宁通信B(200468)宁通信Ｂ2005年年度报告摘要（英文版）

Nanjing Putian Telecommunications Co., Ltd. Summary of 2005 Annual Report (Based on IFRS) §1 Important Note 1.1 The Board of Directors, the Supervisory Committee as well as the directors, supervisors and senior management of the Company hereby confirm that there are no factitious record, misleading statements or material omission in the information carried in this report, and collectively and individually accept full responsibility for the truthfulness, accuracy and completeness of the whole contents. This summary is abstracted from the full text of the annual report. Investors may read the full text for the detailed contents. 1.2 None of the directors, supervisors and senior executives has announced that he/she could not confirm the truthfulness, accuracy and completeness of the contents of the report or held an objection on that. 1.3 Nine directors were present at the board meeting, including Mr. Li Weide who authorized Mr. Zhao Xinping to attend the meeting on his behalf. . 1.4 A standard unqualified audit report has been issued to the Company by Horwath Hong Kong CPA Limited. 1.5 The Company’s Legal Representative Li Weide, General Manager Sun Liang, and Associate Chief Accountant Shi Lian hereby confirm that the financial report in this report is truthful and complete. 1.6 This report is prepared both in Chinese and in English. In case of any inconsistency between the two versions, the Chinese version should prevail. §2 Profiles of the Company 2.1 Company profile Stock Abbreviation NJ TEL Stock Code 200468 Listing and Trading Place Shenzhen Stock Exchange Registered address ： No. 58 Qinhuai Road, Jiangning Registered address and business Economics and Technology Development Zone, Nanjing, address Jiangsu Province PRC Business address：No. 1 Putian Road, Qinhuai District Nanjing Postal code of registered address：211100 Postal Code Postal code of business address：210012 Web Site www.postel.com.cn Email Address securities@postel.com.cn 2.2 Contact information Secretary of the BOD Securities Affair Representative Name Xiao Zhaokai Shi Lian No. 1 Putian Road, Qinhuai District No. 1 Putian Road, Qinhuai District Mailing Address Nanjing Nanjing -1- Telephone 025-52418518-2278 025-52418518-2258 Fax 025-52409954 025-52409954 Email xzk@postel.com.cn sl@postel.com.cn §3 Financial & Operating Highlights 3.1 Main accounting data(RMB’000) Year-on-year 2004(before 2005 2004 increase/decre 2003 adjusted) ase（％） Revenue 775,783 851,292 851,292 -8.87% 818,647 Profit Before Tax 9,228 -34,885 -34,885 126.45% 13,922 Profit/(loss) attributable to -263 -36,614 -27,461 99.28% 12,068 equity holders of the parent Net Cash Generated from -5,774 58,806 16,109 -109.82% 53,813 Operating Activities 2004 Year-end Increase/decre 2005 Year-end 2004 Year-end (before ase of the 2003 Year-end adjusted) balance（％） Total Assets 1,085,994 948,276 948,276 14.52% 1,026,102 Shareholder’s 329,168 329,040 339,948 0.04% 366,365 Equity(excluding minor shareholder’s equity) 3.2 Main financial indicators(Yuan) Year-on-year 2004(before 2005 2004 Increase/decre 2003 adjusted) ase Earnings Per Share -0.001 -0.170 -0.128 99.28% 0.056 Return on Net Assets(%) -0.08% -11.13% -8.08% 11.05% 3.29% Net Cash Generated from -0.027 0.274 0.075 -109.82% 0.250 Operating Activities Per Share 2004 Year-end Increase/decre 2005 Year-end 2004 Year-end (before ase of the 2003 Year-end adjusted) balance（％） Net Assets Per Share 1.531 1.530 1.581 0.04% 1.704 3.3 Discrepancy between operating results audited under CAS and IFRS(RMB’000) √Applicable □ Inapplicable Per CAS Account Per IFRS Account Net Profit 6,303 -263 Profit for the year Equity attributable to Explanation on the discrepancy attributable to equity equity holders of the holders of the parent parent As determined pursuant to PRC accounting 6,303 341,275 regulations Adjustment for provision of staff welfare and (60) - bonuses Income and expenditure taken directly to 52 - reserves Recognition of losses of subsidiaries in excess (2,970) - of the Company’s investment costs in profit and loss account -2- Recognition of losses attributable to the (2,246) (13,154) minority over their contribution in the Company’s accounts Difference in recognition and amortisation of (1,333) 1,047 goodwill Minority interests (9) - As determined pursuant to IFRS (263) 329,168 §4 Share Capital Variation & Shareholder Introduction 4.1 Changes of the Company’s shares Increase/decre Year-beginning ase during the Year-end year Number Proportion Number