沙隆达Ｂ(200553)2007年年度报告摘要（英文版）

Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Stock code: 000553 stock abbreviation: Sanonda A No.: 2008-03 HUBEI SANONDA CO., LTD. SUMMARY OF ANNUAL REPORT 2007 §1. Important Notes 1.1 The Board of Directors, the Supervisory Board, Directors, Supervisors and Senior Executives of Hubei Sanonda Co., Ltd. (hereinafter referred to as the Company) hereby confirm that no omission, misstatement, or misleading information exists in this report, and accept, individually and collectively, the responsibilities for the authenticity, accuracy and completeness of the contents of this report. The summary of annual report 2007 is abstracted from the full text of such report; the investors are suggested to read the full text of such report to understand more details. 1.2 None of Directors, Supervisor or Senior Executives stated that he (she) could not ensure the correctness, accuracy and completeness of the contents of the Annual Report or have objection for this report. 1.3 All directors attended the Board meeting. 1.4 The 2007 Financial Reports of the Company had been audited by Vocation International Certified Public Accountants, and an unqualified Auditors' Report for the Company had been issued by the Auditor. 1.5 Mr. Li Zuorong, Chairman of the Board of the Company, Mr. He Xuesong, Chief Financial Officer, and Mr. He Xuesong, Person who is in Charge of Accounting Organ, hereby confirm that the Financial Report enclosed in this Annual Report is true and complete. 1.6 This report has been prepared in Chinese and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. §2 Company Profile 2.1 Basic information Stock abbreviation Sanonda Ａ, Sanonda B Stock code 000553, 200553 Listed stock exchange Shenzhen Stock Exchange Registered address No. 93, Beijing East Road, Jingzhou, Hubei Post code 434001 Office address No. 93, Beijing East Road, Jingzhou, Hubei Post code 434001 Internet website of the Company http://www.sanonda.cn E-mail of the Company sld@chemchina.com.cn 2.2 Contact person and contact method Secretary to the Board Securities Affairs Representative Name Li Zhongxi Liang Jiqin Contact address No. 93, Beijing East Road, Jingzhou, Hubei No. 93, Beijing East Road, Jingzhou, Hubei Telephone 0716-8208632 0716-8208232 Fax 0716-8208899 0716-8208899 E-mail li_zhongxi@263.net freefly2006@263.net 1 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Yuan Increase/ 2007 2006 decrease than 2005 last year（％） Prior to Subsequent to Subsequent to Prior to Subsequent to adjustment adjustment adjustment adjustment adjustment 1,261,835,295.8 Operating revenue 1,648,350,997.55 1,402,296,005.04 1,444,449,312.33 14.12% 1,267,770,150.54 8 Total profit 40,061,647.32 33,148,459.96 39,334,245.48 1.85% 12,618,968.50 19,089,671.12 Net profit attributable to shareholders of the 29,600,801.04 22,956,580.59 25,985,571.59 13.91% 5,165,234.82 10,306,675.33 company Net profit attributable to shareholders of the company after deducting 34,272,179.96 5,882,953.13 28,347,076.02 20.90% 9,100,343.35 14,241,783.86 non-recurring gains and losses Net cash flow arising 271,646,576.89 240,431,207.69 240,184,855.01 13.10% 81,231,828.28 81,348,827.82 from operating activities Increase/ decrease from At the end of 2007 At the end of 2006 the end of last At the end of 2005 year（％） Prior to Subsequent to Subsequent to Prior to Subsequent to adjustment adjustment adjustment adjustment adjustment Total assets 1,740,712,079.90 1,617,094,926.82 1,625,094,922.02 7.11% 1,667,788,212.86 1,678,038,600.58 Owners’ equity (or 914,984,485.67 900,295,089.22 883,458,820.83 3.57% 878,945,465.14 880,849,782.22 shareholders’ equity) 3.2 Major financial indexes Unit: RMB Yuan Increase/ 2007 2006 decrease than 2005 last year（％） Prior to Subsequent to Subsequent to Prior to Subsequent to adjustment adjustment adjustment adjustment adjustment Basic earnings per share 0.05 0.08 0.09 -44.44% 0.02 0.03 Diluted earnings per 0.05 0.08 0.09 -44.44% 0.02 0.03 share Basis earnings per share after deducting 0.06 0.02 0.03 100.00% 0.03 0.05 non-recurring gains and losses Fully diluted return on 3.24% 2.55% 2.94% 0.30% 0.59% 1.17% net assets Weighted average return 3.29% 2.55% 2.99% 0.30% 0.59% 1.17% on net assets Fully diluted return on net assets after 3.75% 0.65% 3.21% 0.54% 1.04% 1.62% deducting non-recurring gains and losses 2 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Weighted average return on net assets after 3.81% 0.65% 3.26% 0.55% 1.04% 1.62% deducting non-recurring gains and losses Net cash flow per share arising from operating 0.46 0.81 0.81 -43.21% 0.27 0.27 activities Increase/ decrease from At the end of 2007 At the end of 2006 the end of last At the end of 2005 year（％） Prior to Subsequent to Subsequent to Prior to Subsequent to adjustment adjustment adjustment adjustment adjustment Net assets per share attributable to 1.54 3.03 2.97 -48.15% 2.96 2.97 shareholders of the company Non-recurring gains and losses √Applicable □Inapplicable Unit: RMB Yuan Items Amount Gains and losses from non-current assets disposal -11,707,391.93 Gains and losses from debt restructuring 9,864,764.75 Other non-operating income and expense -3,982,162.01 Impact on income tax 1,955,562.27 Non-operating gains and losses attributable to minority shareholder -802,152.00 Total -4,671,378.92 Items measured by fair value □Applicable √Inapplicable 3.3 Difference in net profit as audited by PRC GAAP and IFRS √Applicable □Inapplicable Unit: RMB Yuan PRC GAAP IFRS Net profit 29,600,801.04 29,600,801.04 Net assets 914,984,485.67 908,242,000.00 Unit: RMB'0000 Shareholders' equity in