宁通信Ｂ(200468)2006年年度报告摘要（英文版）

Nanjing Putian Telecommunications Co., Ltd. Summary of 2006 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 omissions 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 details. 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 Ms. Fu Ruolin, Mr. Li Tong and Mr. Yang Zhen who respectively authorized Mr. Zhou Desheng, Mr. Zheng Jianhua and Mr. Yu Hongliang to attend the meeting and vote on his/her behalf due to official business. . 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 Mr. Zhao Xinping, General Manager Mr. Sun Liang, and Associate Chief Accountant Mr. 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 No. 58 Qinhuai Road, Jiangning Economics and Technology Postal code of registered address Development Zone, Nanjing, Jiangsu Province PRC Postal Code 211100 Business address No. 1 Putian Road, Qinhuai District Nanjing 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 Zhang Shenwei No. 1 Putian Road, Qinhuai District No. 1 Putian Road, Qinhuai District Mailing Address Nanjing Nanjing -1- Telephone 025-52418518-2278 025-52418518-2073 Fax 025-52409954 025-52409954 Email xzk@postel.com.cn zsw@postel.com.cn §3 Financial & Operating Highlights 3.1 Main accounting data(RMB’000) Year-on-year 2004(before 2006 2005 increase/decre 2004 adjusted) ase（％） Revenue 991,795 775,783 27.84% 851,292 851,292 Profit Before Tax -658 9,228 -107.13% -34,885 -34,885 Profit/(loss) attributable to -11,137 -263 -4134.60% -36,614 -27,461 equity holders of the parent Net Cash Generated from -27,914 -5,774 -383.44% 58,806 16,109 Operating Activities Increase/decre 2004 Year-end 2006 Year-end 2005 Year-end ase of the 2004 Year-end (before balance（％） adjusted) Total Assets 1,153,043 1,085,994 6.17% 948,276 948,276 Shareholder’s 317,138 329,168 -3.65% 329,040 339,948 Equity(excluding minor shareholder’s equity) 3.2 Main financial indicators(Yuan) Year-on-year 2004(before 2006 2005 Increase/decre 2004 adjusted) ase Earnings Per Share -0.052 -0.001 -4134.60% -0.170 -0.128 Return on Net Assets(%) -3.51% -0.08% -3.43% -11.13% -8.08% Net Cash Generated from -0.130 -0.027 -383.44% 0.274 0.075 Operating Activities Per Share Increase/decre 2004 Year-end 2006 Year-end 2005 Year-end ase of the 2004 Year-end (before balance（％） adjusted) Net Assets Per Share 1.531 1.531 0.04% 1.530 1.581 3.3 Discrepancy between operating results audited under CAS and IFRS(RMB’000) √Applicable □ Inapplicable Per CAS Account Per IFRS Account Net Profit 4,118 -11,137 Explanation on the (Loss)/profit for the year attributable to equity discrepancy holders of the parent As determined pursuant to PRC accounting regulations 4,118 Adjustment for provision of staff welfare and bonuses (72) Recognition of losses of subsidiaries in excess of the Company’s investment costs in profit and loss account (28,218) -2- Write back of losses attributable to the minority over their contribution in the Company’s accounts 13,154 Difference in recognition and amortisation of goodwill (119) As determined pursuant to IFRS (11,137) §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 115,000,000 53.49% 115,000,000 53.49% 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 100,000,000 46.51% 100,000,000 46.51% 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 15807 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 Chan Keung B-shareholder 0.59% 1,265,600 0 Unknown Zheng Ganch B-shareholder 0.32% 692,946 0 Unknown ABN AMRO B-shareholder 0.30% 655,600 0 Unknown BANK NV Chen Chaofan B-shareholder 0.19% 416,979 0 Unknown -3- Zhong Guowei B-shareholder 0.19% 412,600 0 Unknown Zhao Guanghui B-shareholder 0.18% 377,650 0 Unknown Li Y B-shareholder 0.16% 351,837 0 Unknown THE CHINA B-shareholder 0.16% 337,900 0 Unknown INDEX FUND LIMITED Ye Zhuanyou B-shareholder 0.15% 322,900 0 Unknown Top ten shareholders of tradable shares Shareholder’s name Number of tradable shares Share type Chan Keung 1,265,600 B-share Zheng Ganchi 692,946 B-share ABN AMRO BANK NV 655,600 B-share Chen Chaofan 416,979 B-share Zhong Guowei 412,600 B-share Zhao Guanghui 377,650 B-share Li Yi 351,837 B-share THE CHINA INDEX FUND 337,900 B-share LIMITED Ye Zhuanyou 322,900 B-share Lin Xiaoyan 310,000 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-mentioned others. It’s unknown by the Company whether there are related shareholders 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 tradable 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 4.3.2 Introduction 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 Principal business: to develop, manufacture, sell and provide services for