Proportion Non-tradable shares 1.Promoter shares 115,000,000 53.49% 115,000,000 53.49% Including: State-owned shares 115,000,000 53.49% 115,000,000 53.49% Domestic legal person shares Foreign legal person shares Other 2.Placement legal person shares 3.Employee’s shares 4.Preference shares and other Listed shares 1.RMB ordinary shares 2.Domestically-listed foreign shares 100,000,000 46.51% 100,000,000 46.51% 3.Overseas listed foreign shares 4.Other Shares in total 215,000,000 100% 215,000,000 100% 4.2 Top ten shareholders & top ten holders of tradable shares Total number of shareholders 17410 Top ten shareholders Non-tradable Number of Shareholder’s Type of Proportion in shares held Shareholding mortgaged or name shareholder share capital by the frozen shares shareholder China Potevio State-owned 53.49% 115,000,000 115,000,000 0 Company legal person Limited shareholder Cai Weiguang B-shareholder 0.21% 460,000 0 Unknown Chen Chaofan B-shareholder 0.19% 416,879 0 Unknown Lin Xiaoyan B-shareholder 0.19% 410,542 0 Unknown Lin Wenguang B-shareholder 0.17% 357,698 0 Unknown Li Yi B-shareholder 0.16% 351,837 0 Unknown Wu Fenqian B-shareholder 0.15% 332,900 0 Unknown Ye Zhuanyou B-shareholder 0.15% 322,900 0 Unknown WONG LAI B-shareholder 0.14% 308,600 0 Unknown -3- Zhang Zhimei B-shareholder 0.13% 285,600 0 Unknown Top ten shareholders of circulating shares Shareholder’s name Number of circulating Share type shares Cai Weiguang 460,000 B-share Chen Chaofan 416,879 B-share Lin Xiaoyan 410,542 B-share Lin Wenguang 357,698 B-share Li Yi 351,837 B-share Wu Fenqiang 332,900 B-share Ye Zhuanyou 322,900 B-share WONG LAI 308,600 B-share Zhang Zhimei 285,600 B-share Huang Peiling 276,600 B-share Specification of related parties Among the top ten shareholders, China Potevio Company Limited or persons acting in concert is neither a related party nor a person acting in concert with the among the above shareholders others. It’s unknown by the Company whether there are related parties or persons acting in concert among the other shareholders. The Company does not know whether there are related parities or persons acting in concert among the top ten holders of circulating shares. 4.3 Introduction of the controlling shareholder and effective controller of the Company 4.3.1 Changes of the Company’s controlling shareholder or effective controller during the year √Applicable □ Inapplicable Name of the new controlling shareholder China Potevio Company Limited Date of the change of a controlling shareholder 28 June 2005 Date of disclosure of the change and the 30 June 2005 newspaper on which the announcement was the Securities Times, Ta Kung Pao published 4.3.2 Details of the controlling shareholder and the effective controller Name of the controlling shareholder: China Potevio Company Limited Company type: a company limited by shares Legal representative: Xing Wei Date of corporation: July 23, 2003 Registered capital: RMB 1.9 billion Business scope: to develop, manufacture, sell and provide services for mobile telecommunications products and terminal equipment, data communication products, internet communication products, computers, software as well as related spare and parts of these products; to engage in technology transfer, consultancy and services; to engage in project contracting and design; to engage in industry investment. Name of the Company’s effective controller: China Putian Corporation Company type: state-owned sole enterprise Legal representative: Xing Wei Registered capital: RMB 1093.37 million -4- Date of corporation: 1980 Business scope: to develop and manufacture various communications equipment such as large-scale digital program-controlled switchboard, GSM and CDMA mobile telecommunication equipment and mobile phone, IP serial products, micro-wave telecommunication equipment, optical telecommunication equipment, optical and electric telecommunication cable, communication power supply, distribution equipment, IC phone, multi-media computer terminal, fax machine, postal mechanic and so on; engage in contract for international and domestic telecommunication project, engage in technical and economic business such as cooperation, technology introduction, import and export of relevant products. Originally named China Posts and Telecommunications Industry Corporation, China Putian Corporation is a large-scale enterprise under the State-owned Assets Supervision and Administration Commission of the State Council (“SASAC”). 