accounting statement prepared based on PRC GAAP 914,984 Adjustment: Withdrawing bad debt of accounts receivable -19,596 Explanation on Amortization of special appropriation 1,822 difference Switching back deferred income -5,804 Adjustment of deferred tax -2,514 Adjustment of payroll payable 21,408 Adjustment of unrealization gains and losses in investment -2,058 Shareholders' equity in accounting statement prepared based on IFRS 908,242 3 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. §4 Change in Share Capital and Shareholder 4.1 Changes in share capital Unit: Share Prior to the change Increase/decrease (+, - ) Subsequent to the change Capitalization Number of Proportion Issuance of Bonus Number of Proportion of reserved Other Subtotal shares (%) new shares shares shares (%) fund I. Shares subject to 63,361,669 21.34% 63,361,669 -4,489,266 58,872,403 122,234,072 20.58% trading moratorium 1. Shares held by the 2,244,633 0.76% 2,244,633 -4,489,266 -2,244,633 State 2. Shares held by state-owned legal 59,843,601 20.15% 59,443,601 -400,000 59,043,601 118,887,202 20.02% person 3. Shares held by other domestic 1,273,435 0.43% 1,673,435 400,000 2,073,435 3,346,870 0.56% investors Including: Shares held by domestic 1,250,000 0.42% 1,650,000 400,000 2,050,000 3,300,000 0.56% non-stated legal persons Shares held by domestic natural 23,435 0.01% 23,435 23,435 46,870 0.01% persons 4. Shares held by foreign investors Including: Shares held by foreign legal persons Shares held by foreign natural persons II. Shares not subject to trading 233,599,941 78.66% 233,599,941 4,489,266 238,089,207 471,689,148 79.42% moratorium 1. RMB ordinary 118,599,941 39.94% 118,599,941 4,489,266 123,089,207 241,689,148 40.69% shares 2. Domestically listed 115,000,000 38.73% 115,000,000 115,000,000 230,000,000 38.73% foreign shares 3. Overseas listed 0 0.00% foreign shares 4. Other 0 0.00% III. Total Shares 296,961,610 100.00% 296,961,610 296,961,610 593,923,220 100.00% Change in shares subject to trading moratorium Unit: share Number of shares Increase of shares Number of Number of shares released from subject to trading shares subject subject to trading Date of Name of shareholder trading moratorium to trading Reason moratorium at the releasing moratorium in subscription in moratorium at year-begin 2007 2007 the year-end Sanonda Group Commitment in the share 59,843,601 0 59,043,601 118,887,202 3 Aug. 2009 Corporation merger reform Transferring in the share Jingzhou Shashi merger reform, and District Union Rural 1,250,000 0 1,250,000 2,500,000 continued to perform 3 Aug. 2009 Credit Cooperation commitment in the share merger reform Jingzhou Sanonda Transferring in the share 0 0 800,000 800,000 merger reform, and 3 Aug. 2009 Advertising Co., Ltd. continued to perform 4 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. commitment in the share merger reform State-owned Assets Administration Commitment in the share 2,244,633 4,489,266 2,244,633 0 18 Dec. 2007 Bureau of Qichun merger reform County Directors, Freezing shares held by Supervisors and 23,435 0 23,435 46,870 － senior management Senior management Total 63,361,669 4,489,266 63,361,669 122,234,072 － － 4.2 Statement of shares held by the top ten shareholders and the top ten tradable shareholders Unit: Share Total number of shareholders 142,593 Top ten shareholders Number of shares Proportion Total number of Share pledged or Name of shareholders Nature of shareholders subject to trading (%) shares held frozen moratorium held SANONDA GROUP State-owned legal entity 20.02% 118,887,202 118,887,202 81,720,000 CORPORATION STATE-OWNED ASSETS ADMINISTRATION BUREAU State legal entity 0.76% 4,489,266 OF QICHUN COUNTY JINGZHOU SHASHI Domestic DISTRICT UNION RURAL non-state-owned legal 0.42% 2,500,000 2,500,000 CREDIT COOPERATION entity LIN CHENG FENG Domestic natural person 0.22% 1,287,506 WANG GONG LIN Domestic natural person 0.19% 1,110,000 ZHONG YU LIAN Domestic natural person 0.15% 878,100 JIA JI YAO Domestic natural person 0.14% 820,000 HUANG,WENJUN Domestic natural person 0.13% 800,000 JINGZHOU SANONDA State-owned legal entity 0.13% 800,000 800,000 ADVERTISING CO., LTD. LI SHUN QIN Domestic natural person 0.12% 718,700 Top ten shareholders with tradable share Number of shares not Name of shareholders subject to trading Category of share moratorium held STATE-OWNED ASSETS ADMINISTRATION BUREAU 4,489,266 RMB ordinary shares OF QICHUN COUNTY LIN CHENG FENG 1,287,506 Domestically listed foreign shares WANG GONG LIN 1,110,000 Domestically listed foreign shares ZHONG YU LIAN 878,100 Domestically listed foreign shares JIAN JI YAO 820,000 Domestically listed foreign shares HUANG,WENJUN 800,000 Domestically listed foreign shares LI SHUN QIN 718,700 Domestically listed foreign shares ZHANG QI HUA 690,000 Domestically listed foreign shares SUPER EMPEROR INVESTMENT CO., LTD. 600,000 Domestically listed foreign shares FU LI YAN 600,000 RMB ordinary shares The Company is not aware of whether there is any associated Explanation on relationship among the top ten shareholders relationship among the above top ten shareholders and whether there is or action-in-concert any action-in-concert among them. 4.3 Particulars about the controlling shareholders and actual controllers of the Company 5 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. 