-class monitor maker. We already have the building blocks in place
abundant manufacturing capacities, advance technologies and quality products. It is our intent to build on this strong foundation one of the most successful companies in its industry. In sum, despite the current economic and geopolitical uncertainties, I am confident that TPV has the resilience, perseverance and flexibility to cross new frontiers in a dynamic world. As Walt Disney once said, If you can dream it, you can do it. At TPV, we believe we can.

Appreciation

Finally, I would like to thank our Board of Directors and employees for their dedications and hard work, and our shareholders, business associates and customers for their continuous support and guidance.
Dr HSUAN, Jason Chairman and Chief Executive Officer Hong Kong, 7th April, 2003
CCID China Center for Information Industry Development
Management Discussion and Analysis

Industry Overview

The downward spiral of the IT industry continued in 2002. According to MIC, global PC demand remained stagnant in 2002 as businesses and consumers cut back on IT spending in the wake of economic uncertainties. In view of the military conflict in the Middle East and the continuous weakness in global economy, PC industry is unlikely to return to its prime anytime soon albeit there is a glimpse of hope that the pent up replacement demand from PCs bought before Year 2000 could kickstart another PC growth cycle later this year. Amidst the gloom, desktop monitors remained as one of the best performing sectors among PC peripherals on the back of burgeoning popularity of TFT-LCD monitors. According to MIC, approximately 31.4 million units of TFT-LCD monitors were sold worldwide in 2002, as compared to 15.4 million a year ago. The expeditious growth in TFT-LCD monitor demand had come at the expense of CRT monitors which saw their shipment declined by approximately 7 percent to 84.3 million units. With affordability of TFT-LCD monitors less of an issue now that price gaps between them and their comparable CRT models have closed to within two to one, global demand for TFT-LCD monitors is projected to increase by more than 50 percent to approximately 48.0 million units this year. Although the recent tightening of TFT-LCD panel supply has resulted in an approximately 15 percent price hike in the first quarter of 2003, most industry analysts are projecting for a relatively stable price environment for TFT-LCD panels for the rest of the year. Capacities from the new 5G fabs coming on stream in the second half of this year will very likely bring the market closer to equilibrium, and knock panel prices back to their lows seen at the end of 2002.

countries/places where the Group operates. Also, the Group offers employee share options to employees according to individual merits.
Liquidity, Financial Resources and Capital Structure
Monitor is a working capital intensive business. As such, the Group manages its financial resources prudently and relies principally on its internally generated cash flows to meet long-term capital commitments. Bank debts, however, are utilized from time to time to finance shortterm liquidity. As at 31st December 2002, the Group had cash and bank balances (including pledged bank deposits) of US$254.8 million (31st December 2001: US$86.0 million), banking facilities of US$886.2 million (31st December 2001: US$466.2 million), of which US$60.9 million (31st December 2001: 26.5 million) was drawn down. All bank debts were borrowed on floating rate basis with approximately 84.3 percent of them denominated in US dollars and the balance in Renminbi. In order to improve its cash flows in the slow economy, the Group has tightened its inventory policy and successfully negotiated better payment terms with key suppliers. Compared to 2001, inventory turnover fell by 8 days to 40 days while accounts payable turnover lengthened from 92 days to 96 days. These improvements, combined with a better receivables turnover of 56 days (2001: 62 days), had resulted in a shorter cash cycle and generated cash flows from operations of US$117.6 million for the year. The Groups gearing ratio, which represents the ratio of total bank debts to total assets, was maintained at a satisfactory level of 7.9 percent. Current ratio also improved from approximately 122 percent to 148 percent.

Research and Development

The onset of the digital era brought aplenty business opportunities but at the same time called for flexibility and focus to stay abreast with technological advancements. To this end, TPV has expanded its team of engineers from 290 to its current strength of 454 to drive product innovation and product development. In 2002, the Group launched 66 CRT models and 86 TFTLCD models, which included a small number of LCD TV monitors. It will widen its TFT-LCD product range to include monitor models that come with higher frequency, better resolution and brightness, as well as TV models that equip with wireless headphones, digital photo frames and DVD players. In the second half of this year, the Group will also launch its first generation of plasma TVs.