4.3.3 The diagram illustrating the ownership and controlling relationship between the Company and its effective controller SASAC 100% China Putian Corporation 100% China Putian Corporation 53.49% Nanjing Putian Telecommunications Co., Ltd. §5 Directors, Supervisors & Senior Management 5.1 Changes of the number of shares held by the directors, supervisors and senior management and the remuneration of the directors, supervisors and senior management Total Whether or remuneratio not receive n received remuneratio Shareholding from the n from a at Shareholding Reason of Name Position Sex Age Term of office Company shareholder year-beginnin at year-end the change during the or other g reporting related period(RMB parties ’000) June 2003 Li Weide Director Male 58 0 0 201.8 No -May 2006 -5- Chairman of Jan 2005 0 0 the BOD -May 2006 June 2005 Director 0 0 -May 2006 Sun Liang Male 41 118.8 No General Jan 2005 0 0 Manager -May 2006 Zhang June 2005 Director Male 48 0 0 0 Yes Xiaocheng -May 2006 Wu June 2003 Director Male 35 0 0 0 Yes Xiaohua -May 2006 June 2005 Jiang Kun Director Male 37 0 0 0 Yes -May 2006 Shi Independent June 2003 Male 50 0 0 30 No Director -May 2006 Jianjun Independent June 2003 Yang Zhen Male 44 0 0 30 No Director -May 2006 Yu Independent June 2003 Male 51 0 0 30 No Hongliang Director -May 2006 Chairman of Wang the June 2003 Male 55 0 0 0 Yes Jiaqiang Supervisory -May 2006 Committee Xu June 2005 Supervisor Female 37 0 0 0 Yes Xiaohui -May 2006 Shi June 2003 Supervisor Male 55 0 0 142.1 No Xinhua -May 2006 Deputy Jiang June 2003 General Male 50 0 0 153.8 No Haishan -May 2006 Manager Deputy June 2003 Sun Qiang General Male 48 0 0 186.3 No -May 2006 Manager Deputy Jiang June 2003 General Male 43 0 0 186.2 No Hanbin -May 2006 Manager Deputy Liu June 2003 General Male 51 0 0 163.7 No Chuanxi -May 2006 Manager Deputy June 2003 Yuan Yong General Male 42 0 0 194.1 No -May 2006 Manager Deputy Zou June 2003 General Male 45 0 0 194.2 No Dezhong -May 2006 Manager Xiao Secretary of June 2003 Male 40 0 0 142.0 No Zhaokai the BOD -May 2006 Total - - - - 0 0 - 1,773 - §6 Report of the Board of Directors 6.1 Management’s discussion and analysis I. Review of operations during the reporting period 1. Discussion and analysis of the overall operating condition of the Company during the reporting period The Year 2005 was an important year for the Company. It was a year in which the Company -6- laid a solid foundation to make its industries stronger and better. During the year, the Company further sorted out its idea on the direction of its development, deciding to engage in three industries, including application industry, processing industry and integration trade industry. It put more efforts on capital operation and organizational adjustment, effectively optimizing its structure of production. During the year, the Company achieved awarding results in expanding both overseas and domestic markets, and successfully maintained the lead in market shares in the fields of distribution frame products, intelligent building products and electrical appliances. During the year, the Company developed a lot of new products and technology that were guided by the market demand and catered to the trend of technology development and the shift of customer needs, such as IP video terminal and digital Set-top Box, fostering many new economic growth points. Meanwhile, fundamental management was further intensified by the standard of simplicity, high-efficiency and pragmatism, and good results were achieved in different areas such as cost control, financial management and human resources system establish. The revenue and profit for the reporting period is as follows(RMB’000): 2005 2004 Change(%) Change(%) Sales revenue 775,783 851,292 -75,509 -8.87% Gross profit 127,282 157,712 -30,430 -19.29% Profit/(loss) attributable -263 -36,614 36,351 99.28% to equity holders of the parent Decrease of revenue and gross profit was mainly due to the decrease of revenue from telecommunications products and electric appliances as a result of the rising of the raw material prices and the falling of the product prices. Main reasons for the growth of net profit were: compared with last year, administrative expenses dropped 70,490 thousand yuan, gain from disposal of subsidiaries rose 10,753 thousand yuan, and share of losses of associates decreased 6,842 thousand yuan. 2. Major suppliers and customers In 2005, the Company’s purchase from the top five suppliers amounted to RMB 209,418 thousand, accounting for about 28.27 percent of the total purchase, and sales to the top five customers amounted to RMB 67,202 thousand, accounting for about 8.66 percent of the total revenue. 