4.3.1 Particulars about change in the controlling shareholders and actual controllers of the Company □Applicable √Inapplicable 4.3.2 Introduction to detail situation for the controlling shareholders and the actual controller s (1) The controlling shareholder Name of the controlling shareholder: Sanonda Group Corporation Legal representative: Li Zuorong Registered capital: RMB 240.66 million Date of foundation: 1994 Scope of business: manufacturing and sales of chemical products and pharmaceutical products; import and export trade of pesticide, chemical products and chemical mechanical equipments and fittings; manufacturing and sales of chemical mechanical equipments; production and fixing of steel construction; fixing of chemical engineering and lease of housing. (2) Actual controller Name of the actual controller: ChemChina Agrochemical Corporation Registered capital: RMB 300 million ChemChina Agrochemical Corporation is a large-scale stated-owned sole company subordinate to ChemChina Group Corporation, as well as the wholly-owned subsidiary of ChemChina Group Corporation and one of the specialized companies under ChemChina Group Corporation, who is engaged in investment, development, production and operation of pesticides, chemical fertilizers, fine chemical products and minerals products. ChemChina Group Corporation subordinates to SASAC of State Council, which is state-owned large-scale corporation established after approval by the State Council in 2004. 4.3.3 Relationship between the Company and its controlling shareholder: SASAC of State Council 100% ChemChina Group Corporation 100% ChemChina Agrochemical Corporation 100% Sanonda Group Corporation 20.02% Hubei Sanonda Co., Ltd. 6 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. §5. Particulars about Directors, Supervisors and Senior Management 5.1 Particulars about changes in shares held by directors, supervisors and senior managemen t Share incentive granted during the Remunerati Total reporting period on received remuneration from Number Number received shareholder of shares of Market Beginning Ending date from the Number entities or held at the shares Reasons for of Number price of Name Title Gender Age date of of office Company in other beginning held at change shares of share Exercis stock at office term term the reporting related of the the to be exercise e price the period parties or year year-end period- (RMB’0,000 exercise d not ) d end (Yes / No) Transferring to Chairman of 30 Jun. 30 Jun. share capital Li Zuorong Male 57 3,660 5,490 20.00 0 0 0.00 0.00 No the Board 2006 2009 after selling out Transferring to Liu 30 Jun. 30 Jun. Director Male 45 2,440 32,840 share capital 18.00 0 0 0.00 0.00 No Xingping 2006 2009 after buy in Capital reserve Director, 28 Aug. 30 Jun. transferring in He Fuchun General Male 42 2,440 4,880 18.00 0 0 0.00 0.00 No 2006 2009 to share Manager capital Director, Standing 30 Jun. 30 Jun. Liu Anping Deputy Male 40 0 0 16.00 0 0 0.00 0.00 No 2006 2009 General Manager He Director, 30 Jun. 30 Jun. Male 52 0 0 15.00 0 0 0.00 0.00 No Xuesong CFO 2006 2009 Director, Capital reserve Deng Deputy 30 Jun. 30 Jun. transferred Male 40 2,440 4,880 15.00 0 0 0.00 0.00 No Guobin General 2006 2009 into share Manager capital 28 Aug. 30 Jun. Yin Hong Director Male 40 0 0 14.00 0 0 0.00 0.00 No 2006 2009 Yu Independent 30 Jun. 30 Jun. Male 43 0 0 3.00 0 0 0.00 0.00 No Jingzhong Director 2006 2009 Li Independent 30 Jun. 30 Jun. Male 62 0 0 3.00 0 0 0.00 0.00 No Shouming Director 2006 2009 Independent 30 Jun. 30 Jun. Li Hui Female 39 0 0 3.00 0 0 0.00 0.00 No Director 2006 2009 Assistant Yang 30 Jun. General Male 35 1 Feb. 2007 0 0 12.00 0 0 0.00 0.00 No Guang 2009 Manager Sellingout Chairman of after capital Zhang the 30 Jun. 30 Jun. reserve Male 54 2,440 3,660 14.00 0 0 0.00 0.00 No Jianguo Supervisory 2006 2009 transferred Board into share capital 30 Jun. 30 Jun. Xu Baojian Supervisor Male 51 0 0 4.00 0 0 0.00 0.00 No 2006 2009 30 Jun. 30 Jun. Liu Jun Supervisor Female 46 0 0 4.00 0 0 0.00 0.00 No 2006 2009 Jiang 30 Jun. 30 Jun. Supervisor Male 33 0 0 4.00 0 0 0.00 0.00 No Chenggang 2006 2009 Gong 30 Jun. Supervisor Male 38 1 Feb. 2007 0 0 4.00 0 0 0.00 0.00 No Shubin 2009 Secretary of 30 Jun. 30 Jun. Li Zhongxi Male 37 0 0 10.00 0 0 0.00 0.00 No the Board 2006 2009 Total - - - - - 13,420 51,750 - 177.00 0 0 - - - Numbers of shares futures and restricted shares of the Company entitled to the foresaid members. 7 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. □Applicable √Inapplicable §6 Report of Board of Directors 6.1 Discussion and analysis of operation results during the reporting period In the reporting period, surrounding the production and operation target established by the Board of Directors at the year-begin, the Company overcame influence from disadvantageous factors such as rise of price of raw materials and energy, export rebate rate reduction, upside land use tax, RMB appreciation, as well as the sales of riskiest pesticide was forbidden in home, and grasped such favorable opportunity as blooming demand in domestic and overseas pesticides market, so as to reinforce marketing, strength enterprise management, enhance technology reformation and project construction, rapidly develop technology innovation activities, therefore, the Company achieved production and operation target well all year round. In the reporting period, the Company achieved income from main operation of RMB 1.57 billion, up 11.23% year-on-year, total profit of RMB 40.06 million, up 2% year-on-year, net profit attributable to shareholder of listed company of RMB 29.6 million, up 14% year-on-year. The Company produced chemical pesticides of 41,300 tons, up 14.51% year-on-year, as well as caustic soda of 101,400 tons, up 14.74% year-on-year. The Company created foreign currency amounting to USD 93.78 million, up 46% year-on-year. 6.2 