PURCHASE, SALE AND REDEMPTION OF SHARES The Company had not redeemed any of its shares during the year. Neither the Company nor any of its subsidiaries had purchased or sold any of the Companys shares during the year.
PRE-EMPTIVE RIGHTS No pre-emptive rights exist under the laws of Bermuda in relation to the issue of new shares by the Company.
DIRECTORS The directors during the year were: Executive Directors Dr Hsuan, Jason Mr Houng Yu-Te Mr Pen Tseng-Kwan Mr Yang Hsing-Nang Mr Djuhar, Johny Mr Lin Yeun-Wu Non-executive Directors Mr Pen, Stanley (also known as Pan Fang-Jen) Mr Djuhar, Sutanto Independent Non-executive Directors Mr Chan Boon-Teong Dr Ku Chia-Tai Mr Cheung Doi Shu (i) In accordance with Bye-law 99 of the Companys Bye-laws, Mr Houng Yu-Te, Mr Yang Hsing-Nang and Mr Pen Tseng-Kwan will retire by rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting. None of the non-executive directors was appointed for a specific term as they are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Bye-laws of the Company.
(resigned on 25th February 2002)
DIRECTORS SERVICE CONTRACTS All executive directors who are proposed for re-election at the forthcoming annual general meeting have service contracts with the Company for an initial term of three years from 8th October 1999 and continuing thereafter until terminated by either party with at least three months advance notice in writing. None of the directors who are proposed for re-election at the forthcoming annual general meeting have service contracts with the Company which is not terminable within one year without payment of compensation, other than statutory compensation.
BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT Executive Directors Dr Hsuan, Jason Aged 59, Chairman and Chief Executive Officer, joined the Group in November 1990 and is responsible for the Groups overall corporate policies and business development. Before joining the Group, he had over 19 years of managerial experience in well-known multi-national enterprises, which include General Electric and PepsiCo. Dr Hsuan graduated from Department of Electrical Engineering of National Cheng Kung University, Taiwan in 1968, and holds a doctorate degree of philosophy in systems engineering from the Polytechnic Institute of Brooklyn and a masters degree in systems engineering from Boston University. Mr Houng Yu-Te Aged 56, Vice President, is responsible for the Groups general administration and financial operations. Mr Houng holds a bachelors degree in accounting from Soochow University, Taiwan. Before joining the Group in December 1996, he gained audit and finance experience with an international accounting firm in Taiwan and worked for a number of companies for over 28 years in charge of the accounting and financial operations. Mr Pen Tseng-Kwan Aged 34, joined the Group as a Corporate Restructuring Specialist and assistant to Dr Hsuan, Jason in February 1994. Mr Pen holds a masters degree in business administration from Owen Graduate School of Management, Vanderbilt University, and a bachelor of science degree in computer engineering and industrial management from CarnegieMellon University. Mr Pen worked for several multi-national corporations. He is a son of Mr Pen, Stanley. Mr Yang Hsing-Nang Aged 58, Vice President, joined the Group in April 1995 and is responsible for the Groups product design and development. Mr Yang holds a bachelors degree in electrical engineering from National Cheng Kung University, Taiwan. Before joining the Group, he worked for the Sampo Group in Taiwan for over 26 years and was in charge of the design and development of television sets and computer monitors. Mr Djuhar, Johny Aged 44, is a representative for Brilliant Way Investment Limited which is a substantial shareholder of the Company. Mr Djuhar received his bachelor of science degree from Pacific Union College in the US. He is a director of P.T. Indoaluminium, an aluminium foil plant company in Indonesia. He is also a director of the China Pacific Group and Pacific Flour & Food (Fujian) Corporation Limited. He is a son of Mr Djuhar, Sutanto.