3. Composition and changes of assets in the reporting period 2005 Year-en 2004Year-end Change(RMB’000) Change(%) Main factors that cause a d material change Receivables 461,221 399,743 61,478 15.38% Increase of trade and other and receivables prepayments Inventories 163,202 162,462 740 0.46% - Property, plant 116,873 130,702 -13,829 -10.58% Disposal of fixed assets and equipment Construction in 5,842 3,198 2,644 82.68% progress Short-term 434,000 349,200 84,800 24.28% Necessity for current capital bank loan turnover Long-term bank 35,000 35,000 0 0.00% - loan 2005 2004 Change(RMB’000) Change(%) Selling costs 72,511 71,546 965 1.35% - Administrative 34,111 104,589 -70,478 -67.39% Disposal of the inventories -7- expenses for which provisions for falling price reserves had been partly or wholly made Finance costs 18,235 18,174 61 0.34% - Tax 4,314 2,194 2,120 96.63% In this year the Company paid tax for the previous year 4. Composition of cash flows and material change 2005 2004 Change(’000) Change(%) Main factors that cause a material change Cash flows form operating -5,774 58,806 -64,580 -109.82% Trade and other payables activities increased as a result of the company’s taking advantage of its business credit, meanwhile raw material prices rose, causing the cost to rise Cash flows form investment 19,704 -1,809 21,513 1189.22% Gain on disposal of equity activities of subsidiaries Cash flows form financing -19,641 -32,123 12,482 38.86% Part of bank loans activities reached maturity at the end of 2005 and was obtained again at the begging of 2005 5. Operating results of main subsidiaries and associated companies in 2005 (Yuan) (1) Main subsidiaries Equity owned Registered Net Subsidiary by the Main business Total Assets Revenue capital Profit/loss Compa ny Nanjing Nanfang Manufacture and Telecommunication sales of data 98.24% 34,205,148 151,768,561 166,473,738 3,023,031 s Company Limited communication equipment Nanjing Putian Manufacture and Smart-building 41.35% sales of intelligent 12,000,000 70,397,899 104,372,072 9,381,797 Technology Ltd. building system Beijing Picom Network electronic Telecommunication products, digital USD 51% 19,699,861 34,912,371 -5,823,078 s Equipment Ltd. transmission 500,000 system Nanjing Putian Electric Hongyan Electric appliances, USD 51.2% 67,464,496 85,924,734 799,147 Appliance Company telecommunicatio 1,930,000 n parts Nanjing Putian manufacture and Network Company sales of software Ltd. of 91.16% telecommunicatio 10,000,000 8,460,788 2,687,041 -1,040,070 ns, network and electronic equipment Nanjing Putian Manufacture and Changle sales of Telecommunication 50.7% 5,000,000 16,527,651 40,284,057 2,776,816 telecommunicatio s Equipment Co., n equipment Ltd. -8- Putian Export and import Telecommunication of s (H.K.) Co., Ltd. telecommunicatio HKD 90% ns equipment, 19,260,914 16,459,727 5,903,136 2,000,000 Hi-tech R & D and transfer, technology trade Nanjing Postel Design, Wongzhi production and 90,000,000 67% 29,967,367 - 983,378 Telecommunication sales of CDMA ($10,900,000) s Co., Ltd. cell phone Note: The net profit of Nanjing Nanfang Telecommunications Company Limited increased 16.65 million Yuan from that of last year, mainly because that more provisions for receivables and inventories were made in last year, and meanwhile this year’s product gross margin was higher than last year’s. (2) Associated companies that contributed more than 10 percent of the Company’s net profit. Investment Equity owned Registered Income Company by the Main business Net profit capital contributed to Company the Company Data Xishan Putian communications, Information Network 49% 20,000,000 -4,072,968 -1,995,754 voice transmission, Co., Ltd. internet services II. Forecast of future development 1. Analysis of the trend of industrial development and market competition The Company is a telecommunications equipment manufacturer. With the soaring growth of telecommunications and internet industries, the telecommunications equipment manufacturers are faced with a golden opportunity for development, but meanwhile the competition in this industry is very fierce. The Company will try to grasp the opportunity, keeping up with the trend of new technologies such as 3G and FTTH, setting a target that conforms to the Company’s realities, entering the coordinated product market in a short time, ensuring it develops in a sustainable and