Distribution of the main operations classified according to industry and products: Unit: RMB'0000 Distribution of the main operations classified according to industry Increase/decreas Increase/decreas Increase/decrease Industry or products Operating Operating Cost Operating profit e proportion of e proportion of proportion of Revenue Rate operation operation cost operating profit revenue compared with rate compared compared with the last year (%) with the last year the last year (%) (%) Pesticides 118,157.63 98,661.76 16.50% 15.70% 15.40% 0.22% Chemical 37,215.78 32,307.02 13.19% 7.14% 10.26% -2.46% Real estate 0.00 0.00 0.00% -100.00% 0.00% -100.00% Other 1,618.06 1,315.47 18.70% -60.64% -63.87% 7.27% Total 156,991.47 132,284.26 15.74% 11.23% 11.69% -0.35% Distribution of the main operations classified according to products Pesticides 118,157.63 98,661.76 16.50% 15.70% 15.40% 0.22% Chemical 37,215.78 32,307.02 13.19% 7.14% 10.26% -2.46% Real estate 0.00 0.00 0.00% -100.00% 0.00% -100.00% Other 1,618.06 1,315.47 18.70% -60.64% -63.87% 7.27% Total 156,991.47 132,284.26 15.74% 11.23% 11.69% -0.35% 6.3 Main operation by region Unit: RMB'0000 District Operating Revenue Change of operation Revenue compared with the last year (%) Domestic 82,928.47 -6.75% Overseas 74,063.00 41.85% Total 156,991.47 11.23% 8 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. 6.4 Use of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.5 Application of the non-raised proceeds √Applicable □Inapplicable Unit: RMB'0000 Name of projects Investment amount in Progress of projects Earnings of projects the year Project of ion-exchange membrane 1,656.00 20% Uncompleted th Extension project for the 4 phase of 681.00 70% Uncompleted sewage treatment 15000-ton glyphosate 676.00 11% Uncompleted Innovation of refrigeration station 536.00 50% Uncompleted DDV pilot test 507.00 100% Meeting prospect ion Total 4,056.00 - - 6.6 Explanation of the Board of Directors on the “Non-standard Auditors’ Report” issued by the Certified Public Accountants □Applicable √Inapplicable 6.7 Preplan of profit distribution or capitalization of common reserves for 2007 made by the Board of Directors □Applicable √Inapplicable The Company did not appropriate share distribution preplan though the Company achieved the profit in the report period √Applicable □Inapplicable The reasons why the Company did not appropriate share distribution preplan though the Company achieved the profit in the Usage and plan of undistributed profit report period The Company did not make up losses Making up losses §7 Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets □Applicable √Inapplicable Explanation on the influences exerted by the issues mentioned in 7.1 and 7.2 upon the cont inuity of the Company’s business and the stability of the management team. 9 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. 7.3 Significant guarantees √Applicable □Inapplicable Unit: RMB'0000 External guarantee of the Company (excluding the guarantee for the shareholding subsidiaries) Name of the Date of occurrence Amount of Guarantee Accomplished Guarantee for related party Company (date of agreement Guarantee type guarantee term or not (yes or not) guaranteed signed) Total amount of guarantee occurred in the report period 0.00 Total balance of guarantee at the end of the report period 0.00 Guarantee of the Company for the shareholding subsidiaries Total amount of guarantee occurred for shareholding subsidiaries in the 3,500.00 report period Total balance of guarantee occurred for shareholding subsidiaries at the end 20,995.00 of the report period Total amount of external guarantee of the Company (Including the guarantee for the shareholding subsidiaries) Total amount of guarantee 20,995.00 The proportion of the total amount of guarantee in the net assets of the 22.95% Company Of which: The amount of guarantee provided for shareholders, actual controller and 0.00 other related parties Guarantee amount for the debts of the guaranteed companies with an 20,995.00 asset-liability ratio of over 70 percent, directly or indirectly The amount by which the total guarantee amount exceeded 50 percent of the 0.00 net assets Total amount of the above three guarantees 20,995.00 7.4 Significant related transactions 7.4.1 Related transactions concerning routine operation √Applicable □Inapplicable Unit: RMB'0000 Selling products and offering labor service to Purchasing products and accepting labor related parties service from related parties Related parties Proportion taking up Proportion taking up Amount the amount of the same Amount the amount of the same kind of transactions kind of transactions Hubei Datian Chemical Co., Ltd. 50.93 100.00% 0.00 0.00% Jingzhou Lida Industrial Co., Ltd. 0.00 0.00% 744.68 2.67% Hubei Datian Chemical Co., Ltd. 0.00 0.00% 1,600.00 5.74% Jingzhou Fude Food General Factory 0.00 0.00% 2,272.56 8.15% China National Agrochemical 0.00 0.00% 10,258.17 36.78% Corporation Jingzhou Hengxiang Chemical 0.00 0.00% 5,793.46 20.77% Material Trade Co., Ltd. Jingzhou Tianyang Huibao Chemical 0.00 0.00% 640.29 2.30% Co., Ltd. China National Agrochemical 0.00 0.00% 2,398.08 8.60% Corporation Hubei Jingzhou Huaxiang Chemical 0.00 0.00% 1,104.80 3.96% Co., Ltd. Beijing Insight Chemical Technology 0.00 0.00% 1,299.69 4.66% Co., Ltd Jingzhou Hengxiang Chemical 0.00 0.00% 446.32 1.60% Material Trade Co., Ltd. 10 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Beijing (Blue Star) Chemical 0.00 0.00% 1,231.08 4.41% Machinery Co., Ltd. Sichuan Blue Star Machinery Co., Ltd 0.00 0.00% 99.70 0.36% Total 50.93 100.00% 27,888.83 100.00% A transaction amount of RMB 509,300 occurred during the related transactions of the Company selling products or providing labor service to the controlling shareholder or its subsidiaries in the report period. 