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT (Continued) Non-executive Directors Mr Pen, Stanley (also known as Pan Fang-Jen) Aged 61, is a co-founder of the Group. Mr Pen graduated from the World College of Journalism. He is the Chairman of AOC International as well as Pentun Trade & Development Inc., Taiwan. Mr Djuhar, Sutanto Aged 75, is a co-founder of the Group. Mr Djuhar, born in Indonesia, was the founder of P.T. Indocement, a cement manufacturing company listed in Indonesia, and P.T. Bogasari Flour Mills. He is also the Chairman of the China Pacific Group and a director of First Pacific Company Limited, a listed company in Hong Kong.
Independent Non-executive Directors Mr Chan Boon-Teong Aged 60, graduated from Imperial College of the University of London with a bachelors degree in electrical engineering. Mr Chan also holds a masters degree in electrical engineering and operational research from the Polytechnic University of New York City. He has over 32 years of experience in the commercial, industrial and real estate business in the Southeast Asia region. He was a director of the former Kowloon Stock Exchange in 1973. He is currently the Chairman of Coastal Realty Group Limited, a listed company in Hong Kong. Mr Chan is a member of the National Chinese Peoples Political Consultative Conference. He is also a member of the Standing Committee of the All-China Federation of Returned Overseas Chinese. Mr Chan was appointed as an independent non-executive director of the Company in May 1998. Dr Ku Chia-Tai Aged 60, holds a bachelors degree in electrical engineering from National Cheng Kung University, Taiwan, a masters degree in electrical engineering from Rutgers University of New Jersey and a doctorate degree in electrical engineering from the University of Pittsburgh, Pennsylvania. Dr Ku has over 25 years of managerial experience in the computer and telecommunications industries. He is currently the Senior Advisor to the Chairman of Far Eastone Telecommunications Company Limited, Taiwan. Dr Ku was appointed as an independent non-executive director of the Company in May 1998. Mr Cheung Doi Shu Aged 41, is a solicitor qualified to practice in Hong Kong, England and Wales, Singapore and the Australian Capital Territory. He is the senior partner of D. S. Cheung & Co. whose practice includes securities, corporate finance, PRC investments and international banking and finance. Mr Cheung holds directorships in several listed companies in Hong Kong. Mr Cheung was appointed as an independent non-executive director of the Company in September 2001.
BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT (Continued) Senior Management Mr Liu Houng-Ya Aged 58, Deputy General Manager, is in charge of the sales and marketing in Japan. Mr Liu holds a bachelors degree in electrical engineering from National Cheng Kung University, Taiwan. Prior to joining the Group in May 1999, he worked for an international electrical appliances company in Taiwan for over 30 years. Mr Hsieh Chi-Tsung Aged 51, Deputy General Manager, is in charge of the procurement of production equipment and raw materials. Mr Hsieh holds a bachelors degree in mechanical engineering from Fong-Ja University, Taiwan. Prior to joining the Group in 1994, he worked for a number of well-known monitor manufacturers in Taiwan as purchasing supervisor for over 23 years. Mr Lu Being-Chang Aged 56, Deputy General Manager, is in charge of product research and development. Mr Lu graduated from National Cheng Kung University, Taiwan with a bachelors degree in science and a masters degree in electrical engineering. Prior to joining the Group in November 1999, he worked for the Sampo Group in Taiwan for over 25 years and was in charge of manufacturing and research and development.

Respective responsibilities of directors and auditors The Companys directors are responsible for the preparation of accounts which give a true and fair view. In preparing accounts which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to you.
Basis of opinion We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Companys and the Groups circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe that our audit provides a reasonable basis for our opinion.
Opinion In our opinion the accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31st December 2002 and of the Groups profit and cash flows for the year then ended and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
PricewaterhouseCoopers Certified Public Accountants Hong Kong, 7th April 2003
Consolidated Profit and Loss Account
For the year ended 31st Decemebr 2002 Note 2002 US$000 Turnover Cost of goods sold Gross profit Other revenues Selling and distribution expenses Administrative expenses Research and development expenses Operating profit Finance costs Share of profits less losses of - a jointly controlled entity - associated companies Profit before taxation Taxation Profit attributable to shareholders Dividends Earnings per share - Basic - Fully diluted US3.99 cents US3.86 cents US3.57 cents US3.52 cents 1,506,236 (1,387,589) 118,647 10,510 (42,028) (21,108) (10,806) 55,215 (3,322) 2001 US$000 1,246,040 (1,149,475) 96,565 6,404 (26,779) (16,920) (8,096) 51,174 (5,672)

1 Principal accounting policies (Continued)
Jointly controlled entities
A jointly controlled entity is a joint venture established as a corporation, partnership or other entity under a contractual arrangement whereby the Group and other parties undertake that the economic activity of the jointly controlled entity is subject to joint control and none of the participating parties has unilateral control over its economic activity. The consolidated profit and loss account includes the Groups share of the results of the jointly controlled entities for the year, and the consolidated balance sheet includes the Groups share of the net assets of the jointly controlled entities and goodwill/negative goodwill (net of accumulated amortization) on acquisition.