healthy way. 2. Operating plan for the new year (1) Further conduct institutional restructure and enhance outside cooperation, facilitating new progress of the Company’s industries. (2) Strengthen the opening up of new markets both at home and abroad, enhance the sense of service and promote the standard of service, widening the influence of the Company’s brand, emphasizing effective publicity. (3) Make innovations, speeding up the development of new products, fostering new economic growth points for the Company. (4) Conduct reforms in mechanism and structure and implement capital operation to promote the development of the Company (5) Adopt a modern lean management model to raising work efficiency and try to gain actual effect (6) Strengthen the management and exploiting of human resources, building the corporate culture with a spirit of keeping innovation. 3. Fund demand and usage plan According to its operating plan, the Company needs current capital of about RMB 200 million in -9- 2006, which will mainly be its own funds and bank loans. 4. Difficulties and risks in operations (1) Due to hot market competition, production prices continued to fall in this year. Meanwhile, prices of raw materials got still higher, causing the production cost to rise. That is a difficulty the Company is faced with. In the last few years, the Company has taken a series measures, such as purchasing by public bidding and raising sales volume, to counteract the unfavorable influences. In the future it will adopt more methods including setting up a purchasing center to further control the cost and expenses. (2) In order to prevent and reduce financial risks, the Company will continue to clear up receivables, reduce inventories and conduct reorganization of assets to further perfect assets structure and enhance assets quality. 6.2 Classification of the Company’s main business in terms of industry and product (RMB’000) A breakdown of main business by industry Year-on-year A breakdown Year-on-year Year-on-year Gross margin increase/decre by industry or Revenue Cost increase/decrease increase/decrease （％） ase of gross product of revenue（％） of cost（％） margin（％） Telecommunic 654,019 546,452 16.45% -8.79% -6.31% -2.21% ations industry Electric 115,294 95,179 17.45% -8.69% -7.77% -0.82% appliances Other 6,470 4,060 37.25% -18.71% -16.73% -1.49% A breakdown of main business by product Distribution frame series 229,431 165,579 27.83% -10.08% -8.73% -1.07% product Comprehensiv e wiring and data 315,364 262,226 16.85% -6.08% -8.24% 1.96% transmission products Plugs and receptacles for 115,294 95,179 17.45% -8.69% -7.77% -0.82% industrial and civilian use Other 115,693 122,707 -6.06% -13.72% 1.45% -15.86% 6.3 Classification of main business in terms of region (RMB’000) Region Revenue Year-on-year increase/decrease（％） North China 194,470 -31.12% East China 306,398 13.27% Other regions 274,915 -7.89% 6.4 Usage of the proceeds raised from share issuing □ Applicable √ Inapplicable Changes of projects invested with the proceeds raised from share issuing □ Applicable √ Inapplicable 6.5 Projects not funded by the proceeds raised from share issuing □ Applicable √ Inapplicable -10- 6.6 Explanation of the BOD on the “non-standard opinion” issued by the accounting firm □ Applicable √ Inapplicable 6.7 Preplan on profit distribution or on transfer of capital surplus to share capital proposed by the Board of Directors □ Applicable √ Inapplicable The Company made a profit in the reporting period but did not propose a cash dividend declaration preplan √Applicable□ Inapplicable Reason for not proposing a cash dividend declaration preplan though making a profit in the Usage plan of retained earnings reporting period Audited by international accounting standard, the Company reported net loss of RMB 263 thousand for 2005 and accumulated losses of RMB 81,031 thousand at year-end (according to Chinese accounting standard, the Company reported net - profit of RMB 6,303,424 and attributable profit of RMB –86,314,665 at year-end). According to the fact, the Board of Directors advised that no dividends be declared for 2005, and that no capital reserve be transferred into share capital. §7 Significant Issues 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 Sale of assets □ Applicable √ Inapplicable Net profit Pricing contributing principle whether a to the listed Whether Whether the Profit/los related company the debts and s from transaction Transacting Selling Selling by the property liabilities Assets sold