7.4.2 Related credits and liabilities current √Applicable □Inapplicable Unit: RMB'0000 Funds provided by the Company to Funds provide by related parties to the Related parties related parties Company Occurred amount Balance Occurred amount Balance China National Agrochemical 11,701.70 10.01 11,848.67 532.77 Corporation Beijing Insight Chemical Technology 0.00 197.50 0.00 0.00 Co., Ltd Beijing TH-UNIS Insight Chemical 0.00 12.90 0.00 40.00 Technology Co., Ltd Jingzhou Sanonda Advertising Co., Ltd. 0.00 0.10 0.18 0.35 Hubei Datian Chemical Co., Ltd. 1,500.00 92.89 1,600.00 0.55 Jingzhou Hengxiang Chemical Material 280.00 41.95 314.00 26.72 Trade Co., Ltd. Beijing (Blue Star) Chemical Machinery 1,231.00 927.48 303.52 0.00 Co., Ltd. Sichuan Blue Star Machinery Co., Ltd 99.70 55.50 44.20 0.00 Jingzhou Fude Food General Factory 0.00 0.00 82.69 109.12 Jingzhou Dali Industrial Co., Ltd 0.00 0.00 0.00 99.98 Jingzhou Tianyang Huibao Chemical 0.00 5.00 155.00 18.81 Co., Ltd. Total 14,812.40 1,343.33 14,348.26 828.30 Of which: The funds provided by the Listed Company to controlling shareholder and its subsidiaries during the report period totaled RMB 148,124,000, as well as the balance of RMB 11,278,200. 7.4.3 Progress of repayment on the capital occupied as at the end of 2007 □Applicable √Inapplicable New capital occupation in the year 2007 □Applicable √Inapplicable In case of the Company's failure to complete the repayment of the capital occupation of non-operating as at the end of 2007, relevant reason, measures for debt repayment and plan for responsibility ascertainment □Applicable √Inapplicable 7.5 Financing entrustment □Applicable √Inapplicable 11 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. 7.6 Implementation of commitments √Applicable □Inapplicable Commitments made by Sanonda Group Corporation, the controlling shareholder of the Company (1) No trading or transferring within 36 months from the first trading day of A shares after the share merger reform proposal was implemented, it would comply with relevant regulations not to sell. The said commitments are under fulfillment. In the Shareholders' General Meeting 2006, Sanonda Group Corporation would propose the proposal on transferring capital reserve into share capital at the rate of 10 shares for every 10 shares to all shareholders of Sanonda at the Annual Shareholders' General Meeting 2006, and would vote the affirmative vote. The said commitment has been implemented on 9 July 2007. Please refer to the Public Notice disclosed in China Securities Journal, Securities Times and Hong Kong Ta Kung Pao, as well as http://www.cninfo.com.cn dated 3 July 2007. 7.7 Significant lawsuits and arbitrations □Applicable √Inapplicable 7.8 Other significant events, as well as explanation on analysis to their influences and solutions 7.8.1 Securities investment √Applicable □Inapplicable Unit: RMB Yuan Proportion of Initial Gains/losses in Securities Short form of Holding Book value in total securities No. Type of securities investment in period-end the report code securities number period-end amount (Yuan) period （％） Huaxin 1 Stock 600801 27,842,679.64 3,100,000 0.00 0.00% 24,155,749.48 Cement Subscription of 2 Stock 000000 0.00 0 0.00 0.00% 55,852,085.94 new stock Other securities investments held in period-end 0.00 - 0.00 0.00% 0.00 Securities investment gain/loss sold out in the period - - - - 0.00 Total 27,842,679.64 - 0.00 100% 80,007,835.42 7.8.2 Equity of other listed companies held by the Company √Applicable □Inapplicable Unit: RMB Yuan Equity Profit and Change in Book value Subject for Short form of Initial investment proportion in loss in the the owners’ Stock code at the accounting Source of shares stock amount that of this report equity in the period-end calculation company period report period Shuanghuan Long-term Purchase of 000707 Science and 495,000.00 0.27% 495,000.00 0.00 0.00 equity original issue Technology investment legal person share Total 495,000.00 - 495,000.00 0.00 0.00 - - 7.8.3 Equity of non-listed financial enterprises held by the Company √Applicable □Inapplicable Unit: RMB Yuan Equity Book value Profit and Change in Subject for Initial investment Number of shares Name proportion in at the loss in the the owners’ accounting Source of shares amount held that of this period-end report equity in the calculation 12 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. company period report period Jingzhou City Long-term Purchase of Commercial 20,000,000.00 20,000,000 6.65% 8,008,982.63 0.00 0.00 equity original issue Bank Co., investment legal person share Ltd. Total 20,000,000.00 20,000,000 - 8,008,982.63 0.00 0.00 - - 7.8.4 Trading of shares of other listed companies □Applicable √Inapplicable §8 Report of the Supervisory Board √Applicable □Inapplicable The Board of Supervisor believed that the Company has carried out the production and business operation strictly in accordance with the relevant laws and regulations, and that there is no problem on the financial status, the use of raised funds, the purchase and sales transactions and the related transactions of the Company. §9 Financial Report 9.1 Auditing opinions Auditors’ Report Standard Auditors' Reports with unqualified opinion Auditors' Report All Shareholders of Hubei Sanonda Co., Ltd : TZJS Zi [2008] No. 637 We have audited the accompanying financial statements of the Company, which comprise the consolidated balance sheet and balance sheet as at 31 December 2007, the consolidated income statement and income statement, the consolidated statement of changes in equity and statement of changes in equity, the consolidated cash flow statement and cash flow statement for the year then ended, and notes to the financial statements. Management’s Responsibility for the Financial Statements The Company’s management is responsible for the preparation of these financial statements in accordance with China Accounting Standards for Business Enterprises (2006) issued by the Ministry of Finance of the People’s Republic of China. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements comply with the requirements of China Accounting Standards for Business Enterprises (2006) issued by the Ministry of Finance of the People’s Republic of China and present fairly, in all material respects, the consolidated financial position and financial position of the Company as at 31 December 2007, and the consolidated results of operations and results of operations and the consolidated cash flows and cash 13 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. flows of the Company for the year then ended. Beijing · China 22 April 2008 CPA: Kuang Min CPA: Zhang Juzhong 9.2 Financial Statement 9.2.1 Balance Sheet Prepared by Hubei Sanonda Co., Ltd. 31 Dec. 2007 Unit: RMB Yuan Amount at the period-end Amount at the period-begin Items Consolidation Parent Company Consolidation Parent Company Current assets Cash and cash equivalents 452,405,704.33 384,695,931.50 319,965,596.44 223,103,831.01 Settlement fund 0.00 0.00 0.00 0.00 Outgoing call loan 0.00 0.00 0.00 0.00 Trading financial assets 0.00 0.00 28,287,350.22 28,287,350.22 Notes receivable 9,219,453.30 4,086,851.80 8,022,453.60 2,634,370.00 Accounts receivable 229,963,431.81 32,952,675.83 172,823,247.54 70,851,773.59 Prepayment 52,965,149.82 46,688,523.44 37,113,502.94 21,362,489.04 Insurance receivables 0.00 0.00 0.00 0.00 Reinsurance Receivable 0.00 0.00 0.00 0.00 Provision of reinsurance 0.00 0.00 0.00 0.00 contract reserve receivable Interests receivable 0.00 0.00 0.00 0.00 Other receivables 25,035,288.85 117,689,217.89 51,181,972.69 144,632,369.62 Financial assets purchased 0.00 0.00 0.00 0.00 under agreement to resell Inventories 301,638,198.05 167,548,483.81 336,105,443.22 178,537,759.78 Non-current assets due within 0.00 0.00 0.00 0.00 1-year Other current assets 0.00 0.00 0.00 0.00 Total current assets 1,071,227,226.16 753,661,684.27 953,499,566.65 669,409,943.26 Non-current assets： Loan and payment on other's behalf disbursed Available-for-sale financial assets Investment held to maturity Long-term receivables Long-term equity investment 15,763,382.63 81,598,425.27 16,545,382.63 82,380,425.27 Investment property 5,581,186.50 5,581,186.50 5,826,394.50 5,826,394.50 Fixed assets 403,368,455.33 324,118,110.46 431,417,936.01 346,844,364.76 Construction in progress 78,790,543.52 75,760,032.60 30,744,114.30 25,253,253.21 Engineering materials 28,298.44 2,071,479.30 1,979,356.81 Disposal of fixed assets Production biological assets 14 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Oil-gas assets Intangible assets 163,784,716.33 118,945,235.98 182,278,251.30 137,294,823.35 R&D expenses Goodwill Long-term deferred expenses 105,913.25 197,553.29 Deferred tax assets 2,062,357.74 2,514,244.04 Other non-current assets Total non-current assets 669,484,853.74 606,002,990.81 671,595,355.37 599,578,617.90 Total assets 1,740,712,079.90 1,359,664,675.08 1,625,094,922.02 1,268,988,561.16 Current liabilities： Short-term loans 334,979,993.25 185,000,000.00 225,000,000.00 141,000,000.00 Loans from central bank Deposits received and hold for others Call loan received Held-for-trading financial liabilities Notes payable 18,700,000.00 15,000,000.00 41,800,974.00 25,000,000.00 Accounts payable 117,249,335.53 78,354,115.32 149,582,111.47 79,291,777.70 Advance from customers 120,143,625.78 44,679,708.83 93,782,570.43 27,458,119.93 Financial assets sold under agreements to repurchase Fees and commissions payable Payroll payable 19,920,791.68 6,908,859.22 28,727,112.15 11,347,797.76 Taxes payable 1,759,988.62 1,622,398.62 -7,656,817.89 -1,019,659.19 Interests payable 3,912,441.11 6,951,417.19 Other payables 55,938,899.17 21,982,218.83 65,821,322.30 34,090,037.99 Amount due to reinsurance Insurance contract provision Entrusted trading of securities Entrusted selling of securities Non-current liabilities due 3,650,000.00 10,587,923.56 within 1-year Other current liabilities Total current liabilities： 676,255,075.14 353,547,300.82 614,596,613.21 317,168,074.19 Non-current liabilities： Long-term loans 90,000,000.00 90,000,000.00 90,000,000.00 90,000,000.00 Bonds payable Long-term payables 21,505,160.76 16,962,597.44 Specific payables 2,761,170.00 10,811,422.00 2,920,800.00 Provision for liabilities Deferred taxes liabilities Other non-current liabilities 12,119,452.00 6,990,000.00 Total non-current liabilities： 126,385,782.76 113,952,597.44 100,811,422.00 92,920,800.00 Total liabilities 802,640,857.90 467,499,898.26 715,408,035.21 410,088,874.19 Shareholders' Equity： Share capital 593,923,220.00 593,923,220.00 296,961,610.00 296,961,610.00 15 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Capital surplus 271,719,841.74 268,447,075.77 566,756,587.94 565,408,685.77 Less：Treasury Stock Surplus reserve 57,285,245.67 57,285,245.67 57,285,245.67 57,285,245.67 General risk provision Retained earnings -7,943,821.74 -27,490,764.62 -37,544,622.78 -60,755,854.47 Foreign exchange difference Total shareholders' equity 914,984,485.67 892,164,776.82 883,458,820.83 858,899,686.97 attributable to holding company Minority interest 23,086,736.33 26,228,065.98 Total shareholder's equity 938,071,222.00 892,164,776.82 909,686,886.81 858,899,686.97 Total liabilities & shareholder's 1,740,712,079.90 1,359,664,675.08 1,625,094,922.02 1,268,988,561.16 equity 9.2.2 Income Statement Prepared by Hubei Sanonda Co., Ltd. Jan.