Associated companies

An associated company is a company, not being a subsidiary, in which an equity interest is held for the long-term and significant influence is exercised in its management. The consolidated profit and loss account includes the Groups share of the results of the associated companies for the year, and the consolidated balance sheet includes the Groups share of the net assets of the associated companies and also goodwill/negative goodwill (net of accumulated amortization) on acquisition. Equity accounting is discontinued when the carrying amount of the investment in an associated company reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated company.

Intangible assets

(i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Groups share of the net assets of the acquired subsidiary/jointly controlled entity/associated company, is recognized as an asset and amortized using the straight-line method over its estimated useful economic life of not more than 15 years. (ii) Trademarks Trademarks acquired from third parties are stated at cost less accumulated amortization and accumulated impairment losses. Trademarks are amortized on a straight-line basis over their estimated useful lives of not more than 15 years. (iii) Impairment of intangible assets Where an indication of impairment exists, the carrying amount of any intangible asset, including goodwill previously written off against reserves, is assessed and written down immediately to its recoverable amount.

2 Turnover, revenue and segment information (Continued)
Primary reporting format business segments
2002 CRT monitors US$000 Turnover Cost of goods sold Other revenues excluding interest income and export incentives received Operating expenses Segment results Interest income Export incentives received Operating profit Finance costs Share of profits less losses of - associated companies Profit before taxation Taxation Profit attributable to shareholders Other information: Capital expenditure Depreciation Amortization Balance sheet Segment assets Interests in associated companies Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities (385,198) (83,567) 838,621 (753,826) LCD monitors US$000 625,784 (593,250) Others (Note (a)) US$000 41,831 (40,513) Total US$000 1,506,236 (1,387,589)

3,093 (55,096) 32,792

2,308 (16,400) 18,442

154 (2,446) (974)

5,555 (73,942) 50,260 1,274 3,681 55,215 (3,322) 3,878 55,771 (4,672) 51,099

11,382 16,274 420

12,751 16,616 520

325,734

165,682
491,416 20,669 261,713 773,798 (468,765) (60,927) (529,692)
Primary reporting format business segments (Continued)
2001 CRT monitors US$000 Turnover Cost of goods sold Other revenues excluding interest income and export incentives received Operating expenses Segment results Interest income Export incentives received Operating profit Finance costs Share of profits less losses of - a jointly controlled entity - associated companies Profit before taxation Taxation Profit attributable to shareholders Other information: Capital expenditure Depreciation Amortization Balance sheet Segment assets Interests in associated companies Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities (274,597) (49,594) 921,964 (841,052) LCD monitors US$000 257,847 (244,528) Others (Note (a)) US$000 66,229 (63,895) Total US$000 1,246,040 (1,149,475)

3,013 (40,885) 43,040

494 (8,483) 5,330

87 (2,427) (6)

3,594 (51,795) 48,364 1,755 1,055 51,174 (5,672) 1,287 2,621 49,410 (6,064) 43,346

14,097 15,339 473

16,848 15,598 522

300,146

AOC do Brasil Monitores Ltda

Brazil

500,000 ordinary shares of Reais $1 each
AOC International (Europe) GmbH

Germany

Ordinary shares DEM450,000
TPV International (USA), Inc.

United States of America

1,000,000 ordinary shares of US$1 each
(a) (b) The subsidiaries operate principally in their places of incorporation. The two subsidiaries are established as wholly foreign owned enterprises.
Interests in associated companies Group 2002 US$000 Unlisted shares, at cost Share of undistributed reserves Share of net assets Unlisted shares, share of net assets other than goodwill Share of goodwill 14,405 6,264 20,669 19,20,US$000 14,405 3,322 17,727 16,17,727
14 Interest in associated companies (Continued) The following is a list of the principal associated companies at 31st December 2002: Place of incorporation and operation United States of America Particulars of issued share capital/ registered capital 1,000,000 ordinary shares of US$1 each 280,600,000 ordinary shares of RMB1 each Interest held indirectly 24%
Name Envision Peripherals, Inc.
Principal activities Trading of computer monitors Production and sale of computer monitors
Beijing Orient Top Victory Electronics Company Limited (BJOTV) (Note (a))