the o not (if party date price assets from right is involved is transacti yes, state the transferre totally on the pricing year-beginni d transferred t principle) ng to the selling date 45% equity Negotiated Shanghai of Nanjing price Linyan Putian 30 June according Investment 21,020.0 2,025.6 11,775.9 No Yes No Smart-buildin 2005 to Consulting g Company evaluated Company Ltd. Ltd. result 35% equity of Nanjing management Putian 20 May Negotiated of a Communicati 633.8 -30.2 -2.2 No Yes No 2005 price subsidiary ons Company Ltd. -11- The influence of the transactions in 7.1 and 7.2 on the continuity of the Company’s business and the stability of the management The above-mentioned assets purchase and selling will not affect the continuity of the Company’s business and the stability of the management. 7.3 Significant guarantee √ Applicable □ Inapplicable RMB’000 Guarantee offered by the Company(excluding the guarantee offered to the subsidiaries) Happening Date (the Guaranty Name of date when the Amount of Type of Term of Completed or whether offered the guaranty agreement guaranty guaranty guaranty not to a related party debtor was signed) or not - Accumulative amount of guaranty during 0 reporting period Balance of guarantee at the end of the 0 reporting period Guaranty offered to the subsidiaries Accumulative amount of guarantee offered to 44,000 the subsidiaries during this reporting period Balance of guarantee offered to the 35,000 subsidiaries at the end of this reporting period Total amount of guarantee offered by the Company(including guaranty offered to the subsidiaries) Total amount of guarantee 35,000 Proportion of the total amount of guarantee in 10.26% net assets Including: Amount of guarantee offered to the Company’s shareholders, actual controller 0 and their related parties Amount of guarantee directly or indirectly offered on the liabilities of a debtor whose 0 assets liabilities ratio was above 70% Amount of guarantee exceeding 50% of net 0 assets Total amount of the three types of guarantee 0 above 7.4 Material related-party transactions 7.4.1 Related-party transactions that are relevant to day-to-day operations √ Applicable □ Inapplicable (Yuan) Sales to the related parties Purchase from the related parties Proportion in the Proportion in the Related party Amount of the tr Amount of the tr same type of same type of ansaction ansaction transaction transaction Shanghai Posts & 484,501 0.06% Telecommunications Equipment Co., Ltd. Chongqing Putian 2,092,996 0.27% Communication Equipment Co., Ltd. Shanghai Huanying Display 5,892,906 0.76% Technology Company Ltd. Shenzhen Putianlingyun 245,299 0.03% Electronic Ltd. Naning Putian Zhongyou 686,476 0.09% Telecommunications Co., Ltd. Guangxi Putainyoutong 392,405 0.05% Telecommunications Equipment -12- Company Ltd. Nanjing Putian Datang 1,111,043 0.14% Information Electric Company Ltd. Nanjing Yuhua Electroplating 1,824,015 0.24% Factory Total 10,905,626 1.40% 1,824,015 0.24% 7.4.2 Receivables and payables with the related parties √ Applicable □ Inapplicable (Yuan) Fund provided by the listed Fund provided to the listed company to related parties company by related parties Name of the related party Accumulative Accumulative Balance at year-e Balance at year-e Amount in the Amount in the nd nd year year Xishan Putian Information 0 1,000,000 0 0 Network Co., Ltd. Total 0 1,000,000 0 0 Note: the accumulative amount of fund provided by the Company to its controlling shareholder and the subsidiaries of the controlling shareholder during the reporting period is zero Yuan, and the balance at the end the reporting period is zero Yuan. Fund occupation by major shareholders and clear-up plan □ Applicable √ Inapplicable Whether the clear-up plan can ensure a radical solution of the problem by the end of 2006 □ Yes □ No √ Inapplicable 7.5 Entrustment investment □ Applicable √ Inapplicable 7.6 Fulfillment of commitment 7.6.1 Schedule for the split share structure reform The Company enquired the shareholder of the Company’s non-tradable shares, and was informed that the shareholder had no plans for the split share structure reform at present because according to the current government policy, the listed companies that had only issued B shares except non-tradable shares were not permitted to conduct the reform. 