-Dec. 2007 Unit: RMB Yuan This year Same period of last year Items Consolidation Parent Company Consolidation Parent Company I. Total revenue 1,648,350,997.55 1,147,079,409.80 1,444,449,312.33 979,390,732.45 Including: revenue 1,648,350,997.55 1,147,079,409.80 1,444,449,312.33 979,390,732.45 Interests income Insurance fee income Fee and commission income II. Total cost of sales 1,684,213,998.12 1,186,870,079.60 1,429,530,355.20 980,719,128.06 Including: Cost of sales 1,400,956,841.13 972,035,966.64 1,211,182,903.44 815,052,500.76 Interests expenses Service charge and commission income Insurance discharge payment Claim expenses-net Provision for insurance contract reserve-net Insurance policy dividend paid Reinsurance expense Business taxes and 2,195,493.76 1,118,882.89 2,816,514.64 2,083,222.30 surcharges Distribution 63,374,261.95 46,352,756.12 71,025,617.61 54,539,809.27 expenses Administrative 101,989,254.63 68,509,059.53 79,560,874.60 56,546,765.61 expenses Financial costs 41,037,649.87 31,309,216.47 30,444,570.10 20,549,103.82 Impairment loss 74,660,496.78 67,544,197.95 34,499,874.81 31,947,726.30 Plus: gain/loss on change in fair value (“-”for loss) gain/loss on 81,737,835.42 87,944,863.76 27,631,747.00 13,102,245.10 investment(“-”for loss) 16 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Including: income from investment on associates and jointly ventures Gain or loss on foreign exchange difference (“-”for loss) III. Operating profit(“-”for loss) 45,874,834.85 48,154,193.96 42,550,704.13 11,773,849.49 Plus: non-operating income 10,827,960.65 110,089.66 1,520,105.60 1,211,055.62 Less: non-operating expense 16,641,148.18 13,409,119.60 4,736,564.25 4,360,126.92 Including: loss from 12,260,017.68 9,447,976.17 4,463,672.95 4,278,018.29 disposal of non-current asset IV. Total profit(“-”for loss) 40,061,647.32 34,855,164.02 39,334,245.48 8,624,778.19 Less: income tax expense 7,632,435.18 1,590,074.17 7,952,984.00 4,215,968.62 V. Net profit(“-”for loss) 32,429,212.14 33,265,089.85 31,381,261.48 4,408,809.57 Including: Attributable to equity holders of the parent 29,600,801.04 33,265,089.85 25,985,571.59 4,408,809.57 company Minority interest 2,828,411.10 5,395,689.89 VI. Earnings per share (I) basic earnings per share 0.05 0.09 (II) diluted earnings per share 0.05 0.09 9.2.3 Cash Flow Statement Prepared by Hubei Sanonda Co., Ltd. Jan.-Dec. 2007 Unit: RMB Yuan This year Same period of last year Items Consolidation Parent Company Consolidation Parent Company 1. Cash flows from operating activities Cash received from sales of 1,671,493,810.91 1,188,894,719.03 1,589,540,118.43 1,132,276,232.22 goods or rending of services Net increase of deposits received and held for others Net increase of loans from central bank Net increase of inter-bank loans from other financial assets Cash received against original insurance contract Net Cash received from reinsurance Net increase of client deposit and investment Cash received from disposal of held-for-trading financial assets Cash received as Interests, fees and commissions received Net increase of inter-bank fund received Cash received under repurchasing, net Tax returned 20,394,759.73 14,603,582.69 15,117,413.80 Other cash received from 23,442,727.62 31,411,626.27 82,501,508.56 70,156,343.74 operating activities 17 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Sub-total of cash inflow from 1,715,331,298.26 1,234,909,927.99 1,687,159,040.79 1,202,432,575.96 operating activities Cash paid for goods and 1,221,087,573.67 840,505,311.27 1,248,534,659.30 809,824,557.42 services Net increase of loans and advances Net increase of deposit in central bank, banks and other financial institutions Cash paid for original contract claim Cash paid for interests, fees and commission Cash paid for policy dividend Cash paid to and for employees 108,634,353.26 67,826,630.51 91,775,320.14 62,891,180.11 Cash paid for all types of taxes 30,466,412.48 19,977,661.12 19,334,552.76 8,194,200.00 Other cash paid relating to 83,496,381.96 58,645,083.83 87,329,653.58 41,853,137.37 operating activities Sub-total of cash outflows 1,443,684,721.37 986,954,686.73 1,446,974,185.78 922,763,074.90 Net cash outflow in operating 271,646,576.89 247,955,241.26 240,184,855.01 279,669,501.06 activities 2. Cash Flows from Investing Activities Cash received from return of 119,315,789.68 93,619,416.63 53,267,114.41 13,041,916.47 investments Cash received from investment 18,155,744.75 24,028,892.14 246,000.00 income Net cash received from disposal of fixed assets, intangible assets and 458,861.00 94,145.00 3,682,351.00 3,664,351.00 other long-term assets Net cash received from disposal of subsidiaries and other operating units Other cash received relating to 2,220.82 investing activities Sub-total of cash inflows of 137,930,395.43 117,742,453.77 57,197,686.23 16,706,267.47 investing activities Cash paid for acquisition of fixed assets, intangible assets and 83,337,017.15 82,267,245.29 71,557,025.79 68,811,700.00 other long-term assets Cash paid for acquisition of 87,638,860.84 53,612,666.54 36,489,274.64 36,489,274.64 investments Net increase of pledge loans Net cash paid for acquisition of subsidiaries and other operating