41.74%

Note (a)
In July 2001, with the approval of the relevant authorities in the PRC, BJOTV was restructured from a Sinoforeign equity joint venture into a joint-stock limited company with foreign investment. As a result of the restructuring, the Group has a 48% equity interest in this company as to 43% by way of direct shareholdings and as to 5% by way of holding economic benefits and voting rights associated with the relevant shares. Before the restructuring, BJOTV was treated as a jointly controlled entity and the results for the period from 1st January 2001 to 30th June 2001 were included in the share of results of a jointly controlled entity in the consolidated profit and loss account. On 3rd July 2002, the Group together with other shareholders of BJOTV entered into an agreement with certain investors pursuant to which shares were issued by BJOTV to the new investors. As a result of the increase in the share capital of BJOTV, the equity interest in BJOTV held by the Group was diluted from 48% to 41.74% and the financial effect of the dilution is not significant to the Group.

Note (b)

The share of net assets of BJOTV as a material associated company as at 31st December 2002 is as follows: 2002 US$000 Unlisted shares, at cost Share of undistributed reserves Share of net assets 14,165 6,361 20,US$000 14,165 3,415 17,580
14 Interest in associated companies (Continued) Set out below is a summary of the financial information of BJOTV, a principal associated company and previously a jointly controlled entity:
2002 US$000 Turnover - as an associated company - as a jointly controlled entity 2001 US$000

Trade payables The ageing analysis of trade payables is as follows: Group 2002 US$30 days days days Over 90 days 127,238 78,950 74,277 111,853 392,US$000 161,545 64,352 46,859 51,435 324,191
Amount due to an associated company The amount due to an associated company represents cash received on behalf of an associated company. The amount is unsecured, interest-free and has no fixed repayment terms.
Warranty provisions Group US$000 At 1st January 2002 Charged to the profit and loss account Utilized during the year At 31st December 2002 8,571 12,355 (10,626) 10,300
The Group gives three-year warranties on certain products and undertakes to repair or replace items that fail to perform satisfactorily. The provision as at 31st December 2002 has been made for expected warranty claims on products sold during the last three financial years. It is expected that the majority of this expenditure will be incurred in the next financial year, and all will be incurred within two years of the balance sheet date.
23 Pledge of assets Approximately US$33.9 million (2001: US$26.8 million) of fixed assets, US$46.0 million (2001: US$46.0 million) of inventories and US$36.5 million (2001: US$36.7 million) of bank deposits have been pledged as security for the general banking facilities amounting to US$477.0 million (2001: US$304.5 million) granted to the Group. At the balance sheet date, the amount so utilized amounting to US$10.9 million (2001: US$26.5 million).
Share capital 2002 US$000 Authorized: 4,000,000,000 (2001: 4,000,000,000) ordinary shares of US$0.01 each Issued and fully paid: 1,332,515,264 (2001: 1,215,381,264) ordinary shares of US$0.01 each 2001 US$000

40,000

13,325

12,154

A summary of the above movements in issued share capital of the Company is as follows: Number of issued ordinary shares of US$0.01 each At 31st December 2001 Issue of shares pursuant to the exercise of share options (Note (a)) Subscription of shares (Note (b)) At 31st December 2002 1,215,381,264 12,134,000 105,000,000 1,332,515,264
Par value US$000 12,1,050 13,325
The following alterations in the Companys issued share capital took place during the year: (a) During the year, 12,134,000 new shares of US$0.01 each were issued upon the exercise of options under a share option scheme approved by the shareholders of the Company on 21st September 1999 (the Option Scheme) at an exercise price of HK$0.67 (US$0.09) per share. These shares rank pari passu with the existing shares of the Company. On 29th May 2002, the Company entered into a subscription agreement with Fields Pacific Limited (Fields), the ultimate holding company of the Company, pursuant to which the Company allotted and issued to Fields 105,000,000 new shares of US$0.01 each at a subscription price of HK$2.92 (US$0.37) per share totaling HK$306,600,000 (US$38,850,000) on 11th June 2002. These shares rank pari passu with the existing shares of the Company. The net proceeds of the subscription amounted to approximately US$38,395,000 were used for improvement of production facilities and general working capital of the Group.