mobile telecommunications system and terminals, Internet communication equipment and terminals, radio and TV equipment and terminals, computers, software, system integration, optical cable, postal equipment and related spare and parts; to contract domestic and overseas projects, to undertaken project planning, designing and inspection; to produce, sell and maintain mechanical and electrical products, mechanical devices, instruments, meters and related spare and parts; to engage in industry investment; to provide technology transfer, consultancy and services; import and export. Name of the Company’s effective controller: China Putian Corporation Company type: state-owned sole enterprise -4- Legal representative: Xing Wei Registered capital: RMB 1093.37 million Date of corporation: 1980 Business scope: to organize its subsidiaries 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. 4.3.3 The diagram illustrating the ownership and controlling relationship between the Company and its effective controller State-owned Assets Supervision and Administration Commission of the State Council 100% China Putian Corporation 100% China Potevio Company Limited 53.49% Nanjing Putian Telecommunications Co., Ltd. §5 Directors, Supervisors & Senior Management 5.1 Changes of shareholding 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) Zhao Chairman of Male 40 May 2006 0 0 0 Yes -5- Xinping the BOD -May 2009 Vice chairman of May 2006 Sun Liang the BOD, Male 42 0 0 201.4 No -May 2009 General Manager Zheng May 2006 Director Male 34 0 0 0 Yes Jianhua -May 2009 May 2006 Li Tong Director Male 36 0 0 0 Yes -May 2009 Zhou May 2006 Director Male 32 0 0 0 Yes Desheng -May 2009 May 2006 Fu Ruolin Director Female 36 0 Yes -May 2009 Independent May 2006 Yang Zhen Male 45 0 0 No Director -May 2009 41.7 Yu Independent May 2006 Male 52 0 0 No Hongliang Director -May 2009 41.7 Independent May 2006 Shi Jiguo Male 52 0 0 No Director -May 2009 29.2 Chairman of Wang the May 2006 Male 58 0 0 0 Yes Zhiqi Supervisory -May 2009 Committee Xiong May 2006 Supervisor Male 44 0 0 0 Yes Weihua -May 2009 Shi May 2006 Supervisor Male 56 0 0 No Xinhua -May 2009 111.6 Deputy Jiang May 2006 General Male 51 0 0 No Haishan -May 2009 Manager 131.9 Deputy May 2006 Sun Qiang General Male 49 0 0 No -May 2009 Manager 136.5 Deputy Jiang May 2006 General Male 44 0 0 No Hanbin -May 2009 Manager 130.7 Deputy Liu May 2006 General Male 52 0 0 No Chuanxi -May 2009 Manager 127.7 Deputy May 2006 Yuan Yong General Male 43 0 0 No -May 2009 Manager 134.9 Deputy Zou May 2006 General Male 46 0 0 No Dezhong -May 2009 Manager 141.8 Secretary of the BOD, Xiao May 2006 Deputy Male 41 0 0 No Zhaokai -May 2009 General Manager 116.9 Total - - - - 0 0 - 1346.0 - §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 2006 was an important year for the Company in which we made a breakthrough -6- and advanced vigorously in an innovative spirit. In the face of hot market competition, we pressed ahead with the reform of management mechanism, and promoted organizational restructuring and refined management with focus on the fulfillment of operating target. In order to adapt to the situation in the transitional period of telecommunications industry, we further adjusted structure of production to ensure steadily development in application industry, processing industry and integration trade industry. According to the domestic and overseas conditions of telecommunications industry, we intensified market exploration with emphasis on strategic analysis of market development. And the marketing system was optimized. In response to the demand of market, we accelerated technological and technical innovation and put out a lot of new products to enhance our core competitiveness. Meanwhile, we gradually carried forward with the reform of operation mechanism and the implementation of refined management, and strengthened internal control. Under the effort of the whole staff, the annual operation budget was accomplished smoothly. The revenue and profit for the reporting period is as follows(RMB’000): 2006 2005 Change(%) Change(%) Sales revenue 991,795 775,783 216,012 27.84% Gross profit 190,023 127,282 62,741 49.29% Profit/(loss) -11,137 -263 -10,874 -4134.60% attributable to equity holders of the parent Increase of revenue and gross profit mainly resulted from expansion of sales volume by our efforts in market exploration and increase of services like processing Desk-top Box. Decrease of net profit is mainly influenced by increase of administrative expenses and decrease of investment income. 