units Other cash paid relating to 90,689.30 investing activities Sub-total of cash outflows of 171,066,567.29 135,879,911.83 108,046,300.43 105,300,974.64 investing activities Net cash inflow from investing -33,136,171.86 -18,137,458.06 -50,848,614.20 -88,594,707.17 activities 3. Cash Flows from Financing Activities: Cash received from investment 18 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. Including: Cash received from minority shareholders of subsidiaries Cash received from borrowings 395,000,000.00 322,000,000.00 271,000,000.00 196,000,000.00 Cash received from bonds issuing Cash received relating to 1,212,451.29 1,085,329.25 financing activities Sub-total of cash inflows of 396,212,451.29 322,000,000.00 272,085,329.25 196,000,000.00 financing activities Cash paid for repayments of 466,280,185.30 366,000,000.00 355,350,000.00 281,000,000.00 borrowings Cash paid for dividends, profit 34,247,031.25 24,225,682.71 28,292,945.88 22,297,210.18 distribution or interest Including: dividends or profits paid to minority shareholders by subsidiaries Other cash paid relating to 1,755,531.88 282,906.17 financing activities Sub-total of cash outflows of 502,282,748.43 390,225,682.71 383,925,852.05 303,297,210.18 financing activities Net cash inflow from -106,070,297.14 -68,225,682.71 -111,840,522.80 -107,297,210.18 financing activities 4. Effect of foreign exchange rate changes 5. Net decrease in cash and cash 132,440,107.89 161,592,100.49 77,495,718.01 83,777,583.71 equivalents Add : Cash and cash equivalents 319,965,596.44 223,103,831.01 242,469,878.43 139,326,247.30 at the beginning of the year 6. Cash and cash equivalents at the 452,405,704.33 384,695,931.50 319,965,596.44 223,103,831.01 end of the year 19 Summary 9.2.4 Statement of Change in Equity Prepared by Hubei Sanonda Co., Ltd. 31 Dec. 2007 Unit: RMB Yuan Year 2007 Shareholders' equity belonged to parent company Shareholders' equity be General Minorit Items Less: Retaine Less: Share Capital Surplus Risk y Total Share Capital Su Treasur d others Treasur capital reserve reserve provisio interest capital reserve re y stock earnings y stock n I. Balance at 31 December, 296,961, 566,756, 57,285,2 -37,544, 26,228,0 909,686, 296,961, 566,756, 57 2006 610.00 587.94 45.67 622.78 65.98 886.81 610.00 587.94 Plus: change in accounting policies Correction of errors in previous period 296,961, 566,756, 57,285,2 -37,544, 26,228,0 909,686, 296,961, 566,756, 57 II. Balance at 1 January, 2007 610.00 587.94 45.67 622.78 65.98 886.81 610.00 587.94 III. Increase/ decrease during 296,961, -295,03 29,600,8 -3,141,3 28,384,3 the financial year (“-”for loss) 610.00 6,746.20 01.04 29.65 35.19 29,600,8 2,828,41 32,429,2 (I) Net profit 01.04 1.10 12.14 (II) Gain and loss 1,924,86 1,924,86 recognized directly in equity 3.80 3.80 1. Net changes in fair 20 Summary value of available-for-sale financial assets 2. Effects on changes in equity of invested companies under equity method 3. Deferred tax effect 1,924,86 1,924,86 4. Others 3.80 3.80 1,924,86 29,600,8 2,828,41 34,354,0 Subtotal of (I)and (II) 3.80 01.04 1.10 75.94 (III) Contributions and -3,124,8 -3,124,8 decrease of capital 63.84 63.84 1. Contributions by shareholders 2. Equity settled share-based payment -3,124,8 -3,124,8 3. Others 63.84 63.84 -2,844,8 -2,844,8 (IV) Profit distribution 76.91 76.91 1. Surplus reserve accrued 2. General risk provision accrued 3. Distribution to -2,844,8 -2,844,8 shareholders 76.91 76.91 21 Summary 4. Others (V) Transfer within 296,961, -296,96 shareholders' equity 610.00 1,610.00 1. Capital reserve 296,961, -296,96 transferred to capital (share 610.00 1,610.00 capital) 2. Surplus reserve transferred to capital (share capital) 3. Surplus reserve offsetting losses 4. Others IV. Balance at 31 December, 593,923, 271,719, 57,285,2 -7,943,8 23,086,7 938,071, 296,961, 566,756, 57 2007 220.00 841.74 45.67 21.74 36.33 222.00 610.00 587.94 22 Summary of Annual Report 2007 of Hubei Sanonda Co., Ltd. 9.3 Detailed explanation on the changes in the accounting policies, accounting estimate or accounting methods compared with the latest Annual Repot √Applicable □Inapplicable The Company performed the new Accounting Standard for Business Enterprise since 1 Jan. 2008. In accordance with Accounting Standard for Business Enterprise No. 38 --- First Time Adoption of Accounting Standard for Business Enterprise, Questions and Answers on the Standards for Information Disclosures by Companies That Offer Securities to the Public --- Compilation and Disclosure of Financial and Accounting Information for Comparison during the Period of Transition from the Old Accounting Standard and the New Accounting Standard (ZJKJ Zi [2007] No. 10) issued by CSRC, as well as Interpretation for Accounting Standard for Business Enterprise No. 1 promulgated by the Ministry of Finance, the Company made retrospective adjustment to the financial statement over the previous years and restatement. 9.4 Content of significant accounting errors, amounts changed, reasons and influences □Applicable √Inapplicable 9.5 Detailed explanation on the changes in the consolidation scope compared with the latest Annual Repot √Applicable □Inapplicable Jingzhou Sanonda IFS Chemical Co., Ltd. fail to be brought into the consolidation scope in last year because its assets, income and profit index are lower than 10%, however, in 2007, the Company brought into the consolidation scope according to Accounting Standard for Business Enterprise No. 33 --- Consolidated Financial Statement, and made the corresponding adjustment to the consolidated statement of last year. 23