26 Pension obligations (Continued) Movement in the liability recognized in the balance sheet: 2002 US$000 At 1st January 2002 Total expense, included in staff costs (Note 9) Contributions paid At 31st December 2002 The principal actuarial assumptions used were as follows: 2002 % Discount rate Expected rate of return on plan assets Expected rate of future salary increases 3.75 3.75 3.00 1,493 (112) 1,381
Long-term bank loan, unsecured The long-term bank loan is repayable as follows: Group and Company US$000 In the second year In the third to fifth year 25,000 25,000 50,000 US$000 -
The loan is granted by a group of banks and is guaranteed unconditionally and irrevocably by two subsidiaries of the Company, namely Top Victory International Limited and Top Victory Investments Limited.
28 Notes to the consolidated cash flow statement (a) Reconciliation of operating profit to net cash inflow generated from operations 2002 US$000 Operating profit Interest income Depreciation Amortization of intangible assets (Gain)/loss on disposal of fixed assets Gain on disposal of other investments Operating profit before working capital charges Decrease in amount due to a jointly controlled entity Decrease/(increase) in net amounts due from associated companies Increase in trade receivables Increase in deposits, prepayments and other receivables (Increase)/decrease in inventories Increase in trade payables Increase in warranty provisions, other payables, accruals and pension obligations Net cash inflow generated from operations (b) Analysis of changes in financing during the year Share capital including premium and share redemption reserve US$000 At 1st January Issue of new shares Repurchase of shares Net repayment of short-term loans Long-term bank loan raised Decrease/(increase) in pledged bank deposits At 31st December 40,294 39,437 US$000 39,(28) 55,215 (1,274) 16,(80) 70,997 45,914 (10,350) (25,172) (43,936) 68,127 12,017 117,597 Restated 2001 US$000 51,174 (1,755) 15,261 (245) 65,555 (4,585) (22,129) (43,046) (9,910) 42,790 70,756 13,585 113,016
Bank loans US$000 26,461 (15,533) 50,000 US$000 80,965 (54,504) -
Pledged bank deposits US$000 (36,662) US$000 (31,867) -

79,731

40,294

60,928

26,461

168 (36,494)

(4,795) (36,662)
28 Notes to the consolidated cash flow statement (Continued) (c) Major non-cash transaction At 31st December 2001, the Company issued and allotted a total of 2,855,089 new ordinary shares of US$0.01 each as scrip dividend in lieu of cash amounting to US$602,449 to certain shareholders.

6. Securities Issue Mandate (Continued) (d) for the purpose of this Resolution: Relevant Period means the period from the passing of this Resolution until whichever is the earlier of: (i) (ii) the conclusion of the next annual general meeting of the Company; the expiration of the period within which the next annual general meeting of the Company is required by the Bye-laws of the Company or any applicable laws of Bermuda to be held; and (iii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the shareholders of the Company in general meeting. Rights Issue means an offer of shares open for a period fixed by the directors of the Company to holders of shares of the Company or any class thereof whose names appear on the registers of members of the Company on a fixed record date in proportion to their then holdings of such shares or class thereof (subject to such exclusions or other arrangements as the directors of the Company may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognized regulatory body in Bermuda, Hong Kong and Singapore). 7. Extension of the Securities Issue Mandate As regards the extension of shares repurchased under the Repurchase Mandate, to consider and, if thought fit, to pass, with or without amendments, the following resolution as Ordinary Resolution No. III: THAT subject to the passing of Ordinary Resolutions Nos. I and II, the general mandate granted to the directors of the Company to allot, issue and deal with additional securities in the capital of the Company pursuant to Ordinary Resolution No. II be and is hereby extended by the addition thereto of an amount representing the aggregate nominal amount of the shares repurchased by the Company under the authority granted pursuant to Ordinary Resolution No. I, provided that such amount shall not exceed 10% of the aggregate nominal amount of the share capital of the Company in issue as at the date of the passing of this Resolution.
8. Adoption of the New Share Option Scheme As regards the adoption of the new share option scheme, to consider and, if thought fit, to pass, with or without amendments, the following resolution as Ordinary Resolution No.IV: THAT (a) the new share option scheme of the Company (a copy of which has been initialled by the Chairman of this meeting and for the purpose of identification marked A) be and is hereby adopted with immediate effect; (b) the existing share option scheme of the Company adopted pursuant to an ordinary resolution passed by the shareholders of the Company on 21st September 1999 be terminated with immediate effect; and (c) to issue and allot from time to time such number of shares pursuant to the exercise of the options under the new share option scheme to the extent of 10% of the issued share capital of the Company as at the date of the approval of the new share option scheme. On behalf of the Board