7.6.2 Other Commitment □ Applicable √ Inapplicable 7.7 Significant lawsuit or arbitration □ Applicable √ Inapplicable §8 Report of the Supervisory Committee □ Applicable √ Inapplicable §9 Financial Report 9.1 Auditor’s opinion -13- Auditor’s opinion: standard unqualified opinion 9.2 Financial Statements -14- 9.2.1 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 (Expressed in Renminbi thousands) 2005 2004 Notes RMB’000 RMB’000 (Restated) Turnover 5 775,783 851,292 Cost of sales (648,501) (693,580) Gross profit 127,282 157,712 Other operating income 6 1,641 7,324 Selling expenses (72,511) (71,546) Administrative expenses (34,099) (104,589) Profit/(loss) from operations 22,313 (11,099) Other gains and losses 7 (3,553) 3,280 Finance costs 8 (18,235) (18,174) Gain/(loss) on disposal of subsidiaries 10,698 (55) Share of losses of associates (1,995) (8,837) Profit/(loss) before taxation 9 9,228 (34,885) Taxation 11 (4,314) (2,194) Profit/(loss) for the year 4,914 (37,079) Attributable to: Equity holders of the parent (263) (36,614) Minority interests 5,177 (465) 4,914 (37,079) Basic loss per share 12 RMB (0.001) RMB (0.17) -15- 9.2.2 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 (Expressed in Renminbi thousands) 2005 2004 Notes RMB’000 RMB’000 (Restated) Non-current assets Property, plant and equipment 13 116,873 130,702 Construction in progress 5,842 3,198 Land use rights 14 33,632 34,410 Interests in associates 15 1,408 2,803 Available-for-sale investments 17 1,212 4,780 Intangible assets 18 5,503 9,844 164,470 185,737 Current assets Inventories 19 163,202 162,462 Trade and other receivables 20 461,221 399,743 Investments held for trading - 363 Pledged bank deposits 103,000 - Cash and bank balances 194,101 199,971 921,524 762,539 I. Current liabilities Bank loans 21 434,000 349,200 Tax payable 1,199 1,123 Trade and other payables 22 222,295 175,806 657,494 526,129 Net current assets 264,030 236,410 Total assets less current liabilities carried forward 428,500 422,147 -16- NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2005 (Expressed in Renminbi thousands) 2005 2004 Notes RMB’000 RMB’000 (Restated) Total assets less current liabilities brought forward 428,500 422,147 Non-current liabilities Bank loans 21 35,000 35,000 Employee housing benefits payable 10,691 15,069 Other non-current liabilities 80 2,529 (45,771) (52,598) Net assets 382,729 369,549 Equity Share capital 23 215,000 215,000 Reserves 24 114,168 114,040 Attributable to equity holders of the parent 329,168 329,040 Minority interests 53,561 40,509 Total equity 382,729 369,549 -17- 9.2.3 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2005 (Expressed in Renminbi thousands) Statutory and Attributabl discret e -ionary Statutory Exchange to equity surplus public Accumu- holders of Share Capital reserve welfare translation Other lated the Minority Total Capital surplus fund fund reserve reserves losses parent interests Equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Notes (Note 24 (Note 23) 24(a)&( c)) (b)) At 1 January 2004 - As previously reported 215,000 167,664 15,216 9,640 (14) 115 (41,256) 366,365 15,820 382,185 - Prior year adjustment (Note 28) - - - - - - (1,755) (1,755) 1,755 - - As restated 215,000 167,664 15,216 9,640 (14) 115 (43,011) 364,610 17,575 382,185 Exchange translation difference - - - - (109) - - (109) - (109) Share of waived debts of an associate - 423 - - - - - 423 - 423 Others - 730 - - - - - 730 - 730 Net income recognised directly in equity - 1,153 - - (109) - - 1,044 - 1,044 Loss for the year - - - - - - (36,614) (36,614) (465) (37,079) Total income and expenses recognised for the year - 1,153 - - (109) - (36,614) (35,570) (465) (36,035) Acquisition of subsidiaries - - - - - - - - 20,711 20,711 Disposal of a subsidiary - - - - - - - - (41) (41) Changes in minority interests - - - - - - - - 852 852 Capital contributed by minority shareholders - - - - - - - - 3,165 3,165 Dividend paid to minority shareholders - - - - - - - - (1,288) (1,288) Profits appropriation of subsidiaries - - 935 414 - - (1,349) - - - At 31 December 2004 215,000 168,817 16,151 10,054 (123) 115 (80,974) 329,040 40,509 369,549 -18- NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2005 (Expressed in Renminbi thousands) Statutory and Attributabl discret e -ionary Statutory Exchange to equity surplus public Accumu- holders of Share Capital reserve welfare translation Other lated the Minority Total Capital surplus fund fund reserve reserves losses parent interests Equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Notes (Note 24 (Note 23) 24(a)& (c)) (b)) At 1 January 2005 - As previously reported 215,000 168,817 16,151 10,054 (123) 115 (70,066) 339,948 29,601 