2. Major suppliers and customers In 2006, the Company’s purchase from the top five suppliers amounted to RMB 257,939 thousand, accounting for about 25.59 percent of the total purchase, and sales to the top five customers amounted to RMB 167,681 thousand, accounting for about 16.9 percent of the total revenue. 3. Composition and changes of assets in the reporting period 2006 Year-en 2005Year-end Change(RMB’000) Change(%) Main factors that cause a d material change Receivables 519,878 461,221 58,657 12.72% sales volume was and expanded. And the service prepayments of processing Desk-top Box we began to undertake in this year caused increases of accounts receivable, material in stock and finished goods Inventories 204,365 163,202 41,163 25.22% - Property, plant 114,704 116,873 -2,169 -1.86% - and equipment Construction in 1,786 5,842 -4,056 -69.43% Construction-in-progress progress was transferred into fixed assets when completed Short-term 477,900 434,000 43,900 10.12% - bank loan Long-term bank 0 35,000 -35,000 -100.00% A long-term loan of seven -7- loan years is due within one year and was transferred into current assets 2006 2005 Change(RMB’000) Change(%) Selling costs 71,836 72,511 -675 -0.93% - Administrative 106,660 34,099 72,561 212.80% The accounting method of expenses technology development cost was adjusted. Provisions for bad assets, which was accounted as administrative expenses, was increased over last year. The administrative expenses of last year was decreased due to selling inventory. Finance costs 19,277 18,235 1,042 5.71% - Tax 3,284 4,314 -1,030 -23.88% - 4. Composition of cash flows and material change 2006 2005 Change(’000) Change(%) Main factors that cause a material change Cash flows from operating -27,914 -5,774 -22,140 -383.44% The service of processing activities Desk-top Box generated an increase of account receivable Cash flows from investment -3,707 19,704 -23,411 -118.81% Buying land and other activities fixed assets in 2006 Cash flows from financing 31,339 -19,641 50,980 259.56% Increase of bank loans activities 5. Operating results of main subsidiaries and associated companies in 2006 (Yuan) (1) Main subsidiaries Equity owned Registered Subsidiary by the Main business Total Assets Revenue Net Profit/loss capital Compa ny Nanjing Nanfang Manufacture and Telecommunication sales of data 98.24% 34,205,148 145,770,062.88 163,737,382.02 6,591,111.16 s Company Limited communication equipment Nanjing Putian Manufacture and Smart-building 41.35% sales of intelligent 12,000,000 87,125,683.31 131,874,344.07 11,288,518.42 Technology Ltd. building system Beijing Picom Network electronic Telecommunication products, digital USD 51% 496,663.85 3,720,847.48 -16,521,054.48 s Equipment Ltd. transmission 500,000 system Nanjing Putian Electric Hongyan Electric appliances, USD 51.2% 58,731,202.44 87,416,449.25 854,454.33 Appliance telecommunicatio 1,930,000 Company n parts Nanjing Putian manufacture and Network Company sales of software Ltd. of 91.16% telecommunicatio 10,000,000 12,787,985.15 4,029,271.64 -1,104,449.61 ns, network and electronic equipment -8- Nanjing Putian Manufacture and Changle sales of Telecommunication 50.7% 5,000,000 14,335,419.04 45,140,407.00 3,540,114.09 telecommunicatio s Equipment Co., n equipment Ltd. Putian Export and import Telecommunication of s (H.K.) Co., Ltd. telecommunicatio HKD 90% ns equipment, 16,369,807.44 25,601,981.31 576,607.27 2,000,000 Hi-tech R & D and transfer, technology trade Nanjing Postel Design, Wongzhi production and 90,000,000 67% 44,247,993.61 76,666,097.42 -4,273,602.28 Telecommunication sales of CDMA ($10,900,000) s Co., Ltd. cell phone Note: Beijing Picom Telecommunications Equipment Ltd. reported a decrease of net profit by 10,698 thousand yuan compared with the previous year, mainly due to provision for bad debts of accounts receivable and depreciation of inventory accounted for 2006. The operation conditions of Nanjing Postel Wongzhi Telecommunications Co., Ltd. were improved this year by undertaking the service of processing Set-top Box. It realized revenue of 766,661 thousand yuan, whereas the considerably high cost impeded it to make a profit. (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 -1,035,756.76 -507,520.81 voice transmission, Co., Ltd. internet services II. Forecast of future development 1. Analysis of the trend of industrial development and market competition Generally, the telecommunications equipment industry will keep growing steadily and rapidly in the next few years. Increase of investment in mobile communications and 3G network will bring about abundant opportunities for the industry. In the face of the favorable macro environment, we will try to grasp the opportunity of development to expand our market shares in fierce competition and carry out sustainable development by taking a series of measures, including optimizing structure of production, enhancing the competitiveness of our core products and promoting our profitability. 2. Operating plan for the new year The overall principle for our work in 2007 is: to widen our ideas and make innovations in a creative spirit; to promote optimization of structure of production by making breakthrough in emerging industries and capital operation; to deepen reforms and corporate reorganization and implement refined management, creating our overall competitiveness in operation cost, human resources and corporate culture, so as to ensure the budget of year to be fulfilled. In order to ensure the accomplishment of annual operation goal and sustainable development, we are going to take the following measures: (1) To expand development into new areas; -9- (2) To cooperate with competitive domestic and overseas enterprises more closely, vigorously exploring international market, realizing our internationalization strategy. (3) To intensify our work in brand publicity, market exploration and technology research, building a solid foundation for development. (4) To further the reforms and corporate reorganization, restructuring qualified subsidiaries as limited-liability firms. (5) To establish a modernized enterprise management mode. We will implement refined management to raise efficiency and effectiveness. (6) To continue to strengthen work in corporate culture to build a harmonious enterprise. 3. Fund demand and usage plan According to the operating plan, the need of current capital for 2007 is around RMB 100 million, which will be financed by the Company itself in operating activities and by bank loans. 4. Difficulties and risks in operations At present, the domestic telecommunications industry is experiencing structural transition. As a telecommunications equipment supplier, the Company is faced with both an opportunity for development and a severe challenge. We are going to respond energetically. We will try to maintain our market shares of competitive traditional products and meanwhile seek new impetus of profit growth and explore overseas market. At the same time, we will intensify internal management, optimize assets structure, control costs and raise profitability. 5. Influence of possible changes in accounting policy and accounting estimate on the financial conditions and operating results of the Company after the new Accounting Standards for Business Enterprises are implemented (1) Long-term equity investments——investments in subsidiaries will be accounted for by equity method instead of the previous cost method, which will reduce the influence of subsidiaries’ profits or losses on the parent company. But the consolidated statements will not be influenced. (2) The joint ventures will no longer be consolidated instead of being consolidated by proportion method previously, which will influence profit before tax in consolidated statements, but net profit will not be influenced by this change. (3) The structure of consolidated statements will differ from the previous one, for example, the item of uncertain investment loss will not be included in balance sheet and income statement, and minor shareholders’ equity will not listed above net profit, which will influence net profit and undistributed profit. (4) Other changes of accounting policies and estimates will not exert significant influences on the Company. The above influences are subject to variation in case of further explanation made by the Ministry of Finance on the new accounting standard. 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 866,732 698,574 19.40% 32.52% 27.84% 2.95% ations industry Electric 121,719 98,522 19.06% 5.57% 3.51% 1.61% -10- appliances A breakdown of main business by product Distribution 253,170 179,322 29.17% 10.35% 8.30% 1.34% frame and related products PDS and data 333,035 259,170 22.18% 5.60% -1.17% 5.33% transmission products Plugs and 121,719 98,522 19.06% 5.57% 3.51% 1.61% receptacles for industrial and civilian use Other 283,870 262,253 7.62% 145.36% 113.72% 13.68% 6.3 Classification of main business in terms of region (RMB’000) Region Revenue Year-on-year increase/decrease（％） North China 228,431 17.46% East China 347,003 13.25% Other regions 416,361 51.45% 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 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 Usage plan of retained