369,549 - Prior year adjustment (Note 28) - - - - - - (10,908) (10,908) 10,908 - - As restated 215,000 168,817 16,151 10,054 (123) 115 (80,974) 329,040 40,509 369,549 Exchange translation difference recognised directly in equity - - - - 391 - - 391 - 391 (Loss)/profit for the year - - - - - - (263) (263) 5,177 4,914 Total income and expenses recognised for the year - - - - 391 - (263) 128 5,177 5,305 Partial disposal of a subsidiary - - - - - - - - 10,316 10,316 Elimination on disposal of a subsidiary - - (792) (356) - - 1,148 - - - Changes in minority interests - - - - - - - - (1,000) (1,000) Dividend paid to minority shareholders - - - - - - - - (1,441) (1,441) Profits appropriation by subsidiaries - - 678 264 - - (942) - - - At 31 December 2005 215,000 168,817 16,037 9,962 268 115 (81,031) 329,168 53,561 382,729 -19- 9.2.4 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2005 (Expressed in Renminbi thousands) 2005 2004 Note RMB’000 RMB’000 (Restated) Operating activities Profit/(loss) before taxation 9,228 (34,885) Adjustment for: Depreciation 17,242 15,088 Provision for impairment loss on property, plant and equipment - 256 (Write back of)/provision for bad and doubtful debts of trade and other receivables (426) 4,403 (Write back of)/provision for slow-moving inventories (19,071) 27,194 Amortisation of land use rights and intangible assets 5,436 6,425 Interest expenses 22,121 20,554 Interest income (4,857) (3,392) Share of losses of associates 1,995 8,837 Negative goodwill credited to income statement - (8,103) Loss/(gain) on disposal of property, plant and equipment 981 (43) Gain on disposal of investments held for trading (359) - Gain on partial disposal of equity interest of a subsidiary (10,704) - Loss on disposal of subsidiaries 27 6 55 Cash flows before changes in working capital 21,592 36,389 Decrease in inventories 17,406 27,277 Increase in trade and other receivables (65,252) (3,917) Increase/(decrease) in trade and other payables 53,036 (20,508) Decrease in employee housing benefits payable (4,378) (6,511) Decrease in other non-current liabilities (2,449) - Decrease in bank fixed deposits with maturity over 3 months - 49,208 Effect of foreign exchange rate changes 550 - Cash generated from operations 20,505 81,938 Interest paid (22,121) (17,162) Income tax paid (4,158) (5,970) Net cash (used in)/generated from operating activities (5,774) 58,806 -20- NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2005 (Expressed in Renminbi thousands) 2005 2004 Note RMB’000 RMB’000 (Restated) Investing activities Proceeds from disposal of property, plant and equipment 1,955 695 Purchase of property, plant and equipment, and payments on construction in progress (9,147) (9,561) Purchase of investments held for trading - (363) Purchase of intangible assets (317) (2,049) Proceeds from disposal of investments held for trading 722 - Increase in investment in an associate (600) - Purchase of subsidiaries - 8,795 Refund of deposit on investment 2,500 - Purchase of additional equity interest of a subsidiary - (75) Dividends from associates - 790 Disposal of a subsidiary 27 (1,286) (41) Partial disposal of equity interest of a subsidiary 21,020 - Interest received 4,857 - Net cash generated from/(used in) investing activities 19,704 (1,809) Financing activities New borrowing of bank loans 464,000 381,000 Repayment of bank loans (379,200) (415,000) Capital contributed by minority shareholders - 3,165 Increase in pledged bank deposits (103,000) - Dividend paid to minority shareholders (1,441) (1,288) Net cash used in financing activities (19,641) (32,123) Net (decrease)/increase in cash and cash equivalents (5,711) 24,874 Cash and cash equivalents at beginning of year 199,971 175,097 Effect of foreign exchange rate changes (159) - Cash and cash equivalents at end of year 194,101 199,971 -21- 9.3 Changes in accounting policy, accounting estimate and accounting method compared with that of the last annual report □ Applicable √ Inapplicable 9.4 Items, corrected amount, reason and influence of material accounting mistakes □ Applicable √ Inapplicable 9.5 Changes in consolidating scope compared with that of last year √ Applicable □ Inapplicable In this year the company sold a 35% equity interest in Nanjing Putian Telecommunications Shiye Company Ltd. Prior to the disposal, the Company held a 45% equity in the subsidiary. Accordingly the financial statements of the subsidiary had not been consolidated. Nanjing Putian Telecommunications Co., Ltd. April 11, 2006 -22-