earnings preplan though making a profit in the reporting period Audited by the international accounting standard, the Company reported net loss of 11,137 thousand Yuan for 2006 and accumulated losses of 92,997 thousand Yuan(according to the Chinese accounting standard, the - Company reported net profit of 4,118,123.31 Yuan and attributable profit of -83,098,223.47 Yuan). The Board of Directors advised that no dividends be declared for 2006, and no capital reserve be transferred into share capital. §7 Significant Issues -11- 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 Sale of assets □ Applicable √ Inapplicable RMB’000 Net profit Pricing contributing principle whether a to the listed Whether Whether the Profit/los related company the debts and Selling s from transaction Transacting Selling by the property liabilities Assets sold price the o not (if party date 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 1.54% Equity o f Nanjing Nanjing Dongda Jianjiang 31 Broadband Negotiated Science & August 1,050 0 750 No Yes Yes Telecommuni price Technology 2006 cations Ltd.. Technology Ltd. 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 37,800 the subsidiaries during this reporting period Balance of guarantee offered to the 32,900 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 32,900 Proportion of the total amount of guarantee in 10.40% 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% -12- 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 Naning Putian Zhongyou 8,991 0.91% 0 0.00% Telecommunications Co., Ltd. China Putian Corporation 405 0.04% 192 0.02% Guangxi Putainyoutong 97 0.01% 85 0.01% Telecommunications Equipment Company Ltd. Nanjing Putian Datang 0 0.00% 108 0.01% Information Electric Company Ltd. Nanjing Yuhua Electroplating 0 0.00% 8,998 0.93% Factory Total 9,493 0.96% 9,383 0.97% 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 China Putian Corporation 0 0 20,000 20,000 Total 0 0 20,000 20,000 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. 7.4.3 Progress made in withdrawing the fund occupied by a controlling shareholder at the end of 2005 □ Applicable √Inapplicable Increase of occupied fund during 2006 □ Applicable √Inapplicable Reasons of the listed company’s failure to accomplish work in withdrawing the fund occupied by a controlling shareholder due to non-operating reasons by the end of 2006and measures which have been taken to withdraw the fund as well as plan for responsibility ascertainment □ Applicable √Inapplicable 7.5 Entrustment investment □ Applicable √ Inapplicable 7.6 Fulfillment of commitment -13- 7.6.1 Commitment during the split share structure reform made by the original non-tradable shareholders and its implementations □ Applicable √ Inapplicable 7.6.2 Amount of tradable shares with unrestricted conditions held by original non-tradable shareholders whose holding proportion exceeded 5% at the end of report period □ 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 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 2006 (Expressed in Renminbi thousands) 2006 2005 Notes RMB’000 RMB’000 Turnover 6 991,795 775,783 Cost of sales (801,772) (648,501) Gross profit 190,023 127,282 Other operating income 7 2,354 1,641 Selling expenses (71,836) (72,511) Administrative expenses (106,660) (34,099) Profit from operations 13,881 22,313 Other gains and losses 8 5,120 (3,553) Finance costs 9 (19,277) (18,235) Gain on disposal of subsidiaries - 10,698 Share of losses of associates (382) (1,995) (Loss)/profit before taxation 10 (658) 9,228 Taxation 12 (3,284) (4,314) (Loss)/profit for the year (3,942) 4,914 Attributable to: Equity holders of the parent (11,137) (263) Minority interests 7,195 5,177 (3,942) 4,914 Basic loss per share 13 RMB(0.052) RMB(0.001) -15- 9.2.2 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006 (Expressed in Renminbi thousands) 2006 2005 Notes RMB’000 RMB’000 Non-current assets Property, plant and equipment 14 114,704 116,873 Construction in progress 1,786 5,842 Land use rights 15 32,354 33,632 Interests in associates 16 1,026 1,408 Available-for-sale investments 18 924 1,212 Intangible assets 19 4,236 5,503 155,030 164,470 Current assets Inventories 20 204,365 163,202 Trade and other receivables 21 519,878 461,221 Pledged bank deposits 80,000 103,000 Cash and bank balances 193,770 194,101 998,013 921,524 Current liabilities Bank loans 22 477,900 434,000 Tax payable 2,246 1,199 Trade and other payables 23 284,747 222,295 764,893 657,494 Net current assets 233,120 264,030 Total assets less current liabilities carried forward 388,150 428,500 -16- NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2006 (Expressed in Renminbi thousands) 2006 2005 Notes RMB’000 RMB’000 Total assets less current liabilities brought forward 388,150 428,500 Non-current liabilities Bank loans 22 - 35,000 Employee housing benefits payable 10,737 10,691 Other non-current liabilities 80 80 (10,817) (45,771) Net assets 377,333 382,729 Equity Share capital 24 215,000 215,000 Reserves 25 102,138 114,168 Attributable to equity holders of the parent 317,138 329,168 Minority interests 60,195 53,561 Total equity 377,333 382,729 -17- 9.2.3 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2006 Statutory and discret Attributable -ionary Statutory to equity surplus public Exchange holders of Share Capital reserve welfare translation Accumu- Other the Minority Total lated 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 (Note 24) (Notes 25 (Note 25 (a)&( c)) (b)) At 1 January 2005 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 Exchange translation difference recognised directly in equity - - - - (893) - - (893) - (893) (Loss)/profit for the year - - - - - - (11,137) (11,137) 7,195 (3,942) Total income and expenses recognised for the year - - - - (893) - (11,137) (12,030) 7,195 (4,835) Liquidation of a subsidiary - - (31) - - 31 - - - Dividend paid to minority shareholders - - - - - - - - (561) (561) Profits appropriation by subsidiaries - - 860 - - (860) - - - Transfer - - 9,962 (9,962) - - - - - - At 31 December 2006 215,000 168,817 26,828 - (625) 115 (92,997) 317,138 60,195 377,333 -18- 9.2.4 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2006 (Expressed in Renminbi thousands) 2006 2005 RMB’000 RMB’000 Operating activities (Loss)/profit before taxation (658) 9,228 Adjustment for: Depreciation 14,682 17,242 Provision for/(write back of) bad and doubtful debts of trade and other receivables 13,365 (426) Provision for/(write back of) slow-moving inventories 6,273 (19,071) Amortisation of land use rights and intangible assets 5,272 5,436 Interest expenses 24,904 22,121 Interest income (6,600) (4,857) Share of losses of associates 382 1,995 Impairment loss on available-for-sale investments (12) - Dividend income (39) - Gain on disposal of available-for-sale investments (750) - (Gain)/loss on disposal of property, plant and equipment and and construction in process (410) 981 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 - 6 Cash flows before changes in working capital 56,409 21,592 (Increase)/decrease in inventories (47,436) 17,406 Increase in trade and other receivables (72,022) (65,252) Increase in trade and other payables 63,074 53,036 Increase/(decrease) in employee housing benefits payable 46 (4,378) Decrease in other non-current liabilities - (2,449) Effect of foreign exchange rate changes (844) 550 Cash (used in)/generated from operations (733) 20,505 Interest paid (24,904) (22,121) Income tax paid (2,237) (4,158) Net cash used in operating activities (27,914) (5,774) -19- 9.2.4 NANJING PUTIAN TELECOMMUNICATIONS CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2006 (Expressed in Renminbi thousands) 2006 2005 RMB’000 RMB’000 Investing activities Proceeds from disposal of property, plant and equipment 1,771 1,955 Purchase of property, plant and equipment, and payments on construction in progress (12,661) (9,147) Purchase of land use right (349) - Purchase of intangible assets (157) (317) Proceeds from disposal of investments held for trading 1,050 722 Increase in investment in an associate - (600) Refund of deposit on investment - 2,500 Dividends 39 - Net cash outflow arised from disposal of a subsidiary - (1,286) Partial disposal of equity interest of a subsidiary - 21,020 Interest received 6,600 4,857 Net cash (used in)/generated from investing activities (3,707) 19,704 Financing activities New borrowing of bank loans 468,800 464,000 Repayment of bank loans (459,900) (379,200) Increase in pledged bank deposits 23,000 (103,000) Dividend paid to minority shareholders (561) (1,441) Net cash generated from/(used in) financing activities 31,339 (19,641) Net decrease in cash and cash equivalents (282) (5,711) Cash and cash equivalents at beginning of year 194,101 199,971 Effect of foreign exchange rate changes (49) (159) Cash and cash equivalents at end of year 193,770 194,101 -20- 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 two of the company’s subsidiaries, Shanghai Huaning Telecommunications Development Ltd. and Nanjing Golden Electronics Ltd., were liquidated. Accordingly the two companies were not consolidated. Nanjing Putian Telecommunications Co., Ltd. April 10, 2007 -21-